[OTTAWA FINANCIAL CORPORATION LETTERHEAD]
April 1, 1999
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Ottawa Financial
Corporation, we cordially invite you to attend the Annual Meeting of
Shareholders of the Corporation. The meeting will be held at 10:00 a.m. local
time, on April 27, 1999 at the Holiday Inn and Conference Center located at 650
East 24th Street, Holland, Michigan. This annual meeting will include
management's report to you on Ottawa Financial Corporation's 1998 financial and
operating performance.
We encourage you to attend the meeting in person. Whether or not you
plan to attend, however, PLEASE READ THE ENCLOSED PROXY STATEMENT AND THEN
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING POSTPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This will save us
the additional expense in soliciting proxies and will ensure that your shares
are represented at the meeting.
Your Board of Directors and management are committed to the continued
success of Ottawa Financial Corporation and the enhancement of your investment.
As Vice Chairman of the Board and Chief Executive Officer of Ottawa Financial
Corporation, I want to express my appreciation for your confidence and support.
Very truly yours,
/s/ Douglas J. Iverson
DOUGLAS J. IVERSON
VICE CHAIRMAN OF THE BOARD AND CEO
<PAGE>
OTTAWA FINANCIAL CORPORATION
245 Central Avenue
Holland, Michigan 49423
(616) 393-7000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1999
Notice is hereby given that the Annual Meeting of Shareholders of
Ottawa Financial Corporation will be held at the Holiday Inn and Conference
Center located at 650 East 24th Street, Holland, Michigan on April 27, 1999, at
10:00 a.m. local time.
A proxy card and a proxy statement for the meeting are enclosed.
The meeting is for the purpose of considering and acting upon:
1. The election of four directors of Ottawa Financial;
2. The ratification of an amendment to Ottawa Financial's 1995
Stock Option and Incentive Plan to increase the number of
shares available for issuance under such plan by 283,860
shares (4.99% of the current outstanding shares of common
stock) for use in connection with general corporate purposes;
3. The ratification of an amendment to Ottawa Financial's 1995
Stock Option and Incentive Plan to remove the Office of Thrift
Supervision imposed restrictions on the granting and vesting
of awards under the plan;
4. The ratification of the appointment of Crowe, Chizek and
Company LLP as Ottawa Financial's independent auditors for the
fiscal year ending December 31, 1999; and
such other matters as may properly come before the meeting or any adjournments
thereof. The Board of Directors is not aware of any other business to come
before the meeting.
Any action may be taken on the foregoing proposals at the meeting on
the date specified above, or on any date or dates to which the meeting may be
adjourned. Shareholders of record at the close of business on March 11, 1999,
are the shareholders entitled to vote at the meeting and any adjournments
thereof. A complete list of shareholders entitled to vote at the meeting will be
available for inspection by shareholders at the executive offices of Ottawa
Financial Corporation during the ten days prior to the meeting as well as at the
meeting.
You are requested to complete, sign and date 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 or otherwise properly revoke such proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Douglas J. Iverson
DOUGLAS J. IVERSON
VICE CHAIRMAN OF THE BOARD AND CEO
Holland, Michigan
April 1, 1999
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE OTTAWA FINANCIAL
CORPORATION THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT
THE MEETING. A PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
OTTAWA FINANCIAL CORPORATION
245 Central Avenue
Holland, Michigan 49423
(616) 393-7000
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1999
--------------------
This proxy statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Ottawa Financial Corporation of proxies
to be used at the Annual Meeting of Shareholders of Ottawa Financial and all
adjournments thereof. The annual meeting is being held at the Holiday Inn and
Conference Center located at 650 East 24th Street, Holland, Michigan on April
27, 1999, at 10:00 a.m. local time. The accompanying Notice of Meeting and this
proxy statement are first being mailed to shareholders on or about April 1,
1999. Certain of the information provided herein relates to AmeriBank, a
wholly-owned subsidiary of Ottawa Financial Corporation.
At the meeting, shareholders of Ottawa Financial are being asked to
consider and vote upon (i) the election of four directors of Ottawa Financial;
(ii) the ratification of an amendment to Ottawa Financial's 1995 Stock Option
and Incentive Plan (the "Stock Option Plan") that would increase the number of
shares available for issuance under such plan by 283,860 shares ; (iii) the
ratification of an amendment to the Stock Option Plan to remove the Office of
Thrift Supervision imposed restrictions on the granting and vesting of awards
under the plan; and (iv) the ratification of the appointment of Crowe, Chizek
and Company LLP as Ottawa Financial's independent auditors for the fiscal year
ending December 31, 1999.
PROXIES AND PROXY SOLICITATION
Proxies are solicited to provide all shareholders of record on the
voting record date, an opportunity to vote on the matters scheduled for the
annual meeting and described in these materials. Shares of common stock can only
be voted if the shareholder is present in person at the annual meeting or by
proxy. Shares of common stock represented by properly executed proxies will be
voted by the individuals named in the such proxy in accordance with the
shareholder's instructions. Where properly executed proxies are returned to
Ottawa Financial with no specific instruction as how to vote at the annual
meeting, the persons named in the proxy will vote the shares "FOR" each of the
proposals described in the proxy statement. Should any other matters be properly
presented at the annual 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.
Ottawa Financial maintains an Employee Stock Ownership Plan ("ESOP")
which owns approximately 9.0% of Ottawa Financial's common stock. Full time
employees of Ottawa Financial and AmeriBank participate in the ESOP. Each ESOP
participant has the right to direct the ESOP trustee on how to vote the shares
of common stock allocated to his or her account under the ESOP. If an ESOP
participant properly executes the proxy distributed by the ESOP trustee, the
ESOP trustee will vote the shares represented by that proxy at the annual
meeting. Shares of common stock represented by properly executed proxies will be
voted by the ESOP trustee in accordance with the shareholder's instructions.
Where properly executed proxies are returned to the ESOP trustee with no
specific instructions as how to vote at the annual meeting, the trustee will
vote the shares "FOR" each of the proposals described in this proxy statement.
The ESOP trustee will vote all of the unallocated ESOP shares (i.e., shares of
common stock held in the ESOP, but not allocated to any participant's account)
in the same proportion as the voted allocated shares with respect to such issue.
In the event the ESOP participant fails to give timely voting instructions to
the trustee with respect to the voting of the common stock that is allocated to
his or her ESOP account, the trustee will not vote such shares. If other matters
are presented for a vote at the annual meeting, the shares for which proxies
have been received will be voted in accordance with the discretion of the
proxies.
Any person giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of Ottawa Financial, at its executive offices, a
written revocation or a proxy bearing a later date. Shareholders may also revoke
their proxies by attending the annual meeting in person and casting a ballot.
Attendance at the meeting will not in itself constitute the revocation of a
proxy.
<PAGE>
Ottawa Financial will pay the costs of soliciting proxies. In addition
to the solicitation of proxies by mail, solicitation may be made by directors,
officers and employees of Ottawa Financial and AmeriBank by telephone or other
communication and by Regan & Associates, Inc. Directors, officers and employees
will receive no additional compensation for the solicitation of proxies, and
Regan & Associates will receive a fee of $5,000, plus reasonable out-of-pocket
expenses, for its services. Ottawa Financial will reimburse brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to the beneficial owners of common stock.
VOTING RIGHTS AND VOTE REQUIRED
Shareholders of record as of the close of business on March 11, 1999
will be entitled to notice of and to vote at the annual meeting. As of March 11,
1999, Ottawa Financial had 5,688,572 shares of common stock issued and
outstanding. Each shareholder of record on March 11, 1999, is entitled to one
vote per share on each matter to be voted on at the annual meeting. Such votes
may be exercised in person or by a properly executed proxy as discussed above.
