[Home Federal logo omittted]
222 West Second Street
Seymour, Indiana 47274
(812) 522-1592
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On October 24, 2000
Notice is hereby given that the Annual Meeting of Shareholders of Home
Federal Bancorp (the "Corporation") will be held at the Hampton Inn, 247 N.
Sandy Creek Drive, Seymour, Indiana, on Tuesday, October 24, 2000, 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 2003.
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 11, 2000, 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, 2000, 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 K. Keach, Jr.
John K. Keach, Jr.
Chairman of the Board, President and
Chief Executive Officer
Seymour, Indiana
September 22, 2000
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.
HOME FEDERAL BANCORP
222 West Second Street
Seymour, Indiana 47274
(812) 522-1592
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 24, 2000
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 Hampton Inn, 247 N. Sandy Creek Drive, Seymour, Indiana, on October 24,
2000, 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 22, 2000.
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 11, 2000
(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 4,497,856 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 11, 2000, other than the
following:
Number of Shares
Name and Address of of Common Stock Percent of
Beneficial Owner Beneficially Owned Class
-----------------------------------------------------------------------------
Heartland Advisors, Inc. 268,250(1) 6.0%
790 North Milwaukee Street
Milwaukee, WI 53202
Lawrence E. Hiler 286,537(2) 6.4%
P.O. Box 148
Walkerton, IN 46574
(1) The information is based on an amendment to a Schedule 13G Report filed by
the Shareholder with the Securities and Exchange Commission and dated
January 20, 2000, but otherwise does not reflect any changes in those
shareholdings which may have occurred since the date of such filing.
Heartland Advisors, Inc. is a registered investment advisor and the shares
shown above are held in its investment advisory accounts, including
Heartland Value Fund, a series of Heartland Group, Inc., a registered
investment company which holds more than 5% of the Corporation's
outstanding shares.
(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 and repurchase programs.
PROPOSAL I -- ELECTION OF DIRECTORS
The Corporation's Board of Directors currently consists of seven members.
Mr. Gregory J. Pence was added to the Board of Directors of the Corporation in
1999 to fill the vacancy created by the retirement of John Keach, Sr. from the
Board. Mr. Pence's term expires in 2001. 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 Lewis W.
Essex and Harvard W. Nolting, Jr., each of whom currently serves as a director.
Messrs. Essex and Nolting each have been nominated to serve for a three-year
term ending in 2003.
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.
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 9/11/00(1) Class
---- --- -------------------------- ----- ------ ----------- ------
Director Nominees
Lewis W. Essex 68 Director 1972 1990 2003 129,400(2) 2.9%
Harvard W. Nolting, Jr. 61 Director 1988 1990 2003 66,796(3) 1.5%
Directors Continuing
In Office
John T. Beatty 50 Director 1991 1992 2001 24,809(4) *
Harold Force 49 Director 1991 1992 2001 27,033(5) *
John K. Keach, Jr. 48 Chairman of the Board, 1990 1990 2002 214,099(6) 4.6%
President and
Chief Executive Officer
David W. Laitinen, MD 48 Director 1990 1990 2002 63,416(7) 1.4%
Gregory J. Pence 43 Director 1999 1999 2001 65,000(8) 1.4%
Executive Officers
Gerald L. Armstrong 60 Executive Vice 109,834(9) 2.4%
President and Chief
Operating Officer
Lawrence E. Welker 53 Executive Vice 125,018(10) 2.7%
President, Chief Financial
Officer, Treasurer and Secretary
S. Elaine Pollert 40 Executive Vice President, 87,624(11) 1.9%
Retail Banking
All executive officers and
directors as a group (10 persons) 913,029(12) 18.4%
* Less than 1%.
(1) Includes shares beneficially owned by members of the immediate families
of the directors, director nominees, or executive officers residing in
their homes. Unless otherwise indicated, each nominee, director or
executive officer has sole investment and/or voting power with respect to
the shares shown as beneficially owned by him or her.
