SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
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 Rule 14a-11(c) or Rule 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.
<PAGE>
(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 24, 1999
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Horizon Financial Services
Corporation, 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 28, 1999 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 1999 Annual Report to
Stockholders. At the Meeting, we will report on our 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,
/s/Robert W. DeCook
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 28, 1999
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 28, 1999.
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 one director of the Company;
2. The ratification of the appointment of KPMG LLP as auditors for the
Company for the fiscal year ending June 30, 2000;
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 10, 1999
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
/s/ROBERT W. DECOOK
ROBERT W. DECOOK
Chairman of the Board, President and
Chief Executive Officer
Oskaloosa, Iowa
September 24, 1999
- --------------------------------------------------------------------------------
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 28, 1999
This proxy statement is being furnished to you 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 28, 1999, 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 24, 1999. 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 one director of the Company and a proposal to
ratify the appointment of KPMG LLP as the Company's auditors for the fiscal year
ending June 30, 2000.
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
director nominee and "FOR" ratification of the appointment of KPMG LLP as
auditors for the fiscal year ending June 30, 2000. Should any other matters be
properly presented at the annual meeting for action, the persons named in the
enclosed proxy and acting thereunder will have the discretion to vote on such
matters in accordance with the best judgment.
The Company maintains an Employee Stock Ownership Plan ("ESOP") which
owns approximately 8.9% of the Company's common stock. Employees of the Company
and the Bank participate in the ESOP. Pursuant to the terms of the ESOP, each
ESOP participant has the right to direct the trustee of the ESOP on how to vote
the shares of common stock allocated to his or her account under the ESOP. If an
ESOP participant properly executes the proxy distributed by the trustee of the
ESOP, the ESOP trustee will vote the shares represented by that proxy at the
Meeting. Where an ESOP participant specifies a choice, the proxy will be voted
in accordance with the ESOP participant's instructions. If no specific direction
is given, the ESOP trustee will vote the shares "FOR" the election of
management's director nominee and "FOR" ratification of the appointment of KPMG
LLP as auditors for the fiscal year ending June 30, 2000. 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. The trustee of the
ESOP will vote the unallocated ESOP shares in the same proportion as voted
allocated shares.
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.
<PAGE>
The Company will pay the cost of solicitation of proxies. 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 10,
1999 (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 LLP as auditors for
the year ending June 30, 2000 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
proposals, except for 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 LLP 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 875,062 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 Company's directors.
2
<PAGE>
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Horizon Financial Services Corporation Employee 77,666 8.9%
Stock Ownership Plan (1)
301 First Avenue East
Oskaloosa, Iowa 52577
William A. Krause Revocable Trust (2) 86,500 9.9%
4201 Westown Parkway, Suite 320
West Des Moines, Iowa 50266
Athena Capital Management, Inc. (3) 52,270 6.0%
621 E. Germantown Pike, Suite 105
Plymouth Valley, Pennsylvania 19401
Gerald M. Kirke(4) 85,500 9.8%
1776 West Lakes Parkway
West Des Moines, IA 50398
Robert W. DeCook (5) 88,976 10.2%
301 First Avenue East
Oskaloosa, Iowa 52577
Thomas L. Gillespie (6) 55,000 6.3%
301 First Avenue East
Oskaloosa, Iowa 52577
Gary L. Rozenboom (7) 47,274 5.4%
301 First Avenue East
Oskaloosa, Iowa 52577
Directors and executive officers of the Company and the Bank as a group 253,471 29.0%
(7 persons) (8)
</TABLE>
- -----------------------
(1) The amount reported represents shares held by the ESOP, 66,168 shares
of which were allocated to accounts of participants. Pursuant to the
terms of the ESOP, each ESOP participant has the right to direct the
voting of shares of Common Stock allocated to his or her account. First
Bankers Trust Company, N.A., the trustee of the ESOP, may be deemed to
beneficially own the shares of Common Stock held by the ESOP which have
not been allocated to the accounts of participants ("unallocated
shares"). Unallocated shares will be voted in the same proportion as
the voted allocated shares.
(2) Based on information included in a Schedule 13D/A filed by the William
A. Krause Revocable Trust (the "WAK Trust"), with the Securities and
Exchange Commission (the "SEC") on July 6, 1999. The WAK Trust reported
sole voting and investment power with respect to all shares of Common
Stock reported in its Schedule 13D.
