<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
D&N FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
D&N FINANCIAL CORPORATION
400 QUINCY STREET
HANCOCK, MICHIGAN 49930
(906) 482-2700
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
------------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of D&N Financial Corporation ("D&N" or the "Corporation") will be
held at the office of the Corporation located at 363 West Big Beaver Road, Suite
250, Troy, Michigan, on Wednesday, April 30, 1997, at 2:00 p.m. (Eastern
Daylight Time). A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of:
I. Electing three directors of the Corporation;
II. Ratifying the adoption of an amendment to the Amended and Restated 1994
Management Stock Incentive Plan that includes increasing the number of
shares reserved for issuance thereunder by 400,000 (which is less than
5.00% of the issued and outstanding shares of the Corporation's common
stock);
III. Ratifying the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Corporation for the fiscal year ending December 31,
1997; and
IV. Transacting such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
The Board of Directors is not aware of any other business to come before
the Meeting. Any action may be taken on any one of the foregoing proposals at
the Meeting on the date specified above, or on any date or dates to which the
Meeting may be adjourned or postponed. Stockholders of record at the close of
business on March 11, 1997 will be entitled to vote the number of shares held of
record in their names on that date.
A complete list of stockholders entitled to vote at the Meeting will be
available for examination by any stockholder for any purpose relevant to the
Meeting between 8:00 a.m. and 5:00 p.m. on working days at the 363 West Big
Beaver Road, Suite 100, Troy, Michigan office of the Corporation, for a period
of ten days prior to the Meeting.
You are requested to fill in and sign the enclosed form of proxy which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend and vote at the
Meeting in person.
By Order of the Board of Directors
LINDA K. KORPELA
LINDA K. KORPELA
Corporate Secretary
Hancock, Michigan
March 25, 1997
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED, POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
PROXY STATEMENT
OF
D&N FINANCIAL CORPORATION
400 QUINCY STREET
HANCOCK, MICHIGAN 49930
(906) 482-2700
ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of D&N Financial Corporation,
a Delaware corporation ("D&N" or the "Corporation"), for use at its 1997 Annual
Meeting of Stockholders to be held on Wednesday, April 30, 1997, at 2:00 p.m.
(Eastern Daylight Time), at the office of the Corporation located at 363 West
Big Beaver Road, Suite 250, Troy, Michigan, and at any adjournment or
postponement thereof (the "Meeting"). This Proxy Statement and the accompanying
Notice of Meeting and Proxy Card are first being mailed to stockholders of the
Corporation on or about March 25, 1997. Certain of the information provided
herein relates to D&N Bank (the "Bank"), a wholly owned subsidiary of the
Corporation.
Proxies solicited on behalf of the Board of Directors of the Corporation
will be voted in accordance with the directions given therein. Where no
instructions are indicated, proxies will be voted "FOR" the proposals set forth
in this Proxy Statement for consideration at the Meeting. The Corporation does
not know of any matters, other than as described in the Notice of Meeting, that
are to be properly presented at the Meeting. If any other matters are properly
presented at the Meeting for action, the persons named in the enclosed proxy and
acting thereunder will have the discretion to vote on such matters in accordance
with their best judgment.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) duly executing and delivering
to the Secretary of the Corporation a later dated proxy relating to the same
shares prior to the exercise of such proxy, (ii) filing with the Secretary of
the Corporation at or before the Meeting a written notice of revocation bearing
a later date than the proxy, or (iii) attending the Meeting and voting in person
(although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy should be delivered
to Linda K. Korpela, Corporate Secretary, 400 Quincy Street, Hancock, Michigan
49930.
Proxies marked as abstaining will be treated as present for purposes of
determining a quorum at the Meeting, and will be counted as present and entitled
to vote on any matter as to which abstention is indicated. Proxies returned by
brokers as "non-votes" on behalf of shares held in street name, because the
beneficial owners' discretion has been withheld as to one or more matters on the
agenda for the Meeting, will be treated as present for purposes of determining a
quorum for the Meeting, but will not be counted as voting on any matter as to
which a non-vote is indicated on the broker's proxy.
VOTE REQUIRED FOR APPROVAL OF PROPOSALS
Directors shall be elected by a plurality of the shares present in person
or represented by proxy at the Meeting and entitled to be voted on the election
of directors.
Approval of the proposal to amend the Amended and Restated 1994 Management
Stock Incentive Plan requires the affirmative vote of at least a majority of
shares present in person or represented by proxy at the Meeting and entitled to
be voted on the matter.
Approval of the ratification of Coopers & Lybrand L.L.P. as auditors for
the Corporation for the fiscal year ending December 31, 1997 requires the
affirmative vote of at least a majority of shares present in person or
represented by proxy at the Meeting and entitled to be voted on the matter.
1
<PAGE> 4
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record as of the close of business on March 11, 1997 will
be entitled to one vote for each share then held. As of such date, there were
8,314,654 shares of common stock (the "Common Stock") outstanding and entitled
to vote.
Set forth below is certain information as of March 11, 1997, as to (i)
those persons who were known by the Corporation to own beneficially more than 5%
of the Common Stock of the Corporation and (ii) the shares of Common Stock
beneficially owned by the executive officers named below and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------------------------ -------------------- ----------
<S> <C> <C>
Heartland Advisors, Inc..................................... 695,800(1) 8.37
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Mellon Bank Corporation..................................... 452,000(2) 5.44
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
George J. Butvilas, President
and Chief Executive Officer............................... 227,196(3) 2.67
D&N Financial Corporation and D&N Bank
Kenneth R. Janson, Executive Vice President,
Chief Financial Officer and Treasurer..................... 40,655(3) 0.49
D&N Financial Corporation and D&N Bank
Alfred J. Sliwinski, Executive Vice President/
Community Banking......................................... 55,434(3)(4) 0.66
D&N Bank
Richard E. West, Senior Vice President/
Wholesale Banking......................................... 30,083(3) 0.36
D&N Bank
Peter L. Lemmer, Senior Vice President/
General Counsel........................................... 26,688(3) 0.32
D&N Financial Corporation and D&N Bank
All directors and executive officers as a group (17
persons)(5)............................................... 992,925(6) 11.35
</TABLE>
- ---------------
(1) The above information regarding beneficial ownership by Heartland Advisors,
Inc. ("HAI") is as reported by them in a Schedule 13G dated February 12,
1997 under the Securities Exchange Act of 1934. HAI reported sole voting
power as to 621,300 shares, sole dispositive power as to 695,800 shares,
shared voting power as to no shares, and shared dispositive power as to no
shares. The shares are held in investment advisory accounts of HAI. The
interests of one such account, Heartland Value Fund, a series of Heartland
Group, Inc., a registered investment company, relate to more than 5% of the
class.
(2) The above information regarding beneficial ownership by Mellon Bank
Corporation ("MBC") is as reported by them in a Schedule 13G dated January
30, 1997 under the Securities Exchange Act of 1934. MBC reported sole voting
power as to 452,000 shares, sole dispositive power as to 26,000 shares,
shared voting power as to no shares, and shared dispositive power as to
426,000 shares.
(3) Includes for Messrs. Butvilas, Janson, Sliwinski, West and Lemmer,
respectively, 203,680, 33,744, 46,692, 24,535 and 22,135 shares subject to
options granted under the Corporation's stock option plans that are
exercisable within 60 days of March 11, 1997.
(4) Mr. Sliwinski has disclaimed beneficial ownership over 183 shares of D&N
Common Stock.
2
<PAGE> 5
(5) Includes directors and executive officers of the Corporation and the Bank as
of March 11, 1997.
(6) In addition to shares held directly, this amount includes restricted stock
and 436,205 shares subject to options exercisable within 60 days of March
11, 1997 granted under the Corporation's stock option plans. Also included
are shares allocated under the D&N Bank 401(k) Plan and shares held in
retirement accounts or by certain family members, over which shares the
respective directors and officers may be deemed to have shared voting and
investment powers. However, 1,853 of these shares have been disclaimed for
beneficial ownership purposes.
PROPOSAL I -- ELECTION OF DIRECTORS
Approximately one-third of the Corporation's Board of Directors is elected
annually.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
THREE NOMINEES PROPOSED BY YOUR BOARD OF DIRECTORS.
INFORMATION REGARDING DIRECTORS
Since the March 25, 1996 Proxy Statement, the number of directors
increased from eight to nine as a result of the Corporation's merger with Macomb
Federal Savings Bank on April 10, 1996. Stanley A. Jacobson was appointed to
fill the newly created Board position until the 1998 Annual Meeting of
Stockholders. In addition, Thomas J. St. Dennis resigned from the Board of
Directors effective October 4, 1996 due to other business commitments. On
December 2, 1996, the Board of Directors appointed Steven E. Zack to fill the
vacancy until the 1999 Annual Meeting of Stockholders.
The table below sets forth certain information regarding the composition
of the Corporation's Board of Directors, including terms of office. It is
intended that the proxies solicited on behalf of the Board of Directors (other
than proxies in which the vote is withheld as to one or more nominees) will be
voted at the Meeting for the election of the nominees listed below. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute as the Board of Directors may
recommend. At this time, the Board of Directors knows of no reason why any of
the nominees might be unable to serve if elected. There are no arrangements or
understandings between any nominee and any other person pursuant to which such
nominee was selected. Except for Directors Butvilas, Jacobson and Smith who
beneficially own approximately 2.67%, 1.58% and 2.91%, respectively, of the
outstanding shares of the Corporation's Common Stock including options
exercisable within 60 days of March 11, 1997, no director of the Corporation
owned in excess of one percent of the total outstanding shares of the
Corporation's Common Stock at March 11, 1997.
