HORIZON BANCORP INC /IN/
10-Ks and 10-Qs
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _______)
Filed by the Registrant ⌧
Filed by a party other than the Registrant ◻
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to § 240.14a-12
HORIZON BANCORP, INC.
(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):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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): |
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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☐ Fee paid previously with preliminary materials.
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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March 20, 2020
Dear Shareholder:
You are cordially invited to attend the 2020 Annual Meeting of Shareholders of Horizon Bancorp, Inc. to be held at the Orak Shrine Center, 3848 Frontage Road,
Michigan City, Indiana on Thursday, May 7, 2020, at
10:00 a.m.
local time (registration will begin at 9:30 a.m.). To ensure that a quorum will be represented at the meeting, we encourage you to vote promptly
using one of the methods described in the Proxy Statement. Voting early will not limit your right to attend the meeting and vote in person.
As in recent years, we are utilizing the Securities and Exchange Commission rules that allow us to furnish proxy materials to our shareholders by posting the
materials on the Internet. This Internet posting allows us to provide our shareholders with the information they need, while lowering the cost of delivery and reducing the environmental impact of our Annual Meeting. Our proxy materials are posted at
http://www.investorvote.com/hbnc. On March 20, 2020, we will mail a notice to our shareholders containing instructions on how to access our proxy materials online and on how to vote.
The Notice of Annual Meeting and the Proxy Statement cover the business to come before the meeting, which will be:
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election of directors;
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an advisory (non-binding) vote to approve executive compensation; and
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ratification of the independent auditors.
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We urge you to read these materials carefully.
The Annual Report for the year ending December 31, 2019 is posted on the Internet, and if you request printed versions of the proxy materials, a copy of the
Annual Report will be enclosed with the Notice of Annual Meeting and Proxy Statement.
I look forward to meeting our shareholders, and welcome the opportunity to discuss the business of your company with you.
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Craig M. Dwight
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Chair of the Board and Chief Executive Officer
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HORIZON BANCORP, INC.
515 Franklin Street
Michigan City, Indiana 46360
515 Franklin Street
Michigan City, Indiana 46360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 7, 2020
To Our Shareholders:
The Annual Meeting of Shareholders of Horizon Bancorp, Inc. (“
Horizon
”) will be held on Thursday, May 7, 2020,
10:00 a.m.
local time (registration will begin at 9:30 a.m.), at the Orak Shrine Center, 3848 Frontage Road, Michigan City, Indiana.
The Annual Meeting will be held for the following purposes:
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Election of Directors
: To elect four directors to serve three-year terms expiring in 2023.
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Advisory Vote to Approve Executive Compensation
: To vote on a non-binding, advisory proposal to approve the compensation of Horizon’s executive officers described in this Proxy Statement.
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Ratification of Independent Auditors
: To ratify the appointment of BKD, LLP, as independent auditors for 2020.
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Other Business
: To transact such other business as may properly come before the meeting or any adjournment of the meeting.
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You can vote at the meeting or any adjournment of the meeting if you are a shareholder of record at the close of business on March 6, 2020.
We urge you to read the Proxy Statement carefully so that you may be informed about the business to come before the meeting or any adjournment.
This Notice of Annual Meeting and Proxy Statement are posted on the Internet at http://www.investorvote.com/hbnc under “Proxy Information.” A copy of our
Annual Report for the fiscal year ended December 31, 2019, also is posted on the Internet at http://www.sec.gov, and, if you request printed versions of the proxy materials, the Annual Report will be enclosed with this Notice of Annual Meeting and
Proxy Statement.
By Order of the Board of Directors
Todd A. Etzler, Secretary
Michigan City, Indiana
March 20, 2020
As shareholders of Horizon, your vote is important. Whether or not you plan to be present in person at the Annual Meeting, it is important that your shares are
represented.
Please vote as soon as possible.
Please vote as soon as possible.
HORIZON BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 7, 2020
General Information
Information About Proxy Materials
Why am I receiving these proxy materials?
The Board of Directors of Horizon Bancorp, Inc., an Indiana corporation (“
Horizon
”), is soliciting proxies to be voted
at the Annual Meeting of Shareholders to be held on Thursday, May 7, 2020, at
10:00 a.m.
local time. The meeting will be held at the Orak Shrine Center, 3848 Frontage Road, Michigan City, Indiana. Our Board of
Directors has made these materials available to you on the Internet, or, upon your request, has delivered printed versions of these materials to you by mail. We plan to mail our Notice of Internet Availability of Proxy Materials to our shareholders on
March 20, 2020.
What is included in these materials?
These materials include:
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Our Proxy Statement for the Annual Meeting; and
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Our 2019 Annual Report, which includes our audited consolidated financial statements.
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If you requested a paper copy of these materials by mail, a proxy card also was included.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission (“
SEC
”), we have elected to provide access to our
proxy materials over the Internet. Accordingly, we sent our shareholders a Notice of Internet Availability of Proxy Materials (“
Notice
”). All shareholders receiving the Notice have the ability to access the proxy
materials over the Internet and to request a paper copy of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, the Notice contains instructions on
how shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
How can I get electronic access to the proxy materials?
The Notice provides you with instructions regarding how to view our proxy materials for the Annual Meeting on the Internet.
You also may choose to receive your future proxy materials by email by following the instructions in the Notice that was sent to you. Receiving materials by
email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual shareholders’ meetings on the environment. If you elect to receive future proxy materials by email, you will receive an email next year with
instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
Items of Business
What will the shareholders vote on at the Annual Meeting?
Shareholders will vote on the following three proposals:
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The election of four directors to serve three-year terms;
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An advisory proposal on the compensation of Horizon’s executive officers described in this Proxy Statement; and
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The ratification of the appointment of BKD, LLP, as independent auditors for 2020.
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Will there be any other items of business on which to vote?
Management is not aware of any other matters to be presented at the meeting other than those mentioned above and has not received notice from any shareholders
requesting that other matters be considered.
Voting Information
Who can vote at the Annual Meeting?
Shareholders of record of Horizon common shares as of the close of business on March 6, 2020, the record date, may vote at the Annual Meeting. On the record
date, 44,795,487 Horizon common shares were outstanding. Each common share is entitled to one vote on each matter to be voted on at the Annual Meeting.
How do I vote my shares?
There are three ways to vote by proxy prior to the Annual Meeting:
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By Telephone:
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Shareholders located in the United States can vote by telephone by calling 1-800-652-VOTE (8683) and following the instructions in the Notice;
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By Internet:
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You can vote over the Internet at www.investorvote.com/hbnc by following the instructions in the Notice; or
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By Mail:
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You can vote by signing, dating, and mailing the proxy card sent to you by mail if you have requested printed proxy materials.
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We encourage you to vote over the Internet, by telephone, or by mailing the proxy card even if you plan to attend the meeting.
All proxies properly submitted in time to be counted at the Annual Meeting will be voted in accordance with the instructions contained in the proxy. If you
submit a proxy without voting instructions, the proxies named in the proxy will vote on your behalf for each matter described below in accordance with the recommendations of the Board of Directors on Proposals 1, 2, and 3 as set forth in this Proxy
Statement and on any other matters in accordance with their best judgment.
If you have shares held by a broker or other nominee, you may instruct the broker or other nominee to vote your shares by following the instructions the broker
or other nominee provides to you.
Proxies solicited by this Proxy Statement may be exercised only at the Annual Meeting and any adjournment and will not be used for any other meeting.
Can I vote my shares in person at the meeting?
If you are a shareholder of record as of March 6, 2020, you may vote your shares in person at the meeting.
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If your shares are held by a broker or other nominee, you must obtain a proxy from the broker or nominee giving you the right to vote the shares at the
meeting.
Can I change my vote after I have voted by telephone, online or mailed my proxy card?
You may change your vote at any time prior to the vote at the Annual Meeting. If you are the shareholder of record, you may change your vote by granting a new
proxy bearing a later date (which automatically revokes the earlier proxy), by providing a written notice of revocation to Horizon’s Secretary (Todd A. Etzler, 515 Franklin Street, Michigan City, Indiana 46360), or by voting in person at the Annual
Meeting.
What constitutes a quorum?
A majority of the outstanding common shares present or represented by proxy constitutes a quorum for the Annual Meeting. As of March 6, 2020, the record date,
44,795,487 common shares were issued and outstanding.
How many votes are required for the election of directors and the other proposals?
The following votes will be required to approve the proposals:
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Proposal 1:
Directors will be elected by a plurality of the votes cast, which means that the director nominees who receive the highest number of common shares voted “for” their election are
elected. Shareholders may vote “for” a director or “withhold” a vote or authority to vote. “Withhold” votes and broker non-votes (described below) are not considered votes cast for the foregoing purpose, and neither will have an effect on
the election of the nominees.
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Proposals 2 and 3:
The advisory vote to approve executive compensation (Proposal 2), and the ratification of the independent auditors (Proposal 3) each requires that more votes are cast in favor
of the proposal than are cast against the proposal. Shareholders may vote “for,” “against” or “abstain.” Abstentions and broker non-votes are not considered votes cast for the foregoing purpose, and neither will have an effect on the
outcome.
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Abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum at the Annual Meeting.
What is a “broker non-vote”?
A “broker non-vote” occurs when a broker submits a proxy that does not indicate a vote on a proposal because the broker has not received instructions from the
beneficial owners on how to vote on such proposal and the broker does not have discretionary authority to vote in the absence of instructions. Brokers generally have the authority to vote, even though they have not received instructions, on matters
that are considered “routine,” such as the ratification of auditors in Proposal 3.
To avoid a broker non-vote of your shares on all other proposals, each of which proposals relates to a non-routine matter, you must
provide voting instructions to your broker or other nominee.
Who pays the cost of this proxy solicitation?
Horizon pays the cost of soliciting proxies. Upon request, Horizon will reimburse brokers, dealers, banks, trustees, and other fiduciaries for the reasonable
expenses they incur in forwarding proxy materials to beneficial owners of the common shares. In addition to sending the Notice of Internet Availability of Proxy Materials and requested proxy materials by mail, proxies may be solicited personally or by
telephone or facsimile or electronic mail, by certain directors, officers, and employees of Horizon, Horizon Bank, and their subsidiaries, who will not be specially compensated for such solicitation.
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Proposal 1
Election of Directors
The first matter to be acted upon at the Annual Meeting is the election of directors. Horizon’s Board of Directors currently consists of eleven members,
comprised of eight males and three females. As required by Horizon’s current Articles of Incorporation, the Board is divided into three classes of equal or near-equal size and the members of one class of directors are elected to serve three-year terms
at each Annual Meeting.
Director Qualifications and Diversity
Horizon is a community bank that operates in a heavily regulated industry and relies on its Board of Directors for local knowledge and business acumen. Horizon
believes its Board should be composed of individuals with business or academic experience that has made a positive impact on its business and the local community. In addition, Horizon’s directors are expected to meet the standards outlined below.
Horizon believes that all of its current Board members possess the professional and personal qualifications necessary for effective Board service, and Horizon has highlighted particularly noteworthy attributes for each Board member in the individual
biographies below. In addition, several of Horizon’s Board members have numerous years of service on the Board and have served through multiple economic cycles. Horizon believes this experience has provided them with significant and valuable
understanding of Horizon’s business, the regulatory requirements, and the industry in which Horizon competes.
Horizon’s directors have considerable professional and business acumen, are well educated, and are engaged in the local communities served by Horizon. Five
members of Horizon’s current Board of Directors qualify as “audit committee financial experts,” which is a considerable number for a company of Horizon’s size.
Horizon’s directors actively participate in continuing education, with each director completing a minimum of 100% of their 2019 and 2018 assigned educational
programs. In addition, several directors attended outside training programs in the areas of audit, compensation, lending, fraud, and regulatory compliance.
Horizon’s Board of Directors believes that the Board, as a whole, should have a diverse range of characteristics and skills to function at an optimal level in
exercising its oversight. The Board’s Corporate Governance and Nominating Committee is authorized by Horizon’s Bylaws to select Horizon’s nominees to serve as directors. The Corporate Governance and Nominating Committee Charter requires the Committee,
before it selects a nominee for election or re-election or recommends a director to fill a vacancy, to review and evaluate:
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the nominee’s qualifications, including his or her judgment, skill, capability, diversity, ability to serve, conflicts of interest, business experience, the interplay of the candidate’s experience with that of the other Board members,
and the extent to which a candidate would be a desirable addition to the Board and any committee of the Board;
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if applicable to the nominee, whether the nominee would be deemed “independent” under marketplace rules of the NASDAQ Stock Market and SEC regulations;
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whether the nominee is qualified and likely to remain qualified to serve under Horizon’s Bylaws; and
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such other factors the Committee deems relevant.
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The Corporate Governance and Nominating Committee Charter also provides that in determining whether to select incumbent directors for re-election to the Board,
the Committee must consider the director’s past participation and contribution to the Board.
The Corporate Governance and Nominating Committee applies a broad concept of diversity, which includes all of the criteria listed in the Corporate Governance
and Nominating Committee Charter together
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with other factors, such as the nominee’s age, gender-identity, ethnicity, disability, sexual orientation, cultural background, leadership abilities, continuous learning and the
location of the nominee’s residence and place of business. When the Corporate Governance and Nominating Committee seeks new director candidates to add to the Board or to replace directors who have resigned or recommends the re-election of incumbent
directors, the Corporate Governance and Nominating Committee selects director nominees on the basis of all of these criteria with the goal of finding the best qualified person to meet Horizon’s needs.
With respect to geographic diversity, the Corporate Governance and Nominating Committee considers whether current directors and nominees reside and/or have a
place of business in the cities and counties in which Horizon Bank has branches and in which it may consider locating future branches. Each of Horizon’s current directors lives or works in the markets served by Horizon.
With respect to skill set diversity, the Corporate Governance and Nominating Committee seeks to have directors and nominees with not only experience and
expertise related to banking but also in a broad range of other professions. The Board currently consists of members with expertise in manufacturing, academia, accounting, law, finance, collections, receivable management, Women Business Enterprise
(WBE), real estate sales, real estate development, construction management, architecture, and information technology.
The Corporate Governance and Nominating Committee also considers the age of director nominees and current directors. Horizon’s Bylaws provide that a nominee
who is not currently serving on the Board must not have reached his or her sixtieth birthday as of the date of the shareholder meeting at which the nomination will be considered or as of the date the nominee is elected to fill a Board vacancy. The
Bylaws also specify that directors may continue to serve until the end of the year in which they reach their seventy-fifth birthday.
In addition to consideration of the above diversity characteristics, the Corporate Governance and Nominating Committee emphasizes and has required searches and
our search firms to include women and minority candidates in the pool and to also actively seek candidates of diverse characteristics (including gender-identity, ethnicity, disability, sexual orientation, and cultural background) from which the
committee selects director candidates. Our last director search resulted in adding a woman to our Board bringing the female representation to three or 27.3% of our Board.
Nominees
The terms of James B. Dworkin, Michele M. Magnuson, Daniel F. Hopp, and Steven W. Reed will end at the Annual Meeting.
The Board of Directors has nominated each of the directors whose terms expire to serve additional three-year terms as members of the Class of 2023.
Each of the nominees has agreed to serve for the term for which he or she has been nominated. We intend that the proxies solicited by the Board of Directors
will be voted for the nominees named above. If any nominee is unable to stand for election, the Board of Directors may designate a substitute nominee or adopt a resolution reducing the number of members on the Board. If a substitute nominee is
designated, common shares represented by proxy will be voted for the substituted nominee.
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The Board of Directors unanimously recommends that the shareholders
vote “FOR” the election of the four nominees
(Item 1 on the Proxy Card)
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Members of the Board of Directors
The following table presents biographical information on all of the directors, including the four nominees, and information regarding the director’s
experiences, qualifications, attributes, or skills that have caused the Corporate Governance and Nominating Committee and the Board to determine that the director should continue to serve on Horizon’s Board. All of the directors of Horizon also serve
as directors of Horizon Bank.
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Age
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Business Experience and Service as Director
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Class of 2023
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James B. Dworkin
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Mr. Dworkin is the Chancellor Emeritus of Purdue University North Central. He has over 42 years of experience in education and has a business school background and a Ph.D. in Industrial
Relations. He currently serves as a Professor of Management at the Krannert School of Management at Purdue University. He has served on Horizon’s Board of Directors since 2003 and on the Board of Directors of Horizon Bank since 2002.
Mr. Dworkin has extensive knowledge and experience in academia, negotiations, business administration, and management of a large organization. In addition, Mr. Dworkin has
considerable knowledge of local business and has served on the boards of multiple not-for-profit organizations. Mr. Dworkin regularly shares his local and national insights with the Board and senior management. In addition, due to his extensive
knowledge of the local community, he provides considerable insight into current local events. Mr. Dworkin’s community knowledge, ability to work with others, and consensus building abilities are valuable contributions to Horizon’s Board of
Directors.
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Daniel F. Hopp
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Mr. Hopp retired in June 2011 as Senior Vice President, Corporate Affairs, and General Counsel of Whirlpool Corporation, a Fortune 500 company located within Horizon’s market area. He has a
law degree and has over 26 years’ experience working with a publicly traded corporation. He has served on Horizon’s Board of Directors since 2005 and on the Board of Directors of Horizon Bank since 2004. He has served as the Lead Director of
Horizon’s Board of Directors since July 1, 2013.
Mr. Hopp has extensive knowledge and experience in manufacturing, management of a large and complex organization, corporate law and the rules and regulations applicable to
large publicly traded companies. Mr. Hopp’s educational and professional background is rarely found on a community bank board. In addition, Mr. Hopp is very active in the local not-for-profit community. At Horizon’s Board meetings, Mr. Hopp
regularly provides invaluable insights based on his professional and educational experiences, and he has the ability to look at complex problems from a different perspective. Mr. Hopp is a valuable member of Horizon’s Board of Directors.
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Michele M. Magnuson
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Ms. Magnuson (formerly, Thompson) is the former President and Chief Financial Officer and a director of both LaPorte Bancorp, Inc. and its wholly owned banking subsidiary The LaPorte Savings
Bank, an Indiana-chartered savings bank. She originally joined The LaPorte Savings Bank in 2003 as Chief Financial Officer and was named Vice President in 2004, Executive Vice President in 2007, and President and Chief Financial Officer in
2011. She also served LaPorte Bancorp, Inc.’s predecessor organization as Executive Vice President and Chief Financial Officer (named in 2007) and President and Chief Financial Officer (named in 2011). She was appointed to the Boards of
Directors of The LaPorte Savings Bank
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Name
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Age
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Business Experience and Service as Director
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and LaPorte Bancorp, Inc. in 2007. Ms. Magnuson has served on both Horizon’s and Horizon Bank’s Board of Directors since her appointment in July 2016. If Ms. Magnuson were serving on the
Audit Committee, she would qualify as an audit committee financial expert under SEC rules.
Ms. Magnuson has more than 32 years of banking experience. She is a graduate of Ball State University and holds a Master of Business Administration from Indiana University South Bend. Ms.
Magnuson’s extensive management, financial and banking industry experience, including her familiarity with the local business and economic environment in the communities formerly served by The LaPorte Savings Bank and now served by Horizon
Bank, adds value and a unique perspective to the Boards of Directors of both Horizon and Horizon Bank.
