SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
HF BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
HF BANCORP, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- ----------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] 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:
Notes:
HF BANCORP, INC.
445 EAST FLORIDA AVENUE
HEMET, CALIFORNIA 92543-4244
(800) 540-4363 Ext. 2411
September 24, 1996
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders (the
"Annual Meeting") of HF Bancorp, Inc. (the "Company"), the holding company for
Hemet Federal Savings and Loan Association (the "Association"), Hemet,
California, which will be held on October 28, 1996, at 2:00 p.m., Pacific Time,
at the Simpson Neighborhood Center, 305 E. Devonshire Avenue, Hemet, California.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of HF Bancorp, Inc., as well as a representative of Deloitte & Touche
LLP, the Company's independent auditors, will be present at the Annual Meeting
to respond to any questions that stockholders may have regarding the business to
be transacted.
The Board of Directors of HF Bancorp, Inc. has determined that the matters
to be considered at the Annual Meeting are in the best interests of the Company
and its stockholders. For the reasons set forth in the Proxy Statement, the
Board unanimously recommends that you vote "FOR" each matter to be considered.
YOUR COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST
BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS. WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED SO
THAT YOUR SHARES WILL BE REPRESENTED.
On behalf of the Board of Directors and all of the employees of the Company
and the Association, I thank you for your continued interest and support.
Sincerely yours,
/s/ J. Robert Eichinger
President and Chief Executive Officer
HF BANCORP, INC.
445 EAST FLORIDA AVENUE
HEMET, CALIFORNIA 92543
(800) 540-4363 Ext. 2411
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 28, 1996
---------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of HF Bancorp, Inc. (the "Company") will be held on October 28, 1996,
at 2:00 p.m., Pacific Time, at the Simpson Neighborhood Center, 305 E.
Devonshire Avenue, Hemet, California.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of two directors to three-year terms of office, each;
2. The ratification of the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending June
30, 1997; and
3. Such other matters as may properly come before the Annual Meeting and
at any adjournments thereof, including whether or not to adjourn the
meeting.
The Board of Directors has established September 6, 1996, as the record
date for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting and at any adjournments thereof. Only record holders
of the common stock of the Company as of the close of business on that date will
be entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. In the event there are not sufficient votes for a quorum or to approve
or ratify any of the foregoing proposals at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit further solicitation of
proxies by the Company. A list of stockholders entitled to vote at the Annual
Meeting will be available at HF Bancorp, Inc., 445 East Florida Avenue, Hemet,
California 92543-4244, for a period of ten days prior to the Annual Meeting and
will also be available at the meeting itself.
By Order of the Board of Directors
/s/ Janet E. Riley
Corporate Secretary
Hemet, California
September 24, 1996
HF BANCORP, INC.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1996
-----------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to stockholders of HF Bancorp, Inc.
(the "Company") in connection with the solicitation by the Board of Directors
("Board of Directors" or "Board") of proxies to be used at the annual meeting of
stockholders (the "Annual Meeting"), to be held on October 28, 1996, at 2:00
p.m., Pacific Time, at the Simpson Neighborhood Center, 305 E. Devonshire
Avenue, Hemet, California and at any adjournments thereof. The 1996 Annual
Report on Form 10-K to Stockholders, including consolidated financial statements
for the fiscal year ended June 30, 1996, and a proxy card, accompanies this
Proxy Statement, which is first being mailed to record holders on or about
September 24, 1996.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the outstanding shares of common stock be
represented by proxy or in person at the Annual Meeting. Stockholders are
requested to vote by completing the enclosed proxy card and returning it signed
and dated in the enclosed postage-paid envelope. Stockholders are urged to
indicate their vote in the spaces provided on the proxy card. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY
CARDS WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR NAMED
IN THIS PROXY STATEMENT AND FOR THE RATIFICATION OF DELOITTE & TOUCHE, LLP, AS
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1996.
Other than the matters set forth on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS, IF
ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS
THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to vote personally at the
Annual Meeting.
1
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Company. Proxies may be solicited personally or by mail or
telephone by directors, officers and other employees of the Company and its
subsidiary, the Association, without additional compensation therefor. The
Company will also request persons, firms and corporations holding shares in
their names, or in the name of their nominees, which are beneficially owned by
others, to send proxy material to and obtain proxies from such beneficial
owners, and will reimburse such holders for their reasonable expenses in doing
so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of shares
of common stock of the Company ("Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Annual Meeting, except as
described below. There is no cumulative voting for the election of directors.
The close of business on September 6, 1996, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 6,281,875 shares.
In accordance with the provisions of the Company's Certificate of
Incorporation, record holders of Common Stock who beneficially own in excess of
10% of the outstanding shares of Common Stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. A person or
entity is deemed to beneficially own shares owned by an affiliate of, as well as
by persons acting in concert with, such person or entity. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own stock in excess of the
Limit supply information to the Company to enable the Board of Directors to
implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after giving
effect to the Limit described above, if applicable) is necessary to constitute a
quorum at the Annual Meeting. In the event that there are not sufficient votes
for a quorum, or to approve or ratify any matter being presented at the time of
the Annual Meeting, the Annual Meeting may be adjourned in order to permit the
further solicitation of proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a stockholder to vote "FOR" the election of the nominees
proposed by the Board of Directors, or to "WITHHOLD AUTHORITY" to vote for one
or more of the nominees being proposed. Under Delaware law and the Company's
Bylaws, directors are elected by a plurality of votes cast, without regard to
either broker non-votes, or proxies as to which authority to vote for one or
more of the nominees being proposed is withheld.
