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
[ X ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Harrington Financial Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Harrington Financial Group, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
<PAGE>
Payment of Filing Fee (Check the appropriate box):
(previously paid by wire transfer)
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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>
September 24, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Harrington Financial Group, Inc. The meeting will be held at the Radisson
Hotel, located at 8787 Keystone Crossing, Indianapolis, Indiana 46240, on
Thursday, October 23, 1997 at 2:00 p.m., Eastern Standard Time. The matters to
be considered by stockholders at the Annual Meeting are described in the
accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. Voting by proxy will not prevent you from voting in person, but will
ensure that your vote is counted if you are unable to attend.
Your continued support of and interest in Harrington Financial Group,
Inc. are sincerely appreciated.
Sincerely,
/s/ Douglas T. Breeden
Douglas T. Breeden
Chairman of the Board
/s/ Craig J. Cerny
Craig J. Cerny
President
<PAGE>
HARRINGTON FINANCIAL GROUP, INC.
722 E. Main Street
Richmond, Indiana 47375
(765) 962-8531
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 23, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Harrington Financial Group, Inc. (the "Company") will be held at
the Radisson Hotel located at 8787 Keystone Crossing, Indianapolis, Indiana
46240, on Thursday, October 23, 1997 at 2:00 p.m., Eastern Standard Time, for
the following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect four (4) directors for a three-year term or until their
successors are elected and qualified;
(2) To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending June
30, 1998; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any other such
business.
The Board of Directors has fixed September 5, 1997 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Debra L. Dugan
Debra L. Dugan
Corporate Secretary
Richmond, Indiana
September 24, 1997
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
<PAGE>
HARRINGTON FINANCIAL GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 23, 1997
This Proxy Statement is furnished to holders of common stock, $0.125
par value per share ("Common Stock"), of Harrington Financial Group, Inc. (the
"Company"), the Indiana- chartered registered thrift holding company for
Harrington Bank, FSB (the "Bank"). Proxies are being solicited on behalf of the
Board of Directors of the Company to be used at the Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Radisson Hotel located at 8787
Keystone Crossing, Indianapolis, Indiana 46240, on Thursday, October 23, 1997 at
2:00 p.m., Eastern Standard Time, for the purposes set forth in the Notice of
Annual Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about September 24, 1997.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted FOR the nominees for director described herein, FOR
ratification of the appointment of Deloitte & Touche LLP for fiscal 1998 and
upon the transaction of such other business as may properly come before the
meeting in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company written
notice thereof (Secretary, Harrington Financial Group, Inc., P. O. Box 968,
Richmond, Indiana 47375); (ii) submitting a duly-executed proxy bearing a later
date; or (iii) appearing at the Annual Meeting and giving the Secretary notice
of his or her intention to vote in person. Proxies solicited hereby may be
exercised only at the Annual Meeting and any adjournment thereof and will not be
used for any other meeting.
VOTING
Only stockholders of record at the close of business on September 5,
1997 ("Voting Record Date") will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 3,256,738 shares of Common Stock outstanding
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting. Directors are elected by a plurality of the
votes cast with a quorum present. The four persons who receive the greatest
number of votes of the holders of Common Stock represented in person or by proxy
at the Annual Meeting will be elected directors of the Company. Abstentions are
considered in determining the presence of a quorum and will not affect the vote
required
<PAGE>
for the election of directors. The affirmative vote of the holders of a majority
of the total votes present in person or by proxy is required to ratify the
appointment of the independent auditors. Abstentions will not be counted as
votes cast, and accordingly will have no effect on the voting of this proposal.
Under rules of the New York Stock Exchange, all of the proposals for
consideration at the Annual Meeting are considered "discretionary" items upon
which brokerage firms may vote in their discretion on behalf of their clients if
such clients have not furnished voting instructions. Thus, there are no
proposals to be considered at the Annual Meeting which are considered
"non-discretionary" and for which there will be "broker non-votes."
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
Election of Directors
The Amended and Restated Articles of Incorporation of the Company
provide that the Board of Directors of the Company shall be divided into three
classes which are as nearly equal in number as possible, and that members of
each class of directors are to be elected for a term of three years. One class
is to be elected annually. Stockholders of the Company are not permitted to
cumulate their votes for the election of directors.
No director or executive officer of the Company is related to any other
director or executive officer of the Company by blood, marriage or adoption, and
each of the nominees currently serves as a director of the Company, except
Marianthe S. Mewkill.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If the person or persons named as nominee should be unable or unwilling
to stand for election at the time of the Annual Meeting, the proxies will
nominate and vote for one or more replacement nominees recommended by the Board
of Directors. At this time, the Board of Directors knows of no reason why the
nominees listed below may not be able to serve as directors if elected.
The following tables present information concerning the nominees for
director of the Company and each director whose term continues.
2
<PAGE>
<TABLE>
Nominees for Director for Three-Year Term Expiring in 2000
<CAPTION>
Director
Name Age(1) Since
- ------------------------------------------------ ----------------- ------------------------
<S> <C> <C>
Douglas T. Breeden 46 1988
Stephen A. Eason, C.F.A. 40 1991
Daniel C. Dektar 38 1996
Marianthe S. Mewkill 36 --
</TABLE>
The Board of Directors recommends that you vote FOR the election of the
above nominees for director.
<TABLE>
Members of the Board of Directors Continuing in Office
Directors Whose Terms Expire in 1998
<CAPTION>
Director
Name Age(1) Since
- -------------------------------------------- ------------------ --------------------------
<S> <C> <C>
Michael J. Giarla 39 1988
Lawrence E. Golaszewski, C.P.A. 38 1991
David F. Harper, C.P.A. 54 1995
John J. McConnell 51 1995
</TABLE>
<TABLE>
Directors Whose Terms Expire in 1999
<CAPTION>
Director
Name Age(1) Since
- ------------------------------------------------ ----------------- ------------------------
<S> <C> <C>
Craig J. Cerny 42 1988
William F. Quinn, C.F.A. 33 1991
Stanley J. Kon 48 1994
</TABLE>
- ------------------
(1) As of September 5, 1997.
