Horizon Bancorp Inc DEF 14A, filed Mar 18, 2024
Horizon Bancorp Inc (HBNC)
DEF 14A
2024-03-18
For: 2024-05-02
View Original
Added on
June 12, 2026
About this DEF 14A
Horizon Bancorp Inc filed this DEF 14A on March 18, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
| Filed by the Registrant: | ☒ | ||||
| Filed by a party other than the Registrant | ☐ | ||||
| Check the appropriate box: | |||||
| ☐ | Preliminary Proxy Statement | ||||
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14–a6(e)(2)) | ||||
| ☒ | Definitive Proxy Statement | ||||
| ☐ | Definitive Additional Materials | ||||
| ☐ | Soliciting Material Pursuant to § 240.14a–12 | ||||
(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. | |||||||
| 1) | Title of each class of securities to which transaction applies: | |||||||
| 2) | Aggregate number of securities to which transaction applies: | |||||||
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0–11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||||||
| 4) | Proposed maximum aggregate value of transaction: | |||||||
| 5) | Total fee paid: | |||||||
| ☐ | Fee paid previously with preliminary materials. | |||||||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0–11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||||||
| 1) | Amount Previously Paid: | |||||||
| 2) | Form, Schedule or Registration Statement No.: | |||||||
| 3) | Filing Party: | |||||||
| 4) | Date Filed: | |||||||
March 18, 2024
Dear Shareholder:
You are cordially invited to attend the 2024 Annual Meeting of Shareholders of Horizon Bancorp, Inc. to be held virtually on Thursday, May 2, 2024, at 10:00 a.m. Central Daylight Time. You may attend by visiting www.meetnow.global/MQLC4ML, where you will be able to listen to the meeting live, submit questions, and vote online during the meeting. You will be asked to enter the 15-digit control number on the Proxy Card or Notice of Internet Availability of Proxy Materials. 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 virtual meeting and vote electronically during the meeting.
As in recent years, we are furnishing proxy materials to our shareholders by posting the materials on the Internet. This Internet posting provides you with the information you need, while lowering the cost of delivery and reducing the environmental impact of our Annual Meeting. Our proxy materials are posted at www.investorvote.com/hbnc (and for street holders at www.edocumentview.com/hbnc). Our proxy materials are posted at www.investorvote.com/hbnc (and for street holders at www.edocumentview.com/hbnc). On March 18, 2024, 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:
i.Election of directors;
ii.An advisory (non–binding) vote to approve executive compensation;
iii.An advisory (non–binding) vote on the frequency of the advisory vote to approve executive compensation; and
iv.Ratification of the independent registered public accounting firm.
We urge you to read these materials carefully.
The Annual Report for the year ending December 31, 2023 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.
Thank you for your continued support of our company.
| Thomas M. Prame | ||
| Chief Executive Officer & President | ||
| Craig M. Dwight | ||
| Chairman and Chief Executive Officer | ||
HORIZON BANCORP, INC.
515 Franklin Street
Michigan City, Indiana 46360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 4, 2023
To Our Shareholders:
The Annual Meeting of Shareholders of Horizon Bancorp, Inc. (sometimes referred to as “Horizon,” “we” or “us”) will be held virtually at www.meetnow.global/MQLC4ML on Thursday, May 2, 2024, 10:00 a.m. Central Daylight Time. To participate in the Annual Meeting, you will need the 15-digit control number included on your Notice of Internet Availability of Proxy Materials or on your proxy card or obtained in the manner prescribed by your nominee.
We encourage you to access the meeting prior to the start time to allow time for check in. If you experience technical difficulties during the check-in process or during the meeting, please contact Shareholder Services, Computershare Limited, at (888) 724-2416 in the U.S. and (781) 575-4223 for outside the U.S.
The Annual Meeting will be held for the following purposes:
1.Election of Directors: To elect three directors to serve three–year terms expiring in 2027.
2.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.
3.Advisory Vote on Frequency of Advisory Vote to Approve Executive Compensation: To hold non–binding, advisory vote on the frequency of the advisory vote to approve Horizon’s executive compensation.
4.Ratification of Independent Registered Public Accounting Firm: To ratify the appointment of FORVIS, LLP, as our independent registered public accounting firm for 2024.
5.Other Business: To transact such other business as may properly come before the meeting or any adjournment of the meeting.
You can vote at the virtual meeting or any adjournment of the meeting if you are a shareholder of record at the close of business on March 1, 2024. There are several ways to vote, including online, by telephone, by regular mail with a proxy card or at the virtual meeting.
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 www.investorvote.com/hbnc (and for street holders at www.edocumentview.com/hbnc) under “Proxy Information.” A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, also is posted on the Internet at 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
March 18, 2024
As shareholders of Horizon, your vote is important. Whether or not you plan to attend the Annual Meeting virtually, it is important that your shares are represented. Please vote as soon as possible.
HORIZON BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 2, 2024
GENERAL INFORMATION
Information About the Meeting
Why are we holding a virtual meeting instead of a physical meeting?
We believe holding a virtual meeting expands access, improved communication, and cost savings. Accordingly, our 2024 Annual Meeting of Shareholders will once again be a virtual meeting. We hope that a virtual meeting will allow more shareholders to attend and participate in the meeting since geographic location is not a limitation. All a shareholder needs is Internet access and a browser in order to attend and participate.
We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically, and submit questions during the virtual annual meeting.
How can I attend the Annual Meeting?
The Annual Meeting will be a completely virtual meeting of shareholders, conducted exclusively by audio via the Internet. You are entitled to participate in the Annual Meeting only if you were a shareholder of Horizon as of the close of business on March 1, 2024 (the “Record Date”), or if you hold a valid proxy for a record shareholder. Horizon will not hold an in-person meeting.
You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.meetnow.global/MQLC4ML and entering the 15-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials.
If, on the Record Date, you held your shares in your own name as reflected in the records of our transfer agent, Computershare, you may attend the virtual meeting without registering in advance. If, on the Record Date, you held your shares in “street name,” through an intermediary, such as a bank or broker, you must register in advance, using the instructions below, in order to attend the virtual meeting.
The online virtual Annual Meeting will begin promptly at 10:00 a.m. Central Daylight Time. We encourage you to access the meeting prior to the start time leaving ample time for the check in.
How do I register to attend and vote at the Annual Meeting virtually, if my shares are held in street name on the Record Date?
If, on the Record Date, you held your shares in a “street name” through an intermediary, such as a bank or broker, you must register in advance in order to attend the virtual meeting. To register, you must obtain a legal proxy, executed in your favor, from the holder of record and submit proof of your legal proxy reflecting the number of shares of Horizon common stock you held as of the Record Date, along with your name and email address, to Computershare Limited (“Computershare”). Requests for registration must be labeled as “Legal Proxy” and be received no later than 9:00 a.m. Central Daylight Time, on April 26, 2024. You will then receive a confirmation of your registration, with a control number, by email from Computershare. Your control number will enable your access to the Annual Meeting via www.meetnow.global/MQLC4ML.
1
Please direct your requests for registration as follows:
By email: | Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com. | ||||
By Mail: | Computershare Horizon Bancorp, Inc. Legal Proxy P.O. Box 43001 Providence, RI 02940-3001 | ||||
What can I do if I have technical difficulties during the check–in process or during the virtual Annual Meeting?
If you experience technical difficulties during the check-in process or during the meeting, please contact Shareholder Services, Computershare, at (800) 368-5948 in the U.S. and (781) 575-4223 for outside the U.S. The number for shareholders to contact if they have trouble accessing the virtual meeting is: 1-888-724-2416.
Information About Proxy Materials
Why am I receiving these proxy materials?
The Board of Directors of Horizon is soliciting proxies to be voted at the Annual Meeting of Shareholders to be held on Thursday, May 2, 2024, at 10:00 a.m. Central Daylight Time. The meeting will be held virtually only, and Horizon will not hold an in-person meeting this year. 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 18, 2024.
What is included in these materials?
These materials include:
•Our Notice of Annual Meeting and Proxy Statement for the Annual Meeting; and | ||
•Our Annual Report to Shareholders, which includes the Annual Report on Form 10–K for the year ended December 31, 2023 (where you can find our audited consolidated financial statements). | ||
If you requested a paper copy of these materials by mail, we also included a proxy card.
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”). This approach results in a more efficient way to distribute our proxy materials and, more importantly, results in significant cost savings on printing and mailing for Horizon and we believe is more environmentally friendly. 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.
2
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:
•The election of three directors to serve three–year terms; | ||
•A non–binding advisory proposal on the compensation of Horizon’s executive officers as described in this Proxy Statement; | ||
•An advisory proposal on the frequency of the advisory vote to approve the compensation of Horizon’s executive officers; and | ||
•The ratification of the appointment of FORVIS, LLP as Horizon’s independent registered public accounting firm for 2024. | ||
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 1, 2024, the Record Date, may vote at the Annual Meeting. On the Record Date, 44,111,174 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:
•By Telephone: | Shareholders located in the United States, United States territories and Canada can vote by telephone by calling toll free 1–800–652–VOTE (8683) and following the instructions in the Notice; | ||||
•By Internet: | You can vote over the Internet at www.investorvote.com/hbnc by following the instructions in the Notice; or | ||||
•By Mail: | You can vote by signing, dating, and mailing the proxy card sent to you by mail if you have requested printed proxy materials. | ||||
We encourage you to vote over the Internet, by telephone, or by mailing the proxy card even if you plan to attend the virtual 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 in accordance with the recommendations of the Board of Directors on Proposals 1, 2, 3, and 4 as set forth in this Proxy Statement and on any other matters in accordance with their best judgment.
3
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 electronically during the virtual meeting?
Yes. If you are a shareholder of record as of March 1, 2024, you may vote your shares electronically during the meeting by clicking on the “Cast Your Vote” link on the Meeting Center site.
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 electronically during the meeting. See above under “How do I register to attend and vote at the Annual Meeting virtually, if my shares are held in street name on the Record Date?”
Can I change my vote after I have voted by telephone, online or mailed my proxy card?
Yes. 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); | ||
•delivering written notice of revocation to Horizon’s Secretary (Todd A. Etzler, 515 Franklin Street, Michigan City, Indiana 46360); | ||
•entering a new vote by telephone or on the Internet; or | ||
•voting by virtual ballot at the virtual 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 1, 2024, the Record Date, 44,111,174 common shares were issued and outstanding. Abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum at the Annual Meeting.
How many votes are required for the election of directors and other proposals?
The following votes will be required to approve the proposals:
•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 votes “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. Under our recently adopted Director Resignation Policy, any nominee for director who receives a greater number of “withhold” votes from his or her election than votes "for" such election is required to promptly tender his or her resignation to the Board, subject to acceptance by the Board. See “Election of Directors — Plurality Plus Voting for Directors; Director Resignation Policy” below. | ||
•Proposal 2 and 4: The advisory vote to approve executive compensation (Proposal 2), and the ratification of the independent registered public accounting firm (Proposal 4) each requires that more votes are cast in favor of the proposal than are cast against the proposal. Shareholders may vote “for” or “against” this proposal or “abstain” from voting on this proposal. Abstentions and broker non-votes are not considered votes cast for the foregoing purpose, and neither will have an effect on the outcome. | ||
•Proposal 3: The advisory vote on the frequency of the advisory vote to approve executive compensation (Proposal 3) requires shareholders to vote on a frequency of “one year,” “two years” or “three years,” or to abstain from voting. Neither abstentions nor broker non-votes will have an effect on the outcome. | ||
4
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 an independent registered public accounting firm in Proposal 4. 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. In addition to sending the Notice of Internet Availability of Proxy Materials and requested proxy materials by mail, we may solicit proxies personally or by telephone, 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.
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.
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 thirteen members. 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 familiar with the local communities served by Horizon. Five members of Horizon’s current Board of Directors qualify as “audit committee financial experts,” which we believe is a considerable number for a company of Horizon’s size. The Board of Directors also has professional experience in balance sheet and liquidity management, human capital, and cybersecurity, and enterprise risk management (ERM) programs.
Horizon’s directors actively participate in continuing education, with each director completing a minimum of 100% of their 2023 and 2022 assigned educational programs. In addition, several directors attended outside training programs in the areas of audit, enterprise risk management, 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:
5
•the nominee’s qualifications, including his or her judgment, skill, capability, diversity, ability to serve, conflicts of interest, business experience, the extent that the director contributes to the diversity of the Board, 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; | ||
•if applicable to the nominee, whether the nominee would be deemed “independent” under marketplace rules of the NASDAQ Stock Market and SEC regulations; | ||
•whether the nominee is qualified and likely to remain qualified to serve under Horizon’s Bylaws; and | ||
•such other factors the Committee deems relevant. | ||
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 broad criteria in its consideration, which include all of the criteria listed in the Corporate Governance and Nominating Committee Charter together with other factors, such as the nominee’s age, gender identity, ethnicity, disability, sexual orientation, cultural background, leadership abilities, continuous learning and their familiarity with Horizon’s markets. 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. The Corporate Governance and Nominating Committee evaluates candidates recommended by shareholders using the same criteria it applies to evaluate other director candidates.
With respect to geographic diversity, the Corporate Governance and Nominating Committee considers whether current directors and nominees are familiar with the states, cities, and counties in which Horizon Bank has branches and in which it may consider locating future branches.
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 financial services, manufacturing, academia, accounting, law, finance, human capital and employment regulation, privacy, and cyber security/information technology.
The Corporate Governance and Nominating Committee also considers the age diversity, tenure, and experience of director nominees and current directors.The Corporate Governance and Nominating Committee also considers the age diversity, tenure, and experience of director nominees and current directors.
In addition to consideration of the above characteristics, the Corporate Governance and Nominating Committee emphasizes and has required director searches to include women and minority candidates in the candidate 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. Three Board members, or 25.0% of our Board, are female, one of whom is our Lead Director. Prior to the retirement of Susan D. Aaron on December 31, 2023, 33.3% of our board was female. After the retirement of Peter L. Pairitz at the conclusion of the 2024 annual meeting, 27.3% of our board will be female.
The Nasdaq Stock Market (“Nasdaq”) Listing Rule 5605(f) (the “Diverse Board Representation Rule”) requires each Nasdaq-listed company, subject to certain exceptions, to have or explain why it does not have (1) at least one director who self-identifies as female, and (2) at least one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+. All Nasdaq-listed companies must have, or explain why they do not have, at least one diverse director by August 7, 2023. All companies listed on the Nasdaq Global Select Market, such as Horizon, must have, or explain why they do not have, at least two diverse directors by August 6, 2025.
In addition, new Listing Rule 5606 (the “Board Diversity Disclosure Rule”) requires each Nasdaq-listed company, subject to certain exceptions, to provide statistical information about the company’s board of directors, in a uniform format, related to each director’s self-identified gender, race, and self-identification as LGBTQ+.
6
Although we are not required to fully comply with the Diverse Board Representation Rule until 2025, we believe we presently meet the requirements of that rule based on the self-identified characteristics of the current members of our Board. In the matrix below, we have provided the statistical information required by the Board Diversity Disclosure Rule.
