[ LOGO ] HOME FEDERAL BANCORP
222 West Second Street
Seymour, Indiana 47274
(812) 522-1592
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
To Be Held On October 22, 1996
Notice is hereby given that the Annual Meeting of Shareholders of Home
Federal Bancorp (the "Corporation") will be held at the Holiday Inn, 2025 East
Tipton Street, Seymour, Indiana, on Tuesday, October 22, 1996, at 3:00 P.M.,
Eastern Standard time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of two directors of the Corporation
for terms expiring in 1999.
2. Other Business. Such other matters as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on September 10, 1996, are
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended June 30, 1996, is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ John Keach, Sr.
----------------------------------
John K. Keach, Sr.,
Chairman of the Board
Seymour, Indiana
September 20, 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
[ LOGO ] HOME FEDERAL BANCORP
222 West Second Street
Seymour, Indiana 47274
(812) 522-1592
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PROXY STATEMENT
---------------
FOR ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1996
This Proxy Statement is being furnished to the holders of common stock,
without par value ( "Common Stock"), of Home Federal Bancorp ("the
Corporation"), an Indiana corporation, in connection with the solicitation of
proxies by the Board of Directors of the Corporation for use at the Annual
Meeting of Shareholders of the Corporation to be held at 3:00 p.m., Eastern
Standard Time, at the Holiday Inn, 2025 East Tipton Street, Seymour, Indiana, on
October 22, 1996, and at any and all adjournments of such meeting. The principal
asset of the Corporation consists of 100% of the issued and outstanding shares
of Common Stock, $.01 par value per share, of Home Federal Savings Bank (the
"Bank"), a federal savings bank based in Seymour, Indiana. This Proxy Statement
is expected to be mailed to Shareholders on or about September 20, 1996.
A Notice of Annual Meeting and form of proxy accompany this Proxy
Statement. Any Shareholder giving a proxy has the right to revoke it, by
delivering written notice to the Secretary of the Corporation, by filing a later
proxy, or in person at the meeting, at any time before such proxy is exercised.
All proxies will be voted in accordance with the directions of the Shareholder
and, to the extent no directions are given, will be voted "for" item 1.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only Shareholders of record at the close of business on September 10, 1996
(the "Voting Record Date"), will be eligible to vote at the Annual Meeting or at
any adjournment thereof. Such Shareholders are entitled to one vote for each
share then held. As of that date, the Corporation had 2,226,282 shares of the
Corporation's Common Stock issued and outstanding. A majority of the votes
entitled to be cast, in person or by proxy, at the Annual Meeting is necessary
for a quorum. In determining whether a quorum is present, Shareholders who
abstain, cast broker non-votes, or withhold authority to vote on one or more
director nominees will be deemed present at the Annual Meeting.
Management knows of no person who held more than 5% of the outstanding
shares of the Corporation's Common Stock on September 10, 1996, other than the
following:
Number of Shares
Name and Address of of Common Stock Percent of
Beneficial Owner Beneficially Owned Class (1)
- - -------------------------- ------------------ -----------
Hart N. Hasten 82,750(1) 3.7%
3901 West 86th Street
Suite 470
Indianapolis, IN 46268
Mark Hasten 82,750(1) 3.7%
3901 West 86th Street
Suite 470
Indianapolis, IN 46268
Lawrence E. Hiler 127,350(2) 5.7%
P.O. Box 148
Walkerton, IN 46574
(1) The information in this chart is based on a Schedule 13D Report filed
by the Shareholders with the Securities and Exchange Commission on September 20,
1994, but otherwise does not reflect any changes in those shareholdings which
may have occurred since the date of such filing. The Schedule 13D Report was
filed on behalf of a Group consisting of Messrs. Hart N. Hasten and Mark Hasten.
<PAGE>
Together the members of the Group own 7.6% of the outstanding stock. However,
each member of the Group disclaims beneficial ownership of the shares owned by
the other. Mark and Hart Hasten are officers of Hasten Bancorp, a multi-bank
holding company and of Harcourt Management Company, Inc., a closely held real
estate investment company. In the Schedule 13D, Mark and Hart Hasten state that,
subject to further investigation of the Corporation, they may seek control of
the Corporation through the acquisition of additional shares of Common Stock of
the Corporation or a possible business combination with the Corporation. There
is no agreement between any member of the Group and the Corporation relating to
such matters.
(2) The information is based on a Schedule 13D Report filed by the
Shareholder with the Office of Thrift Supervision on July 26, 1991, but
otherwise does not reflect any changes in those shareholdings which may have
occurred since the date of such filing, except for changes resulting from the
Corporation's stock splits.
