<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant[X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MILTON FEDERAL FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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 O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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MILTON FEDERAL FINANCIAL CORPORATION
25 LOWRY DRIVE
WEST MILTON, OHIO 45383
(937) 698-4168
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the 1999 Annual Meeting of Shareholders of
Milton Federal Financial Corporation ("MFFC") will be held at the American
Legion building at 2334 South Miami Street, West Milton, Ohio, 45383, on January
20, 1999, at 2:00 p.m., local time (the "Annual Meeting"), for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
1. To reelect three directors of MFFC for terms expiring in 2001;
2. To ratify the selection of Crowe, Chizek and Company LLP as
the auditors of MFFC for the current fiscal year;
3. To consider and vote upon a shareholder proposal regarding the
sale or merger of MFFC; and
4. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only shareholders of MFFC of record at the close of business on
December 4, 1998, will be entitled to receive notice of and to vote at the
Annual Meeting and at any adjournments thereof. Whether or not you expect to
attend the Annual Meeting, we urge you to consider the accompanying Proxy
Statement carefully and to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO
THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF
A QUORUM MAY BE ASSURED. The giving of a Proxy does not affect your right to
vote in person in the event you attend the Annual Meeting.
By Order of the Board of Directors
December 18, 1998 E. Lynn App, Secretary
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MILTON FEDERAL FINANCIAL CORPORATION
25 LOWRY DRIVE
WEST MILTON, OHIO 45383
(937) 698-4168
PROXY STATEMENT
PROXIES
The enclosed Proxy is being solicited by the Board of Directors of
Milton Federal Financial Corporation, an Ohio corporation ("MFFC"), for use at
the 1999 Annual Meeting of Shareholders of MFFC to be held at the American
Legion building at 2334 South Miami Street, West Milton, Ohio, 45383, on January
20, 1999, at 2:00 p.m., local time, and at any adjournments thereof (the "Annual
Meeting"). Without affecting any vote previously taken, the Proxy may be revoked
by a shareholder executing a later dated proxy which is received by MFFC before
the Proxy is exercised or by giving notice of revocation to MFFC in writing or
in open meeting before the Proxy is exercised. Attendance at the Annual Meeting
will not, of itself, revoke a Proxy.
Each properly executed Proxy received prior to the Annual Meeting and
not revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted:
FOR the reelection of Messrs. Glenn E. Aidt, Kenneth J. Faze and David
R. Hayes, as directors of MFFC for terms expiring in 2001;
FOR the ratification of the selection of Crowe, Chizek and Company LLP
("Crowe Chizek") as the auditors of MFFC for the current fiscal year;
and
AGAINST the approval of the shareholder proposal regarding the sale or
merger of MFFC (the "Shareholder Proposal").
Proxies may be solicited by the directors, officers and other employees
of MFFC and Milton Federal Savings Bank, a wholly-owned subsidiary of MFFC
("Milton Federal"), in person or by telephone, telegraph or mail only for use at
the Annual Meeting. Such Proxies will not be used for any other meeting. The
cost of soliciting Proxies will be borne by MFFC.
Only shareholders of record as of the close of business on December 4,
1998 (the "Voting Record Date"), are eligible to vote at the Annual Meeting.
Each such shareholder will be entitled to cast one vote for each share owned.
MFFC's records disclose that, as of the Voting Record Date, there were 2,213,495
votes entitled to be cast at the Annual Meeting.
This Proxy Statement is first being mailed to shareholders of MFFC on
or about December 18, 1998.
VOTE REQUIRED
ELECTION OF DIRECTORS
Under Ohio law and MFFC's Code of Regulations (the "Regulations"), the
three nominees receiving the greatest number of votes will be elected as
directors. Shares as to which the authority to vote is withheld and shares held
by a nominee for a beneficial owner which are represented in person or by proxy
but not voted ("non-votes") with respect to the
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election of directors are not counted toward the election of directors or toward
the election of the individual nominees specified on the form of proxy. If the
accompanying Proxy is signed and dated by the shareholder but no vote is
specified thereon, the shares held by such shareholder will be voted FOR the
reelection of the three nominees.
RATIFICATION OF SELECTION OF AUDITORS AND APPROVAL OF THE SHAREHOLDER PROPOSAL
The affirmative vote of the holders of a majority of the shares
represented in person or by proxy at the Annual Meeting is necessary to ratify
the selection of Crowe Chizek as the auditors of MFFC for the current fiscal
year and to approve the Shareholder Proposal. The effect of an abstention or a
non-vote is the same as a vote against ratification or approval. If the
accompanying Proxy is signed and dated by the shareholder but no vote is
specified thereon, the shares held by such shareholder will be voted FOR the
ratification of the selection of Crowe Chizek as auditors and AGAINST the
Shareholder Proposal.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
only person known to MFFC to own beneficially more than five percent of the
outstanding common shares of MFFC as of November 30, 1998:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address Beneficial Ownership Shares Outstanding
- ---------------- -------------------- ------------------
<S> <C> <C>
United National Bank & Trust 189,989 (1) 8.58%
220 Market Avenue South
Canton, Ohio 44702
</TABLE>
- -----------------------------
(1) Consists of shares held by United National Bank & Trust as the Trustee
for the Milton Federal Financial Corporation Employee Stock Ownership
Plan (the "ESOP").