Director nominees who receive the highest number of votes for the
positions to be filled will be elected. Ratification of the amendments to the
Stock Option Plan and the appointment of Crowe, Chizek and Company LLP as Ottawa
Financial's independent auditors for the fiscal year ending December 31, 1999
requires the affirmative vote of the majority of shares present in person or
represented by proxy at the annual meeting and entitled to vote on the matter.
Abstentions may be specified on all proposals except the election of directors
and will be counted as votes cast on a particular matter as well as shares
present and represented for purposes of establishing a quorum. Accordingly,
abstentions on the proposals to ratify the amendments to the Stock Option Plan
and the appointment of Crowe, Chizek and Company LLP as Ottawa Financial's
independent auditors will have the effect of a negative vote. Broker nonvotes
(I.E., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons as to certain
proposals on which such beneficial owners or persons are entitled to vote their
shares but with respect to which the brokers or nominees have no discretionary
power to vote without such instructions) will not be treated as votes cast on a
particular matter but will be treated as shares present or represented for
purposes of establishing a quorum. Accordingly, broker nonvotes have no effect
on the outcome of the election of directors, the ratification of the amendments
to the Stock Option Plan or ratification of the appointment of the independent
auditors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of the March 11, 1999 voting record
date, information regarding share ownership of: (i) those persons or entities
known by management to beneficially own more than five percent of Ottawa
Financial's common stock and (ii) all current directors and executive officers
of Ottawa Financial and AmeriBank as a group. See "Proposal I - Election of
Directors" for information regarding share ownership of Ottawa Financial's
directors and executive officers named in the Summary Compensation Table under
"Executive Compensation" below.
Shares of Percent
Beneficial of
Beneficial Owners Ownership(1) Class
----------------- ------------ ------
Ottawa Financial Corporation(2) 510,868 8.98%
Employee Stock Ownership Plan
245 Central Avenue
Holland, Michigan 49423
Schwartz Investment Counsel, Inc.(3) 447,799 7.87%
and Schwartz Investment Trust
3707 W. Maple
Bloomfield Hills, Michigan 48301
Directors and executive officers 855,407 14.22%
of Ottawa Financial and AmeriBank
as a group (11 persons)(4)
(FOOTNOTES BEGIN ON FOLLOWING PAGE)
2
<PAGE>
- ------------------------------
(1) All amounts have been adjusted to reflect the 10% stock dividend paid by
Ottawa Financial on August 31, 1998.
(2) Represents shares held by the ESOP, of which 282,638 shares have been
allocated to accounts of participants. Pursuant to the terms of the ESOP,
ESOP participants have the right to direct the voting of shares allocated
to their ESOP accounts. First Bankers Trust Company, N.A., Quincy,
Illinois, as the trustee of the ESOP, may also be deemed to be a beneficial
owner of the shares held by the ESOP which have not been allocated to a
specific participant's account or which have been allocated but not voted
by the participants.
(3) As reported in Amendment No. 2 to Schedule 13D filed with the Securities
and Exchange Commission on May 15, 1998 by the following persons and
entities: Schwartz Investment Counsel, Inc. ("SICI") and related entities;
Schwartz Value Fund ("SVF"); G&G Limited Partnership ("G&G"); George P.
Schwartz ("GPS"); and Gregory J. Schwartz ("GJS") (collectively, the "13D
Reporting Persons"). The italicized numbers herein represent the reported
shares as adjusted for the 10% stock dividend paid by Ottawa Financial on
August 31, 1998. The 13D Reporting Persons reported beneficial ownership of
Ottawa Financial's common stock, as follows: SICI - 149,060 shares (163,966
SHARES); SVF - 150,000 shares (165,000 SHARES); G&G - 100,000 shares
(110,000 SHARES); GPS - 5,830 shares (6,413 SHARES); and GJS - 2,200 shares
(2,420 SHARES). With the exception of SICI, each of the 13D Reporting
Persons reported sole voting and investment power with respect to the
shares of common stock they reported as beneficially owned. SICI reported
sole voting and investment power with respect to 110,770 shares (121,847
SHARES) of common stock and shared voting and investment power with respect
to 38,290 shares (42,119 SHARES) of the common stock it reported as
beneficially owned.
(4) Includes shares held directly, as well as shares held jointly with family
members, shares held in retirement accounts, held in a fiduciary capacity,
held by certain of the group members' families, or held by trusts of which
the group member is a trustee or substantial beneficiary, with respect to
which shares the group member may be deemed to have sole or shared voting
and/or investment powers. This amount also includes 326,047 shares issuable
to directors and executive officers upon the exercise of options currently
exercisable or exercisable within 60 days of the March 11, 1999 voting
record date.
PROPOSAL I
ELECTION OF DIRECTORS
Ottawa Financial's Board of Directors is composed of ten members.
Approximately one-third of the directors are elected annually. Directors of
Ottawa Financial are elected to serve for a three-year term or until their
respective successors are elected and qualified.
The following table sets forth certain information regarding the
composition of Ottawa Financial's Board of Directors, including each director's
term of office. The Board of Directors, acting as the nominating committee, has
recommended and approved the nominees identified in the following table. 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 a nominee) will be voted at the
annual meeting "FOR" the election of the nominees identified below. If a nominee
is unable to serve, the shares represented by all valid proxies will be voted
for the election of such substitute nominee as the Board of Directors may
recommend. At this time, the Board of Directors knows of no reason why a nominee
might be unable to serve if elected. Except as disclosed herein, there are no
arrangements or understandings between any nominee and any other person pursuant
to which the nominee was selected.
G. W. Haworth, who has served as a member of the Board of Directors of
Ottawa Financial since its inception in 1994 and AmeriBank since 1966, has
indicated to the Board that he intends to retire as a member of the Board of
Directors. Mr. Haworth currently expects to retire from the Board in May 1999.
Mr. Haworth's term on the Board expires in the year 2001. In accordance with
Ottawa Financial's Bylaws, the Board of Directors will either appoint for the
remainder of Mr. Haworth's term a person to fill the Board vacancy created by
his retirement or reduce the size of the Board to eliminate the vacancy.
3
<PAGE>
<TABLE>
<CAPTION>
Term of Percent
Position(s) Held in Director Office Beneficial of
Name Age(1) Ottawa Financial Since(2) Expires Ownership(3)(4) Class
---- ------ ---------------- -------- ------- --------------- -----
NOMINEES
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Bieke 65 Director 1998 2002 67,828 1.19%
Ronald L. Haan 45 President and Director 1996 2002 102,840 1.79%
Douglas J. Iverson 49 Vice Chairman of the Board and 1993 2002 145,754(5) 2.53%
Chief Executive Officer
Brian W. Koop 48 Director 1992 2002 52,794 .93%
DIRECTORS REMAINING IN OFFICE
Gordon H. Cunningham 67 Chairman of the Board 1973 2000 67,246 1.18%
B. Patrick Donnelly, III 53 Director 1984 2000 40,694 .71%
Robert D. Kolk 57 Director 1989 2000 71,550 1.25%
Gordon L. Grevengoed 67 Director 1986 2001 208,652 3.62%
G. W. Haworth 86 Director 1966 2001 27,930 .49%
Leon E. Koops 53 Director 1986 2001 56,919 1.00%
</TABLE>
- --------------------
(1) At December 31, 1998.
(2) Includes service as a director of AmeriBank.
(3) The nature of beneficial ownership for shares reported in this column is
sole voting and investment power, except as otherwise indicated in these
footnotes. All amounts reported under this column have been adjusted for
the 10% stock dividend paid by Ottawa Financial on August 31, 1998.
