SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FIRST DEFIANCE FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
<PAGE>
FIRST DEFIANCE FINANCIAL CORP.
601 Clinton Street
Defiance, Ohio 43512
(419) 782-5015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Annual
Meeting") of First Defiance Financial Corp., Defiance, Ohio ("First Defiance")
will be held at the home office of its subsidiary First Federal Savings and
Loan, located at 601 Clinton Street, Defiance, Ohio 43512, Tuesday, April 21,
1998 at 1:00 p.m., Eastern Time, for the following purposes, all of which are
more completely set forth in the accompanying Proxy Statement:
(1) To elect three (3) directors for three-year terms, and
until their successors are elected and qualified;
(2) To ratify the appointment by the Board of Directors of
Ernst & Young LLP as First Defiance's independent auditors for the year
ending December 31, 1998; and
(3) To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof. Management is not
aware of any other business.
The Board of Directors has fixed March 6, 1998 as the voting record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting or at any adjournment thereof. Only those shareholders of
record as of the close of business on that date will be entitled to vote at the
Annual Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John W. Boesling
-------------------
John W. Boesling
Secretary
Defiance, Ohio
March 23, 1998
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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
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<PAGE>
PROXY STATEMENT
First Defiance Financial Corp.
601 Clinton Street
Defiance, Ohio 43512
1998 ANNUAL MEETING OF SHAREHOLDERS
April 21, 1998
General
This Proxy Statement is being furnished to holders of common stock,
$0.01 par value per share ("Common Stock"), of First Defiance Financial Corp.,
Defiance, Ohio ("First Defiance"). Proxies are being solicited on behalf of the
Board of Directors of First Defiance to be used at the Annual Meeting of
Shareholders ("Annual Meeting") to be held at the home office of First Federal
Savings and Loan ("First Federal") located at 601 Clinton Street, Defiance, Ohio
43512, on Tuesday April 21, 1998 at 1:00 p.m., Eastern Time, and at any
adjournment thereof for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement is first being mailed to shareholders on
or about March 23, 1998.
Proxies
The proxy solicited hereby, if properly signed and returned to First
Defiance and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the nominees for director described herein and
for the other matter described below and, upon the transaction of such other
business as may properly come before the meeting, in accordance with the best
judgment of the persons appointed as proxies. Any shareholder giving a proxy has
the power to revoke it at any time before it is exercised by (i) filing with the
Secretary of First Defiance written notice thereof (John W. Boesling, Secretary,
First Defiance Financial Corp., 601 Clinton Street, Defiance, Ohio 43512); (ii)
submitting a duly-executed proxy bearing a later date; or (iii) appearing at the
Annual Meeting and giving notice of revocation to the Secretary. Proxies
solicited hereby may be exercised only at the Annual Meeting and any adjournment
thereof and will not be used for any other meeting.
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<PAGE>
Voting Rights
Only shareholders of record at the close of business on March 6, 1998
("Voting Record Date") will be entitled to notice of and to vote at the Annual
Meeting. On the Voting Record Date, there were 8,123,171 shares of Common Stock
issued and outstanding and First Defiance had no other class of equity
securities outstanding. Each share of Common Stock is entitled to one vote at
the Annual Meeting on all matters properly presented at the meeting.
The presence, either in person or by proxy, of at least a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Directors are elected by a plurality
of the votes cast with a quorum present. Abstentions are considered in
determining the presence of a quorum and will not affect the plurality vote
required for the election of directors. A majority of the total votes cast is
required to ratify the appointment of the independent auditors. Under rules of
the New York Stock Exchange, the proposals for election of directors and
ratification of the auditors are considered "discretionary" items upon which
brokerage firms may vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions and for which there will not be
"broker non-votes."
