<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
HORIZON FINANCIAL SERVICES CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[ON HORIZON FINANCIAL SERVICES CORPORATION LETTERHEAD]
September 26, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Horizon Financial Services
Corporation (the "Company"), we cordially invite you to attend the Annual
Meeting of Stockholders of the Company (the "Meeting"). The meeting will be held
at 3:00 p.m. local time, on October 23, 1997 at the main office of the Company
located at 301 First Avenue East, Oskaloosa, Iowa.
The attached Notice of Annual Meeting of Stockholders and Proxy Statement
discuss the business to be conducted at the Meeting. We have also enclosed a
copy of Horizon Financial Services Corporation's fiscal 1997 Annual Report to
Stockholders. At the Meeting we will report on the Company's operation and
outlook for the year ahead.
We encourage you to attend the Meeting in person. Whether or not you plan to
attend, however, please read the enclosed Proxy Statement and then complete,
sign and date the enclosed proxy and return it in the accompanying postpaid
return envelope as promptly as possible. This will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the Meeting.
Your Board of Directors and management are committed to the continued success of
Horizon Financial Services Corporation and the enhancement of your investment.
As Chairman of the Board, President and Chief Executive Officer, I want to
express my appreciation for your confidence and support.
Very truly yours,
Robert W. DeCook
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
HORIZON FINANCIAL SERVICES CORPORATION
301 First Avenue East
Oskaloosa, Iowa 52577
(515) 673-8328
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 23, 1997
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Horizon Financial Services Corporation (the "Company") will be
held at the main office of the Company located at 301 First Avenue East,
Oskaloosa, Iowa, at 3:00 p.m. local time, on October 23, 1997.
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 two directors of the Company;
2. The ratification of the appointment of KPMG Peat Marwick LLP as
auditors for the Company for the fiscal year ending June 30, 1998;
and such other matters as may properly come before the Meeting, or any
adjournments 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. Stockholders of record at the close of business on September 12, 1997
are the stockholders entitled to vote at the Meeting and any adjournments
thereof.
You are requested to complete and sign 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.
By Order of the Board of Directors
Robert W. DeCook
Chairman of the Board, President and
Chief Executive Officer
Oskaloosa, Iowa
September 26, 1997
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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 PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
HORIZON FINANCIAL SERVICES CORPORATION
301 First Avenue East
Oskaloosa, Iowa 52577
(515) 673-8328
ANNUAL MEETING OF STOCKHOLDERS
October 23, 1997
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Horizon Financial Services Corporation
(the "Company") of proxies to be used at the Annual Meeting of Stockholders of
the Company (the "Meeting") which will be held at the main office of the Company
located at 301 First Avenue East, Oskaloosa, Iowa, on October 23, 1997, at 3:00
p.m. local time, and all adjournments of the Meeting. The accompanying Notice of
Meeting and this Proxy Statement are first being mailed to stockholders on or
about September 26, 1997. Certain of the information provided herein relates to
Horizon Federal Savings Bank ("Horizon Federal" or the "Bank"), a wholly owned
subsidiary of the Company.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon the election of two directors of the Company and a proposal to
ratify the appointment of KPMG Peat Marwick LLP as the Company's auditors for
the fiscal year ending June 30, 1998.
Proxies and Proxy Solicitation
If a shareholder properly executes the enclosed proxy distributed by
the Company, the proxies named will vote the shares represented by that proxy at
the Meeting. Where a shareholder specifies a choice, the proxy will be voted in
accordance with the shareholder's instructions. If no specific direction is
given, the proxies will vote the shares "FOR" the election of management's
nominees for directors of the Company and "FOR" the appointment of KPMG Peat
Marwick LLP as auditors for the fiscal year ending June 30, 1998. If other
matters are presented at the Meeting, the shares for which proxies have been
received will be voted in accordance with the discretion of the proxies.
Any proxy given pursuant to this solicitation or otherwise may be
revoked by the shareholder giving it at any time before it is voted by
delivering to the Secretary of the Company at the above address, on or before
the taking of the vote at the Meeting, a written notice of revocation bearing a
later date than the proxy or a later dated proxy relating to the same shares of
common stock, par value $.01 per share, of the Company (the "Common Stock"), or
by attending the Meeting and voting in person. Attendance at the Meeting will
not in itself constitute the revocation of a proxy.