The following table sets forth certain information with respect to the
number of common shares of MFFC beneficially owned by each director of MFFC and
by all directors and executive officers of MFFC as a group as of November 30,
1998:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership
-----------------------
Sole Voting and Shared Voting and Percent of
Name and Address(1) Investment Power Investment Power Shares Outstanding
- ------------------- ---------------- ----------------- ------------------
<S> <C> <C> <C>
Glenn E. Aidt 46,796 (2) 10,000 2.53 %
E. Lynn App 10,827 (3) 60,893 (4) 3.23 %
Kenneth J. Faze 10,845 (3) 15,000 1.16 %
David R. Hayes 10,827 (3) 64,043 (4) 3.37 %
Robert E. Hine 17,041 (3) 0 .77 %
Christopher S. Long 20,827 (3) 58,293 (4) 3.56 %
Cletus G. Minnich, Jr. 13,527 (3) 7,300 .94 %
</TABLE>
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<TABLE>
<S> <C> <C> <C>
All directors and executive officers
of MFFC as a group (8 persons) 177,027 (5) 99,043 (6) 11.93 %
</TABLE>
- ----------------------------
(1) Each of the persons listed in this table may be contacted at the
address of MFFC.
(2) This number includes 30,945 shares that may be acquired upon the
exercise of options awarded pursuant to the Milton Federal Financial
Corporation 1995 Stock Option and Incentive Plan (the "Stock Option
Plan") and 12,241 shares allocated to Mr. Aidt's ESOP account, with
respect to which Mr. Aidt has voting control.
(3) This number includes 7,734 shares that may be acquired upon the
exercise of options awarded pursuant to the Stock Option Plan.
(4) This number includes 58,293 shares held by the Milton Federal Savings
Bank Recognition and Retention Plan and Trust (the "RRP"), with respect
to which Messrs. App, Hayes and Long have shared voting power as
Trustees of the RRP.
(5) This number includes 100,557 shares that may be acquired upon the
exercise of options awarded pursuant to the Stock Option Plan and
19,181 shares allocated to the ESOP accounts of executive officers.
(6) The 58,293 shares held by the RRP Trust are reflected in each of three
directors' amounts but counted only once in the total amount
beneficially owned by all directors and executive officers of MFFC as a
group.
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
The Regulations provide for a Board of Directors consisting of seven
persons. Each of the directors of MFFC is also a director of Milton Federal.
In accordance with Section 2.03 of the Regulations, nominees for
election as directors may be proposed only by the directors or by a shareholder
entitled to vote for directors if such shareholder has submitted a written
nomination to the Secretary of MFFC by the later of the November 30 immediately
preceding the annual meeting of shareholders or the sixtieth day before the
first anniversary of the most recent annual meeting of shareholders held for the
election of directors. Each such written nomination must state the name, age,
business or residence address of the nominee, the principal occupation or
employment of the nominee, the number of common shares of MFFC owned either
beneficially or of record by each such nominee and the length of time such
shares have been so owned.
The Board of Directors proposes the reelection of the following persons
to terms which will expire in 2001:
<TABLE>
<CAPTION>
Director
Director of Milton Federal
Name Age (1) Position(s) Held Since (2) Since
- ---- --- ---------------- ----- -----
<S> <C> <C> <C>
Glenn E. Aidt 58 Director, President and Chief 1994 1989
Executive Officer
Kenneth J. Faze 65 Director 1994 1985
David R. Hayes 49 Director 1994 1986
</TABLE>
- -----------------------------
(1) As of November 30, 1998.
(2) Each director nominee became a director of MFFC in connection with the
conversion of Milton Federal from mutual to stock form (the
"Conversion") and the formation of MFFC as the holding company for
Milton Federal.
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The following directors will continue to serve after the Annual Meeting
for the terms indicated:
<TABLE>
<CAPTION>
Director
Director of Milton Federal
Name Age (1) Position(s) Held Since (2) Since Term Expires
- ---- --- ---------------- ----- ----- ------------
<S> <C> <C> <C> <C>
E. Lynn App 56 Director and Secretary 1994 1986 2000
Robert E. Hine 69 Director and Vice Chairman 1994 1973 2000
Christopher S. Long 56 Director 1994 1989 2000
Cletus G. Minnich, Jr. 74 Director and Chairman 1994 1957 2000
</TABLE>
- -----------------------------
(1) As of November 30, 1998.
(2) Each director became a director of MFFC in connection with the
Conversion.
MR. AIDT has served as the President, the Chief Executive Officer and a
director of Milton Federal since November 1989.
MR. APP has served as a director of Milton Federal since 1986 and is
the principal shareholder and President of E Lynn App, Inc., Architects, in
Englewood, Ohio.
DR. FAZE has served as a director of Milton Federal since 1985. Dr.
Faze was the Chief Executive Officer of Milton Union Medical Center, Inc., in
West Milton, Ohio, from 1984 to March 1, 1998, when he retired from the active
practice of medicine.
DR. HAYES has served as a director of Milton Federal since 1986 and has
been the President of West Milton Veterinary Clinic, Inc., West Milton, Ohio,
since 1984.
MR. HINE has served as the Vice Chairman of the Board of Directors of
Milton Federal since 1993 and as a director since 1973. Mr. Hine has been
co-owner and Chief Executive Officer of Hine's, Inc. in Union and Troy, Ohio,
since 1954.