Information concerning the principal position with the Company and the
Bank and principal occupation of each nominee for director and members of the
Board continuing in office during the past five years is set forth below.
3
<PAGE>
Douglas T. Breeden. Dr. Breeden is currently Chairman of the Board of
the Company and Chairman of the Board and Chief Executive Officer of Smith
Breeden Associates, Inc. ("Smith Breeden"), which he co-founded in June 1982.
Dr. Breeden also serves as Chairman of the Board of the Smith Breeden Mutual
Funds, and Chairman of the Board of Breeden Community Corporation, which owns
the Overlook Restaurant and the Leavenworth Inn, both located in Leavenworth,
Indiana. He is a Research Professor of Finance at Duke University's Fuqua School
of Business, where he has been on the faculty since 1985. Dr. Breeden has also
served on business school faculties at Stanford University and the University of
Chicago, and as a visiting professor at Yale University and the Massachusetts
Institute of Technology. He is Editor of the Journal of Fixed Income. Dr.
Breeden has served as Associate Editor for five journals in financial economics,
and was elected to the Board of Directors of the American Finance Association.
He holds a Ph.D. in Finance from the Stanford University Graduate School of
Business, and a B.S. in Management Science from the Massachusetts Institute of
Technology. Dr. Breeden was formerly Chairman of the Board of Roosevelt
Financial Group, a $9 billion thrift, recently acquired by Mercantile Bancorp.
Craig J. Cerny. Mr. Cerny has been the President of the Company and the
Chairman of the Board and Chief Executive Officer of the Bank since February
1992. Prior thereto, Mr. Cerny was the Company's Executive Vice President since
1988. Mr. Cerny has been the Bank's President since July 1994. Mr. Cerny
currently serves as the Chairman of the Board and Chief Executive Officer of
Harrington West Financial Group, Inc., a $400 million thrift holding company
with offices on the southern and central coast of California, and as a director
of its wholly owned subsidiary, Los Padres Savings Bank, F.S.B.. Mr. Cerny is a
former Principal, Executive Vice President and Director of Smith Breeden where
he was employed from April 1985 to December 1996. Mr. Cerny was active in Smith
Breeden's bank consulting and investment advisory practice. Prior to joining
Smith Breeden, Mr. Cerny held a number of financial management related positions
with Hallmark Cards and Pizza Hut Restaurants, Inc. He holds a Master of
Business Administration in Finance from Arizona State University, where he
graduated with distinction. Mr. Cerny earned a Bachelor of Science in Finance
from Arizona State University and was a member of the Honors Convocation.
Daniel C. Dektar. Mr. Dektar is a Director, Principal and Executive
Vice President of Smith Breeden. He joined the firm in August 1986. He serves as
a liaison among the trading, client service, and research groups to ensure
accurate analysis and timely execution of trading opportunities. Mr. Dektar
manages mortgage portfolios for the Smith Breeden Family of Mutual Funds and is
a Vice President of several of the funds. Mr. Dektar consults institutional
clients in the areas of investments and risk management. He holds a Master of
Business Administration from Stanford University Graduate School of Business.
Mr. Dektar received a Bachelor of Science in Business Administration, summa cum
laude, from the University of California at Berkeley, where he was a University
of California Regent's Scholar.
4
<PAGE>
Stephen A. Eason, C.F.A. Mr. Eason is an Executive Vice President and
Director of Smith Breeden where he has been employed since April 1988. Mr. Eason
manages Smith Breeden's Dallas office and is Director of the firm's
discretionary separate account management business. He holds a Master of
Business Administration with Concentration in Finance from The Wharton School,
Graduate Division, University of Pennsylvania. Mr. Eason earned a Bachelor of
Science in Business Administration, Finance and Banking, from the University of
Arkansas, where he graduated with Highest Honors.
Michael J. Giarla. Mr. Giarla is President, Chief Operating Officer and
Director of Smith Breeden where he has been employed since July 1985. He also
serves as President of the Smith Breeden Mutual Funds. Formerly Smith Breeden's
Director of Research, he was involved in research and programming, particularly
in the development and implementation of models to evaluate and hedge mortgage
securities. Mr. Giarla holds a Master of Business Administration with
Concentration in Finance from the Stanford University Graduate School of
Business. He earned a Bachelor of Arts in Statistics, summa cum laude, from
Harvard University.
Lawrence E. Golaszewski, C.P.A. Mr. Golaszewski has been a consultant
for L.E.G. Consulting, a sole proprietorship providing strategic and financial
consulting services to financial institutions, government sponsored enterprises
and brokerage firms, since August 1996. Mr. Golaszewski has particular expertise
in the analysis and evaluation of mortgage banking operations, including the
formulation of models for evaluating excess mortgage servicing, pipeline hedging
and pipeline fallout rates. He served as Vice President and Principal of Smith
Breeden where he was employed from 1987 until 1996. At Smith Breeden, Mr.
Golaszewski was actively involved in the analysis, trading, and hedging of
mortgage loans and securities. Mr. Golaszewski holds a Master of Business
Administration with Specialization in Finance from the University of Chicago
Graduate School of Business. He holds a Bachelor of Science in
Finance/Accounting, summa cum laude, from the State University of New York at
Buffalo.
David F. Harper, C.P.A. Mr. Harper has been a Vice President of Harris
Harper Counsel, Inc., an investment advisory firm located in Richmond, Indiana,
since January 1991. Mr. Harper also has maintained a public accounting practice
since October 1990. He previously was a Partner in the Indiana C.P.A. Firm of
Geo. S. Olive & Co. from October 1978 to October 1990. Mr. Harper has served as
a Director of the Bank since 1991. He holds a Bachelor of Business
Administration in Accounting, magna cum laude, from the University of
Cincinnati.