(2) Includes 33,745 shares held by a trust of which Mr. Essex is a trustee
and beneficiary, 11,961 shares subject to stock options granted under the
Home Federal Bancorp 1993 Stock Option Plan (the "1993 Option Plan"), the
Home Federal Bancorp 1995 Stock Option Plan (the "1995 Option Plan") or
by the Corporation, and 44,043 shares owned by Mr. Essex's mother as to
which Mr. Essex has a power of attorney.
Footnotes continued on following page
(3) Includes 11,961 shares subject to stock options granted under the 1993
Stock Option Plan, the 1995 Option Plan or by the Corporation.
(4) Includes 10,000 shares held jointly by Mr. Beatty and his wife and 14,809
shares subject to stock options granted under the the 1993 Option Plan, the
1995 Option Plan or by the Corporation.
(5) Includes 225 shares held jointly by Mr. Force and his wife, and 26,303
shares subject to stock options granted under the the 1993 Option Plan, the
1995 Option Plan or by the Corporation.
(6) Includes 79,049 shares held jointly by Mr. Keach and his wife, 3,476 shares
held by his wife and children, 116,909 shares subject to stock options
granted under the Home Federal Bancorp Stock Option Plan (the "Option
Plan"), the 1993 Option Plan, the 1995 Option Plan and the Home Federal
Bancorp 1999 Stock Option Plan (the "1999 Option Plan"), and 14,665 whole
shares allocated as of June 30, 2000, to Mr. Keach's account under the Home
Federal Bancorp Employees Salary Savings Plan (the "401(k) Plan"). Does not
include stock options for 36,146 shares which are not exercisable within a
period of 60 days following the Voting Record Date.
(7) Includes 25,476 shares held jointly by Dr. Laitinen and his wife, 24,292
shares held by Mrs. Laitinen for their minor children, and 13,648 shares
subject to stock options granted under the 1993 Option Plan, the 1995
Option Plan or by the Corporation.
(8) Includes 31,500 shares held by Mr. Pence's wife or by his wife for the
benefit of their children and 13,500 shares subject to a stock option
granted under the 1995 Option Plan.
(9) Includes 67,614 shares subject to stock options granted under the Stock
Option Plan, the 1993 Option Plan, the 1995 Option Plan, and the 1999
Option Plan and 10,333 whole shares allocated as of June 30, 2000, to Mr.
Armstrong's account under the 401(k) Plan. Does not include stock options
for 36,641 shares which are not exercisable within a period of 60 days
following the Voting Record Date.
(10) Includes 99,764 shares subject to stock options granted under the Stock
Option Plan, the 1993 Option Plan, the 1995 Option Plan, and the 1999
Option Plan and 3,313 whole shares allocated as of June 30, 2000, to Mr.
Welker's account under the 401(k) Plan. Does not include stock options for
16,641 shares which are not exercisable within a period of 60 days
following the Voting Record Date.
(11) Includes 76,254 shares subject to stock options granted under the 1993
Option Plan, the 1995 Option Plan, and the 1999 Option Plan and 3,224 whole
shares allocated as of June 30, 2000, to Ms. Pollert's account under the
401(k) Plan. Does not include stock options for 8,708 shares which are not
exercisable within a period of 60 days following the Voting Record Date.
(12) Includes 452,723 shares subject to stock options granted under the Stock
Option Plan, the 1993 Option Plan, the 1995 Option Plan, the 1999 Option
Plan and outside of those plans, and 31,535 whole shares allocated as of
June 30, 2000, to the accounts of participants in the 401(k) Plan. Does not
include stock options for 98,136 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 retired from his position as Chief Executive Officer of
Essex Castings, Inc. in 1996.
Harold Force has been President of Force Construction Company, Inc. since
1976.
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. In 1999, he was appointed Chairman of the Board of Directors of
the Corporation.
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.
Gregory J. Pence is President of Keil Brothers Oil Co., Inc. and KP Oil
Company, Inc. (wholesale petroleum distributors, convenience store
retailing and property management).
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 12 meetings during the fiscal year ended June
30, 2000. 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,
Nolting, Jr., and Pence 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, 2000.