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<PAGE>
Beneficial Ownership
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only person or
entities, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("1934 Act"), who or which was known
to First Defiance to be the beneficial owner of more than 5% of the issued and
outstanding Common Stock, (ii) each director and each person nominated to become
a director of First Defiance, (iii) the executive officers of First Defiance
named in the Summary Compensation Table set forth under "Executive
Compensation," and (iv) all directors and executive officers of First Defiance
as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner or Beneficial Ownership as of Percent of
Number of Persons in Group March 6, 1998 (1) Common Stock
-------------------------- ----------------- ------------
<S> <C> <C>
First Federal Savings and Loan
Employee Stock Ownership Plan 845,236 (2) 10.41%
Janus Capital Corporation 477,910 (3) 5.88%
Fidelity Management and Research Company 457,900 (4) 5.63%
Don C. Van Brackel 222,302 (5) 2.70%
Edwin S. Charles 118,775 (6) 1.45%
James M. Zachrich 90,513 (7) 1.11%
Dr. John U. Fauster III 50,978 (7)(8) (9)
Dr. Marvin J. Ludwig 54,307 (7)(10) (9)
Stephen L. Boomer 34,404 (7) (9)
Thomas A. Voigt 10,261 (11) (9)
Dr. Douglas A. Burgei 11,973 (11) (9)
Gerald W. Monnin 4,568 (12) (9)
Peter Diehl 0 (9)
William J. Small 71,962 (13) (9)
John C. Wahl 64,040 (14) (9)
John W. Boesling 100,684 (15) 1.23%
All directors and executive
officers as a group (14 persons) 898,231 (16) 10.49%
</TABLE>
(Footnotes on next page)
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<PAGE>
(1) For purposes of this table, pursuant to rules promulgated under the
1934 Act, an individual is considered to beneficially own shares of
Common Stock if he or she directly or indirectly has or shares (1)
voting power, or (2) investment power, which includes the power to
dispose or direct the disposition of the shares. Unless otherwise
indicated, an officer or a director has sole voting power and sole
investment power with respect to the indicated shares. Shares which are
subject to stock options which have been granted under the 1993 Stock
Option Plan (the "the 1993 Directors' Plan"), the 1993 Stock Incentive
Plan (the "1993 Incentive Plan") or the 1996 Stock Option Plan (the
"1996 Stock Option Plan") which are exercisable within 60 days of the
Voting Record Date and shares which will be received upon the vesting
of awards under the 1996 Management Recognition Plan and Trust ("1996
MRP") within 60 days of the Voting Record Date are deemed to be
outstanding for the purpose of computing the percentages of Common
Stock beneficially owned by the respective individuals and group. The
1993 Directors' Plan, the 1993 Incentive Plan and the 1996 Stock Option
Plan are collectively referred to as the "Option Plans". Information
regarding beneficial ownership by individuals who are not officers or
directors of the Company was obtained from 13G filings with the
Securities and Exchange Commission.
(2) Shares owned by First Federal Savings and Loan Employee Stock Ownership
Plan ("ESOP") which have been allocated to persons listed in this
beneficial ownership table are also included in those persons holdings.
(3) The shares are beneficially owned by Janus Capital Corporation and
Thomas H. Bailey. Janus Capital Corporation is a registered investment
advisor which furnishes investment advice to several investment
companies registered under Section 8 of the Investment Company Act of
1940 and individual and institutional clients (collectively referred to
as the "Managed Portfolios"). Janus Capital Corporation does not have
the right to receive any dividends from, or proceeds from the sale of
securities held in its Managed Portfolios and disclaims any ownership
associated with such rights. Thomas H. Bailey owns 12.2% of Janus
Capital Corporation and he serves as President and Chairman of the
Board of Janus Capital Corporation. He does not own of record any
shares of First Defiance Financial Corp. Common Stock. However, as a
result of his position, Mr. Bailey may be deemed to have the power to
exercise or to direct the exercise of such voting and/or dispositive
power that Janus Capital Corporation may have with respect to First
Defiance Financial Corp. Common Stock held by the Managed Portfolios.
Mr. Bailey specifically disclaims beneficial ownership of any shares of
First Defiance Financial Corp. Common Stock that Janus Capital Corp.
may be deemed to control.
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<PAGE>
(4) The shares are beneficially owned by Fidelity Management & Research
Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an
investment advisor to various investment companies registered under
Section 8 of the Investment Company Act of 1940. The shares are owned
by Fidelity Select Home Finance Portfolio, an investment company. FMR
Corp., and its principal shareholders Edward C. Johnson 3d and Abigail
P. Johnson are each deemed to have sole voting power over 0 shares and
sole dispositive power over 457,900 shares.
(5) Includes 90,027 shares owned by trusts for the benefit of Mr. Van
Brackel and his wife, 9,327 shares that vest within 60 days under the
1996 MRP, 20,294 shares that have been allocated to Mr. Van Brackel's
account in the ESOP and 102,654 shares that may be acquired upon the
exercise of stock options, including 23,317 options that vest within 60
days under the 1996 Stock Option Plan. Should Mr. Van Brackel terminate
his employment with First Defiance before April 19, 1998, he will
forfeit his unvested shares in the 1996 MRP and the 1996 Stock Option
Plan.