MR. LONG, who has served as a director of Milton Federal since 1989,
has been the President and co-owner of Long & Associates, Inc., an association
management firm in West Milton, Ohio, since 1984.
MR. MINNICH has served as the Chairman of the Board of Directors of
Milton Federal since 1978. From 1958 to 1988, Mr. Minnich served as the
President and a director of Milton Federal.
MEETINGS OF DIRECTORS
The Board of Directors of MFFC met 17 times for regularly scheduled and
special meetings during the fiscal year ended September 30, 1998. Each director
attended at least 75% of the aggregate of such meetings and all meetings of
committees of the Board of Directors of which such director was a member.
Each director of MFFC is also a director of Milton Federal. The Board
of Directors of Milton Federal met 17 times for regularly scheduled and special
meetings during the fiscal year ended September 30, 1998. Each director attended
at least 75% of the aggregate of such meetings and all meetings of committees of
the Board of Directors of which such director was a member.
COMMITTEES OF DIRECTORS
The Board of Directors of MFFC has an Audit Committee, an ESOP
Committee and a Stock Option Committee.
The Audit Committee recommends audit firms to the full Board of
Directors and reviews and approves the annual independent audit report. Such
committee also monitors management's responses to Office of Thrift Supervision
("OTS")
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examination reports. The members of the Audit Committee are Messrs. Faze, Hine
and Minnich. The Audit Committee met four times during fiscal year 1998.
The ESOP Committee administers the ESOP and presently consists of
Messrs. Hayes, Long, Hine and Faze. The ESOP Committee met seven times during
the fiscal year ended September 30, 1998.
The Stock Option Committee is responsible for administering the Stock
Option Plan, including interpreting the Stock Option Plan and awarding options
pursuant to its terms. Its members are Messrs. Hayes, Long, Hine and Faze. The
Stock Option Committee met seven times during the fiscal year ended September
30, 1998.
The Board of Directors of MFFC does not have a nominating committee or
a compensation committee. Nominees for election to the Board of Directors are
selected by the entire Board of Directors.
The Board of Directors of Milton Federal has several committees,
including Compensation, RRP, Executive and Loan Committees.
The Compensation Committee of Milton Federal reviews the President's
salary and recommends salary increases to the full Board of Directors for
approval. The Compensation Committee also reviews the President's
recommendations with respect to salary increases for the other executive
officers and reports thereon to the Board of Directors, which makes the final
salary determinations. Messrs. Hayes, Long, Hine and Faze are the members of the
Compensation Committee. Such Committee met seven times during fiscal year 1998.
The RRP Committee of Milton Federal administers the RRP. Such Committee
consists of Messrs. Hayes, Long, Hine and Faze. The RRP Committee met seven
during fiscal year 1998.
The Executive Committee of Milton Federal is authorized to act, with
certain limitations, on behalf of the Board of Directors between meetings of the
Board of Directors. Messrs. Aidt, Hine and Minnich are the members of the
Executive Committee. The Executive Committee met ten times during fiscal year
1998.
The Loan Committee reviews the recommendations of Milton Federal's loan
officers and approves or disapproves loans of up to $400,000. Any loans of
amounts exceeding $400,000 are referred to the full Board of Directors. The
members of the Loan Committee are Messrs. Aidt, Hine and Minnich. The Loan
Committee met fifty four times during fiscal year 1998.
EXECUTIVE OFFICERS
In addition to Mr. Aidt, the President of both MFFC and Milton Federal,
and Mr. App, the Secretary of MFFC, the following persons are executive officers
of MFFC and Milton Federal and hold the designated positions:
<TABLE>
<CAPTION>
Name Age(1) Position(s) Held
---- ------ ----------------
<S> <C> <C>
Thomas P. Eyer 44 Treasurer and Chief Financial
Officer of MFFC, Executive Vice
President/Financial Operations,
Treasurer and Chief Financial
Officer of Milton Federal,
Executive Vice
President/Administration
Michael J. Hufford 45 Secretary, Senior Vice
President/Lending Operations of
Milton Federal
</TABLE>
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<TABLE>
<S> <C> <C>
Debbie A. Jones 50 Executive Vice President/Banking
Operations of Milton Federal
</TABLE>
- -----------------------------
(1) As of November 30, 1998.
MR. EYER has served as Executive Vice President of Administration of
Milton Federal since July 1998 and as Senior Vice President/Financial
Operations, Chief Financial Officer and Treasurer of Milton Federal since
January 1994. Mr. Eyer has also served as the Treasurer and Chief Financial
Officer of MFFC since 1994. He served as Vice President, Chief Financial Officer
and Treasurer of Milton Federal from 1992 until 1993.
MR. HUFFORD has served as Senior Vice President/Lending Operations for
Milton Federal since January 1993 and Secretary of Milton Federal since 1993. He
has worked for Milton Federal since 1974.
MRS. JONES has served as Executive Vice President of Banking Operations
since July 1998 and has served as Senior Vice President/Banking Operations for
Milton Federal since January 1994. She has worked for Milton Federal since 1979.
Mr. Hufford is the brother of Mr. Minnich's daughter-in-law.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to Glenn E. Aidt,
the President and Chief Executive Officer of both MFFC and Milton Federal, for
the fiscal years ended September 30, 1998, 1997 and 1996. No other executive
officer of MFFC earned salary and bonus in excess of $100,000 during such
period.