PROPOSAL I -- ELECTION OF DIRECTORS
The Corporation's Board of Directors currently consists of seven members.
The Corporation's By-laws provide that the directors shall be divided into three
classes as nearly equal in number as possible. Directors of the Corporation are
generally elected to serve for a three-year period or until their respective
successors are elected and qualified. The two nominees for election as a
director this year are John K. Keach, Jr. and David W. Laitinen, MD, each of
whom currently serves as a director and whose term will expire upon the
completion of the election at the Annual Meeting. Mr. Keach, Jr. and Dr.
Laitinen each have been nominated to serve for a three-year term ending in 1999.
The following table sets forth certain information regarding the nominees
for election as a director and each director continuing in office after the
Annual Meeting. It is intended that the proxies solicited on behalf of the Board
of Directors (other than proxies as to which authorization is withheld) will be
voted at the Annual Meeting for the election of the nominees identified below.
If any nominee is unable or declines to serve (an event which the Board of
Directors does not anticipate), the proxies will have discretionary authority to
vote for a substitute nominee named by the Board of Directors if the Board
elects to fill such nominee's position. The table also sets forth the number of
shares of the Corporation's Common Stock beneficially owned by certain executive
officers of the Corporation and by all directors and executive officers of the
Corporation as a group. Mr. Keach, Jr. is the son of the Corporation's Chairman
of the Board.
<TABLE>
<CAPTION>
Shares of
Common
Positions Director Director Stock
Held With of the of the Term Beneficially Percent
the Bank Corporation to Owned on of
Name Age Corporation Since Since Expire 9/10/96(1) Class
- - ---- --- --------------------- ----- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Director Nominees
John K. Keach, Jr. 44 President and 1990 1990 1999 56,289(2) 2.5%
Chief Executive
Officer
David W. Laitinen, MD 44 Director 1990 1990 1999 25,642(3) 1.1%
Directors Continuing In Office
John T. Beatty 46 Director 1991 1992 1998 9,372(4) *
Lewis W. Essex 64 Director 1972 1990 1997 55,718(5) 2.5%
Harold Force 45 Director 1991 1992 1998 9,372(6) *
John K. Keach, Sr. 69 Chairman of 1954 1990 1998 82,165(7) 3.7%
the Board
Harvard W. Nolting, Jr. 57 Director 1988 1990 1997 28,032(8) 1.3%
Executive Officers
Gerald L. Armstrong 56 Executive Vice 33,453(9) 1.5%
President and Chief
Operating Officer
Lawrence E. Welker 49 Executive Vice 52,646(10) 2.3%
President, Chief
Financial Officer,
Treasurer
and Secretary
All executive officers and
directors as a group (9 persons) 352,689(11) 15.1%
- - --------------------------
*Less than 1%.
</TABLE>
<PAGE>
(1) Includes shares beneficially owned by members of the immediate families
of the directors or director nominees residing in their homes. Unless
otherwise indicated, each nominee or director has sole investment and/or
voting power with respect to the shares shown as beneficially owned by
him.
(2) Includes 28,650 shares held jointly by Mr. Keach and his wife, 1,746
shares held by his wife and children, 20,931 shares subject to stock
options granted under the Home Federal Bancorp Stock Option Plan (the
"Stock Option Plan") and the Home Federal Bancorp 1993 Stock Option (the
"1993 Option Plan"), and 4,962 whole shares allocated as of March 31,
1996, to Mr. Keach's account under the Home Federal Bancorp Employees
Salary Savings Plan (the "401(k) Plan"). Does not include stock options
for 11,044 shares which are not exercisable within a period of 60 days
following the Voting Record Date.
(3) Includes 10,198 shares held jointly by Dr. Laitinen and his wife, 10,797
shares held by Mrs. Laitinen for their minor children, and 4,647 shares
subject to stock options granted under the 1993 Option Plan or by the
Corporation.
(4) Includes 225 shares held jointly by Mr. Beatty and his wife and 8,022
shares subject to stock options granted under the 1993 Option Plan or by
the Corporation.
(5) Includes 14,998 shares held by a trust of which Mr. Essex is a trustee
and beneficiary, 3,522 shares subject to stock options granted under the
1993 Option Plan or by the Corporation, and 19,575 shares owned by Mr.
Essex's mother as to which Mr. Essex has a power of attorney.
(6) Includes 9,147 shares subject to stock options granted under the 1993
Option Plan or by the Corporation.
(7) Includes 22,000 shares held jointly by Mr. Keach and his wife and 17,181
shares subject to stock options granted under the Stock Option Plan and
the 1993 Option Plan . Does not include stock options for 8,294 shares
which are not exercisable within a period of 60 days following the Voting
Record Date.