(6) Includes 6,261 shares owned by his wife, 22,999 shares held by a trust
for the benefit of his children, 1,399 shares that vest within 60 days
under the 1996 MRP and 50,581 shares that may be acquired upon the
exercise of stock options, including 3,497 options that vest within 60
days under the 1996 Stock Option Plan. Mr. Charles shares voting power
with certain of his children with respect to the 22,999 shares cited
above. Should Mr. Charles terminate his board service with First
Defiance before April 19, 1998, he will forfeit his unvested shares in
the 1996 MRP and the 1996 Stock Option Plan.
(7) Includes 1,399 shares that vest within 60 days under the 1996 MRP and
28,196 shares that may be acquired upon the exercise of stock options,
including 3,497 options that vest within 60 days under the 1996 Stock
Option Plan. Should the director terminate his board service with First
Defiance before April 19, 1998, he will forfeit his unvested shares in
the 1996 MRP and the 1996 Stock Option Plan.
(8) Includes 1,000 shares owned by his wife.
(9) Less than 1% of the total outstanding shares of Common Stock.
(10) Includes 1,431 shares owned by his wife.
(11) Includes 1,399 shares that vest within 60 days under the 1996 MRP and
6,606 shares that may be acquired under the exercise of stock options,
including 3,497 options that vest within 60 days under the 1996 Stock
Option Plan. Should the director terminate his board service with First
Defiance before April 19, 1998, he will forfeit his unvested shares in
the 1996 MRP and the 1996 Stock Option Plan.
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<PAGE>
(12) Includes 1,243 shares that vest within 60 days under the 1996 MRP and
3,109 shares that may be acquired under the exercise of stock options
that vest within 60 days under the 1996 Stock Option Plan. Should Mr.
Monnin terminate his board service with First Defiance before April 22,
1998, he will forfeit his unvested shares in the 1996 MRP and the 1996
Stock Option Plan.
(13) Includes 101 shares owned jointly with his son, 201 shares held as
custodian for minor children, 2,760 shares that vest within 60 days
under the 1996 MRP, 6,431 shares which have been allocated to Mr.
Small's account in the ESOP and 45,920 shares that may be acquired upon
the exercise of stock options, including 6,900 options that vest within
60 days under the 1996 Stock Option Plan. Should Mr. Small terminate
his employment with First Defiance before April 19, 1998, he will
forfeit his unvested shares in the 1996 MRP and the 1996 Stock Option
Plan.
(14) Includes 300 shares held as custodian for minor children, 4,000 shares
that vest within 60 days under the 1996 MRP, 9,552 shares that have
been allocated to Mr. Wahl's account in the ESOP and 42,000 shares that
may be acquired upon the exercise of stock options, including 6,000
options that vest within 60 days under the 1996 Stock Option Plan.
Should Mr. Wahl terminate his employment with First Defiance before
April 19, 1998, he will forfeit his unvested shares in the 1996 MRP and
the 1996 Stock Option Plan.
(15) Includes 2,760 shares that vest within 60 days under the 1996 MRP,
13,886 shares that have been allocated to Mr. Boesling's account in the
ESOP and 39,708 shares that may be acquired upon the exercise of stock
options, including 6,900 options that vest within 60 days under the
1996 Stock Option Plan. Should Mr. Boesling terminate his employment
with First Defiance before April 19, 1998, he will forfeit his unvested
shares in the 1996 MRP and the 1996 Stock Option Plan.
(16) Includes options to purchase 442,323 shares, including 72,307 options
that vest within 60 days under the 1996 Stock Option Plan. Also
includes 33,083 shares that vest within 60 days under the 1996 MRP.
Also includes 66,639 shares of Common Stock allocated to the accounts
of executive officers in the ESOP.
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<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR, DIRECTORS
WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
First Defiance's Board of Directors is currently composed of nine
members. The Code of Regulations of First Defiance provides that the Board of
Directors of First Defiance shall be divided into three classes which are as
equal in number as possible, and that the members of each class are to be
elected for a term of three years and until their successors are elected and
qualified. One class of directors is elected annually.