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. In addition to solicitation by mail,
directors, officers and employees of the Company and the Bank may solicit
proxies personally or by facsimile, telegraph or telephone, without additional
compensation.
Voting Rights; Vote Required
Shareholders of record as of the close of business on September 12,
1997 (the "Voting Record Date"), will be entitled to one vote on each matter
presented for a vote at the Meeting for each share of Common Stock then held.
Such vote may be exercised in person or by a properly executed proxy as
discussed above. Directors shall be elected by a plurality of the shares present
in person or represented by proxy at the Meeting and entitled to vote on the
election of directors. Approval of the appointment of KPMG Peat Marwick LLP as
auditors for the year ending June 30, 1998 requires 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.
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
<PAGE>
proposals except the election of directors and will be counted as present for
purposes of the item on which the abstention is noted. Abstentions on the
proposal to ratify KPMG Peat Marwick as the Company's auditors will have the
effect of a negative vote since that proposal requires the affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. A broker non-vote (i.e., proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owners or
other persons as to certain proposals on which such beneficial owners or persons
are entitled to vote their shares but with respect to which the brokers or
nominees have no discretionary power to vote without such instructions) will
have no effect on the outcome of the election of directors or ratification of
auditors. Brokers who do not receive instructions are entitled to vote on the
election of directors and the ratification of the Company's auditors.
Voting Securities and Principal Holders Thereof
As of the Voting Record Date, the Company had 425,540 shares of Common
Stock issued and outstanding. The following table sets forth information
regarding share ownership of: (i) those persons or entities known by management
to beneficially own more than five percent of the Company's Common Stock and
(ii) all directors and officers as a group. See "Proposal I - Election of
Directors" for information regarding share ownership of the Corporation's
directors.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Beneficial Owner Owned of Class
- ----------------------------------------------------------------------- ------------ --------
<S> <C> <C>
Horizon Financial Services Corporation Employee Stock Ownership Plan(1) 39,724 9.33%
301 First Avenue East
Oskaloosa, Iowa 52577
Robert W. DeCook(2) 39,726 9.08%
301 First Avenue East
Oskaloosa, Iowa 52577
Gary L. Rozenboom(3) 23,131 5.41%
301 First Avenue East
Oskaloosa, Iowa 52577
Thomas L. Gillespie (4) 22,926 5.31%
301 First Avenue East
Oskaloosa, Iowa 52577
Directors and executive officers of the Company and the Bank as a group 111,974 24.69%
(7 persons)(5)
- -----------------------
</TABLE>
(1) The amount reported represents shares held by the Company's Employee Stock
Ownership Plan ("ESOP"), 21,688 shares of which were allocated to accounts
of participants. First Bankers Trust Company, N.A., the trustee of the
ESOP, may be deemed to beneficially own the shares held by the ESOP which
have not been allocated to the accounts of participants.
(2) Mr. DeCook has reported sole voting and investment power with respect to
the shares of Common Stock beneficially owned by him. Included in the
Common Stock beneficially owned by Mr. DeCook are options to purchase
12,144 shares of Common Stock.
(3) Mr. Rozenboom has reported sole voting and investment power with respect to
2,631 shares of Common Stock and shared power with respect to 20,500 shares
of Common Stock beneficially owned by him. Included in the Common Stock
beneficially owned by Mr. Rozenboom are options to purchase 2,024 shares
of Common Stock.
(4) Mr. Gillespie has reported sole voting and investment power with respect to
10,204 shares of Common Stock and shared power with respect to 12,722
shares of Common Stock beneficially owned by him. Included in the shares of
Common Stock beneficially owned by Mr. Gillespie are options to purchase
6,072 shares of Common Stock.
(5) Includes shares held directly, as well as, jointly with family members, and
shares held in retirement accounts in a fiduciary capacity or by certain
family members, with respect to which shares the listed individuals or
group members may be deemed to have sole or shared voting and investment
power. Included in the Shares of Common Stock beneficially owned by all
directors and executive officers of the Company as a group are options to
purchase 28,067 shares of Common Stock.