2
As to the approval of Deloitte & Touche LLP as independent auditors of the
Company and all other matters that may properly come before the Annual Meeting,
by checking the appropriate box, a stockholder may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on the item. Under
the Company's Bylaws, unless otherwise required by law, all such matters shall
be determined by a majority of the votes cast, without regard to either broker
non-votes, or proxies marked "ABSTAIN" as to that matter.
Proxies solicited hereby will be returned to the Company's transfer agent,
and will be tabulated by inspectors of election designated by the Board of
Directors, who will not be employed by, or a director of, the Company or any of
its affiliates. After the final adjournment of the Annual Meeting, the proxies
will be returned to the Company for safekeeping.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed by
the Company to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
regarding such ownership filed by such persons with the Company and with the
Securities and Exchange Commission ("SEC"), in accordance with Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act").
Other than those persons listed below, the Company is not aware of any person,
as such term is defined in the Exchange Act, that owns more than 5% of the
Company's Common Stock as of the Record Date.
3
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
- -------------------- --------------------------------------- ------------ -------
Common Stock Hemet Federal Savings and Loan 462,875/(1)/ 7.0%
Association Employee Stock Ownership
Plan ("ESOP")
445 East Florida Avenue
Hemet, California 92543-4244
Common Stock Kahn Brothers & Co., Inc. 472,180/(2)/ 7.5
555 Madison Avenue
New York, New York 10022
Common Stock Wellington Management Company 427,000/(3)/ 6.8
75 State Street
Boston, Massachusetts 02110
Common Stock Brandes Investment 378,055/(4)/ 6.0
12750 High Bluff Drive
San Diego, California 92130
- -------------------------
(1) Shares of Common Stock were acquired by the ESOP in the Conversion. The
ESOP Committee administers the ESOP. The ESOP Trustee must vote all
allocated shares held in the ESOP in accordance with the instructions of
the participants. As of the Record Date, 46,288 shares have been allocated
to participant's accounts. Under the ESOP, unallocated shares will be voted
by the ESOP Trustee in a manner calculated to most accurately reflect the
instructions received from participants regarding the allocated stock so
long as such vote is in accordance with the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(2) Based upon a Schedule 13G filed on behalf of Kahn Brothers & Co., Inc. on
February 7, 1996 and subsequently verified by the Company using the
Bloomberg report.
(3) Based upon a Schedule 13G filed on behalf of Wellington Management Company
on February 21, 1996 and subsequently verified by the Company using the
Bloomberg report.
(4) Based on a Schedule 13F filed on behalf of Brandes Investment on August 15,
1996.
4
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven directors
and is divided into three classes. Each of the seven members of the Board of
Directors of the Company also presently serves as a director of the Association.
Mr. Norman M. Coulson was appointed to the Board of Directors on June 20, 1996
with a term expiring at this Annual Meeting. Mr. George W. Fenimore, who
currently serves as a director of the Company and the Association, will be
retiring immediately prior to the Annual Meeting. The Board has voted to amend
the Bylaws of the Company to decrease the size of the Board from seven to six
directors effective upon Mr. Fenimore's retirement. Directors are elected for
staggered terms of three years each, with the term of office of only one of the
three classes of Directors expiring each year. Directors serve until their
successors are elected and qualified.
The two nominees proposed for election at this Annual Meeting are Norman M.
Coulson and Leonard E. Searl. No person being nominated as a director is being
proposed for election pursuant to any agreement or understanding between any
person and the Company.
In the event that any such nominee is unable to serve or declines to serve
for any reason, it is intended that the proxies will be voted for the election
of such other person as may be designated by the present Board of Directors.
The Board of Directors has no reason to believe that any of the persons named
will be unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEE
IS WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD, IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth, as of the Record Date, the names of the
nominees, continuing directors and executive officers of the Company and their
ages, a brief description of their recent business experience, including present
occupations and employment, certain directorships held by each, the year in
which each became a director of the Association, and the year in which their
terms (or in the case of the nominees, their proposed terms) as director of the
Company expire. The table also sets forth the amount of Common Stock and the
percent thereof beneficially owned by each director and executive officer and by
all directors, named executive officers and executive officers as a group as of
the Record Date. Ownership information is based upon information furnished by
the respective individuals.
5
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ----------------------------- ------- -------- ----------- ------------- ------------
NOMINEES
Norman M. Coulson 63 1996 1999 3,300(3)(4) *%
Retired Chairman and Chief
Executive officer of Glendale
Federal Bank, 1957-1992
Leonard E. Searl 69 1976 1999 22,347(3)(4) *
Retired from various farming
and cattle enterprises in 1988
CONTINUING DIRECTORS
J. Robert Eichinger 65 1981 1997 73,687(3)(4) 1.2
Chairman of the Board,
President and Chief Executive
Officer of the Company and
the Association
Harold L. Fuller 61 1993 1997 6,622(3)(4) *
Retired Partner with Deloitte &
Touche LLP and member of
the Board of Directors of Villa
Esperanza, a non-profit home
for mentally disabled persons
Dr. Robert K. Jabs 61 1990 1998 7,774(3)(4) *
Professor of Business at
California Baptist College
Patricia A. "Corky" Larson 68 1995 1998 4,048(3)(4) *
Executive Director of the
Coachella Valley Association
of Governments. Former
member of the Board of
Education in the Palm Springs
Unified School District and
former supervisor of the
Riverside County Board of
Supervisors.