Stanley J. Kon. Dr. Kon is a Principal of Smith Breeden Associates,
Inc. and senior member of the Research Group. Dr. Kon has been a Professor of
Finance at the University of Michigan since 1982. During this time he served as
Chairman of the Finance Department, Director of the J. Ira Harris Center for the
Study of Corporate Finance, and a member of the Advisory Board for the Mitsui
Life Financial Research Center. Prior to 1982, Professor Kon served on the
faculties of New York University, University of Chicago,
5
<PAGE>
and the University of Wisconsin at Madison. He has written extensively in the
areas of investment management, performance measurement, asset pricing, and
statistical models of stock returns. Dr. Kon has also served as a consultant to
government, business and financial institutions. Dr. Kon is also a Director of
Harrington Bank, Harrington West Financial Group, Inc., and Los Padres Savings
Bank. Dr. Kon holds a Ph.D. in Finance from the State University of New York at
Buffalo, a Master of Business Administration in Finance and Economics from St.
John's University and a Bachelor of Science in Chemical Engineering from the
Lowell Technological Institute.
John J. McConnell. Dr. McConnell is the Emanuel T. Weiler Distinguished
Professor of Management and the Director of Doctoral Programs and Research at
the Krannert School of Management, Purdue University, and has served in that
capacity since 1989. He has been a professor of Finance at that institution
since 1983. Dr. McConnell currently serves as a director of Harrington West
Financial Group, Inc. and its wholly-owned subsidiary, Los Padres Savings Bank.
He served on the Board of Directors of the Federal Home Loan Bank of
Indianapolis from 1983 to 1986 and has done consulting work for various
government agencies, trade associations and corporations. He has authored
numerous publications on topics related to financial services and general
finance. Dr. McConnell holds a Ph.D. in Finance from Purdue University and a
Master of Business Administration in Finance and Accounting from the University
of Pittsburgh. He received his undergraduate degree in Economics from Dennison
University.
Marianthe S. Mewkill. Ms. Mewkill is the Chief Financial Officer of Smith
Breeden where she has been employed since 1992. She also serves as the Chief
Financial Officer of the Smith Breeden Mutual Funds. She handles financial
reporting, budgeting, and tax research and planning for Smith Breeden's four
offices and for the Smith Breeden Mutual Funds. She also ensures compliance with
agency regulations and administers Smith Breeden's internal trading policy. Ms.
Mewkill holds a Master of Business Administration with a concentration in
Finance from the Leonard N. Stern School of Business, New York University. She
earned a Bachelor of Arts from Wellesley College, magna cum laude, with a major
in History and French, and a minor in Economics.
William F. Quinn, C.F.A. Mr. Quinn is a Vice President and Principal of Smith
Breeden where he has been employed since June 1986. Mr. Quinn is a portfolio
manager for Smith Breeden, where he manages several fixed income portfolios for
a number of institutional clients. He is also actively involved in the
formulation and implementation of investment and risk management policies and
procedures as well as clients' strategic and business plans. Mr. Quinn was an
Executive Vice President of the Company from March 1992 to October 1996 and
served on the Bank's Investment Committee, where he participated in the
determination of the Bank's investment strategies. Mr. Quinn holds a Master of
Science in Management with Concentrations in Finance, MIS and System Dynamics
from the Sloan School of Management, Massachusetts Institute of Technology. He
earned a Bachelor of Science in Management Science from the Massachusetts
Institute of Technology.
6
<PAGE>
Stockholder Nominations
Article III, Section 14 of the Company's Amended and Restated Bylaws
("Bylaws") governs nominations for election to the Board of Directors and
requires all such nominations, other than those made by the nominating committee
of the Board, to be made at a meeting of stockholders called for the election of
directors, and only by a stockholder who has complied with the notice provisions
in that section. Stockholder nominations must be made pursuant to timely notice
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered to, or mailed, postage prepaid, to the principal executive
offices of the Company not later than 90 days prior to the anniversary date of
the mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of stockholders of the Company. Each written notice of
a stockholder nomination shall set forth (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (e)
the consent of each nominee to serve as a director of the Company if so elected.
Board of Directors Meetings and Committees of the Company and the Bank
Beginning August 1996, regular meetings of the Board of Directors of
the Company are held quarterly. During the year ended June 30, 1997, the Board
of Directors of the Company held five meetings. No incumbent director attended
fewer than 75% of the aggregate of the total number of Board meetings held
during his tenure in office during the last fiscal year or the total number of
all meetings held by committees of the Board on which he served during such
year. The Board of Directors of the Company has established the following
committees:
The Audit Committee of the Company recommends independent auditors to
the Board annually and reviews the Company's financial statements and the scope
and results of the audit performed by the Company's independent auditors. The
Audit Committee, which is comprised of Messrs. Harper, Kon and Golaszewski, met
four times during fiscal 1997.
The Nominating Committee of the Company makes director nominations for service
on the Board of Directors. The Nominating Committee members are Messrs. Breeden,
Giarla and McConnell. The Nominating Committee met once during fiscal 1997. For
the
7
<PAGE>
director nominations to be acted upon at the Annual Meeting, the Nominating
Committee included Mr. Cerny, Mr. Harper, and Dr. McConnell.
The Compensation Committee reviews the compensation of Mr. Cerny, the
President of the Company, and recommends to the Board adjustments in his
compensation. See "Executive Compensation - Compensation Committee Interlocks
and Insider Participation." The Compensation Committee of the Company also
administers the stock benefit plans of the Company. The Committee, which is
comprised of Messrs. Breeden, Giarla and McConnell, met once during fiscal 1997.
The Executive Committee of the Company is empowered to act on behalf of
the Company's Board of Directors when the Board is not in session. Beginning
August 1996, the Executive Committee of the Company meets intraquarterly. The
Executive Committee members are Messrs. Breeden, Cerny, Giarla, Harper, Kon and
McConnell. The Executive Committee met seven times during fiscal 1997.