(8) Includes 2,772 shares subject to stock options granted under the 1993
Stock Option Plan or by the Corporation.
(9) Includes 24,981 shares subject to stock options granted under the Stock
Option Plan and the 1993 Option Plan, and 3,997 whole shares allocated as
of March 31, 1996, to Mr. Armstrong's account under the 401(k) Plan. Does
not include stock options for 6,044 shares which are not exercisable
within a period of 60 days following the Voting Record Date.
(10) Includes 31,500 shares held jointly by Mr. Welker and his wife, 650
shares held by Mrs. Welker for their minor children, 17,181 shares
subject to stock options granted under the Stock Option Plan and the 1993
Option Plan, and 3,315 whole shares allocated as of March 31, 1996, to
Mr. Welker's account under the 401(k) Plan. Does not include stock
options for 6,044 shares which are not exercisable within a period of 60
days following the Voting Record Date.
(11) Includes 108,384 shares subject to stock options granted under the Stock
Option Plan, the 1993 Option Plan, and outside of those plans, and 12,274
whole shares allocated as of March 31, 1996, to the accounts of
participants in the 401(k) Plan. Does not include stock options for
31,426 shares which are not exercisable within a period of 60 days
following the Voting Record Date.
The business experience of each of the above directors and director
nominees for at least the past five years is as follows:
John T. Beatty is President and Treasurer of Beatty Insurance, Inc.
Lewis W. Essex has been Chairman of the Board of Essex Castings, Inc.
since 1992. He retired from his position as Chief Executive Officer of Essex
Castings, Inc. on Janury 1, 1996, having served in that position since prior to
1991.
Harold Force has been President of Force Construction Company, Inc. since
1976.
John K. Keach, Sr. has been employed by the Bank since 1950. He served in
various positions until 1974, at which time be became President and Chief
Executive Officer. He was elected as Chairman of the Board in 1986. He resigned
as President, remaining Chief Executive Officer, in 1988. He resigned as Chief
Executive Officer as of July 1, 1994.
John K. Keach, Jr. has been employed by the Bank since 1974. In 1985, he
was elected Senior Vice President - Financial Services, in 1987 he became
Executive Vice President, and in 1988 he became President and Chief Operating
Officer. In 1994, he became President and Chief Executive Officer.
<PAGE>
David W. Laitinen, MD has been an orthopedic surgeon in Seymour, Indiana
since 1983.
Harvard W. Nolting, Jr. was a co-owner of Nolting Foods, Inc. (grocery
chain) for over 30 years before his retirement in 1994.
Directors will be elected upon receipt of a plurality of votes cast at the
Annual Meeting. Plurality means that individuals who receive the largest number
of votes cast are elected up to the maximum number of directors to be chosen at
the meeting. Abstentions, broker non-votes, and instructions on the accompanying
proxy to withhold authority to vote for one or more of the nominees will result
in the respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominee will not be reduced by such action.
Meetings and Committees of the Board of Directors of the Corporation
The Board of Directors meetings are generally held on a monthly basis. The
Board of Directors held a total of twelve meetings during the fiscal year ended
June 30, 1996. No incumbent director attended fewer than 75% of the sum of the
meetings of the Board of Directors held while he served as a director and the
meetings of committees on which he served.
The Audit Committee, comprised of Messrs. Essex (Chairman), Beatty, Force,
and Nolting, Jr., recommends the appointment of the Corporation's independent
accountants in connection with its annual audit, and meets with them to outline
the scope and review the results of such audit. That committee met four times
during the Corporation's fiscal year ended June 30, 1996.
The Board of Directors of the Corporation has a Compensation Committee, the
members of which are Messrs. Nolting, Jr. (Chairman), Keach, Sr., Laitinen and
Keach, Jr., which reviews payroll costs and salary recommendations and sets
salary guidelines. During the fiscal year ended June 30, 1996, the Compensation
Committee met two times.
The Corporation's Stock Option Committee administers the Stock Option Plan,
the 1993 Option Plan, and the Home Federal Bancorp 1995 Stock Option Plan (the
"1995 Option Plan"). It did not meet during the fiscal year ended June 30, 1996.
Its members are all of the directors except Messrs. Keach, Sr. and Keach, Jr.