<TABLE>
Summary Compensation Table
--------------------------
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------- --------------------------
Awards
--------------------------
Name and Principal Year Salary ($)(1) Bonus ($) Restricted Securities All Other
Position Stock Awards Underlying Compensation
($) Options/
SARs(#)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glenn E. Aidt 1998 $137,035 (2) $24,628 -- -- $40,949 (6)
President, Chief 1997 $129,332 (3) $22,187 -- -- $43,049 (7)
Executive Officer 1996 $116,613 (4) $19,810 $266,267(5) -- $44,714 (8)
</TABLE>
- -------------------------
(1) Does not include amounts attributable to other miscellaneous benefits
received by executive officers. The cost to Milton Federal of providing
such benefits to Mr. Aidt was less than 10% of his cash compensation.
(2) Includes salary of $127,876 and directors' fees of $9,159.
(3) Includes salary of $120,323 and directors' fees of $9,009.
(4) Includes salary of $108,373 and directors' fees of $8,240.
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(5) Mr. Aidt was awarded 18,052 common shares of MFFC under the RRP on
October 16, 1995. One-fifth of such awarded shares are earned on each
of the first five anniversaries of the date the shares were awarded.
The figure represents the dollar value of such awarded shares based on
the $14.75 closing sale price per share reported by The Nasdaq Stock
Market for the shares on October 16, 1995. The aggregate fair market
value of the 18,052 shares at September 30, 1998, was $230,163 based
upon the $12.75 per share closing sale price reported by The Nasdaq
Stock Market. Dividends are paid on all awarded shares at the same rate
as they are paid to all shareholders.
(6) Consists of Milton Federal's matching contribution to Mr. Aidt's
defined contribution plan account in the amount of $1,416; the $39,429
aggregate value at the date of allocation of 3,092 common shares of
MFFC allocated to Mr. Aidt's account pursuant to the ESOP; and the
premium of $104 paid by Milton Federal for insurance on the life of Mr.
Aidt payable to a beneficiary designated by Mr. Aidt.
(7) Consists of Milton Federal's matching contribution to Mr. Aidt's
defined contribution plan account in the amount of $1,323; the $41,509
aggregate value at the date of allocation of 2,721 common shares of
MFFC allocated to Mr. Aidt's account pursuant to the ESOP; and the
premium of $217 paid by Milton Federal for insurance on the life of Mr.
Aidt payable to a beneficiary designated by Mr. Aidt.
(8) Consists of Milton Federal's matching contribution to Mr. Aidt's
defined contribution plan account in the amount of $1,153; the $43,322
aggregate value at the date of allocation of 3,209 common shares of
MFFC allocated to Mr. Aidt's account pursuant to the ESOP; and the
premium of $239 paid by Milton Federal for insurance on the life of Mr.
Aidt payable to a beneficiary designated by Mr. Aidt.
STOCK OPTION PLAN
At the 1995 Annual Meeting of the Shareholders of MFFC, the
shareholders approved the Stock Option Plan. The Board of MFFC reserved 257,887
commons shares, which is equal to 10% of the common shares issued in connection
with the Conversion, for issuance by MFFC upon the exercise of options to be
granted to certain directors, officers and employees of Milton Federal and MFFC
from time-to-time under the Stock Option Plan. Options to purchase 225,651
common shares of MFFC have been awarded pursuant to the Stock Option Plan.
The Stock Option Committee may grant options under the Stock Option
Plan at such times as it deems most beneficial to Milton Federal and MFFC on the
basis of the individual participant's responsibility, tenure and future
potential to Milton Federal and MFFC. Options granted to the officers and
employees under the Stock Option Plan may be "incentive stock options" ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), which, if certain conditions are met, permit the optionees
to delay the recognition of federal taxable income on the shares received upon
the exercise of the options. Options granted under the Stock Option Plan to
directors who are not employees of MFFC or Milton Federal will not qualify under
the Code and thus will not be ISOs ("Non-qualified Stock Options").
Each option is exercisable commencing on the first anniversary of the
grant of the option with respect to no more than one-fifth of the shares subject
to the option on each anniversary of the date of grant of the option. The option
exercise price for ISOs and Non-qualified Stock Options is determined by the
Stock Option Committee at the time of option grant. The exercise price for an
option, however, must not be less than 100% of the fair market value of the
shares on the date of the grant. Moreover, for an employee who owns more than
10% of MFFC's outstanding common shares, the exercise price of an ISO may not be
less than 110% of the fair market value of the shares on the date of the grant,
and the ISO shall not be exercisable after the expiration of five years from the
date it is granted. No stock option will be exercisable after the expiration of
ten years from the date of grant.
An option recipient cannot transfer or assign an option other than by
will or in accordance with the laws of descent and distribution. Termination for
cause, as defined in the Stock Option Plan, will result in the annulment of any
outstanding options. The Stock Option Plan provides that in the event of a
"change in control," as defined in the Stock Option Plan, all options then
outstanding shall become immediately exercisable. A "change in control" includes
approval by the shareholders of the execution of an agreement for a merger or
acquisition, a change in control as defined under OTS regulations or the
acquisition of the beneficial ownership of 25% or more of the voting shares of
MFFC by any person or entity.