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, 2000, the Compensation
Committee met one time.
The Corporation's Stock Option Committee administers the Stock Option Plan,
the 1993 Option Plan, the 1995 Option Plan, and the 1999 Option Plan. It met one
time during the fiscal year ended June 30, 2000. Its members are all of the
directors except Mr. Keach, Jr.
The Corporation's Nominating Committee nominated the slate of directors set
forth in the Proxy Statement. The Nominating Committee held one meeting for the
fiscal year ended June 30, 2000. The members of the Nominating Committee for the
2000 Annual Meeting were Messrs. Beatty (Chairman) and Force. 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 2000 of Messrs. Nolting, Jr. (Chairman), 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 2000, 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.
The Corporation's Stock Option Committee administers the Corporation's
stock option plans. 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.
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 2000. Mr. Keach, Jr.'s salary was increased from $249,831 in fiscal 1999
to $282,683 in fiscal 2000. In recommending this increase, the Compensation
Committee considered the Corporation's financial performance for the prior
fiscal year.
Stock Options. The Corporation's stock option plans serve as 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 a grant of stock options for 32,500 shares of
Common Stock during fiscal year 2000. See "Management Remuneration and Related
Transactions--Stock Options."
Finally, the Committee notes that Section 162(m) of the Internal Revenue
Code, in certain circumstances, limits to $1 million the deductibility of
compensation, including stock-based compensation, paid to top executives by
public companies. None of the compensation paid to the executive officers named
in the compensation table below exceeded the threshold for deductibility under
section 162(m).
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
2000 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, Jr. Lewis W. Essex
David W. Laitinen Harold Force
David W. Laitinen
Harvard W. Nolting, Jr.
Gregory J. Pence
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, 2000, and (ii) each other executive officer of the
Corporation serving as such during the 2000 fiscal year, who earned over
$100,000 in salary and bonuses during that year (the "Named Executive
Officers").
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
Name and Principal Other Annual Restricted Securities All Other
Position During Last Fiscal Compensation Stock Underlying Compensation
Fiscal Year Year Salary($)(1) Bonus($)(2) ($)(3) Awards($) Options(#) ($)(4)
----------------------------------------------------------------------------------------------------------------
John K. Keach, Jr. 2000 $282,683 $ 0 -- -- 32,500 $2,813
Chairman of the Board, 1999 $249,831 $ 0 -- -- 15,050 $2,924
President and 1998 $225,629 $56,738 -- -- 15,000 $2,935
Chief Executive Officer
Gerald L. Armstrong 2000 $151,264 $ 0 -- -- 20,000 $2,669
Executive Vice 1999 $142,724 $ 0 -- -- 11,650 $3,063
President and Chief 1998 $133,019 $27,515 -- -- 10,000 $2,842
Operating Officer
Lawrence E. Welker 2000 $144,511 $ 0 -- -- 20,000 $1,955
Executive Vice President 1999 $133,520 $ 0 -- -- 11,650 $2,579
Chief Financial Officer, 1998 $124,620 $26,482 -- -- 10,000 $2,297
Treasurer and Secretary
S. Elaine Pollert 2000 $126,435 $ 0 -- -- 20,000 $1,960
Executive Vice President, 1999 $115,030 $ 0 -- -- 11,650 $1,857
Retail Banking 1998 $100,015 $21,250 -- -- 10,000 $1,632
(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, which
was terminated in fiscal 1999.
(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 $50,000 or 10% of the officer's salary and bonus.
(4) Includes the Bank's contributions on behalf of the Named Executive Officers
to the 401(k) Plan.
Stock Options
The following table sets forth information related to options granted
during fiscal year 2000 to the Named Executive Officers.
Option Grants - Last Fiscal Year
Individual Grants
% of Total
Options Granted Exercise or
Options to Employees Base Price Expiration Grant Date
Name Granted(#)(1) In Fiscal Year ($/Share)(2) Date(3) Value (4)
-----------------------------------------------------------------------------------------------------------------
John K. Keach, Jr. 32,500 17.3% $23.0625 12/20/09 $204,750
Gerald L. Armstrong 20,000 10.6% $23.0625 12/20/09 $126,000
Lawrence E. Welker 20,000 10.6% $23.0625 12/20/09 $126,000
S. Elaine Pollert 20,000 10.6% $23.0625 12/20/09 $126,000
(1) Options to acquire shares of the Corporation's Common Stock.