(4) Includes shares of common stock as to which the named individual has the
right to acquire beneficial ownership, currently or within 60 days of the
March 11, 1999 voting record date, pursuant to the exercise of stock
options, as follows: Mr. Bieke - 4,353 shares; Mr. Haan - 43,549 shares;
Mr. Iverson - 81,611 shares; Mr. Koop - 17,410 shares; Mr. Cunningham -
26,115 shares; Mr. Donnelly - 17,410 shares; Mr. Kolk -17,410 shares; Mr.
Grevengoed - 81,295 shares; Mr. Haworth - 8,704 shares; and Mr.
Koops - 17,410.
(5) Includes shared voting and investment power over 1,210 shares of common
stock owned by a living trust of which the named individual is a co-trustee
and beneficiary.
The business experience of each director of Ottawa Financial for at
least the past five years is set forth below.
RONALD J. BIEKE. Mr. Bieke is President of Arcadia BIDCO Corporation, a
business and industrial development corporation, which is located in Kalamazoo,
Michigan. Since 1996, Mr. Bieke has also been serving as Vice Chairman of the
Board of Directors of Mercantile Bank of Southwest Florida. From 1987 to 1996,
Mr. Bieke served as Chairman and Chief Executive Officer of AmeriBank Federal
Savings Bank, headquartered in Muskegon, Michigan. Ottawa Financial acquired
AmeriBank Federal Savings Bank in February 1996.
RONALD L. HAAN. Mr. Haan was appointed, effective January 1, 1999,
President and Chief Operating Officer of AmeriBank and Ottawa Financial,
President of O.S. Services, Inc. and Chairman of the Board of AmeriPlan
Financial Services, Inc. Previously, he served as Executive Vice President and
Assistant Secretary of AmeriBank and Senior Vice President and Assistant
Secretary of Ottawa Financial. Mr. Haan also serves as a director of AmeriBank
and Ottawa Financial. Prior to joining Ottawa Financial in February 1996, Mr.
Haan was employed in 1989 as Executive Vice President of AmeriBank Federal
Savings Bank and in February 1990 was appointed Chief Financial Officer. In
December 1990, he was elected President, Chief Administrative Officer and a
director of AmeriBank Federal Savings Bank. Prior to his employment at AmeriBank
Federal Savings Bank, Mr. Haan was employed by MetroBanc Federal
4
<PAGE>
Savings Bank of Grand Rapids, Michigan, from 1978 to 1987 as Vice President, and
from 1987 to 1989 at Comerica Bank, Grand Rapids, Michigan, as Vice President
and Regional Manager.
DOUGLAS J. IVERSON. Mr. Iverson was appointed, effective January 1,
1999, Chief Executive Officer and Vice Chairman of the Boards of Ottawa
Financial and AmeriBank, and Chief Executive Officer of O.S. Services, Inc.
Previously, he served as Executive Vice President, Secretary and Chief Operating
Officer of Ottawa Financial and President and Secretary of AmeriBank. Mr.
Iverson joined AmeriBank in 1972, and has served in numerous capacities during
such tenure.
BRIAN W. KOOP. Mr. Koop is Vice President and Senior Executive for JCI
Institute, which provides leadership training and development for executives of
Johnson Controls, Inc., a company which manufactures automotive parts.
GORDON H. CUNNINGHAM. Mr. Cunningham has served as Chairman of the
Board of Directors of Ottawa Financial since its incorporation in March 1994.
Mr. Cunningham is a partner in the law firm of Cunningham Dalman, P.C., which
acts as general counsel to AmeriBank. He was appointed Chairman of the Board of
AmeriBank in 1992.
B. PATRICK DONNELLY, III. Mr. Donnelly began serving as President of
Productive Solutions, LLC, a consulting company, in July 1998. Prior to that
date, he was Plant Manager of RAN Enterprises, Inc. beginning in November 1995,
and Production Manager of Technical Auto Parts beginning in October 1993. He is
also a director of Donnelly Corporation, a publicly held company.
ROBERT D. KOLK. Mr. Kolk is President and Co-owner of Mechanical
Transplanter Company, a manufacturer of agricultural transplanting machinery.
GORDON L. GREVENGOED. Effective January 1, 1999, Mr. Grevengoed
resigned as President, Chief Executive Officer and Vice Chairman of the Board of
Directors for Ottawa Financial and as Vice Chairman of the Board and Chief
Executive Officer for AmeriBank. He served in such capacities with Ottawa
Financial since its incorporation in March 1994. He was elected President and
Chief Executive Officer of AmeriBank in 1985 and elected Vice Chairman of
AmeriBank in 1992. Mr. Grevengoed joined AmeriBank in 1956.
G. W. HAWORTH. Mr. Haworth is founding Chairman of the Board of
Haworth, Inc., an office furnishings manufacturer.
LEON E. KOOPS. Mr. Koops is President of Hamilton Distributing Company,
an agricultural equipment distributor.
MEETINGS AND COMMITTEES OF THE BOARDS OF DIRECTORS
MEETINGS AND COMMITTEES OF OTTAWA FINANCIAL. Meetings of the Ottawa
Financial Board of Directors are generally held on a monthly basis. For the year
ended December 31, 1998, the Board of Directors met 13 times. During 1998, no
incumbent director of Ottawa Financial attended fewer than 75% of the aggregate
of the total number of Board meetings and the total number of meetings held by
the committees of the Board of Directors on which they served.
The Board of Directors of Ottawa Financial has standing Audit,
Executive Compensation and Nominating Committees.
Ottawa Financial's Audit Committee is responsible for the review of
Ottawa Financial's annual audit report prepared by its independent auditors. The
review includes a detailed discussion with the independent auditors and
recommendation to the full Board of Directors concerning any action to be taken
regarding the audit. Directors Cunningham (Chairman), Donnelly and Kolk
currently serve on this Committee. The Audit Committee met three times during
1998.
The Executive Compensation Committee, consisting of Directors
Cunningham (Chairman), Bieke, Koop and Koops, is responsible for developing and
making recommendations to the Board of Directors with respect to Ottawa
Financial's executive compensation policies. In addition, the Executive
Compensation Committee, pursuant to authority
5
<PAGE>
delegated by the Board, determines on an annual basis the compensation to be
paid to the Chief Executive Officer, President and each of the other executive
officers of Ottawa Financial and AmeriBank. Non-employee directors who do not
sit on the Executive Compensation Committee also participate in making executive
compensation decisions through the review, discussion and ratification of the
executive Compensation Committee's recommendations. The Executive Compensation
Committee is also responsible for administering Ottawa Financial's Stock Option
Plan and Management Recognition and Retention Plan. This committee met 10 times
during 1998.
The entire Board of Directors acts as Ottawa Financial's Nominating
Committee for selecting nominees for election as directors. Nominations of
persons for election to the Board of Directors may be made only by or at the
direction of the Board of Directors or by any shareholder entitled to vote for
the election of directors who complies with the notice procedures set forth in
the Bylaws of Ottawa Financial. Nominations by shareholders must be delivered in
writing to, and received by, the Secretary of Ottawa Financial Corporation at
245 Central Avenue, Holland, Michigan 49423, at least 90 days prior to the date
of the annual meeting. However, if less than 100 days' notice of the date of the
annual meeting is given or made to shareholders, nominations by shareholders
must be delivered to the Secretary of Ottawa Financial no later than the close
of business on the 10th day following the day on which notice of the date of the
annual meeting was mailed or public announcement of the date of the annual
meeting was first made, whichever occurs first. The current Bylaws also include
provisions setting forth the specific conditions under which persons may be
nominated as directors of Ottawa Financial at the annual meeting of
shareholders. A copy of such provisions is available upon request to Ottawa
Financial's Corporate Secretary, 245 Central Avenue, Holland, Michigan 49423.