The tables below reflect the diversity of Horizon’s Board based on the self-identified characteristics of our directors. The table for Horizon’s Board includes diversity statistics that meet the Board Diversity Disclosure Rule described above.
| HORIZON BANCORP, INC. | |||||||||||||||||||||||
| Board Diversity Matrix | |||||||||||||||||||||||
| As of March 18, 2024 | |||||||||||||||||||||||
| Total Number of Directors | 12 | ||||||||||||||||||||||
| Female | Male | Non–Binary | Did Not Disclose Gender | ||||||||||||||||||||
| Part I: Gender Identity | |||||||||||||||||||||||
| Directors | 3 | 9 | 0 | 0 | |||||||||||||||||||
| Part II: Demographic Background | |||||||||||||||||||||||
| African American or Black | 1 | 0 | 0 | 0 | |||||||||||||||||||
| Alaskan Native or Native American | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Asian | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Hispanic or Latinx | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | |||||||||||||||||||
| White | 2 | 9 | 0 | 0 | |||||||||||||||||||
| Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | |||||||||||||||||||
| LGBTQ+ | 0 | ||||||||||||||||||||||
| Did Not Disclose Demographic Background | 0 | ||||||||||||||||||||||
Plurality Plus Voting for Directors; Director Resignation Policy
Pursuant to Indiana law and Horizon’s Bylaws, directors are elected by a plurality of the votes cast in both contested elections (elections in which the number of nominees is greater than the number of Board seats open for election) and uncontested elections. On December 20, 2022, the Board adopted a Director Resignation Policy, effective January 1, 2023, with respect to uncontested elections of directors. In accordance with this policy, in an uncontested election, any nominee for director who receives a greater number of “withhold” votes from his or her election than votes "for" such election (a "Majority Withheld Vote") is required to promptly tender his or her resignation to the Board, subject to acceptance by the Board.
Under the Director Resignation Policy, in the event a director receives a Majority Withheld Vote and tenders his or her resignation, the Corporate Governance and Nominating Committee of the Board will make a recommendation to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Corporate Governance and Nominating Committee’s recommendation, and publicly disclose (by a press release, a filing with the SEC, or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the receipt of the resignation. The Corporate Governance and Nominating Committee, in making its recommendation, and the Board, in making its decision, may each consider any factors or other information that they consider appropriate and relevant.
Any director who tenders a resignation shall not participate in the Corporate Governance and Nominating Committee deliberations concerning such director’s resignation or the resignation of any other director who received a Majority Withheld Vote at the same election, or the decision of the Board with respect to such director’s resignation or the resignation of any other director who received a Majority Withheld Vote at the same election.
7
If all of the members of the Corporate Governance and Nominating Committee received a Majority Withheld Vote at the same election, then no Committee action shall be required, and the Board shall determine whether to accept or reject each resignation without the participation of the directors who received a Majority Withheld Vote at such election.
If a director’s resignation is rejected by the Board, the director will continue to serve for the remainder of the term for which he or she was elected but received the Majority Withheld Vote and until his or her successor is duly elected and qualified, or his or her earlier death, resignation or removal. If a director’s resignation is accepted by the Board, the Board, in its sole discretion, may fill the resulting vacancy or decrease the size of the Board, each in accordance with Horizon’s Bylaws.
Nominees for Election as Class of 2026 Directors
The terms of Julie S. Freigang, Lawrence E. Burnell, and Peter L. Pairitz as directors will end at the Annual Meeting. Peter L. Pairitz submitted notice on January 19, 2024 that he will retire from the Board at the end of his current term and will not stand for re-election at the Company's 2024 annual meeting of shareholders. The decision by Mr. Pairitz to not stand for re-election was not a result of any disagreement with the Board or management of Horizon or Horizon Bank. The Board of Directors assigned Thomas M. Prame to this year’s class of 2027 to permit him to run for election at the first annual meeting, the 2024 annual meeting, subsequent to his appointment as CEO of Horizon.
With great sadness, the Board of Directors was informed that director Spero W. Valavanis passed away in January 2024.
The Board of Directors has nominated Julie S. Freigang, Lawrence E. Burnell, and Thomas M. Prame to serve three-year terms as members of the Class of 2027.
On January 23, 2024, the Board appointed Kevin W. Ahern and Brian W. Maass to serve on the Board, effective as of January 23, 2024, to fill the vacancy resulting from the retirement of Susan D. Aaron and a vacancy created when the Board increased the size of the board to 13. Each has served as an independent director on the board of Horizon Bank since April 18, 2023. Also, on January 23, 2024, the Board adopted a resolution, that, effective at the close of the 2024 annual meeting, the Board positions will be reduced to 11.
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.
| The Board of Directors unanimously recommends that the shareholders vote “FOR” the election of the three nominees (Item 1 on the Proxy Card) | ||
8
Members of the Board of Directors
The following table presents biographical information on all of the directors, including the three 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.
| Name | Age | Business Experience and Service as a Director | ||||||||||||
| Nominees for Director – Class of 2027 | ||||||||||||||
| Lawrence E. Burnell | 69 | 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 48 years of financial management experience, including serving in senior financial management positions at White Lodging Services Corporation for the last 31 years. Mr. Burnell has a B.S. in accounting, has passed the CPA exam, and has 10 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) 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. | ||||||||||||
| Julie S. Freigang | 56 | Ms. Freigang is the Vice President and Chief Information Officer for CF Industries Holdings, Inc. (NYSE: CF) headquartered in Northbrook, Illinois, where she oversees the company’s information technology. Ms. Freigang has held this position since October 2020. Before joining CF Industries, she held the position of Vice President, Chief Information Officer at Franklin Electric Co., Inc. (NASDAQ: FELE) from 2014-2020 and the position of Vice President – IT at Eaton Corporation from 2011-2014. Ms. Freigang earned a Bachelor of Science in Mechanical Engineering and graduated with honors from Valparaiso University in Valparaiso, Indiana. Ms. 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. Ms. Freigang possesses particular knowledge and experience in cyber security and information technology for publicly traded companies. In previous and current roles, she has built and maintained a comprehensive cybersecurity program, including strategy, risk assessment, technology implementation, insurance, auditing, policy development, awareness training and incident response. She is also responsible for the overall Business Continuity Program, in alignment with Enterprise Risk Management. Her experience will continue to provide Horizon with considerable expertise and insight into these areas. | ||||||||||||
| Thomas M. Prame | 53 | Mr. Prame has held the position of Chief Executive Officer since June 1, 2023. Prior to that he held the position of President of Horizon and the Bank since August 15, 2022. Before joining Horizon, Mr. Prame was Executive Vice President of Consumer, Wealth and Mortgage Banking at First Midwest Bancorp from May 2012 to March 2022. Mr. Prame also held the position leading strategy during his tenure at First Midwest. Mr. Prame holds a B.S. in Economics from University of Rochester and an M.B.A in Finance from the University of Notre Dame – Mendoza College of Business. Mr. Prame has extensive knowledge of banking, fintech, strategy, balance sheet management, marketing, human resources, risk management, and banking rules and regulations. | ||||||||||||
9
| Name | Age | Business Experience and Service as a Director | ||||||||||||
| Continuing Directors – Class of 2025 | ||||||||||||||
| Kevin W. Ahern | 61 | Mr. Ahern is Managing Partner of Brush Creek Partners, Littleton, Colorado, a private investment vehicle focused on making investments in operating companies in the specialty finance, banking and financial services, manufacturing, distribution, media, and business and consumer services sectors. Mr. Ahern has held his current position since 2020. He also recently joined Castle Creek Capital, an alternative asset management firm focused on the community banking industry, as a Senior Advisor. He previously founded and served as Chairman and CEO of CIC Bancshares and Centennial Bank, Denver, Colorado until it was acquired in 2016 by Heartland Financial USA. Following the sale of CIC Bancshares, Mr. Ahern served as Executive Chairman of Centennial Bank and then Chairman of Citywide Banks, both Heartland Financial member banks, and also served as an Executive Vice President with Heartland Financial until 2019. Mr. Ahern was appointed to the Board in January 2024 and Horizon Bank’s board in May 2023. Mr. Ahern is a member of the board of directors of Bank of Idaho Holding Company, Idaho Falls, Idaho, since July 2023, InBankshares, Corp Denver, Colorado, since November 2020, and Bancorp 34, Inc., Scottsdale, Arizona, since January 2023. He is also Chairman of Investment Trust Company, a Colorado-based independent trust company since 2020. Mr. Ahern has extensive knowledge and experience in banking, balance sheet management, liquidity management, finance, accounting and banking rules and regulations. | ||||||||||||
| Eric P. Blackhurst | 62 | Mr. Blackhurst is Associate General Counsel, Corporate Transactions and Latin America, of The Dow Chemical Company, a global material science company 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 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. In addition to serving as legal counsel at a major public corporation, Mr. Blackhurst has served in leadership roles with a significant number of local and regional not for profit organizations, including fund raising campaigns. 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. | ||||||||||||
| Craig M. Dwight | 67 | Since July 1, 2013, Mr. Dwight has held the position of Chair of Horizon. He served as the Chief Executive Officer of Horizon and Horizon Bank from July 1, 2001 until his retirement on July 31, 2023. Prior to serving in those capacities, 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 45 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. | ||||||||||||
10
| Brain W. Maass | 50 | Mr. Maass is Founder and Managing Director of Maass Financial Consulting LLC, which provides consulting services in the banking industry including asset liability management, liquidity management, and merger and acquisition advisory services. He served as Executive Vice President Chief Financial Officer with TCF Financial, Minneapolis, Minnesota, from January 2016 to June 2021. (During the transition period after the merger of TCF Financial Corporation with Chemical Financial Corporation, Mr. Maass served an interim role [part of 2019 and 2020] as Deputy Chief Financial Officer and, thereafter resumed his position as Chief Financial Officer.) Mr. Maass holds a B.S. degree in Accounting from Northern Illinois University and an M.B.A. in Finance from University of St. Thomas – Opus College of Business. Mr. Maass was appointed to the Board in January 2024 and Horizon Bank’s board in May 2023. Mr. Maass has more than 28 years of banking industry experience. He has spent much of his career managing various treasury, accounting, and finance areas within large complex regional and national banking organizations. He has extensive knowledge and experience in banking, balance sheet management, liquidity management, bank mergers/integrations, and risk management. | ||||||||||||
| Name | Age | Business Experience and Service as a Director | ||||||||||||
| Continuing Directors – Class of 2026 | ||||||||||||||
| James B. Dworkin | 75 | Mr. Dworkin is the Chancellor Emeritus of Purdue University North Central. He has over 44 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 Mitchell E. Daniels School of Business 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. | ||||||||||||
| Michele M. Magnuson | 63 | 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 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. She served as the Lead Director since July 1, 2022. Ms. Magnuson has more than 34 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. | ||||||||||||
11
| Steven W. Reed | 61 | 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 39 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. | ||||||||||||
| Vanessa P. Williams | 52 | Ms. Williams is the senior vice president and general counsel for Kelly Services, Inc. (Nasdaq: KELYA, KELYB), a global leader in providing strategic workforce solutions headquartered in Troy, Michigan, where she oversees the legal, risk, compliance, procurement and physical security teams. Ms. Williams joined Kelly Services, Inc. in 2020. Prior to joining Kelly Services, Inc., Ms. Williams served as senior vice president in legal, risk and compliance for IHS Markit, a London-based global information provider, from 2006 to 2020. Ms. Williams holds a J.D. degree from William and Mary Law School, an M.B.A., with a focus in international business, from Wayne State University and a B.A. in communications from the University of Alabama. She has more than 27 years of senior legal law firm and in-house experience and has been a certified privacy professional since 2007. She has served on Horizon’s Board of Directors since January 1, 2023 and on the Board of Directors of Horizon Bank since January 18, 2022. Ms. Williams possess extensive knowledge and experience in regulatory and legal compliance. Ms. Williams also oversees the global legal team, procurement, insurance risks, enterprise risk management (ERM), physical security and safety, investor relations, and employment compliance at Kelly Services. She spent the majority of her career at companies in the data science and information industries, where she oversaw privacy, data use and data compliance and third-party risk management. Her experience will continue to provide Horizon with considerable expertise and insight into these areas. | ||||||||||||
HORIZON’S ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) FRAMEWORK
Since 1873, Horizon has operated as a community bank, putting people and its communities first. Building relationships and supporting its communities has been at the core of Horizon’s approach to banking and its business. Horizon’s ESG framework is built around its desire to make a positive impact and empower its employees, customers and communities. The Corporate Governance and Nominating Committee has been charged with oversight of this framework.
Horizon issued its inaugural sustainability report in the second quarter of 2021 that detailed its ESG initiatives incorporating metrics for calendar year 2020 from guidelines set out in in the Sustainability Accounting Standards for Commercial Banks prepared by the Sustainability Accounting Standards Board. The sustainability report includes information about our diversity and inclusion efforts and our Senior Community Development Officer in addition to our contributions to the communities that we served in the past year. As an annual report, the Corporate Social Responsibility report for 2022 and 2023, when issued, may be found on our website with additional information on community outreach at www.horizonbank.com, under “About Us” by selecting “Corporate Social Responsibility Report.”
12
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 Chairman, is the only current director on the Board of Directors of Horizon 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. In addition, the Board’s key standing committees meet in executive session without the presence of directors who are not independent, and the non-management directors of the Board meet in executive session without the presence of directors who are not independent. In addition, the Board will meet in executive session without directors who are not independent at least twice a year.
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 position of Chairman of the Board currently is held by Craig M. Dwight, which he retained upon his retirement as Chief Executive Officer of Horizon in July 2023. The position of independent Lead Director is held by Michele M. Magnuson. Thomas M. Prame holds the positions of CEO of Horizon and the Bank, for which he also serves as the Chairman of the Bank Board.
On January 17, 2023, the Board approved the appointment of Thomas M. Prame to serve as the Chief Executive Officer of both Horizon and Horizon Bank, effective as of June 1, 2023. Mr. Prame currently serves as the President of both Horizon and Horizon Bank and on the Board of Directors of Horizon Bank and will continue to serve in all of those positions in addition to his new role as Chief Executive Officer.
Horizon’s Bylaws provide that if the offices of Chairman 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.
On June 21, 2022, Michele M. Magnuson was elected by Horizon’s independent directors to serve as the Lead Director for a three-year term, commencing on July 1, 2022 and expiring on June 30, 2025. Although the offices of Chairman of the Board and Chief Executive Officer are not held by the same person, the Chairman and the Chief Executive Officer are not independent under marketplace rules of the NASDAQ Stock Market and SEC regulations, therefore, the Board retains the lead director office held by Ms. Magnuson.
13
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 Chairman, 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:
•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; | ||
•Providing input to the Chairman and Chief Executive Officer and the Corporate Secretary on the preparation of agendas for Board and committee meetings; and | ||
•Advising the Chairman on the quality, quantity, usefulness and timeliness of information provided to directors to support the work of the Board of Directors and committees. | ||
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.