(2) The option exercise price may be paid in cash or with the approval of the
Stock Option Committee in shares of the Corporation's Common Stock or a
combination thereof. The option exercise price equaled the market value of
a share of the Corporation's Common Stock on the date of grant.
(3) Mr. Armstrong's options are exercisable as follows: 1,145 on January 1,
2004, 4,336 on the first days of 2005 - 2008, and 1,511 on January 1, 2009.
The other options became exercisable on June 21, 2000.
(4) This column sets forth the present value of the options on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: dividend yield of 2.38%, risk-free rate of return of 6.508%,
expected volatility of 24.13% and expected life of options of 5.37 years.
The following table includes information relating to option exercises by
the Named Executive Officers during fiscal 2000 and the number of shares covered
by both exercisable and unexercisable stock options held by the Named Executive
Officers as of June 30, 2000. Also reported are the values for "in-the-money"
options (options whose exercise price is lower than the market value of the
shares at fiscal year end) which represent the spread between the exercise price
of any such existing stock options and the fiscal year-end market price of the
stock.
Aggregate Option Exercises in Last Fiscal Year and
Outstanding Stock Option Grants And Value Realized As Of 6/30/2000
Value of
Number of In-the-Money
Securities Underlying Options
Unexercised Options at Fiscal Year
at Fiscal Year End(#) End($)(1)
--------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------------------------------------ ---------------------------------------------
John K. Keach, Jr. --- --- 116,909 36,146 $376,619 $6,309
Gerald L. Armstrong 5,400 $67,241 67,614 36,641 $269,538 $1,660
Lawrence E. Welker --- --- 99,764 16,641 $383,923 $1,660
S. Elaine Pollert 1,927 $22,658 76,254 8,708 $147,337 $ ---
(1) Amounts reflecting gains on outstanding in-the-money options are based on
the June 30, 2000, average between the high and low prices for the stock,
which was $16.50.
Employment Agreements
The Bank has three-year employment contracts with the following executive
officers: Lawrence E. Welker, John K. Keach, Jr., Gerald L. Armstrong and S.
Elaine Pollert (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 or her base compensation
under the contract (a) for an additional three years 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 the
Corporation or in the composition of its Board of Directors), or (b) for the
remaining term of the contract, 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 or she 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 four 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. $886,500
Gerald L. Armstrong $450,000
Lawrence E. Welker $426,000
S. Elaine Pollert $390,000
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 or her 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 $600 per regular meeting attended, $200
per committee meeting attended, $300 per special meeting attended, and a $3,300
quarterly retainer. If a director misses more than three consecutive meetings,
he is removed from the Board.
Stock Options to Outside Directors. On October 26, 1999, the Corporation's
five outside directors other than Mr. Pence received automatically under the
1995 Option Plan a non-qualified stock option to purchase 1,431 shares of the
Corporation's Common Stock for $21.8125 per share. On December 21, 1999, Gregory
Pence was granted under the 1995 Option Plan an option for 13,500 shares of the
Corporation's Common Stock with an exercise price of $23.0625.
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 entered into deferred
compensation agreements with the five outside directors. Under these agreements,
each outside director deferred all or part of his monthly fee during a period of
five years from June, 1992, to May, 1997, and will subsequently receive deferred
compensation after he reaches his normal retirement date (as outlined below) or
upon his death. The annual deferred compensation benefits payable to each of the
outside directors is as follows:
Amount of Annual
Name of Individual Deferred Compensation
------------------ ----------------------
David W. Laitinen $91,231
Harold Force $79,757
John T. Beatty $65,239
Harvard W. Nolting, Jr. $32,357
Lewis W. Essex $28,320
The normal retirement date for Messrs. Beatty, Force, and Laitinen is the
first day of the month following the date on which they reach 60, for Mr.