<TABLE>
<CAPTION>
DIRECTOR OF SHARES OF COMMON
POSITIONS HELD CORPORATION TERM STOCK BENEFICIALLY
IN THE CORPORATION OR BANK TO OWNED AS OF
NAME AGE AND THE BANK SINCE EXPIRE MARCH 11, 1997(1)
---- --- ------------------ ----------- ------ ------------------
<S> <C> <C> <C> <C> <C>
NOMINEES
Joseph C. Bromley.......... 68 Director of the Corporation 1980 2000(2) 14,840(3)
and the Bank
Sharon A. Reese
Dalenberg................ 52 Director of the Corporation 1994 2000(4) 7,079(3)
and the Bank
Peter Van Pelt............. 64 Director of the Corporation 1988 2000 18,496(3)
and the Bank
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR OF SHARES OF COMMON
POSITIONS HELD CORPORATION TERM STOCK BENEFICIALLY
IN THE CORPORATION OR BANK TO OWNED AS OF
NAME AGE AND THE BANK SINCE EXPIRE MARCH 11, 1997(1)
---- --- ------------------ ----------- ------ ------------------
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C> <C> <C>
Stanley A. Jacobson........ 47 Director of the Corporation 1996 1998 131,151
and the Bank and Vice
President/Business
Development Officer of the
Bank
Randolph P. Piper.......... 48 Director of the Corporation 1982 1998 28,204(3)(5)
and the Bank
Kenneth D. Seaton.......... 67 Director and Chairman of 1964 1998 51,386(3)
the Board of the
Corporation and the Bank
George J. Butvilas......... 51 Director, President and 1990 1999 227,196(3)
Chief Executive Officer of
the Corporation and the
Bank
B. Thomas M. Smith, Jr. ... 62 Director of the Corporation 1995 1999 242,239(3)
and the Bank
Steven E. Zack............. 46 Director of the Corporation 1996 1999 39,365
and the Bank
</TABLE>
- ---------------
(1) Includes shares held directly, as well as restricted stock and shares
subject to options exercisable within 60 days of March 11, 1997 granted
under the Corporation's stock option plans, shares allocated under the D&N
Bank 401(k) Plan and shares held in retirement accounts or by certain
members of the named individuals' families. To the extent that restricted
stock is held pursuant to the Tandem Restricted Stock/Stock Option Program
under the Amended and Restated Stock Option and Incentive Plan, these shares
are included in this total and the related tandem options are not so
included.
(2) In accordance with the age limitation for directors in the Bylaws of the
Corporation, Mr. Bromley is required to retire at the 1999 Annual Meeting of
Stockholders following his 70th birthday. The Board of Directors has not
made a determination at this time whether to fill the vacancy or to reduce
the number of directors.
(3) Includes shares subject to options which are exercisable within 60 days of
March 11, 1997: J. Bromley, 5,000; S. Reese, 5,000; P. Van Pelt, 13,000; R.
Piper, 13,000; K. Seaton, 5,000; G. Butvilas, 203,680; and B. Smith, Jr.,
5,000.
(4) The Office of Thrift Supervision ("OTS") extended an exemption from the
Depository Institution Management Interlocks Act until July 26, 1997. While
the Board of Directors has nominated Ms. Reese for a three-year term, the
Corporation has not yet filed an application for an extension of this
exemption.
(5) 1,670 of these shares have been disclaimed for beneficial ownership
purposes.
The business experience of each of the directors during the last five
years is as follows:
Joseph C. Bromley. Mr. Bromley has been associated with Churchill
Transportation, Inc. of Detroit, Michigan, a 48-state truck load carrier, since
October 1990 and presently serves as its Executive Vice President and Treasurer.
Prior to that, he had been Director, President and Chief Executive Officer of
Regency Motor Freight, Inc. in Detroit, Michigan. Mr. Bromley was a director of
First Farmington Savings and Loan Association from 1959 until its merger with
the Bank in 1980.
George J. Butvilas. Mr. Butvilas joined D&N as President in May 1990. He
was named Chief Executive Officer of the Bank in 1991 and Chief Executive
Officer of the Corporation in 1992. Prior to joining D&N, he had
4
<PAGE> 7
over 16 years experience as a commercial and community banker, most recently as
Executive Vice President and Director of Boulevard Bancorp, Inc. of Chicago,
Illinois.
Stanley A. Jacobson. Mr. Jacobson has served as Vice President/Business
Development Officer of the Bank since April 1996. He also is an attorney and has
been active in southeastern Michigan real estate developments for his own
account and in association with Mark Jacobson & Associates, Inc. since 1986. Mr.
Jacobson was President since 1989 and a director since 1975 of Macomb Federal
Savings Bank until its merger with the Bank in 1996.
Randolph P. Piper. Mr. Piper has been an attorney-at-law in Flint,
Michigan for over 23 years. He was a director of First Federal Savings and Loan
Association of Flint from 1979 until its merger with the Bank in 1982.
Sharon A. Reese Dalenberg. Ms. Reese is founder and has been President of
The Astor Group of Chicago, Illinois since 1978, which is a management
consulting firm specializing in all aspects of human resource training and
management development with Fortune Five Hundred and Fifty firms. Ms. Reese also
is President and CEO of Continental Courier, Inc., a courier service provider in
the Chicago metropolitan area. She also serves as a member of the Board of
Directors for Standard Federal Bank in Chicago, Illinois.
Kenneth D. Seaton. Mr. Seaton has been Chairman of the Board of the
Corporation since its formation in 1988 and served as its Chief Executive
Officer from 1988 to 1992. He was Chief Executive Officer of the Bank from 1968
to 1991. He joined the Bank in 1957 and had been an executive officer since
1962.
B. Thomas M. Smith, Jr. Mr. Smith was a consultant for ITT Corporation, a
multi-national conglomerate headquartered in New York, from January 1996 to
December 1996. Prior to that, he served as Vice President and Director of
Corporate Purchasing for ITT.
Peter Van Pelt. Mr. Van Pelt has served as the manager of North Wind Books
(and its predecessor business, The Museum Shop) of Eagle Harbor, Michigan since
January 1994. From 1990 to 1993, he was an independent management consultant.
Prior to that, he served as President of Runzheimer International of Rochester,
Wisconsin, a specialized management consulting firm.
Steven E. Zack. Mr. Zack has served as President of Global Commercial
Credit, a specialty insurance firm in Franklin, Michigan, since March 1996 and
as Executive Vice President of J. A. Versical & Associates, Inc., a Michigan
retail insurance broker, since May 1994. From May 1992 to May 1994, he served as
an independent insurance consultant and prior to that, as the National Marketing
Coordinator of Burns and Wilcox, Ltd., a wholesale insurance broker. Mr. Zack
was a director of Macomb Federal Savings Bank from 1989 until its merger with
the Bank in 1996.
BOARD OF DIRECTORS MEETINGS, COMPENSATION AND COMMITTEES
The Board conducts its business through meetings of the Board and through
the activities of its committees. The Board of Directors of the Corporation held
thirteen meetings during fiscal year 1996. All incumbent directors of the
Corporation attended 100% of the meetings of the Board of Directors and
committees on which such directors served during this period. The Corporation
has standing Audit, Compensation, Stock Option and Executive Committees.
The Corporation has no standing nominating committee. The full Board of
Directors acts as a nominating committee for the annual selection of its
nominees for election as directors. During fiscal year 1996, the Board of
Directors acting as a nominating committee met three times. While the Board of
Directors will consider nominees recommended by stockholders, it has neither
actively solicited nominations nor established any procedures for this purpose
outside of the requirements of the Bylaws of the Corporation.
The Bank, as the principal subsidiary of the Corporation, has certain
standing committees of its Board of Directors. These committees consist of the
Asset/Liability, Audit, Community Responsibility, Compensation, Executive and
Loan Committees. The Bank's Board of Directors is comprised of the same
individuals who currently serve on the Board of Directors of the Corporation.
During fiscal year 1996, the Board of Directors of
5
<PAGE> 8
the Bank held twelve meetings. No incumbent director of the Bank attended fewer
than 96% of the total meetings of the Board of Directors and committees on which
such director served during this period.
During fiscal year 1996, directors received $8,500 per annum, payable
monthly; the chairpersons of the Board's Asset/Liability, Audit, Community
Responsibility, Compensation and Loan Committees received additional
compensation of $50 per month; and the Chairman of the Board received additional
compensation of $750 per month. In addition, directors received a fee of $400
per day for attendance at meetings of the Board of Directors and a fee of $400
for attendance at Board committee meetings. These are the total fees paid for
representation on both the Corporation and the Bank Boards of Directors and are
allocated pursuant to a cost allocation agreement between the Corporation and
the Bank. A separate attendance fee is not received for a Corporation Board or
committee meeting if a fee is received for a meeting of the Bank Board or
parallel Bank committee held on the same day. Directors who are full-time
employees of the Corporation or the Bank did not receive the Board meeting or
committee meeting attendance fees. In March 1996, each non-employee director was
granted 7,500 nonqualified stock options pursuant to the formula award program
under the Amended and Restated 1994 Management Stock Incentive Plan with an
exercise price equal to the fair market value of D&N Common Stock on the date of
grant.
Set forth below is a list of the principal committees formed by the Board
of Directors of the Corporation and the Bank and members of those committees.
Asset/Liability Committee. The Asset/Liability Committee is responsible
for monitoring the Bank's exposure to interest rate risk in conjunction with
credit, operational and liquidity risks as they affect net interest income,
capital and return on equity and other aspects of asset/liability management.