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 Chairman 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, the Lead Director, 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.
14
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 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 2023 Annual Meeting was released to shareholders on March 17, 2023. Accordingly, the last day to deliver a nomination for the 2024 Annual Meeting was 120 days before March 17, 2024, or November 17, 2023. Shareholder nominations must (i) include the detailed information about the nominee required by the Bylaws, which were amended by the Board effective as of January 1, 2024, to, among other things, add the following additional requirements: (a) a written questionnaire with respect to the background and qualifications of the nominee, in the form required by Horizon, (b) an agreement from the proposed director nominee, in the form required by Horizon, agreeing to, among other things, comply with various policies and procedures of the Company applicable to all directors, and (c) a written statement that such shareholder intends to solicit proxies in support of such director nominee in accordance with Rule 14a–19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and also (ii) comply with the other requirements set forth in the Bylaws, including the requirements of Rule 14a–19 under the Exchange Act. The Corporate Governance and Nominating Committee does not have a separate policy for considering director candidates recommended by shareholders because the shareholder 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 the requirements of the federal securities laws, regulations and rules, including Rule 14a-19 under the Exchange Act, 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 10 meetings during 2023, and each director serving on the Board during 2023 attended in person or virtually 89.5% 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. Three of the eleven members of the Board of Directors who were serving as a director at the time attended the 2022 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 are Mr. Blackhurst, who serves as Chair, Ms. Magnuson, and Ms. Williams. 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 four times during 2023. 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.
15
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.”
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 are Mr. Reed, who serves as Chair, Mr. Burnell, Mr. Dworkin, Ms. Freigang, and Mr. Maass. 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 met five times during 2023. 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 39 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 are Mr. Pairitz, who serves as Chair until the end of his term at the 2024 annual meeting, Mr. Blackhurst, Ms. Magnuson, Mr. Reed, and Ms. Williams, who will assume the Chair at the end of Mr. Pairitz’s term at the 2024 annual meeting. 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 nine times in 2023. 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 assist the Committee in determining whether Horizon’s compensation system in effect is a reasonable and appropriate means for achieving Horizon’s business objectives.
16
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 2023, FW Cook reported to the Compensation Committee on the findings from its analysis of Horizon’s named executive officers’ compensation. “Named executive officers” or the NEO’s refers to the five executive officers who are named in the Summary Compensation Table below because of their positions and levels of 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. Prame, who serves as Horizon’s Chief Executive Officer and President. 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:
•Strategic Leadership: Strategic leadership entails development of appropriate strategies for Horizon and the ability to gain support for those strategies. | ||
•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. | ||
•Financial Results: Financial results focus on the overall financial health of Horizon and ability to achieve financial goals. | ||
•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. | ||
•Succession Planning, Talent 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. | ||
•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. | ||
17
•External Relations: Requires that the Chief Executive Officer serve as an effective external spokesperson or the company, maintains credibility within the investor and business community, is viewed as a leader in the industry to outside observers and peer organizations, and is an effective representative of Horizon in the local community. | ||
•Overall Performance: Requires the Chief Executive Officer to effectively lead Horizon. | ||
In conducting the Chief Executive Officer’s performance review for 2023, 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 and are adjusted by one-time expenses.
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 19, 2023, 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 Chief Legal and Risk Officer, 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:
•High – potential material threat to the enterprise. | ||
•Moderate – not a material threat to the enterprise, however, could impact current year’s performance. | ||
•Low – minimal threat to the enterprise. | ||
High level risks and established metrics were reviewed with Horizon’s Board or Board committees four times during 2023, as discussed below. The Board anticipates a similar review at least quarterly in 2024.
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 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
18
internal auditor, and Horizon’s independent registered public accounting firm. RSM US, LLP served as Horizon’s internal auditor during 2023. 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 2023, 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 2023 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.
Cyber Security
The Board established the Cyber Security Committee of the Board in December 2022 to augment the Board's oversight with cybersecurity focus and expertise and to complement the risk framework activities of the Enterprise Risk Management and Credit Policy Committee. The Cyber Security Committee considers risks associated with Horizon's overall cyber security and information technology programs; information technology audits; the security risk insurance that Horizon maintains for information technology, cyber security and privacy risks; Horizon's information security training programs; and compliance with all rules and regulations and risk control policies and procedures relating to information technology and cyber security.
Pursuant to the Cyber Security Committee Charter, the Cyber Security Committee is required to meet at least three times per year and report to the Board annually. The Cyber Security Committee met three times in 2023. In addition, the Cyber Security Committee Charter provides that a majority of the Cyber Security Committee's voting members must qualify as independent directors under SEC rules and NASDAQ listing standards. During 2023, 80% of the Cyber Security Committee's members qualified as independent.
Horizon's senior management briefs the Cyber Security Committee at each Cyber Security Committee meeting (see below for detailed discussion). In 2023, Horizon's information technology/cyber security program was audited by Horizon's internal and external auditors. The Cyber Security 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.”
Through Horizon's enterprise risk management framework and reporting functions, the Board, its Committees and Management assess and manage cybersecurity risks created by cybersecurity threats. Horizon's Vice President, Information Security and Audit Information Security officer (“Information Security Officer”) provides an annual Information Security Program report to the Board and as needed when cybersecurity risk is elevated. Horizon's Senior Vice President, Senior Technology Officer is a member of the Cyber Security Committee and reports on cyber security risks at each meeting a minimum of three times a year. The Senior Vice President, Senior Technology Officer reports to the Executive Vice President, Senior Operations Officer, who also is a member of the Cyber Security Committee. For independence, the Information Security Officer reports to Horizon's Senior Vice President, Senior Auditor and Compliance Officer. Horizon's risk escalation framework requires progressive escalation of cyber security risks to management and its Committees, then to Board Committees and, ultimately, to the Board.
Management's Operations Committee meets monthly and provides oversight and governance of the technology and cyber security programs. The Senior Vice President, Senior Technology Officer and Information Security Officer are members of this committee and report monthly on the technology and cyber security programs. The Senior Vice President, Senior Technology Officer also is a member of Management's Enterprise Risk & Disclosure Committee, which meets a minimum of four times a year, to report on the technology and cyber security programs.
19
Horizon engages in regular assessments of its infrastructure, software systems, and network architecture, using internal cybersecurity experts and third–party specialists. It also maintains a third–party risk management program designed to identify, assess, and manage risk, including cybersecurity risks, associated with external service providers and our supply chain.
The Executive Vice President, Senior Operations Officer has 34 years of experience in operations and technology with an educational background in Business Administration. In the role of Senior Bank Operations Officer and Executive for the past 23 years, she oversees and works closely with Horizon's technology and security teams to develop and implement robust security measures to protect the Bank's systems, networks, and customer data. The Senior Bank Operations Officer stays current on the latest industry trends and emerging cyber threats through publications, webinars, seminars and banking association training around cyber security. She also collaborates with external agencies, such as law enforcement and regulatory bodies, to address cyber threats and ensure compliance with industry best practices.
The Senior Vice President, Senior Technology Officer has 27 years of experience in information technology, with the last 12 as the information technology leader for the Bank. He holds a Bachelor's Degree in Computer Science. He is an active member of FS–ISAC's Mergers an Acquisition Working Group, and a named author of their 2023 “Cybersecurity Best Practices in Mergers, Acquisitions and Divestiture Deals” publication. He also serves as an advisory member of the Indiana Governor's Executive Council on Cybersecurity. He attends numerous industry training sessions including those put on by the SANS Institute, PaloAlto, Cisco, Microsoft, the Cybersecurity and Infrastructure Security Agency (CISA), and FS–ISAC.
The Vice President, Information Security and Audit Information Security Officer has 27 years as an IT Professional, with the last 8 as the cybersecurity leader for Horizon Bank with an education background in Technology. He has achieved numerous certifications throughout his career including the Microsoft Certified Systems Engineer (MCSE) and Certified Novell Engineering (CNE 5/6), and has demonstrated a continued commitment to excellence and has attained certification as a Certified Information Systems Security Professional (CISSP) issued by ISC2 in 2022. Through continuous learning and professional development, the Information Security Officer has honed his expertise in cybersecurity frameworks, threat detection, incident response, and risk management. He also serves as a member of the Indiana Bankers Association (IBA) Cyber Security Committee and attends numerous industry training sessions including those put on by Microsoft, FS–ISAC, SANS Institute.
Notwithstanding our defensive measures and processes, the threat posed by cyber–attacks is severe. Our internal systems, processes, and controls are designed to mitigate loss from cyberattacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our Company. See Item 1A. Risk Factors for further discussion of risks related to cyber security
in Horizon's 2023 Annual Report on Form 10–K filed with the Securities and Exchange Commission.
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.
20
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 2023, 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 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, and 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:
| Participant | Ownership Thresholds | |||||||
| Director | 3 times amount of annual retainer | |||||||
| Chief Executive Officer | 3 times base salary | |||||||
| Named Executive Officers (other than Chief Executive Officer) | 2 times base salary | |||||||
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.
| Participant | Percentage of After–Tax Profit Associated with the Acquired Shares | |||||||
| Director and Chief Executive Officer | 75% | |||||||
| Named Executive Officers (other than Chief Executive Officer) | 50% | |||||||
21
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.
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 2023 Annual Report on Form 10-K.
This Report is respectfully submitted by the Compensation Committee of Horizon’s Board of Directors:
Peter L. Pairitz, Chair
Eric P. Blackhurst
Vanessa P. Williams
Michele M. Magnuson
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.
22
Use of FW Cook Compensation Consultant
The Compensation Committee retained FW Cook to prepare a report for purposes of evaluating executive compensation for Horizon’s named executive officers, including its chief executive officer and as part of its consideration of executive compensation for 2024. The most recent FW Cook report was received in December 2023 and used 2022 compensation data to compare overall executive compensation practices against 20 companies of comparable size and common business traits, as selected by FW Cook with input from management and approved by the Compensation Committee. Horizon’s peer group for purposes of the 2023 FW Cook report included the following companies:
1st Source Corporation | German American Bancorp, Inc. | Old Second Bancorp, Inc. | ||||||||||||
| (South Bend, IN) | (Jasper, IN) | (Aurora, IL) | ||||||||||||
| Byline Bancorp | Great Southern Bancorp | Park National Corporation | ||||||||||||
| (Chicago, IL) | (Springfield, MO) | (Newark, OH) | ||||||||||||
| Community Trust Bancorp | Independent Bank Corporation | Peoples Bancorp | ||||||||||||
| (Pikeville, KY) | (Ionia, MI) | (Marietta, OH) | ||||||||||||
| City Holding Company | Lakeland Financial | Premier Financial Corp. | ||||||||||||
| (Charleston, WV) | (Warsaw, IN) | (Defiance, OH) | ||||||||||||
| Farmers National Banc Corp. | Mercantile Bank | QCR Holdings | ||||||||||||
| (Canfield, OH) | (Grand Rapids, MI) | (Moline, IL) | ||||||||||||
| First Busey Corporation | Midland States Bancorp | Stock Yards Bancorp, Inc. | ||||||||||||
| (Champaign, IL) | (Effingham, IL) | (Louisville, KY) | ||||||||||||
| First Mid Bancshares, Inc. | MidWestOne Financial Group, Inc. | |||||||||||||
| (Mattoon, IL) | (Iowa City, IA) | |||||||||||||
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 14, 2023 that addresses the independence of FW Cook and the 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.
The following highlights are from the 2023 FW Cook report:
•Horizon’s position was assessed in relation to a peer group of 20 other companies comparable to Horizon in various measures of size, including total assets, total shareholder equity, net revenue, net income, number of employees and market capitalization. Company performance for Horizon and the peer group is measured on a one-year and three-year basis for size, profitability, growth and shareholder return (with composite scores representing an average of the relative rankings in these categories). | ||
•Total annual compensation (“TAC”) for the last completed fiscal year (2022) for the named executive officers is directionally aligned with composite company size and performance for that year. TAC refers to base salary plus annual bonus. | ||
23
•TAC for the last five completed fiscal years (2018-2022) is also directionally aligned relative to composite company size and performance over that same time period. | ||
•Total compensation paid (“TCP”) for the last completed fiscal year (2022) for the named executive officers is directionally aligned with three-year company performance (2020-2022). TCP refers to multi-year long-term incentive cash awards earned for the latest performance cycle, plus all other compensation reported, plus value realized on any stock option exercises, plus restricted stock/performance shares earned and/or vested. | ||
•TCP for the last five completed fiscal years (2018-2022) is also directionally aligned with trailing three-year performance over that same time period. | ||
•On average, total direct compensation (“TDC”) opportunities for Horizon’s named executive officers, individually and in total, are positioned generally in the lower half of the market median range, slightly below the market media. | ||
•Horizon’s TDC mix is representative of median competitive practice. | ||
•Horizon ranks near the median of the peer group in terms of equity compensation cost, as measured by absolute dollar amount and near the median relative to pre-tax income. | ||
•Horizon ranks between the median and the 25th percentile and the median of the peer group in terms of share usage run rate. | ||
•Horizon ranks between the 25th percentile and median of the peer group in terms of potential dilution overhang from outstanding grants, and in the top quartile in total potential dilution because of the large number of shares that remain available for future grants. | ||
•Horizon’s practice of using a portfolio of two long-term incentive grant types, consisting of restricted stock vesting over three years and performance shares cliff vesting after a three-year performance period, falls within a reasonable range of peer group practice. | ||
Overview of 2023 Compensation Process and Programs
2023 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 2023 compensation for the Chief Executive Officer, Chief Financial Officer and other top officers, the Compensation Committee relied in part upon on the analysis provided by the 2022 FW Cook report delivered in December 2022, just as the Compensation Committee will use the 2023 FW Cook report delivered in December 2023 as part of its consideration of executive compensation for 2024. The Compensation Committee’s review included a study of base pay, bonus, and long-term compensation.