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Steven W. Reed
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Mr. Reed is a partner with the firm of BGBC Partners, LLP, an Indianapolis full service accounting, and business consulting firm. He was a Board member of Heartland Community Bank from 2006
until July 2012. He has a B.S. in Business with a concentration in finance. Mr. Reed is a Certified Public Accountant, practicing since 1985, amassing over 31 years of experience with financial reporting, tax, and business valuation.
Additionally, Mr. Reed holds the appellations “Accredited in Business Valuation (ABV)” and “Certified in Financial Forensics (CFF).” These accreditations recognize special training, testing, and qualification in business valuation and in
forensic accounting through the American Institute of Certified Public Accountants. Mr. Reed has served on the Board of Directors of Horizon since 2014 and Horizon Bank since 2012.
Mr. Reed possesses particular knowledge and experience in finance, accounting, tax, and business valuation as it relates to closely held business. His experience will
continue to provide Horizon with considerable expertise and insight into these areas. Mr. Reed chairs the Audit Committee and qualifies as an audit committee financial expert under SEC rules.
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Class of 2022
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Susan D. Aaron
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Ms. Aaron is the Chair of Vision Financial Services, Inc., LaPorte, Indiana, an accounts receivable management business in which she has more than 32 years’ experience. Ms. Aaron has both a
B.S. in finance and an M.B.A. in accounting from Indiana University. If Ms. Aaron were serving on the Audit Committee, she would qualify as an audit committee financial expert under SEC rules. She has served on Horizon’s Board of Directors
since 1995 and on the Board of Directors of Horizon Bank since 1993.
Ms. Aaron possesses particular knowledge and experience in accounts receivable management, collection services and their related rules and regulations, finance,
accounting, management and local market knowledge as it relates to the small business community and not-for-profit organizations. She also brings her experience and insights as the owner of a WBE-certified business. Ms. Aaron’s extensive
experience provides significant insight and expertise to Horizon’s Board, particularly as they apply to commercial lending, accounts receivable management and knowledge of the local community.
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Eric P. Blackhurst
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Mr. Blackhurst is Associate General Counsel, Corporate Transactions and Latin America, of The Dow Chemical Company, a global material science company with 2019 annual sales of $43 billion
headquartered in Midland, Michigan. Mr. Blackhurst has held his current position since 2018. He was the Assistant General Counsel, Corporate and Financial Law from 2014 to 2018, and Assistant General Counsel, Chemicals and Energy, Performance
Products and Systems from 2009 through 2014. He has held positions of increasing importance with Dow since 1990. Mr. Blackhurst is a former member of the board of directors of both
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Business Experience and Service as Director
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Wolverine Bancorp., Inc. (“Wolverine”) and Wolverine Bank, serving from 2009 until Horizon’s acquisition of Wolverine in October 2017. Mr. Blackhurst has served on both Horizon’s and Horizon
Bank’s Board of Directors since his appointment in October 2017.
Mr. Blackhurst’s extensive corporate, legal, and international experience, including experience serving as legal counsel at a major public corporation and his general business acumen provide
the Board of Directors of Horizon and Horizon Bank with critical insights into business operations and issues.
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Craig M. Dwight
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Since July 1, 2013, Mr. Dwight has held the position of Chair and Chief Executive Officer of Horizon. He has served as the Chief Executive Officer of Horizon and Horizon Bank since July 1,
2001. Prior to that, he was the President and Chief Administrative Officer of Horizon and the Chair and Chief Executive Officer of Horizon Bank commencing in December 1998. He has over 40 years of banking experience, including experience as a
senior credit officer, senior commercial loan officer, branch manager, human resources director, and chief executive officer. He has a business degree with a concentration in accounting. Mr. Dwight has served on Horizon’s Board of Directors and
the Board of Directors of Horizon Bank since 1998.
Mr. Dwight has extensive knowledge and experience in banking, credit underwriting, balance sheet management, liquidity management, finance, accounting and banking rules
and regulations. In addition, Mr. Dwight has considerable knowledge of the local business, municipal and not-for-profit communities. Mr. Dwight has served in leadership roles with a significant number of local not-for-profit organizations,
including leading several fund raising campaigns. Mr. Dwight’s intimate knowledge of Horizon’s business and his leadership through periods of economic turmoil and ability to look for new opportunities for Horizon makes him a valuable member of
Horizon’s Board of Directors.
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Class of 2021
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Lawrence E. Burnell
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Mr. Burnell is the Vice Chairman of White Lodging Services Corporation, a national hotel management and development company, and has also served as the Chief Operating Officer and Chief
Financial Officer. He has over 43 years of financial management experience, including serving in senior financial management positions at White Lodging Services Corporation for the last 27 years. Mr. Burnell has a B.S. in accounting, has passed
the CPA exam, and has 11 years of experience serving with a national public accounting firm. Mr. Burnell serves on the Audit Committee and he qualifies as an audit committee financial expert under SEC rules. He has served on Horizon’s Board of
Directors since 2009 and on the Board of Directors of Horizon Bank since September 2007.
Mr. Burnell has extensive experience and knowledge in real estate development, trends in commercial real estate values, and management of a large and complex service
organization, finance, and accounting. Mr. Burnell’s extensive commercial real estate background provides Horizon’s Enterprise Risk Management and Credit Policy Committee (formerly known as the Loan Committee), which he chairs, with important
insight into this industry, which is especially valuable during the current economic climate. In addition, Mr. Burnell’s extensive accounting, management and service industry experience provides an important perspective to Horizon’s Board of
Directors.
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Julie Scheck Freigang
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Julie Scheck Freigang is the Vice President and Chief Information Officer for Franklin Electric Co., Inc. (NASDAQ: FELE) headquartered in Fort Wayne,
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Name
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Age
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Business Experience and Service as Director
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Indiana where she oversees the company’s information technology across 110 locations in 21 countries. Ms. Scheck Freigang has held this position since April 2014
.
Before joining Franklin Electric, she held the position of Vice President – IT at Eaton Corporation in Galesburg, Michigan from January 2011 to April 2014. Ms. Scheck Freigang earned a Bachelor of Science in Mechanical
Engineering and graduated with honors from Valparaiso University in Valparaiso, Indiana. Ms. Scheck Freigang has served on the Board of Directors of Horizon Bank since 2019 and was appointed to a Horizon Board of Directors vacancy in January
2020.
Within the Fort Wayne area, Ms. Scheck Freigang is active in encouraging girls to consider technical fields and has sponsored the Northeast Indiana Tech Coalition TechFest for five years. Ms.
Scheck Freigang possesses particular knowledge and experience in information technology for publicly traded companies. Her experience will continue to provide Horizon with considerable expertise and insight into these areas.
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Peter L. Pairitz
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Mr. Pairitz is a business developer who focuses on consulting with small business owners regarding all aspects of business ownership, including financing alternatives, and he has management
responsibilities for several types of businesses. He is a CPA with public accounting firm experience in auditing and managing audits of financial institutions. If Mr. Pairitz were serving on the Audit Committee, he would qualify as an audit
committee financial expert under SEC rules. He has served on Horizon’s Board of Directors since 2001 and on the Board of Directors of Horizon Bank since 2000.
Mr. Pairitz has extensive knowledge and experience in finance, accounting, audit, manufacturing, real estate development, and the local business community. Mr. Pairitz’
business experiences, local knowledge, and attention to detail are very important to Horizon’s Board of Directors. In addition, Mr. Pairitz has continued his outside board education in the areas of enterprise risk, credit, and compensation
trends and has shared his knowledge and experience with the Enterprise Risk Management and Credit Policy Committee, Compensation Committee, and Corporate Governance and Nominating Committee.
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Spero W. Valavanis
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Mr. Valavanis is an architect and has over 42 years’ experience in design, strategic and financial planning, business development and management, hiring and compensation, and marketing,
first, as a Principal/Owner of Design Organization, Inc., an architecture, engineering and interior design firm, and then as a shareholder and Office Director & Vice President for Shive-Hattery Inc., an architecture and engineering firm,
upon its acquisition of Design Organization, Inc. in 2013. Mr. Valavanis is a Principal with Shive-Hattery Inc., where he has been employed since 2013. He has served on Horizon’s Board of Directors since 2000 and on the Board of Directors of
Horizon Bank since 1998.
Mr. Valavanis has extensive knowledge and experience in architecture, design, construction management and of the local business, municipal and not-for-profit communities.
Mr. Valavanis is a past Board Chair of the Greater Valparaiso Chamber of Commerce and the Porter County Community Foundation, and has served on many not-for-profit boards of directors. Mr. Valavanis has continued his director education with a
focus on asset and liability management and on trust matters. Mr. Valavanis’ professional background, local market knowledge and community involvement are important contributions to Horizon’s Board of Directors.
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9
Corporate Governance
Director Independence
Annually, Horizon’s Board of Directors considers the independence of each of the directors under the listing standards of the NASDAQ Stock Market. In
determining independence, the Board considers, among other things, current or previous employment relationships as well as material transactions and relationships between Horizon or Horizon Bank and the directors, members of their immediate family and
entities in which the directors have a significant interest. The purpose of this review is to determine whether any relationships or transactions exist or have occurred that are inconsistent with a determination that the director is independent.
The Board of Directors has determined that ten of the eleven current members of the Board qualify as independent directors under SEC rules and the NASDAQ
Listing Standards. Craig M. Dwight, who serves as Horizon’s Chair and Chief Executive Officer, is the only current director who does not qualify as an independent director because of the positions he holds with Horizon and Horizon Bank.
Members of the Audit, Compensation and Corporate Governance and Nominating Committees must and do meet all applicable independence tests of the NASDAQ Stock
Market and the SEC.
Board Leadership Structure
Horizon’s Board of Directors believes that each business is unique, and therefore, Board leadership structure should vary depending upon each company’s
circumstances and needs as they evolve over time. The positions of Chief Executive Officer and Chair of the Board currently are held by Craig M. Dwight. The Board has determined that it is in the best interests of Horizon to consolidate these positions
due to Mr. Dwight’s unique experiences and Horizon’s corporate governance practice of having an independent lead director when these two positions are consolidated, as discussed below.
Mr. Dwight’s extensive banking background experience in the States of Indiana and Michigan; his demonstrated ability to lead complex organizations; his proven
leadership during varying economic cycles; his forward and strategic thinking; his personal integrity; his demonstrated ability to hold the interests of the company above his own personal interests; his ability to recruit and retain an outstanding
executive leadership team with similar values and beliefs; and his willingness to seek and receive outside counsel provides him with the unique ability to hold both offices of Chair and Chief Executive Officer.
On April 16, 2013, the Horizon Board of Directors amended Horizon’s Bylaws to provide that if the offices of Chair of the Board and Chief Executive Officer are
held by the same person, then the independent members of the Board are required to appoint one of the incumbent, independent directors to serve as the Lead Director. The selection process, term, qualifications, authority, responsibilities and other
provisions governing the role of the Lead Director are set forth in the Charter of the Lead Independent Director, which the Board adopted on April 16, 2013, and amended on June 19, 2018.
Effective July 1, 2013 and reaffirmed by the Board in June 2019, the Board appointed Daniel F. Hopp as the Lead Director. In accordance with Horizon’s Charter
of the Lead Independent Director, the Lead Director calls and presides at executive sessions of the independent directors; coordinates the activities and communications among independent directors; presides at all meetings of the Board at which the
Chair is not present or if circumstances arise in which the role of the Chair is, or may be perceived to be, in conflict; approves the meeting schedules for independent directors and sets and reviews the agendas for executive sessions of the
independent directors; and may attend committee meetings of any committee of the Board of Directors. The Lead Director serves as the principal liaison between the independent directors and the Chief Executive Officer and other members of senior
management on matters of corporation policy, strategy, executive management performance and other matters, such as by:
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Consulting with the Chief Executive Officer regarding any concerns of the directors about Horizon or its performance, the Chief Executive Officer’s performance, and the performance of other executive management;
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Providing input to the Chair and Chief Executive Officer and the Corporate Secretary on the preparation of agendas for Board and committee meetings; and
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Advising the Chair on the quality, quantity, usefulness and timeliness of information provided to directors to support the work of the Board of Directors and committees.
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In addition, at the direction of the full Board of Directors, the Lead Director may authorize the retention by Horizon of outside advisors and consultants to
report directly to the Board of Directors.
All of the directors on the Board, other than Mr. Dwight, qualify as independent under the NASDAQ rules. The key standing committees − the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee − are comprised entirely of independent directors and provide independent oversight of management. In addition, the Board’s key standing committees meet in executive session
without the presence of Mr. Dwight, and the non-management directors of the Board meet in executive session without the presence of Mr. Dwight. In addition, the Board will meet in executive session without Mr. Dwight at least twice a year.
Communications with Directors
Shareholders may communicate directly with the Board of Directors or individual members of the Board of Directors in writing by sending a letter to the Board
at: Horizon Bancorp, Inc. Board of Directors, 515 Franklin Street, Michigan City, Indiana 46360. All communications directed to the Board of Directors will be transmitted to the Chair of the Board of Directors or other director identified in the
communication without any editing or screening.
Shareholders also may communicate concerns, suggestions, or questions to any member of the Board of Directors or member of senior management by logging onto
the www.ethicspoint.com website from any computer at any time or by calling the toll-free hotline number, 866-294-4694. EthicsPoint is a worldwide, confidential, and anonymous web and telephone reporting system that allows shareholders, customers,
vendors and employees the ability to report concerns, as well as to pose questions and suggestions, confidentially and anonymously. EthicsPoint is fully compliant with reporting requirements such as those mandated by the Sarbanes-Oxley Act, Section
301. All communications received through EthicsPoint, either by web or telephone, are transmitted directly to the Chair of the Board’s Audit Committee, the Chair of the Board’s Corporate Governance and Nominating Committee, and designated members of
senior management, without editing or screening
Code of Ethics
Horizon’s Code of Ethics for Executive Officers and Directors supplements the Horizon Bancorp, Inc. and Horizon Bank Advisor Code of Conduct and Ethics
applicable to all employees, including officers. Horizon’s Code of Ethics for Executive Officers and Directors is available on Horizon’s website at www.horizonbank.com in the section headed “About Us – Investor Relations – Corporate Information” under
the caption “Corporate Governance.”
Director Nomination Procedures
Horizon’s Bylaws provide that any of the following may nominate director candidates: the Board of Directors, a nominating committee of the Board, any person
appointed and authorized by the Board to make nominations, or any shareholder entitled to vote for the election of directors who has complied with the notice procedures specified in the Bylaws.
Horizon’s Bylaws provide that nominations by shareholders must be made in writing and must be received at Horizon’s principal executive office not fewer than
120 days in advance of the anniversary date
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of the release of the prior year’s proxy statement to shareholders in connection with the Annual Meeting. For instance, the proxy statement for last year’s 2019 Annual Meeting
was released to shareholders on March 15, 2019. Accordingly, the last day to deliver a nomination for the 2020 Annual Meeting was 120 days before March 15, 2020, or November 16, 2019. Shareholder nominations must include the detailed information about
the nominee required by the Bylaws and also must comply with the other requirements set forth in the Bylaws. The Corporate Governance and Nominating Committee does not have a separate policy for considering director candidates recommended by
shareholders because the director nomination procedures are set forth in Horizon’s Bylaws.
Horizon’s Bylaws provide that the chair of the Annual Meeting may, in his or her discretion, disregard nominations that are not made in accordance with the
Bylaws and may instruct the election inspector to disregard all votes cast for any such nominee. A complete copy of the applicable provisions of Horizon’s Bylaws is available to shareholders without charge upon request to the Secretary.
Meetings of the Board of Directors and Committees
Horizon’s Board of Directors held 12 meetings during 2019, and each director attended 83.3% or more of the total number of meetings of the Board and the
committees upon which he or she served. Horizon and its subsidiaries have joint standing committees. These committees include the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee. Executive sessions of
the independent directors are held at least two times a year.
Although Horizon does not have a policy regarding the attendance of directors at the Annual Meeting of shareholders, Horizon encourages directors to attend the
Annual Meeting. Eight of the then-current eleven members of the Board of Directors attended the 2019 Annual Meeting.
Corporate Governance and Nominating Committee
The members of the Corporate Governance and Nominating Committee are appointed by the Board of Directors in April, effective May of each year. The members of
the Corporate Governance and Nominating Committee for 2019/2020 are Mr. Pairitz, who serves as Chair, Ms. Aaron, Mr. Blackhurst, and Mr. Hopp. All of the members of the Corporate Governance and Nominating Committee qualify as independent directors as
defined by the SEC rules and NASDAQ listing standards. The Corporate Governance and Nominating Committee met three times during 2019. The responsibilities of the Corporate Governance and Nominating Committee of the Board of Directors include selecting
the individuals to be nominated for membership on the Board of Directors and overseeing the annual self-evaluations by the Board and its committees.
The Corporate Governance and Nominating Committee selects a slate of nominees and then recommends those nominees to the Board of Directors. The entire Board of
Directors determines who the nominees will be. The Corporate Governance and Nominating Committee and the Board select nominees who meet the qualifications set forth in Horizon’s Bylaws and the applicable independence requirements under the SEC and
NASDAQ rules.
The responsibilities of the Corporate Governance and Nominating Committee also include (i) reviewing and reporting to the Board on matters of corporate
governance and developing and recommending to the Board corporate governance principles; (ii) leading the Board and its committees in its supervisory oversight functions of related party transactions and insider share transactions; and (iii) reviewing
Horizon’s activities and practices regarding environmental, social, and governance matters.
The Corporate Governance and Nominating Committee Charter is posted on Horizon’s website at www.horizonbank.com in the section headed “About Us – Investor
Relations – Corporate Information” under the caption “Corporate Governance.”
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Audit Committee
Audit Committee members serve one-year terms and are appointed by the Board of Directors in April, effective January of each year. The Audit Committee members
for 2019/2020 are Mr. Reed, who serves as Chair, Mr. Burnell, Mr. Dworkin, and Ms. Freigang (effective with her January 21, 2020 appointment). The Audit Committee met four
times in 2019. The purpose of the Audit
Committee is to assist the Boards of Directors of Horizon and Horizon Bank in fulfilling their statutory and fiduciary responsibilities with respect to examinations of Horizon, Horizon Bank, and their affiliates and the monitoring of accounting,
auditing, and financial reporting practices. The Audit Committee reviews the internal audit procedures of Horizon and Horizon Bank and recommends to the Boards of Directors the engagement of outside and internal auditing firms.
Horizon’s Board of Directors has determined that Mr. Reed qualifies as an “audit committee financial expert” as defined by the SEC rules. Mr. Reed has a
Bachelor of Science degree in Business with a concentration in finance, and is a registered certified public accountant with over 31 years of public accounting experience.
All of the members of the Audit Committee, including Mr. Reed, qualify as independent directors as defined by the SEC rules and NASDAQ listing standards.
The Audit Committee Charter is posted on Horizon’s website at www.horizonbank.com in the section headed “About Us – Investor Relations – Corporate Information”
under the caption “Corporate Governance.”
Compensation Committee
Compensation Committee members serve one-year terms and are appointed by the Board of Directors in April, effective May of each year. The members of the
Compensation Committee for 2019/2020 are Ms. Aaron, who serves as Chair, Mr. Blackhurst, Mr. Hopp and Mr. Pairitz. All of the members of the Compensation Committee qualify as independent directors as defined by the SEC rules and NASDAQ listing
standards. The Compensation Committee met six times in 2019. The Committee reviews salary and employee benefit issues relating to employees and directors of Horizon, Horizon Bank, and their affiliates.