(3) Based on information included in a Schedule 13G/A filed by Athena
Capital Management, Inc. ("AMC") with the SEC on January 26, 1999. The
shares of Common Stock to which such Schedule 13G/A relates to are held
by AMC, as investment advisor, for its clients, none of whom
individually own in excess of five percent. AMC reported shared voting
and investment power with respect to all shares of Common Stock
reported in its Schedule 13G/A.
(4) Based on information included in a Schedule 13D filed by Gerald M.
Kirke with the SEC on August 24, 1998. Mr. Kirke reported sole voting
and investment power with respect to all of the shares of Common Stock
reported in his Schedule 13D.
(5) 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 10,360 shares of Common Stock.
(6) Mr. Gillespie has reported sole voting and investment power with
respect to 29,556 shares of Common Stock and shared power with respect
to 25,444 shares of Common Stock beneficially owned by him. Included in
the shares of Common Stock beneficially owned by Mr. Gillespie are
options to purchase 15,180 shares of Common Stock.
(Footnotes to the table continue on the next page)
3
<PAGE>
(7) Mr. Rozenboom has reported sole voting and investment power with
respect to 6,274 shares of Common Stock and shared power with respect
to 41,000 shares of Common Stock beneficially owned by him. Included in
the Common Stock beneficially owned by Mr. Rozenboom are options to
purchase 5,060 shares of Common Stock.
(8) 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 42,660 shares of Common
Stock.
PROPOSAL 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 nominee 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 nominee were selected.
<TABLE>
<CAPTION>
Shares of
Term of Common Stock Percent
Director Office Beneficially of
Name Age(1) Position(s) Held Since(2) Expires Owned(3) Class
- ------------------------------------------------------------------------------------------------------------------
NOMINEES
<S> <C> <C> <C> <C> <C> <C>
Robert W. DeCook 57 Chairman of the Board, 1973 2002 88,976 10.2%
President and Chief
Executive Officer
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C> <C> <C> <C>
Dwight L. Groves 60 Director 1995 2001 3,110 *%
Gary L. Rozenboom 59 Director 1982 2001 47,274(4) 5.4%
Thomas L. Gillespie 49 Director and Vice 1992 2000 55,000(5) 6.3%
President
Norman P. Zimmerman 66 Director 1976 2000 26,274 3.0%
</TABLE>
- -----------------
* Less than 1%.
(1) At June 30, 1999.
(2) Includes service as a director of the Bank.
(Footnotes to the table continue on the next page)
4
<PAGE>
(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. Groves - 1,720 shares; Mr. Rozenboom - 5,060 shares; Mr. Gillespie
- 15,180 shares; Mr. Zimmerman - 5,060 shares; and Mr. DeCook - 10,360
shares.
(4) Includes 41,000 shares as to which Mr. Rozenboom has reported shared
voting and dispositive power.
(5) Includes 25,444 shares as to which Mr. Gillespie has reported shared
voting and dispositive power.
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.
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 has served as Chairman of the Board of
Iowa Title Guarantee, the State's title insurance agency. Mr. DeCook has been
the Chairman and a member of the Board of Directors of Iowa's Community Bankers
and Chairman of the Legislative Committee of Iowa's Community Bankers. 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 Council.
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 a former
mayor of the City of Oskaloosa, Iowa.
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 1999. During fiscal 1999, 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
5
<PAGE>
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 1999.
The Compensation Committee is currently composed of Directors
Zimmerman, Rozenboom and Groves. This Committee is responsible for administering
the Company's 1994 Stock Option and Incentive Plan and the Company's Recognition
and Retention Plan. This Committee met two times during the fiscal 1999.
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 (and be in
compliance with the requirements of the Company's Bylaws) and received at the
principal executive offices of the Company not less than 30 days prior to the
date of the meeting; provided, however, that in the event that less than 40
days' notice or prior disclosure of the date of the meeting is given or made to
stockholders, to be timely, notice by the stockholder must be so received not
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.
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 1999. During fiscal 1999, 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.
The Bank has Standing Salary, Audit and Nominating Committees. The Bank
also has other committees, including Loan, Investment, Asset/Liability
Management, and Technology Committees, which meet as needed to review various
other functions of the Bank.
The Salary Committee establishes compensation for the officers and
employees of the Bank. The current members of this committee are Directors
Zimmerman, Rozenboom, and Groves and President DeCook. The Salary Committee met
two times during fiscal 1999.
The Bank's Audit Committee selects the Bank's independent accountants
and meets with these accountants to discuss the scope and results of the annual
audit. This committee, which is composed of the outside directors of the Bank,
met once during fiscal 1999.