24
Horizon’s peer group for purposes of the 2022 FW Cook report included the following companies:
1st Source Corporation | German American Bancorp, Inc. | Old Second Bancorp, Inc. | ||||||||||||
| (South Bend, IN) | (Jasper, IN) | (Aurora, IL) | ||||||||||||
| Byline Bancorp | Great Southern Bancorp | Park National Corporation | ||||||||||||
| (Chicago, IL) | (Springfield, MO) | (Newark, OH) | ||||||||||||
| Community Trust Bancorp | Independent Bank Corporation | Peoples Bancorp | ||||||||||||
| (Pikeville, KY) | (Ionia, MI) | (Marietta, OH) | ||||||||||||
| City Holding Company | Lakeland Financial | Premier Financial Corp. | ||||||||||||
| (Charleston, WV) | (Warsaw, IN) | (Defiance, OH) | ||||||||||||
| Enterprise Financial Services Corp. | Mercantile Bank | QCR Holdings | ||||||||||||
| (Clayton, MO) | (Grand Rapids, MI) | (Moline, IL) | ||||||||||||
| First Busey Corporation | Midland States Bancorp | Stock Yards Bancorp, Inc. | ||||||||||||
| (Champaign, IL) | (Effingham, IL) | (Louisville, KY) | ||||||||||||
| First Mid Bancshares, Inc. | MidWestOne Financial Group, Inc. | |||||||||||||
| (Mattoon, IL) | (Iowa City, IA) | |||||||||||||
The Named Executive Officers
The following discussion of compensation focuses on the compensation of the 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 2023 are as follows:
| Name | Position | |||||||
Thomas M. Prame(1) | President and Chief Executive Officer of Horizon and Horizon Bank | |||||||
Mark E. Secor(2) | Executive Vice President and Chief Financial Officer of Horizon and Horizon Bank | |||||||
| Kathie A. DeRuiter | Executive Vice President of Horizon and Horizon Bank; Senior Operations Officer of Horizon Bank | |||||||
| Lynn M. Kerber | Executive Vice President of Horizon and Horizon Bank; Chief Commercial Banking Officer of Horizon Bank | |||||||
Craig M. Dwight(3) | Chairman of the Board and Former Chief Executive Officer of Horizon and Horizon Bank | |||||||
| Todd A. Etzler | Executive Vice President, Chief Legal and Risk Officer & Corporate Secretary | |||||||
(1) | Mr. Prame was appointed Chief Executive Officer of Horizon and Horizon Bank effective as of June 1, 2023. Prior to that, Mr. Prame served as President of Horizon and Horizon Bank during 2023. | ||||
(2) | As previously disclosed, Horizon and Mr. Secor have agreed that he will transition from his role as Executive Vice President and Chief Financial Officer of Horizon and Horizon Bank. Mr. Secor will continue in the role of Executive Vice President and Chief Financial Officer until a successor is appointed and will support the transition of the process through April 30, 2024. | ||||
(3) | Effective June 1, 2023, Mr. Dwight stepped down as Chief Executive Officer of Horizon and Horizon Bank, and subsequently retired from Horizon and Horizon Bank effective as of July 3, 2023. Due to Mr. Dwight’s position as Chief Executive Officer of Horizon in 2023, he remained as a named executive officer for 2023. | ||||
25
Annual Advisory Vote on Executive Compensation
At the 2023 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 83.9% 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 2023 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 2024 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 has held say-on-pay votes on an annual basis. The advisory vote on the frequency of say-on-pay votes is required to occur at least every six years, and the shareholders will have the opportunity to vote on the frequency question again at Horizon’s 2024 Annual Meeting of shareholders. At this time, the Board of Directors continues to believe that holding an advisory “say-on-pay” vote every year is the most appropriate option for Horizon and its shareholders. Holding an advisory vote every year (instead of every two years or every three years) allows our shareholders to react to our compensation philosophy, policies, and practices more frequently and, as such, provides the Board of Directors with valuable direction (see “Proposal 3 Advisory Vote on Frequency of the Advisory Vote on Executive Compensation” below).
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. | ||
26
•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, adjusted by one-time expenses and events, 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 “Clawbacks: 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.”
| 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 met financial and non–financial objectives •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 $5-10 billion on the SNL Bank Index) •Competitive with comparable peers | ||||||||||||
27
| 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.
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 Thomas M. Prame, Chief Executive Officer, and Mark E. Secor, Executive Vice President and Chief Financial Officer, are also impacted by written employment agreements with Horizon and Horizon Bank.
In connection with his appointment as Chief Executive Officer, Mr. Prame entered into an amended and restated employment agreement on May 18, 2023, effective June 1, 2023, which provides that Mr. Prame will receive an annual base salary of $600,000, to be reviewed and potentially increased annually (but not decreased) by Horizon’s Compensation Committee. In connection with Mr. Secor’s transition, he entered into an employment agreement effective as of November 6, 2023, which provides that Mr. Secor will receive an annual base salary of $347,109.88 through the end of the term of the agreement. 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.” As discussed above, Mr. Secor will transition from his role as Executive Vice President and Chief Financial Officer of Horizon and Horizon Bank, and he will continue in that role until a successor is appointed and will support the transition process through April 30, 2024.
Mr. Dwight was a party to a second amended and restated employment agreement, effective January 1, 2023, which terminated upon Mr. Dwight’s retirement from Horizon on July 3, 2023. Mr. Dwight’s employment agreement contained provisions regarding certain payments to be made to Mr. Dwight upon the termination of the agreement due to his retirement, including base salary and bonus payout at target. This payout was in part to support a smooth and orderly transition to Horizon’s new CEO. The amounts paid to Mr. Dwight under the provisions of his employment agreement in connection with his retirement from Horizon are set forth below in “Payments to Craig M. Dwight Upon Retirement. “ 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 2023 report reported that the average and highest base salary compensation for a Chief Executive Officer were $660,000 and $825,000, respectively. For Mr. Prame’s services as President and Chief Executive Officer, he was paid a base salary in 2023 of $600,000. For Mr. Dwight’s services as Chairman of the Board and Chief Executive Officer before his retirement in 2023, he was paid a base salary of $654,050, which represented a 3.0% increase over his 2022 base salary of $635,000.
The salary increases for 2023 for the other named executive officers ranged from 3% to 17%. Mr. Secor’s salary was increased to $347,110 from $337,000 (3.00%); Ms. DeRuiter’s salary was increased to $324,480 from $312,000 (4.00%); Ms. Kerber’s salary was increased to $324,480 from $284,233 (17.42%), and Mr. Etzler’s salary was increased to $254,658 from $240,240 (6.00%). The salary increases were based on the Compensation Committee’s in-depth review of FW Cook’s 2022 compensation reports in conjunction with Horizon’s standard
28
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. The following named executive officers, Messrs. Prame, Secor, and Etzler, and Mses. DeRuiter and Kerber currently participate in the 2023 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 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. Prame’s and Mr. Secor’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.
29
The weightings for Horizon’s 2023 bonus matrix for each named executive officer (other than Mr. Prame) are as follows:
| Named Executive Officer & Category | Short–Term Metric Weighting | Long–Term Metric Weighting | ||||||||||||
| President and Chief Executive Officer (Mr. Prame) | ||||||||||||||
| 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% | |||||||||||||
| Executive Vice President and Senior 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 (Ms. Kerber) | ||||||||||||||
| Financial Outcome of Horizon (Net Income & Efficiency) | 20% | |||||||||||||
| Financial Outcomes for Areas of Direct Responsibility | 40% | |||||||||||||
| Positioning Horizon for Future Success | 30% | |||||||||||||
| Enterprise Risk Management | 20% | 70% | ||||||||||||
| Project Management | 20% | |||||||||||||
| Former 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, Chief Legal and Risk Officer & Corporate Secretary (Mr. Etzler) | ||||||||||||||
| Financial Outcome of Horizon (Net Income & Efficiency) | 60% | |||||||||||||
| Positioning Horizon for Future Success | 20% | |||||||||||||
| Enterprise Risk Management | 20% | 60% | ||||||||||||
| Project Management | 20% | 20% | ||||||||||||
Horizon’s 2024 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. Pursuant to Mr. Prame’s employment agreement, Mr. Prame will also be eligible to participate in the Company’s 2024 executive officer target bonus plan, subject to annual approval by the Compensation Committee.
The Compensation Committee established a minimum earnings target for Horizon to achieve before any bonuses would be paid out under the Bonus Plan for 2023. In 2023, the minimum earnings threshold was $65.5 million. If Horizon’s net income for 2023 was below $65.5 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, the effects of the balance sheet restructuring decision made in the fourth quarter of 2023, and other one-time expenses.
30
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 $8.0 million and $9.0 million above the targets of $91.0 million for 2023 and $97.0 million for 2022, and the maximum efficiency ratio goal was approximately 350 basis points better than the targets of 59.0% for 2023 and 57.0% for 2022. In 2023, 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 does not meets, meets, exceeds, or far exceeds expectations.
For 2023, 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. Prame, 80%; Mr. Secor, 60%; Ms. DeRuiter, 55%; Ms. Kerber, 55%; and Mr. Etzler, 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 2023 being 70% for Mr. Prame; 60% for Mr. Secor; 50% for Ms. DeRuiter; 60% for Ms. Kerber; and 60% for Mr. Etzler. 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 considering Messrs. Prame’s bonuses, the Compensation Committee used established short- and long-term goals for 2023 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.
In order to earn a bonus award in 2023, the Bonus Plan’s participants were required to achieve an aggregate weighted score of 80% or higher for long-term goals to earn the long-term portion of the cash bonus and 80% or higher for short-term goals to earn the short-term portion of the cash bonus. If the participant achieved the goals for all categories, the participant’s aggregate weighted score would be 100%. Due to the financial results of the company not meeting expectations, none of the named executives qualified for bonus awards in the short-term portion of the Bonus Plan.
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. Prame, Secor, Dwight, and Etzler, and Mses. DeRuiter and Kerber had an opportunity to earn under the Bonus Plan for 2023 are presented below in the Grants of Plan-Based Awards table.
The Compensation Committee has reviewed the Bonus Plan for 2023, and based on that review, the Compensation Committee has concluded that the Bonus Plan, as designed for 2023, 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.
31
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 with the last options expiring June 18, 2022, 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 authorized 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).
In 2021, the shareholders approved the Horizon Bancorp, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Omnibus Plan”), which became effective May 6, 2021 and terminates on the earlier of the date Horizon elects to terminate the Plan (which Horizon is permitted to do at any time) or the date all common shares reserved for issuance under the Plan are issued or otherwise deemed issued under the Plan.
A primary reason for adopting the 2021 Omnibus Plan was to replace the Horizon Bancorp, Inc. Amended and Restated 2013 Omnibus Equity Incentive Plan, which expired on February 1, 2023, and which contained certain single trigger change-in-control provisions and obsolete share recycling provisions. Awards under the 2013 Plan remain outstanding but no new awards may be granted under the 2013 Plan.
Horizon reserved 1,787,548 shares of our common stock for future awards under the 2021 Omnibus Plan, which includes 1,400,000 new shares of common stock plus 387,548 shares of common stock remaining and unused in the 2013 Plan that were rolled into the 2021 Omnibus Plan.
In general, the majority of the awards granted under the 2021 Omnibus Plan must have a minimum vesting schedule of at least one year. Specifically, at least 95% of the awards granted will have a minimum vesting schedule of one year, subject to acceleration of vesting, to the extent permitted by the Compensation Committee or set forth in the 2021 Omnibus Plan or the applicable award agreement in the event of: (i) a termination of service for death, disability, or retirement; (ii) limited conditions relating to a change in control; and (iii) with respect to cash-based awards and substitute awards, in connection with a corporate transaction, such as a merger or sale of Horizon. Awards granted under the 2021 Omnibus Plan are also subject to Horizon’s clawback policy.
Like Horizon’s prior plans, the Compensation Committee administers the 2021 Omnibus Plan and may grant the following types of awards under the 2013 Omnibus Plan and the 2021 Omnibus Plan, which may vest on a time basis or pursuant to performance metrics set by the Compensation Committee from time to time:
•Incentive and nonqualified stock options | ||
•Stock appreciation rights | ||
•Restricted stock | ||
•Restricted stock units | ||
•Other stock–based awards | ||
•Any combination of the above | ||
The effects on awards granted under the 2021 Omnibus Plan in the event of a change in control of Horizon are discussed below under Potential Payments Upon Termination or Change in Control - Other Benefits Upon Termination or Change in Control.
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
32
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 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 third anniversary of the date of grant if the executive officer remains employed by Horizon, Horizon Bank, or any of their affiliates.
The performance shares or units 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 $5 billion and $10 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 (50th to 74th percentile relative to the comparative SNL group), a target level (75th to 84th percentile relative to the comparative SNL group), or a maximum level (greater than 84th 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 one tax-qualified retirement plan, the Employees’ Thrift Plan (“Thrift Plan”). 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. Prame or Mr. Secor from employment in certain situations not related to a change in control of Horizon, Mr. Prame and Mr. Secor (but no other named executive officers) 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.”
Horizon Bank entered into an amended Change in Control Agreement with Mr. Prame effective June 1, 2023, and new or amended Change in Control Agreements with Mr. Secor, Ms. DeRuiter, and Mr. Etzler, each effective January 1, 2020, and Ms. Kerber, effective October 1, 2020. Horizon Bank also entered into amendments to the Change in Control Agreements with Mses. DeRuiter and Kerber and Mr. Etzler, each effective December 1, 2022. 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.”
33
Mr. Dwight was a party to a second amended and restated employment agreement, effective January 1, 2023, which terminated upon Mr. Dwight’s retirement from Horizon on July 3, 2023. Mr. Dwight’s employment agreement contained provisions regarding certain payments to be made to Mr. Dwight upon the termination of the agreement due to his retirement, including base salary. The amounts paid to Mr. Dwight under the provisions of his employment agreement in connection with his retirement from Horizon are set forth below in “Payments to Craig M. Dwight Upon Retirement.”
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 since 2019.
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.
34
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. Prame is provided with a social country club membership, and Mr. Dwight is provided a country club membership. The total cost of these memberships 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 Thomas M. Prame, Horizon’s Chief Executive Officer. Since Mr. Prame, who succeeded Mr. Dwight as CEO in June 2023 in connection with Mr. Dwight’s retirement, was serving as CEO on December 31, 2023 (the date selected by Horizon for purposes of identifying Horizon’s median employee), it is Mr. Prame’s annualized compensation rate as of December 31, 2023 that was used for the CEO component of the pay ratio calculation, as disclosed herein. For 2023, our last completed fiscal year, (i) the median of the annual total compensation of all employees (other than Mr. Prame) was $42,478; and (ii) the annualized total compensation of Mr. Prame as of December 31, 2023 was $1,129,286.
Based on this information, for 2023, the ratio of the annual total compensation of Mr. Prame to the median of the annual total compensation of all employees was 26.6 to 1; in other words, Mr. Prame’s annual total compensation was 26.6 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, 2023, excluding Mr. Prame, leased employees, or independent contractors. 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 2023, 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 on an equal basis.
Once we identified the median employee, we computed the median employee’s annual total compensation for 2023 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. Prame’s annual total compensation, we used the amount reported in the “Total” column of the Summary Compensation Table included in this Proxy Statement, plus an amount equal to $19,231 to reflect the annualization of Mr. Prame’s base salary and annual bonus, which results in an annual total compensation for 2023 for purposes of the pay ratio calculation of $1,129,286.
35
This information is being provided for compliance purposes and is a reasonable estimate calculated in a manner consistent with SEC rules. The SEC rules for identifying the median employee and in calculating the pay ratio allow companies to adopt a variety of methodologies, exclusions and assumptions that reflect their employee populations and compensation practices. As such, the pay ratio reported by other companies, including companies in our peer group, may not be comparable to the pay ratio reported above.
This information is provided for compliance purposes. Neither the Compensation Committee nor management of the company used the pay ratio measure in making compensation decisions.