At the Annual Meeting, shareholders of First Defiance will be asked to
elect three directors for three year terms, and in each case until their
successors are elected and qualified. Mr. Boomer currently serves as a director
of First Defiance. Mr. Diehl and Mr. Small have been nominated to fill the
vacancies created by the retirement of Edwin S. Charles and James M. Zachrich
effective with the Annual Meeting. No nominee for director is related to any
other director or executive officer of First Defiance by blood, marriage or
adoption.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees for director listed
below. If any person named as nominee should be unwilling to stand for election
at the time of the Annual Meeting, the proxies will vote for any replacement
nominee or nominees recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why any of the nominees listed below may
not be able to serve as a director if elected.
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<PAGE>
Information with Respect to Nominees for Director and Continuing Directors
The following tables present information concerning each nominee for
director and each director whose term continues, including his tenure as a
director of First Federal.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS EXPIRING IN 2001
Positions Held in Director
Name Age First Defiance Since(1)
---- --- -------------- --------
<S> <C> <C> <C>
Stephen L. Boomer 47 Director 1994
William J. Small 47 Senior Vice President,
President of First Federal
Savings and Loan N/A
Peter A. Diehl 47 N/A N/A
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
NOMINEES BE ELECTED AS DIRECTORS
DIRECTORS WITH TERMS EXPIRING IN 1999
Positions Held in Director
Name Age First Defiance Since(1)
---- --- -------------- --------
<S> <C> <C> <C>
Dr. John U. Fauster 60 Director 1975
Dr. Marvin J. Ludwig 71 Director 1979
Thomas A. Voigt 55 Director 1995
</TABLE>
(Footnotes on next page)
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<PAGE>
<TABLE>
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 2000
Positions Held in Director
Name Age First Defiance Since(1)
---- --- -------------- --------
<S> <C> <C> <C>
Don C. Van Brackel 59 Chairman, President and
Chief Executive Officer 1979
Dr. Douglas A. Burgei 43 Director 1995
Gerald W. Monnin 59 Director 1997
</TABLE>
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(1) Each director also serves as a director of First Federal Savings and Loan
("First Federal"), a wholly owned subsidiary of First Defiance. The
indicated year includes service as a director for First Federal prior to
the formation of First Defiance in 1995.
The business experience of each of the nominees or directors for at least the
past five years is as follows:
William J. Small. Mr. Small has been nominated for a three year term on
the board of directors expiring in 2001. He was appointed President and Chief
Operating Officer of First Federal in June 1996, after having served as Senior
Vice President responsible for lending from July 1, 1994. He also is a Senior
Vice President of First Defiance. Prior to joining First Defiance he was
president and managing officer of The Hicksville Building, Loan and Savings
Bank, Hicksville, Ohio since 1987. Mr. Small serves as a member of the Loan
Review Committee.
Peter A. Diehl. Mr. Diehl has been nominated for a three year term on the
board of directors expiring in 2001. He is President/Chief Executive Officer of
Diehl, Inc., a privately held company headquartered in Defiance, Ohio which
produces canned dairy products and non-dairy creamers for distribution
throughout the United States and Asia.
Stephen L. Boomer. Mr. Boomer is President and co-owner of Arps Dairy
Inc., Defiance, Ohio, a processor and distributor of various dairy products. He
has been a director since August 1, 1994 and currently serves as Chairman of the
MRP - Stock Options Committee and as a member of the Audit and Governance
Committees and serves on the Executive and Loan Review Committees on a rotating
basis during the year.
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<PAGE>
Don C. Van Brackel. Mr. Van Brackel became Chairman of the Board of
Directors and Chief Executive Officer of First Federal, First Defiance's
predecessor, on January 1, 1995. He was president and managing officer of First
Federal from July 1992 until June 1996 and has been a director of First Defiance
and its predecessors since 1979. He previously was president and chief executive
officer of A. Van Brackel & Sons, Inc., Defiance, Ohio, a company that sells and
services coin-operated equipment, sound systems and satellite-delivered
background music as a 3-M franchisee. As Chairman and CEO, Mr. Van Brackel is
also Chairman of the Executive and Loan Review Committees of First Federal and a
member of the Investment Committee.
John U. Fauster III D.D.S. Dr. Fauster is affiliated with the Defiance
Dental Group and engages in the general practice of dentistry in Defiance, Ohio.
He has been a director of First Defiance and its predecessors since 1975 and
currently serves as a member of its Audit, Compensation and Long Range Planning
Committees and serves on the Executive and Loan Review Committees on a rotating
basis during the year.