The Corporation's Nominating Committee nominated the slate of directors set
forth in the Proxy Statement. The Nominating Committee held one meeting during
the fiscal year ended June 30, 1996. The members of the Nominating Committee for
the 1996 Annual Meeting were Messrs. Force (Chairman), Nolting, Jr., Beatty, and
Essex. The Nominating Committee will consider the nomination of any Shareholder
of the Corporation entitled to vote for the election of directors at the meeting
who has given timely notice in writing to the Secretary of the Corporation as
provided in the Corporation's By-laws. To be timely, a Shareholder's notice must
be delivered to or mailed and received by the Secretary of the Corporation not
less than 60 days prior to the meeting, unless less than 70 days' notice or
prior public disclosure of the date of the meeting is given or made to
Shareholders (which notice or public disclosure shall include the date of the
annual meeting specified in publicly-available By-laws, if the annual meeting is
held on such date), in which case the notice by a Shareholder must be received
no later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made.
Management Remuneration and Related Transactions
Joint Report of the Compensation Committee and the Stock Option Committee
The Compensation Committee of the Board of Directors was comprised during
fiscal 1996 of Messrs. Nolting, Jr. (Chairman), Keach, Sr., Laitinen and Keach,
Jr. The Committee reviews payroll costs, establishes policies and objectives
relating to compensation, and approves the salaries of all employees, including
executive officers. All decisions by the Compensation Committee relating to
salaries of the Corporation's executive officers are approved by the full Board
of Directors. In fiscal 1996, there were no modifications to Compensation
Committee actions and recommendations made by the full Board of Directors. In
approving the salaries of executive officers, the Committee has access to and
reviews compensation data for comparable financial institutions in the Midwest.
Moreover, from time to time the Compensation Committee reviews information
provided to it by independent compensation consultants in making its decisions.
<PAGE>
The Corporation's Stock Option Committee administers the Stock Option Plan,
the 1993 Option Plan, and the 1995 Option Plan. Its members are all of the
Corporation's outside directors.
The objectives of the Compensation Committee and the Stock Option Committee
with respect to executive compensation are the following:
(1) provide compensation opportunities comparable to those offered by other
similarly situated financial institutions in order to be able to
attract and retain talented executives who are critical to the
Corporation's long-term success;
(2) reward executive officers based upon their ability to achieve
short-term and long-term strategic goals and objectives and to enhance
shareholder value; and
(3) align the interests of the executive officers with the long-term
interests of Shareholders by granting stock options which will become
more valuable to the executives as the value of the Corporation's
shares increases.
At present, the Corporation's executive compensation program is comprised
of base salary, annual incentive bonuses and long-term incentive bonuses in the
form of stock options. Reasonable base salaries are awarded based on salaries
paid by comparable financial institutions, particularly in the Midwest, and
individual performance. The annual incentive bonuses are tied to the
Corporation's performance in the areas of growth, profit, quality, and
productivity for the current fiscal year, and stock options have a direct
relation to the long-term enhancement of Shareholder value. In years in which
the performance goals of the Corporation are met or exceeded, executive
compensation tends to be higher than in years in which performance is below
expectations.
Base Salary. Base salary levels of the Corporation's executive officers are
intended to be comparable to those offered by similar financial institutions in
the Midwest. In determining base salaries, the Compensation Committee also takes
into account individual experience and performance.
Mr. Keach, Jr. was the Corporation's Chief Executive Officer throughout
fiscal 1996. Mr. Keach, Jr.'s salary was increased from $156,550 in fiscal year
1995 to $187,014 in fiscal year 1996. In recommending this increase, the
Compensation Committee considered the Corporation's financial performance for
the prior fiscal year.
Annual Incentive Bonuses. Under the Corporation's Annual Incentive Plan,
all employees of the Corporation receive a cash bonus for any fiscal year in
which the Corporation achieves certain goals in the areas of growth, profit,
quality and productivity established by the Board of Directors. Individual
bonuses are equal to a percentage of the employee's base salary, which
percentage varies with the extent to which the Corporation exceeds these goals
for the fiscal year.
The Corporation believes that this program provides an excellent link
between the value created for Shareholders and the incentives paid to
executives, since executives receive no bonuses unless the above-mentioned goals
are achieved and since the level of those bonuses will increase with greater
achievement of those goals.
Mr. Keach, Jr.'s bonus for fiscal 1996 was $46,620 compared to $32,500 for
fiscal 1995. The increase resulted from Mr. Keach, Jr.'s increase in base salary
and the Corporation's financial performance during fiscal 1996.