MEETINGS AND COMMITTEES OF AMERIBANK. AmeriBank's Board of Directors
meets at least monthly and held 14 meetings during the year ended December 31,
1998. During 1998, no incumbent director of AmeriBank attended fewer than 75% of
the aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he served.
The principal standing committees of AmeriBank are Executive, Executive
Compensation, Audit and Nominating. AmeriBank also has other committees which
meet as needed to review various other functions of AmeriBank.
DIRECTOR COMPENSATION
The Boards of Directors of Ottawa Financial and its wholly-owned
subsidiary, AmeriBank, have identical membership. Each director who is not an
employee of Ottawa Financial or AmeriBank receives, in the aggregate, a $725
monthly retainer for his service as a director on these Boards. In addition,
each of these non-employee directors receives: (i) $200 for each Ottawa
Financial Board meeting attended, (ii) $350 for each AmeriBank Board meeting
attended, except for the Chairman of the Board who receives $525 for each
AmeriBank Board meeting attended, and (iii) $100 per hour for committee meetings
attended. Directors who are employed by Ottawa Financial or AmeriBank do not
receive fees for their service on these Boards or for any Board committees on
which they serve.
Director Cunningham, is a partner in the law firm of Cunningham Dalman
P.C. Such firm acts as counsel to AmeriBank. The legal fees received from Ottawa
Financial or AmeriBank for professional services during the fiscal year ended
December 31, 1998 did not exceed 5% of the firm's gross revenues.
EXECUTIVE COMPENSATION
Effective January 1, 1999, Mr. Grevengoed retired as President and
Chief Executive Officer of Ottawa Financial and AmeriBank. As of the same date,
Mr. Iverson was appointed Chief Executive Officer and Vice Chairman of the Board
of Directors of Ottawa Financial and AmeriBank, and Mr. Haan was appointed
President and Chief Operating Officer of Ottawa Financial and AmeriBank. During
1998, Mr. Iverson served as Executive Vice President, Chief Operating Officer
and Secretary of Ottawa Financial and President and Secretary of AmeriBank, and
Mr. Haan served as Senior Vice President and Assistant Secretary of Ottawa
Financial and Executive Vice President and Assistant Secretary of AmeriBank.
6
<PAGE>
The following table sets forth information concerning the compensation
of Messrs. Grevengoed, Iverson and Haan during 1998. No other officer made in
excess of $100,000 during such period.
<TABLE>
<CAPTION>
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation(1) Awards
------------------------ ------------------------
Restricted
Stock All Other
Salary Bonus Award Options Compensation
Name and Principal Position Year ($) ($) ($) (#)(2) ($)
- ------------------------------- ---- ----------- ------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gordon L. Grevengoed 1998 $153,000 $95,338 -- -- $12,803(4)
CEO AND PRESIDENT, RETIRED 1997 143,000 82,800 -- -- 15,980
1996 138,000 35,009 -- -- 13,106
Douglas J. Iverson 1998 143,000 88,671 -- -- 12,789(4)
CEO AND VICE CHAIRMAN OF 1997 133,000 76,800 -- -- 15,935
THE BOARD 1996 128,000 32,211 -- -- 12,081
Ronald L. Haan 1998 133,000 82,004 -- 29,432 11,804(4)
PRESIDENT AND COO 1997 123,000 70,800 -- -- 15,353
1996 118,000 -- $160,600(3) 72,582 11,198
</TABLE>
- -----------------------------
(1) The named executive officers in the table did not receive any additional
benefits or perquisites which, in the aggregate, exceeded the lesser of 10%
of his salary and bonus, or $50,000.
(2) Adjusted to reflect the 10% stock dividend paid by Ottawa Financial on
August 31, 1998. See the table captioned "Aggregate Options Exercised in
Last Fiscal Year and FY-End Option Values" for additional information on
stock options.
(3) Represents the dollar value, based on the average of the closing bid and
asked price per share of Ottawa Financial common stock on the date of
grant. The shares of restricted stock vest in five equal annual
installments, subject to Mr. Haan's continuous service with Ottawa
Financial or AmeriBank. Any dividends paid on the restricted common stock
are held in a restricted interest-bearing account until such shares are no
longer subject to any restrictions. At December 31, 1998, Mr. Haan had
7,260 shares of Ottawa Financial common stock still subject to restrictions
with a value, based upon closing price of $21.25 per share of Ottawa
Financial common stock as reported on The Nasdaq National Market at such
date, of $154,275.
(4) Represents AmeriBank's contributions to the ESOP on behalf of Messrs.
Grevengoed, Iverson and Haan. At December 31, 1998, the value of the shares
of Ottawa Financial common stock allocated to Messrs. Grevengoed, Iverson
and Haan under the ESOP was $32,938, $32,746 and $30,366, respectively.
7
<PAGE>
The following table sets forth information concerning stock options
granted by Ottawa Financial during 1998 to Mr. Haan. Messrs. Grevengoed and
Iverson were not granted any options during 1998. No stock appreciation rights
have been granted by Ottawa Financial to date.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
- ------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Terms(1)
- ---------------------------------------------------------------------------------------------- -----------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ----------------------- ------------ -------------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Haan 29,432 23.0% $22.00 12/22/08 $407,339 $1,031,886
</TABLE>
- ---------------------
(1) A 5% and 10% annually compounded increase in Ottawa Financial's common
stock price from the date of grant to the end of the 10-year option term
would result in stock prices of $35.84 and $57.06, respectively.
The following table sets forth information as to the aggregate number
and value of stock options held by Messrs. Grevengoed, Iverson and Haan at
December 31, 1998.
<TABLE>
<CAPTION>
Aggregate Options Exercised in Last Fiscal Year and FY-End Option Values
- -------------------------------------------------------------------------------------------------------------------------
Shares Value Number of Securities Value of Unexercised
Acquired on Realized Underlying Unexercise In-the-Money Options
Name Exercise(#)(1) ($) Options at FY-End(#)(1 FY-End($)(2)
- --------------------------- ---------------- ------------- -------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon L. Grevengoed 7,370 $113,940 74,241 54,407 $768,394 $563,112
Douglas J. Iverson -- -- 61,208 40,806 633,503 422,342
Ronald L. Haan -- -- 29,033 72,981 226,398 339,593
</TABLE>
- ----------------------
(1) Adjusted for the 10% stock dividend paid by Ottawa Financial on August 31,
1998.
(2) Represents the aggregate market value of the named executive officer's
stock options as of December 31, 1998. The market value per share of common
stock is the difference between the market price per share of the Ottawa
Financial common stock less the exercise price of the options.
EMPLOYMENT AGREEMENTS
AmeriBank has employment agreements with Messrs. Iverson and Haan. Each
employment agreement provides for an initial term of three years and for annual
extensions of one year, in addition to the then-remaining term under the
agreement, on each anniversary of the effective date of the agreement. Any
extension under the agreement is, however, subject to a yearly performance
evaluation by disinterested members of AmeriBank's Board of Directors. The
executive's annual base salary in effect under the agreement at the time of each
annual extension cannot be reduced below his then current salary. The employment
agreement also guarantees executive participation in an equitable manner in
employee benefits applicable to executive personnel.
8
<PAGE>
The employment agreement provides for termination upon the executive's
death, for cause or in certain other events. The agreement is also terminable by
the executive upon 90 days' notice to AmeriBank. For the year ended December 31,
1998, the disinterested members of AmeriBank's Board of Directors authorized
contract extensions for Messrs. Iverson and Haan for an additional year.
Accordingly, Messrs. Iverson and Haan each has approximately three years
remaining on his respective employment agreement.