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The following table sets forth information regarding the number and
value of unexercised options held by Mr. Aidt at September 30, 1998:
<TABLE>
Aggregated Option/SAR Exercises In Last Fiscal Year and 9/30/98 Option/SAR Values
---------------------------------------------------------------------------------
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
9/30/98 (#) 9/30/98 ($)(1)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Glenn E. Aidt -- N/A 30,946/20,632 -/-
</TABLE>
- -----------------------------
(1) For purposes of this table, the value of the option was determined by
multiplying the number of shares subject to the unexercised option by
the difference between the $13.69 exercise price and the fair market
value of MFFC's common shares, which was $12.75 on September 30, 1998,
based on the closing sales price reported by The Nasdaq Stock Market.
RECOGNITION AND RETENTION PLAN AND TRUST
At the 1995 Annual Meeting of the Shareholders of MFFC, the
shareholders of MFFC approved the RRP. With funds contributed by Milton Federal,
the RRP purchased 103,155 shares of MFFC, 74,784 of which were awarded to
directors and executive officers of Milton Federal in October 1995.
The RRP is administered by the RRP Committee. Subject to express
provisions of the RRP and to review and acceptance or rejection by the Board of
Directors, the RRP Committee determines which directors and employees of Milton
Federal are eligible to receive awards of MFFC common shares under the RRP,
which eligible persons will be awarded shares under the RRP and the number of
shares awarded.
One-fifth of such shares will be earned and non-forfeitable on each of
the first five anniversaries of the date of the awards. Until shares awarded are
earned by the participant, such shares will be forfeited in the event that the
employment of the employee is terminated. In the event of the death or
disability of a participant, however, the participant's shares will be deemed to
be earned and nonforfeitable upon such date. In addition, all shares awarded
pursuant to the RRP become earned and nonforfeitable if, within one year
following a "change in control" of MFFC or Milton Federal, (i) the participant's
employment is involuntarily terminated for any reason other than just cause or
(ii) a material adverse change occurs in the capacity, conditions or
circumstances of the participant's employment. Change of control for such
purpose means the acquisition of voting or investment control of 25% or more of
the voting securities of MFFC by any person or persons acting as a group.
RRP shares will be distributed as soon as practicable after they are
earned. Each participant granted shares under the RRP will be entitled to the
benefit of any dividends or other distributions paid on such shares prior to
such shares being earned, although the dividends or other distributions will be
retained by the RRP until the shares are earned. All plan shares which have not
been earned and distributed will be voted by the Trustees of the RRP, who are
currently Messrs. App, Hayes and Long.
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EMPLOYMENT AGREEMENTS
Milton Federal and Mr. Aidt are parties to an agreement with an
expiration date of November 28, 2000 (the "Employment Agreement"). A salary and
performance review must be conducted by the Board of Directors not less often
than annually. The Employment Agreement requires the inclusion of Mr. Aidt in
any formally established employee benefit, bonus, pension and profit-sharing
plans for which senior management personnel are eligible. The Employment
Agreement also provides for vacation and sick leave.
The Employment Agreement is terminable by Milton Federal at any time.
In the event of termination by Milton Federal for "just cause," as defined in
the Employment Agreement, Mr. Aidt will have no right to receive any
compensation or other benefits for any period after such termination. In the
event of termination by Milton Federal other than for just cause, at the end of
the term of the Employment Agreement or in connection with a "change of
control," as defined in the Employment Agreement, Mr. Aidt will be entitled to a
continuation of salary payments for a period of time equal to the term of the
Employment Agreement and a continuation of benefits substantially equal to those
being provided at the date of termination of employment until the end of the
term of the Employment Agreement or the date Mr. Aidt becomes employed full-time
by another employer, whichever occurs first.
The Employment Agreement also contains provisions with respect to the
occurrence within one year of a "change of control" of (1) the termination of
employment for any reason other than just cause, retirement or termination at
the end of the term of the agreement, (2) a change in the capacity or
circumstances in which Mr. Aidt is employed or (3) a material reduction in Mr.
Aidt's responsibilities, authority, compensation or other benefits provided
under the Employment Agreement without Mr. Aidt's written consent. In the event
of any such occurrence, Mr. Aidt will be entitled to payment of an amount equal
to three times his average annual compensation for the three taxable years
immediately preceding the termination of employment. In addition, Mr. Aidt will
be entitled to continued coverage under all benefit plans until the earliest of
the end of the term of the Employment Agreement or the date on which Mr. Aidt is
included in another employer's benefit plans as a full-time employee. The
maximum which Mr. Aidt may receive, however, is limited to an amount which will
not result in the imposition of a penalty tax pursuant to Section 280G(b)(3) of
the Code. "Control," as defined in the Employment Agreement, generally refers to
the acquisition by any person or entity of the ownership or power to vote 10% or
more of the voting stock of Milton Federal or MFFC, the control of the election
of a majority of Milton Federal's or MFFC's directors or the exercise of a
controlling influence over the management or policies of Milton Federal or MFFC.
DEFINED BENEFIT PLAN
Milton Federal sponsors a defined benefit pension plan (the "Pension
Plan") covering all employees age 21 or older who have completed at least one
year of service to Milton Federal.