6
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ----------------------------- ------- -------- ----------- ------------- ------------
NAMED EXECUTIVE
OFFICERS WHO ARE NOT
DIRECTORS
Alex J. Neil 63 - - 24,386(3)(4) *
Vice President and Chief
Financial Officer of the
Company and Senior Vice
President Treasurer and
Chief Financial Officer
of the Association
Gerald A. Agnes 37 - - 29,038(3)(4) *
Executive Vice President of the
Company and Executive Vice
President and Chief Operating
Officer of the Association
Jack A. Sanden 55 - - 26,139(3)(4) *
Senior Vice President of the
Association
OTHER EXECUTIVE
OFFICERS OF THE
COMPANY WHO ARE
NOT DIRECTORS
Janet E. Riley 58 - - 4,850(3)(4) *
Corporate Executive Secretary
of the Company and the
Association
Stock Ownership of all 252,307 4.0%
Directors and Executive
Officers as a Group
(14 persons)
- --------------------------------
* Represents less than 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Association.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein (except as noted).
(3) Includes 3,300, 9,882, 43,642, 4,122, 5,274, 3,548, 22,320, 27,773, 23,299
and 3,500 shares awarded to Messrs. Coulson, Searl, Eichinger and Fuller,
Dr. Jabs, Ms. Larson, Messrs. Neil, Agnes and Sanden and Ms. Riley under
the Hemet Federal Savings and Loan Association 1995 Master Stock
Compensation Plan ("Stock Compensation Plan"). Awards to directors under
the Stock Compensation Plan vest in five equal annual installments
commencing January 11, 1997, except that awards to Mr. Coulson will not
begin vesting until June 20, 1997. Base grants to officers under the
Stock Compensation Plan vest in five equal annual installments commencing
January 11, 1997; however, performance grants, which constitute 25% of the
total grant, will only vest if the performance criteria for the year
established by the Compensation Committee is met.
(4) Does not include 10,000, 32,930, 119,025, 13,754, 17,590, 11,836, 79,350,
39,654, 41,394 and 6,500 shares subject to options granted to Messrs.
Coulson, Searl, Eichinger and Fuller, Dr. Jabs, Ms. Larson, Messrs. Agnes,
Neil and Sanden and Ms. Riley under the HF Bancorp, Inc. 1995 Master Stock
Option Plan ("Stock Option Plan"). Options will be exercisable on a
cumulative basis in five equal annual installments commencing January 11,
1997.
7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers (as
defined in regulations promulgated by the SEC thereunder) and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of copies of such reports of
ownership furnished to the Company, or written representations that no forms
were necessary, the Company believes that during the past fiscal year all filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with except that each of the directors and
executive officers of the Company during fiscal 1996 reported the grant of stock
options and stock awards described in footnotes 3 and 4 to the above chart on an
amended Form 5 subsequent to the Form 5 required by August 15, 1996.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
of Directors and through activities of its committees. The Board of Directors
meets monthly and may have additional meetings as needed. During fiscal 1996,
the Board of Directors of the Company, held 14 meetings. The Association held
14 meetings. All of the directors of the Company and Association attended at
least 75% of the total number of the Company's and Association's Board meetings
held and committee meetings on which such directors served during fiscal 1996.
The Boards of Directors of the Company and the Association maintain committees,
the nature and composition of which are described below:
AUDIT COMMITTEE. The Audit Committee of the Company consists of Messrs.
Jabs (Chairman), Fenimore, Larson and Searl, all of whom are outside directors.
This committee meets as called by the Committee Chairman. The purpose of this
committee is to provide assurance that financial disclosures made by management
portray the financial condition and results of operations. The committee also
maintains a liaison with the outside auditors and reviews the adequacy of
internal controls. The Audit Committee of the Company met 4 times in fiscal
1996.
NOMINATING COMMITTEE. The Nominating Committee of the Company for the 1996
Annual Meeting consists of Messrs. Eichinger, Jabs and Fuller and Ms. Larson.
This Committee met once in fiscal 1996 to consider and recommend the nominees
for director to stand for election at the Company's Annual Meeting. The
Company's Certificate of Incorporation and Bylaws also provide for stockholder
nominations of directors. These provisions require such nominations to be made
pursuant to timely notice in writing to the Secretary of the Company. The
stockholders' notice of nomination must contain all information relating to the
nominee that is required to be disclosed by the Company's Bylaws and by the
Securities and Exchange Act of 1934. See "Additional Information - Notice of
Business to be Conducted at the Annual Meeting."
COMPENSATION COMMITTEE. The Compensation Committee of both the Company and
Association consists of Messrs. Fenimore (Chairman), Jabs, and Searl. All
compensation decisions for fiscal 1996 were made by the Compensation Committee.
This committee met in fiscal 1996 to approve the Stock Option Plan and the Stock
Compensation Plan, including a schedule of awards for both directors and
officers. They also established the percentage distribution for Base Grants and
Performance Grants for the Stock Compensation Plan. The Compensation Committee
met 2 times in fiscal 1996. Inasmuch as the foregoing plans were approved at
the Annual Meeting of Stockholders on January 11, 1996, neither the Chief
Executive
8
Officer or the senior officers' salaries were reviewed during the fiscal year
which ended June 30, 1996.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Directors of the Company do not receive any fees or
retainer for serving on the Company's Board of Directors. In fiscal 1996, non-
employee directors received an annual retainer for service on the Board of
Directors of the Association of $5,400 and a fee of $1,750 per regular Board
Meeting. All members of the Board of Directors, with the exception of Mr.