2
<PAGE>
I. ELECTION OF DIRECTORS
General
The Company's Board of Directors is currently composed of five members,
each of whom is also a director of the Bank. Directors are generally elected to
serve for three-year terms or until their respective successors are elected and
qualified. The directors are divided into three classes, with approximately
one-third of the directors elected annually.
The table below sets forth certain information, as of the Voting Record
Date, regarding the composition of the Company's Board of Directors, including
each director's term of office. The Board of Directors acting as the nominating
committee has recommended and approved the nominees identified in the following
table. 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 a nominee)
will be voted at the Meeting "For" the election of the nominees identified
below. If a nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute nominee as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any nominee may be unable to serve, if elected. Except as disclosed
herein, there are no arrangements or understandings between the nominees and any
other person pursuant to which the nominees were selected.
<TABLE>
<CAPTION>
Shares of
Common Stock
Position(s) Held in Director Term to Beneficially Percent
Name Age(1) the Company Since(2) Expire Owned(3) of Class
- ------------------- ------ -------------------- -------- ------- ------------ --------
NOMINEES
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Gillespie 47 Director and Vice President 1992 2000 22,926(4) 5.31%
Norman P. Zimmerman 64 Director 1976 2000 12,631(5) 2.95%
DIRECTORS CONTINUING IN OFFICE
Robert W. DeCook 55 Chairman of the Board, 1973 1999 39,726 9.08%
President and Chief
Executive Officer
Dwight L. Groves 58 Director 1995 1998 1,211 .28%
Gary L. Rozenboom 57 Director 1982 1998 23,131(6) 5.41%
</TABLE>
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(1) At June 30, 1997.
(2) Includes service as a director of the Bank.
(3) The nature of beneficial ownership for shares reported in this column
is sole voting and investment power, except as otherwise noted in these
footnotes. Included in the shares beneficially owned by the named
individuals are options to purchase shares of Common Stock as follows:
Mr. Gillespie - 6,072 shares; Mr. Zimmerman - 2,024 shares; Mr. DeCook -
12,144 shares; Mr. Groves - 516 shares and Mr. Rozenboom - 2,024 shares.
(4) Includes 12,722 shares as to which Mr. Gillespie has reported shared
ownership.
(5) Includes 10,000 shares as to which Mr. Zimmerman has reported shared
ownership.
(6) Includes 20,500 shares as to which Mr. Rozenboom has reported shared
ownership.
3
<PAGE>
The principal occupation of each director of the Company is set forth
below. All directors have held their present position for at least five years
unless otherwise indicated.
Thomas L. Gillespie - Mr. Gillespie joined the Bank as a loan officer
in 1976 and was appointed Vice President - Residential Lending and Collections
in 1978. Mr. Gillespie graduated from the Savings and Loan Academy of Iowa in
1980 and in 1972 received his B.A. degree in Physical Education with a minor in
Science from Simpson College.
Norman P. Zimmerman - Dr. Zimmerman practiced Dentistry in Oskaloosa
for 32 years prior to his retirement in the summer of 1992. Dr. Zimmerman has
been very active in church and community affairs in Oskaloosa. He is currently
serving as the mayor of the City of Oskaloosa, Iowa.
Robert W. DeCook - Mr. DeCook is the President and Chief Executive
Officer of the Company, the Bank and the Bank's subsidiary, Horizon Investment
Services, Inc. Mr. DeCook is a member of the Bar in the State of Iowa and
practiced law for three years in Oskaloosa, Iowa before joining Horizon Federal
as a loan officer in 1972 and thereafter being appointed President and Chief
Executive Officer in 1976. Mr. DeCook is currently serving as Chairman of the
Board of Iowa Title Guarantee, the State title insurance agency. Mr. DeCook has
been the Chairman and a member of the Board of Directors of the Iowa League of
Savings Institutions and Chairman of the Legislative Committee of the Iowa
League of Savings Institutions. Mr. DeCook received his B.A. degree in
Philosophy from Grinnell College in 1964 and his Juris Doctorate from the
University of Iowa in 1967.
Dwight L. Groves - Mr. Groves is currently engaged in the business of
property management primarily in the Oskaloosa, Iowa area. Prior to his
involvement in property management, Mr. Groves spent twenty years in the
restaurant business as an owner/operator.