Directors Piper (Chairperson), Smith, Van Pelt and Zack currently compose the
Asset/Liability Committee. This committee met four times during fiscal year
1996.
Audit Committee. The Audit Committee meets with the Corporation's
independent auditors and oversees the internal audit functions of the
Corporation and the Bank. The Audit Committee currently is composed of Directors
Van Pelt (Chairperson), Reese and Smith. The Corporation's Audit Committee met
four times and the Bank's Audit Committee met four times during fiscal year
1996.
Community Responsibility Committee. The Community Responsibility Committee
is responsible for ensuring that an affirmative effort is made by the Bank to
meet the banking and financial needs within its communities, with an
understanding of the cultural diversity within these communities. The Community
Responsibility Committee currently is composed of Directors Reese (Chairperson),
Smith and Van Pelt. This committee met three times during fiscal year 1996.
Compensation Committee. The Compensation Committee is responsible for
reviewing and recommending to the Board of Directors senior officers' salaries,
compensation and benefit programs and other aspects of personnel matters.
Directors Bromley (Chairperson), Reese and Van Pelt currently compose the
Compensation Committee. The Corporation's Compensation Committee met four times
and the Bank's Compensation Committee met four times during fiscal year 1996.
Executive Committee. The Executive Committee is authorized to exercise all
of the authority of the Board of Directors in the management of the Corporation
and the Bank between Board meetings, unless otherwise provided for in the Bylaws
of such entities. The Executive Committee currently is composed of Directors
Butvilas (Chairperson), Bromley, Seaton and Smith. The Executive Committee did
not meet during fiscal year 1996.
Loan Committee. The Loan Committee is responsible for monitoring the
credit risk and other aspects of the Bank's lending operations. Members of the
committee currently are Directors Jacobson (Chairperson), Piper and Seaton. This
committee met twelve times during fiscal year 1996.
Stock Option Committee. The Stock Option Committee is responsible for
administering the Corporation's stock option plans. Current members of the
committee are Directors Bromley (Chairperson) and Reese. This committee met two
times during fiscal year 1996.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
paid or granted to the Corporation's Chief Executive Officer and to each of the
four other most highly compensated executive officers of the Corporation and the
Bank whose aggregate cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
----------------------- -------
ANNUAL COMPENSATION SECURITIES
------------------------------------ RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(2)
------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George J. Butvilas............. 1996 $248,500(1) $72,007 $0 $0 42,353 $0 $23,338
President and Chief 1995 248,500(1) 0 0 0 0 0 5,270
Executive Officer 1994 207,544(1) 0 0 0 0 0 5,208
Kenneth R. Janson.............. 1996 $109,651 $21,433 $0 $0 15,731 $0 $ 8,284
Executive VP, Chief 1995 106,968 6,800 0 0 0 0 3,568
Financial Officer and 1994 100,000 0 0 0 0 0 3,352
Treasurer
Alfred J. Sliwinski............ 1996 $109,700 $19,818 $0 $0 14,706 $0 $ 8,215
Executive VP/Community 1995 95,559 5,000 0 0 0 0 3,190
Banking 1994 86,029 0 0 0 0 0 2,953
Richard E. West................ 1996 $ 93,163 $19,508 $0 $0 12,671 $0 $ 7,120
Senior VP/Wholesale 1995 86,161 5,750 0 0 0 0 2,908
Banking 1994 82,053 0 0 0 0 0 2,730
Peter L. Lemmer................ 1996 $ 91,709 $ 9,627 $0 $0 10,526 $0 $ 6,331
Senior VP/General 1995 89,473 5,300 0 0 0 0 1,627
Counsel 1994 84,429 0 0 0 0 0 1,510
</TABLE>
- ---------------
(1) Includes annual fees received as a director; no meeting or committee fees
were received.
(2) Represents employer matching contribution under the D&N Bank 401(k) Plan,
contributions under a nonqualified supplemental executive retirement plan
("SERP"), and life insurance premiums paid by the Corporation as follows:
<TABLE>
<CAPTION>
YEAR 401(K) SERP LIFE INS.
---- ------ ---- ---------
<S> <C> <C> <C> <C>
Butvilas....................................... 1996 $9,500 $13,070 $768
1995 4,620 0 650
1994 4,619 0 589
Janson......................................... 1996 $7,865 $ 0 $419
1995 3,208 0 360
1994 2,999 0 353
Sliwinski...................................... 1996 $7,771 $ 0 $444
1995 2,866 0 324
1994 2,647 0 306
West........................................... 1996 $6,760 $ 0 $360
1995 2,585 0 323
1994 2,462 0 268
Lemmer......................................... 1996 $5,977 $ 0 $354
1995 1,342 0 285
1994 1,266 0 244
</TABLE>
7
<PAGE> 10
The following table sets forth certain information concerning stock
options and stock appreciation rights ("SARs") granted to named executive
officers in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------ -------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE ($)(6)
---- ------------ ------------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Butvilas............................... 42,353(1) 18.04% $12.75 3/30/06 $235,279
Janson................................. 15,731(2) 6.70% $12.75 3/30/06 $ 87,389
Sliwinski.............................. 14,706(3) 6.27% $12.75 3/30/06 $ 81,695
West................................... 12,671(4) 5.40% $12.75 3/30/06 $ 70,390
Lemmer................................. 10,526(5) 4.48% $12.75 3/30/06 $ 58,474
</TABLE>
- ---------------
(1) 14,118 options were exercisable on 3/31/96, and 14,118 and 14,117 options
will become exercisable on 3/31/97 and 3/31/98, respectively.
(2) 5,244 options were exercisable on 3/31/96, and 5,244 and 5,243 options will
become exercisable on 3/31/97 and 3/31/98, respectively.
(3) 4,902 options were exercisable on 3/31/96, and 4,902 and 4,902 options will
become exercisable on 3/31/97 and 3/31/98, respectively.
(4) 4,224 options were exercisable on 3/31/96, and 4,224 and 4,223 options will
become exercisable on 3/31/97 and 3/31/98, respectively.
(5) 3,509 options were exercisable on 3/31/96, and 3,509 and 3,508 options will
become exercisable on 3/31/97 and 3/31/98, respectively.
(6) The fair value of grants made in fiscal 1996 was estimated to be $5.5552 per
share on the date of grant using the Black-Scholes option pricing model with
the following assumptions used: risk-free interest rate of 6.3%, expected
volatility of 25.1%, expected lives of seven years and no dividend yield.
The following table sets forth certain information concerning the number
and value of stock options and SARs at December 31, 1996 held by the named
executive officers. None of the named officers exercised any stock options or
SARs during 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END($)
SHARES ACQUIRED ---------------------------- ----------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Butvilas............. 0 N/A 189,562 28,235 $1,468,815 $112,940
Janson............... 0 N/A 28,500 10,487 227,108 41,948
Sliwinski............ 0 N/A 41,790 9,804 348,451 39,216
West................. 0 N/A 20,311 8,447 161,674 33,788
Lemmer............... 0 N/A 18,626 7,017 150,144 28,068
</TABLE>
8
<PAGE> 11
EMPLOYMENT CONTRACTS
The Bank has an employment contract with Mr. Butvilas, President and Chief
Executive Officer of the Bank and the Corporation. On February 26, 1997, the
Board of Directors extended the expiration date of Mr. Butvilas' contract from
May 1998 to May 2000.
The employment contract provides for a salary as determined by the Board
of Directors. Salary increases may be reviewed at least annually and are subject
to the sole discretion of the Board of Directors, except that any new salary
must not be less than the employee's prior year's salary. The contract also
provides for, among other things, participation in an equitable manner in
employee benefits applicable to executive personnel.
This contract provides for termination upon the employee's death, for
cause or in certain events as specified by OTS regulations. The contract is
terminable by Mr. Butvilas upon 90 days notice to the Bank. Mr. Butvilas'
contract also provides for a severance payment up to the remaining amount under
his contract term with a minimum payment of 200% of his annual salary in the
event of an involuntary termination or other specified circumstances in
connection with a change of control or within one year thereafter, provided that
the employee is not thereafter employed by the purchasing entity. Change of
control means the acquisition of 25% or more of voting securities of the Bank or
the Corporation by any person or persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is composed of three
non-employee directors. The Committee is responsible for overseeing all
compensation policies of the Corporation and the Bank (the "Company"), and
recommending to the full Board of Directors actions governing executive officer
salaries and annual and long-term incentive plans. Described below is an
accounting of those actions taken by the Committee regarding executive officer
and CEO compensation in 1996.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
As in prior years, the Committee's principal philosophy is to integrate
compensation consideration with the execution of the Company's strategic plan,
to ensure Company performance results and stockholder return. This is
accomplished by providing both short-term and long-term incentives that reward
achievement of the Company's performance goals and business plans. Assessments
of both individual and corporate performance are made within a framework, where
the executive shares compensation risk and reward, relative to results achieved.
It is also the objective of the Committee, in its compensation policies,
to attract and recruit quality professional talent, encourage stock ownership by
senior management in the Company, and ensure that executive compensation is
competitive to industry peer institutions. The Committee continues to use
independent compensation survey information from national and regional financial
research organizations that report compensation practices and salary levels for
various executive positions at comparable size financial institutions. It is the
Committee's philosophy to provide executive base compensation that is
competitive to other regional financial institutions' median base salary levels.
The Committee's decisions regarding base salaries for executive officers are
discretionary and no quantifiable formula is utilized in the decision-making
process.
The Corporation has also designed its compensation practices to comply
with the Internal Revenue Code's Section 162(m) compensation deduction limit of
$1.0 million.
During 1996, under the Company's performance-formula compensation plans
discussed below, the executive officers received incentive payments for
achieving the Company's 1995 earnings per share goal and specific individual
performance targets that are integral to the Company's strategic business plan.