Stock Options. The Stock Option Plan, the 1993 Option Plan, and the 1995
Option Plan are the Corporation's long-term incentive plans for executive
officers and other key employees. These plans align executive and Shareholder
long-term interests by creating a strong and direct link between executive pay
and Shareholder return, and enable executives to acquire a significant ownership
position in the Corporation's Common Stock. Stock options are granted at the
prevailing market price and will only have a value to the executives if the
stock price increases. The Stock Option Committee determines the number of
option grants to be made to executive officers based on the practices of
comparable financial institutions as well as the executive's level of
responsibility and contributions to the Corporation.
Mr. Keach, Jr. received no grants of stock options during fiscal year 1996.
See "Management Remuneration and Related Transactions-- Stock Options."
<PAGE>
The Compensation Committee and the Stock Option Committee believe that
linking executive compensation to corporate performance results in a better
alignment of compensation with corporate goals and the interests of the
Corporation's Shareholders. As performance goals are met or exceeded, most
probably resulting in increased value to Shareholders, executives are rewarded
commensurately. The Committee believes that compensation levels during fiscal
1996 for executives and for the chief executive officer adequately reflect the
Corporation's compensation goals and policies.
Compensation Committee Members Stock Option Committee Members
------------------------------ ------------------------------
Harvard W. Nolting, Jr. John T. Beatty
John K. Keach, Sr. Lewis W. Essex
John K. Keach, Jr. Harold Force
David W. Laitinen David W. Laitinen
Harvard W. Nolting, Jr.
Remuneration of Named Executive Officers
During the last three fiscal years, no cash compensation was paid directly
by the Corporation to any of its executive officers. Each of such officers was
compensated by the Bank.
The following table sets forth information as to annual, long-term and
other compensation for services in all capabilities to the Corporation and its
subsidiaries for each of the Corporation's last three fiscal years of (i) the
individual who served as chief executive officer of the Corporation during the
fiscal year ended June 30, 1996, and (ii) each executive officer of the
Corporation serving as such during the 1996 fiscal year, who earned over
$100,000 in salary and bonuses during that year (the "Named Executive
Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
-------------------------------------- -----------------------
Name and Principal Other Annual Restricted Securities All Other
Position During Last Fiscal Compensation Stock Underlying Compensation
Fiscal Year Year Salary($)(1) Bonus($)(2) ($)(3) Awards($) Options(#) ($)(4)
- - ----------------------- ------ ------------ ------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John K. Keach, Jr. 1996 $187,014 $46,620 -- -- -- $2,537
President and Chief 1995 $156,550 $32,500 -- -- 10,000 $3,798
Executive Officer 1994 $136,526 $30,800 -- -- 15,225 $2,100
and Director
Gerald L. Armstrong 1996 $120,473 $24,570 -- -- -- $2,590
Executive Vice 1995 $ 97,694 $16,575 -- -- 5,000 $2,802
President and Chief 1994 $ 96,985 $17,595 -- -- 15,225 $1,816
Operating Officer
Lawrence E. Welker 1996 $106,500 $22,365 -- -- -- $1,946
Executive Vice President 1995 $ 88,462 $14,625 -- -- 5,000 $1,765
Chief Financial Officer, 1994 $ 85,222 $15,385 -- -- 15,225 $1,588
Treasurer and Secretary
</TABLE>
(1) Includes amounts deferred by the Corporation's executive officers pursuant
to ss.401(k) of the Internal Revenue Code of 1986, as amended (the "Code"),
under the 401(k) Plan.
(2) The bonus amounts were paid under the Bank's Annual Incentive Plan.
(3) Each Named Executive Officer of the Corporation receives certain
perquisites, but the incremental cost of providing such perquisites does
not exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
(4) Includes the Bank's contributions on behalf of the Named Executive Officers
to the 401(k) Plan.
Stock Options
The following table includes information relating to option exercises by
the Named Executive Officers during fiscal 1996 and the number of shares covered
by both exercisable and unexercisable stock options held by the Named Executive
Officers as of June 30, 1996. Also reported are the values for "in-the-money"
options (options whose exercisable price is lower than the market value of the
shares at fiscal year end) which represent the spread between the exercise price
of any such existing stock options and the fiscal year-end market price of the
stock. No options were granted during fiscal 1996 to the Named Executive
Officers.
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and
Outstanding Stock Option Grants And Value Realized As Of 6/30/96
<TABLE>
<CAPTION>
Value of
Number of In-the-Money
Securities Underlying Options
Unexercised Options at Fiscal Year
at Fiscal Year End(#) End($)(1)
Shares --------------------------- -----------------------------
Acquired on Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John K. Keach, Jr. 2,500 $54,463 20,931 11,044 $191,957 $25,557
Gerald L. Armstrong 2,300 $39,968 24,981 6,044 $244,730 $14,932
Lawrence E. Welker --- --- 17,181 6,044 $106,982 $14,932
</TABLE>
- - ----------
(1) Amounts reflecting gains on outstanding in-the-money options are based on
the June 30, 1996, average between the high and low closing prices for the
stock, which was $26.00.