Coulson, are members of the Board of Directors of First Hemet Corporation
("First Hemet"), a wholly-owned subsidiary of HF Financial Corporation, a
wholly-owned subsidiary of the Association. Committee fees of $200 per meeting
are paid to non-employee directors of the Company. One third of the fees paid
to Board members are paid by the Company and two-thirds are paid by the
Association.
DIRECTORS RETIREMENT PLAN. The Association and the Company maintain a
retirement plan for those directors who have completed ten years of service or
who have both attained the age of 65 and had five years of consecutive service
as a director and who were elected to the Board prior to March 31, 1995. This
plan covers a total of eleven (11) participants, six (6) of which are retired.
This plan was terminated effective March 31, 1995 with respect to future
directors. The Directors' Retirement Plan provides that a participant will
receive monthly benefits until death equal to 60% of the basic monthly directors
fee such participant received for the last month in which he served as director.
Upon the retired Participant's death, 50% of his benefit shall continue to be
paid to the Participant's surviving spouse for the balance of the spouse's life.
If the Participant dies while still serving as a director, 50% of the monthly
retirement benefit that said Participant would have received had he retired the
day immediately preceding the date of his death shall be paid to his surviving
spouse for the balance of the spouse's life. No Participant shall be paid a
retirement benefit if he is removed from the Board for cause pursuant to Section
302 of the California Corporation's Code or an equivalent federal regulation or
statute.
1995 DIRECTORS' DEFERRED FEE STOCK UNIT PLAN. The Association and the
Company have implemented the 1995 Directors' Deferred Fee Stock Unit Plan
("Deferred Fee Plan") for its directors. Under the Deferred Fee Plan, directors
may elect to defer receipt of directors' fees earned by them until their service
with the Board of Directors terminates. The directors' deferred fees are
credited to the account of participating directors under the terms of the
Deferred Fee Plan and are credited with earnings based on several investment
choices, including Company Common Stock. If a participant chooses to have
deferred fees credited to a stock unit account with the Deferred Fee Plan, the
participant will receive a benefit based on the earnings from and appreciation
in the stock of the Company.
The Association has established an irrevocable grantor's trust ("rabbi
trust") in connection with the Directors Retirement Plan and Deferred Fee Plan
that is funded with contributions from the Association for the purpose of
providing the benefits promised under the terms of the plans. The participants
have only the rights of unsecured creditors with respect to the trust's assets,
and will not recognize income with respect to benefits provided by the plans
until such benefits are received by the participants. The assets of the rabbi
trust are considered part of the general assets of the Association and are
subject to the claims of the Association's creditors in the event of the
Association's insolvency. Earnings on the trust's assets are taxable to the
Association. The trustee of the trust may invest the trust's assets in the
Company's stock.
9
STOCK OPTION PLAN. Under the Stock Option Plan, each outside director was
granted non-statutory stock options to purchase varying amounts of Common Stock
depending on each director's years of service at an exercise price of $10.0532
per share, which was the fair market value of the shares on the date of grant
(January 11, 1996). The grants to each director included a base grant of
options to purchase 10,000 shares of Common Stock and a variable award related
to years of service. To the extent options for shares are available for grant
under the Stock Option Plan, each outside director of the Company who is elected
subsequent to January 11, 1996 will be granted non-statutory stock options to
purchase 10,000 shares of Common Stock with an exercise price equal to the fair
market value on the date of grant. Options become exercisable in five (5) equal
annual installments of 20% commencing one year from the date of grant.
STOCK COMPENSATION PLAN. Under the Stock Compensation Plan, each outside
director was granted an award of 3,300 shares of Common Stock. Additional
shares were awarded to outside directors under the Stock Compensation Plan based
upon their years of service. To the extent shares are available for grant under
the Stock Compensation Plan, each outside director who is elected subsequent to
January 11, 1996 will be granted an award equal to 3,300 shares of Common Stock.
Awards to directors vest in five (5) equal annual installments at a rate of 20%
commencing one year from the date of grant.
EXECUTIVE COMPENSATION
THE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE GRAPH
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the SEC, the Company is required to provide certain data and
information in regard to the compensation and benefits provided to the Company's
Chief Executive Officer and other executive officers of the Company. The
disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
consideration that led to fundamental executive compensation decisions affecting
those individuals. In fulfillment of this requirement, the Compensation
Committee of the Company and Association (the "Committee") at the direction of
the Board of Directors, has prepared the following report for inclusion in this
proxy statement.
GENERAL. The Committee is responsible for establishing the compensation
levels and benefits for executive officers of the Company and Association and
for reviewing recommendations of management for compensation and benefits for
other officers and employees of the Association. The Company does not pay any
cash compensation to the executive officers of the Company for serving as such.
The Committee consists of Messrs. Fenimore, Jabs and Searl, who are outside
directors.
COMPENSATION POLICIES. The Committee has the following goals for
compensation programs impacting the executive officers of the Company and the
Association.
. to provide compensation opportunities which are consistent with
competitive norms of the industry and the Company's level of
performance, thus allowing the Company to retain high quality
executive officers who are critical to the Company's long term
success;
10
. to motivate key executive officers to achieve strategic business
initiatives and reward them for their achievement; and
. to provide motivation for the executive officers to enhance
shareholder value by linking their compensation to the value of the
Company's Common Stock.
In addition, in order to align the interests and performance of its
executive officers with the long term interests of its stockholders, the Company
and the Association adopted plans, which reward the executives for delivering
long term value to the Company and the Association through stock ownership.
The compensation package available to executive officers is composed of the
following items:
(i) base salary;
(ii) annual cash awards; and
(ii) long term incentive compensation, including option and stock awards.