The Compensation Committee Charter is posted on Horizon’s website at www.horizonbank.com in the section headed “About Us – Investor Relations – Corporate
Information” under the caption “Corporate Governance.”
Compensation Committee Interlocks and Insider Participation
All of the members of the Compensation Committee are independent, and no member of the Compensation Committee has served as an officer or employee of Horizon,
Horizon Bank, or any of Horizon’s other subsidiaries. None of the members of the Compensation Committee serves as an executive officer of another entity at which one of Horizon’s executive officers serves as a member of the Board of Directors. No
member of the Compensation Committee has had any relationship with Horizon requiring disclosure under Item 404 of SEC Regulation S-K, which requires the disclosure of certain related person transactions, other than loans made in the ordinary course of
business on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable loans with unrelated third parties and which management believes did not involve more than normal risk of
collectability or present other unfavorable features.
Compensation Consultants
The Compensation Committee has the authority under its charter to retain outside consultants to provide assistance. At least every two years, the Compensation
Committee engages a compensation consultant to conduct a review of executive and director compensation. A primary function of the consultant is to provide market data to the Committee concerning compensation of comparable companies in order to
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assist the Committee in determining whether Horizon’s compensation system in effect is a reasonable and appropriate means for achieving Horizon’s business objectives.
In accordance with the Compensation Committee’s authority, the Compensation Committee has engaged Frederic W. Cook & Co., Inc. (“
FW Cook
”) on a number of occasions since 2002. In December 2019, FW Cook reported to the Compensation Committee on the findings from its analysis of Horizon’s named executive officers’ compensation. To evaluate the reasonableness of
Horizon’s executive compensation, the Compensation Committee annually obtains surveys from accounting firms and other sources and augments that data with the FW Cook reviews, which are more extensive and include peer comparison of cash, short-term
compensation, and long-term compensation. FW Cook’s reports have provided the Compensation Committee with an updated competitive survey, and the Compensation Committee has relied primarily on these surveys in reaching its decisions on compensation and
to compare the reasonableness of total compensation for the named executive officers and directors. In addition, FW Cook’s reports have reviewed long-term equity compensation awards to the named executive officers in comparison with peer data and
acceptable banking practices. FW Cook provides no other services to Horizon and meets all other standards for independence and lack of conflicts of interest for compensation consultants.
Performance Reviews
The Compensation Committee, with input from the entire Board of Directors, conducts an annual review of the performance of Mr. Dwight, who serves as Horizon’s
Chair of the Board and Chief Executive Officer. In addition, the Compensation Committee, with input from the Chief Executive Officer, reviews the performance of Horizon’s other executive officers.
In conducting its review, the Compensation Committee considers a variety of performance factors in order to analyze the compensation of each of these executive
officers. These factors generally include strategic planning, traditional financial results, positioning Horizon for future success, and enterprise risk management.
The financial services business is complex and is undergoing changes that generate uncertainties about future events. The Chief Executive Officer must provide
guidance and leadership in nearly all aspects of this dynamic enterprise. In the process, however, the Chief Executive Officer is not expected to work alone. The performance evaluation recognizes that programs initiated at the top level of an
organization are not, and should not be expected to be, “quick fixes.” These programs are generally long-term in nature, bringing benefits to Horizon over many years. For those reasons, the Compensation Committee also focuses on the following issues in
determining performance levels for the Chief Executive Officer:
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Strategic Leadership
: Strategic leadership entails development of appropriate strategies for Horizon and the ability to gain support for those strategies.
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Enterprise Guardianship
: Enterprise guardianship requires the Chief Executive Officer to set the tone in such matters as Horizon’s reputation, ethics, legal compliance, customer relations, employee
relations, and ensuring results.
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Risk Management
: Risk management requires the Chief Executive Officer to maintain a strong risk management culture, to provide oversight of key risks including financial reporting, reputation,
asset quality, compliance with all banking rules and regulations and to assure proper maintenance of good internal controls and processes.
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Board Relationship
: Board relationship requires the Chief Executive Officer to work collaboratively with Board members and committees, communicate information in a timely manner to ensure full and
informed consent about matters of corporate governance and provide complete transparency to the Board.
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Financial Results
: Financial results focus on the overall financial health of Horizon and ability to achieve financial goals.
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Talent Recruitment, Retention & Training
: The Chief Executive Officer is required to recruit, attract, and retain an exceptional leadership team in order to effectively run the organization
today and in the future. In addition, continuous organizational learning is a key focal point for the Chief Executive Officer and ongoing training is vital to Horizon’s continued success.
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In conducting the Chief Executive Officer’s performance review for 2019, the Compensation Committee obtained input from members of the Board. A significant
portion of management compensation, including that of the Chief Executive Officer and the other executive officers, is performance related.
Risk Management and Compensation Policies and Practices
Horizon monitors its incentive and commission-based compensation plans through an incentive compensation and commission plan matrix that provides a schedule of
all plans, associated risks and how the risks are mitigated. This matrix is reviewed by the Compensation Committee in a private session with the person who serves as Horizon’s Senior Vice President, Senior Auditor, Enterprise Risk Manager, and
Compliance Officer (“
Risk Manager
”). Horizon’s incentive compensation plans minimize undue risk taking through plan design, incentive compensation caps, and Compensation Committee oversight. Plan design provides
the Compensation Committee with the ability to change, modify, or cancel any incentive compensation plan at the Committee’s sole discretion. In addition, all material incentive compensation payouts, excluding commissions paid to mortgage loan
originators, are subject to Horizon’s achievement of minimum cash flow coverage to cover dividends, and fixed costs at the holding company, and individual employee performance that is satisfactory to Horizon.
The SEC’s compensation risk rules provide that if a public company’s compensation policies and practices create risks that are reasonably likely to have a
material adverse effect on the company, then the company must provide disclosures addressing the compensation policies and practices as they relate to risk management and risk-taking incentives with respect to all employees and to disclose in their
proxy statements whether a company’s compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the company. Horizon reviewed its compensation policies and practices for all employees on September
17, 2019, including executive officers, and has determined that those policies and practices are reasonable and unlikely to have a material adverse effect on Horizon. Horizon believes that the design and oversight of its compensation plans help ensure
that the plans do not encourage excessive risk taking.
Enterprise Risk Management
In conjunction with Horizon’s Enterprise Risk Management Policy, the Risk Manager, who serves as Horizon’s senior enterprise risk manager, and other members of
senior management meet annually with all business units to discuss risks related to their areas and how risks are mitigated. The risks are then classified as follows:
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High – potential material threat to the enterprise.
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Moderate – not a material threat to the enterprise, however, could impact current year’s performance.
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Low – minimal threat to the enterprise.
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High level risks and established metrics were reviewed with Horizon’s Board or Board committees four times during 2019, as discussed below. The Board
anticipates a similar review at least quarterly in 2020.
As part of its oversight function, the Board and its committees monitor how management operates Horizon and maintains internal controls and processes. When
granting authority to management, approving strategies and receiving management reports, the Board considers, among other things, the risks, and vulnerabilities faced by Horizon. The Audit Committee considers risks associated with Horizon’s overall
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financial reporting, the disclosure process, compliance with all rules and regulations and risk control policies and procedures. At its regularly scheduled quarterly meetings,
the Audit Committee meets in executive session with its internal auditor, its Risk Manager, and Horizon’s independent registered public accounting firm. RMS US, LLP served as Horizon’s internal auditor during 2019. High-level risks are reviewed with
the Audit Committee at each meeting.
The Board committees review high-level risks associated in the area of their responsibilities. The Asset Liability Committee reviews risks related to
liquidity, interest rates, quality of the investment portfolio, operations, facilities, and information security. The Enterprise Risk Management and Credit Policy Committee reviews risks related to credit, loan concentrations, community reinvestment,
and compliance with lending rules and regulations. In addition, it oversees Horizon’s enterprise risk management policies and key risk metrics and proactively monitors emerging risk trends and economic factors. As a result, it will recommend any
necessary adjustments to Horizon’s enterprise risk management practices and metrics. In 2019, the Compensation Committee met one time in executive session with the Risk Manager to review Horizon’s incentive compensation plans to be certain that
employees are not incentivized to take undue risks, and the Compensation Committee anticipates that it will meet one time during 2020 to conduct a similar review.
The matrices for the Executive Officer Bonus Plan have included “Enterprise Risk Management” as a category since 2009. For information about the Executive
Officer Bonus Plan and matrices, see the discussion under the caption “
Annual Performance-Based Incentive Compensation
” in the Compensation Discussion and Analysis below.
Anti-Hedging and Anti-Pledging Policies
Horizon has robust policies restricting hedging and pledging transactions related to Horizon’s common shares. These policies prohibit a full range of
transactions and cover a broad group of participants, including directors, officers, employees, family members, other members of a person’s household, and controlled entities. Horizon believes that hedging and pledging transactions could have the
effect of diluting the risks and rewards of stock ownership in Horizon and could cause an employee, director or executive officer to have different objectives from Horizon’s other shareholders.
Horizon addresses hedging and pledging in three separate policy documents: (i) the Insider Trading Policy, which applies to all directors, officers, employees,
family members, other members of a person’s household, and controlled entities; (ii) the Anti-Hedging Policy, which applies to all directors and executive officers; and (iii) the Anti-Pledging Policy, which applies to all directors and executive
officers.
Each of the policies applies restrictions to a broad range of transactions that could reasonably be expected to have the effect of hedging or offsetting a
decrease in the market value of Horizon’s common shares, such as prepaid variable forwards, equity swaps, collars and exchange funds. In addition, restrictions apply to options trading, margin accounts and pledging because these situations can also
foster objectives that differ from other Horizon shareholders or can force sales while the person subject to the policy possesses material nonpublic information.
Employees who are not executive officers are strongly encouraged not to engage in any hedging or monetization transactions, but are permitted the limited
ability to seek pre-clearance from Horizon’s Compliance Officer (currently designated as the Chief Financial Officer) to engage in such a transaction. The person must provide sufficient justification for the transaction. In addition, an employee who is
not an executive officer may also seek pre-clearance from the Compliance Officer for pledging Horizon common shares as collateral for a loan and must demonstrate his or her financial capacity to repay the loan without resorting to the pledged
securities. During 2019, no requests from non-executive officer employees for deviations from the Insider Trading Policy were received by the Compliance Officer.
With respect to directors, executive officers, their family members and controlled entities, Horizon has adopted an even more aggressive stance with respect to
all hedging and pledging transactions. In
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addition to the Insider Trading Policy, these persons are also subject to the Anti-Hedging Policy and the Anti-Pledging Policy. The Anti-Hedging Policy prohibits them from
purchasing financial instruments or engaging in activities that could reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any Horizon securities. There are no exceptions.
The Anti-Pledging Policy prohibits them from pledging, hypothecating or encumbering Horizon securities as collateral for any indebtedness, including pledging
securities as collateral for margin accounts. However, the Corporate Governance and Nominating Committee of the Board of Directors may grant prior approval for a pledge of securities in limited circumstances for loans with a clear purpose for use of
the proceeds and a well-defined and identifiable source of repayment. Horizon’s directors and executive officers have not requested any pledging of Horizon securities at this time, and therefore, no waivers or exceptions have been granted.
Succession Plan
Horizon maintains a detailed chief executive officer succession plan that includes a formal selection process that considers emergency, temporary, and
permanent succession plans. Horizon’s succession plan includes a discussion on the bank’s future outlook, cultural fit, core competencies required for the position and use of independent third parties, if necessary. Horizon’s succession plan also
contemplates review of both internal and external candidates. Horizon’s chief executive officer succession plan is periodically reviewed by the Board of Directors.
Stock Ownership Guidelines
Horizon Ownership Guidelines (“
Ownership Guidelines
”) require that members of the Boards of Directors of Horizon and
Horizon Bank and Horizon’s executive officers attain and maintain a level of ownership of Horizon’s common shares having a value at least equal to the following ownership thresholds specified in the Ownership Guidelines:
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Participant
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Ownership Thresholds
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Director
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3 times amount of annual retainer
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Chief Executive Officer
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3 times base salary
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Named Executive Officers (other than Chief Executive Officer)
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2 times base salary
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If a participant is not in compliance with the Ownership Threshold due to the number of common shares owned or from stock price fluctuations, then, until such
time as the participant attains the Ownership Threshold, the participant is subject to additional restrictions. The additional restrictions include certain limitations on sale of current shares owned and additional shares acquired.
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Participant
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Percentage of After-Tax Profit Associated with the Acquired Shares
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Director and Chief Executive Officer
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75%
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Named Executive Officers (other than the Chief Executive Officer)
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50%
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Shares are considered to be owned by a participant for the purposes of the Ownership Guidelines if those shares would be deemed to be beneficially owned
according to the SEC’s beneficial ownership rules applicable to determining ownership for the beneficial ownership table included annually in Horizon’s proxy statement for its shareholders’ meeting. Shares of restricted stock for which the restrictions
have not yet lapsed, and non-vested unexercised stock options, are not considered to be shares owned for the purposes of the Ownership Guidelines. Any exceptions or waivers to the Ownership Guidelines must be approved by the Compensation Committee.
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Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included below. Based on that review and
discussion, the Compensation Committee has recommended to Horizon’s Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into Horizon’s 2019 Annual Report on Form 10-K.
This Report is respectfully submitted by the Compensation Committee of Horizon’s Board of Directors:
Susan D. Aaron, Chair
Eric P. Blackhurst
Daniel F. Hopp
Peter L. Pairitz
Compensation Discussion and Analysis
Executive Summary
The Compensation Discussion and Analysis describes and analyzes the compensation of Horizon’s named executive officers. Horizon’s compensation program is
designed to align executive officer compensation with Horizon’s annual and long-term performance and with the interests of Horizon’s shareholders. The development of compensation programs and benefit plans for senior executives, along with specific
compensation decisions for the named executive officers, is the responsibility of the Compensation Committee of the Board. The Compensation Committee is assisted from time to time by an independent compensation consultant, whose duties are detailed in
this Proxy Statement. The Compensation Committee utilizes benchmark data obtained from industry publications and the compensation consultant to assist in determining the reasonableness of Horizon’s pay programs, the direction of Horizon’s total
compensation as compared with Horizon’s performance and in making compensation decisions on named executive officers.
The Compensation Committee, with input from the Board of Directors, annually evaluates the Chief Executive Officer’s performance in comparison to corporate
goals and objectives and determines and approves the Chief Executive Officer’s compensation based on achievement of those goals and objectives. The Chief Executive Officer evaluates the performance of the other named executive officers in comparison to
goals and recommends to the Compensation Committee a base salary change for each named executive officer based on achievement of their goals and objectives. The Compensation Committee makes the final decision on the other named executive officers’
compensation.
This Compensation Discussion and Analysis also includes information about the ratio of Horizon’s Chief Executive Officer’s annual total compensation to the
median of the annual total compensation of all other Horizon employees.
Overview of 2019 Compensation Process and Programs
Use of FW Cook Compensation Consultant
.
As it has done several times in the past, the Compensation Committee retained FW Cook to prepare a report for purposes of evaluating executive compensation for
Horizon’s named executive officers. The most recent FW Cook report was received in December 2019 and compared overall executive compensation against 18 companies of comparable size and common business traits, as selected by FW Cook with input from
management and approved by the Compensation Committee. The following highlights are from the 2019 FW Cook report:
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Horizon is positioned near the median of the group of 18 comparison companies in various measures of size, including total assets, total shareholder equity, net revenue, pre-tax income, number of employees and market capitalization.
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Total direct compensation (“TDC”) for the last completed fiscal year (2018) for Mr. Dwight, the Chief Executive Officer, is positioned 1% below the median of the 18 comparison companies.
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Target TDC at the 18 comparison companies increased by 14%, although target TDC for Mr. Dwight increased by 3% year over year.
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Mr. Dwight’s base salary is near the high end of the median range of the 18 comparison companies, annual bonus opportunities are near the low end of the median range, and long-term incentive opportunities are near the median of the
median range.
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With respect to Mr. Dwight’s compensation mix, his target TDC is weighted similarly to median competitive practice.
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On average, TDC opportunities for the named executive officers (excluding Mr. Dwight), individually and in total, are positioned within the market median range. The competitive market median increased 14% year-over-year on average for
all executive officers.
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|
|
• |
Total annual compensation for the last completed fiscal year (2018) for Mr. Dwight and all the other named executive officers is directionally aligned with company size and performance.
|
|
|
• |
Total annual compensation for the last five completed fiscal years (2014-2018) on average is somewhat high relative to company size and performance for each of those fiscal years.
|
|
|
• |
Total compensation paid for the last completed fiscal year (2018) for Mr. Dwight and all the other named executive officers on average is directionally aligned with three-year company performance (2016-2018).
|
|
|
• |
Total compensation paid for the last five completed fiscal years (2014-2018) on average is directionally aligned with trailing three-year actual performance.
|
|
|
• |
Horizon’s annual bonuses earned as a percent of target ranged from 92-125%, versus an earnout range of 90-140% of target at the 18 comparison companies at the 25
th
and 75
th
percentiles, respectively.
|
|
|
• |
Horizon’s TDC mix is representative of median competitive practice.
|
|
|
• |
Horizon’s long-term incentive mix of 80% performance shares and 20% stock options is more performance-oriented than median competitive practice, where 60% is allocated to performance awards, 33% to time-based restricted stock, and 7% to
stock options. Only 2 of the 18 comparison companies grant stock options or stock appreciation rights.
|
|
|
• |
Horizon ranks near the 25
th
percentile of the 18 comparison companies in terms of equity compensation cost, as measured by absolute dollar amount, and near the 25
th
percentile relative to pre-tax income.
|
|
|
• |
Horizon ranks near the 25
th
percentile of the 18 comparison companies in terms of share usage run rate due to Horizon’s use of stock options which require more shares than restricted stock to deliver the same value. Because
Horizon has decreased its weighting on stock options (as it has expanded its use of performance shares) from 50% to 20%, the share usage run rate has decreased.
|
|
|
• |
Horizon ranks below the 25
th
percentile of the 18 comparison companies in terms of potential dilution overhang.
|
|
|
• |
Horizon aligns with comparison company practice by using a portfolio of two long-term incentive grant types (stock options and performance-based restricted stock awards). More than half of the 18 comparison companies also use two
long-term incentive grant types.
|
The Compensation Committee has considered the independence of FW Cook in light of SEC rules and NASDAQ listing standards. In connection with this process, the
Committee has reviewed, among other items, a letter from FW Cook dated August 9, 2019 that addresses the independence of FW Cook and the
19
members of the consulting team serving the Compensation Committee, including the following factors: (i) other services provided to us by FW Cook, (ii) fees paid by us as a
percentage of FW Cook’s total revenue, (iii) policies or procedures of FW Cook that are designed to prevent conflicts of interest, (iv) any business or personal relationships between the senior advisor of the consulting team with a member of the
Committee, (v) any Horizon stock owned by the senior advisor or any immediate family member, and (vi) any business or personal relationships between Horizon’s executive officers and the senior advisor. The Committee discussed these considerations and
concluded that the work performed by FW Cook and its senior advisor involved in the engagement did not raise any conflicts of interest.