Employment Agreements
The Bank has three-year employment contracts with the following executive
officers: Lawrence E. Welker, John K. Keach, Jr. and Gerald Armstrong
(collectively, the "Employees"). The Corporation has guaranteed the Bank's
obligations under these contracts. The contracts can be extended annually for
additional one-year terms to maintain a three-year term unless notice is
properly given by either party to the contract, and have been so extended. The
Employees receive their current salary, 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 Bank employees. The Employees may terminate their employment upon 30 days'
written notice to the Bank. The Bank may discharge the Employees for "cause"
(generally, dishonesty, incompetence, forms of misconduct, or certain legal
violations) at any time or in certain events specified by Office of Thrift
Supervision regulations. Upon termination of an Employee's employment by the
Bank for other than cause or in the event of termination by an Employee for
"cause" (generally, material changes in duties or authority or breaches by the
Bank of the contract), that Employee 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 not
approved in advance by the Board of Directors (generally, material changes in
the owners of shares of the Bank or in the composition of its Board of
Directors), or (b) for an additional one year (or the remaining term of the
contract, if shorter) if the termination does not follow a change of control. In
addition, during such period, the Employee will continue to participate in the
Bank's group insurance plans or receive comparable benefits. Moreover, within a
period of three months after such termination following a change of control, the
Employee will have the right to cause the Bank 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. If the payments
provided for in the employment agreement together with any other payments made
to an Employee by the Bank are deemed to be payments in violation of the "golden
parachute" rules of the Code, such payments will be reduced to the largest
amount which would not cause the Bank to lose a tax deduction for such payments
under those rules. The cash compensation which would be paid under these
contracts to the three Named Executive Officers if the contracts were terminated
as of the date hereof after a change of control for other than cause by the Bank
or for cause by the Employees, would be the following:
Named Executive Officer Cash Compensation
----------------------- -----------------
John K. Keach, Jr. $585,000
Gerald L. Armstrong $360,000
Lawrence E. Welker $336,000
<PAGE>
The employment contracts provide the Bank protection of its confidential
business information and protection from competition by the Employees should any
of them voluntarily terminate his employment without cause or be terminated by
the Bank for cause.
The existence of these contracts may make a merger, other business
combination or change of control of the Bank more difficult or less likely. This
is because, unless the Employees are allowed to maintain their positions and
authority with the Bank, they will be entitled to payments which in the
aggregate may be deemed to be substantial. However, the employment contracts
provide security to the Employees, and the Board of Directors believes that it
will encourage their objective evaluation of opportunities for mergers, other
business combinations or other transactions involving a change of control of the
Corporation or the Bank since they will be in a position to evaluate such
transactions without significant concerns about the manner in which such
transactions will affect their financial security.
Compensation of Directors
Monthly Fee. Directors of the Corporation are not currently paid director's
fees. Each director of the Bank receives a monthly fee of $1,350. If a director
misses more than three consecutive meetings, he is removed from the Board. The
members of Board committees are not paid a separate fee for attending committee
meetings.
Stock Options to Outside Directors. On October 24, 1995, the Corporation's
five outside directors received automatically under the 1993 Option Plan a
non-qualified stock option to purchase 636 shares of the Corporation's Common
Stock for $25.125 per share.
The options are exercisable in whole or in part at any time from and after
six months following their grant until ten years and one day following their
grant, except that such options will terminate, if not previously exercised, six
months after the optionholders cease to be directors of the Corporation for any
reason other than death. If the optionholder dies while a director of the
Corporation or within six months after he ceases to be a director, the option
may be exercised by his executor, administrator or estate beneficiaries within
one year following the date of his death but not later than the last day of the
option term.
The options are nontransferable other than by will or the laws of descent
and distribution and must be exercised by delivering a cash payment equal to the
exercise price to the Corporation.
Deferred Compensation for Outside Directors. The Bank has entered into
deferred compensation agreements with the five outside directors. Under these
agreements, each outside director defers all or part of his monthly fee during a
period of five years and subsequently receives deferred compensation after he
reaches his normal retirement date or upon his death. The annual deferred
compensation benefits payable to each of the outside directors assuming he
continues to defer the fees he is currently deferring during the five year
deferral period is as follows:
Amount of Annual
Name of Individual Deferred Compensation
------------------ ---------------------
David W. Laitinen $88,559
Harold Force $77,417
John T. Beatty $63,120
Harvard W. Nolting, Jr. $31,308
Lewis W. Essex $28,320
The normal retirement date for Messrs. Beatty, Force, Laitinen and Nolting
is the first day of the month following the date on which they reach 65, and for
Mr. Essex is the first day of the month following the date on which he reaches
70. The deferred compensation is payable to Messrs. Beatty, Force, Laitinen and
Nolting for a period of 15 years and is payable to Mr. Essex for a period of 10
years.