In the event an executive's employment is involuntary terminated in
connection with or within 12 months following a change in control, as that term
is defined in the employment agreement, Ottawa Financial or AmeriBank would be
obligated to (i) pay the executive his salary for the remaining term of his
employment agreement, (ii) pay an amount equal to 299% of the executive's
average annual compensation over the last five taxable years as determined under
Section 280G of the Internal Revenue Code of 1986, and (iii) to maintain for the
remaining term of the executive's agreement substantially the same health
coverages available to him in effect immediately prior to such involuntary
termination. The amounts payable to the executive pursuant to subsections (i),
(ii) and (iii) above shall be limited, such that these amounts will not exceed
three times the executive's average annual compensation over the most recent
five year period or be nondeductible by AmeriBank for federal income tax
purposes pursuant to Section 280G of the Internal Revenue Code of 1986. Based on
their current salaries, if Messrs. Iverson's and Haan's employment had been
involuntarily terminated as of December 31, 1998, they would have been entitled
to receive a lump sum cash payment of approximately $845,000 and $662,000,
respectively.
Mr. Grevengoed had an employment agreement with AmeriBank on the same
terms as described above. On December 31, 1998, Mr. Grevengoed voluntarily
retired as President and Chief Executive Officer of Ottawa Financial and
AmeriBank. Upon his retirement, Ottawa Financial and AmeriBank ceased to have
any further obligations to Mr. Grevengoed under that employment agreement.
DEFINED BENEFIT PENSION PLAN
AmeriBank maintains a pension plan in which the executive officers
named in the Summary Compensation Table participate. However, the annual
benefits payable upon retirement to the named executive officers are different,
principally because of the integration of the pension plan assumed by AmeriBank
in connection with its acquisition of American Federal Savings Bank. AmeriBank
has frozen benefits under its pension plan.
MESSRS. GREVENGOED AND IVERSON. The following table indicates the
estimated annual benefits payable upon retirement as a single-life annuity to
Mr. Iverson for the specified compensation and years of service classifications
under the AmeriBank pension plan, assuming that he remains in service with
AmeriBank or Ottawa Financial until his retirement at age 65. The benefits
listed in the table are not subject to Social Security or other offset amounts.
In April 1998, pursuant to the provisions of the pension plan, Mr. Grevengoed
elected to receive his benefits due under the plan in a lump sum payment
totaling $601,258.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
-------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------------------------------------------------------------------------------
$150,000 $33,750 $45,000 $56,250 $67,500 $75,000
175,000 33,750 45,000 56,250 67,500 75,000
200,000 33,750 45,000 56,250 67,500 75,000
225,000 33,750 45,000 56,250 67,500 75,000
250,000 33,750 45,000 56,250 67,500 75,000
275,000 33,750 45,000 56,250 67,500 75,000
300,000 33,750 45,000 56,250 67,500 75,000
- --------------------------------------------------------------------------------
MR. HAAN. The following table indicates the estimated annual benefits
payable upon retirement as a single-life annuity to Mr. Haan for the specified
compensation and years of service classifications under the AmeriBank pension
plan, assuming that he remains in service with AmeriBank or Ottawa Financial
until his retirement at age 65. The benefits listed in the tables are not
subject to Social Security or other offset amounts.
9
<PAGE>
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
-----------------------------------------------------------
REMUNERATION 5 10 15 20 25
- --------------------------------------------------------------------------------
$150,000 $16,847 $33,695 $50,542 $67,390 $84,237
175,000 16,847 33,695 50,542 67,390 84,237
200,000 16,847 33,695 50,542 67,390 84,237
225,000 16,847 33,695 50,542 67,390 84,237
250,000 16,847 33,695 50,542 67,390 84,237
275,000 16,847 33,695 50,542 67,390 84,237
300,000 16,847 33,695 50,542 67,390 84,237
- --------------------------------------------------------------------------------
The term "compensation" under the pension plan generally refers to
total salary and wages paid or otherwise accrued to an employee, including
bonuses, overtime and extra remuneration, but excluding certain specified items
such as incentive and long-term executive compensation awards, the value of
stock awards, employer contributions to benefit plans and other non-taxable
fringe benefits. As of December 31, 1998, Messrs. Iverson and Haan had 24 and 8
years of credited service (rounded to the nearest whole year) under the pension
plan, respectively.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee is composed entirely of
independent outside directors and is responsible for developing and making
recommendations to the Board of Directors with respect to Ottawa Financial's
executive compensation policies, as well as administering the Stock Option Plan
and the Management Recognition and Retention Plan. In addition, the Executive
Compensation Committee, pursuant to authority delegated by the Board, determines
on an annual basis the compensation to be paid to the other executive officers
of Ottawa Financial. Non- employee directors who do not sit on the Executive
Compensation Committee also participate in making executive compensation
decisions through the review, discussion and ratification of the Executive
Compensation Committee's recommendations.
OVERVIEW AND PHILOSOPHY
The Executive Compensation Committee has developed and implemented an
executive compensation program which is based on guiding principles designed to
align executive compensation with the values and objectives, business strategy,
management initiatives, and the business and financial performance of Ottawa
Financial. In applying these principals, the Executive Compensation Committee
has established a program to:
o Support a performance-oriented environment that rewards performance not
only with respect to Ottawa Financial's goals but also its performance as
compared to that of industry performance levels;
o Attract and retain key executives critical to the long-term success of
Ottawa Financial and AmeriBank;
o Integrate compensation programs with both Ottawa Financial's annual and
long-term strategic planning and measuring processes; and
o Reward executives for long-term strategic management and the enhancement of
shareholder value.
Furthermore, in making compensation decisions, the Executive
Compensation Committee focuses on the individual contributions of executive
officers to Ottawa Financial. The Executive Compensation Committee uses its
discretion to set executive compensation where, in its judgment, external,
internal or an individual's circumstances warrant it. The Compensation Committee
also periodically reviews the compensation policies of other similarly situated
companies, as set forth in various industry publications, to determine whether
Ottawa Financial's compensation decisions are competitive within its industry.
10
<PAGE>
EXECUTIVE OFFICER COMPENSATION PROGRAM
Ottawa Financial's executive officer compensation program is comprised
of base salary, annual incentive bonuses, long-term incentive compensation in
the form of stock options and restricted stock awards, and various benefits,
including medical and pension plans generally available to its employees.
BASE SALARY. Base salary levels for Ottawa Financial's executive
officers are competitively set relative to companies in the thrift industry. In
determining salaries, the Compensation Committee also takes into account
individual experience and performance, and specific issues particular to Ottawa
Financial.
ANNUAL INCENTIVE BONUSES. Executive officers are paid an annual
incentive bonus, which is a percentage of such executive officers' base salary,
if Ottawa Financial's targeted goals established at the beginning of each year
are met and certain safety and soundness standards at AmeriBank level are
maintained. The annual incentive bonus awards for Messrs. Grevengoed, Iverson
and Haan were calculated based on a comparison of Ottawa Financial's actual
results to its targeted goals for return on equity and asset quality. The
remaining executive officer's annual incentive bonus award was based on a
comparison of Ottawa Financial's actual results to its targeted goals for return
on assets and certain departmental goals. The Board of Directors establishes the
minimum and maximum bonus pool based on a range of return on assets, taking into
consideration Ottawa Financial's performance goals included in its business
plan.
STOCK BENEFIT PLANS. The Stock Option Plan and Management Recognition
and Retention Plan are Ottawa Financial's long-term incentive plans for
directors, officers and employees. The objectives of the program are to align
executive and shareholder long-term interests by creating a strong and direct
link between executive pay and Ottawa Financial's performance, and to enable
executives to develop and maintain a significant, long-term stock ownership
position in Ottawa Financial's common stock. Awards are made at a level
calculated to be competitive with the thrift industry and within the limits
prescribed by the Office of Thrift Supervision.