The Executive Committee of the Bank reviews the compensation of senior
executive officers, other than the President, and recommends to the Board
adjustments in such compensation based on a number of factors, including the
profitability of the Bank. See "Executive Compensation - Compensation Committee
Interlocks and Insider Participation." The Executive Committee is also empowered
to act on behalf of the Bank's Board of Directors when the Board is not in
session. Messrs. Cerny, Kon and McConnell comprise the Executive Committee,
which met once during fiscal 1997.
Executive Officers Who Are Not Directors
Set forth below is information concerning the executive officers of the
Company and the Bank who do not serve on the Board of Directors of the Company.
All executive officers are elected by the Board of Directors and serve until
their successors are elected and qualified. No executive officer is related to
any director or other executive officer of the Company by blood, marriage or
adoption, and there are no arrangements or understandings between a director of
the Company and any other person pursuant to which such person was elected an
executive officer.
Catherine A. Habschmidt, C.P.A. Ms. Habschmidt is Chief Financial Officer and
Treasurer of the Company and Senior Vice President, Chief Financial Officer and
Secretary of the Bank. Ms. Habschmidt became Chief Financial Officer and
Treasurer of the Company in November 1995. Ms. Habschmidt has served as the
Bank's Chief Financial Officer since 1989, and as Senior Vice President and
Secretary since 1994. Prior thereto, she served as Controller of the Bank since
1987 and was employed by a public accounting firm from 1985 to 1987. Ms.
Habschmidt holds a Master of Science in Accounting from Ball State University
where she received the Outstanding Graduate Student Award. She holds a Bachelor
of Arts in Mathematics from Earlham College where she was elected to Phi Beta
Kappa.
8
<PAGE>
James C. Stapleton. Mr. Stapleton has been Executive Vice President and
Chief Operating Officer of the Bank since June 1992. From August 1989 to June
1992, Mr. Stapleton served as the Bank's Compliance Officer. Prior thereto, Mr.
Stapleton was a Loan Officer for the Bank from 1986 through July 1989 and served
in various management positions for the Richmond Palladium - Item newspaper from
1976 to 1986.
Daniel H. Haglund. Mr. Haglund has been Chief Investment Officer and
Treasurer of the Bank since June 1994 and Senior Vice President since October
1995. From September 1988 to June 1994, Mr. Haglund served as Portfolio Manager
for Hemet Federal Savings and Loan Association, Hemet, California. Mr. Haglund
holds a Master of Business Administration in Finance from Indiana University and
a Bachelor of Arts in Psychology from Alma College.
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN PERSONS
The following table sets forth, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by the directors of the
Company and all directors and executive officers of the Company and the Bank as
a group. Other than with respect to certain directors of the Company as set
forth below, the Company was not aware of any other person or entity, including
any "group" as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), who or which was the beneficial owner
of more than 5% of the issued and outstanding Common Stock.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned as of
Name of Beneficial Owner September 5, 1997(1)
- -------------------------------------------------------------------- ----------------------------------------
No. %
--------------------------- -----------
<S> <C> <C>
Douglas T. Breeden 1,503,490(2) 46.16%
Craig J. Cerny 246,727(3) 7.58
Daniel C. Dektar 52,128(4) 1.59
Stephen A. Eason, C.F.A. 120,906(5) 3.71
Michael J. Giarla 194,599(6) 5.97
Lawrence E. Golaszewski, C.P.A. 62,264(7) 1.91
David F. Harper, C.P.A. 11,392(8) *
Stanley J. Kon 10,224(9) *
Gerald J. Madigan 2,940(10) *
John J. McConnell 3,392(11) *
William F. Quinn, C.F.A. 78,740(12) 2.41
All directors and executive officers of the Company 2,315,548(13) 71.02%
and the Bank as a group (17 persons)
</TABLE>
(Footnotes on following page)
9
<PAGE>
- -----------------
* Represents less than 1% of the outstanding Common Stock.
(1) For purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to beneficially own shares of
Common Stock if he or she directly or indirectly has or shares (i)
voting power, which includes the power to vote or to direct the voting
of the shares; or (ii) investment power, which includes the power to
dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment
power with respect to the indicated shares. Shares which are subject to
stock options and which may be exercised within 60 days of September 5,
1997 are deemed to be outstanding for the purpose of computing the
percentage of Common Stock beneficially owned by such person.
(2) Includes 11,400 shares held by Dr. Breeden's spouse, 4,000 shares held
by Dr. Breeden's spouse as custodian for their children, 200 shares
which may be acquired by Dr. Breeden upon the exercise of stock
options, and 15,000 shares held by Breeden Community Corporation, a
corporation controlled by Dr. Breeden.
(3) Includes 30,000 shares held by Mr. Cerny's spouse, 967 shares held by
the Company's Employee Stock Ownership Plan ("ESOP") for the account of
Mr. Cerny, and 6,000 shares held by a profit sharing plan maintained by
Smith Breeden.
(4) Includes 200 shares which may be acquired by Mr. Dektar upon the
exercise of stock options.
(5) Includes 18,000 shares held by a profit sharing plan maintained by
Smith Breeden and 200 shares which may be acquired by Mr. Eason upon
the exercise of stock options.
(6) Includes 30,347 shares held by a profit sharing plan maintained by
Smith Breeden, 9,393 shares held by Mr. Giarla as custodian for his
child, 3,899 shares held by Mr. Giarla's spouse in her Individual
Retirement Account, 80,760 shares held by Mr. Giarla's spouse, and 200
shares which may be acquired by Mr. Giarla upon the exercise of stock
options.
(7) Includes 200 shares which may be acquired by Mr. Golaszewski upon the
exercise of stock options.
(8) Includes 300 shares which may be acquired by Mr. Harper upon the
exercise of stock options.