The agreements provide reduced deferred compensation for directors failing
to defer their monthly fees for the full five-year period.
<PAGE>
Directors Emeritus Benefits
Effective April 1, 1992, in consideration of a director serving as Director
Emeritus, any Director Emeritus is paid for each meeting attended, an amount
equal to 3/4 of the monthly fee paid to directors at the time of his retirement
from the Board.
Pension Plan
The Bank's employees are included in a pension plan administered by the
Bank. Separate actuarial valuations are not made for individual members of the
plan. The Bank's employees are eligible to participate in the plan once they
have completed one year of service for the Bank and have attained the age of 21
years.
The plan provides for monthly retirement benefits determined on the basis
of the employee's years of service and the employee's average base salary for
the five consecutive years of his employment producing the highest average.
Early retirement, disability, and death benefits are also payable under the
plan, depending upon the participant's age and years of service. During fiscal
1996, the Bank made no contribution to the pension plan, as it was fully funded
for that year.
The estimated annual retirement benefits guaranteed for a period certain of
120 months and for lifetime thereafter, payable at normal retirement age (65)
under the plan to persons in specified remuneration and years of service
classifications assuming the year of birth is 1936 or later are as follows
(benefits noted in the table are not subject to any offset):
Highest Five-Year Years of Service
Average Annual -----------------------------------------------------------
Compensation 10 20 30 40 50
- - ----------------- ------- ------- --------- ---------- ----------
$100,000 $19,500 $39,000 $ 58,500 $ 78,250 $ 98,250
$120,000 $23,500 $47,000 $ 70,500 $ 94,250 $ 118,250
$140,000 $27,500 $55,000 $ 82,500 $ 110,250 $ 138,250
$160,000 $31,500 $63,000 $ 94,500 $ 126,250 $ 158,250
$180,000 $35,500 $71,000 $ 106,500 $ 142,250 $ 178,250
$220,000 $39,500 $79,000 $ 118,500 $ 158,250 $ 198,250
$240,000 $43,500 $87,000 $ 130,500 $ 174,250 $ 218,250
Benefits are currently subject to maximum Code limitations of $120,000 per
year. The years of service credited under the pension plan as of June 30, 1996,
to the Named Executive Officers are as follows:
Name of Executive Officer Years of Service
------------------------- ----------------
John K. Keach, Jr. 22
Gerald L. Armstrong 3.25
Lawrence E. Welker 17
The compensation covered by the pension plan for purposes of computing
their benefits is the equivalent of the compensation set forth in the salary
column in the chart on page 6.
Supplemental Retirement Income and Deferred Compensation Program
The Bank has entered into either supplemental retirement agreements or
deferred compensation agreements with its executive officers and with eight of
its other employees deemed by the management of the Bank to be key employees.
These agreements provide the key employees of the Bank with supplemental
retirement benefits after the employee reaches his normal retirement date, upon
earlier termination of his employment, unless such termination is for cause, or
upon his death. The normal retirement date for John Keach, Jr. and Lawrence E.
Welker is the first day of the month coincident with his attainment of age 60,
and for Gerald Armstrong is the first day of the month coincident with his
attainment of age 65. The annual benefits are payable to those persons for a
period of 15 years.
<PAGE>
The annual benefits for the Named Executive Officers are equal to the
amounts specified below:
Name of Executive Officer Amount of Annual Benefit
------------------------- ------------------------
John K. Keach, Jr. $82,664
Gerald L. Armstrong $67,343
Lawrence E. Welker $58,649
The agreements provide reduced annual benefits for the executive officers
electing early retirement. If the executive officer leaves before early
retirement, the annual benefits are further reduced, and such reduction is
dependent on his years of service with the Bank, completed after the date the
agreements were executed. In the event of a change of control of the Bank, the
reductions described above are somewhat decreased. While the benefits are paid
from the general assets of the Bank, the Bank has secured key person life
insurance in order to provide the Bank with the funds necessary to provide the
benefits described above. Under the supplemental retirement agreements, if an
executive officer or employee is terminated for cause, all benefits under his
agreement are forfeited.
Performance Graph
The following graph shows the performance of the Corporation's Common Stock
since June 30, 1991, in comparison to the NASDAQ Stock Market - U.S. Index and
the NASDAQ Bank Index.