The Bank's Nominating Committee, which consists of the full Board of
Directors of the Bank, reviews the terms of the directors and makes nominations
for directors to be voted on by the Company, as the sole shareholder of the
Bank. This committee met once during fiscal 1999.
Director 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 $600 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.
6
<PAGE>
Executive Compensation
The following table sets forth information regarding compensation paid
or granted to the Company's Chief Executive Officer for services rendered during
fiscal 1999. No executive officer made in excess of $100,000 (salary plus bonus)
during fiscal 1999.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- --------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation (1) Compensation Awards
- --------------------------------------------------------------------------------------------------------------------
Restricted All Other
Fiscal Salary Bonus Stock Options Compensation
Name and Principal Position Year ($) ($) Award($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 $78,700 $1,500 --- --- $16,630(2)
Robert W. DeCook, President 1998 76,700 6,118 --- --- 31,185
and Chief Executive Officer 1997 75,500 2,228 --- --- 15,878
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. DeCook did not receive any additional benefits or perquisites
which, in the aggregate, exceed the lesser of 10% of his salary and
bonus, or $50,000.
(2) Represents the ESOP contribution of $16,423 and life insurance premiums
of $207 paid by the Company on behalf of Mr. DeCook.
The following table provides information as to the value of the options
held by the Company's Chief Executive Officer on June 30, 1999, none of which
have been exercised. No stock options or stock appreciation rights were granted
by the Company during fiscal 1999.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Aggregate Option Exercises in Last Fiscal Year and FY-End Option Values
- --------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#)(1) FY-End ($)(2)
- --------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. DeCook --- $--- 10,360 --- $86,092 $---
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents an option to purchase shares of Common Stock. Option amounts
have been adjusted to reflect the two-for-one stock split paid in the
form of a 100% stock dividend by the Company on November 10, 1997.
(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 $8.31 per share of the Common
Stock as reported on the Nasdaq SmallCap Market on June 30, 1999.
7
<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 for fiscal 1999 was $78,700. 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, 1999, 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 Office of Thrift Supervision ("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 Company'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,
1999, under circumstances entitling him to severance pay as described above, he
would have been entitled to receive a lump sum cash payment of approximately
$230,130. 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.
8
<PAGE>
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has renewed the Company's arrangement for KPMG
LLP to be its auditors for the 2000 fiscal year, subject to the ratification of
the appointment by the Company's stockholders. A representative of KPMG 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 LLP AS THE COMPANY'S AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 2000.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for its 2000 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 28, 2000. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended, and as with any
stockholder proposal (regardless of whether included in the Company's proxy
materials), the Company's Certificate of Incorporation and Bylaws, and Delaware
law. Otherwise, any stockholder proposal to take action at such meeting must be
received at the Company's main office on or before September 28, 2000 (30 days
prior to next years anticipated annual meeting date). In the event that the date
of next year's annual meeting changes, a stockholder proposal must be received
not later than 30 days prior to the new date of such annual meeting; provided,
however, that in the event that less than 40 days notice or prior disclosure of
the new date of annual meeting is given or made to stockholders, notice of a
proposal by a stockholder to be timely must be received not later than the close
of business on the tenth day following the day on which notice of the new date
of the annual meeting was mailed or public announcement of the new date of such
meeting was first made. All stockholder proposals must also comply with the
Company's Certificate of Incorporation and Bylaws, and Delaware law.
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.
9
<PAGE>
REVOCABLE PROXY
HORIZON FINANCIAL SERVICES CORPORATION
ANNUAL MEETING OF SHAREHOLDERS o October 28, 1999
The undersigned hereby appoints the members of 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 Shareholders (the "Meeting"), to be
held on October 28, 1999 at the Company's office located at 301 First Avenue
East, Oskaloosa, Iowa, at 3:00 P.M. local time, and at any and all adjournments
thereof, as follows:
I. The election of Robert W. DeCook as a director for a term to expire in
the year 2002.
[ ] FOR [ ] WITHHELD
II. The ratification of the appointment of KPMG LLP as independent auditors
for the Company for the year ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
(Continued and to be signed on the reverse side)
<PAGE>
(Continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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 JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
The proxy may be revoked at any time before it is voted by filing with the
Secretary of the Company 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 shres of Company 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. If this proxy is properly revoked as
described above, then the power of such attorney and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company, prior to the execution
of this proxy, of Notice of Annual Meeting, a proxy statement dated September
24, 1999 and the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1999.
DATED: _________________________________
_________________________________ _________________________________
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
_________________________________ _________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian please give your full
title. If shares are held jointly, each holder should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE