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of Horizon. For further information concerning how Horizon aligns executive compensation with Horizon’s performance, see “Compensation Discussion and Analysis.”
| (a) | (b) | (b) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary Compensation Table Total for Principal Executive Officer (PEO) | Compensation Actually Paid (CAP) | Average Summary Compensation | Value of Initial Fixed $100 Investment Based On | Company Selected Measure (CSM): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year | First CEO(1) | Second CEO (2) | First CEO (3) | Second CEO (3) | Table Total for Non-PEO NEOs(4) | Actually Paid to Non-PEO NEOs(5) | Company Total Shareholder Return (TSR) (6) | Peer Group TSR (7) | Net Income (in Millions) (8) | Return on Average Assets (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | N/A | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | N/A | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | N/A | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Amounts reported in this column and others related to the "First CEO" are for Craig M. Dwight, who served as Chief Executive Officer of Horizon until his retirement from the Company on June 1, 2023. The dollar amounts reported in this column are the amounts of total compensation reported for Mr. Dwight for each corresponding year in the “Total” column of the Summary Compensation Table (“SCT”). See “Executive Compensation – Executive Compensation Tables – Summary Compensation Table for 2023.” | ||||
(2) | Amounts reported in this column and others related to the "Second CEO" are for Thomas M. Prame, who succeeded Mr. Dwight as Chief Executive Officer of the Company upon Mr. Dwight's retirement. The dollar amounts reported in this column are the amounts of total compensation reported for Mr. Prame for 2023 in the “Total” column of the Summary Compensation Table (“SCT”). See “Executive Compensation – Executive Compensation Tables – Summary Compensation Table for 2023.” | ||||
(3) | |||||
| Compensation Actually Paid to First CEO | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Salary (A) | Stock Awards (B) | Non–Equity Incentive Plan Compensation (C) | All Other Compensation (D) | SCT Total (E) | Deductions from SCT Total (F) | Additions to SCT Total (G) | CAP | ||||||||||||||||||||||||||||||||||||||||||
| 2023 | $ | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| 2022 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
36
| Compensation Actually Paid to Second CEO | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Salary (A) | Stock Awards (B) | Non–Equity Incentive Plan Compensation (C) | All Other Compensation (D) | SCT Total (E) | Deductions from SCT Total (F) | Additions to SCT Total (G) | CAP | ||||||||||||||||||||||||||||||||||||||||||
| 2023 | $ | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||
(A) | The dollar amounts in the “Salary” columns are the amounts reported for Mr. Dwight and Mr. Prame for each corresponding year in the “Salary” column of the Summary Compensation Table. | ||||
(B) | The dollar amounts in the “Stock Awards” columns are the amounts reported for Mr. Dwight and Mr. Prame for each corresponding year in the “Stock Awards” column of the SCT. | ||||
| (C) | The dollar amounts in the “Non-Equity Incentive Plan Compensation” columns are the amounts reported for Mr. Dwight and Mr. Prame for each corresponding year in the “Non-Equity Incentive Plan Compensation” column of the SCT. | ||||
| (D) | The dollar amounts in the “All Other Compensation” columns are the amounts reported for Mr. Dwight and Mr. Prame for each corresponding year in the “All Other Compensation” column of the SCT. | ||||
| (E) | The dollar amounts in the “SCT Total” columns are the amounts reported for Mr. Dwight and Mr. Prame for each corresponding year in the “Total” column of the SCT. | ||||
| (F) | The dollar amounts in the “Deductions from SCT Total” columns are the total of the amounts reported for Mr. Dwight and Mr. Prame in the “Stock Awards” and “Option Awards” columns, as applicable, in the SCT for the applicable year. | ||||
| (G) | The dollar amounts in the “Additions to SCT Total” column reflect the addition (or subtraction, as applicable) of the following equity award adjustments for Mr. Dwight and Mr. Prame for the applicable year: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. | ||||
(4) | |||||
(5) | |||||
| Compensation Actually Paid to Non–PEO | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Salary | Stock Awards | Non–Equity Incentive Plan Compensation | All Other Compensation | SCT Total | Deductions from SCT Total | Additions to SCT Total | CAP | ||||||||||||||||||||||||||||||||||||||||||
| 2023 | $ | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| 2022 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
(6) | TSR for Horizon Bancorp, Inc. is cumulative total TSR returns on common share from S&P Global Market Intelligence, respectively for each period. | ||||
(7) | |||||
(8) | The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. | ||||
(9) | The percentages reported represent the amount of net income reflected in the Company’s audited financial statements divided by the reported average assets for the applicable year. | ||||
37
Financial Performance Measures
As described in greater detail in “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short- term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s
performance are as follows:
Analysis of the Information Presented in the Pay versus Performance Table
In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table.
Compensation Actually Paid and Total Shareholder Return
Compensation Actually Paid and Net Income
Compensation Actually Paid and Return on Average Assets
38
Total Shareholder Return of Horizon and Total Shareholder Return of Peer Group
Other Compensation and Compensation-Related Policies
Clawbacks: Recovery of Incentive Compensation under the Dodd–Frank Act
Under the Dodd–Frank Act, the SEC was required to adopt a rule directing national securities exchanges to establish listing standards which provide that 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 fiscal 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. On October 17, 2023, Horizon adopted a compensation recovery policy that replaced its existing clawback policy and incorporates the requirements of Section 10D of the Securities Exchange Act of 1934, as amended, and Nasdaq Listing Rule 5608, as mandated by the Dodd-Frank Act.
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.
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.
39
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 “legacy” 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 $1 million, if such payments are appropriate to attract and retain executive talent or to meet other business objectives, in the best interests of Horizon and its shareholders.
EXECUTIVE COMPENSATION TABLES
The following tables provide information on the 2023 compensation for Horizon’s Chief Executive Officer, Chief Financial Officer, and the other three most highly compensated executive officers of Horizon and Horizon Bank. These five individuals are referred to as the “named executive officers.” Effective June 1, 2023, Mr. Dwight stepped down as CEO of Horizon and Horizon Bank, and he subsequently retired from Horizon and Horizon Bank effective as of July 3, 2023. Due to Messrs. Dwight and Prame both serving as Chief Executive Officers during a part of 2023, Mr. Dwight is included in the compensation tables for named executive officers.
40
Summary Compensation Table for 2023
The table below provides information with respect to the total compensation earned by or paid to the named executive officers for 2023.
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||||||||||||
Craig M. Dwight (6) | 2023 | 342,118 | N/A | 844,977 | — | 806,214 | (8) | 1,993,309 | ||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2022 | 635,000 | N/A | 419,969 | 190,500 | 83,441 | 1,328,910 | |||||||||||||||||||||||||||||||||||||
| Chairman | 2021 | 605,000 | N/A | 284,980 | 438,625 | 73,754 | 1,402,359 | |||||||||||||||||||||||||||||||||||||
Thomas M. Prame(7) | 2023 | 580,769 | N/A | 299,981 | 176,771 | 52,536 | (9) | 1,110,057 | ||||||||||||||||||||||||||||||||||||
| President/CEO | 2022 | 200,961 | 50,000 | 203,800 | — | 1,600 | 406,361 | |||||||||||||||||||||||||||||||||||||
| Mark E. Secor | 2023 | 347,110 | N/A | 173,538 | 34,711 | 68,429 | (10) | 623,788 | ||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2022 | 337,000 | N/A | 372,272 | 33,700 | 64,769 | 807,741 | |||||||||||||||||||||||||||||||||||||
| 2021 | 318,172 | N/A | 127,269 | 167,040 | 56,756 | 669,237 | ||||||||||||||||||||||||||||||||||||||
| Kathie A. DeRuiter | 2023 | 324,480 | N/A | 129,788 | 56,784 | 63,006 | (11) | 574,058 | ||||||||||||||||||||||||||||||||||||
| Executive Vice President | 2022 | 312,000 | N/A | 124,787 | 117,000 | 60,687 | 614,474 | |||||||||||||||||||||||||||||||||||||
| Senior Operations Officer | 2021 | 278,512 | N/A | 111,405 | 132,293 | 53,022 | 575,232 | |||||||||||||||||||||||||||||||||||||
| Lynn M. Kerber | 2023 | 324,480 | N/A | 129,788 | 73,008 | 66,500 | (12) | 593,776 | ||||||||||||||||||||||||||||||||||||
| Executive Vice President | 2022 | 284,233 | N/A | 313,004 | 128,127 | 41,744 | 767,108 | |||||||||||||||||||||||||||||||||||||
| Chief Commercial Banking Officer | ||||||||||||||||||||||||||||||||||||||||||||
| Todd A. Etzler | 2023 | 254,658 | N/A | 98,966 | 57,298 | 39,707 | (13) | 450,629 | ||||||||||||||||||||||||||||||||||||
| EVP, Chief Legal and | ||||||||||||||||||||||||||||||||||||||||||||
| Risk Officer | ||||||||||||||||||||||||||||||||||||||||||||
(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) | Messrs. Prame, Secor, and Etzler and Mses. DeRuiter and Kerber 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 20 of the Notes to Consolidated Financial Statements in Horizon’s 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission. | ||||
(4) | Messrs. Prame, Secor, and Etzler and Mses. DeRuiter and Kerber received payments under Horizon’s Executive Officer Bonus Plan. (For more information about the Bonus Plan and these payments see the discussion above in the Compensation Discussion and Analysis - Annual Performance-Based Cash Incentive Compensation.) | ||||
(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) | Effective June 1, 2023, Mr. Dwight stepped down as CEO of Horizon and Horizon Bank, and he subsequently retired from Horizon and Horizon Bank effective as of July 3, 2023. See “Payments to Craig M. Dwight Upon Retirement” beginning on page 50 below for a description of the amounts payable to Mr. Dwight under his employment agreement. | ||||
(7) | Mr. Prame was appointed Chief Executive Officer of Horizon and Horizon Bank effective as of June 1, 2023, and prior to that he served as President of Horizon and Horizon Bank during 2023. The amounts shown in this table for Mr. Prame for 2023 represent all amounts earned by Mr. Prame for his service as both President and Chief Executive Officer. | ||||
(8) | Includes Horizon’s matching contributions of $13,200 under the Thrift Plan, $26,250 under the SERP and $62,402 in dividends on performance and restricted stock. Amount also includes the following termination payments to Mr. Dwight paid or accrued under his employment agreement: (i) $311,932 representing Mr. Dwight’s remaining annual base salary through July 3, 2023 and (ii) $392,430 representing the full amount of Mr. Dwight’s target bonus for 2023. See “Payments to Craig M. Dwight Upon Retirement” below. | ||||
(9) | Includes Horizon’s matching contributions of $13,200 under the Thrift Plan, $20,237 under the SERP and $19,009 in dividends on performance and restricted stock. | ||||
41
(10) | Includes Horizon’s matching contributions of $12,795 under the Thrift Plan, $30,465 under the SERP and $25,169 in dividends on performance and restricted stock. | ||||
(11) | Includes Horizon’s matching contributions of $13,200 under the Thrift Plan, $35,000 under the SERP and $14,806 in dividends on performance and restricted stock. | ||||
(12) | Includes Horizon’s matching contributions of $10,825 under the Thrift Plan, $35,000 under the SERP and $20,647 in dividends on performance and restricted stock. | ||||
(13) | Includes Horizon’s matching contributions of $12,767 under the Thrift Plan, $15,784 under the SERP and $11,156 in dividends on performance and restricted stock. | ||||
During 2023, Mr. Prame and, beginning on November 6, 2023, Mr. Secor had written employment agreements with Horizon providing for them to receive, among other things, base salary, to participate in all other incentive compensation and benefit programs offered to executive officers of Horizon and Horizon Bank, and to receive additional post-termination compensation upon termination or a change in control. In addition, Mr. Dwight’s employment agreement contained provisions regarding certain payments to be made to Mr. Dwight upon the termination of the agreement due to his retirement. Certain amounts included in the Summary Compensation Table for Mr. Dwight under the column “All Other Compensation” represent termination payments to Mr. Dwight paid or accrued under his employment agreement. No amounts are included in the Summary Compensation Table that reflect amounts paid or accrued to Mr. Prame or Mr. Secor pursuant to their employment agreements as a result of any termination or change in control.
For a more detailed discussion of the employment agreements, see “Potential Payments Upon Termination or Change in Control” below. For a discussion of the amounts payable to Mr. Dwight under his employment agreement upon his retirement, see “Payments to Craig M. Dwight Upon Retirement” below.
Grants of Plan–Based Awards
The following table presents additional information about non-equity incentive awards and long-term equity incentive awards granted to our named executive officers during 2023.
Estimated Possible Payouts Under Non–Equity Incentive Plan Awards(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | 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 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||
| Thomas M. Prame | 45,000 | 45,000 | 90,000 | 180,000 | 180,000 | 360,000 | 240,000 | 240,000 | 480,000 | |||||||||||||||||||||||||||||||||||||||||||||||
| Mark E. Secor | 17,356 | 17,356 | 34,712 | 69,422 | 69,422 | 138,844 | 104,133 | 104,133 | 208,266 | |||||||||||||||||||||||||||||||||||||||||||||||
| Kathie A. DeRuiter | 14,196 | 14,196 | 28,392 | 56,784 | 56,784 | 113,568 | 89,232 | 89,232 | 178,464 | |||||||||||||||||||||||||||||||||||||||||||||||
| Lynn M. Kerber | 14,196 | 14,196 | 28,392 | 56,784 | 56,784 | 113,568 | 89,232 | 89,232 | 178,464 | |||||||||||||||||||||||||||||||||||||||||||||||
| Todd A. Etzler | 11,141 | 11,141 | 22,282 | 44,565 | 44,565 | 89,130 | 70,031 | 70,031 | 140,062 | |||||||||||||||||||||||||||||||||||||||||||||||
42
Estimated Future Payouts Under Equity Incentive Plan Award(2) | All Other Option Awards: | |||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold 25% Payout (#) | Target 100% Payout (#) | Maximum 150% Payout (#) | Grant Date Fair Value of Stock Options and Awards ($)(3) | |||||||||||||||||||||||||||||||||||||||
| Craig M. Dwight | March 21, 2023 | 4,597 | 18,388 | 27,582 | $ | 209,991 | ||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 55,603 | 634,986 | ||||||||||||||||||||||||||||||||||||||||||
| Thomas M. Prame | March 21, 2023 | 5,254 | 21,015 | 31,523 | 239,991 | |||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 5,253 | 59,989 | ||||||||||||||||||||||||||||||||||||||||||
| Mark E. Secor | March 21, 2023 | 3,039 | 12,157 | 18,236 | 138,833 | |||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 3,039 | 34,705 | ||||||||||||||||||||||||||||||||||||||||||
| Kathie A. DeRuiter | March 21, 2023 | 2,273 | 9,092 | 13,638 | 103,831 | |||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 2,273 | 25,958 | ||||||||||||||||||||||||||||||||||||||||||
| Lynn M. Kerber | March 21, 2023 | 2,273 | 9,092 | 13,638 | 103,831 | |||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 2,273 | 25,958 | ||||||||||||||||||||||||||||||||||||||||||
| Todd A. Etzler | March 21, 2023 | 1,733 | 6,933 | 10,400 | 79,175 | |||||||||||||||||||||||||||||||||||||||
| March 21, 2023 | 1,733 | 19,791 | ||||||||||||||||||||||||||||||||||||||||||
(1) | The amounts represent the threshold, target and maximum annual incentive award estimated payouts for the January 1, 2023 – December 31, 2023 performance period. The actual 2023 payout is reported in the 2023 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, 2023 – December 31, 2025 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. The amounts shown only at the Target level (without threshold or maximum levels) relate to restricted stock awards that vest on the third anniversary of the date of grant, provided that the employee continues to be employed and in good standing. | ||||
(3) | The grant date fair value of stock and option awards has been computed in accordance with FASB ASC Topic 718. | ||||
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 2021 Omnibus Plan and are described in more detail in the Compensation Discussion and Analysis above. The restricted shares that were granted in 2023 to executive officers are service-based and become earned and vested at the end of a three-year period.