9
<PAGE> 12
ANNUAL INCENTIVE AWARDS
Short-term cash awards are made to the executive officers based upon the
achievement of both corporate and individual performance measures. All executive
officers share the same corporate goals, which are based on earnings. Each
executive officer has different individual performance targets and weighting
factors between corporate, financial and individual goals. The corporate
performance level is determined by actual percent of goal achievement in excess
of 100%. Failure to reach 100% corporate performance results in no incentive
being paid, despite the achievement of the individual performance goals. To
encourage progressive results in excess of performance goals, no performance
ceilings are established but payment amounts are subject to a maximum percent of
salary target.
LONG-TERM INCENTIVE AWARDS
Long-term stock option awards under the control of the
stockholder-approved Amended and Restated 1994 Management Stock Incentive Plan
are designed to increase long-term stockholder value. The plan has a formula
with respective target stock option award levels based upon average percentages
of compensation paid to banking executives at financial institutions of similar
size as the Company. Award payouts are subject to the achievement of Return on
Average Assets and Return on Average Equity targets each year as delineated in
the Company's business plan. Minimum key ratios, including tangible capital,
loan loss reserve/total loans, and non-performing assets/tangible capital and
loan loss reserve, must also be met for an award payout. Options are granted at
the fair market value of D&N Common Stock on the date of grant, which is ninety
days following the end of the fiscal year. One-third of the options are
exercisable immediately, with one-third each vesting on the first and second
anniversaries of the grant date.
CEO COMPENSATION DISCUSSION
Mr. Butvilas' base compensation remained unchanged in 1996 from 1995. Mr.
Butvilas' overall compensation included an annual incentive payment for
achieving the Company's 1995 annual earnings goal, under the Company's Annual
Incentive Plan discussed above. During 1996, the Committee continued to focus
its evaluation of Mr. Butvilas on his success in achieving the Company's
profitability goals and an improved stockholder return, as evidenced by the
following stockholder return performance presentation. Additionally, the
Committee considered Mr. Butvilas' success in growing the asset size of the
Company, expanding the retail franchise system, and implementing new cost
control initiatives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In accordance with Item 404 of SEC Regulation S-K, no interlock
relationships existed by the Committee members. Furthermore, no member of the
Committee is a former or current officer or employee of the Corporation or any
of its subsidiaries.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors.
Joseph C. Bromley, Chairman
Sharon A. Reese Dalenberg
Peter Van Pelt
10
<PAGE> 13
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Corporation's Common Stock
against the cumulative total return of Media General's Composite S&L Index ("MG
Group Index") and the NASDAQ Market Index for the period of five years
commencing January 1, 1992 and ending December 31, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL RETURN AMONG D&N FINANCIAL CORPORATION,
NASDAQ MARKET INDEX AND MG GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD D&N MG GROUP NASDAQ
(FISCAL YEAR COVERED) FINANCIAL INDEX MARKET INDEX
CORP.
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 160.98 132.76 100.98
1993 151.22 164.62 121.13
1994 146.34 157.68 127.17
1995 236.59 249.75 164.96
1996 326.83 325.95 204.98
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1992
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DECEMBER 31
CERTAIN TRANSACTIONS
The Corporation, through the Bank, has followed a policy of granting to
its executive officers, directors and principal stockholders consumer loans as
well as mortgage loans for purposes of purchasing or improving their residences.
These loans were initially made on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
nonaffiliated persons. Federal Reserve Board Regulation O, 12 CFR Part 215 was
amended to permit making certain kinds of loans to directors and executive
officers at favorable interest rates. The Bank adopted a policy, effective
September 30, 1996, of granting certain
11
<PAGE> 14
loans to executive officers at the same rates as are available to other Bank
employees through the Employee Loan Program. Generally, employees may receive a
loan benefit that provides up to a 1% interest rate reduction on eligible loans
and a waiver of the loan processing/origination fee. There are limitations with
regard to loan type and the frequency of receiving certain benefits. All
participants in the Employee Loan Program must meet the same credit and approval
standards that are applicable to the general public. It is the belief of
management that these loans neither involve more than the normal risk of
collectability nor present other unfavorable features. Loans to directors are
made on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with nonaffiliated persons.
All loans by the Bank to its directors and executive officers are subject to OTS
regulations restricting loans and other transactions with affiliated persons of
the Bank.
Set forth below is certain information as of December 31, 1996 regarding
the indebtedness under the Bank's Employee Loan Program of each executive
officer of the Corporation and his or her affiliates whose aggregate
indebtedness to the Bank under such program exceeded $60,000 at any time during
the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
LARGEST
AMOUNT
OUTSTANDING
DATE OF TYPE OF ORIGINAL SINCE BALANCE AT INTEREST RATE
NAME AND POSITION LOAN LOAN AMOUNT 12/31/95 12/31/96 PAID
----------------- ------- ------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
George J. Butvilas................... 12/14/92 Mortgage $226,600 $218,451 $215,913 7.0%
Director, President and CEO of 05/26/92 Advantage 25,000 24,763 24,599 1.5% over
Corporation and Bank Line of prime
Credit
Peter L. Lemmer...................... 05/31/95 Mortgage 95,200 93,127 89,289 6.5%
Senior VP/General Counsel of
Corporation and Bank
Donald W. Schulze.................... 08/16/96 Mortgage 112,881 112,881 112,881 8.25%
Senior VP/Human Resources of Bank
Alfred J. Sliwinski.................. 10/04/96 Mortgage 224,050 224,050 224,050 8.25%
Executive VP/Community Banking of 10/08/96 Auto 10,339 10,339 10,150 8.4%
Bank
</TABLE>
PROPOSAL II -- RATIFICATION OF THE ADOPTION OF THE AMENDMENT TO THE AMENDED AND
RESTATED 1994 MANAGEMENT STOCK INCENTIVE PLAN
The Corporation's Amended and Restated 1994 Management Stock Incentive
Plan (the "Stock Plan") currently authorizes the issuance of up to 600,000
shares of the Corporation's Common Stock and currently expires on February 27,
2005. The Stock Plan was initially ratified by the stockholders of the
Corporation in 1994 and amended in 1995.
The Stock Plan was adopted in order to advance the interests of the
Corporation and its stockholders by providing executive officers, directors and
certain key employees an opportunity to acquire or increase their proprietary
interest in the Corporation through the grant of a variety of long-term
incentive awards. Under the Stock Plan, 533 persons were eligible to become
participants in the Stock Plan as of December 31, 1996. By encouraging such
persons to become owners of the Corporation, the Corporation seeks to attract,
motivate, reward and retain those individuals whose judgment, initiative,
leadership and effort most directly determines the success of the Corporation.
THE AMENDMENT TO THE STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Stock Plan which will increase by 400,000 (i.e., an amount
equal to approximately 4.81% of the current issued and
12
<PAGE> 15
outstanding shares of Common Stock) the number of shares available for issuance
under the Stock Plan, increase the term of the plan so that the plan expires ten
years from the date of stockholder approval of the amendment, and include
advisory directors as persons eligible to participate in the Stock Plan.
Reservation of the additional 400,000 shares under the Stock Plan is being
requested for future grants. As of March 11, 1997 (the latest date available
prior to the mailing of this Proxy Statement), of the 600,000 shares of Common
Stock reserved for issuance under the Stock Plan, awards representing 260,347
shares of Common Stock are available for grant and previously granted options to
purchase 323,878 shares of Common Stock remain unexercised. The exercise of
stock options may decrease certain per share financial measures for a period of
time and may diminish a stockholder's percentage of voting power in the
Corporation, although the Corporation may consider repurchasing its shares in
the future in order to minimize or avoid any such effects.
Attached as Exhibit A to this Proxy Statement is the complete text of the
Stock Plan including the amendments thereto. The principal features of the Stock
Plan are summarized below.
PRINCIPAL FEATURES OF THE STOCK PLAN
The Stock Plan provides for awards in the form of stock options and
restricted stock. Each award shall be on such terms and conditions, consistent
with the Stock Plan, as the Committee administering the Stock Plan may
determine.
Shares may be either authorized but unissued shares or reacquired shares
held by the Corporation in its treasury. Any shares subject to an award which
expires or terminates unexercised will again be available for issuance under the
Stock Plan. Generally, no award or any right or interest therein is assignable
or transferable except under certain limited exceptions set forth in the Stock
Plan.
The Stock Plan is administered by a Committee consisting of at least two
non-employee members of the Board of Directors. The current committee members
are Joseph C. Bromley and Sharon A. Reese Dalenberg. In granting awards under
the Stock Plan, the Committee considers, among other things, the participant's
duties and overall performance and contribution to the success of the
Corporation and the Bank.
STOCK OPTIONS
The Committee may grant either "incentive stock options" as defined under
Section 422 of the Internal Revenue Code of 1986 (the "Code") or stock options
not intended to qualify as such ("nonqualified stock options").
In general, stock options will not be exercisable after the expiration of
their terms. Unless otherwise determined by the Committee, in the event that a
participant ceases to maintain continuous service (as defined in the Stock Plan)
with the Corporation or one of its subsidiaries for any reason other than death
or termination for cause, an exercisable stock option will continue to be
exercisable for three months immediately thereafter, but in no event after the
expiration date of the stock option. In the event of the death of a participant
during such service or within three months following termination, a stock option
will continue to be exercisable for one year, to the extent exercisable by the
participant immediately prior to his or her death, but in no event after the
expiration of the stock option. A stock option will automatically terminate and
will no longer be exercisable as of the date a participant is terminated for
cause.