Mr. J. Robert Eichinger has employment agreements with the Company and the
Association which specify a minimum base salary and require periodic review of
such salary. In addition, executive officers participate in other benefit
plans available to all employees including an Employee Stock Ownership Plan and
a Defined Benefit Plan.
BASE SALARY. In determining salary levels, the Committee considers the
entire compensation package, including the potential equity compensation
provided under the Company's stock plans. The Committee usually meets in the
fourth quarter of each fiscal year to determine the level of any salary increase
to take effect immediately after such determination is made. In addition,
during the fiscal year ended June 30, 1995, an outside consultant reviewed the
Company's salary structure.
The salary levels are intended to be consistent with the competitive
practices of other comparable financial institutions and each executives' level
of responsibility. The Committee consulted surveys of compensation paid to
executive officers performing similar duties for depository institutions and
their holding companies, with particular focus on the level of compensation paid
by comparable institutions in the Association's market area. The peer group
utilized for comparison included some, but not all, of the companies included in
the peer group used for the Stock Performance Graph. It is the Committee's goal
that the total compensation package for its executive officers be competitive
with the median (50th percentile) total compensation of the comparable
institutions.
Although the Committee's decisions are discretionary and no specific
formula is used for decision making, salary increases are aimed at reflecting
the overall performance of the Company and the performance of the individual
executive officer.
ANNUAL CASH AWARDS. The Committee granted no discretionary cash awards in
fiscal 1996. As discussed under base salaries, the bonus awards are intended to
be consistent with competitive practices of other comparable financial
institutions and each executives' level of responsibility. Although the
decision concerning bonus awards are discretionary, the bonus awards are aimed
at reflecting the overall financial performance of the Company and the
performance of the individual executive officer.
11
LONG TERM INCENTIVE COMPENSATION. The Company and the Association have
adopted the Stock Option Plan and Stock Compensation Plan under which executive
officers have received grants. See "Salary Compensation Table" or Option
Tables. The Committee believes that stock ownership is a significant incentive
in building stockholder's wealth and aligning the interests of employees with
those of stockholders. Stock options and stock awards under such plans were
allocated by the Committee based upon regulatory practices and polices, the
practices of other recently converted financial institutions as verified by
external surveys and based upon the executive officers' level of responsibility
and contributions to the Company and the Association.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. After taking into
consideration the factors discussed above, including the overall compensation
package and stock based compensation awards, Mr. Eichinger's salary for fiscal
1996 was increased to $200,000 in connection with the conversion of the
Association from mutual to stock form. He received no bonus in fiscal 1996. No
specific formula was used nor did the Committee set specified salary levels or
bonus awards based on the achievement of particular quantifiable objectives or
financial goals. Rather, the Committee considered the overall profitability of
the Association and the contributions made to the Association by the Chief
Executive Officer. In addition, Mr. Eichinger has been granted 119,025 options
and awarded 43,642 shares which will vest at a rate of 20% per year beginning on
January 11, 1997 in accordance with the factors discussed above.
PERSONNEL, COMPENSATION AND BENEFITS COMMITTEE
George W. Fenimore (Chairman)
Dr. Robert K. Jabs
Leonard E. Searl
12
STOCK PERFORMANCE GRAPH. The following graph shows a weekly comparison of
cumulative total shareholder return on the Company's Common Stock, based on the
market price of the Common Stock with the cumulative total return of companies
in the Nasdaq Stock Market and Nasdaq Bank Stocks for the period beginning on
June 30, 1995, the day the Company's Common Stock began trading, through June
30, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURNS
HF Bancorp, Inc.
June 30, 1995 - June 30, 1996
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Summary
6/30/95 7/31/95 8/31/95 9/29/95 10/31/95 11/30/95 12/29/95
------- ------- ------- ------- -------- -------- --------
HF Bancorp, Inc. 100.000 104.545 116.667 118.182 113.636 119.697 119.697
Nasdaq Stock Market 100.000 107.347 109.519 112.038 111.398 114.011 113.401
Nasdaq Bank Stocks 100.000 104.711 110.332 112.880 114.722 120.607 123.211
1/31/96 2/29/96 3/29/96 4/30/96 5/31/96 6/28/96
------- ------- ------- ------- ------- -------
HF Bancorp, Inc. 121.212 119.697 121.212 118.182 122.727 118.182
Nasdaq Stock Market 113.956 118.301 118.687 128.535 134.449 128.383
Nasdaq Bank Stocks 123.537 125.231 128.106 127.45 129.6 130.276
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.000 on 6/30/95.
- --------------------------------------------------------------------------------
13
SUMMARY COMPENSATION TABLE. The following table shows, for the fiscal years
ended June 30, 1996, 1995 and 1994, the cash compensation paid by the
Association, as well as certain other compensation paid or accrued for those
years, to the chief executive officer and those executive officers of the
Company and the Association who received salary and bonus in excess of $100,000
in fiscal 1996 ("Named Executive Officers").