The performance shares that were awarded in 2023 become earned and vested based on the achievement of certain performance goals during a three-year performance period from January 1, 2023 to December 31, 2025, 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 $5 billion and $10 billion on the SNL Bank Index for the same measures. Only banks that have reported year-end results by March 1st 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 (50th to 74th percentile relative to the comparative SNL group), a target level (75th to 84th percentile relative to the comparative SNL group), or a maximum level (greater than 84th 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 2023, the Compensation Committee adjusted earnings for acquisition-related costs and other one-time events.
43
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.
Outstanding Equity Awards at Fiscal Year–End 2023
The following table presents information on stock options, restricted stock, and performance shares held by the named executive officers on December 31, 2023.
| Option 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 | |||||||||||||||||||||||||||
| Craig M. Dwight | 10,330 | — | N/A | $ | 16.76 | March 21, 2027 | ||||||||||||||||||||||||||
| 8,629 | — | N/A | 20.11 | March 20, 2028 | ||||||||||||||||||||||||||||
| 11,261 | — | N/A | 16.74 | March 19, 2029 | ||||||||||||||||||||||||||||
| Thomas M. Prame | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Mark E. Secor | 2,809 | — | N/A | 16.76 | March 21, 2027 | |||||||||||||||||||||||||||
| 2,440 | — | N/A | 20.11 | March 20, 2028 | ||||||||||||||||||||||||||||
| 4,593 | — | N/A | 16.74 | March 19, 2029 | ||||||||||||||||||||||||||||
| Kathie A. DeRuiter | 2,407 | — | N/A | 16.76 | March 21, 2027 | |||||||||||||||||||||||||||
| 2,157 | — | N/A | 20.11 | March 20, 2028 | ||||||||||||||||||||||||||||
| 3,513 | — | N/A | 16.74 | March 19, 2029 | ||||||||||||||||||||||||||||
| Lynn M. Kerber | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Todd A. Etzler | N/A | N/A | N/A | 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, 2023. | ||||
| Stock Awards | ||||||||||||||||||||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||
| Craig M. Dwight | 62,763 | $ | 898,139 | 47,030 | $ | 672,999 | ||||||||||||||||||||
| Thomas M. Prame | 15,253 | 218,270 | 21,015 | 300,725 | ||||||||||||||||||||||
| Mark E. Secor | 16,046 | 229,618 | 24,186 | 346,102 | ||||||||||||||||||||||
| Kathie A. DeRuiter | 4,678 | 66,942 | 18,715 | 267,812 | ||||||||||||||||||||||
| Lynn M. Kerber | 14,324 | 204,976 | 17,301 | 247,577 | ||||||||||||||||||||||
| Todd A. Etzler | 3,653 | 52,274 | 14,618 | 209,184 | ||||||||||||||||||||||
(1) | Consists of awards of time-based restricted stock. | ||||
(2) | Consists of awards of performance shares. | ||||
44
Option Exercises and Stock Vested for 2023
The following table presents information on the exercise by named executive officers of stock options during 2023 and the shares of restricted stock and performance share awards held by named executive officers that vested during 2023. On December 31, 2023, performance share awards were not yet determinable for the performance period ended December 31, 2023. 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 | — | $ | — | 29,004 | $ | 329,289 | ||||||||||||||||||||
| Thomas M. Prame | — | — | — | — | ||||||||||||||||||||||
| Mark E. Secor | — | — | 13,520 | 153,496 | ||||||||||||||||||||||
| Kathie A. DeRuiter | — | — | 12,065 | 136,977 | ||||||||||||||||||||||
| Lynn M. Kerber | — | — | 10,726 | 116,874 | ||||||||||||||||||||||
| Todd A. Etzler | — | — | 6,197 | 70,356 | ||||||||||||||||||||||
(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. No options were exercised in 2023. | ||||
Nonqualified Deferred Compensation for 2023
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 | $ | 52,500 | $ | 26,250 | $ | 133,808 | $ | — | $ | 2,850,009 | ||||||||||||||||||||||
| Thomas M. Prame | 40,654 | 20,327 | 1,479 | — | 62,459 | |||||||||||||||||||||||||||
| Mark E. Secor | 60,930 | 30,465 | 14,075 | — | 1,321,189 | |||||||||||||||||||||||||||
| Kathie A. DeRuiter | 70,000 | 35,000 | 21,515 | — | 1,103,592 | |||||||||||||||||||||||||||
| Lynn M. Kerber | 75,000 | 35,000 | (4,047) | — | 203,491 | |||||||||||||||||||||||||||
| Todd A. Etzler | 31,568 | 15,784 | (4,695) | — | 133,737 | |||||||||||||||||||||||||||
(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.
On January 17, 2023, the Board approved the appointment of Thomas M. Prame to serve as the Chief Executive Officer of both Horizon and Horizon Bank, effective as of June 1, 2023. In connection with his appointment as Chief Executive Officer, Horizon and Horizon Bank entered into an Amended and Restated Employment Agreement with Mr. Prame effective as of June 1, 2023. In addition, in connection with Mark E. Secor’s transition from his position, Horizon and Horizon Bank entered into an Employment Agreement with Mr. Secor, effective as of November 6, 2023. The section below entitled “Employment Agreements” includes a
45
description of the provisions of Mr. Prame’s amended and restated employment agreement and Mr. Secor’s employment agreement applicable with respect to a termination of employment.
Mr. Dwight was a party to a second amended and restated employment agreement, effective January 1, 2023, which terminated upon Mr. Dwight’s retirement from Horizon on July 3, 2023. Mr. Dwight’s employment agreement contained provisions regarding certain payments to be made to Mr. Dwight upon the termination of the agreement due to his retirement. The amounts paid to Mr. Dwight under the provisions of his employment agreement in connection with his retirement from Horizon are set forth below in “Payments to Craig M. Dwight Upon Retirement.”
Employment Agreements
Amended and Restated Employment Agreement with Thomas M. Prame
Mr. Prame has been employed by Horizon under a written employment agreement since August 2022. In connection with his appointment as Chief Executive Officer, on May 18, 2023, Horizon and Horizon Bank entered into an Amended and Restated Employment Agreement with Mr. Prame, effective as of June 1, 2023 (the “Amended Employment Agreement”).
The table below includes a brief description of the key operative provisions of the Amended Employment Agreement relating to potential payments upon termination of employment, assuming the triggering events giving rise to the payments occurred on December 31, 2023. The Amended Employment Agreement does not provide for any payments to Mr. Prame upon a change in control, because any payments or benefits payable to him upon a change in control are addressed in Change in Control Agreements for Mr. Prame, as more fully described below in “Change in Control Agreements.”
| Key Terms and Conditions | Description | |||||||
| Term | •Rolling 1-year term beginning June 1, 2023 that will be extended annually for another year unless Horizon delivers notice to Mr. Prame that it will not be extended. | |||||||
| 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. | |||||||
46
| Termination Provisions | •Horizon can terminate the executive for “Cause,” which includes any of the following actions by the executive: ◦Intentional acts of fraud, embezzlement, dishonesty; ◦Intentional damage causing material harm to Horizon; ◦Material breach of the employment agreement or the Change in Control Agreement; ◦Gross negligence or insubordination; Willful and material violation of Horizon’s written policies or codes of conduct or laws, including related to discrimination, harassment, or illegal or unethical conduct; ◦Conduct that causes (or is reasonably likely to cause) negative publicity, disgrace, embarrassment or disrepute; ◦A conviction for a felony or a misdemeanor involving dishonesty, breach of trust or moral turpitude; or ◦Removal or permanent prohibition of the executive from participating in the conduct of the affairs of a bank or bank holding company under the federal banking laws. •Mr. Prame has the right to terminate the employment relationship for “Good Reason,” which includes, among other reasons, the following: ◦Office move more than 30 miles from home, except if in connection with a move of Horizon’s headquarters to a new location; ◦A reduction of 10% or more in salary or total compensation, including benefit plan rights (unless institution–wide reductions and proportionate to other executive officers); or ◦Assignment of materially different duties, reduced responsibilities, or removal from current position or title •Mr. Prame is required to provide a 60-day written notice before terminating the relationship without “Good Reason” •Horizon can terminate Mr. Prame the Amended Employment 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 Mr. Prame without “Cause” or he resigns for “Good Reason,” the executive is entitled to the following payments: ◦Base salary through date of termination; ◦An amount equal to two times the then–current annual base salary; ◦An amount equal to two times the average of his cash bonuses for the prior two calendar years; provided that, (i) for 2023, the bonus shall be two times $275,000, and (ii) for 2024, the bonus calculation shall be two times the average of $275,000 plus his 2024 target bonus; Continued participation in group health and life insurance programs for two years, or cash reimbursement in equivalent amount (subject to a ceiling of 110% of Horizon’s standard cost for providing the benefits); ◦Vested and accrued incentive and benefit plan compensation and matching contributions; and ◦Cash reimbursement for reasonable expenses (as determined by the Board) actually incurred by Mr. Prame in searching for new employment during the one-year period following termination, up to $20,000. •In the event Horizon terminates Mr. Prame with “Cause” or he resigns without “Good Reason,” or he dies or is disabled, Mr. Prame is entitled to the following payments: ◦Base salary through date of termination; and ◦Vested and accrued incentive and benefit plan compensation and matching contributions | |||||||
47
| Limitations on Payments | •All payments to Mr. Prame 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 | •Mr. Prame 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. Prame’s employment had been terminated by Horizon without cause, or by the executive with good reason as of December 31, 2023, he would have been entitled to a severance amount and other benefits under his employment agreement in the amount of $1,780,267.
If Mr. Prame’s employment had been terminated by Horizon with cause, by the executive without good reason or due to the executive’s death or disability, Mr. Prame, 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. Mr. Prame was not entitled to any benefits other than pursuant to life insurance policies as of December 31, 2023. Therefore, if Mr. Prame’s employment had terminated on December 31, 2023, the only amounts payable would have been life proceeds in the amount of $500,000 to Mr. Prame or to his estate. 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.”
Employment Agreement with Mark E. Secor
In connection with his transition, on November 6, 2023, Horizon and Horizon Bank entered into an Employment Agreement with Mr. Secor (the “Secor Employment Agreement”). The Secor Employment Agreement was intended to grant certain retention incentive to Mr. Secor to ensure his continued service to Horizon Bank during the term of the agreement, which will end on April 30, 2024. Pursuant to the Secor Employment Agreement, Mr. Secor will continue to serve as the Chief Financial Officer (“CFO”) of Horizon and Horizon Bank until a successor is appointed to the CFO position.
The table below includes a brief description of the key operative provisions of the Secor Employment Agreement relating to potential payments upon termination of employment, assuming the triggering events giving rise to the payments occurred on December 31, 2023. The Secor Employment Agreement does not provide for any payments to Mr. Secor upon a change in control, because any payments or benefits payable to him upon a change in control are addressed in Change in Control Agreements for Mr. Secor, as more fully described below in “Change in Control Agreements.”
| Key Terms and Conditions | Description | |||||||
| Term | •Term began on November 6, 2023 and ends on April 30, 2024. | |||||||
| Salary & Benefits | •Entitled to an annual base salary of $347,110 through the end of the term. •Entitled to participate in Horizon’s benefit plans and programs that are generally available to executive officers during the term, including health, dental and vision insurance; life and disability insurance; sick leave; holidays; and 401(k) plan participation, except that he will only be entitled to participate in other incentive compensation plans and programs in effect from time to time (including Horizon’s long-term equity incentive compensation plans and the Supplemental Executive Retirement Plan) during 2023, subject to the terms and conditions of such plans and programs. | |||||||
| Bonus Payments | •Mr. Secor will continue to be eligible to receive a cash bonus for 2023 pursuant to Horizon’s Executive Officer Bonus Plan, subject to the approval by the compensation committee of the Board (the “2023 Bonus”). •Mr. Secor will be entitled to a cash bonus for 2024 of $46,281.31 if he remains employed on the last day of the term (the “2024 Bonus”). •If Mr. Secor is employed on April 30, 2024, Horizon will pay Mr. Secor a retention bonus equal to $173,554.94 (the “Stay Bonus”). | |||||||
48
| Termination Provisions | •Horizon can terminate Mr. Secor for “Cause,” which includes any of the following actions by the executive: ◦Intentional acts of fraud, embezzlement, dishonesty; ◦Intentional damage causing material harm to Horizon; ◦Material breach of the employment agreement or the Change in Control Agreement; ◦Gross negligence or insubordination, substandard performance of the executive’s duties or responsibilities, or the executive’s failure to carry out lawful directives of the CEO or Board; ◦Willful and material violation of Horizon’s written policies or codes of conduct or laws, including related to discrimination, harassment, or illegal or unethical conduct; ◦Conduct that causes (or is reasonably likely to cause) negative publicity, disgrace, embarrassment or disrepute; ◦A conviction for a felony or a misdemeanor involving dishonesty, breach of trust or moral turpitude; or ◦Removal or permanent prohibition of the executive from participating in the conduct of the affairs of a bank or bank holding company under the federal banking laws. •Mr. Secor has the right to terminate the employment relationship for “Good Reason,” which is defined as a material breach by Horizon or Horizon Bank of any provision of the Secor Employment Agreement during the term, other than a breach justifying termination under any other provision of the agreement. •Mr. Secor is required to provide a 30-day written notice before terminating the relationship without “Good Reason.” •Horizon can terminate Mr. Secor and the Secor Employment 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 Mr. Secor without “Cause” or he resigns for “Good Reason,” the executive is entitled to the following payments: ◦Base salary through date of termination; ◦The remaining portion of Mr. Secor’s base salary to be paid through the end of the term; ◦An amount equal to the Stay Bonus; and ◦A pro-rated amount of the: (i) 2023 Bonus, if earned and applicable, and (ii) the 2024 Bonus based upon the actual number of days Mr. Secor was employed during 2024, if applicable. •In the event Horizon terminates Mr. Secor with “Cause” or he resigns without “Good Reason,” or he dies or is disabled, Mr. Secor is entitled to the following payments: ◦Base salary through date of termination; ◦Vested and accrued incentive and benefit plan compensation and matching contributions; and ◦All options and other equity incentive awards held by Mr. Secor at such time shall be treated in accordance with the applicable plan and award agreement(s) governing such awards. •In the event Mr. Secor’s employment is terminated for “Cause,” by Mr. Secor without “Good Reason,” or in the event of termination due to the death or disability, prior to the payment of any bonus, including the 2023 Bonus and the 2024 Bonus, then such bonus will not be payable to Mr. Secor. | |||||||
| Limitations on Payments | •All payments Mr. Secor 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 | •Mr. Secor 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. | |||||||
49
If Mr. Secor’s employment had been terminated by Horizon without cause, or by the executive with good reason as of December 31, 2023, he would have been entitled to a severance amount and other benefits under his employment agreement in the amount of $363,000.