The Compensation Committee intends to continue to employ an independent, third-party consultant to review executive compensation, including long-term benefits,
at least every two years.
2019 Compensation Program
The Compensation Committee sets the compensation of all named executive officers of Horizon, including that of the Chief Executive Officer. Compensation is
composed of several segments, including base salary, short-term incentives, and long-term incentives. The Compensation Committee compares all executive compensation, including that of the Chief Executive Officer, to the compensation paid to persons
holding the comparable position in similar financial institutions.
In determining the 2019 compensation for the Chief Executive Officer, Chief Financial Officer and other top officers, the Compensation Committee placed its
greatest reliance on the analysis provided by the 2018 FW Cook report delivered in December 2018, just as the Compensation Committee will use the 2019 FW Cook report delivered in December 2019 as part of its consideration of executive compensation for
2020. The Compensation Committee’s review included a study of base pay, bonus, and long-term compensation. The 2018 FW Cook report made comparisons against a group of 19 Midwestern regional banks indicated in the list below. The peer group was selected
by FW Cook and approved by the Compensation Committee.
The following list includes all peer group companies included in FW Cook’s 2018 report:
|
|
• |
1
st
Source Corporation (South Bend, IN)
|
|
|
• |
Community Trust Bancorp (Pikeville, KY)
|
|
|
• |
City Holding Company (Charleston, WV)
|
|
|
• |
Enterprise Financial Services Corp. (Clayton, MO)
|
|
|
• |
First Busey Corporation (Champaign, IL)
|
|
|
• |
First Defiance Financial (Defiance, OH)
|
|
|
• |
First Financial Corp. (Terre Haute, IN)*
|
|
|
• |
First Mid-Illinois Bancshares, Inc. (Mattoon, IL)
|
|
|
• |
German American Bancorp (Jasper, IN)
|
|
|
• |
Great Southern Bancorp (Springfield, MO)
|
|
|
• |
Hills Bancorporation (Hills, IA)*
|
|
|
• |
Independent Bank Corporation (Ionia, MI)
|
|
|
• |
Lakeland Financial (Warsaw, IN)
|
|
|
• |
Mercantile Bank (Grand Rapids, MI)
|
|
|
• |
Midland States Bancorp (Effingham, IL)
|
20
|
|
• |
MidWestOne Financial (Iowa City, IA)
|
|
|
• |
Peoples Bancorp (Marietta, OH)
|
|
|
• |
QCR Holdings (Moline, IL)
|
|
|
• |
SY Bancorp (formerly, Stock Yards Bancorp) (Louisville, KY)
|
As previously described, the December 2019 FW Cook report employed a comparison group of 18 companies, eliminating the companies denoted above with an asterisk
and adding Byline Bancorp (Chicago, IL). These adjustments reflect changes to the peer group prompted by Horizon’s larger size due to organic growth and merger activity.
The following discussion of compensation focuses on the compensation of the five executive officers who are named in the Summary Compensation Table below
because of their positions and levels of compensation (referred to throughout this Proxy Statement as the “named executive officers.” The named executive officers and their positions with Horizon and Horizon Bank during 2019 are as follows:
|
Name
|
Position
|
|
Craig M. Dwight
|
Chair of the Board and Chief Executive Officer of Horizon and Horizon Bank
|
|
Mark E. Secor
|
Executive Vice President and Chief Financial Officer of Horizon and Horizon Bank
|
|
Dennis J. Kuhn
|
Executive Vice President of Horizon; Chief Commercial Banking Officer of Horizon Bank
|
|
James D. Neff
|
President of Horizon and Horizon Bank
|
|
Kathie A. DeRuiter
|
Executive Vice President of Horizon; Senior Bank Operations Officer of Horizon Bank
|
Annual Advisory Vote on Executive Compensation
At the 2019 Annual Meeting, Horizon provided shareholders with a separate, advisory shareholder “say-on-pay” vote to approve the compensation of the named
executive officers. At that meeting, 97.6% of Horizon’s common shares that were cast on the proposal (excluding abstentions) were voted in favor of Horizon’s compensation of those executive officers as disclosed in the proxy statement. Following the
2019 vote, the Board of Directors considered whether any changes should be implemented in connection with Horizon’s compensation policies and decisions. The Board believes that the high percentage of shares voting in support of the say-on-pay proposal
indicated that shareholders approve the work of Horizon’s Compensation Committee and that shareholders consider Horizon’s executive compensation programs to be aligned with shareholders’ interests. Given the significant shareholder support, the Board
and Compensation Committee concluded that Horizon’s executive compensation is aligned with shareholders’ interests and, therefore, no additional action was taken in response to the outcome of the advisory vote on executive compensation. At the 2020
Annual Meeting, shareholders again will have the opportunity to vote, in an advisory capacity, on Horizon’s named executive officer compensation (see “
Proposal 2: Advisory Vote to Approve Executive Compensation
”
below).
Advisory Vote on Frequency of the Advisory Vote on Executive Compensation
At the 2018 Annual Meeting, shareholders voted in an advisory vote to recommend the frequency at which Horizon should present shareholders with the opportunity
to participate in an advisory say-on-pay vote on Horizon’s executive compensation. Horizon’s Board of Directors recommended an annual vote. Shareholders voted on whether the say-on-pay votes should be held every one, two, or three years. Of Horizon’s
common shares voted in 2018 on that frequency proposal (excluding abstentions), 92% of those common shares were voted in favor of holding future say-on-pay votes on an annual basis, as the Board of Directors recommended. In light of that result and
other factors that the Board has considered, Horizon will continue to hold say-on-pay votes on an annual basis, as it has done since the first shareholder vote on frequency in 2012. The advisory vote on the frequency of say-on-pay votes is required to
occur at least every six years and will occur next during or before 2024.
21
Compensation Risk
As discussed under the caption “
Risk Management and Compensation Policies and Practices
” in the Corporate Governance
section above, Horizon’s Risk Manager, who serves as the senior risk officer, meets with the Board of Directors and the Audit and Compensation Committees to review Horizon’s compensation and other risks and to address how to mitigate and monitor such
risks.
Horizon’s long-term business objectives require that Horizon increase revenues year-over-year, maintain profitability in each year, increase market share and
demonstrate sound enterprise risk management. Horizon believes that if it is successful in achieving these objectives, the results will inure to the financial benefit of Horizon’s shareholders. Accordingly, Horizon has designed its executive
compensation program to reward its executives for achieving annual and long-term financial and business results that meet these objectives. Specifically, the amount of incentive compensation received by Horizon’s executive officers is directly related
to Horizon’s and to an individual executive’s performance results. Horizon recognizes that the pursuit of these objectives may lead to behaviors that focus executives on their individual enrichment rather than Horizon’s long-term welfare. If this were
to occur, it could weaken the link between pay and performance and result in less of a correlation between the compensation delivered to Horizon’s executives and the return realized by Horizon’s shareholders. Accordingly, Horizon has designed its
executive compensation program to limit and mitigate these possibilities and ensure that its compensation practices and decisions are consistent with Horizon’s risk profile.
The Compensation Committee has had in place since 2003 certain rules that provide it with considerable latitude in determining whether or not bonuses should be
paid. The Compensation Committee believes these rules protect the shareholders and help mitigate the possibility that executive officers will take any undue risks. The rules are as follows:
|
|
• |
The Compensation Committee may unilaterally amend, modify, or cancel the plans at any time at its sole discretion.
|
|
|
• |
Named executive officer bonuses will only be paid if Horizon achieves a minimum net income level that is more than sufficient to cover fixed costs and dividends at the holding company level. This minimum net income level supports the
concept that the shareholders are paid first and ahead of executive officer bonuses.
|
|
|
• |
Executive officers will be paid bonuses only if they are in good standing with Horizon and are not under a performance warning, suspension, or individual regulatory sanction.
|
|
|
• |
The Compensation Committee or its designee is to review and approve all executive officer bonuses prior to payment.
|
|
|
• |
Bonuses are subject to receipt of an unqualified opinion by Horizon’s independent accountants on its most current year-end financial statements.
|
|
|
• |
Horizon Bank has a policy that allows it to “claw back” incentive compensation as discussed below under the heading “
Recovery of Incentive Compensation under the Dodd-Frank Act
.”
|
Overview of Compensation Elements and Mix
We have included in this section and the table below a brief overview of the primary elements of Horizon’s compensation plan for the Chief Executive Officer
and other named executive officers. A more in-depth discussion of the compensation elements and mix follows in “
Detailed Discussion of Compensation Elements
.”
22
|
Pay Element
|
Role
|
Key Factors
|
|
Base Salary
|
•
Provides the only fixed
element of compensation
|
•
Responsibilities,
skills, experience and demonstrated performance
•
Competitive with comparable peers
|
|
Annual Performance-Based Cash Incentive Compensation (
i.e.,
pay for results)
|
•
Reward performance if, and only to the
extent, that Horizon and its shareholders also benefit financially from the officer’s stewardship
•
Focuses executives on annual
objectives that support long-term strategy and value creation
|
•
Determined
pursuant to the Executive Officer Bonus Plan, which sets pre-established corporate financial and individual performance objectives
•
Achievement of short-term and
long-term corporate and individual performance metrics
•
Horizon must achieve a certain minimum
earnings threshold before any level of award is earned.
•
Executive must be in good standing
with Horizon and not under any regulatory sanction
•
Competitive with comparable peers
|
|
Long-Term Performance-Based Equity and/or Cash Incentive Compensation
|
•
Reinforces the need for long-term
sustained financial and stock price performance
•
Aligns interests of executives with
shareholders
•
Encourages retention
•
Focus on performance-based awards
reduces the incentive and manages the risk that executives could engage in risky behavior to drive up the price of common shares
•
Encourages and facilitates stock
ownership
|
•
Achievement of performance goals
during a performance period, all as set by the Compensation Committee (generally based on a comparison of Horizon’s average performance over the performance period for the return on common equity, compounded annual growth rate of total
assets, and return on average assets, all relative to the average performance for publicly traded banks with total assets between $1-5 billion on the SNL Bank Index)
•
Competitive with comparable peers
|
|
Retirement and Other Benefits
|
•
Supports the health and security of
executives
•
Enhances executive productivity
|
•
Competitive with comparable peers
|
|
Limited Perquisites
|
•
Promote Horizon’s presence in the
marketplace through memberships
|
•
Value to Horizon
|
To encourage appropriate decision-making and facilitate the alignment of the interests of Horizon’s executives with those of Horizon and its shareholders,
Horizon’s executive compensation program includes “at risk” compensation, as discussed below in “
Detailed Discussion of Compensation Elements
.” Horizon believes that the allocation of at risk compensation for
annual cash incentives is reasonable for Horizon given its business objectives and is comparable to that of Horizon’s peer group.
23
Detailed Discussion of Compensation Elements
Base Salary
Salaries of all executive officers, including the Chief Executive Officer, are governed by Horizon’s formal salary administration program, which is updated
each year. The salary administration program involves consideration of an executive officer’s position and responsibility and performance as determined in the detailed annual performance reviews discussed above.
The salaries of Craig M. Dwight, Chief Executive Officer, and James D. Neff, President, are also impacted by written employment agreements with Horizon and
Horizon Bank. Each entered into an amended and restated employment agreement on December 31, 2019, effective January 1, 2020. The agreements provide that Messrs. Dwight and Neff will continue to receive an annual base salary equal to the amount being
paid to each of them on the date of their agreements, subject to annual increases (but not decreases) based on the annual review of Horizon’s Compensation Committee. Other provisions of the agreements are discussed below following the Summary
Compensation Table and in the discussion of “
Potential Payments Upon Termination or Change in Control
.”
The Compensation Committee compares the salary of each executive officer to those salaries being paid to executive officers in similar positions in
organizations of comparable size in the Midwest. Salary ranges are then computed from that data for each Horizon executive officer position. Salary increases are calculated based on individual performance rating, where the executive officer’s base
salary falls within the executive officer’s respective salary range, benchmark data, total compensation in comparison to peer compensation mix, and Horizon’s salary matrix.
FW Cook’s 2019 report reported that the average and highest base salary compensation for a Chief Executive Officer were $535,000 and $750,000, respectively.
For Mr. Dwight’s services as Chair of the Board and Chief Executive Officer, he was paid a base salary in 2019 of $558,900, which represented a 3.50% increase over his 2018 base salary of $540,000.
The salary increases for 2019 for the other named executive officers ranged from 3.00% to 4.00%. Mr. Secor’s salary was increased to $291,366 from $282,880
(
3.00%
)
; Mr. Neff’s salary was increased to $388,125 from $375,000 (3.50%); Ms. DeRuiter’s salary was increased to $260,000 from $250,000 (4.00%); and Mr. Kuhn’s salary was
increased to $257,500 from $250,000 (3.00%). The salary increases were based on the Compensation Committee’s in-depth review of FW Cook’s 2018 compensation reports in conjunction with Horizon’s standard salary administration program as outlined above,
pursuant to which the Compensation Committee takes into consideration the individual performance rating, where the executive officer’s base salary falls within their respective salary range, benchmark data, total compensation in comparison to peer,
compensation mix and Horizon’s salary matrix. The salary matrix takes into account both the performance review rating and the employee’s current salary, with respect to the salary range, in determining the percentage increase.
Annual Performance-Based Cash Incentive Compensation
After consultations with compensation consultant FW Cook in 2003, the Compensation Committee of the Board of Directors of Horizon adopted an Executive Officer
Bonus Plan. The Bonus Plan permits executive officers to earn, as a cash bonus, a percentage of their salary based on the achievement of corporate and individual goals in the relevant year. All of the named executive officers, Messrs. Dwight, Neff,
Kuhn, Secor, and Ms. DeRuiter, currently participate in the Bonus Plan. Participants in the Bonus Plan are not eligible to participate in any other short-term cash incentive plan offered by Horizon.
To receive a bonus under the Bonus Plan, the executive officer must be employed by Horizon or one of its subsidiaries on the date the annual bonus payment is
made and must be in good standing with Horizon. If the executive officer retires or dies after earning an annual bonus at the end of the measuring period, then the executive officer (or the estate) will still be eligible to receive the bonus. The
Compensation
24
Committee may adjust or amend the Bonus Plan at any time in its sole discretion. All executive officers’ bonuses are subject to final approval by the Compensation Committee or
its designee, and bonus payments are subject to Horizon’s receipt from its independent accountants of an unqualified audit opinion on Horizon’s most current year-end financial statements. Mr. Dwight’s and Mr. Neff’s bonuses are paid in accordance with
their employment agreements, which provide that they may participate in all incentive compensation plans and programs generally available to executive officers.
As approved by the Compensation Committee, Horizon’s bonus matrices for executive officers are divided into short-term and long-term metrics with total bonus
opportunities weighted fifty percent each. Short-term metrics place heavier weight on financial outcomes in order to align bonus payouts with shareholders’ interests for the given year. Long-term metrics place heavier weight on positioning Horizon for
future success and enterprise risk management to align with shareholders’ long-term interests. Bonus calculations for financial outcomes are based on quantifiable targets and, for non-financial targets, on observations by Horizon’s Chief Executive
Officer, the Compensation Committee, and the Board of Directors in comparison to Horizon’s strategic plan.
The weightings for Horizon’s 2019 bonus matrix for each individual participant are as follows:
|
Named Executive Officer & Category
|
Short-Term
Metric
Weighting
|
Long-Term
Metric
Weighting
|
||||||
|
Chief Executive Officer (Mr. Dwight)
|
||||||||
|
Financial Outcome of Horizon (Net Income & Efficiency)
|
70
|
%
|
||||||
|
Positioning Horizon for Future Success
|
70
|
%
|
||||||
|
Enterprise Risk Management
|
30
|
%
|
30
|
%
|
||||
|
Executive Vice President and Chief Financial Officer (Mr. Secor)
|
||||||||
|
Financial Outcome of Horizon (Net Income & Efficiency)
|
60
|
%
|
||||||
|
Positioning Horizon for Future Success
|
20
|
%
|
||||||
|
Enterprise Risk Management
|
40
|
%
|
60
|
%
|
||||
|
Project Management
|
20
|
%
|
||||||
|
President (Mr. Neff)
|
||||||||
|
Financial Outcome of Horizon (Net Income, Efficiency, Asset Quality, Business Unit Income, Enterprise Risk Management, & Positioning Horizon for
Long Term Success)
|
40
|
%
|
||||||
|
Financial Outcomes for Areas of Direct Responsibility
|
45
|
%
|
||||||
|
Positioning Horizon for Future Success
|
30
|
%
|
||||||
|
Enterprise Risk Management
|
15
|
%
|
70
|
%
|
||||
|
Executive Vice President and Senior Bank Operations Officer (Ms. DeRuiter)
|
||||||||
|
Financial Outcome of Horizon (Net Income & Efficiency)
|
50
|
%
|
||||||
|
Positioning Horizon for Future Success
|
20
|
%
|
||||||
|
Enterprise Risk Management
|
30
|
%
|
60
|
%
|
||||
|
Project Management
|
20
|
%
|
20
|
%
|
||||
|
Executive Vice President and Chief Commercial Banking Officer (Mr. Kuhn)
|
||||||||
|
Financial Outcome of Horizon (Net Income, Efficiency, Business Unit Income & Asset Quality)
|
45
|
%
|
||||||
|
Financial Outcomes for Areas of Direct Responsibility
|
40
|
%
|
||||||
|
Positioning Horizon for Future Success
|
30
|
%
|
||||||
|
Enterprise Risk Management
|
15
|
%
|
70
|
%
|
||||
Horizon’s 2020 bonus matrices for each named executive officer will follow substantially the same categories and metric weightings as above,
subject to approval by the Compensation Committee and Board of Directors.
25
The Compensation Committee established a minimum earnings target for Horizon to achieve before any bonuses would be paid out under the Bonus Plan for 2019. In
2019, the minimum earnings threshold was $36.4 million. If Horizon’s net income for 2019 was below $36.4 million, no bonuses would be paid to any executive officer. The minimum earnings target is tied to earnings available to pay dividends and fixed
costs at the holding company. Earnings, for purposes of the Bonus Plan, are determined by the Compensation Committee, which has the discretion to make adjustments for special non-recurring costs such as acquisition-related expenditures and other
one-time expenses. In 2019, the Compensation Committee adjusted earnings for acquisition-related costs.
The Compensation Committee also approved a target bonus matrix for each executive officer to be used to calculate the executive officer’s bonus (if any) for
the year (assuming that the minimum earnings target has been met). The matrix for each executive officer specifies the performance measures applicable to the executive officer, the targets for each performance measure and the weight to be assigned to
each performance measure in calculating the bonus if the specified target levels are achieved.
The Compensation Committee sets the target awards to be challenging, but reasonably attainable. The maximum earnings goal was approximately $6.0 million above
the targets of $58.0 million for 2019 and $56.0 million for 2018 and the maximum efficiency ratio goal was approximately 160 basis points and 225 basis points better than the targets of 58.0% for 2019 and 57.0% for 2018, respectively. In 2019, the
minimum earnings amount for payout was achieved, and all the participants were in good standing with Horizon. Any participant not in good standing with Horizon would not be eligible for incentive compensation.