The exercise price for the purchase of shares subject to a stock option at
the date of grant may not be less than 100% of the fair market value of the
shares covered by the stock option on that date. The exercise price must be paid
in full, in cash or in shares of Common Stock, or a combination of both.
RESTRICTED STOCK
The Committee may grant restricted stock, subject to forfeiture if the
participant fails to remain in the continuous service of the Corporation or one
of its subsidiaries as a director, advisory director, officer or
13
<PAGE> 16
employee. The holder of restricted stock shall have all of the rights of a
stockholder, including the right to receive dividends and the right to vote the
shares. The participant may not, however, sell, assign, transfer, pledge or
otherwise encumber any of the restricted stock during the restricted period.
The Committee may, in its discretion, accelerate the time at which any or
all restrictions will lapse, or may remove any or all of the restrictions. In
the event a participant ceases to be employed by reason of death, disability or
retirement, restricted stock still subject to restrictions will be free of the
restrictions imposed by the Committee, and the Corporation shall deliver such
shares within 60 days, unless otherwise provided by the Committee. In the event
of termination for any other reason, all shares still subject to restrictions
will be forfeited and returned to the Corporation, unless the Committee provides
otherwise.
EFFECT OF MERGER AND OTHER ADJUSTMENTS
In the case of any merger, consolidation or combination of the Corporation
with or into another company or other entity, whereby the Corporation is not the
continuing company, any participant to whom a stock option or restricted stock
award has been granted shall retain the right to receive, upon exercise of such
stock option or the lapsing of restriction pursuant to the restricted stock
award, the value of such stock award.
In the event that there is any change in the shares of the Corporation
subsequent to the Stock Plan's effective date by reason of any recapitalization,
stock split, reverse stock split, stock dividend, reorganization, consolidation,
combination or exchange of shares, merger, or any other change in the corporate
structure or the shares of the Corporation, the aggregate number and class of
shares available for stock option and restricted stock awards, the exercise
price per share of each such stock option and the amount paid, if any, for each
restricted stock share granted, and the number and class of shares subject to
each outstanding award may be adjusted by the Committee, whose determination
shall be conclusive and binding.
In the event the service of a participant is voluntarily or involuntarily
terminated for any reason within 18 months after a change in control of the
Corporation (i) any restriction period with respect to restricted stock shall
lapse upon termination and all shares awarded as restricted stock shall become
fully vested, and (ii) all stock options previously granted, not terminated and
not fully exercisable shall become exercisable in full upon termination. A
change in control will be deemed to occur when (i) a person or group becomes the
beneficial owner of shares of the Corporation representing 25% or more of the
total number of votes which may be cast for the election of the Board of
Directors of the Corporation, (ii) in connection with any cash tender offer,
merger or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the Corporation
cease to be a majority of the Board of Directors, (iii) the acquisition of
between 10% and 25% of the outstanding shares of the Corporation by any third
person, if the Board of Directors of the Corporation or the OTS has made a
determination that such acquisition constitutes or will constitute control of
the Corporation, or (iv) the stockholders of the Corporation shall approve an
agreement providing either for a transaction in which the Corporation will cease
to be an independent publicly owned corporation or for a sale or other
disposition of all or substantially all of the assets of the Corporation.
AMENDMENT AND TERMINATION
The Board of Directors of the Corporation may at any time amend, suspend
or terminate the Stock Plan or any portion thereof but may not, without the
prior approval of the stockholders, make any amendment which (i) materially
increases the total number of shares which may be subject to awards, (ii)
materially increases the benefits which accrue to participants under the Stock
Plan, or (iii) changes the class of persons eligible to participate in the Stock
Plan; provided, however, that no such amendment, suspension or termination shall
impair the rights of any participant without his consent regarding any award
theretofore previously made pursuant to the Stock Plan. Unless previously
terminated, the Stock Plan shall continue in effect for a term of ten years from
the date of stockholder approval of the amended plan, after which no further
awards may be granted under the Stock Plan.
14
<PAGE> 17
FEDERAL INCOME TAX CONSEQUENCES
Under present federal income tax laws, awards under the Stock Plan will
have the following consequences:
(1) The grant of an award will neither, by itself, result in the
recognition of taxable income to the participant nor entitle the
Corporation to a deduction at the time of such grant.
(2) The exercise of a stock option which is an "incentive stock
option" within the meaning of Section 422 of the Code will generally not,
by itself, result in the recognition of taxable income to the participant
nor entitle the Corporation to a deduction at the time of such exercise.
However, the difference between the exercise price and the fair market
value of the option shares on the date of exercise is an item of tax
preference which may, in certain situations, trigger the alternative
minimum tax. The alternative minimum tax is incurred only when it exceeds
the regular income tax. The alternative minimum tax will be payable at the
rate of 26% to the first $175,000 of "minimum taxable income" in excess of
$33,750 (single person) or $45,000 (married person filing jointly). This
tax applies at a flat rate of 28% of so much of the taxable excess as
exceeds $175,000. If a taxpayer has alternative minimum taxable income in
excess of $150,000 (married persons filing jointly) or $112,500 (single
person), the $45,000 or $33,750 exemptions are reduced by an amount equal
to 25% of the amount by which the alternative minimum taxable income of the
taxpayer exceeds $150,000 or $112,500, respectively. Provided the
applicable holding periods described below are satisfied, the participant
will recognize long-term capital gain or loss upon resale of the shares
received upon such exercise. The Corporation will generally not be entitled
to a tax deduction with respect to the granting or exercise of such a stock
option or the subsequent sale of the shares. If the shares are not held for
at least one year after transfer of the shares to him or her, or two years
after the grant of the incentive stock option, whichever is later, the
participant will also recognize ordinary income or loss upon disposition in
an amount equal to the difference between the exercise price and the fair
market value on the date of exercise of the shares acquired pursuant to the
incentive stock option. In such an event, the Corporation will generally be
entitled to a corresponding deduction, provided the Corporation meets its
federal withholding tax obligations.
(3) The exercise of a stock option which is not an incentive stock
option will result in the recognition of ordinary income by the participant
on the date of exercise in an amount equal to the difference between the
exercise price and the fair market value on the date of exercise of the
shares acquired pursuant to the stock option.
(4) Holders of restricted stock will recognize ordinary income on the
date that the shares of restricted stock are no longer subject to a
substantial risk of forfeiture, in an amount equal to the fair market value
of the shares on that date. In certain circumstances, a holder may elect to
recognize ordinary income and determine such fair market value on the date
of the grant of the restricted stock. Holders of restricted stock will also
recognize ordinary income equal to their dividend or dividend equivalent
payments when such payments are received.
(5) The Corporation will be allowed a deduction at the time and in the
amount of any ordinary income recognized by the participant under the
various circumstances described above, provided that the Corporation meets
its federal withholding tax obligations.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE AMENDMENT TO THE AMENDED AND RESTATED 1994
MANAGEMENT STOCK INCENTIVE PLAN.
15
<PAGE> 18
PROPOSAL III -- RATIFICATION OF APPOINTMENT OF AUDITORS
The Corporation's independent auditors are Coopers & Lybrand L.L.P.,
certified public accountants. At the Meeting, the stockholders will consider and
vote on the ratification of the appointment of independent auditors for the
Corporation's fiscal year ending December 31, 1997. The Board of Directors has
engaged Coopers & Lybrand L.L.P. to be its auditors subject to ratification by
the Corporation's stockholders. A representative of Coopers & Lybrand L.L.P. is
expected to attend the Meeting and will have an opportunity to make a statement
and be available to answer questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE CORPORATION'S
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Corporation's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at D&N's main office, 400 Quincy Street,
Hancock, Michigan 49930, no later than November 25, 1997. Any such proposal
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended.
SOLICITATION OF PROXIES
The cost of solicitation of the proxies will be borne by the Corporation.
The Corporation has retained the services of Regan & Associates, Inc., a
professional proxy solicitation firm, to assist in the solicitation of proxies.
Such firm will receive a fee of approximately $3,000 for such services plus
reimbursement for reasonable out-of-pocket expenses. Under certain
circumstances, additional fees may be paid to Regan & Associates, Inc. In
addition to solicitations by mail, the directors and certain officers and
regular employees of the Corporation and Bank may solicit proxies personally
and/or by use of telecommunications equipment, without additional compensation.
The Corporation will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
materials to and obtaining proxy materials from the beneficial owners of Common
Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Corporation's equity securities, to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Corporation. Officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish the Corporation with copies of all Section
16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, all Section 16(a) filing requirements applicable to
its officers, directors and greater than 10% beneficial owners were complied
with during the fiscal year ended December 31, 1996 with one exception. The
year-end Form 5 to report exempt transactions in the D&N Bank 401(k) Plan
covering 146 shares was filed late by John L. Blissett, a former officer of the
Corporation.
16
<PAGE> 19
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the Meeting, it is intended
that holders of the proxies will act in accordance with their best judgment and
vote the proxies to the extent permitted by law.
By Order of the Board of Directors
LINDA K. KORPELA
LINDA K. KORPELA
Corporate Secretary
Hancock, Michigan
March 25, 1997
17
<PAGE> 20
EXHIBIT A
D&N FINANCIAL CORPORATION
AMENDED AND RESTATED
1994 MANAGEMENT STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Amended and Restated 1994 Management Stock Incentive
Plan (the "Plan") of D&N Financial Corporation (the "Corporation") shall be to
promote and enhance the long term interests of the Corporation and its
stockholders by providing a means of retaining and motivating directors,
advisory directors, officers and employees. The Plan is intended to award to
eligible participants or allow them to acquire shares of the Corporation's stock
pursuant to the Plan provisions outlined herein. This Plan is an amendment and
restatement of the Corporation's Amended and Restated 1994 Management Stock
Incentive Plan, which was initially approved by stockholders at the April 26,
1994 Annual Meeting. This amended and restated Plan was submitted for
stockholder approval at the April 30, 1997 Annual Meeting.