Marvin J. Ludwig. Dr. Ludwig was president of The Defiance College, an
independent, co-educational, liberal arts college affiliated with the United
Church of Christ, from 1975 until his retirement on June 30, 1994. He has served
as a director of First Defiance and its predecessors since 1979 and currently
serves as Chairman of the Audit and Compensation Committees and as a member of
the MRP - Stock Options Committee and serves on the Executive and Loan Review
Committees on a rotating basis during the year.
Douglas A. Burgei, D.V.M. Dr. Burgei is a veterinarian practicing in
Napoleon, Ohio since 1978. He was appointed to the Board of Directors in August
1995 and he serves as Chairman of the Governance Committee and as a member of
the Investment and Long-Range Planning and serves on the Executive and Loan
Review Committees on a rotating basis.
Thomas A. Voigt. Mr. Voigt is a vice president and general manager of the
Bryan Publishing Company, publisher of one daily and eight weekly newspapers,
including The Bryan Times, The Countyline, The Montpelier Leader Enterprise and
Realty Northwest. He was appointed to the board in August, 1995 and he serves as
Chairman of the Long-Range Planning Committee and on the Compensation and MRP -
Stock Options Committees and serves on the Executive and Loan Review Committees
on a rotating basis during the year.
Gerald W. Monnin. Mr. Monnin is President and Chief Executive Officer of
Northwest Controls, a Defiance, Ohio company that distributes high technology
electronic automation and control products and systems. He has been a director
since April 1997 and serves on the Long-Range Planning, MRP - Stock Options and
Governance Committees and serves on the Executive and Loan Review Committees on
a rotating basis during the year.
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<PAGE>
Executive Officers Who Are Not Directors
The following sets forth certain information with respect to the executive
officers of First Federal who are not directors or nominees, including their
business experience for at least the past five years.
John C. Wahl. Age 37. Mr. Wahl was appointed Treasurer in April, 1997 and
Senior Vice President and Chief Financial Officer in January, 1997 after having
served as Controller since June 1, 1994. He also is Chairman of the Company's
Investment Committee. Prior to joining First Defiance he was a senior manager
with Ernst & Young LLP, the Company's independent auditors.
John W. Boesling. Age 50. Mr. Boesling joined First Federal in 1971 and
currently serves as Senior Vice President responsible for branch administration
and security
Patricia A. Cooper. Age 52. Mrs. Cooper was appointed Senior Vice
President in January 1997 and is responsible for operations. She has served
First Federal in a variety of capacities since she joined the Company in 1964.
Jeffrey D. Vereecke. Age 36. Mr. Vereecke was appointed Senior Vice
President in November 1997 and is responsible for lending. He originally joined
the staff of First Federal in 1984 and has served in a variety of capacities,
most recently as Vice President of consumer and commercial lending. Mr. Vereecke
serves as a member of the Loan Review Committee.
Compliance with Section 16(a) of the 1934 Act
Section 16(a) of the 1934 Act requires First Defiance's officers and
directors, and persons who own more than 10% of the Common Stock to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% shareholders
are required by regulation to furnish First Defiance with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to First
Defiance, First Defiance believes that during 1997, all Section 16(a) filing
requirements applicable to its officers and directors were complied with.
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<PAGE>
The Board of Directors and Its Committees
Regular meetings of the Board of Directors of First Defiance are held
monthly and special meetings of the Board of Directors of First Defiance are
held from time to time as needed. Regular meetings of the Board of Directors of
First Federal are also held on at least a monthly basis and special meetings of
the Board of Directors of First Federal are held from time-to-time as needed.
There were 14 meetings of the Board of Directors of First Defiance and 15
meetings of the Board of Directors of First Federal held during 1997. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of either First Defiance or First Federal held during 1997 and the
total number of meetings held by all committees of the Board on which the
director served during such year.
The Boards of Directors of First Defiance and First Federal have
established various committees, including Executive, Audit, Governance,
Compensation, Long Range Planning and MRP - Stock Options Committees.
The Executive Committee generally has the power and authority to act on
behalf of the Board of Directors on important matters between scheduled Board
meetings unless specific Board of Directors action is required or unless
otherwise restricted by First Defiance's or First Federal's charter or bylaws or
its Board of Directors. Mr. Van Brackel serves as Chairman of the Executive
Committee. The eight outside directors serve on the Committee on a rotating
basis during the year. The Executive Committee met 52 times during 1997.