The normal Pension Plan retirement benefit payable upon retirement at
or after age 65 is the product of (a) 1%, multiplied by (b) years of service,
multiplied by (c) average annual salary for the five consecutive years of
highest salary. Employees become 100% vested in the Pension Plan after five
years of employment. Participants are automatically 100% vested at 65 years of
age regardless of years of service. The Pension Plan also includes provisions
for early retirement, disability retirement and a death benefit. The
compensation covered by the Pension Plan includes only the employee's basic
annual salary, exclusive of bonuses, fees or other special payments.
The following table presents information regarding annual payments to
be made to employees pursuant to the Pension Plan.
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<PAGE> 12
<TABLE>
PENSION PLAN TABLE
<CAPTION>
HIGH-5 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE BENEFIT BENEFIT BENEFIT BENEFIT BENEFIT
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 15,000 $ 2,300 $ 3,000 $ 3,800 $ 4,500 $ 5,300
30,000 4,500 6,000 7,500 9,000 10,500
45,000 6,800 9,000 11,300 13,500 15,800
60,000 9,000 12,000 15,000 18,000 21,000
75,000 11,300 15,000 18,800 22,500 26,300
90,000 13,500 18,000 22,500 27,000 31,500
105,000 15,800 21,000 26,300 31,500 36,800
120,000 18,000 24,000 30,000 36,000 42,000
135,000 20,300 27,000 33,800 40,500 47,300
150,000 22,500 30,000 37,500 45,000 52,500
</TABLE>
Milton Federal had no Pension Plan expense for fiscal year 1997 because
the Pension Plan was overfunded. Mr. Aidt has nine years of credited service
under the Pension Plan. The base salary of Mr. Aidt for 1998 is set forth in the
Summary Compensation Table under the "Salary" heading. Benefits under the
Pension Plan are computed based on the straight life annuity method and are not
subject to deduction for social security or any other offset amount.
DIRECTOR COMPENSATION
MFFC pays no directors' fees. Effective January 1, 1997, each director
of Milton Federal receives a fee of $9,009 per year for service as a director of
Milton Federal. Each non-employee director also receives $125 per hour for
attending committee meetings.
In October 1993, Milton Federal instituted a deferred compensation
program for its directors pursuant to which the directors may defer payment of
their directors' fees. Under an agreement between each of six of the directors
and Milton Federal, such fees are credited to an account for the director. The
amount credited bears interest at a rate determined by the Board of Directors,
currently an annual rate of seven percent. The deferred amounts plus interest
will be paid from the general assets of Milton Federal to the director at the
time of his termination of board service. If the director dies while serving as
a director of Milton Federal, an annual payment will be made for five years to
the director's beneficiary. Such death benefit payments will total the amount
which would have accrued to the director's account assuming deferral of $7,000
per year until age 70. The plan may be amended or terminated by Milton Federal
at any time.
Milton Federal has purchased insurance contracts on the lives of the
participants in the deferred compensation plan and named Milton Federal as the
beneficiary. While the insurance contracts are not committed to fund the
deferred compensation plan and the plan is an unsecured obligation of Milton
Federal, management currently intends to use the insurance for such purpose.
The directors of MFFC are also eligible for awards under the Stock
Option Plan and the RRP. During fiscal year 1998, no awards were granted under
the Stock Option Plan and the RRP.
COMPENSATION COMMITTEE REPORT
As a unitary savings and loan holding company, the business of MFFC
consists principally of holding the stock of Milton Federal. The functions of
the executive officers of MFFC, who are also the executive officers of Milton
Federal,
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<PAGE> 13
pertain primarily to the operations of Milton Federal. The executive officers
receive their compensation, therefore, from Milton Federal, rather than from
MFFC. The Compensation Committee of the Milton Federal Board of Directors (the
"Committee") has furnished the following report concerning executive
compensation.
PROCESS FOR DETERMINING COMPENSATION
MFFC has not paid any cash compensation to its executive officers since
its formation. All executive officers of MFFC also currently hold positions with
Milton Federal and receive cash compensation from Milton Federal.
The compensation levels of the executive officers, including the Chief
Executive Officer/President (the "CEO"), are reviewed each year by the
Committee. The Committee reviews independent surveys of compensation of officers
in the thrift industry. In addition, it assesses each executive officer's
contribution to MFFC and Milton Federal, the skills and experiences required by
such officer's position and the potential of the officer to contribute to MFFC
and Milton Federal in the future. Based on the foregoing assessment, the
Committee makes recommendations to the full Board of Directors of Milton
Federal. The Board of Directors reviews such recommendations and makes final
determinations with respect to the compensation of executive officers, except
that Board members who are also executive officers do not participate in
discussions regarding their own respective compensation.
COMPENSATION POLICIES
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that will assist Milton Federal and MFFC in
attracting and retaining qualified executives and that will also integrate
compensation with the short and long-term performance goals of Milton Federal
and MFFC and reward individual performance, initiative and achievements. The
cash compensation program for executive officers consists of the following two
elements: a base salary and an officer incentive bonus. The executive officers
of Milton Federal are also eligible for awards under the Stock Option Plan and
the RRP. The combination of base salary, bonus, and stock benefit plan awards is
designed to relate total compensation levels to the performance of Milton
Federal and MFFC and each individual executive officer's contribution thereto.