2. DEFINITIONS
Unless the context of the applicable section clearly indicates otherwise,
the terms below, when used within this Plan, shall have the meaning set forth in
this Section 2.
2.01 Affiliate means any "parent corporation" or "subsidiary corporation"
of the Corporation as such terms are defined within Sections 424(e)
and (f), respectively, of the Code, including any corporation that
becomes an Affiliate after the adoption of this Plan.
2.02 Agreement means a written agreement or other form of instrument
(including any amendments or supplements) between the Corporation and
a Participant specifying the terms and conditions of an Award of
Restricted Stock or an Option to the Participant.
2.03 Award means the granting, by the Committee, of an Incentive Stock
Option, a Nonqualified Stock Option, or Restricted Stock, or any
combination thereof, pursuant to the provisions of the Plan.
2.04 Beneficiary means the person or persons designated in writing by the
Participant or, in the absence of such a designation or if the
designated person or persons predecease the Participant, the
Participant's beneficiary shall be the person or persons who inherit
the Participant's right by will or applicable law.
2.05 Board of Directors or Board means the Board of Directors of D&N
Financial Corporation.
2.06 Cause means, in the context of termination of employment for cause,
termination of employment because of personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or cease-and-desist order, or
material breach of any agreement with D&N Bank or the Corporation.
2.07 Code means the Internal Revenue Code of 1986, as amended from time to
time.
2.08 Committee means a Committee of the Board, as described in Section 3,
responsible for the administration of the Plan.
2.09 Common Stock means the Common Stock, par value $.01 per share, of the
Corporation.
2.10 Continuous Service means the absence of any interruption or
termination of service as a director, advisory director, officer or
employee of the Corporation or an Affiliate, except that when used
with
A-1
<PAGE> 21
respect to persons granted an Incentive Stock Option shall mean the
absence of any interruption or termination as an employee. Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Corporation or in the case of transfers between payroll locations of
the Corporation, or between the Corporation, its parent, its
subsidiaries or its successor.
2.11 Disability means a disability as defined in the Corporation's Long
Term Disability Insurance Plan, as amended from time to time.
2.12 Employee means any person, including an officer or director, who is
employed by the Corporation or any Affiliate.
2.13 Exercise Period means that period of time as designated by the
Committee for the exercise of Options pursuant to the Plan.
2.14 Exercise Price means, in the case of an Option, the price per Share
at which the shares subject to such Option may be purchased upon
exercise.
2.15 Fair Market Value means, for any given date, the average of the high
and low quoted sales price on such date of a Share on the composite
tape for the New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape on the New York
Stock Exchange or, if the Shares are not listed or admitted to
trading on such Exchange, on the principal United States securities
exchange registered under the 1934 Act on which the Shares are listed
or admitted to trading, or, if the Shares are not listed or admitted
to trading on such exchange, the mean between the closing high bid
and low asked quotations for a Share on such date on the National
Association of Securities Dealers, Inc. Automated Quotations System,
or any similar system. If the Common Stock was not traded on such
date, then the Fair Market Value is determined with reference to the
next preceding day that the Common Stock was so traded. If no such
quotations are available, the Fair Market Value is determined based
upon a date and in a manner as determined by the Committee.
2.16 Incentive Stock Option means an Option to purchase shares of Common
Stock granted by the Committee pursuant to Section 6 of the Plan and
intended to qualify under Section 422 of the Code.
2.17 Non-Employee Director means a director who a) is not currently an
officer or employee of the Corporation or an Affiliate; b) is not a
former employee of the Corporation or an Affiliate who receives
compensation for prior services (other than from a tax-qualified
retirement plan); c) has not been an officer of the Corporation or an
Affiliate; d) does not receive remuneration from the Corporation or
an Affiliate in any capacity other than as a director; and e) does
not possess an interest in any other transactions or is not engaged
in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
2.18 Nonqualified Stock Option means an Option to purchase shares of
Common Stock granted by the Committee pursuant to Section 6 of the
Plan and which is not intended to qualify under Section 422 of the
Code.
2.19 Option means an Incentive Stock Option or a Nonqualified Stock
Option.
2.20 Participant means any director, advisory director, officer or
employee of the Corporation or an Affiliate who is selected by the
Committee to receive an Award.
2.21 Plan means the Amended and Restated 1994 Management Stock Incentive
Plan of the Corporation.
2.22 Restriction Period means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect with
respect to Restricted Stock under the Plan.
A-2
<PAGE> 22
2.23 Restricted Stock means Shares which have been contingently awarded to
a Participant by the Committee subject to the restrictions referred
to in Section 7 of the Plan, so long as such restrictions remain in
effect.
2.24 Retirement means retirement pursuant to the Corporation's retirement
policy, as amended from time to time.
2.25 Share or Shares means a share or shares of the Corporation's Common
Stock.
2.26 Wherever used herein, unless indicated otherwise, words in the
masculine form shall be deemed to refer to females as well as males.
3. ADMINISTRATION
3.01 Committee. The Plan shall be administered by a Committee consisting
of two or more members, appointed by the Board, each of whom shall be
a Non-Employee Director.
3.02 Determinations. Within the limits of the provisions of the Plan, the
Committee shall have sole and plenary authority and discretion to
grant Awards and determine (i) Plan Participants; (ii) the form and
amount of such Awards; (iii) the number of Shares subject to types of
Awards generally, as well as to individual Awards granted under the
Plan; (iv) the terms, Award date, termination date and other
conditions upon which Awards shall be granted under the Plan; (v) the
form and provisions of Agreements or other such instruments
evidencing such grants; (vi) limitations or restrictions applicable
to any such Award; (vii) interpretations of the Plan's provisions;
and (viii) regulations for the administration of the Plan including
the right to prescribe, amend and rescind such regulations. The
determinations of the Committee on all matters regarding the Plan
shall be final and conclusive unless otherwise determined by the
Board of Directors, and no member of the Committee shall be liable
for any act conducted in good faith with respect to the Plan.
3.03 Quorum. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which
a quorum is present, as well as acts which are approved in writing by
a majority of the Committee without a meeting, shall be considered
acts of the Committee.
4. PARTICIPATION
Participants granted Awards pursuant to the Plan, including directors,
advisory directors, officers and employees of the Corporation or any Affiliate,
shall be determined by the Committee based upon its evaluation of each eligible
Participant's duties, overall performance and contribution to the success of the
Corporation or an Affiliate, and capacity for contributing to the successful
performance of the Corporation or its Affiliates. All decisions regarding Awards
granted to Plan Participants by the Committee shall be conclusive.
5. SHARE AWARDS UNDER THE PLAN
5.01 Form. Awards granted pursuant to the Plan shall be in the form of
Incentive Stock Options, Nonqualified Stock Options or Restricted
Stock as herein defined in Section 2.
5.02 Shares Subject to Plan. The total number of Shares which may be
awarded by the Corporation in the forms included within Section 5.01
shall not exceed one million Shares, subject to adjustments outlined
in Section 8.01. Those Shares with respect to which Awards may be
granted under the Plan may be either authorized but unissued Shares
or Shares heretofore or hereafter reacquired by the Corporation and
held in its treasury.
A-3
<PAGE> 23
5.03 Unexercised, Terminated and Forfeited Shares. Shares from Options
which have expired unexercised or have been terminated for any reason
and Shares of Restricted Stock which are forfeited for any reason may
be reallocated to subsequent Options or Restricted Stock granted
under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be in such form and upon such terms
and conditions as the Committee shall determine from time to time, subject to
the following:
6.01 General Committee Authority and Discretion. Except as expressly
limited by the provisions of the Plan and subject to the statutory
requirements of Incentive Stock Options as outlined in Section 6.06
of the Plan, the Committee shall have absolute authority and
discretion to determine the terms and conditions of all Options
including Participants, number of Shares per Award, Exercise Price
(which shall not be less than the Fair Market Value per Share on the
date of grant of such Option), expiration date, restrictions, and the
manner, timing and sequencing of exercise. The terms and conditions
of Options need not be identical among Participants. As a condition
of granting any Option, the Committee may require that a Participant
agree not to exercise thereafter any one or more Options previously
granted to such Participant. The Committee may not grant Awards to
any individual in any calendar year with respect to more than 25% of
the total Shares subject to the Plan.
6.02 Option Agreement or Other Award Instrument. Each Option granted under
the Plan shall be evidenced by an Option Agreement or other
instrument, in a form as determined by the Committee in its sole
discretion, which has been executed by the Corporation and by the
Participant. Officers of the Corporation expressly designated and so
authorized by the Committee may execute and deliver Option Agreements
or other Award instruments in the name of the Corporation.
6.03 Forms of Payment. At the time that an Option granted under the Plan,
or any part thereof, as permitted according to terms established by
the Committee, is exercised, payment for the Shares issuable
thereupon shall be made in full in cash (including check, money
order, cashier's check, or certified check) or by delivering (i)
Shares already owned by the Participant and having a Fair Market
Value equal to the applicable Exercise Price as determined in a
manner established by or acceptable to the Committee and in
conformance with applicable laws, or (ii) a combination of cash and
currently owned Shares.
6.04 Service to the Corporation. Except as provided in Section 6.05 of the
Plan, every Option granted to a Participant shall be exercisable by
the Participant during his lifetime, and only in the event that such
Participant has maintained Continuous Service since the date of the
grant of such Option.