Gary L. Rozenboom - Mr. Rozenboom has owned and operated a hardwood
floor finishing business in Oskaloosa, Iowa since 1972. He has worked at the
business since 1951. Mr. Rozenboom has been active in community affairs
including serving a term on the Oskaloosa City Counsel.
Meetings and Committees of the Board of Directors
Meetings and Committees of the Company. Meetings of the Company's
Board of Directors are generally held on a monthly basis. The Board of Directors
met 12 times during fiscal 1997. During fiscal 1997, no incumbent director of
the Company attended fewer than 75% of the aggregate of the total number of
Board meetings and the total number of meetings held by the committees of the
Board of Directors on which he served.
The Board of Directors of the Company has standing Audit, Compensation
and Nominating Committees. The Company does not have a standing executive
committee.
The Audit Committee recommends independent auditors to the Board,
reviews the results of the auditors' services, reviews with management and the
internal auditors the systems of internal control and internal audit reports and
assures that the books and records of the Company are kept in accordance with
applicable accounting principles and standards. The members of the Audit
Committee are Directors Zimmerman, Rozenboom, Groves, Gillespie and DeCook. This
Committee met once during fiscal 1997.
The Compensation Committee is currently composed of Directors
Zimmerman and Groves. This Committee is responsible for administering the
Company's 1993 Stock Option and Incentive Plan and Recognition and Retention
Plan. This Committee met twice during the fiscal 1997.
The entire Board of Directors acts as a nominating committee for
selecting nominees for election as directors. While the Board of Directors of
the Company will consider nominees recommended by stockholders, the Board has
not actively solicited such nominations. Pursuant to the Company's Bylaws,
nominations by stockholders must be delivered in writing to the Secretary of the
Company at least 30 days before the date of the Meeting.
Meetings and Committees of the Bank. The Bank's Board of Directors
meets monthly and may have additional special meetings upon the written request
of the Chairman of the Board or at least three directors. The Board of Directors
met 12 times during fiscal 1997. During fiscal 1997, no director of the Bank
attended fewer than 75% of the aggregate of the total number of Board meetings
and the total number of meetings held by the committees of the Board of
Directors on which he served.
4
<PAGE>
The Bank has Loan, Salary, Investment, Asset/Liability Management,
Technology and Audit committees. The Bank does not have a standing Executive
Committee.
The Loan Committee meets weekly, or more frequently as needed, to
review and evaluate loans and approve loans and loan commitments, subject to
Board approval over certain dollar amounts. This committee is comprised of three
individuals who rotate on and off the committee and who are selected from among
several officers of the Bank and most of the members of the Board of Directors.
One outside director of the Bank is always required to be one of the three
members of the Loan Committee. The Loan Committee held approximately 52 meetings
during fiscal 1997.
The Salary Committee establishes compensation for the officers and
employees of the Bank. The current members of this committee are Directors
Zimmerman and Groves and President DeCook. The Salary Committee met two times
during fiscal 1997.
The Investment Committee meets monthly, or more frequently as
necessary, and is responsible for approving investment strategy, implementing
investment policy and monitoring of investment performance of the Bank. The
committee also considers investment recommendations and determines actions to be
taken thereon. The current members of this committee are Director Zimmerman,
President DeCook and Officers Sharon McCrea, Kent Frankenfeld and Sandra
Boender. The Investment Committee held 16 meetings during the fiscal 1997.
The Asset/Liability Management Committee meets monthly, or more
frequently as necessary, and is responsible for managing and setting the Bank's
policy, with respect to the Bank's interest rate risk and setting the interest
rates paid by the Bank. The Asset/Liability Management Committee is comprised of
Director Zimmerman, President DeCook and Officers McCrea, Frankenfeld and
Boender. This committee held 16 meetings during the fiscal 1997.
The Technology Committee meets monthly, or more frequently as
necessary, and is responsible for reviewing and updating the Company's and the
Bank's existing technology, and for recommending new technology to keep the
Company and the Bank competitive in the financial services industry. The
Technology Committee is comprised of Director DeCook, Officers Boender, Sheryl
Dickey, Carol Hoksbergan and Sandra Fall, and employee Vicki Hladik. This
committee held 12 meetings during the fiscal 1997.
All of the outside directors of the Bank constitute the Bank's Audit
Committee, which selects the Bank's independent accountants and meets with these
accountants to discuss the scope and results of the annual audit. This committee
met once during fiscal 1997.
Director Compensation
Cash Compensation. The Company's directors do not receive a fee for
serving on the Company's Board of Directors or any of its committees. All
present members of the Company's Board of Directors are also members of the
Bank's Board of Directors. All of the Bank's non-employee directors are paid a
fee of $400 for each regular and special meeting attended and receive no
additional compensation for service on any committees. Board members who are
employees of the Bank receive no fee for their service on the Board or any
committees.
Executive Compensation
The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the operation
or acquisition of businesses other than the Bank.
5
<PAGE>
The following table sets forth information regarding compensation paid
by the Bank to its Chief Executive Officer for services rendered during fiscal
1997. No executive officer made in excess of $100,000 (salary plus bonus) during
fiscal 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- -------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation Awards
Other Annual Restricted All Other
Name and Principal Position Fiscal Salary Bonus Compensation Stock Options Compensation
Year ($) ($) ($)(1) Award($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. DeCook, President 1997 $75,500 $2,228 --- --- --- $15,878(4)
and Chief Executive Officer 1996 72,500 2,175 --- --- --- 12,397
1995 72,000 2,868 --- $55,660(2) 15,180(3) 11,994
- ----------------------------- ------ ------- ------- ------------ ------------ --------- -------------
</TABLE>
(1) Mr. DeCook did not receive any additional benefits or perquisites which, in
the aggregate, exceeded the lesser of 10% of his salary and bonus, or
$50,000.
(2) Represents the dollar value of the 5,060 shares of restricted Common Stock
granted to Mr. DeCook under the RRP, based on the $11.00 closing price per
share of the Common Stock on October 27, 1994, the date of grant. Any
dividends paid on Common Stock granted pursuant to the RRP are held in a
restricted interest-bearing account until such shares are no longer subject
to restriction. Based on the $19.25 closing price per share of the Common
Stock on June 30, 1997, the 5,060 shares granted to Mr. DeCook had an
aggregate market value of $97,405.
(3) Represents options granted to Mr. DeCook to purchase 15,180 shares of
Common Stock, at an exercise price of $11.00 per share, the "Market Value
(as defined in the Stock Option Plan) of the Common Stock on the date of
the grant. As of June 30, 1997, 60 percent of these options were vested,
with the remaining 40 percent scheduled to vest in two equal annual
installments on October 27, 1997 and 1998, subject to Mr.
DeCook's "Continuous Service" as defined in the Stock Option Plan.
(4) Represents the Bank's ESOP contribution of $15,686 and life insurance
premiums of $192 paid by the Company on behalf of Mr. DeCook.
The following table provides information as to the value of the options
held by the Company's Chief Executive Officer on June 30, 1997, none of which
have been exercised. No stock options or stock appreciation rights were granted
by the Company during fiscal 1997.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#)(1) FY-End ($)(2)
----------------------------------------------------------
Shares
Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Name (#) ($) (#) (#) ($) ($)
Robert W. DeCook --- --- 9,108 6,072 $75,141 $50,094
==================== ============ ========== =========== ============= =========== =============
</TABLE>
(1) Represents an option to purchase shares of Common Stock. The unexercisable
options will vest in two equal annual installments on October 27, 1997 and
1998.
(2) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the option granted based upon the average of
the closing bid and the asked price of $19.25 per share of the Common Stock
as reported on The Nasdaq SmallCap Market on June 30, 1997.
6
<PAGE>
Employment Agreement
The Bank has an employment agreement with Robert W. DeCook for a three
year term. The employment agreement provides for an annual base salary as
determined by the Board of Directors, but in no event less than Mr. DeCook's
current salary, which is $76,700. Salary increases are reviewed not less often
than annually thereafter, and are subject to the sole discretion of the Board of
Directors. The employment contract provides for an extension for one additional
year upon review and authorization by the Board of Directors of the Bank at the
end of each year. For the year ended June 30, 1997, the Bank's Board of
Directors reviewed and authorized the extension of Mr. DeCook's employment
agreement for an additional year.