10
<PAGE>
- -----------------
(9) Includes 3,536 shares held by Dr. Kon as custodian for his children and
300 shares which may be acquired by Dr. Kon upon the exercise of stock
options.
(10) Includes 200 shares which may be acquired by Mr. Madigan upon the
exercise of stock options. Mr. Madigan is not standing for reelection
as a director.
(11) Includes 3,092 shares held jointly with Dr. McConnell's spouse and 300
shares which may be acquired by Dr. McConnell upon the exercise of
stock options.
(12) Includes 7,300 shares held by a profit sharing plan maintained by Smith
Breeden and 200 shares which may be acquired by Mr. Quinn upon the
exercise of stock options.
(13) Includes 2,500 shares which may be acquired by all directors and
executive officers of the Company as a group upon the exercise of stock
options. Also includes 2,933 shares which are held by the Company's
ESOP, which have been allocated to the accounts of executive officers.
Under the terms of the ESOP, Craig J. Cerny, Catherine A. Habschmidt
and James C. Stapleton, who act as trustees of the plan, must vote the
allocated shares held in the ESOP in accordance with the instructions
of the executive officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who own more than 10% of the Company's Common Stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. by certain dates. The Company believes that in the fiscal year ended June
30, 1997, all of these filing requirements were satisfied by its directors and
executive officers except that (i) Merrill Baxter, Mr. Harper and Mr. Quinn were
late reporting two transactions; and (ii) Messrs. Breeden, Dektar, Eason,
Giarla, Golaszewski, Kon, Madigan, and McConnell and Essie Fagan were each late
once in reporting one transaction. In making the foregoing statements, the
Company has relied on representations of its directors and executive officers
and copies of the reports that they have filed with the SEC. The Company knows
of no person, other than Douglas T. Breeden, the Company's Chairman of the
Board, who owns 10% or more of the Company's Common Stock.
11
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table includes individual compensation information with
respect to the President of the Company and the Bank (who serves as the Chief
Executive Officer), who is the only officer of the Company and its subsidiaries
whose total compensation exceeded $100,000 for services rendered in all
capacities during the three fiscal years ended June 30, 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Name and Fiscal Annual Compensation Awards Compensation(3)
------------------------------ -------------------- ---------------------
Principal Position Year Salary(1) Bonus Number of
- -------------------- ------------ ------------- -------------- Options
--------------------
<S> <C> <C> <C> <C> <C>
Craig J. Cerny, 1997 $175,000 $50,000 5,000 $24,212
President 1996 145,833 56,250 -- 22,603
1995 73,077 35,000 16,000(2) 11,058
</TABLE>
- ----------------
(1) Does not include amounts attributable to miscellaneous benefits
received by Mr. Cerny. The costs to the Company of providing such
benefits to Mr. Cerny during the indicated period did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported.
(2) Adjusted to take into consideration a four-for-one stock split with
respect to the Common Stock effective in October 1994 and a two-for-one
stock split effective in October 1995. Consists of stock options
granted in August 1994, which options were exercised in December 1995.
(3) Comprised of $11,500, $9,000 and $6,000 of Bank director fees and
$12,712, $13,603 and $5,058 in contributions pursuant to the Bank's
Profit Sharing Plan in fiscal 1997, 1996 and 1995, respectively. See "-
Benefits - Profit Sharing Plan."
<PAGE>
The following table discloses the total options granted to the
executive officer named in the Summary Compensation Table during the year ended
June 30, 1997:
<TABLE>
<CAPTION>
Number of % of Total Options
Options Granted To Exercise Grant Date
Name Granted Employees(1) Price(2) Expiration Date Present Value(3)
- ------------------ --------------- ------------------ -------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Craig J. Cerny 5,000 58.8% $10.00 January 9, 2007 $29,635
</TABLE>
(Footnotes on following page)
12
<PAGE>
- ---------------
(1) Percentage of options granted to all employees during fiscal 1997.
(2) The exercise price was based on the closing market price of a share of
the Company's Common Stock on the date of grant.
(3) Present Value of the grant at the date of grant under the Black-Scholes
option pricing model.
The following table sets forth, with respect to the executive officer
named in the Summary Compensation Table, information with respect to the
aggregate amount of options exercised during the last fiscal year, any value
realized thereon, the number of unexercised options at the end of the fiscal
year (exercisable and unexercisable) and the value with respect thereto under
specified assumptions.
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired on Value Number of Unexercised in the Money Options at
Name Exercise Realized Options at Fiscal Year End June 30, 1997
- --------------------- ------------ ------------ ----------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig J. Cerny -- -- -- 21,000(1) -- $84,625(2)
</TABLE>
- ---------------
(1) 16,000 shares are exercisable between December 15, 1997 and January 15,
1998 at $7.50 per share. 5,000 shares are exercisable at the rate of
20% per year on each annual anniversary of the date the options were
granted (January 9, 1997) at $10.00 per share.
(2) Value is calculated as the difference between the market price of the
Company's stock at June 30, 1997 ($12.125) and the $7.50 exercise price
for 16,000 shares and the $10.00 exercise price for 5,000 shares.
Board Fees
Directors of the Company (except for the Chief Executive Officer)
received fees of $500 for each meeting attended during fiscal 1997. All
directors of the Bank received fees of $1,000 for each Board meeting attended in
person and $500 for each meeting attended by conference call. Company directors
(except for the Chief Executive Officer who does not receive committee fees)
received $500 per Executive Committee meeting and $300 per Audit Committee
Meeting. In addition, Bank directors (except for the Chief Executive Officer who
does not receive committee fees) received $500 per Executive Committee meeting,
$500 per Investment Committee meeting, $300 per Audit Committee meeting, $300
per Community Reinvestment Act Committee meeting, and $200 per Trust Services
Committee meeting.