6.05 Exercise in the Event of Termination of Service.
(a) Termination Other Than for Cause or Death. If a Participant to
whom an Option was granted shall cease to maintain Continuous Service
due to any reason other than death or termination of employment for
Cause as provided in Sections 6.05(b) and (c), such Participant may
exercise such Option to the extent that the Participant was entitled
to do so on the date of the termination, but only within three months
of cessation of Continuous Service and in no event after the
expiration date of the Option; provided that such right of exercise
after cessation of Continuous Service shall not be available to a
Participant if the Committee determines and provides in the Option
Agreement referenced in Section 6.02 that such right shall not be
available.
(b) Termination Due to Death. In the event of the death of a
Participant while in Continuous Service or within the three month
period referred to in Section 6.05(a), the person or persons to whom
the Participant's rights under the Option pass by will or applicable
law, or, in the case of an Award other than an Incentive Stock
Option, pursuant to a qualified domestic relations order, as defined
in the Code or Title I of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA") or the rules thereunder, may
exercise such Option to the extent that the
A-4
<PAGE> 24
Participant was entitled to do so on the date of the Participant's
death, and within a one year period succeeding the date of the death
of the Participant but in no event after the expiration date of the
Option. Following the death of any Participant to whom an Option was
granted under the Plan, irrespective of whether the person entitled
to exercise such Option desires to do so, the Committee may, as an
alternative means of settlement of such Option, elect to pay to the
person to whom such Option is transferred by will or by the laws of
descent and distribution, or, in the case of an Option other than an
Incentive Stock Option, pursuant to a qualified domestic relations
order, as defined in the Code or Title I of ERISA or the rules
thereunder, the amount by which the Fair Market Value per Share on
the date of exercise of such Option shall exceed the Exercise Price
of such Option, multiplied by the number of Shares with respect to
which such Option is properly exercised. Any such settlement of an
Option shall be considered an exercise of such Option for all
purposes of the Plan.
(c) Termination for Cause. In the event that the Continuous Service
of a Participant is terminated for Cause, all rights under any Option
shall expire immediately upon giving the Participant notice of such
termination from service.
6.06 Statutory Requirements of Incentive Stock Options. In accordance with
Section 422 of the Code, any Options granted under the Plan which are
Incentive Stock Options shall be granted only to officers and other
employees of the Corporation or an Affiliate. Further,
notwithstanding any other Plan provision, (i) no Incentive Stock
Option shall be granted more than ten years after April 30, 1997, the
date on which the Plan was submitted for approval by the stockholders
of the Corporation; (ii) the Exercise Price of an Incentive Stock
Option shall not be less than Fair Market Value on the date of grant
and no Incentive Stock Option may be awarded to any individual owning
more than 10% of the total combined voting power of all classes of
stock of the Corporation or of any Affiliate unless the Exercise
Price is at least 110% of Fair Market Value at the time of the grant
and such Incentive Stock Option is not exercisable after five years
from the date on which it is awarded; (iii) the aggregate Fair Market
Value at the time of grant of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by a
Participant in any calendar year shall not exceed $100,000; and (iv)
each Incentive Stock Option granted under the Plan shall expire not
more than ten years from the date on which it was granted.
7. TERMS AND CONDITIONS OF RESTRICTED STOCK
Restricted Stock shall be awarded under the Plan upon such terms and
conditions as the Committee shall have full authority and discretion to
determine from time to time, subject to provisions of the Plan and to the
following:
7.01 Restriction Period. At the time of an Award of Restricted Stock, the
Committee shall establish for each Participant a Restriction Period
during which or at the expiration of which, as the Committee shall
determine, the Shares awarded as Restricted Stock shall vest. Subject
to any such other terms and conditions as the Committee shall
provide, during the Restriction Period, Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered by the
Participant, except as hereinafter provided in this Section 7. Except
for such restrictions and provisions in this Section 7 of the Plan,
and except as determined by the Committee in its discretion and
provided in the Agreement referred to in Section 7.04, the
Participant as owner of such Shares shall have all of the rights of a
stockholder including but not limited to the right to receive all
dividends paid on such Shares and the right to vote such Shares. The
Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions shall lapse with
respect to any Restricted Stock prior to the expiration of the
Restriction Period with respect thereto, or to remove any or all of
such restrictions, whenever it may determine that such action is
appropriate by reason of changes in applicable tax or other laws or
other changes in circumstances occurring after the commencement of
such Restriction Period.
A-5
<PAGE> 25
7.02 Termination by Death, Retirement or Disability. Except to the extent,
if any, provided by the Committee in the Agreement referred to in
Section 7.04, if a Participant ceases to maintain Continuous Service
because of death, Retirement or Disability, all shares of Restricted
Stock theretofore awarded to him shall become free of the restriction
imposed in Section 7.01 and the Corporation shall deliver to him,
within 60 days of such death, Retirement or Disability, one Share,
absent of the legend referred to in Section 7.05, for each such Share
of Restricted Stock deposited with the Corporation by the Participant
pursuant to Section 7.05.
7.03 Termination by Other Than Death, Retirement or Disability. If a
Participant ceases to maintain Continuous Service for any reason
other than death, Retirement or Disability, unless otherwise
determined by the Committee and provided in the Agreement referenced
in Section 7.04, all Shares of Restricted Stock heretofore awarded to
him which are still subject to the restrictions imposed by Section
7.01 shall, upon such termination, be forfeited by the Participant
and returned to the Corporation.
7.04 Restricted Stock Agreement or Equivalent Instrument. Each Participant
awarded Restricted Stock under the Plan shall enter into an Agreement
or other form of instrument, as determined by the Committee, agreeing
to the terms and conditions of the Award and other such matters as
the Committee shall in its sole discretion determine. Such terms and
conditions need not be identical among Participants.
7.05 Registration, Deposit of Restricted Stock and Legend. Each
certificate issued in respect to Shares of Restricted Stock awarded
under the Plan shall be registered in the name of the Participant and
deposited with the Corporation by the Participant, together with a
stock power endorsed in blank, and shall bear the following, or a
similar, legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions, including
forfeiture, contained in the D&N Financial Corporation Amended and
Restated 1994 Management Stock Incentive Plan and an agreement
entered into between the registered owner and D&N Financial
Corporation. Copies of such Plan and agreement are on file in the
offices of the Secretary of the Corporation."
7.06 Lapsing of Restrictions. When the restrictions imposed by and
outlined within this Section 7 of the Plan and the Agreement referred
to in Section 7.04 have lapsed or otherwise been satisfied with
regard to one or more Shares of Restricted Stock, the Corporation
shall deliver to the Participant (or his legal representative,
beneficiary or heir) one Share, absent of the legend referred to in
Section 7.05, for each such Share of Restricted Stock deposited with
the Corporation by the Participant pursuant to Section 7.05. At that
time, the Agreement referred to in Section 7.04 shall be terminated
to the extent that it relates to these same Shares on which the
restrictions have lapsed or otherwise been satisfied.
8. MISCELLANEOUS
8.01 Adjustment for Changes in Capitalization. In the event that there is
any change in the Shares subsequent to the Plan's effective date by
reason of any recapitalization, stock split, reverse stock split,
stock dividend, reorganization, consolidation, combination or
exchange of shares, merger, or any other change in the corporate
structure or the Shares of the Corporation, the aggregate number and
class of Shares available for Option and Restricted Stock grants, the
Exercise Price per Share of each such Option and the amount paid, if
any, for each Restricted Stock Share granted, and the number and
class of Shares subject to each outstanding Award may be adjusted by
the Committee, whose determination in such matters shall be
conclusive and binding. Any Shares of Restricted Stock received by a
Participant as a result of any of the foregoing shall be subject to
the same restrictions and the certificate(s) or other instruments
representing or evidencing such Shares or
A-6
<PAGE> 26
securities shall be legended and deposited with the Corporation in
the manner provided in Section 7 hereof.
8.02 Effect of Merger or Other Reorganization. In the event of a merger,
consolidation or combination in which the Corporation shall be the
continuing entity and which does not result in the outstanding shares
being converted into or exchanged for different securities, cash or
other property, or any combination thereof pursuant to a plan or
agreement the terms of which are binding upon all stockholders
(except to the extent of the rights of dissenting stockholders under
applicable law), Restricted Stock and Options shall apply to the
continuing entity to the same extent that they applied to the
Corporation immediately prior to the effective date of the merger,
consolidation or combination. In the event of a merger, consolidation
or combination in which the Corporation shall not be the continuing
entity, any Participant to whom an Option or Restricted Stock has
been granted under the Plan shall retain the right to receive upon
exercise of such Option or the lapsing of restrictions pursuant to
provisions outlined within Section 7 of this Plan, as applicable, an
amount equal to (i) in the case of an Option, the excess of the Fair
Market Value on the date of such exercise of the securities, cash or
other property, or combination thereof, receivable upon such merger,
consolidation or combination in respect of a Share over the Exercise
Price of such Option, multiplied by the number of Shares with respect
to which such Option has been exercised; or (ii) in the case of a
Share of Restricted Stock, such cash or other property, or
combination thereof, receivable upon such merger, consolidation or
combination in respect of a Share. Such amount may be payable fully
in cash, fully in one or more of the kind or kinds of property
payable in such merger, consolidation or combination, or partly in
cash and partly in one or more of such kind or kinds of property, all
in the discretion of the Committee.