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ----------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITIONS YEAR ($) ($) ($)(1) ($)(2) (#)(3) ($)(4) ($)(5)
- ------------------------------------------------------------------------------------------------------------------------------------
J. Robert Eichinger 1996 $199,204 $ - - $438,741 119,025 - $ -
President, Chief 1995 165,040 12,000 - - - - 21,000
Executive Officer 1994 160,467 12,000 - - - - 19,500
and Director of the
Association and the
Company
Gerald A. Agnes 1996 $116,850 $ - - $279,208 79,350 - -
Executive Vice 1995 68,963 3,464 - - - - -
President of the 1994 60,462 2,831 - - - - -
Company and
Executive Vice
President and Chief
Operating Officer of
the Association
Alex J. Neil
Vice President and 1996 $119,160 $ - - $224,387 39,654 - $ -
Chief Financial 1995 112,674 10,300 - - - - -
Officer of the 1994 110,211 7,300 - - - - -
Company and Senior
Vice President,
Treasurer and Chief
Financial Officer of
the Association
Jack A. Sanden 1996 $102,590 $ - - $234,229 41,394 - -
Senior Vice 1995 95,546 5,900 - - - - -
President of the 1994 93,931 6,250 - - - - -
Association
- -----------------------------------
(1) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the year; (b) payments of above-
market preferential earnings on deferred compensation; (c) payments of
earnings with respect to long-term incentive plans prior to settlement or
maturation; (d) tax payment reimbursements; or (e) preferential discounts
on stock.
(2) Pursuant to the Stock Compensation Plan, Messrs. Eichinger, Agnes, Neil and
Sanden were awarded 43,642, 27,773, 22,320 and 23,299 shares of Common
Stock, respectively, in fiscal 1996 which had a market value at September
6, 1996 of $409,144, $260,372, $209,250 and $218,428. 25% of the awards
are performance based awards and 75% are base awards. The base awards vest
in equal installments at a rate of 20% a year beginning January 1, 1997;
the performance-based awards will only vest in the event performance
criteria for each year is achieved. When shares become vested and are
distributed, the recipient will also receive an amount equal to accumulated
dividends and earnings thereon. Awards will become vested upon termination
of employment due to death, disability or retirement. However, vesting may
be accelerated by the committee that administers the plan after June 30,
1996.
(3) Includes 119,025, 79,350, 39,654, 79,350 and 41,394 shares subject to
options granted to Messrs. Eichinger, Agnes, Neil and Sanden, respectively,
under the Stock Option Plan. Options granted will become exercisable in
equal installments at an annual rate of 20% beginning January 11, 1997.
(4) For fiscal years 1996, 1995 and 1994, the Association had no long-term
incentive plans, accordingly, there were no payouts or awards under any
long-term incentive plan.
(5) Reflects amounts received for serving as a director of the Association in
1995 and 1994. Mr. Eichinger did not receive board fees for fiscal 1996.
14
EMPLOYMENT AGREEMENTS. The Association and the Company have entered into
employment agreements with J. Robert Eichinger (the "Executive"). These
employment agreements are intended to ensure that the Association and the
Company will be able to maintain a stable and competent management base. The
continued success of the Association and the Company depends, to a significant
degree, on the skills and competence of the Executive.
The employment agreements with the Association and the Company provide for
a three-year term. Commencing on the first anniversary date and continuing
each anniversary date thereafter, the respective Boards of Directors of the
Association and Company may extend the agreements with the Executive for an
additional year such that the remaining term shall be the amount of the original
term unless written notice of non-renewal is given by the Board of Directors
after conducting a performance evaluation of the Executive. The employment
agreements provide that the Executive will receive an annual base salary of
$200,000, which will be reviewed annually by the Board of Directors. In
addition to the base salary, the agreements provide for, among other things,
disability pay, participation in stock benefit plans and other fringe benefits
applicable to executive personnel.
The agreements provide for termination of the Executive by the Association
or the Company for cause or for disability, as defined in the agreements, at any
time. In the event the Association or the Company chooses to terminate the
Executive's employment for reasons other than for cause or for disability, or in
the event of the Executive's resignation from the Association and the Company
upon (i) failure to re-elect the Executive to his current offices, (ii) a
material change in the Executive's functions, duties or responsibilities, or a
material reduction in benefits or perquisites; or (iii) a relocation of the
Executive's principal place of employment that materially alters Mr. Eichinger's
commute; liquidation or dissolution of the Association or the Company, or (v) a
breach of the Employment Agreement by the Association or the Company, the
Executive or, in the event of death, his beneficiary would be entitled to
receive an amount equal to the remaining payments under the Employment
Agreement, including base salary, bonuses, other payments and health benefits
due under the remaining term of the Employment Agreement.
If voluntary or involuntary termination of employment follows a change in
control of the Association or the Company, as defined in the Employment
Agreements, the Executive or, in the event of death, his beneficiary, would be
entitled to a severance payment equal to the greater of (i) the payments due for
the remaining term of the agreement, or (ii) three times his average annual
compensation over the last three years. In addition, the Association and the
Company would continue the Executive's life, health, and disability coverage for
the remaining unexpired term of the Employment Agreements to the extent allowed
by the plans or policies maintained by the Company or Association from time to
time. The Association's agreement has a similar change in control provision,
however, the Executive would only be entitled to receive a severance payment
under one agreement. Payments to the Executive under the Association's
employment agreement are guaranteed by the Company in the event that payments or
benefits are not paid by the Association.
15
CHANGE IN CONTROL AGREEMENTS. The Company and the Association have entered
into six one-year change in control agreements with certain officers, including
Messrs. Neil and Sanden. Commencing on the first annual anniversary date and
continuing on each annual anniversary thereafter, the change in control
agreements may be extended by the respective Board of Directors for an
additional 12 months so that the remaining term is 12 months. Each change in
control agreement will provide that at any time following a change in control of
the Company or the Association, if the Company or the Association terminates the
employee's employment for any reason other than cause, or if the employee
terminates his employment following demotion, loss of title, office or
significant authority, a reduction in compensation, or relocation of the
principal place of employment, the employee or, in the event of death, the
employee's beneficiary would be entitled to receive a payment equal to the
employee's then current annual salary, including bonuses and any other cash
compensation. The Association and the Company would also continue the
employee's life, health, and disability coverage for the remaining unexpired
term of his or her agreement to the extent allowed by the plans or policies
maintained by the Company or Association from time to time. Payments to the
employee under the Association's change in control agreements will be guaranteed
by the Company in the event that payments or benefits are not paid by the
Association.