CHIEF EXECUTIVE OFFICER COMPENSATION
For the fiscal year ended December 31, 1998, Mr. Grevengoed received a
base salary of approximately $153,000. Mr. Grevengoed's base salary for 1997 was
approximately $143,000. The increase reflected the Executive Compensation
Committee's consideration of base salaries in the industry, Mr. Grevengoed's
responsibilities of running a public company, and the Committee's and the
Board's assessment of Mr. Grevengoed's performance over the year in recognition
of the performance by Ottawa Financial during 1998 as compared to Ottawa
Financial's goals.
In 1993, Section 162(m) was added to the Internal Revenue Code, the
effect of which is to eliminate the deductibility of compensation over $1
million, with certain exclusions, paid to each of certain highly compensated
executive officers of publicly held corporations, such as Ottawa Financial.
Section 162(m) applies to all remuneration, both cash and non-cash, that would
otherwise be deductible for tax years beginning on or after January 1, 1994,
unless expressly excluded. Because the current compensation of each of Ottawa
Financial's executive officers is below the $1.0 million threshold, Ottawa
Financial has not yet considered its policy regarding the new provision.
The foregoing report is furnished by the Executive Compensation
Committee of the Board of Directors of Ottawa Financial.
GORDON H. CUNNINGHAM
RONALD J. BIEKE
BRIAN W. KOOP
LEON E. KOOPS
11
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below compares the cumulative total shareholder return
on Ottawa Financial's common stock to the cumulative total return of a broad
index of the Nasdaq Stock Market and a savings and loan industry index for the
period August 19, 1994 (the date Ottawa Financial became a public company)
through December 31, 1998.
[LINE GRAPH -- DESCRIBE]
<TABLE>
<CAPTION>
08/19/94 12/31/94 12/31/95 12/31/96 12/31/97 36159
-------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Ottawa Financial Corporation.... $100.00 $ 86.02 $128.52 $141.17 $319.35 $223.12
Selected Thrift Index........... 100.00 85.62 135.62 177.00 297.59 260.88
Nasdaq Market Index............. 100.00 96.91 125.70 156.21 191.07 269.49
</TABLE>
CERTAIN TRANSACTIONS
AmeriBank has followed a policy of granting loans to eligible
directors, officers, employees and members of their immediate families for the
financing of their personal residences and for consumer purposes. As of December
31, 1998, all loans or extensions of credit to executive officers and directors
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public and do not involve more than the normal risk of repayment or
present other unfavorable features. All loan requests by directors and executive
officers are submitted to AmeriBank's loan committee for approval.
12
<PAGE>
PROPOSAL II
RATIFICATION OF AN AMENDMENT TO THE OTTAWA FINANCIAL CORPORATION
1995 STOCK OPTION AND INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN BY 283,860 SHARES
GENERAL
The Ottawa Financial Corporation 1995 Stock Option and Incentive Plan
was initially ratified by the shareholders in April 1995. The Stock Option Plan
was adopted in order to advance the interests of Ottawa Financial and its
shareholders by affording executive officers, directors and certain key
employees an opportunity to acquire or increase their ownership interest in
Ottawa Financial through the grant of a variety of long-term incentive awards.
By encouraging such persons to become owners of the corporation, Ottawa
Financial seeks to attract, motivate, reward and retain those individuals whose
judgment, initiative, leadership and effort most directly determines its
success. Ottawa Financial also believes that the Stock Option Plan is a useful
tool in negotiating potential mergers and acquisitions. However, because the
awards are granted only to persons affiliated with Ottawa Financial, the Stock
Option Plan could make it more difficult for a third party to acquire control of
Ottawa Financial and thus, could discourage offers for Ottawa Financial's common
stock that may be viewed by Ottawa Financial's stockholders to be in their best
interest. All shares authorized for issuance under the Stock Option Plan have
been adjusted for stock dividends paid by Ottawa Financial to date.
The Stock Option Plan initially authorized the issuance of up to
680,095 shares of Ottawa Financial common stock, which represented 10% of the
common stock issued by Ottawa Financial in its initial public offering. In April
1996, shareholders approved an amendment to the Stock Option Plan which
increased by 334,551 the number of shares available for issuance under the Stock
Option Plan. This amendment was adopted by the Board and approved by
shareholders in order to fund option commitments in connection with Ottawa
Financial's acquisition of AmeriBank Federal Savings Bank, as well as for future
grants and for use as an additional incentive in negotiating potential mergers
and acquisitions.
As of the date of this proxy statement, awards covering all of the
shares of common stock reserved for issuance under the Stock Option Plan have
been granted. The Board of Directors has adopted, subject to shareholder
approval, an amendment to the Stock Option Plan. The amendment, if approved by
shareholders, will increase the number of shares available for issuance under
the Stock Option Plan by 283,860 shares. This increase represents 4.99% of the
currently issued and outstanding common stock of Ottawa Financial. The
additional shares are being requested for use in connection with general
corporate purposes. These uses may include future grants to new or existing
directors, officers and employees of Ottawa Financial and its affiliates, as
well as an additional incentive in negotiating potential mergers and
acquisitions. No acquisitions or mergers are presently contemplated. At this
time, no option awards have been granted with respect to the additional shares
being requested pursuant to this amendment.
The exercise of stock options will increase the number of shares of
Ottawa Financial common stock outstanding. The issuance of these additional
shares may decrease certain per share financial measures for a period of time
and may diminish a shareholder's percentage voting power in Ottawa Financial.
Ottawa Financial has repurchased shares of its common stock in the open market
in the past and may continue to do so in the future in order to minimize or
avoid any such effects. As always, any stock repurchase program will be at the
discretion of the Board of Directors and subject to market conditions.
The principal features of the Stock Option Plan are summarized below.
The summary is not complete and is qualified in its entirety by reference to the
full text of the Stock Option Plan, a copy of which is filed with the Securities
and Exchange Commission. A copy of the Stock Option Plan is available upon
request to Ottawa Financial's Corporate Secretary, 245 Central Avenue, Holland,
Michigan 49423.
PRINCIPAL FEATURES OF THE STOCK OPTION PLAN
The Stock Option Plan provides for awards in the form of stock options,
stock appreciation rights and limited stock appreciation rights. Each award will
be on such terms and conditions, consistent with the Stock Option Plan and
13
<PAGE>
applicable Office of Thrift Supervision regulations, as the committee
administering the Stock Option Plan may determine. See "Proposal III" below.
Shares may be either authorized but unissued shares or reacquired
shares held by Ottawa Financial in its treasury. Any shares subject to an award
which expires or is terminated unexercised will again be available for issuance
under the Stock Option Plan. No award or right or interest therein is assignable
or transferable, except under limited circumstances as described in the Stock
Option Plan.
The Stock Option Plan is administered by the Executive Compensation
Committee of the Board of Directors. Pursuant to the terms of the Stock Option
Plan, any director or employee of Ottawa Financial or its affiliates is eligible
to participate in the Stock Option Plan. In granting awards under the Stock
Option Plan, the Executive Compensation Committee considers, among other things,
position and years of service, value of the participant's service to Ottawa
Financial and AmeriBank, and the added responsibilities of such individuals as
employees, directors and officers of a public company.
STOCK OPTIONS
The term of stock options will not exceed ten years from the date of
grant. The Committee may grant either "incentive stock options" as defined under
Section 422 of the Internal Revenue Code of 1986, as amended, or stock options
not intended to qualify as such.