The objectives of the officer cash bonuses are to motivate and reward
the executive officers in connection with the accomplishment of annual
objectives of Milton Federal and MFFC, to reinforce a strong performance
orientation with differentiation and variability in individual awards based on
contribution to annual and long-range business results and to provide a
competitive compensation package which will attract, reward and retain
individuals of the highest quality. For executive officers of Milton Federal and
MFFC, including the CEO, bonuses are determined as a percentage of annual base
salary, which percentage is calculated based upon the achievement of certain
goals which relate to levels of profitability of MFFC and Milton Federal. The
corporate profitability measurements used were return on assets, return on
equity, efficiency ratio, and net income.
No stock option awards or RRP awards were considered during fiscal year
1998.
DETERMINATION OF CEO'S COMPENSATION
The Committee determined the compensation of the CEO in fiscal year
1998 pursuant to the policies described above for executive officers. The
corporate profitability measurements considered were return on assets, return on
equity, the efficiency ratio, and net income. Additional corporate goals
considered were implementation of stock repurchases, implementation of a
strategic plan, and successful completion of the fiscal 1998 Business Plan. The
individual goals considered were related to the CEO's efforts in Milton Federal
achieving certain regulatory ratings, development of branching strategies, the
development of a plan to use excess capital, community involvement, and industry
involvement.
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<PAGE> 14
Submitted by the Compensation Committee of Milton Federal's Board of Directors:
Robert E. Hine, Chairman
David R. Hayes
Kenneth J. Faze
Christopher S. Long
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
MFFC pays no cash compensation to officers or employees of MFFC or
Milton Federal and therefore has no compensation committee. The Board of
Directors does, however, have a Stock Option Committee, whose members are
Messrs. Faze, Long, Hayes and Hine. Mr. Hine is Vice Chairman of MFFC and Milton
Federal.
The Board of Directors of Milton Federal has a Compensation Committee,
the members of which are Messrs. Hine, Faze, Hayes and Long, none of whom are or
ever have been officers of MFFC or Milton Federal. The Board of Directors of
Milton Federal also has an RRP Committee, composed of Messrs. Faze, Long, Hayes
and Hine, which determines RRP awards and administers the RRP. During fiscal
year 1997, there were no other reportable relationships between the members of
the aforementioned committees and MFFC or Milton Federal.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in
MFFC's cumulative total shareholder return against the cumulative return of a
broad index of The Nasdaq National Market and an index of savings associations
with assets of less than $250 million for the period from October 7, 1994, the
date on which trading of MFFC's shares commenced, and September 30, 1998. The
graph assumes the investment of $100 on October 7, 1994. Cumulative total
shareholder return is measured by dividing (I) the sum of (A) the cumulative
amount of dividends for the measurement period, assuming dividend reinvestment,
and (B) the difference between the price of MFFC's common shares at the end and
at the beginning of the measurement period; by (ii) the price of MFFC's common
shares at the beginning of the measurement period.
[Graph with three lines represeting the different institutions is here]
<TABLE>
<CAPTION>
Period Ending
INDEX 10/7/94 9/30/95 9/30/96 9/30/97 9/30/98
<S> <C> <C> <C> <C> <C>
Milton Federal Financial Corporation 100.00 159.82 149.80 210.10 182.55
NASDAQ - Total U.S. 100.00 140.71 166.97 229.22 234.19
SNL less than $250M Thrift Index 100.00 128.34 144.16 210.05 192.36
</TABLE>
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<PAGE> 15
CERTAIN TRANSACTIONS WITH MFFC
During the fiscal year ended September 30, 1998, certain directors of
MFFC had loans from Milton Federal with balances in excess of $60,000. All of
such loans were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
SELECTION OF AUDITORS
The Board of Directors has selected Crowe Chizek as the auditors of
MFFC and Milton Federal for the current fiscal year and recommends that the
shareholders ratify the selection. Management expects that a representative of
Crowe Chizek will be present at the Annual Meeting, will have the opportunity to
make a statement if he or she so desires and will be available to respond to
appropriate questions.
PROPOSALS OF SHAREHOLDERS
Any proposals of qualified shareholders intended to be included in the
proxy statement for the 2000 Annual Meeting of Shareholders of MFFC should be
sent to MFFC by certified mail and must be received by MFFC not later than
August 20, 1999. In addition, if a shareholder intends to present a proposal at
the 2000 Annual Meeting without including the proposal in the proxy materials
related to that meeting, and if the proposal is not received by November 4,
1999, then the proxies designated by the Board of Directors of MFFC for the 2000
Annual Meeting Shareholders of MFFC may vote in their discretion on any such
proposal any shares for which they have been appointed proxies without mention
of such matter in the proxy statement or on the proxy card for such meeting.
The following shareholder proposal has been submitted for inclusion in
the 1999 proxy statement. The Board of Directors of MFFC recommends that
shareholders vote "against" the following shareholder proposal.
SHAREHOLDER PROPOSAL REGARDING SALE OR MERGER OF MFFC
Gregory J. Iammarino, 1797 Normandy Lane, Troy, Ohio 45373, claiming
that he has owned for more than one year common shares of MFFC with a market
value in excess of $2,000 and that he will continue to hold such shares through
the date of the Annual Meeting, has submitted the following resolution and
supporting statement for inclusion in this Proxy Statement and has stated his
intention to present same at the Annual Meeting. THE MFFC BOARD OF DIRECTORS
OPPOSES THIS RESOLUTION FOR THE REASONS STATED BELOW.