The other non-financial measurements include the following: enterprise risk management; compliance with rules, regulations, and good internal controls;
positioning Horizon for long-term growth; organizational development, retention and attracting good talent; and project management. The weightings for each measurement vary dependent upon the overall responsibilities and primary goals of each executive
officer. Non-financial results are compared with Horizon’s strategic plan and scored based on the observations of the Chief Executive Officer, Compensation Committee, and the Board of Directors. Scores range from meets, exceeds, or far exceeds
expectations.
For 2019, the named executive officers who participated in the Bonus Plan could have earned as a maximum bonus the following percentages of their base
salaries: Mr. Dwight, 70%; Mr. Secor, 55%; Mr. Neff, 55%; Mr. Kuhn, 55%; and Ms. DeRuiter, 55%. Each named executive officer had as a short-term performance goal the achievement of a specified level of financial outcomes for the year, with the
weighting of such goals for 2019 being 70% for Mr. Dwight; 60% for Mr. Secor; 85% for Mr. Neff; 85% for Mr. Kuhn; and 50% for Ms. DeRuiter. The financial outcome targets focused primarily on Horizon’s earnings, efficiency improvements, or business unit
outcomes. The short-term performance goals for each executive officer also included one non-financial metric for enterprise risk management. Long-term performance goals for each executive officer were for enterprise risk management, positioning Horizon
for long-term success or project management.
In order to earn a bonus award, the Bonus Plan’s participants were required to achieve an aggregate weighted score of 80% or higher in 2019. If the participant
achieved the goals for all categories, the participant’s aggregate weighted score would be 100%. In 2019, Mr. Dwight, Mr. Secor, Mr. Neff, Mr. Kuhn and Ms. DeRuiter all exceeded 80% in weighted average scores for both short- and long-term goals and
earned a bonus award.
In considering Mr. Dwight’s bonus, the Compensation Committee used established short- and long-term goals for 2019 and compared actual results with goals. The
goals compared Horizon’s net income compared to plan, Horizon’s efficiency ratio compared to plan, enterprise risk management, compliance with all rules, laws, regulations, audit standards, reputation of Horizon, positioning Horizon for future growth
and expansion, and organizational development including retention and attraction of good talent, efficiency improvement, and continuous learning.
26
The amounts of the bonuses actually paid each year under the Bonus Plan are reported in the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table included below in this Proxy Statement. The payouts that Messrs. Dwight, Secor, Neff, Kuhn and Ms. DeRuiter had an opportunity to earn under the Bonus Plan for 2019 are presented below in the Grants of Plan-Based Awards table.
The Compensation Committee has reviewed the Bonus Plan for 2019, and based on that review, the Compensation Committee has concluded that the Bonus Plan, as
designed for 2019, aligned the interests of the senior executive officers with those of the shareholders and that the Bonus Plan designs provided several features to mitigate any incentive to the senior executive officers to take undue risks that could
threaten the enterprise.
Long-Term Performance-Based Equity and/or Cash Incentive Program
Since 2003, Horizon has maintained an omnibus stock plan for the purpose of attracting and retaining key employees. All omnibus stock plans have been approved
by Horizon’s shareholders. The original 2003 Omnibus Plan expired on January 31, 2013, and although awards under the plan remain outstanding, no additional shares may be granted under the 2003 Omnibus Plan.
In 2014, the shareholders approved the 2013 Omnibus Plan, which replaced the 2003 Omnibus Plan and became effective for a ten-year term beginning February 1,
2013. At the 2018 Annual Meeting, shareholders approved an amended and restated 2013 Omnibus Plan to allow additional stock-based awards. The 2013 Omnibus Plan authorizes the issuance of up to 1,556,325 common shares (as adjusted from 691,700 for the
November 2016 and June 2018 3-for-2 stock splits).
The 2013 Omnibus Plan was designed to satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986, which generally denies a corporate-level
income tax deduction for annual compensation in excess of $1 million paid to the chief executive officer or any of the four other most highly compensated officers of a public company. As a result of tax reform legislation effective for tax years
beginning on January 1, 2018, or later (specifically, the Tax Cuts and Jobs Act of 2017), certain types of compensation, including “performance-based compensation,” which were previously exempt from the limitations, are no longer excluded from the
Section 162(m) deduction limit.
The Compensation Committee administers the 2013 Omnibus Plan and may grant the following types of awards:
|
|
• |
Incentive and nonqualified stock options
|
|
|
• |
Stock appreciation rights
|
|
|
• |
Restricted stock
|
|
|
• |
Performance units and performance shares
|
|
|
• |
Other stock-based awards
|
|
|
• |
Any combination of the above
|
Horizon’s long-term incentive program was historically based on the grant of stock options and restricted stock, but in 2014, Horizon began
awarding performance-based (not time-based) performance shares as its preferred form of long-term performance-based equity compensation. Long-term equity incentives are granted to encourage and facilitate personal stock ownership by executive officers.
Horizon believes this strengthens their personal commitment to Horizon and provides them with a longer-term perspective in their managerial responsibilities. This component of an executive officer’s compensation directly aligns the officer’s interests
with those of Horizon’s shareholders. Horizon also recognizes that equity compensation is an important element of a competitive compensation program. The program utilizes vesting periods and/or long-term performance goals to encourage key employees to
continue in the employ of Horizon and thereby acts as a retention device for key employees.
With respect to stock ownership, as discussed above, all of the named executive officers must comply with the Ownership Guidelines adopted by the Board of
Directors. The Chief Executive Officer
27
must maintain ownership of Horizon common shares having a value equal to at least three times the base salary, and each of the other named executive officers must maintain
ownership of common shares having a value equal to at least twice the applicable executive officer’s base salary. For additional details about the Ownership Guidelines, see the “
Stock Ownership Guidelines
”
section above under the “Corporate Governance” heading.
In determining a reasonable level of long-term compensation to be granted executive officers, the Compensation Committee considers data it deems relevant,
including the data in the independent reports prepared by FW Cook and other peer data.
The stock options that have been granted to executive officers are service based and vest in equal annual installments over a three- or five-year period.
Awards of restricted stock vest on the fourth or fifth anniversary of the date of grant if the executive officer remains employed by Horizon, Horizon Bank, or any of their affiliates.
The performance shares that are awarded become earned and vested based on the achievement of certain performance goals during a performance period as
established by the Compensation Committee at the time of each grant (generally three years). The performance goals are based on a comparison of Horizon’s average performance over the performance period for the return on common equity, compounded annual
growth rate of total assets, and return on average assets, all relative to the average performance for publicly traded banks with total assets between $1 billion and $5 billion on the SNL Bank Index for the same measures. Each of the three performance
goals is weighted roughly equally (34% for return on common equity; 33% for compounded annual growth rate of total assets; and 33% for return on average assets). The payout received by the recipient is determined by whether Horizon achieves the
performance goal at a threshold level (50
th
to 74
th
percentile relative to the comparative SNL group), a target level (75
th
to 84
th
percentile relative to the comparative SNL group), or a maximum level
(greater than 84
th
percentile relative to the comparative SNL group). A performance share award recipient can receive 50% of the award if Horizon achieves the threshold, 100% of the award if Horizon achieves the target, and 125% of the award
if Horizon achieves the maximum.
Qualified Retirement Plans
Horizon maintains two tax-qualified retirement plans, an Employee Stock Ownership Plan (“
ESOP
”) and an Employees’
Thrift Plan (“
Thrift Plan
”). Nearly all Horizon employees are eligible to participate in the ESOP. Horizon’s Board of Directors, in its discretion, determines Horizon’s contributions to the ESOP. The
contributions may be made in the form of cash or common shares. Shares are allocated among participants each December 31 on the basis of each participant’s eligible compensation to total eligible compensation (a maximum of $280,000 per participant).
Dividends on shares held by the plan, at the discretion of each participant, are either distributed to the participant or retained in the plan for the purchase of additional shares.
The Thrift Plan is a 401(k) plan in which all employees with the requisite hours of service are eligible to participate. The Thrift Plan permits voluntary
employee contributions, and Horizon may make discretionary matching and profit sharing contributions. Each eligible employee is vested according to a schedule based upon years of service. Voluntary employee contributions are vested at all times, and
Horizon’s discretionary contributions vest over a six-year period. Participants are eligible to receive matching contributions once they have attained age 21 and completed one year of service. Horizon, at its discretion, provides for matching
contributions as follows: 100% for the first 2% of a participant’s deferral contribution and 50% for each additional percentage deferred up to a total deferral of 6% (a maximum of 4% matching contribution).
Post-Termination Compensation and Benefits
Upon termination of either Mr. Dwight or Mr. Neff from employment in certain situations not related to a change in control of Horizon, Mr. Dwight and Mr. Neff
(but no other named executive officers)
28
will be entitled to certain post-termination compensation and benefits, as provided in their respective employment agreements. Specifically, if Horizon terminates them without
“cause” or either executive resigns for “good reason,” then the terminated executive is entitled to additional compensation and benefits, as more fully described below in “
Potential Payments Upon Termination or Change
in Control.
”
Effective January 1, 2020, all named executive officers (including Mr. Dwight and Mr. Neff) entered into new or amended Change in Control Agreements with
Horizon Bank. Pursuant to the Change in Control Agreements, the named executive officers become entitled to post-termination compensation and benefits, as discussed in more detail below in “
Potential Payments Upon
Termination or Change in Control.
”
The Board of Directors proposed these new employment and change in control agreements to advance Horizon’s commitment to use only double trigger mechanisms for
change-in-control compensation. As a result of the new or amended Change in Control Agreements, and the amended and restated employment agreements for Mr. Dwight and Mr. Neff, also effective January 1, 2020, Horizon no longer has any single-trigger or
modified single-trigger change in control compensation obligations.
Horizon believes its post-termination compensation and benefits arrangements are necessary in order to attract and retain experienced and talented executive
officers in Horizon’s industry, are comparable to arrangements offered by its industry peers, and are consistent with Horizon’s philosophy and compensation objectives.
The Horizon Bancorp Supplemental Executive Retirement Plan (“
Frozen SERP
”), a nonqualified deferred compensation plan,
was originally effective January 1, 1993, and was frozen effective December 31, 2004. The Frozen SERP provides certain management or highly compensated employees of Horizon and its affiliates with supplemental retirement benefits to help recompense
those employees for benefits reduced under the Thrift Plan due to benefit limits imposed by the Code and to permit the deferral of additional compensation. The Frozen SERP is designed and administered to comply with Title I of the Employee Retirement
Income Security Act of 1974 and to be exempt from the requirements of Internal Revenue Code Section 409A. The Frozen SERP is administered by the Compensation Committee. Prior to January 1, 2005, a participant in the Frozen SERP could elect each year to
defer a percentage of the participant’s total cash compensation. Each year, the Compensation Committee, in its discretion, could elect to have Horizon match the amounts deferred by each participant under the Frozen SERP up to a maximum match of
$25,000. The Compensation Committee could also make supplemental contributions in any amount determined by the Compensation Committee in its discretion.
Interest is credited on a participant’s deferred account balance in the Frozen SERP at the five-year U.S. Treasury Bond rate published in
The Wall Street Journal
and in effect as of the first business day of each calendar month, plus 200 basis points, but not to exceed 120% of the Applicable Federal Long-Term Rate for monthly compounding. Amounts
deferred by participants vest immediately. The Compensation Committee can require forfeiture of matching and supplemental contributions if the participant has not completed the number of years of service specified by the Compensation Committee, except
when the participant dies while still employed, is determined to be disabled or retires after reaching age sixty-five. Participants or their designated beneficiaries will begin to receive payments under the Frozen SERP within thirty days after the
participant’s separation from service. Participants may elect lump sum or installment payments, or a combination of the two, subject to the provisions of the Frozen SERP.
The Frozen SERP was amended effective January 1, 2010, to permit a participant’s account assets to be invested in Horizon common shares, and amended effective
December 19, 2017, to allow distributions under the Frozen SERP to be made in cash, Horizon common shares, or a combination of both. Participants in the Frozen SERP may change their investment election option once a year.
No additional amounts, except earnings, accrued to the named executive officers under the Frozen SERP for 2019.
29
Horizon adopted the Horizon Bancorp 2005 Supplemental Executive Retirement Plan (“
2005 SERP
”) to replace the Frozen
SERP effective January 1, 2005. As with its predecessor, the 2005 SERP provides certain management or highly compensated employees of Horizon and its affiliates with supplemental retirement benefits to help recompense those employees for benefits
reduced under the Thrift Plan due to benefit limits imposed by the Code and to permit the deferral of additional compensation. The 2005 SERP is also designed and administered to comply with Title I of the Employee Retirement Income Security Act of 1974
and Code Section 409A, and the 2005 SERP is administered by the Compensation Committee. A participant in the 2005 SERP may elect to defer a percentage of the participant’s total cash compensation each year. The 2005 SERP maximum deferral percentage is
limited to 25%.
Each year, the Compensation Committee, in its discretion, may elect to have Horizon match the amounts deferred by each participant under the 2005 SERP up to a
maximum match of $25,000 for years prior to 2017 and $35,000 for 2017 and beyond. The Compensation Committee may change the match limit prior to the beginning of any year. The Compensation Committee may also make supplemental contributions in any
amount it determines in its discretion.
Interest is credited on a participant’s deferred account balance in the 2005 SERP at the five-year U.S. Treasury Bond rate published in
The Wall Street Journal
and in effect as of the first business day of each calendar month, plus 200 basis points, but not to exceed 120% of the Applicable Federal Long-Term Rate for monthly compounding. Amounts
deferred by participants vest immediately. The Compensation Committee may require forfeiture of matching and supplemental contributions if the participant has not completed the number of years of service specified by the Compensation Committee, except
when the participant dies while still employed, is determined to be disabled or retires after reaching age sixty-five. Participants may specify the date or event upon which they or their designated beneficiaries will begin to receive payment under the
2005 SERP and may elect lump sum or installment payments, or a combination of the two, subject to the provisions of the 2005 SERP.
In December 2009, the Board of Directors approved a second SERP investment alternative in the form of Horizon common shares. In December 2017, the 2005 SERP
was amended to confirm that distributions can be made in cash, Horizon common shares, or a combination of both.
Participants in the 2005 SERP may change their investment election option once a year.
Horizon’s contributions allocated to the named executive officers under the 2005 SERP are included in the All Other Compensation column of the Summary
Compensation Table appearing below.
Perquisites and Other Personal Benefits
Horizon provides minimal perquisites and other personal benefits to its executive officers. Mr. Dwight is provided with country club membership. The cost of
the membership is less than $10,000.
Pay Ratio Disclosure
Horizon has determined the relationship of the annual total compensation of our employees and the annual total compensation of Craig M. Dwight, Horizon’s Chair
of the Board and Chief Executive Officer. For 2019, our last completed fiscal year, (i) the median of the annual total compensation of all employees (other than Mr. Dwight) was $40,240; and (ii) the annual total compensation of Mr. Dwight, as reported
in the Summary Compensation Table, included elsewhere in this Proxy Statement, was $1,238,256.
Based on this information, for 2019, the ratio of the annual total compensation of Mr. Dwight to the median of the annual total compensation of all employees
was 30.8 to 1, or, in other words, Mr. Dwight’s annual total compensation was 30.8 times that of the median of the annual total compensation of all employees.
To identify the “median employee” of Horizon this year (and as we have done each year in the past), we identified all full-time and part-time employees of
Horizon as of December 31, 2019, excluding Mr. Dwight, leased employees or independent contractors, and 80 employees acquired in the March
30
acquisition of Salin Bancshares, Inc. and its banking subsidiary. We then used the employees’ base salary (or wages and overtime for non-salaried employees) plus bonus, on a
non-annualized basis for those employed for less than all of 2019, in order to determine annual cash compensation on a consistent basis, and then we ranked all the employees by compensation amount in order to identify the median employee. We believe
the use of total cash compensation for all employees is a reasonable and consistently applied compensation measure because we do not widely distribute annual equity awards to employees and all employees participate in Horizon’s Thrift Plan and ESOP on
an equal basis.
Once we identified the median employee, we computed the median employee’s annual total compensation for 2019 in accordance with the requirements of Item
402(c)(2)(x) of Regulation S-K, which is the same methodology we use for our named executive officers as set forth in the Summary Compensation Table included in this Proxy Statement.
To determine Mr. Dwight’s annual total compensation, we used the amount reported in the “Total” column of the Summary Compensation Table included in this Proxy
Statement.
Other Compensation and Compensation-Related Policies
Clawbacks: Recovery of Incentive Compensation under the Dodd-Frank Act
Under the Dodd-Frank Act, companies listed on a national securities exchange must adopt a policy providing for the recovery of
incentive-based compensation in the event of an accounting restatement based on erroneous data. Under such a policy, compensation would be recovered, or “clawed back,” from any current or former executive officer of the company who received the
incentive-based compensation during the three years preceding the date on which the company is required to prepare the restatement. The amount to be recovered would be the excess of the amount that would have been paid to the executive officer under
the restatement. Horizon Bank adopted a “claw back” policy in 2009, which covers each exempt employee with the title of Vice President or above or who is a commission-based employee. This policy will be revised as necessary and appropriate in the
future to conform to any additional SEC or NASDAQ requirements for such policies.
Anti-Hedging and Anti-Pledging
Horizon’s insider trading policy has historically identified many prohibited transactions for its directors, officers, employees, family members, and
controlled entities, including hedging and monetization transactions and pledging Horizon’s common shares, for which transactions special pre-clearance with a compliance officer was required. In December 2017, the Board of Directors adopted an even
more aggressive stance with respect to these transactions, believing that hedging and pledging transactions could have the effect of diluting the risks and rewards of stock ownership in Horizon and could cause a director or executive officer to have
different objectives from Horizon’s other shareholders.
First, the Board of Directors adopted a stand-alone anti-hedging policy (separate from the insider trading policy) that applies to all directors, executive
officers, their family members and controlled entities, prohibiting them from purchasing financial instruments or engaging in activities that could reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any
Horizon securities. There are no exceptions.
Also, the Board of Directors adopted a stand-alone anti-pledging policy (separate from the insider trading policy) that applies to the same group as the
anti-hedging policy. All pledging, hypothecating or encumbering of Horizon securities as collateral for any indebtedness is prohibited, including pledging securities as collateral for margin accounts. However, the Corporate Governance and Nominating
Committee of the Board of Directors may grant prior approval for a pledge of securities in limited circumstances for loans with a clear purpose for use of the proceeds and a well-defined and identifiable source of repayment. Horizon’s directors and
executive officers have not requested any pledging of Horizon securities at this time.
31
Stock Ownership
As previously discussed, all of the named executive officers must comply with the Ownership Guidelines for stock ownership adopted by the Board of Directors.
For additional details about the Ownership Guidelines, see the “
Stock Ownership Guidelines
” section above under the “Corporate Governance” heading.
Section 162(m)
In general, under Section 162(m) of the Internal Revenue Code, as modified by The Tax Cuts and Jobs Act passed in December, 2017, public companies are subject
to a $1 million deductibility limit on compensation paid to certain executive officers, including their performance-based compensation which was excluded before tax reform. Awards that were made and subject to binding written contracts in effect on
November 2, 2017 are “grandfathered” under prior law and can still qualify as deductible performance-based compensation even if paid in future years.