In general, stock options will not be exercisable after the expiration
of their terms. Unless otherwise determined by the Executive Compensation
Committee, in the event that a participant ceases to maintain continuous service
to Ottawa Financial, or one of its affiliates, for any reason other than death,
disability or termination for cause, an exercisable stock option will continue
to be exercisable for three months but in no event after the expiration date of
the option. If a participant ceases to maintain continuous service due to death
or disability, any option granted but not fully exercisable will become
exercisable in full upon the happening of such event and remain exercisable (i)
in the event of death for the period described below and (ii) in the event of
disability for a period of three months.
In the event of the death of a participant during such service or
within the three-month periods described above, an exercisable option will
continue to be exercisable for one year following the death of the participant,
but in no event later than ten years from the date of grant. Following the death
of any participant, the Executive Compensation Committee may, as an alternative
means of settlement of an option, elect to pay to the holder an amount of cash
equal to the amount by which the market value of the shares covered by the
option on the date of exercise exceeds the exercise price. 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
may not be less than 100% of the market value of the shares covered by the
option on the date of grant. The exercise price must be paid in full in cash or
shares of common stock, or a combination of both.
STOCK APPRECIATION RIGHTS
The Executive Compensation Committee may grant stock appreciation
rights at any time, whether or not the participant then holds stock options,
granting the right to receive the excess of the market value of the shares
represented by the stock appreciation rights on the date exercised over the
exercise price. Stock appreciation rights generally will be subject to the same
terms and conditions and exercisable to the same extent as stock options, as
described above. Upon the exercise of a stock appreciation right, the
participant will receive the amount due in cash or shares, or a combination of
both, as determined by the Executive Compensation Committee. Stock appreciation
rights may be related to stock options, in which case the exercise of one will
reduce to that extent the number of shares represented by the other.
Stock appreciation rights will require an expense accrual by Ottawa
Financial each year for the appreciation on the stock appreciation rights which
it is anticipated will be exercised. The amount of the accrual is dependent upon
whether, and the extent to which, the stock appreciation rights are granted and
the amount, if any, by which the market value of the stock appreciation rights
exceeds the exercise price.
14
<PAGE>
LIMITED STOCK APPRECIATION RIGHTS
Limited stock appreciation rights will be exercisable only for a
limited period in the event of a tender or exchange offer for shares of Ottawa
Financial's common stock, other than by Ottawa Financial, where 25% or more of
the outstanding shares are acquired in that offer or any other offer which
expires within 60 days of that offer. The amount paid on exercise of a limited
stock appreciation right will be the excess of (a) the market value of the
shares on the date of exercise, or (b) the highest price paid pursuant to the
offer, over the exercise price. Payment upon exercise of a limited stock
appreciation right will be in cash.
Limited stock appreciation rights may be granted at the time of, and
must be related to, the grant of a stock option or stock appreciation right. The
exercise of one will reduce to that extent the number of shares represented by
the other. Subject to vesting requirements contained in Office of Thrift
Supervision regulations, limited stock appreciation rights will be exercisable
only for the 45 days following the expiration of the tender or exchange offer,
during which period the related stock option or stock appreciation right will be
exercisable. See "Proposal III" below.
EFFECT OF CHANGE IN CONTROL AND OTHER ADJUSTMENTS
Shares as to which awards may be granted under the Stock Option Plan,
and shares then subject to awards, will be adjusted by the Executive
Compensation Committee in the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate structure of Ottawa Financial.
In the case of any merger, consolidation or combination of Ottawa
Financial with or into another thrift holding company or other entity, whereby
either Ottawa Financial is not the continuing thrift holding company or its
outstanding shares are converted into or exchanged for securities, cash or
property, or any combination thereof, any participant to whom a stock option,
stock appreciation right and limited stock appreciation right has been granted
prior to such event will have the right, subject to the provisions of the Stock
Option Plan and any applicable vesting period, upon exercise of the option,
stock appreciation right or limited stock appreciation right to an amount equal
to the excess of the fair market value on the date of exercise of the
consideration receivable in the merger, consolidation or combination with
respect to the shares covered or represented by the stock option, stock
appreciation right or limited stock appreciation right over the exercise price
of the option, stock appreciation right or limited stock appreciation right
multiplied by the number of shares with respect to which the option, stock
appreciation right or limited stock appreciation right has been exercised.
In addition, in the event of a change in control, all outstanding stock
options and stock appreciation rights not fully exercisable will become
exercisable in full and remain so for a period of 60 days, after which they will
revert to being exercisable in accordance with their terms, unless the Executive
Compensation Committee provides otherwise.
A change in control will be deemed to occur when (i) any third person,
including a "group" as defined in section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, becomes the beneficial owner of shares of Ottawa
Financial with respect to which 25% or more of the total number of votes may be
cast for the election of the Board of Directors of Ottawa Financial, (ii) as a
result of or in connection with any cash tender or exchange offer (other than an
offer made by Ottawa Financial), merger or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of Ottawa Financial cease to be a majority of the Board of
Directors or (iii) stockholders of Ottawa Financial approve an agreement
providing either for a transaction pursuant to which Ottawa Financial will cease
to be an independent publicly owned entity or pursuant to which substantially
all of its assets will be sold.
AMENDMENT AND TERMINATION
The Board of Directors of Ottawa Financial may at any time amend,
subject to compliance with Office of Thrift Supervision regulations, suspend or
terminate the Stock Option Plan or any portion in the plan, but may not, without
the prior approval of the shareholders, make any amendment which would (i)
increase the aggregate number of shares with respect to which awards may be made
under the Stock Option Plan, except as set forth in Section 11 of the Stock
Option Plan, (ii) materially increase the benefits accruing to the participants
of the Stock Option Plan, (iii) materially change the requirements as to
eligibility for participation in the Stock Option Plan or (iv) change the class
of person eligible to participate in the Stock Option Plan, provided, however,
that no such amendment, suspension or termination
15
<PAGE>
will impair the rights of any participant, without his or her consent, in any
award made pursuant to the Stock Option Plan. See "Proposal III." Unless
previously terminated, the Stock Option Plan will continue in effect for a term
of ten years, after which no further awards may be granted under the Stock
Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under present federal income tax laws, awards under the Stock Option
Plan will have the following consequences:
(1) The grant of an award, by itself, will generally not result in the
recognition of taxable income to the participant or entitle Ottawa Financial to
a deduction at the time of such grant.
(2) In order to qualify as an "incentive stock option", a stock option
awarded under the Stock Option Plan must meet the conditions contained in
Section 422 of the Internal Revenue Code of 1986, including the requirement that
the shares acquired upon the exercise of the stock option be held for at least
one year after the date of exercise and at least two years after the grant of
the option. The exercise of an incentive stock option, by itself, will generally
not result in the recognition of taxable income to the participant or entitle
the company 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 adjustment which may, in certain situations,
trigger the alterative minimum tax. The alternative minimum tax is incurred only
when it exceeds the regular income tax.
(3) If the shares are held by the participant for at least one year
after the incentive stock option is exercised and two years after the incentive
stock option was granted, the participant will recognize a long-term capital
gain or loss upon disposition of the shares and Ottawa Financial will not be
entitled to a corresponding deduction. The capital gain will be considered
long-term if the shares are held for more than 12 months prior to disposition.
The amount of such gain or loss will be equal to the difference between the
amount realized by the participant upon disposition of the shares and the amount
paid by the participant for such shares.
(4) If the shares acquired upon exercise of an incentive stock option
are not held for at least one year after transfer of such shares to the
participant and two years after the grant of the incentive stock option, the
participant generally will recognize ordinary income or loss upon disposition of
the shares in an amount equal to the difference between the exercise price and
the fair market value of the shares on the date of exercise. In such an event,
Ottawa Financial will generally be entitled to a corresponding deduction,
provided the company meets its federal tax reporting obligations.