Payments and benefits under the employment agreements and change in control
agreements and other benefit plans may constitute an excess parachute payment
under Section 280G of the Code, resulting in the imposition of an excise tax on
the recipient and denial of the deduction for such excess amount to the Company
and the Association. In the event of a change in control of the Association or
Company, the total amount of payments due under the Agreements, based solely on
cash compensation paid to Mr. Eichinger over the past three fiscal years and
excluding benefits under any employee benefit plan would be approximately
$636,000. In the event of a change in control of the Association or Company,
the total payments due under the Change in Control Agreements in the aggregate,
based solely on the cash compensation paid to the six officer covered by the
change in control agreements over the past five fiscal years and excluding any
benefits under any employee benefit plan that may be payable, are estimated to
be approximately $567,156.
DEFINED BENEFIT PLAN. The Association currently maintains a
noncontributory defined benefit plan ("Retirement Plan"). All employees who
have worked at the Association for a period of one year and have been with the
Association and attained the age of 21 are eligible to participate in the
Retirement Plan. The Association annually contributes an amount to the Plan
necessary to satisfy requirements in accordance with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
At the normal retirement age of 65 years old, the Plan is designed to
provide a life annuity guaranteed for ten years. The accrued benefit amount is
equal to 4% of a participant's average compensation based on the average of the
60 consecutive retirement months which produce the highest average plus .65% of
average monthly earnings in excess of the Social Security Base, all of the
foregoing multiplied by the first 15 years of service. For each additional Year
of Service in excess of 15, the participant will earn an additional amount equal
to 1/2% of average monthly earnings. The Retirement Plan was amended as of
January 1, 1992, to change
16
the definition of compensation from pay rate to actual W-2 compensation. A
participant may receive a reduced benefit at early retirement or a deferred
vested benefit commencing as of his normal retirement date. For the Plan Year
ending December 31, 1995, the annual contribution was $565,000. In addition to
a single lump sum payment for benefit amounts under $7,000, benefit amounts over
$3,500 and under $7,000 can be made payable in various annuity forms.
Retirement Plan benefits are also payable upon retirement due to disability
or death. A reduced benefit is payable upon early retirement at or after age 55
and the completion of ten years of service with the Association. Upon
termination of employment other than specified above, a participant who was
employed by the Association for a minimum of five years has a vested interest in
his accrued benefit.
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 in calendar year 1995, expressed in the form of a single
life annuity for the final average salary and benefit service classifications
specified.
Participant's Years of Credited Service at Age 65
-------------------------------------------------------------
Average 5 10 15 20 25 30 35
Compensation
- -------------
25,000 5,000 10,000 15,000 15,625 16,250 16,875 17,500
50,000 10,787 21,573 32,360 33,610 34,860 36,110 37,360
75,000 16,599 33,198 49,797 51,672 53,547 55,422 57,297
100,000 22,412 44,823 67,235 69,735 72,235 74,735 77,235
125,000 28,224 56,448 84,672 87,797 90,922 94,047 97,172
150,000 34,037 68,073 102,110 105,860 109,610 113,360 117,110
175,000 34,037 68,073 102,110 105,860 109,610 113,360 117,100
200,000 34,037 68,073 102,110 105,860 109,610 113,360 117,100
225,000 34,037 68,073 102,110 105,860 109,610 113,360 117,100
250,000 34,037 68,073 102,110 105,860 109,610 113,360 117,100
- --------------------------
(1) The benefits displayed above reflect the limitations imposed by IRC Section
401(a)17 on maximum allowable compensation ($150,000 for 1995) and by IRC
Section 415 on maximum annual retirement benefits ($120,000 for 1995).
17
The following table sets forth the years of credited service (i.e., benefit
service) as of June 30, 1996 for each of the Named Executive Officers.
CREDITED SERVICE
-------------------------------------
YEARS MONTHS
------ ------
J. Robert Eichinger 15 8
Gerald A. Agnes 8 7
Alex J. Neil 22 11
Jack A. Sanden 13 11
Hemet Federal Savings and Loan Association Officers Deferred Compensation Plan
------------------------------------------------------------------------------
The Association maintains a deferred compensation plan whereby an officer may
defer all or a portion of compensation otherwise currently payable in exchange
for the receipt at the time they cease to serve as officers of the Association
with a benefit at the time of retirement as provided for in the plan. Amounts
deferred under this program will earn interest, compounded annually, based on
the highest certificate account rate (excluding accounts requiring deposits of
$100,000 or more) in effect on January 1 of each year of the deferral or
distribution period. The plan provides benefits are to be paid in annual
installments over a period of years determined by the Association in its
discretion.
Retirement Restoration Plan
---------------------------
The Association has implemented a non-qualified Retirement Restoration Plan to
provide a select group of management and highly compensated employees with
additional retirement benefits. The benefits provided under the Plan will make
up the benefits lost to the Plan participants due to application of limitations
on compensation and maximum benefits applicable to the Association's tax-
qualified plans, including the ESOP. Benefits will be provided under the Plan at
the same time and in the same form as the benefits will be provided under the
Association's tax-qualified plans.