Horizon will continue to analyze the effects of Section 162(m) on its compensation programs, and will continue to monitor the regulations and any additional
guidance that may be issued by the IRS. In this regard, while the Board and Compensation Committee are mindful of the benefits of the full deductibility of our executive officer’s compensation, the Board and/or Compensation Committee may, in their
judgment, authorize compensation payments that are not fully tax deductible to the extent they exceed $1 million, if such payments are appropriate to attract and retain executive talent or to meet other business objectives, in the best interests of
Horizon and its shareholders.
Executive Compensation Tables
The following tables provide information on the 2019 compensation for Horizon’s Chief Executive Officer, Chief Financial Officer, and the other three most
highly compensated executive officers of Horizon and Horizon Bank. These five individuals are referred to as the “named executive officers.”
32
Summary Compensation Table for 2019
The table below provides information with respect to the total compensation earned by or paid to the named executive officers for 2019.
|
Name and
Principal Position
|
Year
|
Salary
($)
(1)
|
Bonus
($)
(2)
|
Stock
Awards
($)
(3)
|
Option
Awards
($)
(3)
|
Non-Equity Incentive Plan Compensation
($)
(4)
|
All Other Compensation
|
Total
($)
|
|||||||||||
|
Craig M. Dwight
|
2019
|
558,900
|
N/A
|
200,000
|
50,000
|
363,285
|
66,071
|
(6)
|
1,238,256
|
||||||||||
|
Chief Executive Officer
|
2018
|
540,000
|
N/A
|
200,000
|
50,000
|
310,500
|
62,995
|
(6)
|
1,163,495
|
||||||||||
|
|
2017
|
525,000
|
N/A
|
199,989
|
50,000
|
270,375
|
58,475
|
1,103,839
|
|||||||||||
|
|
|||||||||||||||||||
|
Mark E. Secor
|
2019
|
291,366
|
N/A
|
81,582
|
20,396
|
123,831
|
56,240
|
(7)
|
573,415
|
||||||||||
|
Chief Financial Officer
|
2018
|
282,880
|
N/A
|
56,576
|
14,144
|
106,080
|
55,495
|
(7)
|
515,175
|
||||||||||
|
|
2017
|
272,000
|
N/A
|
54,403
|
13,598
|
102,000
|
46,966
|
488,967
|
|||||||||||
|
|
|||||||||||||||||||
|
James. D. Neff
|
2019
|
388,125
|
N/A
|
108,675
|
27,169
|
184,359
|
58,913
|
(8)
|
767,241
|
||||||||||
|
President
|
2018
|
375,000
|
N/A
|
105,000
|
26,250
|
159,375
|
56,530
|
(8)
|
722,155
|
||||||||||
|
|
2017
|
297,771
|
N/A
|
59,557
|
14,890
|
166,221
|
54,331
|
592,770
|
|||||||||||
|
|
|||||||||||||||||||
|
Kathie A. DeRuiter
|
2019
|
260,000
|
N/A
|
62,400
|
15,600
|
104,000
|
50,454
|
(9)
|
492,454
|
||||||||||
|
Executive Vice President
|
2018
|
250,000
|
N/A
|
50,000
|
12,500
|
93,750
|
44,905
|
(9)
|
451,155
|
||||||||||
|
|
2017
|
233,000
|
N/A
|
46,610
|
11,652
|
99,025
|
43,028
|
433,315
|
|||||||||||
|
|
|||||||||||||||||||
|
Dennis J. Kuhn
|
2019
|
257,500
|
N/A
|
61,800
|
15,450
|
83,688
|
53,258
|
(10)
|
471,696
|
||||||||||
|
Executive Vice President
|
2018
|
250,000
|
N/A
|
50,000
|
12,500
|
68,750
|
48,432
|
(10)
|
429,682
|
||||||||||
|
|
2017
|
223,807
|
3,602
|
43,367
|
10,839
|
44,761
|
31,818
|
358,194
|
|
|
1. |
Includes salary amounts paid and salary amounts deferred by the individual named pursuant to Horizon’s Thrift Plan and the 2005 Supplemental Executive Retirement Plan (“
SERP
”).
|
|
|
2. |
The amount reflects the dollar amount paid under Horizon’s holiday bonus plan, which is available to all employees with the exception of specified executive officers, including Messrs. Dwight, Secor, Neff and Kuhn and Ms. DeRuiter.
Messrs. Dwight, Secor, Neff and Kuhn and Ms. DeRuiter are eligible to receive annual bonuses under the Executive Officer Bonus Plan, and if such bonuses are received for a given year, the SEC rules provide that they are to be reported in
the Non-Equity Incentive Plan Compensation column of this table.
|
|
|
3. |
The amounts in this column reflect the aggregate grant date fair value of option awards during the last three fiscal years in accordance with FASB ASC Topic 718. For a discussion of the assumptions used in the calculation of the option
awards reported in this column, please see Note 23 of the Notes to Consolidated Financial Statements in Horizon’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
|
|
|
4. |
Messrs. Dwight, Secor, Neff and Kuhn and Ms. DeRuiter received payments under Horizon’s Executive Officer Bonus Plan. (For more information about the Bonus Plan see the discussion above in the Compensation Discussion and Analysis.)
|
|
|
5. |
The individuals named in the table also received certain perquisites, but the incremental costs of providing the perquisites did not exceed the $10,000 disclosure threshold.
|
|
|
6. |
Includes Horizon’s contribution of $5,412 under Horizon’s Employee Stock Ownership Plan and its matching contributions of $11,200 under the Thrift Plan, $35,000 under the SERP and $14,459 in dividends on performance and restricted stock.
|
|
|
7. |
Includes Horizon’s contribution of $5,412 under Horizon’s Employee Stock Ownership Plan and its matching contributions of $11,200 under the Thrift Plan, $35,000 under the SERP and $4,627 in dividends on performance and restricted stock.
|
|
|
8. |
Includes Horizon’s contribution of $5,412 under Horizon’s Employee Stock Ownership Plan and its matching contributions of $11,200 under the Thrift Plan, $35,000 under the SERP and $7,301 in dividends on performance and restricted stock.
|
|
|
9. |
Includes Horizon’s contribution of $5,412 under Horizon’s Employee Stock Ownership Plan and its matching contributions of $11,200 under the Thrift Plan, $30,000 under the SERP and $3,842 in dividends on performance and restricted stock.
|
|
|
10. |
Includes Horizon’s contribution of $4,730 under Horizon’s Employee Stock Ownership Plan and its matching contributions of $9,788 under the Thrift Plan, $35,000 under the SERP and $3,740 in dividends on performance and restricted stock.
|
33
During 2019, both Mr. Dwight and Mr. Neff had written employment agreements with Horizon providing for them to receive, among other things, base salary, to
participate in all other incentive compensation and benefit programs offered to executive officers of Horizon and Horizon Bank, and to receive additional post-termination compensation upon termination or a change in control. No amounts are included in
the Summary Compensation Table that reflect amounts paid or accrued to Mr. Dwight or Mr. Neff pursuant to these employment agreements as a result of any termination or change in control.
For a more detailed discussion of the employment agreements, both of which were amended and restated effective as of January 1, 2020, see “
Potential Payments Upon Termination or Change in Control”
below
.
Grants of Plan-Based Awards
The following table presents additional information about non-equity incentive awards and long-term equity incentive awards granted to our named executive
officers during 2019.
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
(1)
|
||||||||||||||||||||||||||||||||||||
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
||||||||||||||||||||||||||||||||||
|
Name
|
Short
Term
Goals
|
Long
Term
Goals
|
Total
|
Short
Term
Goals
|
Long
Term
Goals
|
Total
|
Short
Term
Goals
|
Long
Term
Goals
|
Total
|
|||||||||||||||||||||||||||
|
Craig M. Dwight
|
$
|
34,950
|
$
|
34,950
|
$
|
69,900
|
$
|
140,000
|
$
|
140,000
|
$
|
280,000
|
$
|
195,600
|
$
|
195,600
|
$
|
391,200
|
||||||||||||||||||
|
Mark E. Secor
|
9,105
|
9,105
|
18,210
|
50,989
|
50,898
|
101,887
|
80,126
|
80,126
|
160,252
|
|||||||||||||||||||||||||||
|
James D. Neff
|
19,400
|
19,400
|
38,800
|
77,625
|
77,625
|
155,250
|
106,735
|
106,735
|
213,470
|
|||||||||||||||||||||||||||
|
Kathie A. DeRuiter
|
6,500
|
6,500
|
13,000
|
39,000
|
39,000
|
78,000
|
71,500
|
71,500
|
143,000
|
|||||||||||||||||||||||||||
|
Dennis J. Kuhn
|
6,438
|
6,438
|
12,876
|
38,500
|
38,500
|
77,000
|
70,813
|
70,813
|
141,626
|
|||||||||||||||||||||||||||
|
|
Estimated Future Payouts Under
Equity Incentive Plan Award
(2)
|
|
|
||||||||||||||||||||
|
Name
|
Grant Date
|
Threshold 50% Payout
(#) |
Target 100% Payout
(#) |
Maximum 125% Payout
(#) |
All Other Option Awards: Number of Securities Underlying Options
(#) (3) |
Exercise or Base Price of Option Awards ($/sh)
|
Grant Date Fair Value of Stock and Options Awards ($)
(4)
|
||||||||||||||||
|
Craig M. Dwight
|
March 19, 2019
|
5,974
|
11,947
|
14,934
|
$
|
200,000
|
|||||||||||||||||
|
|
March 19, 2019
|
11,261
|
$
|
16.74
|
50,000
|
||||||||||||||||||
|
Mark E. Secor
|
March 19, 2019
|
2,437
|
4,873
|
6,091
|
81,582
|
||||||||||||||||||
|
|
March 19, 2019
|
4,593
|
16.74
|
20,396
|
|||||||||||||||||||
|
James D. Neff
|
March 19, 2019
|
3,246
|
6,491
|
8,114
|
108,675
|
||||||||||||||||||
|
|
March 19, 2019
|
6,119
|
16.74
|
27,169
|
|||||||||||||||||||
|
Kathie A. DeRuiter
|
March 19, 2019
|
1,864
|
3,727
|
4,659
|
62,400
|
||||||||||||||||||
|
|
March 19, 2019
|
3,513
|
16.74
|
15,600
|
|||||||||||||||||||
|
Dennis J. Kuhn
|
March 19, 2019
|
1,846
|
3,691
|
4,614
|
46,610
|
||||||||||||||||||
|
|
March 19, 2019
|
3,479
|
16.74
|
11,652
|
|||||||||||||||||||
| 1 |
The amounts represent the threshold, target and maximum annual incentive award estimated payouts for the January 1, 2019 – December 31, 2019 performance period. The actual 2019 payout is reported in the 2019 Summary Compensation Table
under the “Non-Equity Incentive Plan Compensation” column.
|
| 2 |
The amounts represent the threshold, target, and maximum share payouts under performance share awards for the January 1, 2019 – December 31, 2021 performance period. The performance share awards are designed to reward the achievement
over a three-year performance period of certain performance goals, as described in the Compensation Discussion and Analysis above, under the caption “
Long-Term Performance-Based Equity and/or Cash Incentive
Program.
” The target amount shown represents a 100% payout of the number of shares awarded when the target performance levels are achieved.
|
| 3 |
The amounts in this column represent options awarded under the 2013 Omnibus Plan during 2019.
|
| 4 |
The grant date fair value of stock and option awards has been computed in accordance with FASB ASC Topic 718.
|
34
The non-equity incentive awards were made to the named executive officers under the Executive Officer Bonus Plan. The long-term equity incentive awards were
made under the 2013 Omnibus Plan and are described in more detail in the Compensation Discussion and Analysis above. The stock options that have been granted in 2019 to executive officers are service based and vest in equal annual installments over a
three-year period.
The performance shares that were awarded in 2019 become earned and vested based on the achievement of certain performance goals during a three-year performance
period from January 1, 2019 to December 31, 2021, established by the Compensation Committee at the time of the grant. The performance goals are based on a comparison of Horizon’s average performance over the performance period for the return on common
equity, compounded annual growth rate of total assets, and return on average assets, all relative to the average performance for publicly traded banks with total assets between $1 billion and $5 billion on the SNL Bank Index for the same measures. Only
banks that have reported year-end results by March 1
st
will be considered for comparison purposes. Each of the three performance goals is weighted roughly equally (34% for return on common equity; 33% for compounded annual growth rate of
total assets; and 33% for return on average assets). The payout received by the recipient is determined by whether Horizon achieves the performance goal at a threshold level (50
th
to 74
th
percentile relative to the comparative SNL
group), a target level (75
th
to 84
th
percentile relative to the comparative SNL group), or a maximum level (greater than 84
th
percentile relative to the comparative SNL group). A performance share award recipient can
receive 50% of the award if Horizon achieves the threshold, 100% of the award if Horizon achieves the target, and 125% of the award if Horizon achieves the maximum.
The Compensation Committee has the discretion to make adjustments to the calculations when it deems it warranted due to non-core, non-recurring events and
charges, such as those associated with acquisitions and acquisition-related accounting adjustments. In 2019, the Compensation Committee adjusted earnings for acquisition-related costs.
Unless the Compensation Committee determines otherwise, the executive officers are entitled to receive all cash dividends which would have been paid with
respect to the performance shares as if they had been actual shares.
35
Outstanding Equity Awards at Fiscal Year-End for 2019
The following table presents information on stock options, restricted stock, and performance shares held by the named executive officers on December 31, 2019.
|
Option Awards
|
Stock Awards
|
||||||||||||||||||
|
Name
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
(1)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#)
(2)
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
(3)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
||||||||||
|
Craig M. Dwight
|
10,291
|
-
|
N/A
|
10.38
|
March 15, 2026
|
33,825
|
$
|
642,675
|
N/A
|
N/A
|
|||||||||
|
6,887
|
3,443
|
N/A
|
16.76
|
March 21, 2027
|
N/A
|
N/A
|
|||||||||||||
|
2,876
|
5,753
|
N/A
|
20.11
|
March 20, 2028
|
N/A
|
N/A
|
|||||||||||||
|
-
|
11,261
|
N/A
|
16.74
|
March 19, 2029
|
N/A
|
N/A
|
|||||||||||||
|
Mark E. Secor
|
6,389
|
1,762
|
N/A
|
10.38
|
March 15, 2026
|
10,931
|
207,689
|
N/A
|
N/A
|
||||||||||
|
1,873
|
936
|
N/A
|
16.76
|
March 21, 2027
|
N/A
|
N/A
|
|||||||||||||
|
813
|
1,627
|
N/A
|
20.11
|
March 20, 2028
|
N/A
|
N/A
|
|||||||||||||
|
-
|
4,593
|
N/A
|
16.74
|
March 19, 2029
|
N/A
|
N/A
|
|||||||||||||
|
James D. Neff
|
4,627
|
-
|
N/A
|
10.38
|
March 15, 2026
|
15,265
|
290,035
|
N/A
|
N/A
|
||||||||||
|
2,051
|
1,025
|
N/A
|
16.76
|
March 21, 2027
|
N/A
|
N/A
|
|||||||||||||
|
1,510
|
3,020
|
N/A
|
20.11
|
March 20, 2028
|
N/A
|
N/A
|
|||||||||||||
|
-
|
6,119
|
N/A
|
16.74
|
March 19, 2029
|
N/A
|
N/A
|
|||||||||||||
|
Kathie A. DeRuiter
|
4,416
|
-
|
N/A
|
8.99
|
June 18, 2023
|
8,993
|
170,867
|
N/A
|
N/A
|
||||||||||
|
3,894
|
-
|
N/A
|
9.87
|
March 18, 2024
|
N/A
|
N/A
|
|||||||||||||
|
5,356
|
-
|
N/A
|
10.59
|
March 17, 2025
|
N/A
|
N/A
|
|||||||||||||
|
10,347
|
-
|
N/A
|
10.38
|
March 15, 2026
|
N/A
|
N/A
|
|||||||||||||
|
1,605
|
802
|
N/A
|
16.76
|
March 21, 2027
|
N/A
|
N/A
|
|||||||||||||
|
719
|
1,438
|
N/A
|
20.11
|
March 20, 2028
|
N/A
|
N/A
|
|||||||||||||
|
-
|
3,513
|
N/A
|
16.74
|
March 19, 2029
|
N/A
|
N/A
|
|||||||||||||
|
Dennis J. Kuhn
|
8,625
|
-
|
N/A
|
4.45
|
May 17, 2020
|
8,763
|
166,497
|
N/A
|
N/A
|
||||||||||
|
5,454
|
-
|
N/A
|
8.99
|
June 18, 2023
|
N/A
|
N/A
|
|||||||||||||
|
4,807
|
-
|
N/A
|
9.87
|
March 18, 2024
|
N/A
|
N/A
|
|||||||||||||
|
5,599
|
-
|
N/A
|
10.59
|
March 17, 2025
|
N/A
|
N/A
|
|||||||||||||
|
10,179
|
-
|
N/A
|
10.38
|
March 15, 2026
|
N/A
|
N/A
|
|||||||||||||
|
1,493
|
746
|
N/A
|
16.76
|
March 21, 2027
|
N/A
|
N/A
|
|||||||||||||
|
719
|
1,438
|
N/A
|
20.11
|
March 20, 2028
|
N/A
|
N/A
|
|||||||||||||
|
3,479
|
N/A
|
16.74
|
March 19, 2029
|
N/A
|
N/A
|
||||||||||||||
| 1. |
All options have a ten-year life with pro-rata vesting over a three- or five-year period from the grant date.
|
| 2. |
The shares represented could not be acquired by the named executive officers as of December 31, 2019.
|
| 3. |
Consists of awards of performance shares.
|
36
Option Exercises and Stock Vested for 2019
The following table presents information on the exercise by named executive officers of stock options during 2019 and the shares of restricted stock and
performance share awards held by named executive officers that vested during 2019. At December 31, 2019, performance share awards were not yet determinable for the performance period ended December 31, 2019. A detailed description of how performance
shares are earned and vested appears above in the Compensation Discussion and Analysis.
|
Option Awards
|
Stock Awards
|
|||||||||||||||
|
Name
|
Number of Shares Acquired on Exercise
(#)
|
Value Realized on Exercise
($)
(1)
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized on Vesting
($)
|
||||||||||||
|
Craig M. Dwight
|
-
|
$
|
-
|
3,852
|
$
|
64,482
|
||||||||||
|
Mark E. Secor
|
5,500
|
45,360
|
1,525
|
25,529
|
||||||||||||
|
James D. Neff
|
-
|
-
|
1,731
|
28,977
|
||||||||||||
|
Kathie A. DeRuiter
|
-
|
-
|
1,290
|
21,595
|
||||||||||||
|
Dennis J. Kuhn
|
8,625
|
98,670
|
1,269
|
21,243
|
||||||||||||
| 1 |
Amounts reflecting value realized upon exercise of options are based on the difference between the closing price for a share on the date of exercise and the exercise price for a share.
|
Nonqualified Deferred Compensation for 2019
The following table presents information on compensation deferred by and matching contributions for each of the named executive officers under either or both
the Frozen SERP and 2005 SERP, which plans are discussed above in the Compensation Discussion and Analysis.
|
Name
|
Executive Contributions in Last Fiscal Year ($)
(1)
|
Registrant Contributions in Last Fiscal Year ($)
(1)
|
Aggregate Earnings in Last Fiscal Year
($)
|
Aggregate Withdrawals/ Distributions ($)
|
Aggregate Balance at Last Fiscal Year End ($)
|
|||||||||||||||
|
Craig M. Dwight
|
$
|
70,000
|
$
|
35,000
|
$
|
61,469
|
$
|
-
|
$
|
2,145,023
|
||||||||||
|
Mark E. Secor
|
73,528
|
35,000
|
110,077
|
-
|
865,544
|
|||||||||||||||
|
James D. Neff
|
93,075
|
35,000
|
234,519
|
-
|
1,800,848
|
|||||||||||||||
|
Kathie A. DeRuiter
|
60,000
|
30,000
|
80,695
|
-
|
652,617
|
|||||||||||||||
|
Dennis J. Kuhn
|
81,563
|
35,000
|
50,951
|
-
|
557,873
|
|||||||||||||||
| 1 |
Executive contributions are included in the “Salary” column of the Summary Compensation Table and Registrant Contributions are included in the “All Other Compensation” column of the Summary Compensation Table.
|
Potential Payments Upon Termination or Change in Control
Horizon and Horizon Bank have agreements with the named executive officers and plans in which the named executive officers participate that provide for
benefits upon the resignation, severance, retirement or other termination of the named executive officers.