------------------------------------------------------
MAXIMIZE VALUE RESOLUTION
OF
GREGORY J. IAMMARINO
Resolved that the shareholders of MFFC urge the Board of Directors to
arrange for the prompt sale of MFFC to the highest bidder.
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<PAGE> 16
SUPPORTING STATEMENT
OF
GREGORY J. IAMMARINO
"The purpose of the Maximize Value Resolution is to give all
MFFC shareholders the opportunity to send a message to the MFFC Board
that they support the prompt sale of MFFC to the highest bidder. A
strong and or majority vote by the shareholders would indicate to the
Board the displeasure felt by the shareholders with the financial
performance of MFFC and the drastic action that should be taken. Even
if it is approved by the majority of the MFFC shares represented and
entitled to vote at the Annual Meeting, the Maximize Value Resolution
will not be binding on the MFFC Board. The proponent, however, believes
that if this resolution receives substantial support from the
shareholders, the Board may choose to carry out the request set forth
in the resolution."
"The prompt auction of MFFC should be accomplished by any
appropriate process the Board chooses to adopt including a sale to the
highest bidder whether in cash, stock or a combination of both. It is
expected that the Board will uphold its fiduciary duties to the utmost
during the process."
"The proponent further believes that if the resolution is
adopted, the management and the Board will interpret such adoption as a
message from MFFC's shareholders that it is no longer acceptable for
the Board to continue with its current management plan and strategies."
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
-----------------------------------------------
-----------------------------------------------
RESPONSE OF THE MFFC BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THE "MAXIMIZE VALUE RESOLUTION" FOR THE FOLLOWING REASONS:
The subject of shareholder value is considered often by the Board of
Directors and management of MFFC. For several reasons, the Board of Directors
strongly believes that the implementation of the "Maximize Value Resolution"
will not be in the best interests of shareholders of MFFC and, contrary to the
title of the resolution, will not maximize value to the shareholders of MFFC.
As you know, the Board of Directors of MFFC is elected by the
shareholders of MFFC to direct the management of the business and affairs of
MFFC. Consistent with its fiduciary duties and responsibilities to the
shareholders of MFFC, the Board of Directors continually reviews and monitors
the business and progress of MFFC, including the development of MFFC's products
and services. In addition, the Board of Directors keeps apprised of developments
in the financial institutions industry, including the material terms and
conditions of mergers and acquisitions involving thrifts and community banks.
Accordingly, the Board of Directors strongly believes that it is in the best and
most informed position to evaluate and consider whether MFFC should remain
independent or should pursue the sale of your company.
The consideration of a possible sale of your company involves an
examination of a complex array of factors, including, but not limited to, a
subjective evaluation of the future of MFFC in a changing competitive
environment and the performance of MFFC in such environment; the desires and
expectations of shareholders of MFFC; the needs of our customers, community and
employees; and the impact of the economy on the timing of any such possible
sale. Acting hastily to force a sale of MFFC in an auction or otherwise to the
highest bidder would obstruct the ability of the Board of Directors to examine
carefully such complex array of factors; would restrict the ability of the Board
of Directors to examine all other strategic future alternatives; and could force
a sale of MFFC at a time and in economic conditions which would not
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<PAGE> 17
be conducive to the generation of the highest and best price. As a result of the
foregoing, the adoption of the "Maximum Value Resolution" would weaken the
ability of Board of Directors to maximize shareholder value and could seriously
prejudice and jeopardize the financial interests of shareholders in your
company.
The success of MFFC is highly dependent on its ability to maintain
strong relationships with, and the confidence of, its employees, customers and
shareholders. Although the "Maximum Value Resolution" only requests and does not
obligate the Board of Directors to take certain action, the Board believes that
the approval of the resolution would make our shareholders, customers,
employees, and community uncertain about MFFC's future. Such uncertainty would
undermine confidence in MFFC and would adversely affect MFFC's relationship with
employees and customers. As a result, the ability of MFFC to compete effectively
in the short and long term would be adversely affected, causing a potential
decline in revenues, profits and shareholder value.
In summary, the Board of Directors remains committed to maximizing the
value of MFFC for all shareholders. Such commitment has been demonstrated in
part by our stock repurchases and by our declaration of special dividends. The
Board of Directors will continue to work toward enhancing shareholder value by
focusing on steps to increase MFFC's results of operations, already begun by our
opening of branches in Brookville and Tipp City, achieving record mortgage loan
volumes, controlling of expenses, start-up of new products, and provision of
blue ribbon service to the communities we serve. BECAUSE THE BOARD OF DIRECTORS
DOES NOT BELIEVE THAT THE SHAREHOLDER PROPOSAL DESCRIBED ABOVE IS IN THE BEST
INTERESTS OF ALL OF THE SHAREHOLDERS OF MFFC, THE BOARD VIGOROUSLY OPPOSES THE
SHAREHOLDER PROPOSAL DESCRIBED ABOVE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "AGAINST" THE ADOPTION OF THIS SHAREHOLDER PROPOSAL.
OTHER MATTERS
Management knows of no other business which may be brought before the
Annual Meeting. It is the intention of the persons named in the enclosed Proxy
to vote such Proxy in accordance with their best judgment on any other matters
which may be brought before the Annual Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN AND
RETURN THE PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
December 18, 1998 E. Lynn App, Secretary
17