(5) The exercise of a stock option which is not an incentive stock
option ("non-qualified 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. Ottawa Financial
will be allowed a deduction at the time and in the amount of any ordinary income
recognized by the participant upon the exercise of a non-qualified stock option,
provided the company meets its federal tax reporting obligations.
(6) The exercise of a stock appreciation right will result in the
recognition of ordinary income by the participant on the date of exercise in an
amount of cash, and/or the fair market value on that date of the shares,
acquired pursuant to the exercise. Ottawa Financial will be entitled to a
corresponding deduction provided that it meets its federal tax reporting
obligations.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE AMENDMENT TO THE STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE THEREUNDER.
16
<PAGE>
PROPOSAL III
RATIFICATION OF AN AMENDMENT TO THE STOCK OPTION PLAN TO REMOVE
THE OFFICE OF THRIFT SUPERVISION IMPOSED RESTRICTIONS ON THE
GRANTING AND VESTING OF AWARDS UNDER THE PLAN
GENERAL
As described in Proposal II above, the Board of Directors adopted the
Stock Option Plan, which was approved by shareholders in April 1995. At the time
of its adoption, Office of Thrift Supervision regulations required that Ottawa
Financial's Stock Option Plan contain certain restrictions and limitations on
the granting and vesting of awards under the Stock Option Plan. These provisions
were as follows:
(i) that no individual shall be granted awards under the plan with
respect to more than 25% of the total shares subject to the
Stock Option Plan, and no director who is not an employee of
Ottawa Financial or its subsidiaries shall be granted awards
with respect to more than 5% of the total shares subject to
the Stock Option Plan and that all non-employee directors, in
the aggregate, may not be granted awards under the plan with
respect to more than 30% of the total shares subject to the
plan; and
(ii) that no awards granted under the plan shall vest at a rate in
excess of 20% per year beginning from the date of grant.
The Board of Directors has adopted amendments to the Stock Option Plan
to remove the Office of Thrift Supervision restrictions on the granting and
vesting of awards under the Stock Option Plan. The amendments to the Stock
Option Plan will permit the Executive Compensation Committee of the Board to
grant awards to participants in amounts, and subject to any vesting
requirements, it determines to be appropriate. The Board of Directors believes
this flexibility is important in connection with future acquisitions, if any,
and that this amendment will make the plan more consistent with stock option
plans adopted by non-regulated companies. The Board has determined that the
amendments to the Stock Option Plan are in the best interests of the
shareholders, as well as the officers, directors and employees of Ottawa
Financial. The amendments to the Stock Option Plan are subject to approval by
shareholders. In the event that the amendments to the Stock Option Plan are not
approved by shareholders at the annual meeting, the amendments will not take
effect, but the Stock Option Plan will remain in effect. The principal features
of the Stock Option Plan are summarized in Proposal II above.
The amendments to the Stock Option Plan do not impact the number or
vesting schedules of any awards previously granted under the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE AMENDMENT TO THE STOCK OPTION PLAN TO REMOVE THE OFFICE OF
THRIFT SUPERVISION RESTRICTIONS ON THE GRANTING AND VESTING OF AWARDS UNDER THE
STOCK OPTION PLAN.
PROPOSAL IV
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has renewed Ottawa Financial's arrangement for
Crowe, Chizek and Company LLP to be its independent auditors for the fiscal year
ending December 31, 1999 subject to the ratification of the appointment by
Ottawa Financial's shareholders. A representative of Crowe, Chizek and Company
LLP is expected to attend the meeting to respond to appropriate questions and
will have an opportunity to make a statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF CROWE CHIZEK AND COMPANY LLP AS OTTAWA
FINANCIAL'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
17
<PAGE>
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in Ottawa Financial's proxy
materials for next year's Annual Meeting of Shareholders, any shareholder
proposal to take action at such meeting must be received at Ottawa Financial's
executive office at 245 Central Avenue, Holland, Michigan 49423 no later than
November 22, 1999.
To be considered for presentation at next year's annual meeting,
although not included in the proxy statement, any shareholder proposal must be
received at Ottawa Financial's executive office on or before February 28, 2000;
provided, however, that in the event that the date of next year's annual meeting
is held before April 7, 2000 or after June 26, 2000, the shareholder proposal
must be received not later than the close of business on the later of the 60th
day prior to such annual meeting or the tenth day following the day on which
notice of the date of the annual meeting was mailed or public announcement of
the date of the meeting was made, whichever occurred first. All shareholder
proposals for inclusion in Ottawa Financial's proxy materials will be subject to
the requirements of the proxy rules adopted under the Securities Exchange Act of
1934, as amended, and, as with any shareholder proposal (regardless of whether
included in Ottawa Financial's proxy materials), Ottawa Financial's Certificate
of Incorporation and Bylaws, and Delaware Law.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
annual meeting other than the matters described above in this proxy statement.
However, if any other matters should properly come before the meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
18
<PAGE>
REVOCABLE PROXY
OTTAWA FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
April 27, 1999
The undersigned hereby appoints the members of the Board of Directors
of Ottawa Financial Corporation, and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of Ottawa Financial which the undersigned is entitled to
vote at the Annual Meeting of Shareholders, to be held on Tuesday, April 27,
1999 at the Holiday Inn and Conference Center located at 650 E. 24th Street,
Holland, Michigan at 10:00 a.m. local time, and at any and all adjournments
thereof, as follows:
WITH- FOR ALL
FOR HOLD EXCEPT
--- ---- ------
I. The election of RONALD J. BIEKE, /_/ /_/ /_/
RONALD L. HAAN, DOUGLAS J. IVERSON
and BRIAN W. KOOP as directors for terms
of three years.
INSTRUCTIONS: TO WITHHOLD YOUR VOTE FOR AN INDIVIDUAL NOMINEE MARK
"FOR ALL EXCEPT" WITH AN "X" AND WRITE THE NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW FOR WHOM YOU WISH TO WITHHOLD YOUR VOTE.
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FOR AGAINST ABSTAIN
II. The ratification of an amendment to /_/ /_/ /_/
Ottawa Financial's 1995 Stock Option
and Incentive Plan to increase the
number of shares available thereunder
by 283,860.
III. The ratification of an amendment to /_/ /_/ /_/
Ottawa Financial's 1995 Stock Option
and Incentive Plan to remove Office of
Thrift Supervision restrictions on the
granting and vesting of awards under
the plan.
IV. The ratification of the appointment of /_/ /_/ /_/
Crowe, Chizek and Company LLP as Ottawa
Financial's independent auditors for
the fiscal year ending December 31,
1999.
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" the listed proposals.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS PRESENTED
AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy may be revoked at any time before it is voted by delivering
to the Secretary of Ottawa Financial Corporation, on or before the taking of the
vote at the annual meeting, a written notice of revocation bearing a later date
than the proxy or a later dated proxy relating to the same shares of Ottawa
Financial's common stock, or by attending the meeting and voting in person.
Attendance at the annual meeting will not in itself constitute the revocation of
a proxy. If this proxy is properly revoked as described above, then the power of
such attorneys and proxies shall be deemed terminated and of no further force
and effect.
The undersigned acknowledges receipt from Ottawa Financial Corporation,
prior to the execution of this Proxy, of Notice of the Annual Meeting of
Shareholders, a Proxy Statement dated April 1, 1999 and Ottawa Financial
Corporation's Annual Report to Shareholders for the fiscal year ended December
31, 1998.
Dated: ________________________
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
----------------------------- -------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ABOVE ON THIS CARD.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES ARE HELD
JOINTLY, EACH HOLDER SHOULD SIGN.
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PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
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