Employment Agreements
Mr. Dwight and Mr. Neff have been employed by Horizon under written employment agreements since 2006 and 2011, respectively. On December 31, 2019, Horizon and
Horizon Bank entered into amended and restated employment agreements with both Mr. Dwight and Mr. Neff, with each agreement becoming effective on January 1, 2020 (the “
Employment Agreements
”).
The table below includes a brief description of the key operative provisions of the Employment Agreements relating to potential payments upon termination of
employment. The comparable termination
37
provisions under the prior employment agreements in effect during 2019 provided for essentially the same severance benefits as provided in the Employment Agreements presently in
effect with the following differences. Under the prior employment agreement, Mr. Dwight’s entitlement to cash reimbursement equivalent to the cost of continued participation in group health and life insurance programs was unlimited but is now limited
to 110% of the cost. Also, Mr. Dwight will no longer be entitled to reimbursement of the expense of job placement services.
Neither of the Employment Agreements provides for any payments to Mr. Dwight or Mr. Neff upon a change in control, because any payments or benefits payable to
them upon a change in control are addressed in new Change in Control Agreements for Mr. Dwight and Mr. Neff, as more fully described below in “
Change in Control Agreements.
”
The table below also notes circumstances in which the rights and benefits of Mr. Dwight and Mr. Neff may differ.
|
Key Terms and
Conditions
|
Description
|
|
Term
|
•
Three-year term begins January 1, 2020
Dwight/Neff Differences
•
Dwight term ends January 1, 2023
•
Neff term is a rolling 3-year term
that will be extended annually for another year unless Horizon delivers notice to Neff that it will not be extended
•
On January 1, 2025, Neff becomes an
employee-at-will, and either Horizon or Neff can terminate the relationship for any reason, or no reason, and without notice
|
|
Salary & Benefits
|
•
Entitled to a base salary to be
reviewed and potentially increased annually (but not decreased) by the Compensation Committee of the Board of Directors
•
Entitled to participate in all
incentive compensation and benefit programs generally available to executive officers
|
|
Termination Provisions
|
•
Horizon can terminate the executive
for “Cause,” which includes any of the following actions by the executive:
o
Intentional acts of fraud,
embezzlement, dishonesty
o
Intentional damage causing material
harm to Horizon
o
Material breach of the employment
agreement or the Change in Control Agreement
o
Gross negligence or insubordination
o
Violation of certain banking laws
resulting in the loss of right to work for a depository institution
•
Both Dwight and Neff have the right to
terminate the employment relationship for “Good Reason,” which includes, among other reasons, the following:
o
Office move more than 30 miles from
home
o
Reductions of 10% or more in salary or
total compensation, including benefit plan rights (unless institution-wide reductions and proportionate to other executive officers)
|
38
|
Key Terms and
Conditions
|
Description
|
|
o
Assignment of materially different
duties, reduced responsibilities, or removal from current position or title
•
Both Dwight and Neff are required to
provide a 60-day written notice before terminating the relationship without “Good Reason”
•
Horizon can terminate the executive
and the agreement for reasons related to the federal and state banking regulations, including situations in which the executive might be prohibited from engaging in banking under the Federal Deposit Insurance Act, or the Bank is found in
default or in financial trouble under the Federal Deposit Insurance Act
|
|
|
Special Compensation Rights Upon Certain Terminations
|
•
In the event Horizon terminates the
executive without “Cause” or the executive resigns for “Good Reason,” the executive is entitled to the following payments:
o
Base salary through date of
termination
o
An amount equal to the then-current
annual base salary (Dwight receives this amount multiplied by two)
o
Dwight:
An amount equal to cash bonuses for the prior two calendar years
Neff:
An amount equal to the average of cash bonuses
for the prior two calendar years
o
Continued participation in group
health and life insurance programs for a year (Dwight receives two years), or cash reimbursement in equivalent amount (subject to a ceiling of 110% of Horizon’s standard cost for providing the benefits)
o
Vested and accrued incentive and
benefit plan compensation and matching contributions
•
In the event Horizon terminates the
executive with “Cause” or the executive resigns without “Good Reason,” or the executive dies or is disabled, the executive is entitled to the following payments:
o
Base salary through date of
termination
o
Vested and accrued incentive and
benefit plan compensation and matching contributions
|
|
Limitations on Payments
|
•
All payments to the executives are
subject to FDIC restrictions on golden parachutes and indemnification, as well as subject to Internal Revenue Code Section 409A requirements and the deductibility limits of Internal Revenue Code Section 280G
|
|
Conditions to Payments
|
•
Executives must sign a release of
claims in favor of Horizon within 60 days following termination. The release must remain unrevoked during all revocation right periods.
|
If Mr. Dwight’s or Mr. Neff’s employment had been terminated by Horizon without cause, or by the executive with good reason as of December 31, 2019, each would
have been entitled to a severance amount and other benefits under his employment agreement in the following amounts: Mr. Dwight $1,822,000 and Mr. Neff $575,000.
39
If Mr. Dwight’s or Mr. Neff’s employment had been terminated by Horizon with cause, by the executive without good reason or due to the executive’s death or
disability, each executive, or his estate in the event of death, would have been entitled to base salary through the date of termination and to the payment of vested or accrued amounts under incentive compensation and employee benefits plans and life
insurance proceeds. Neither Mr. Dwight nor Mr. Neff was entitled to any benefits other than pursuant to life insurance policies as of December 31, 2019. Therefore, if Mr. Dwight’s or Mr. Neff’s employment had terminated on December 31, 2019, the only
amounts payable would have been life insurance and salary continuation proceeds in the amount of $800,000 for Mr. Dwight and $800,000 for Mr. Neff, or to each of their estates. These amounts exclude stock options and other equity plan awards that vest
upon a change in control (and, in the case of stock options and time-based restricted stock, upon retirement, disability or death), which are discussed below in “
Other Benefits Upon Termination or Change in Control
.”
Change in Control Agreements
On December 31, 2019, Horizon Bank entered into new or amended Change in Control Agreements with each of its named executive officers, including Mr. Dwight and
Mr. Neff, with each agreement effective on January 1, 2020 (the “
Change in Control Agreements
”). Prior to that time, all of the named executive officers were entitled to change in control severance benefits under
either existing employment agreements or existing change in control agreements.
The table below includes a brief description of the key operative provisions of the Change in Control Agreements relating to potential payments upon
termination of employment. The table below also notes circumstances in which the rights and benefits of each of the respective named executive officers may differ.
|
Key Terms and
Conditions
|
Description
|
Application to Executives
|
|
Term
|
•
Begins January 1, 2020
•
Terminates immediately upon
executive’s termination for any reason before a change in control
•
Upon a change in control, the term is
fixed at 1 year
|
•
Same for all
|
|
Effect of a Change in Control
|
•
If a change in control occurs, and if
executive experiences a “Qualifying Termination” during the 6 months before or the year after a change in control, then executive is entitled to certain severance benefits (provided all other conditions are met)
|
•
Same general right for all (
see Severance Benefits below for specific severance benefit differences
)
|
|
Two Types of “Qualifying Termination”
|
•
Bank terminates executive for any
reason except for “cause”; Cause generally means breach and wrongdoing by executive, in which case executive does not receive severance benefits
•
Executive resigns for “good reason”;
Good reason generally means that the executive’s quality of work life and/or compensation has been impaired by required relocations or reductions in position, responsibility, benefits, and salary
|
•
Same for all
|
40
|
Key Terms and
Conditions
|
Description
|
Application to Executives
|
|
Additional Conditions to Receipt of the Severance Benefits
|
•
Executive must sign and deliver a
release
•
Executive must be and remain in
compliance with restrictive covenants relating to non-disclosure of confidential information, return of property, non-solicitation of certain of Bank’s customers and employees, and non-competition with Bank in certain areas
|
•
Same general condition for all (
variations exist among executives with respect to duration of restrictive covenants based on executive’s position and responsibilities
)
|
|
Double Trigger Change in Control Severance Benefits
(Change in control is first trigger; Qualifying Termination is second trigger)
|
•
Normal payroll.
Base salary earned through the date of termination
|
•
Same for all
|
|
•
Base salary multiple.
A lump sum amount equal to the executive’s then-current base salary multiplied by the executive’s individual multiple
|
•
Multiples
o
Dwight 2.99
o
Neff 2.99
o
Secor 2.00
o
DeRuiter 2.00
o
Kuhn 2.00
|
|
|
•
Cash bonus multiple.
An amount equal to the average of executive’s total cash bonuses in the 2 years preceding termination multiplied by the executive’s individual multiple
|
•
Multiples
o
Dwight 2.99
o
Neff 2.00
o
Secor 2.00
o
DeRuiter 1.00
o
Kuhn 1.00
|
|
|
•
Continued participation in group health and life insurance benefits.
Subject to certain conditions, continued coverage for the executive’s individual benefit continuation term
|
•
Benefit
continuation term
o
Dwight 35 months
o
Neff 24 months
o
Secor 24 months
o
DeRuiter 12 months
o
Kuhn 12 months
|
|
|
•
Vested incentive and benefit plan compensation.
All amounts vested or accrued prior to termination under incentive compensation plans in accordance with their terms
|
•
Same for all
|
|
|
•
Partial year bonus.
An amount equal to the partial year bonus executive would have earned under an existing bonus plan in the year of a change in control, based on then-current financial results
|
•
Same for all
|
|
|
Successors and Assigns
|
•
Bank will require any successor to
assume the Change in Control Agreement
|
•
Same for all
|
41
If Horizon had terminated the named executive officer’s employment without Cause or if the named executive officer had terminated his or her employment without Good Reason
immediately after a change in control, then as of December 31, 2019, the named executive officers would have been paid the amounts set forth in the table below (applied as if the Change in Control Agreements were then in effect). These amounts exclude
stock options and other equity plan awards that vest upon a change in control (and, in the case of stock options and time-based restricted stock, upon retirement, disability or death), which are discussed below in “
Other
Benefits Upon Termination or Change in Control
.”
|
Named Executive Officer
|
Salary, Bonus and Other Severance Benefits
|
Life Insurance and Salary Continuation Proceeds
|
||||||
|
Craig M. Dwight
|
$
|
2,722,000
|
$
|
800,000
|
||||
|
James D. Neff
|
$
|
1,534,000
|
$
|
800,000
|
||||
|
Mark E. Secor
|
$
|
843,000
|
$
|
791,000
|
||||
|
Kathie A. DeRuiter
|
$
|
634,000
|
$
|
760,000
|
||||
|
Dennis J. Kuhn
|
$
|
606,000
|
$
|
758,000
|
||||
If any of the named executive officers qualifies as a “key employee” under Internal Revenue Code Section 409A at the time of their separation from service,
Horizon may not make certain payments of nonqualified deferred compensation to them earlier than six months following the date of their separation from service (or, if earlier, the date of their death). Each of the named executive officers currently is
considered to be a “key employee.”
Other Benefits Upon Termination or Change in Control
In the event of a change in control of Horizon, the recipient of stock options, shares of restricted stock, and performance share awards granted to executive
officers under the 2003 Omnibus Plan or the 2013 Omnibus Plan (collectively, “
Omnibus Plans
”) that are then outstanding and that either are not then exercisable or are subject to any restrictions will become
immediately exercisable, and all restrictions will be removed, as of the first date that the change in control has been deemed to have occurred. Any performance criteria will be deemed to have been satisfied at the target level specified in the award.
In addition, stock options and any time-based restricted stock granted to executive officers will be vested and fully exercisable as of the date of death, disability, or retirement of the executive officer.
The Omnibus Plans provide that a “change in control” will be deemed to have occurred if any of the following conditions or events occurs: (i) any merger,
consolidation or similar transaction which involves Horizon and in which persons who are the shareholders of Horizon immediately prior to the transaction own, immediately after the transaction, shares of the surviving or combined entity which possess
voting rights equal to or less than 50% of the voting rights of all shareholders of such entity, determined on a fully diluted basis; (ii) any sale, lease, exchange, transfer or other disposition of all or any substantial part of the consolidated
assets of Horizon; (iii) any tender, exchange, sale or other disposition (other than disposition of the stock of Horizon or Horizon Bank in connection with bankruptcy, insolvency, foreclosure, receivership or other similar transactions) or purchase
(other than purchases by Horizon or any Horizon sponsored employee benefit plan, or purchases by members of the Board of Directors of Horizon or any subsidiary) of shares which represent more than 25% of the voting power of Horizon or Horizon Bank; or
(iv) during any period of two consecutive years, individuals who at the dates of the adoption of the Omnibus Plans constitute the Board cease for any reason to constitute at least a majority of the Board, unless the election of each director at the
beginning of the period has been approved by directors representing at least a majority of the directors then in office.
42
The Omnibus Plans provide, however, that a change in control will not be deemed to have occurred (i) as a result of the issuance of stock by Horizon in
connection with any public offering of its stock; (ii) with respect to any transaction unless such transaction has been approved or shares have been tendered by a majority of the shareholders who are not persons subject to liability under Section 16(b)
of the Securities Exchange Act of 1934; or (iii) due to stock ownership by the Horizon Bancorp Employees’ Stock Ownership Plan Trust, which forms a part of the Horizon Bancorp Employees’ Stock Ownership Plan, the Horizon Bancorp Employee’s Thrift Plan
Trust Agreement, which forms a part of the Horizon Bancorp Employee’s Thrift Plan, or any other employee benefit plan.
If a change in control had occurred as of December 31, 2019, the stock options, restricted stock and performance share awards granted to executive officers
that were not previously vested would have become fully vested as of that date. The outstanding stock options and performance share awards for the executive officers are discussed in more detail in the discussion of Outstanding Equity Awards at Fiscal
Year-End for 2019. The Omnibus Plans are discussed in more detail above in the Compensation Discussion and Analysis.
Compensation of Directors
The following table presents information about our compensation of members of the Board of Directors. Information on the compensation received by Mr. Dwight,
who is a named executive officer, is included in the Summary Compensation Table above. Mr. Dwight does not receive any additional compensation for service on the Board of Directors.
Director Compensation for 2019
|
Name
|
Fees Earned or Paid in Cash ($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation ($)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
All Other Compensation ($)
|
Total
($)
|
|||||||||||||||||||||
|
Susan D. Aaron
|
$
|
40,004
|
$
|
24,996
|
N/A
|
N/A
|
$
|
-
|
$
|
-
|
$
|
65,000
|
||||||||||||||||
|
Eric P. Blackhurst
|
35,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
60,000
|
|||||||||||||||||||||
|
Lawrence E. Burnell
|
39,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
64,000
|
|||||||||||||||||||||
|
James B. Dworkin
|
37,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
62,000
|
|||||||||||||||||||||
|
Daniel F. Hopp
|
45,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
70,000
|
|||||||||||||||||||||
|
Michele M. Magnuson
|
35,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
60,000
|
|||||||||||||||||||||
|
Larry N. Middleton
|
25,000
|
-
|
N/A
|
N/A
|
-
|
-
|
25,000
|
|||||||||||||||||||||
|
Peter L. Pairitz
|
37,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
62,000
|
|||||||||||||||||||||
|
Steven W. Reed
|
43,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
68,000
|
|||||||||||||||||||||
|
Spero W. Valavanis
|
37,004
|
24,996
|
N/A
|
N/A
|
-
|
-
|
62,000
|
|||||||||||||||||||||
Horizon paid each of its non-employee directors a cash retainer of $35,000 and a retainer in common shares equal in value to $25,000 for their services in
2019. Active employees of Horizon and/or Horizon Bank receive no separate compensation for their services as directors, including Mr. Neff who serves on the Board of Directors of Horizon Bank. The Chair of the Compensation Committee receives an
additional $5,000, the Chair of the Corporate Governance and Nominating Committee receives an additional $2,000, the Chair of the Enterprise Risk Management and Credit Policy Committee receives an additional $4,000, the Chair of the Audit Committee
receives an additional $8,000 and the Chairs of the Asset Liability Committee and Trust Committee receive an additional $2,000. The Lead Director receives an additional fee of $10,000.
Directors do not receive additional compensation for attending meetings of committees of the Board or for special assignments or meetings.
In April 2012, the Board adopted Ownership Guidelines that require each independent director to maintain ownership of common shares having a value equal to at
least three times their annual retainer. The
43
Ownership Guidelines are discussed above in the “
Stock Ownership Guidelines
” section under “Corporate Governance.” All of the members of
the Horizon Board of Directors also serve as directors of Horizon Bank, which is an Indiana state bank. All of the directors satisfy the Ownership Guidelines.
Horizon sponsors a Directors’ Deferred Compensation Plan, which allows non-employee directors of Horizon and Horizon Bank to elect to defer the receipt of fees
for their services. Earnings on fees deferred under the plan are based on the five-year Treasury rate plus 200 basis points but not to exceed 120% of the Applicable Federal Long-Term Rate for monthly compounding. The deferred fees may be invested in
Horizon common shares. Distributions of deferred fees are made to participants or their beneficiaries in a lump sum or annual installments, or in Horizon common shares, upon death or disability of the participants or as designated by participants.
Participants have no rights to amounts deferred other than rights as general creditors of Horizon.
Report of the Audit Committee
This report is being provided to inform shareholders of the Audit Committee’s oversight with respect to Horizon’s financial reporting.
Review with Management and Independent Auditors
The Audit Committee has reviewed and discussed with management the audited financial statements for the year ended December 31, 2019. In addition, the Audit
Committee has discussed with BKD, LLP all communications required by generally accepted auditing standards, including the matters required to be discussed by the Statement of Auditing Standards No. 16, “Communications with Audit Committees” issued by
the Public Company Accounting Oversight Board.
The Audit Committee has received the written disclosures and the letter from BKD, LLP required by applicable requirements of the Public Company Accounting
Oversight Board regarding BKD, LLP’s communications with the Audit Committee concerning independence, and has discussed with BKD, LLP their independence.
Conclusion
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements
be included in the Annual Report on Form 10-K for the year ended December 31, 2019, to be filed with the Securities and Exchange Commission.