[GRAPH OMITTED, CHART INSERTED IN ITS PLACE]
6/91 6/92 6/93 6/94 6/95 6/96
---- ---- ---- ---- ---- ----
Home Federal Bancorp 100 174 350 352 432 486
NASDAQ Bank 100 148 188 214 242 315
NASDAQ Stock Market-US 100 120 151 153 204 261
* $100 INVESTED ON 6/30/91 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
Transactions With Certain Related Persons
The Bank has followed the policy of offering to its directors, officers and
employees and their associates, real estate mortgage loans for the financing of
their principal residences; consumer loans; and, in certain cases, commercial
loans. These loans are made in the ordinary course of business on substantially
the same terms and collateral as those of comparable transactions prevailing at
the time and do not involve more than the normal risk of collectibility or
present other unfavorable features.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Corporation's Compensation Committee are Messrs.
Nolting, Jr. (Chairman), Keach, Sr., Laitinen and Keach, Jr. Messrs. Keach, Sr.
and Keach, Jr. are each officers of the Corporation. All of the outside
directors of the Corporation are members of the Stock Option Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act") requires
that the Corporation's officers and directors and persons who own more than 10%
of the Corporation's Common Stock file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than 10% Shareholders are required by SEC regulations to
furnish the Corporation with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for those persons, the Corporation believes that during the fiscal
year ended June 30, 1996, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners with respect to Section 16(a)
of the 1934 Act were complied with.
ACCOUNTANTS
The firm of Deloitte & Touche has been selected as the Corporation's
principal independent accountant for the current fiscal year. Deloitte & Touche
has served as auditors for the Corporation since 1984. It is expected that
representatives of the firm will be present at the Annual Meeting to make any
statements they desire to make and to answer questions directed to them.
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the next Annual
Meeting to be held in October, 1997, must be received by the Corporation at its
principal executive offices for inclusion in the Proxy Statement and form of
proxy relating to that meeting no later than 120 days in advance of September
20, 1997. Any such proposals should be sent to the attention of the Secretary of
the Corporation, 222 West Second Street, P.O. Box 648, Seymour, Indiana
47274-0648. Those proposals must also satisfy certain requirements specified in
the Corporation's By-laws.
GENERAL
The Board of Directors knows of no matters which are to be presented at the
Annual Meeting other than those stated in the Notice of Annual Meeting and
referred to in this Proxy Statement. If any other matters should properly come
before the meeting, it is intended that the proxies will be voted, with respect
to them, in accordance with the recommendations of the Board of Directors.
The cost of soliciting proxies in the accompanying form will be borne by
the Corporation. In addition to solicitations by mail, some of the officers and
regular employees of the Corporation, who will receive no special compensation
therefor, may solicit proxies by telephone, telegraph or personal visits, and
the cost of such additional solicitation, if any, will be borne by the
Corporation.
Each Shareholder is urged to complete, date and sign the proxy and return
it promptly in the enclosed return envelope.
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Corporation, the
Corporation relies upon information furnished by others for the accuracy and
completeness thereof.
By Order of the Board of Directors
/s/ John Keach, Sr.
----------------------------------
John K. Keach, Sr.,
Chairman of the Board
September 20, 1996
<PAGE>
[PROXY CARD, FRONT]
REVOCABLE PROXY
HOME FEDERAL BANCORP
Annual Meeting of Shareholders
October 22, 1996
The undersigned hereby appoints Gerald L. Armstrong and Lawrence E. Welker,
with full powers of substitution, to act as attorneys and proxies for the
undersigned to vote all shares of capital stock of Home Federal Bancorp which
the undersigned is entitled to vote at the Annual Meeting of Shareholders to be
held at the Holiday Inn, Seymour, Indiana, on Tuesday, October 22, 1996, at 3:00
P.M., and at any and all adjournments thereof, as follows:
1. The election as directors of all nominees listed below for three year
terms, except as marked to the contrary.
[ ] FOR [ ] VOTE WITHHELD
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below:
John K. Keach, Jr. David W. Laitinen, MD
(each for a three year term)
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" each of the listed propositions.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy may be revoked at any time prior to the voting thereof.
The undersigned acknowledges receipt from Home Federal, prior to the
execution of this proxy, of notice of the Meeting, a proxy statement 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 EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH 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 , 1996
----------------------------------------
Print Name of Shareholder
----------------------------------------
Signature of Shareholder
----------------------------------------
Print Name of Shareholder
----------------------------------------
Signature of Shareholder
Please sign as your name appears 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.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