Nolting is the first day of the month following the date on which he reaches 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.
Directors Emeritus Benefits
In consideration of a director serving as Director Emeritus, any Director
Emeritus is paid 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
Pentegra Group. 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 or her 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 2000, the Bank did not make a contribution to the pension plan as the
pension plan was fully funded.
The following table indicates the annual retirement benefit that would be
payable under the plan upon retirement at age 65 to a participant electing to
receive his or her retirement benefit in the standard form of benefit, assuming
various specified levels of plan compensation and various specified years of
credited service.
Highest Five-Year
Average Annual Years of Benefit Service
Compensation 10 20 30 40 50
--------------------------------------------------------------------------------
$140,000 $27,100 $ 54,200 $ 81,400 $108,900 $ 136,900
$160,000 $31,100 $ 62,200 $ 93,400 $124,900 $ 156,900
$180,000 $35,100 $ 70,200 $ 105,400 $140,900 $ 176,900
$200,000 $39,100 $ 78,200 $ 117,400 $156,900 $ 196,900
$220,000 $43,100 $ 86,200 $ 129,400 $172,900 $ 216,900
$240,000 $47,100 $ 94,200 $ 141,400 $188,900 $ 236,900
$260,000 $51,100 $102,200 $ 153,400 $204,900 $ 256,900
$280,000 $55,100 $110,200 $ 165,400 $220,900 $ 276,900
$300,000 $59,100 $118,200 $ 177,400 $236,900 $ 296,900
Benefits are currently subject to maximum Code limitations of $135,000 per year.
The years of service credited under the pension plan as of June 30, 2000, to the
Named Executive Officers are as follows:
Name of Executive Officer Years of Service
------------------------- ----------------
John K. Keach, Jr. 26
Gerald L. Armstrong 7
Lawrence E. Welker 21
S. Elaine Pollert 13
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
other current or former 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 or her normal
retirement date, upon earlier termination of his or her employment, unless such
termination is for cause, or upon his or her death. The normal retirement date
for John Keach, Jr. and Lawrence E. Welker is the first day of the month
coincident with or next following his attainment of age 60, for Gerald Armstrong
is the first day of the month coincident with or next following his attainment
of age 65, and for Elaine Pollert is the first day of the month coincident with
or next following her attainment of age 65. The annual benefits are payable to
those persons for a period of 15 years.
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
S. Elaine Pollert $44,664
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 or her years of service with the Bank, completed after the date
the agreements were executed. If the executive officer is terminated within 3
years following a change of control of the Bank, he is entitled to receive the
present value of his full retirement benefit. 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 or her
agreement are forfeited. There are also death and disability benefits under
these agreements.
Performance Graph
The following graph shows the performance of the Corporation's Common Stock
since June 30, 1995, in comparison to the NASDAQ Stock Market - U.S. Index and
the NASDAQ Bank Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HOME FEDERAL BANCORP, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ BANK INDEX
[GRAPH OMITTED]
* $100 INVESTED ON 6/30/95 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.
Compensation Committee Interlocks and Insider Participation
The members of the Corporation's Compensation Committee are Messrs. Nolting
, Jr. (Chairman), Laitinen and Keach, Jr. Mr. Keach, Jr. is an officer 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, 2000, 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 LLP has been selected as the Corporation's
principal independent accountant for the current fiscal year. Deloitte & Touche
LLP 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
Any proposal which a Shareholder wishes to have presented at the next
Annual Meeting to be held in October, 2001, and included in the Proxy Statement
and form of proxy relating to that meeting must be received by the Corporation
at its principal executive offices no later than 120 days in advance of
September 22, 2001. 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. A Shareholder proposal being submitted outside the processes
of Rule 14a-8 promulgated under the 1934 Act will be considered untimely if it
is received by the Corporation later than 45 days in advance of September 22,
2001.
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 K. Keach, Jr.
John K. Keach, Jr.
Chairman of the Board, President and
Chief Executive Officer
September 22, 2000