13
<PAGE>
Benefits
Employee Stock Ownership Plan. The Company maintains the ESOP for
employees of the Company and the Bank. Full-time employees of the Company and
the Bank who have been credited with at least 1,000 hours of service during a
twelve month period are eligible to participate in the ESOP.
In connection with the Company's initial public offering, the Company
contributed sufficient funds to the ESOP in order to cause the ESOP to purchase
7,000 shares. The Company may, in any plan year, make additional discretionary
contributions for the benefit of plan participants in either cash or shares of
Common Stock, which may be acquired through the purchase of outstanding shares
of Common Stock in the market or from individual stockholders, upon the original
issuance of additional shares by the Company or upon the sale of treasury shares
by the Company. The ESOP purchased 5,000 shares of Common Stock in the open
market in August 1996. Such purchases, if made, could be funded through
borrowing by the ESOP or additional contributions from the Company. The timing,
amount and manner of future contributions to the ESOP will be affected by
various factors, including prevailing regulatory policies, the requirements of
applicable laws and regulations and market conditions.
Any shares of Common Stock purchased by the ESOP with the proceeds of a
loan are held in a suspense account and released on a pro rata basis as debt
service payments are made. Discretionary contributions to the ESOP and shares
released from the suspense account are allocated among participants on the basis
of compensation. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Company might otherwise have contributed
to the ESOP. Participants will vest in their right to receive their account
balances within the ESOP at the rate of 20 percent per year. In the case of a
"change in control," as defined, however, participants will become immediately
fully vested in their account balances, subject to certain tax considerations.
Benefits may be payable upon retirement, early retirement, disability or
separation from service.
The ESOP is subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended, and the regulations of the Internal
Revenue Service and the Department of Labor thereunder.
Stock Option Plan. The Board of Directors of the Company maintains the
Stock Option Plan, which is designed to attract and retain qualified personnel
in key positions, provide officers and key employees with a proprietary interest
in the Company as an incentive to contribute to the success of the Company,
reward key employees for outstanding performance and the attainment of targeted
goals, and retain qualified directors for the Company and the Bank. The Stock
Option Plan was approved by the Company's stockholders in March 1996. An amount
of Common Stock equal to 126,500 shares (10% of the shares of Common Stock sold
in the Offering) has been authorized under the Stock Option Plan, which may be
filled by authorized but unissued shares, treasury shares or
14
<PAGE>
shares purchased by the Company on the open market or from private sources. The
Stock Option Plan provides for the grant of incentive stock options intended to
comply with the requirements of Section 422 of the Code ("incentive stock
options"), non-incentive or compensatory stock options and stock appreciation
rights (collectively "Awards"). Awards are available for grant to directors and
key employees of the Company and any subsidiaries, except that directors will
not be eligible to receive incentive stock options.
The Stock Option Plan is administered and interpreted by a committee of
the Board of Directors ("Committee") which is "disinterested" pursuant to
applicable regulations under the federal securities laws. Unless sooner
terminated, the Stock Option Plan will be in effect for a period of ten years
from the adoption by the Board of Directors. Under the Stock Option Plan, the
Committee will determine which officers and key employees will be granted
options, whether such options will be incentive or compensatory options, the
number of shares subject to each option, whether such options may be exercised
by delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of all stock options shall be required
to be at least equal to the fair market value of a share of Common Stock on the
date the option is granted.
Stock options shall become vested and exercisable in the manner
specified by the Committee at the rate of 20% per year, beginning one year from
the date of grant. Each stock option or portion thereof shall be exercisable at
any time on or after it vests and is exercisable until ten years after its date
of grant or three months after the date on which the optionee's employment
terminates, unless extended by the Committee to a period not to exceed one year
from such termination. However, failure to exercise incentive stock options
within three months after the date on which the optionee's employment terminates
may result in adverse tax consequences to the optionee. Stock options are
non-transferable except by will or the laws of descent and distribution.
Under the Stock Option Plan, the Committee will be authorized to grant
rights to optionees ("stock appreciation rights") under which an optionee may
surrender any exercisable incentive stock option or compensatory stock option or
part thereof in return for payment by the Company to the optionee of cash or
Common Stock in an amount equal to the excess of the fair market value of the
shares of Common Stock subject to option at the time over the option price of
such shares, or a combination of cash and Common Stock. Stock appreciation
rights may be granted concurrently with the stock options to which they relate
or at any time thereafter which is prior to the exercise or expiration of such
options.
Options granted to directors of the Company and the Bank under the
Stock Option Plan are awarded under a formula pursuant to which non-employee
directors of the Company and the Bank received 1,000 and 500 shares,
respectively, upon commencement of the Company's initial public offering and
will receive a similar amount on each annual anniversary thereafter for as long
as shares remain available. An aggregate of 60,000 shares of Common Stock are
available for non-employee directors of the Company and the Bank under the Stock
Option Plan. Such stock options to directors will be vested and exercisable
15
<PAGE>
under the same terms as options granted by the Committee to officers and
employees. At June 30, 1997, the Company had granted an aggregate of 33,250
stock options to directors and executive officers under the Stock Option Plan.
All unvested options are accelerated in the event of retirement under
the Bank's retirement policies or a change in control of the Company, as defined
in the Stock Option Plan. In addition, if an optionee dies or terminates service
due to disability, while serving as an employee or non-employee director, all
unvested options are accelerated. Under such circumstances, the optionee or, as
the case may be, the optionee's executors, administrators, legatees or
distributees, shall have the right to exercise all unexercised options during
the twelve-month period following termination due to disability, retirement or
death, provided no option will be exercisable within six months after the date
of grant or more than ten years from the date it was granted.
In the event of a stock split, reverse stock split or stock dividend,
the number of shares of Common Stock under the Stock Option Plan, the number of
shares to which any Award relates and the exercise price per share under any
option or stock appreciation right shall be adjusted to reflect such increase or
decrease in the total number of shares of the Common Stock outstanding.