8.03 Effect of Change of Control. A "change of control" of the Corporation
shall be any of the following conditions: (i) any third person,
including a "group" as defined in Section 13(d)3 of the 1934 Act,
becomes the beneficial owner of shares of the Corporation with
respect to which 25% or more of the total number of votes for the
election of the Board of Directors of the Corporation may be cast;
(ii) as a result of or in connection with any cash tender offer,
merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the persons who prior to
such event were directors of the Corporation cease to constitute a
majority of the Board of Directors of the Corporation; (iii) any
third person, including a "group" as defined above within this
Section 8.03, acquires between 10% and 25% of the outstanding shares
of the Corporation if the Board of Directors of the Corporation or
the Office of Thrift Supervision or its successor has made a
determination that such acquisition constitutes or will constitute an
acquisition of control of the Corporation; or (iv) the stockholders
of the Corporation shall approve an agreement providing either for a
transaction in which the Corporation will cease to be an independent,
publicly-owned corporation or for a sale or other disposition of all
or substantially all of the assets of the Corporation.
If within 18 months of a change of control of the Corporation as
defined in Section 8.03, the Continuous Service of any Participant of
the Corporation or any Affiliate is voluntarily or involuntarily
terminated for any reason, with or without Cause and notwithstanding
Section 6.05(c) to the contrary, unless other provisions have been
made by the Committee and evidenced by the appropriate Option or
Restricted Stock Agreement, (i) any Restriction Period with respect
to Restricted Stock granted to such Participant shall lapse upon
termination of Continuous Service and all Shares awarded as
Restricted Stock shall become fully vested in the Participant; and
(ii) all outstanding Options not fully exercisable shall become
exercisable in full upon the happening of such termination.
8.04 Nontransferability and Nonassignability. No Restricted Stock or
Option granted under the Plan may be transferred, encumbered,
assigned, pledged or hypothecated except for transfer (i) in the
event of the death of a Participant as provided by will or the
applicable laws of descent and distribution; and (ii) in the case of
Awards, other than Incentive Stock Options, pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA
or the rules
A-7
<PAGE> 27
thereunder. No Restricted Stock or Option awarded under the Plan
shall be subject to execution, attachment or similar process.
Subject to the terms and conditions under which it was granted, each
Option granted hereunder may be exercised only by the Participant to
whom it is issued or the person to whom it was transferred as
provided in the preceding sentence.
8.05 Employee Rights. No director, advisory director, officer or employee
shall have a right to be selected as a Participant nor, having been
so selected, to be necessarily selected again as a Participant; and
no director, advisory director, officer, employee or other person
shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or
any Affiliate. Neither the Plan nor any action taken thereunder shall
be construed as giving any employee any right to be retained in the
employ of the Corporation or any Affiliate, nor affect any right
which the Corporation has to terminate the employment of any
employee.
8.06 Awards Not Considered in Benefit Determinations. No Award under this
Plan shall be taken into account in determining a Participant's
compensation for the purposes of any employee benefit, including but
not limited to pension or life insurance plans of the Corporation or
an Affiliate.
8.07 Withholding Tax. Upon the termination of the Restriction Period with
respect to any Shares of Restricted Stock (or at any such earlier
time, if any, that an election is made by the Participant under
Section 83(b) of the Code, or any successor provision of the Code
intended to include the value of such shares in taxable income), the
Corporation shall be entitled to withhold from the Participant's
compensation an amount sufficient to fulfill its withholding
requirements for Federal, state, local and social security taxes.
Alternatively, the Corporation may require the Participant or other
person receiving such Shares to pay the Corporation the amount of any
taxes which the Corporation is required to withhold with respect to
such Shares, or, in lieu thereof, to retain or sell without notice, a
sufficient number of Shares held by it to cover the amount required
to be withheld. The Corporation shall have the right to deduct from
all dividends paid with respect to Shares of Restricted Stock the
amount of any taxes which the Corporation is required to withhold
with respect to such dividend payments.
Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option pursuant to the Plan, the
Corporation shall have the right to require the Participant or such
other person to pay the Corporation the amount of any taxes which the
Corporation is required to withhold with respect to such Shares, or,
in lieu thereof, to retain or sell without notice, a sufficient
number of such Shares to cover the amount required to be withheld,
or, in lieu of any of the foregoing, to withhold a sufficient sum
from the Participant's compensation payable by the Corporation to
satisfy the Corporation's tax withholding requirements.
The Corporation's method of satisfying its withholding obligations
shall be solely in the discretion of the Corporation, subject to
applicable Federal, state and local law.
8.08 Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so
requests, be conditioned upon the receipt of a representation as to
the investment intention of the Participant to whom such Shares are
to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of the
Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any
representation requirement shall become inoperative upon a
registration of the Shares or other action eliminating the necessity
of such representation under such Securities Act or other securities
legislation. The Corporation shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such Shares to
listing on any stock exchange on which Shares may then be listed, and
(ii) the completion of such registration or other qualification of
such Shares under any state or Federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.
A-8
<PAGE> 28
8.09 Rules of Construction. Headings are given to the provisions and
sections of the Plan solely as a convenience to facilitate reference.
8.10 No Obligation to Exercise. The granting of an Option shall impose no
obligation upon a Plan Participant to exercise such Option.
8.11 Elimination of Fractional Shares. If, under any provision of the Plan
or formula used to calculate levels of Restricted Stock or Options to
be awarded, the number so computed is not a whole number, such number
of Shares shall be rounded down to the next whole number.
9. AMENDMENT OR TERMINATION
The Board of Directors may amend, suspend or terminate the Plan or any
portion thereof at any time, but (except as provided in Section 8.01) no
amendment shall be made without approval of the stockholders of the Corporation
which shall (i) materially increase the aggregate number of Shares with respect
to which Awards may be made under the Plan, (ii) materially increase the
benefits which accrue to Participants under the Plan, or (iii) change the class
of persons eligible to become Participants in the Plan; provided, however, that
no such amendment, suspension or termination shall impair the rights of any
Participant without his consent, regarding any Award theretofore previously made
pursuant to the Plan.
10. DURATION OF THE PLAN
No Shares of Restricted Stock or Options may be granted under this Plan
more than ten years after the later of the date that the Plan is adopted by the
Board or the date that the Plan is approved by stockholders as provided in
Section 11.
11. EFFECTIVE DATE OF THE PLAN
The Plan, as amended, shall become effective upon its approval by vote of
the holders of a majority of the voting shares of the Corporation present either
in person or by proxy at a duly held stockholders' meeting within twelve months
of the date of adoption by the Board of Directors of the Corporation.
A-9
<PAGE> 29
The Directors and Officers of
[D&N LOGO]
cordially invite you to attend our
1997 Annual Meeting of Stockholders
Wednesday, April 30, 1997, 2:00 p.m.
D&N Financial Corporation
363 West Big Beaver Road, Suite 250
Troy, Michigan
IMPORTANT
Please complete both sides of the PROXY CARD, sign, date,
detach and return in the enclosed envelope.
<TABLE>
<S><C>
DETACH ATTENDANCE CARD HERE
DETACH PROXY CARD HERE AND MAIL WITH PROXY CARD
_________________________________________________________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF |
DIRECTORS. IF NOT OTHERWISE SPECIFIED ON THE REVERSE |
SIDE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED | D&N FINANCIAL
AND FOR PROPOSALS II AND III. THE UNDERSIGNED REVOKES ALL | CORPORATION
PROXIES HERETOFORE GIVEN TO VOTE AT SUCH MEETING AND ALL | If you plan to personally attend the
ADJOURNMENTS OR POSTPONEMENTS. | Annual Meeting of Stockholders in
| Troy, Michigan, please check the
Dated: _______________________________ | box below and list names of attendees
_______________________________________ | on the reverse side.
_______________________________________ |
(Please sign here) | Return this stub in the enclosed envelope
| with your completed proxy card.
Please sign your name as it appears above. If executed by |
a corporation, a duly authorized officer should sign. | I/We do plan to attend
Executors, administrators, attorneys, guardians and | the 1997 Meeting in Troy. [ ]
trustees should so indicate when signing. If shares are |
held jointly, at least one holder must sign. |
|
</TABLE>
<PAGE> 30
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED, POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<TABLE>
<S><C>
____________________________________________________________________________________________________________________________________
NAMES OF PERSONS ATTENDING | REVOCABLE PROXY D&N FINANCIAL CORPORATION
| The Stockholder whose signature appears hereon appoints the Board of Directors of D&N
| Financial Corporation (the "Corporation") with full powers of substitution, to act as
___________________________ | attorneys and proxies for the undersigned to vote all shares of Common Stock of the
| Corporation which the undersigned is entitled to vote at the Annual Meeting of
| Stockholders to be held at the office of the Corporation located at 363 West Big
___________________________ | Beaver Road, Suite 250, Troy, Michigan, on Wednesday, April 30, 1997, at 2:00 p.m.
| (Eastern Daylight Time) and at any and all adjournments or postponements thereof,
| with all the powers the Stockholder would possess if personally present, upon the
___________________________ | proposals set forth below and, in their discretion, upon any other business that may
| properly come before said Meeting.
|
___________________________ | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW AND FOR
| PROPOSALS II AND III.
| FOR WITHHELD
| I. Election of Directors: Joseph C. Bromley ________ _________
| Sharon A. Reese Dalenberg ________ _________
| Peter Van Pelt ________ _________
|
| II. Ratification of the adoption of the amendment to the Amended and Restated 1994
| Management Stock Incentive Plan.
| FOR______ AGAINST______ ABSTAIN______
|
| III. Ratification of the appointment of Coopers & Lybrand L.L.P. as independent
| auditors for the Corporation for the fiscal year ending December 31, 1997.
| FOR______ AGAINST______ ABSTAIN______
|
|
|
| (Continued and to be signed on other side)
|
</TABLE>