The agreement provides for termination upon the employee's death, for
cause or upon certain events specified by OTS regulations. The employment
agreement is terminable by Mr. DeCook upon 90 days' notice to the Bank. The
employment agreement further provides for payment to the employee of the greater
of his salary for the remainder of the term of the agreement, or 299% of the
employee's base compensation, in the event there is a "change in control" of the
Bank where employment terminates involuntarily in connection with such change in
control or within 12 months thereafter. This termination payment, however, is
subject to reduction by the amount of all other compensation to the employee
deemed for purposes of the Internal Revenue Code of 1986, as amended (the
"Code") to be contingent on a "change in control," and may not exceed three
times the employee's average annual compensation over the most recent five year
period or be non-deductible by the Bank for federal income tax purposes. For the
purposes of the employment agreement, a "change in control" is defined as any
event which would require the filing of an application for acquisition of
control or notice of change in control pursuant to 12 C.F.R. ss. 574.3 or 4.
Such events are generally triggered prior to the acquisition of control of 10%
of the Corporation's common stock. The agreement guarantees participation in an
equitable manner in employee benefits applicable to executive personnel.
Based on his current salary, if Mr. DeCook was terminated as of July
1, 1997, under circumstances entitling him to severance pay as described above,
he would have been entitled to receive a lump sum cash payment of approximately
$220,000. The contract provides, among other things, for participation in an
equitable manner in employee benefits applicable to executive personnel.
Certain Transactions
The Bank, like many financial institutions, has followed a policy of
granting to officers, directors and employees loans secured by the borrower's
residence and consumer loans. All loans to the Bank's officers and directors are
made in the ordinary course of business and on the same terms, including
interest rate and collateral, and conditions 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. All loans by the Bank to
its directors and executive officers are subject to OTS regulations restricting
loans and other transactions with affiliated persons of the Bank. All loans from
the Bank to its directors, executive officers or their affiliates are approved
or ratified by a majority of the independent and disinterested members of the
Bank's Board of Directors.
II -- RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has renewed the Company's arrangement for KPMG
Peat Marwick LLP to be its auditors for the 1998 fiscal year, subject to the
ratification of the appointment by the Company's stockholders. A representative
of KPMG Peat Marwick LLP is expected to attend the Annual 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 STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
7
<PAGE>
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for the next Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's main office located at
301 First Avenue East, Oskaloosa, Iowa 52577, no later than May 29, 1998. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
8
<PAGE>
REVOCABLE PROXY
HORIZON FINANCIAL SERVICES CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
October 23, 1997
The undersigned hereby appoints the Board of Directors of Horizon
Financial Services Corporation (the "Company"), and its survivor, with full
power of substitution, to act as attorneys and proxies for the undersigned to
vote all shares of common stock of the Company which the undersigned is entitled
to vote at the Annual Meeting of Stockholders (the "Meeting"), to be held on
October 23, 1997 at the main office of the Company located at 301 First Avenue
East, Oskaloosa, Iowa, at 3:00 P.M. local time, and at any and all adjournments
thereof, as follows:
FOR WITHHELD
----- --------
I. The election of Thomas L. Gillespie and
Norman P. Zimmerman as directors for ___ ___
a term to expire in 2000. |___| |___|
Instructions: To vote for all nominees mark the box "FOR" with an "X".
To withhold your vote for an individual nominee mark the box "FOR" with
an "X" and write the name of the individual on the line provided below
for which you wish your vote withheld. To withhold your vote as to all
nominees mark the box "Withheld" with an "X".
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FOR AGAINST ABSTAIN
----- ------- -------
II. The ratification of the appointment
of KPMG Peat Marwick LLP as
auditors for the Company for the ___ ___ ___
fiscal year ending June 30, 1998. |___| |___| |___|
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" the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS 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.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder may revoke this proxy by: (i) filing with the
Secretary of the Company at or before the Meeting a written notice of revocation
bearing a later date than the proxy; (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Secretary of the Company at
or before the Meeting; 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).
The undersigned acknowledges receipt from the Company, prior to the
execution of this Proxy, of Notice of the Meeting, a Proxy Statement dated on or
about September 26, 1997 and the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 1997.
Dated: ________________________
------------------------- -------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
------------------------- ------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears above on this card. When
signing as attorney, executor, administrator, trustee, guardian or
corporate officer please give your full title. If shares are held
jointly, each holder should sign.
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PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
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