The Association has established an irrevocable grantor's trust ("rabbi trust")
funded with contributions from the Association for the purpose of providing the
benefits promised under the terms of the Plan. The Plan participants have only
the rights of unsecured creditors with respect to the trust's assets, and will
not recognize income with respect to benefits provided by the Plan until such
benefits are received by the participants. The assets of the rabbi trust are
considered part of the general assets of the Association and are subject to the
claims of the Association's creditors in the event of the Association's
insolvency. Earnings on the trust's assets are taxable to the Association. The
trustee of the trust may invest the trust's assets in the Company's stock.
18
STOCK OPTION PLAN. The Company maintains the Stock Option Plan which
provides discretionary awards to officers and key employees as determined by a
committee of non-employee directors. The following table lists all grants of
options and stock appreciation rights ("SARs") under the Stock Option Plan to
the Named Executive Officers for fiscal 1996 and contains certain information
about the potential value of those options based upon certain assumptions as to
the appreciation of the Company's stock over the life of the option.
OPTIONS GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
- --------------------------------------------------------------------------------- ----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTION/SARS EXERCISE OR
OPTIONS/ GRANTED TO BASE PRICE
SARS GRANTED EMPLOYEES IN PER EXPIRATION
NAME (#)(2)(3)(4)(5) FISCAL YEAR SHARE DATE(6) 5% 10%
- ---------------------- --------------- ------------ ----------- ---------- ----------- ---------
J. Robert Eichinger.. 119,025 24.2% $10.0532 1/11/06 $1,902,565 $753,846
Gerald A. Agnes...... 79,350 16.1 10.0532 1/11/06 1,268,377 502,564
Alex J. Neil......... 39,654 8.1 10.0532 1/11/06 633,852 251,149
Jack A. Sanden....... 41,394 8.4 10.0532 1/11/06 661,666 262,169
- -----------------------------
(1) The amounts represent certain assumed rates of appreciation. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent on
the future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this
table will be realized.
(2) Options granted pursuant to the Stock Option Plan become exercisable in
equal installments at an annual rate of 20% beginning January 11, 1997,
unless otherwise accelerated.
(3) The purchase price may be paid in cash or in Common Stock.
(4) Under limited circumstances, such as death or disability of an employee, the
employee (or his beneficiary) may request that the Company, in exchange for
the employee's surrender of an option, pay to the employee (or beneficiary),
the amount by which the fair market value of the Common Stock exceeds the
exercise price of the option on the date of the employee's termination of
employment. It is within the Company's discretion to accept or reject such
a request.
(5) To the extent possible, options will be treated as incentive options.
(6) The option term is ten years.
19
The following table provides certain information with respect to the number
of shares of Common Stock represented by outstanding options held by the Named
Executive Officers as of June 30, 1996. Also reported are the values for "in-
the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year end price of the Common
Stock.
FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTION/SARS AT
FISCAL YEAR END(#) FISCAL YEAR END($)
-------------------------------- ------------------------------------
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- --------------------- -------------------------------- ------------------------------------
J. Robert Eichinger.. 0/119,025 0/0
Gerald A. Agnes...... 0/79,350 0/0
Alex J. Neil......... 0/39,654 0/0
Jack A. Sanden....... 0/41,394 0/0
- ---------------------------
(1) The options in this table have an exercise price of $10.0532 and become
exercisable at an annual rate of 20% beginning January 11, 1997. The
options will expire ten (10) years from the date of grant.
(2) Based on market value of the underlying stock at the fiscal year end, minus
the exercise price. The market price on September 6, 1996 was $9.375.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Association provides loans and extensions of credit to its directors
and officers. These loans are made in the ordinary course of business, are made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons and
do not involve more than the normal risk of collectibility or present other
unfavorable features. As of June 30, 1996, two of the Association's executive
officers had loans outstanding, whose individual aggregate indebtedness to the
Association exceeded $60,000, totalling $272,729 in the aggregate. All such
loans are current and were made by the Association in the ordinary course of
business and were not made with favorable terms nor did they involve more than
the normal risk of collectibility or contain unfavorable features.
PROPOSAL 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended June 30, 1996
were Deloitte & Touche LLP. The Company's Board of Directors has reappointed
Deloitte & Touche LLP to continue as independent auditors for the Association
and the Company for the fiscal year ending June 30, 1997 subject to ratification
of such appointment by the stockholders.
20
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and form of
proxy relating to the Annual Meeting of Stockholders to be held in 1997, a
stockholder proposal must be received by the Secretary of the Company at the
address set forth on the first page of this Proxy Statement not later than May
27, 1997. Any such proposal will be subject to 17 C.F.R. (S) 240.14a-8 of the
Rules and Regulations under the Securities Exchange Act of 1934, as amended.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an Annual Meeting. The
stockholder must give written advance notice to the Secretary of the Company not
less than ninety (90) days before the date originally fixed for such meeting,
provided, however, that in the event that less than one hundred (100) days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the date on which the
Company's notice to stockholders of the annual meeting date was mailed or such
public disclosure was made. The advance notice by stockholders must include the
stockholder's name and address, as they appear on the Company's record of
stockholders, a brief description of the proposed business, the reason for
conducting such business at the Annual Meeting, the class and number of shares
of the Company's capital stock that are beneficially owned by such stockholder
and any material interest of such stockholder in the proposed business. In the
case of nominations to the Board of Directors, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement or the proxy relating to an annual
meeting any stockholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
21
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting.
By Order of the Board of Directors
/s/ Janet E. Riley
Janet E. Riley
Corporate Secretary
Hemet, California
September 24, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
22