Steven W. Reed, Chair
James B. Dworkin
Lawrence E. Burnell
Common Share Ownership of Management and Certain Beneficial Owners
Security Ownership of Management
The following table sets forth the number and percent of common shares beneficially owned by the directors, the executive officers named in the Summary
Compensation Table, and all directors and executive officers as a group as of January 1, 2020. On that date, 44,975,771 Horizon common shares were issued and outstanding. Unless otherwise noted below, the address of each beneficial owner listed in the
table is c/o Horizon Bancorp, Inc. 515 Franklin Street, Michigan City, Indiana 46360.
44
|
Name
|
Shares Beneficially Owned
(1)
|
Percentage
|
||||
|
Directors
:
|
||||||
|
Susan D. Aaron
|
55,954
|
(2)
|
*
|
|||
|
Eric P. Blackhurst
|
12,415
|
(3)
|
*
|
|||
|
Lawrence E. Burnell
|
33,992
|
(4)
|
*
|
|||
|
Craig M. Dwight
|
436,461
|
(5)
|
*
|
|||
|
James B. Dworkin
|
38,187
|
(6)
|
*
|
|||
|
Daniel F. Hopp
|
68,389
|
(7)
|
*
|
|||
|
Michele M. Magnuson
|
45,319
|
(8)
|
*
|
|||
|
Peter L. Pairitz
|
208,155
|
(9)
|
*
|
|||
|
Steven W. Reed
|
21,823
|
(10)
|
*
|
|||
|
Spero W. Valavanis
|
69,165
|
(11)
|
*
|
|||
|
Named Executive Officers
:
|
||||||
|
Kathie A. DeRuiter
|
94,020
|
(12)
|
*
|
|||
|
Dennis J. Kuhn
|
55,106
|
(13)
|
*
|
|||
|
James D. Neff
|
334,869
|
(14)
|
*
|
|||
|
Mark E. Secor
|
54,901
|
(15)
|
*
|
|||
|
All Directors and Executive Officers as a Group (15 Persons):
|
1,539,637
|
(16)
|
3.4
|
%
|
||
*Beneficial ownership is less than one percent.
|
|
1. |
The information shown regarding shares beneficially owned is based upon information furnished to Horizon by the individuals listed. The nature of beneficial ownership, unless otherwise noted, represents sole voting or investment power.
Stock options that vested on or before March 1, 2020, are included in the number of shares beneficially owned.
|
|
|
2. |
All of the shares are owned directly by Ms. Aaron and held in her revocable living trust.
|
|
|
3. |
All of the shares are owned directly by Mr. Blackhurst.
|
|
|
4. |
Consists of 9,168 shares owned directly by Mr. Burnell and 24,824 shares held by a trust for which Mr. Burnell is the grantor and serves as trustee.
|
|
|
5. |
Consists of 20,054 vested stock options, 2,482 shares owned directly by Mr. Dwight, 223,339 shares owned jointly by Mr. Dwight and his spouse, 147,923 shares held by the ESOP, and 42,663 shares held by the Thrift Plan.
|
|
|
6. |
Consists of 3,291 shares owned directly by Mr. Dworkin and 34,896 shares owned jointly by Mr. Dworkin and his spouse.
|
|
|
7. |
Consists of 33,066 shares owned directly by Mr. Hopp and 35,323 shares held by a trust for which Mr. Hopp is the grantor and serves as trustee.
|
|
|
8. |
Consists of 45,319 shares held by a trust for which Ms. Magnuson is the grantor and serves as trustee.
|
|
|
9. |
All of the shares are owned directly by Mr. Pairitz.
|
|
|
10. |
All of the shares are owned directly by Mr. Reed.
|
|
|
11. |
All of the shares are owned directly by Mr. Valavanis.
|
|
|
12. |
Consists of 30,726 shares held by the ESOP by Ms. DeRuiter; 21,173 shares held by the Thrift Plan, 26,337 vested stock options and 14,907 shares held in the 2005 SERP.
|
|
|
13. |
Consists of 3,944 shares held by the ESOP by Mr. Kuhn; 2,256 shares held by the Thrift Plan, 36,876 vested stock options and 2,553 shares held in the 2005 SERP.
|
|
|
14. |
Consists of 253,954 shares owned directly by Mr. Neff, 45,064 shares held in the 2005 SERP, 11,158 shares held by the ESOP, 16,505 shares held by the Thrift Plan and 8,188 vested stock options.
|
|
|
15. |
Consists of 2,464 shares owned directly by Mr. Secor, 8,478 shares held by the ESOP, 15,445 shares held by the Thrift Plan, 19,439 shares held in the 2005 SERP and 9,075 vested stock options.
|
|
|
16. |
Includes 100,530 shares covered by stock options and 390,728 shares as to which voting and investment powers are shared by members of the group with their spouses or other family members or held by trusts.
|
45
Security Ownership of Certain Beneficial Owners
The following table and accompanying footnotes set forth information concerning the beneficial ownership of Horizon’s common shares by each person or entity
known by us to own beneficially more than 5% of our common shares as of December 31, 2019.
|
Name and Address of Beneficial Owner
|
Number of Shares Beneficially Owned
|
Percent of Common Shares
|
|
BlackRock, Inc.
1
55 East 52 nd Street New York, NY 10055 |
2,683,384
|
6.0%
|
|
William Nathan Salin Family Irrevocable Trust #1
2
10587 Coppergate Drive Carmel, IN 46032 |
3,251,420
|
7.2%
|
| 1 |
Ownership based on the Schedule 13G filed on February 7, 2020.
|
| 2 |
Ownership based on the Schedule 13G/A filed on February 14, 2020.
|
Certain Business Relationships and Transactions
In accordance with our Corporate Governance and Nominating Committee Charter and NASDAQ requirements, during 2019 the Corporate Governance and Nominating
Committee was responsible for reviewing and approving the terms and conditions of all related person transactions. Horizon’s Amended and Restated Articles of Incorporation provided the procedures for the Board to follow in approving or ratifying
transactions with Horizon in which a director has a direct or indirect interest. The Articles provide that such transactions will be approved or ratified upon the affirmative vote of a majority of the directors on the Board or a Board committee who do
not have a direct or indirect interest in the transaction or by a vote of the shareholders. Horizon’s Code of Ethics for Executive Officers and Directors and the Advisor Code of Conduct for Horizon and Horizon Bank provide the policies and procedures
for the review and approval or ratification of conflict of interest transactions. Any situations involving potential conflicts of interest involving an executive officer, director, or member of his or her family, if material, are to be reported and
discussed with the Code of Ethics contact person. For executive officers, the contact person is the Chief Executive Officer, or if the executive officer believes it more appropriate, the Chair of the Corporate Governance and Nominating Committee or the
Lead Director. For the Chief Executive Officer and directors, the contact person is the Chair of the Corporate Governance and Nominating Committee or the Lead Director.
Directors and executive officers of Horizon and their associates were customers of, and had transactions with, Horizon Bank in the ordinary course of business
during 2019. Horizon expects that comparable transactions will occur in the future. These transactions were made in the ordinary course of business on substantially the same terms, including interest rates, collateral and repayment terms, as those
prevailing at the time for comparable transactions with unrelated third parties. In the opinion of Horizon’s management, these transactions did not involve more than normal risk of collectability or present other unfavorable features. Loans made to
directors and executive officers are in compliance with federal banking regulations and are thereby exempt from insider loan prohibitions included in the Sarbanes-Oxley Act of 2002.
46
Proposal 2
Advisory Vote to Approve Executive Compensation
Background of the Proposal
This proposal provides Horizon’s shareholders with the opportunity to cast an advisory vote to approve Horizon’s executive compensation. As in recent years, we
are providing you with an opportunity to vote, in an advisory capacity, on Horizon’s executive compensation. This proposal is included in compliance with Section 14A of the Securities Exchange Act of 1934.
Executive Compensation
Horizon believes that its compensation is focused on principles that are strongly aligned with the long-term interests of its shareholders. We believe that
both Horizon and our shareholders benefit from our compensation policies and practices. The proposal described below, commonly known as a “say-on-pay” proposal, gives you, as a shareholder, the opportunity to endorse or not endorse our executive
compensation program for named executive officers described in this Proxy Statement. At the Annual Meeting held in 2019, shareholders approved the compensation of Horizon’s named executive officers, with 97.6% of the shares actually voted on the
proposal (excluding abstentions) being voted in favor of the compensation arrangements.
As described above in the Compensation Discussion and Analysis section of this Proxy Statement, a main objective of our executive compensation program is to
align a significant portion of each executive officer’s total compensation with Horizon’s annual and long-term performance and with the interests of our shareholders. A second, related objective of the executive compensation program is to attract and
retain experienced, highly qualified executives so as to enhance Horizon’s long-term success and shareholder value. The Board of Directors believes that Horizon’s compensation policies and procedures achieve these objectives.
47
The following chart compares the change in market price of Horizon’s stock to that of other publicly traded banks in Indiana and Michigan over the past five
years.
|
Index
|
December 31
2014
|
December 31
2015
|
December 31
2016
|
December 31
2017
|
December 31
2018
|
December 31
2019
|
||||||||||||||||||
|
Horizon Bancorp, Inc.
|
100.00
|
106.96
|
160.67
|
159.53
|
135.83
|
163.54
|
||||||||||||||||||
|
Indiana Banks
(1)
|
100.00
|
111.81
|
156.16
|
186.91
|
190.71
|
201.38
|
||||||||||||||||||
|
Michigan Banks
(1)
|
100.00
|
110.52
|
130.62
|
140.61
|
157.23
|
179.68
|
||||||||||||||||||
|
(1)
excludes merger targets
|
||||||||||||||||||||||||
|
Source: S&P Global Market Intelligence
|
||||||||||||||||||||||||
During 2019, Horizon’s Compensation Committee met with Horizon’s Risk Manager to review Horizon’s executive officer incentive compensation program for any
features that may incentivize undue risk taking. The participants in this meeting concluded that Horizon’s incentive compensation plans have several features that help mitigate the possibility that executive officers will take undue risks. These
features include the following:
|
|
• |
The Compensation Committee may unilaterally amend, modify, or cancel the plans at any time at their sole discretion.
|
|
|
• |
Named executive officer bonuses will only be paid if Horizon achieves a minimum net income level that is more than sufficient to cover fixed costs and dividends at the holding company. This minimum net income level supports the concept
that the shareholders are paid first and ahead of executive officer bonuses.
|
48
|
|
• |
Executive officers will only be paid bonuses if they are in good standing with Horizon and not under a performance warning, suspension, or individual regulatory sanction.
|
|
|
• |
The Committee or its designee is to review and approve all executive officer bonuses prior to payment.
|
|
|
• |
Bonuses are subject to receipt of an unqualified opinion by Horizon’s independent accountants on its most current year-end financial statements.
|
|
|
• |
Incentive compensation may be “clawed back” pursuant to a Horizon Bank policy as discussed above under the heading “
Recovery of Incentive Compensation under the Dodd-Frank Act.
”
|
In addition, based on information from FW Cook, Horizon’s compensation consultants, and other sources, we believe our compensation levels for our executive
officers are within acceptable ranges based on our performance relative to our peer group.
Shareholders are encouraged to carefully review the “Compensation Discussion and Analysis” and “Executive Compensation Tables” sections of
this Proxy Statement for a detailed discussion of Horizon’s executive compensation program.
This Proposal 2 gives our shareholders the opportunity to endorse or not endorse Horizon’s overall executive compensation program and policies as reflected in
the Compensation Discussion and Analysis, the disclosures regarding named executive officer compensation provided in the various tables included in this Proxy Statement, the accompanying narrative disclosures, and the other compensation information
provided in this Proxy Statement. The vote is advisory, which means that the vote is not binding on Horizon, our Board of Directors, or the Compensation Committee of the Board of Directors. However, the Board of Directors and the Compensation Committee
value the opinion of our shareholders and will consider the outcome of this vote when considering executive compensation arrangements.
At the 2018 Annual Meeting, Horizon provided shareholders with the opportunity to vote on the frequency of future say-on-pay advisory votes. The Board of
Directors recommended that the advisory say-on-pay vote be held on an annual basis, and 92% of the shares that were voted on the matter (excluding abstentions) were cast in favor of an annual vote. Accordingly, the Board of Directors has included an
advisory say-on-pay vote at each Annual Meeting held thereafter, and has directed that this advisory say-on-pay vote be included for the 2020 Annual Meeting.
Accordingly, we ask our shareholders to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the shareholders of Horizon Bancorp, Inc. approve, on an advisory basis, the compensation of the named
executive officers, as disclosed in Horizon Bancorp, Inc.’s Proxy Statement for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and
Analysis, the 2019 Summary Compensation Table and the other related tables and disclosure.”
Approval of this Proposal 2 requires that the number of votes cast in favor of the proposal exceed the number of votes cast against the proposal. Because this
shareholder vote is advisory, it will not be binding upon the Board of Directors.
|
The Board of Directors unanimously recommends a vote “FOR” approval of the compensation of our named executive officers as disclosed in this Proxy
Statement.
(Item 2 on the Proxy Card)
|
49
Proposal 3
Ratification of Appointment of Independent Auditors
BKD, LLP served as Horizon’s independent auditors for 2018 and 2019. Upon the recommendation of the Audit Committee, the Board of Directors has selected BKD,
LLP as Horizon’s independent auditors for 2020. BKD, LLP has served as Horizon’s independent auditors since 1998. Shareholder ratification of the appointment of the independent auditors is not required by law, but the Audit Committee has proposed and
recommended the submission of the appointment of BKD, LLP to the shareholders to give the shareholders input into the designation of the auditors.
Ratification of the appointment of Horizon’s independent auditor requires that more shares be voted in favor of the proposal than against the proposal. If the
shareholders do not ratify the selection of BKD, LLP, the Audit Committee may reconsider its selection of BKD, LLP as independent auditors. Even if this proposal to ratify the auditors is approved, the Audit Committee, in its discretion, may direct the
appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of Horizon or its shareholders.
Representatives of BKD, LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may
desire.
|
The Audit Committee of the Board of Directors recommends that shareholders vote “FOR” the ratification of the appointment of BKD, LLP as Horizon’s
independent auditors for 2020.
(Item 3 on the Proxy Card).
|
Auditor Fees and Services
BKD, LLP served as Horizon’s independent auditors for 2018 and 2019. The services performed by BKD, LLP in this capacity included conducting an examination in
accordance with generally accepted auditing standards of, and expressing an opinion on, Horizon’s consolidated financial statements. The Board of Directors has selected BKD, LLP as the independent public accountants for 2020 and is seeking shareholder
ratification at the Annual Meeting.
Audit Fees
BKD, LLP’s fees for professional services rendered in connection with the audit and review of Forms 10-Q and all other SEC regulatory filings were $312,400 for
2018 and $
430,336
for 2019.
Audit-Related Fees
BKD, LLP’s audit-related fees were $107,136 for 2018 and $
98,234
for
2019. In 2019, these fees related to accounting consultations and consent procedures performed in conjunction with Horizon’s acquisition of Salin Bancshares, Inc. and audit of the employee benefit plans. In 2018, these fees related to accounting
consultations and consent procedures performed in conjunction with Horizon’s acquisition of Lafayette Community Bancorp and Wolverine Bancorp, Inc.
Tax Fees
BKD, LLP’s fees for tax services were $67,232 for 2018 and $35,675 for 2019.
All Other Fees
BKD, LLP’s other fees were $31,848 for 2018 and $11,613 for 2019. These fees related to data analytics services.
Board of Directors Pre-Approval
Horizon’s Audit Committee formally adopted resolutions pre-approving the engagement of BKD LLP to act as our independent auditor for the fiscal year ending
December 31, 2020. The Audit Committee
50
has not adopted pre-approval policies and procedures in accordance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X, because it anticipates that, in the future, the
engagement of BKD LLP will be pre-approved by the Audit Committee. All audit-related fees and fees for tax services for 2018 and 2019 were pre-approved by the Audit Committee. Horizon’s independent auditors performed all work described above with their
respective full-time, permanent employees.
Delinquent Section 16(a) Reports
Executive officers and directors of Horizon and owners of more than 10% of the common shares are required to file reports of their ownership and changes in
their ownership of common shares with the SEC. Based solely upon a review of the electronic filings made with the SEC through the date of this Proxy Statement or written representations that no reports were required, Horizon believes that its executive
officers, directors and 10% shareholders complied with the 2019 filing requirements.
Shareholder Proposals for 2020 Annual Meeting
Any shareholder who wishes to have a proposal considered for inclusion in Horizon’s Proxy Statement for the 2021 Annual Meeting of Shareholders under Rule
14a-8 of the Securities Exchange Act of 1934 must submit the proposal in writing so that Horizon receives it by November 20, 2020, which date is not less than 120 calendar days before the anniversary date of the release of this Proxy Statement relating
to Horizon’s 2020 Annual Meeting. Proposals should be addressed to Horizon’s Secretary, 515 Franklin Street, Michigan City, Indiana 46360. If notice of any other shareholder proposal intended to be presented at the 2021 Annual Meeting is not received
by Horizon on or before November 20, 2020, the proxy solicited by the Board for use in connection with that meeting may confer authority on the proxies to vote in their discretion on such proposal, without any discussion in Horizon’s proxy statement
for that meeting of either the proposal or how such proxies intend to exercise their voting discretion.
Horizon’s Amended and Restated Bylaws also provide that a shareholder wishing to nominate a candidate for election as a director or to have any other matter
considered by the shareholders at the Annual Meeting must give Horizon written notice of the nomination not fewer than 120 days in advance of the anniversary of the date that Horizon’s proxy statement was released to shareholders in connection with the
previous year’s Annual Meeting. This Proxy Statement is anticipated to be filed with the SEC on March 20, 2020, with Notice of Internet Availability mailed to shareholders on March 20, 2020, which means that the nomination or proposal cut-off date for
the 2020 Annual Meeting is November 20, 2020. Shareholder nominations must include the detailed information about the nominee required by the Amended and Restated Bylaws and also must comply with the other requirements set forth in the Amended and
Restated Bylaws. Proposals to bring other matters before the shareholders must include a brief description of the proposal and the other information required by the Amended and Restated Bylaws. Copies of the Amended and Restated Bylaws are available to
shareholders from Horizon’s Secretary free of charge upon request or from the SEC’s website at www.sec.gov.
51
Other Matters
Management knows of no matters, other than those reported above, that are to be brought before the Annual Meeting. The enclosed proxy confers discretionary
authority on the proxies to vote on any other business that may properly come before the Annual Meeting. It is the intention of the persons named in the proxy to vote in their discretion on any such matter.
To the extent information in this Proxy Statement rests peculiarly within the knowledge of persons other than Horizon, Horizon has relied upon information
furnished by others for the accuracy and completeness of the information.
We urge you to complete, date, and sign the proxy and return it promptly in the enclosed envelope.
Todd A. Etzler
Secretary
Michigan City, Indiana
March 20, 2020
Availability of Form 10-K
A copy of Horizon’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) is available to shareholders without charge, upon
written request to Angelina Rizzo, Shareholder Relations, at 515 Franklin Street, Michigan City, Indiana 46360. The Form 10-K, the other proxy materials and other SEC filings also are available on the Internet at www.investorvote.com/hbnc and online in
the SEC’s EDGAR database at http://www.sec.gov.
52
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|
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TABLE OF CONTENTS