The Company has previously awarded options on a periodic basis without
a specific option plan. At June 30, 1997, the Company had granted stock options
to directors and officers of the Company and the Bank and certain other
affiliates of Smith Breeden to purchase an aggregate of 143,200 shares of Common
Stock at $7.50 per share, which are exercisable between December 15, 1997 and
January 15, 1998.
Profit Sharing Plan. On July 1, 1990, the Bank adopted the Financial
Institutions Thrift Plan ("Profit Sharing Plan"), which is a tax-qualified
defined contribution plan. Prior to July 1, 1997, all employees were eligible to
participate in the Profit Sharing Plan on the first day of the month following
the employee's date of employment. Effective July 1, 1997, employees of the Bank
who have been employed by the Bank for at least one year and 1,000 hours of
service are eligible to participate in the profit sharing plan. Under the Profit
Sharing Plan, a separate account is established for each participating employee
and the Bank may make discretionary contributions to the Profit Sharing Plan
which are allocated to the participants' accounts. Participants vest in employer
discretionary contributions over a six year period. Distributions from the
Profit Sharing Plan are made upon termination of service, death or disability in
a lump sum. The normal retirement age under the plan is age 65.
Transactions With Certain Related Persons
Under applicable federal law, loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general
16
<PAGE>
public, unless the loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the institution and (ii) does not
give preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution, and must not involve more than the normal risk of repayment or
present other unfavorable features.
The Bank's policy provides that all loans made by the Bank to its
directors and officers are made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons. The
Bank's policy provides that such loans may not involve more than the normal risk
of collectibility or present other unfavorable features. As of June 30, 1997,
mortgage and consumer loans to employees in excess of $60,000 aggregated $73,000
or 0.3% of the Company's consolidated stockholders' equity as of such date. All
such loans were made by the Bank in accordance with the aforementioned policy.
The Bank entered into an Investment Advisory Agreement with Smith
Breeden dated April 1, 1992, which was amended on March 1, 1995. Under the terms
of the agreement, the Bank appointed Smith Breeden as investment advisor with
respect to the management of the Bank's portfolio of investments and its asset
and liability management strategies (the "Account"). Specifically, Smith Breeden
advises and consults with the Bank with respect to its investment activities,
including the acquisition of mortgage-backed securities, the use of repurchase
agreement transactions in funding and the acquisition of certain hedging
instruments to reduce the interest rate risk of the Account's investments. Under
the Agreement, Smith Breeden, as agent with respect to the Account, may (i) buy,
sell, exchange and otherwise trade in mortgage-backed securities or other
investments, and (ii) arrange for necessary placement of orders, execution of
transactions, purchases, sales and conveyances with or through such brokers,
dealers, issuers or other persons as Smith Breeden may select, subject to the
approval of the Bank, and establish the price and trade conditions, including
brokerage commissions. For its services, Smith Breeden receives a monthly fee
which is based on the Bank's total consolidated assets plus unsettled purchases
of securities and minus unsettled sales of securities. Smith Breeden received
fees of $281,000, $232,000 and $195,000 during fiscal 1997, 1996 and 1995,
respectively, under such agreement.
During fiscal 1997, Dr. Kon was paid $15,000 per month for two months
under a short-term consulting agreement with the Bank to research and provide
recommendations for enhancing the administrative and portfolio management
process for the Bank's Investment Management and Trust Services business.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company reviews the compensation of
Mr. Cerny, the President of the Company, and recommends to the Board adjustments
in his compensation and reviews the recommendations for compensation adjustments
for the other senior officers of the Company. The Compensation Committee of the
Company also
17
<PAGE>
administers the stock benefit plans of the Company. The Compensation Committee
is comprised of Messrs. Breeden (Chairman), Giarla and McConnell.
The Executive Committee of the Bank's Board of Directors reviews the
compensation of the Bank's senior executive officers, other than the President,
and recommends to the Board adjustments in such compensation. During fiscal
1997, the members of the Executive Committee were Messrs. Cerny, Kon and
McConnell.
The report of the Compensation Committee and the Executive Committee
with respect to compensation for the President and all other executive officers
for the fiscal year ended June 30, 1997 is set forth below:
During the fiscal year 1997, the Executive Committee of the Bank's
Board of Directors was responsible for administering compensation matters
related to the Bank's senior officers, other than the President. The
Compensation Committee of the Company, in consultation with the Company's and
Bank's Board of Directors, administered compensation matters with respect to the
Chief Executive Officer of the Bank and President of the Company.
The purpose of the Compensation Committee is to assist the Board of
Directors of the Company, the Bank, and its subsidiaries in attracting and
retaining qualified, competent management, motivating executives to achieve a
range of performance goals consistent with a business plan approved by the Board
of Directors, and ensuring that proposed compensation and benefit programs are
reasonable and consistent with industry standards, management performance and
shareholder interests.
The Committees consider the following criteria in annual performance
reviews prior to making recommendations with regard to the compensation of the
Chief Executive Officer and other executive officers of the Company and the
Bank:
1. The overall financial performance of the Company and the Bank during
the fiscal year under consideration, relative to stated management
objectives and financial goals and budgets.
2. Individual as well as combined measures of progress of the Company and
the Bank including the quality of the loan portfolio, execution of
retail expansion programs, interest rate risk and investment
management, deposit and loan growth, operating efficiency, personnel
development and training, and other objectives as may be established by
management and the Board of Directors.
3. The CRA, Compliance, and CAMEL ratings as determined by the Office of
Thrift Supervision.
18
<PAGE>
4. The performance of the Chief Executive Officer relative to management,
leadership, professional involvement, maintenance of corporate stature,
and enhancing the image of the Bank in it marketplace.
5. The compensation and benefit levels of comparable positions at peer
group financial institutions.
The compensation recommendations of the Committee include a base
salary, with the possibility of bonus and stock option components, if the
Executive's performance is judged to warrant such compensation.