If Mr. Secor’s employment had been terminated by Horizon with cause, by the executive without good reason or due to the executive’s death or disability, Mr. Secor, 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. Mr. Secor was not entitled to any benefits other than pursuant to life insurance policies as of December 31, 2023. Therefore, if Mr. Secor’s employment had terminated on December 31, 2023, the only amounts payable would have been life proceeds in the amount of $500,000 to Mr. Secor or to his estate. 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.”
Payments to Craig M. Dwight Upon Retirement
On September 20, 2022, Horizon and Horizon Bank entered into entered into a second amended and restated employment agreement with Mr. Dwight, effective January 1, 2023 (the “Dwight Employment Agreement”). The Dwight Employment Agreement provided for, among other things: (i) an annual base salary of $654,050; (ii) a target bonus equal to $392,430 (the “Target Bonus”); (iii) long-term incentive compensation awards of $420,000 under the Horizon Bancorp, Inc. 2021 Omnibus Equity Incentive Plan, which were granted in March 2023, which awards were split into 50% time based restricted stock and 50% restricted stock with performance based vesting; (iv) all other employee benefit plans and programs and all other incentive compensation plans and programs generally available to executive officers, including the Horizon Bancorp Employees’ Thrift Plan (a 401(k) plan) and the Horizon Bancorp 2005 Supplemental Executive Retirement Plan, as amended; and (v) if Mr. Dwight was still employed by the Company on January 1, 2024, a retention bonus of $850,000 (the “Retention Bonus”), to be comprised of a $425,000 cash bonus that would vest and be paid on January 1, 2024 (or as soon as practicable thereafter) and a grant of restricted stock having a grant date value of $425,000 that was granted in March 2023 and to vest on the one year anniversary of the grant date.
The Dwight Employment Agreement provided that if Horizon terminated Mr. Dwight’s employment without “Cause” (as defined in the Dwight Employment Agreement), or if Mr. Dwight terminated his employment with “Good Reason” (as defined in the Dwight Employment Agreement), Mr. Dwight would be entitled to the following: (i) that portion of his annual base salary earned through the date of termination; (ii) an amount equal to his remaining annual base salary through January 1, 2024; (iii) an amount equal to the Target Bonus; (iv) continued participation in group health and life insurance programs through January 1, 2024, or cash reimbursement in an equivalent amount (subject to a ceiling of 110% of Horizon’s standard cost for providing the benefits); (v) the Retention Bonus will immediately vest and be payable on the first payday of 2024; and (vi) all other amounts that have vested and accrued prior to the termination under any incentive compensation or other qualified and non-qualified employee benefit plans, including any Horizon matching contributions. All options and other equity incentive awards held by Mr. Dwight at such time would be treated in accordance with the applicable plan and award agreement(s) governing such awards.
The Amended Employment Agreement further provided that, upon the termination of Mr. Dwight’s employment due to retirement, Mr. Dwight would be entitled to receive the same compensation and benefits payable to him for a termination without Cause or termination for Good Reason, except that (i) the cash portion of the Retention Bonus will immediately vest and be payable in accordance with its terms on the first payday of 2024, the restricted stock portion of the Retention Bonus would continue to vest in accordance with its terms, and the requirement that Mr. Dwight be employed as of January 1, 2024 would be waived, and (ii) his participation in the group health and life insurance programs will not continue following his retirement.
The Board mitigated the risk of loss of management expertise and long–time corporate knowledge during the CEO transition period from Mr. Dwight to Mr. Prame with the Amended Employment Agreement. At the time the Board approved the Amended Employment Agreement, it did not have a single date in mind for a potential transition and needed additional time to determine what date would be most appropriate. As a result, the Board approved the cash retention bonus in the Amended Employment Agreement to assist in securing continued leadership for Horizon through the transition period and in the unlikely event that Thomas Prame did not transition to CEO. To lose such extensive management expertise in a year of transition would be very disruptive to Horizon and its operations. The Board structured Mr. Dwight’s compensation under his Amended Employment Agreement, including the base salary, annual bonus, and retention bonus to retain Mr. Dwight through this critical time period.
50
Retention of Mr. Dwight permitted Horizon to assure continued support of the new CEO and permitted necessary time for the new CEO to orient himself to Horizon.
The Board also structured Mr. Dwight’s Amended Employment Agreement to include an important provision that he could only receive the full compensation if he retires on a time and schedule meeting the Board’s expectations for a smooth transition. Had Mr. Dwight submitted a retirement timeline that the Board felt was inappropriate, it would not have provided its consent. The agreed upon date of July 3, 2023, was reached after substantial debate among the Board as to the best path forward for Horizon.
As discussed above, Mr. Dwight stepped down as CEO of Horizon and Horizon Bank effective June 1, 2023, and he subsequently retired from Horizon and Horizon Bank effective July 3, 2023 pursuant to the terms of the Dwight Employment Agreement. Therefore, pursuant to Regulation S-K Item 402(j), Instruction 4, the following table illustrates the actual payments made to Mr. Dwight or amounts accrued under the provisions of the Dwight Employment Agreement in connection with his retirement from Horizon and Horizon Bank:
Base Salary(1) | Target Bonus | Retention Bonus (Cash Portion) | Retention Bonus (Restricted Stock Portion)(2) | Group Health and Life Insurance Benefits(3) | ||||||||||||||||||||||
| $342,118 | $392,430 | $425,000 | $532,547 | $12,565 | ||||||||||||||||||||||
(1) | Reflects base salary earned through the date of termination and Mr. Dwight’s remaining base salary through January 1, 2024. | ||||
(2) | Reflects equity value using a stock price of $14.31, which was Horizon’s closing stock price on December 29, 2023, the last day of trading of 2023. | ||||
(3) | Reflects continued participation in group health and life insurance programs through January 1, 2024. | ||||
Change in Control Agreements
Horizon Bank entered into new or amended Change in Control Agreements with Mr. Dwight, Mr. Secor, and Ms. DeRuiter, each effective on January 1, 2020, and Ms. Kerber, effective October 1, 2020. In connection with his appointment as Chief Executive Officer, on May 18, 2023, Horizon Bank also entered into an Amended and Restated Change in Control Agreement with Mr. Prame, effective as of June 1, 2023 (collectively, the “Change in Control Agreements”). The Change in Control Agreement with Mr. Dwight terminated upon his retirement as an employee of Horizon and Horizon Bank, effective as of July 3, 2023. On December 1, 2022, Horizon Bank entered into an Amendment to Change in Control Agreement with Ms. DeRuiter (the “DeRuiter Amendment”). The DeRuiter Amendment amended Ms. DeRuiter’s existing Change in Control Agreement to modify the following two severance benefits that she is entitled to receive if she experiences a qualifying termination during the 6 months before or during the year after a change in control (provided all other conditions are met): (i) an amount equal to the average of her total cash bonuses in the 2 years preceding termination multiplied by 2 (which has been increased from a multiple of 1) and (ii) continued participation in group health and life insurance benefits for a period of 24 months (which has been increased from 12 months). All other material terms and conditions of Ms. DeRuiter’s existing Change in Control Agreement as in effect immediately prior to the DeRuiter Amendment remain in effect without change.
On December 1, 2022, Horizon Bank entered into an Amendment to Change in Control Agreement with Ms. Kerber (the “Kerber Amendment”). The Kerber Amendment amended Ms. Kerber’s existing Change in Control Agreement to (i) modify the base salary multiple, if she experiences a qualifying termination during the 6 months before or during the year after a change in control (provided all other conditions are met), to a lump sum amount equal to two times her then-current base salary (which has been increased from a multiple of 1) and (ii) provide that Ms. Kerber must be and remain in compliance with restrictive covenants relating to non–solicitation of certain of the Bank’s customers and employees for a duration of 2 years (which has been increased from 1 year). All other material terms and conditions of Ms. Kerber’s existing Change in Control Agreement as in effect immediately prior to the Kerber Amendment remain in effect without change.
On December 1, 2022, Horizon Bank entered into an Amendment to Change in Control Agreement with Mr. Etzler (the “Etzler Amendment”). The Etzler Amendment amended Mr. Etzler’s existing Change in Control Agreement to (i) modify the base salary multiple, if he experiences a qualifying termination during the 6 months before or during the year after a change in control (provided all other conditions are met), to a lump sum amount equal to two times his then-current base salary (which has been increased from a multiple of 1) and (ii) provide that Mr. Etzler must be and remain in compliance with restrictive covenants relating to non–solicitation of certain of the Bank’s customers and employees for a duration of 2 years (which has been increased from 1 year). All
51
other material terms and conditions of Mr. Etzler’s existing Change in Control Agreement as in effect immediately prior to the Etzler Amendment remain in effect without change.
As referenced above, on May 18, 2023, the Bank entered into an Amended and Restated Change in Control Agreement with Mr. Prame, to be effective as of June 1, 2023. Mr. Prame’s amended Change in Control Agreement modified the following three severance benefits that he is entitled to receive if he experiences a qualifying termination during the 6 months before or during the year after a change in control (provided all other conditions are met): (i) an amount equal to 2.99 times the then-current annual base salary (which has been increased from a multiple of 2), (ii) an amount equal to the average of his total cash bonuses in the 2 years preceding termination multiplied by 2.99 (which has been increased from a multiple of 2); provided, however, that (A) during 2023, the bonus calculation shall be 2.99 times $275,000 and (B) during 2024, the bonus calculation shall be 2.99 times the average of $275,000 plus his 2024 target bonus, and (iii) continued participation in group health and life insurance benefits for a period of 35 months (which has been increased from 24 months). All other material terms and conditions of Mr. Prame’s previous Change in Control Agreement as in effect immediately prior to the amended agreement remain in effect without change.
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 who have entered into Change in Control Agreements with Horizon Bank 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, except Etzler term begins January 1, 2020, Kerber term begins October 1, 2020, and Prame term begins June 1, 2023 | ||||||||||||
| 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, or salary | •Same for all | ||||||||||||
| 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) | ||||||||||||
52
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 •Base salary multiple. A lump sum amount equal to the executive’s then-current base salary multiplied by the executive’s individual multiple •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 •Continued participation in group health and life insurance benefits. Subject to certain conditions, continued coverage for the executive’s individual benefit continuation term •Vested incentive and benefit plan compensation. All amounts vested or accrued prior to termination under incentive compensation plans in accordance with their terms •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 •Multiples ◦Prame 2.99 ◦Secor 2.00 ◦DeRuiter 2.00 ◦Kerber 2.00 ◦Etzler 2.00 •Multiples ◦Prame 2.99 ◦Secor 2.00 ◦DeRuiter 2.00 ◦Kerber 2.00 ◦Etzler 2.00 •Benefit continuation term ◦Prame 35 months ◦Secor 24 months ◦DeRuiter 24 months ◦Kerber 24 months ◦Etzler 24 months •Same for all •Same for all | ||||||||||||
| Successors and Assigns | •Bank will require any successor to assume the Change in Control Agreement | •Same for all | ||||||||||||
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, 2023, the named executive officers (other than Mr. Dwight) 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 | ||||||||||||
| Thomas M. Prame | $ | 2,108,253 | $ | 500,000 | ||||||||||
| Mark E. Secor | 802,968 | 500,000 | ||||||||||||
| Kathie A. DeRuiter | 866,400 | 500,000 | ||||||||||||
| Lynn M. Kerber | 781,315 | 500,000 | ||||||||||||
| Todd A. Etzler | 605,042 | 500,000 | ||||||||||||
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.”
53
Other Benefits Upon Termination or Change in Control
A primary reason behind Horizon’s proposed 2021 Omnibus Equity Incentive Plan is to alter the effect of a change in control on future equity incentive awards, in order to adopt double trigger vesting and/or acceleration of awards as the applicable circumstances occur.
In the event of a Change in Control of Horizon (as defined in the 2021 Omnibus Plan), the surviving or successor company may continue to employ participants and may continue or assume the participant’s awards under the 2021 Omnibus Plan in their original or modified form or may replace some or all of such awards with substitute awards. In any such case, the change in control itself will not accelerate the vesting of any awards. However, if within two years after the change in control, the participant experiences an involuntary termination other than for cause, then (i) outstanding stock options and SARs that are not yet fully exercisable shall immediately become exercisable and remain exercisable in accordance with their terms, and (ii) all other unvested awards, whether service or performance-based, shall immediately become fully vested and non-forfeitable, with performance goals deemed to have been satisfied at the target levels.
The definition of “Change in Control” in the 2021 Omnibus Plan is materially the same as the definition in the 2013 Omnibus Plan and includes:
i.Merger or Consolidation. Any merger, consolidation or similar transaction which involves Horizon or the Bank and in which persons who are the stockholders of Horizon or the Bank 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 stockholders of such entity, determined on a fully-diluted basis;
ii.Asset Sale or Lease. Any sale, lease, exchange, transfer or other disposition of all or substantially all of the consolidated assets of Horizon or the Bank;
iii.Stock Sale and Tender Offers. Any tender, exchange, sale or other disposition (other than disposition of the stock of Horizon or the Bank in connection with bankruptcy, insolvency, foreclosure, receivership or other similar transactions) or purchase (other than purchases by a Horizon or Bank-sponsored employee benefit plan, or purchases by members of the Board of Directors of Horizon or the Bank) of shares of stock which represent more than 25% of the voting power of Horizon or the Bank; or
iv.Reconstitution of Board. During any period of two consecutive years, individuals who at the date of the adoption of the 2021 Omnibus Plan constitute the Board, cease for any reason to constitute at least a majority thereof, 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.
Notwithstanding the foregoing, a Change in Control will not be deemed to have occurred (i) as a result of the issuance of stock by Horizon in a public offering; or (ii) due to stock ownership by any employee benefit plan sponsored by Horizon.
Existing awards remain subject to the provisions of the two plans currently in effect, as described in this section.
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.
Under the Omnibus Plans, if a change in control had occurred as of December 31, 2023, 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 Omnibus Plans are discussed in more detail above in the Compensation Discussion and Analysis.