The base compensation for Craig J. Cerny, Chief Executive Officer, was
established by the Compensation Committee at $200,000 on January 9, 1997. Mr.
Cerny's compensation level was determined with regard to the aforementioned
criteria using as a benchmark the executive compensation survey for savings
institutions as published by America's Community Bankers for the Midwest and
other regions. In addition, during the fiscal year 1997, Mr. Cerny was paid
bonuses totaling $50,000 based on his performance and the performance of the
Company. Mr. Cerny does not participate in the review of his compensation.
With respect to the Bank's other executive officers, the Executive
Committee of the Bank considered salary and bonus recommendations prepared by
the Chief Executive Officer to establish compensation levels for the fiscal year
ending 1997. Salary and bonus recommendations were based on the individual's and
the Company's overall performance in the past year as well as an analysis of
competitive compensation levels in the financial services industry from
America's Community Bankers surveys.
19
<PAGE>
Performance Graph
The following graph compares the cumulative total returns for the
Common Stock of the Company, the Nasdaq Financial Index and the Nasdaq Composite
Index since the Company's initial public offering in May 1996.
<TABLE>
TOTAL RETURN TO STOCKHOLDERS
(Assumes $100 investment on May 7, 1996)
[GRAPHIC -- GRAPH PLOTTED TO POINTS INDICATED IN CHART BELOW]
Total Return Analysis:
<CAPTION>
5/7/96 6/28/96 6/30/97
------ ------- -------
<S> <C> <C> <C>
Harrington Financial Group, Inc. $100 $105.00 $121.56
Nasdaq Composite (US) $100 $100.24 $121.93
Nasdaq Financial (US) $100 $102.73 $153.94
</TABLE>
The above graph represents $100 invested in the Company's initial
public offering of Common Stock on May 7, 1996 at $10.00 per share. The Common
Stock commenced trading on the Nasdaq Stock Market on May 7, 1996.
20
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Deloitte & Touche
LLP, independent certified public accountants, to perform the audit of the
Company's financial statements for the year ending June 30, 1998, and further
directed that the selection of auditors be submitted for ratification by the
stockholders at the Annual Meeting.
The Company has been advised by Deloitte & Touche LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and who will be available to respond to
appropriate questions.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Deloitte & Touche LLP as independent auditors for the fiscal
year ending June 30, 1998.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in October 1998, must be received at
the principal executive offices of the Company, P. O. Box 968, Richmond, Indiana
47375, Attention: Corporate Secretary, no later than May 27, 1998. If such
proposal is in compliance with all of the requirements of Rule 14a-8 under the
1934 Act, it will be included in the proxy statement and set forth on the form
of proxy issued for such annual meeting of stockholders. It is urged that any
such proposals be sent by certified mail, return receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Article II, Section 13 of the
Company's Amended and Restated Bylaws, which provides that business at an annual
meeting of stockholders must be (a) properly brought before the meeting by or at
the direction of the Board of Directors, or (b) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not later than 90 days prior to the
anniversary date of the mailing of proxy materials by the Company in connection
with the immediately preceding annual meeting of stockholders of the Company. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (a) a brief description
of the business desired to be brought before the annual meeting, (b) the name
and address, as they appear on the Company's books, of the stockholder proposing
such
21
<PAGE>
business, (c) the class and number of shares of the Company which are
beneficially owned by the stockholder, and (d) any financial interest of the
stockholder in such business.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year
ended June 30, 1997 accompanies this Proxy Statement. Such annual report is not
part of the proxy solicitation materials.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on Form 10-K
for fiscal 1997 required to be filed under the 1934 Act. Such written requests
should be directed to Catherine A. Habschmidt, C.P.A., Chief Financial Officer
and Treasurer, Harrington Financial Group, Inc., P. O. Box 968, Richmond,
Indiana 47375. The Form 10-K is not part of the proxy solicitation materials.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the approval
of the minutes of the last meeting of stockholders, the election of any person
as a director if the nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the Annual Meeting. Management is not aware
of any business that may properly come before the Annual Meeting other than the
matters described above in this Proxy Statement. However, if any other matters
should properly come before the meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of the 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 the proxy
materials to the beneficial owners of the Company's Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
22
<PAGE>
REVOCABLE PROXY
HARRINGTON FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HARRINGTON FINANCIAL GROUP, INC. ("COMPANY") FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON OCTOBER 23, 1997 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of September 5,
1997, hereby authorizes the Board of Directors of the Company or any successors
thereto as proxies with full powers of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Radisson Hotel located at 8787 Keystone Crossing, Indianapolis, Indiana
46240, on Thursday, October 23, 1997 at 2:00 p.m., Eastern Standard Time, and at
any adjournment of said meeting, and thereat to act with respect to all votes
that the undersigned would be entitled to cast, if then personally present, as
follows:
1. ELECTION OF DIRECTORS
Nominees for a three-year term: Douglas T. Breeden, Marianthe S. Mewkill,
Stephen A. Eason, C.F.A. and Daniel C. Dektar
[ ] FOR [ ] WITHHOLD
AUTHORITY
NOTE: To withhold authority to vote for an individual nominee, strike a line
through that nominee's name. Unless authority to vote for all of the
foregoing nominees is withheld, this Proxy will be deemed to confer
authority to vote for each nominee whose name is not struck.
2. PROPOSAL to ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's independent auditors for the
fiscal year ending June 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF
RETURNED BUT NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR RATIFICATION
OF THE COMPANY'S INDEPENDENT AUDITORS AND OTHERWISE AT THE DISCRETION OF THE
PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT
THE ANNUAL MEETING.
Dated: _______________________________
______________________________________
Signature of Shareholder
______________________________________
Signature of Shareholder
NOTE: Please sign this exactly as your
name(s) appear(s) on this proxy. When
signing in a representative capacity,
please give full title. When shares
are held jointly, only one holder need
sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