54
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 2023.
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. Prame, who is a named executive officer, is included in the Summary Compensation Table above. Mr. Prame does not receive any additional compensation for service on the Board of Directors. In addition, Mr. Dwight, who was an employee of Horizon during a portion of 2023 in addition to his service as a director, received no additional compensation from Horizon for his service as director prior to his retirement. Upon his retirement as an employee of Horizon, Mr. Dwight continued as Chairman of the Board of Directors of Horizon and Horizon Bank without director compensation through January 1, 2024.
Director Compensation for 2023
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||
Susan D. Aaron(1) | $ | 47,090 | $ | 34,993 | $ | 82,083 | ||||||||||||||||||||||||||||||||||||||
| Eric P. Blackhurst | 50,007 | 34,993 | 85,000 | |||||||||||||||||||||||||||||||||||||||||
| Lawrence E. Burnell | 49,382 | 34,993 | 84,375 | |||||||||||||||||||||||||||||||||||||||||
| James B. Dworkin | 47,923 | 34,993 | 82,916 | |||||||||||||||||||||||||||||||||||||||||
| Julie S. Freigang | 50,007 | 34,993 | 85,000 | |||||||||||||||||||||||||||||||||||||||||
| Michele M. Magnuson | 60,632 | 34,993 | 95,625 | |||||||||||||||||||||||||||||||||||||||||
| Peter L. Pairitz | 52,507 | 34,993 | 87,500 | |||||||||||||||||||||||||||||||||||||||||
| Steven W. Reed | 55,007 | 34,993 | 90,000 | |||||||||||||||||||||||||||||||||||||||||
| Spero W. Valavanis | 47,090 | 34,993 | 82,083 | |||||||||||||||||||||||||||||||||||||||||
| Vanessa Williams | 45,007 | 34,993 | 80,000 | |||||||||||||||||||||||||||||||||||||||||
(1) | Susan D. Aaron retired from the Board, effective as of December 31, 2023. | ||||
Horizon paid each of its non-employee directors a cash retainer of $45,000 and a retainer in common shares equal in value to $35,000 for their services in 2023. Active employees of Horizon or Horizon Bank receive no separate compensation for their services as directors, including Mr. Prame who serves on the Board of Directors of Horizon Bank. The Chair of the Compensation Committee receives an additional $7,500, the Chair of the Corporate Governance and Nominating Committee receives an additional $5,000, the Chair of the Enterprise Risk Management and Credit Policy Committee receives an additional $7,500, the Chair of the Audit Committee receives an additional $10,000 and the Chairs of the Asset Liability Committee, and Cyber committee receive an additional $5,000. 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 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.
55
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, 2023. In addition, the Audit Committee has discussed with FORVIS, 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 FORVIS, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding FORVIS, LLP’s communications with the Audit Committee concerning independence, and has discussed with FORVIS, 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, 2023, to be filed with the Securities and Exchange Commission.
Steven W. Reed, Chair
James B. Dworkin
Lawrence E. Burnell
Julie S. Freigang
Brian W. Maass
56
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 March 1, 2024. On that date, 44,111,174 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.
| Name | Shares Beneficially Owned(1) | Percentage | |||||||||||||||
| Directors: | |||||||||||||||||
| Kevin W. Ahern | 10,000 | (2) | * | ||||||||||||||
| Eric P. Blackhurst | 18,491 | (3) | * | ||||||||||||||
| Lawrence E. Burnell | 38,335 | (4) | * | ||||||||||||||
| Craig M. Dwight | 557,037 | (5) | 1.26% | ||||||||||||||
| James B. Dworkin | 50,116 | (6) | * | ||||||||||||||
| Julie S. Freigang | 8,745 | (7) | * | ||||||||||||||
| Michele M. Magnuson | 38,746 | (8) | * | ||||||||||||||
| Brian W. Maass | 800 | (9) | * | ||||||||||||||
| Peter L. Pairitz | 224,647 | (10) | * | ||||||||||||||
| Steven W. Reed | 27,999 | (11) | * | ||||||||||||||
| Vanessa P. Williams | 3,893 | (12) | |||||||||||||||
| Named Executive Officers: | |||||||||||||||||
| Kathie A. DeRuiter | 98,160 | (13) | * | ||||||||||||||
| Todd A. Etzler | 21,578 | (14) | * | ||||||||||||||
| Lynn M. Kerber | 24,831 | (15) | * | ||||||||||||||
| Thomas M. Prame | 22,303 | (16) | |||||||||||||||
| Mark E. Secor | 86,521 | (17) | * | ||||||||||||||
| All Directors and Executive Officers as a Group (16 Persons): | 1,232,202 | (18) | 2.79% | ||||||||||||||
| *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, 2024, or that will become exercisable within 60 days after that date are included in the number of shares beneficially owned. | ||||
(2) | All of the shares are owned directly by Mr. Ahern. | ||||
(3) | All of the shares are owned directly by Mr. Blackhurst. | ||||
(4) | Consists of 9,484 shares owned directly by Mr. Burnell and 28,851 shares held by a trust for which Mr. Burnell is the grantor and serves as trustee. | ||||
(5) | Consists of 30,220 vested stock options, 93,845 shares owned directly by Mr. Dwight, 223,339 shares owned jointly by Mr. Dwight and his spouse, 51,810 shares held by the Thrift Plan, and 157,823 shares held in Mr. Dwight’s individual retirement account as to which Mr. Dwight has dispositive and voting power. | ||||
(6) | Consists of 3,473 shares owned directly by Mr. Dworkin and 46,643 shares owned jointly by Mr. Dworkin and his spouse. | ||||
(7) | Consists of 97 shares owned directly by Ms. Freigang and 8,648 shares owned jointly by Ms. Freigang and her spouse. | ||||
(8) | Consists of 38,746 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. Maass. | ||||
(10) | All of the shares are owned directly by Mr. Pairitz. | ||||
(11) | All of the shares are owned directly by Mr. Reed. | ||||
57
(12) | All of the shares are owned directly by Ms. Williams. | ||||
(13) | Consists of 14,982 shares owned directly by Ms. DeRuiter, 26,612 shares held by the Thrift Plan, 8,077 vested stock options, 14,909 shares held in the 2005 SERP and 33,580 shares held in Ms. DeRuiter’s individual retirement account as to which Ms. DeRuiter has dispositive and voting power. | ||||
(14) | Consists of 14,405 shares owned directly by Mr. Etzler, 2,676 shares held by the Thrift Plan, 590 shares held in the 2005 SERP and 3,907 shares held in Mr. Etzler’s individual retirement account as to which Mr. Etzler has dispositive and voting power. | ||||
(15) | Consists of 21,786 shares owned directly by Ms. Kerber, 1,297 shares held by the Thrift Plan, and 1,748 shares held in the 2005 SERP. | ||||
(16) | Consists of 15,253 shares owned directly by Mr. Prame, 6,750 shares owned jointly by Mr. Prame and his spouse, and 300 shares held in Mr. Prame’s individual retirement account as to which Mr. Prame has dispositive and voting power. | ||||
(17) | Consists of 28,124 shares owned directly by Mr. Secor, 19,558 shares held by the Thrift Plan, 9,842 vested stock options, 19,439 shares held in the 2005 SERP, and 9,558 shares held in Mr. Secor’s individual retirement account as to which Mr. Secor has dispositive and voting power. | ||||
(18) | Includes 48,139 shares covered by stock options and 285,380 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. | ||||
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 March 1, 2024.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Common Shares | ||||||||||||
BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 6,182,984 | 14.0% | ||||||||||||
Dimensional Fund Advisors LP(2) 6300 Bee Cave Road, Building One Austin, TX 78746 | 1,955,694 | 4.4% | ||||||||||||
The Vanguard Group(3) 100 Vanguard Blvd. Malvern, PA 19355 | 2,239,674 | 5.1% | ||||||||||||
(1) | Ownership based on the Schedule 13G filed on January 24, 2024. | ||||
(2) | Ownership based solely on the Schedule 13G filed on February 9, 2024. | ||||
(3) | Ownership based solely on the Schedule 13G/A filed on February 13, 2024. | ||||
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
In accordance with our Corporate Governance and Nominating Committee Charter and NASDAQ requirements, during 2023 the Corporate Governance and Nominating Committee was responsible for reviewing and approving the terms and conditions of all related person transactions. Pursuant to the Corporate Governance and Nominating Committee Charter, the Corporate Governance and Nominating Committee will review any non-loan transaction in which Horizon is a party and the amount involved exceeds $120,000, and in which any of Horizon’s directors, nominees for director, executive officers or 5% or greater shareholders has a direct or indirect material interest. After its review, the Corporate Governance and Nominating Committee will only approve those transactions that are in, or are not inconsistent with, the best interests of Horizon and its shareholders.
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
58
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 2023. 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.
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 2023, shareholders approved the compensation of Horizon’s named executive officers, with 95.6% 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.
During 2023, 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. | ||
•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. | ||
59
•Incentive compensation may be “clawed back” pursuant to a Horizon Bank policy as discussed above under the heading “Clawbacks: 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 2023 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 2024 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2023 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) | ||
PROPOSAL 3
Frequency of Advisory Vote to Approve Executive Compensation
This year, Horizon’s Board of Directors is required to offer shareholders the opportunity to cast an advisory vote on how often Horizon should hold a shareholder “say-on-pay” vote. A “say-on-pay” vote refers to an advisory vote on the compensation paid to Horizon’s named executive officers, such as the vote described in Proposal 2 above. The advisory votes described in Proposal 2and this Proposal 3 are mandated by Section 14A of the Securities and Exchange Act of 1934, which was added by the Dodd-Frank Act, and the implementing regulations adopted by the SEC. The advisory vote on frequency, sometimes referred to as a “say-on-frequency” vote, must be held at least once every six years.
You are being asked to consider whether the shareholders should be offered an advisory vote on executive compensation every year, or once every two years, or once every three years.
60
Shareholders voted on a “say-on-frequency” proposal in 2018. At that time, the Board of Directors recommended that shareholders should have the right to an advisory vote on executive compensation every year because the Board of Directors values the input of the shareholders on the matter. In 2018, shareholders voted in favor of an annual “say-on-pay” vote.
At this time, the Board of Directors continues to believe that holding an advisory “say-on-pay” vote every year is the most appropriate option for Horizon and its shareholders, and recommends that you vote to approve the annual alternative. Holding an advisory vote every year (instead of every two years or every three years) allows our shareholders to react to our compensation philosophy, policies and practices more frequently and, as such, provides the Board of Directors with valuable direction.
Shareholders are not voting to approve or disapprove the recommendation of the Board of Directors. Instead, shareholders may cast a vote on their preferred frequency by choosing among the three alternatives: one year (1 YR on proxy card); two years (2 YR on proxy card); or three years (3 YR on proxy card), or they may abstain from voting.
This vote is advisory and not binding on Horizon or its Board of Directors. The Board and the Compensation Committee will take into account the outcome of the vote and consider the option that receives the most votes when considering the frequency of future advisory votes on executive compensation.
Because this shareholder vote is advisory, it will not be binding upon the Board of Directors.
| The Board of Directors unanimously recommends conducting a non-binding advisory vote to approve the compensation of the named executive officers every year. (Item 3 on the Proxy Card) | ||
PROPOSAL 4
Ratification of Appointment of Independent Registered Public Accounting Firm
FORVIS, LLP (formerly BKD, LLP) served as Horizon’s independent registered public accounting firm for 2021, 2022, and 2023. Upon the recommendation of the Audit Committee, the Board of Directors has selected FORVIS, LLP as Horizon’s independent registered public accounting firm for 2024. FORVIS, LLP has served in this capacity since 1998. Shareholder ratification of the appointment of the independent registered public accounting firm is not required by law, but the Audit Committee has proposed and recommended the submission of the appointment of FORVIS, LLP to the shareholders to give the shareholders input into the designation of the auditors.
Ratification of the appointment of Horizon’s independent registered public accounting firm requires that more shares be voted in favor of the proposal than against the proposal. If the shareholders do not ratify the selection of FORVIS, LLP, the Audit Committee may reconsider its selection of FORVIS, LLP as Horizon’s independent registered public accounting firm. Even if this proposal to ratify the appointment of FORVIS, LLP is approved, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm 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 FORVIS, LLP are expected to be available during the virtual Annual Meeting to respond to appropriate questions and to make such statements as they may desire.
| The Board of Directors unanimously recommends that shareholders vote “FOR” the ratification of the appointment of FORVIS, LLP as Horizon’s independent registered public accounting firm for 2024. (Item 4 on the Proxy Card) | ||
61
AUDITOR FEES AND SERVICES
FORVIS, LLP served as Horizon’s independent registered public accounting firm for 2021, 2022, and 2023. The services performed by FORVIS, 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 FORVIS, LLP as the independent registered public accounting firm for 2024 and is seeking shareholder ratification at the Annual Meeting.
Audit Fees
FORVIS, 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 $653,002 for 2022 and $897,965 for 2023.
Audit–Related Fees
FORVIS, LLP’s audit-related fees were $28,085 for 2022 and $5,775 for 2023. In 2023 and 2022, these fees related to audit of the employee benefit plans.
Tax Fees
FORVIS, LLP’s fees for tax services were $41,363 for 2022 and $78,952 for 2023.
All Other Fees
FORVIS, LLP’s other fees were $0 for 2022 and $0 for 2023.
Board of Directors Pre–Approval
Horizon’s Audit Committee formally adopted resolutions pre-approving the engagement of FORVIS LLP to act as our independent registered public accounting firm for the fiscal year ending December 31, 2024. The Audit Committee 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 FORVIS LLP will be pre-approved by the Audit Committee. All audit-related fees and fees for tax services for 2022 and 2023 were pre-approved by the Audit Committee. Horizon’s independent registered public accounting firm performed all work described above with its 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, except the following: Ms. Williams filed a late Form 3, 156 days late on June 8, 2023 and a late Form 4, 98 days late on June 8, 2023 (one transaction); and Ms. Aaron filed a late Form 4, nine days late on June 8, 2023 (one transaction).
62
SHAREHOLDER PROPOSALS FOR 2025 ANNUAL MEETING
Any shareholder who wishes to have a proposal considered for inclusion in Horizon’s Proxy Statement for the 2025 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 18, 2024, which date is not less than 120 calendar days before the anniversary date of the release of this Proxy Statement relating to Horizon’s 2024 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 2025 Annual Meeting is not received by Horizon on or before November 18, 2024, 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 18, 2024, with Notice of Internet Availability filed and mailed to shareholders on March 18, 2024, which means that the nomination or proposal cut-off date for the 2025 Annual Meeting is November 18, 2024. 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.
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 18, 2024
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 Mckenzie Plummer, Investor Relations, at 515 Franklin Street, Michigan City, Indiana 46360. The Form 10-K and the other proxy materials also are available on the Internet at www.investorvote.com/hbnc) for street holders at www.edocumentview.com/hbnc) and online in the SEC’s EDGAR database at www.sec.gov.
63