The Audit Committee reviews (i) the independent auditors' reports and
results of their examination (ii) the OTS and Federal Deposit Insurance
Corporation and other regulatory reports and (iii) reports issued by First
Federal's internal auditor. The entire Board of Directors subsequently reviews
such reports and examinations. Currently, Drs. Ludwig and Fauster, and Messrs.
Zachrich and Boomer serve as members of this committee. The Audit Committee met
one time during 1997.
The Governance Committee, consisting of Messrs. Charles, Boomer and Monnin
and Dr. Burgei, meets to review certain policies established by the Board of
Directors and to ensure compliance with First Federal and OTS standards.
The Compensation Committee, consisting of Drs. Ludwig and Fauster and
Messrs. Zachrich and Voigt, was established by the Board of Directors to oversee
the compensation programs provided to First Federal's management including base
salaries, bonuses and benefit plans.
The Long Range Planning Committee, consisting of Messrs. Voigt, Zachrich
and Monnin and Drs. Fauster and Burgei, is responsible for reviewing strategic
decisions which will have a long-term impact on First Federal's operations.
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<PAGE>
The MRP - Stock Options Committee, consisting of Messrs. Boomer, Charles,
Voigt and Monnin and Dr. Ludwig, is responsible for reviewing and approving
grants made to management under First Defiance's 1993 MRP, the 1996 Management
Recognition Plan (the "1996 MRP"), and the Option Plans. Such grants are also
subject to approval by the full Board of Directors.
To date, First Defiance has not established a nominating committee, the
functions of which are performed by the full Board of Directors.
Other Committees
In addition to the Committees of the Board of Directors, First Federal
also has an Investment Committee which currently consists of Messrs. Van
Brackel, Charles, and Burgei as well as Mr. Wahl, Senior Vice President and
Treasurer. This committee has full authority to buy or sell any and all
securities and mortgage-backed bank investments within the parameters of the
Investment Policy Statement established by the Board of Directors.
First Federal also has a Loan Review Committee which currently consists of
Mr. Van Brackel and two directors on a rotating basis in conjunction with the
Executive Committee assignment as well as Mr. Small, President and Chief
Operating Officer of First Federal and Mr.Vereecke, Senior Vice President. This
committee reviews and approves loan requests presented by the loan officers and
reviews loans made during the prior months.
Actions by the Loan Review Committee are ratified by the Executive Committee.
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<PAGE>
EXECUTIVE COMPENSATION
Summary
The following table sets forth a summary of certain information concerning
the compensation awarded to or paid by First Defiance for services rendered in
all capacities during the last three fiscal years to the Chief Executive Officer
and the most highly compensated executive officers of First Defiance and First
Federal whose total compensation during the year ended December 31, 1997
exceeded $100,000. Positions with First Defiance are listed as of December 31,
1997.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ ----------------------------------
Name and Year Salary (1) Bonus Other Annual Awards Payouts All Other
Principal (2) Compensation Compensation
Position (3) (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock Securities LTIP
Grants(4) Underlying Payouts
Options
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don C. Van Brackel, 1997 $173,005 $97,803 --- --- --- --- $50,786
Chairman, President and 1996 157,862 80,475 --- $507,145 116,584 --- 43,782
Chief Executive Officer 1995 144,125 73,125 --- --- --- --- 62,012
William J.Small, Senior
Vice President, President, 1997 $129,048 $71,429 --- --- --- --- $50,786
Chief Operating Officer 1996 89,124 53,474 --- $369,750 107,100 --- 36,356
First Federal Savings and 1995 60,000 36,000 --- --- --- --- ---
Loan
John C. Wahl, Senior 1997 $82,168 $49,301 --- $87,000 10,000 --- $50,786
Vice President, Chief 1996 68,724 41,429 --- 130,500 50,000 --- 31,236
Financial Officer and 1995 60,000 36,000 --- --- --- --- 32,239
Treasurer
John W. Boesling, Senior 1997 $77,878 $46,727 --- --- --- --- $50,786
Vice President, Secretary 1996 73,824 39,375 --- $150,075 34,500 --- 33,205
1995 65,625 35,625 --- --- --- --- 42,186
</TABLE>
(Footnotes on next page)
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<PAGE>
(1) Includes amounts deferred by Messrs. Van Brackel and Small pursuant to
First Defiance's deferred compensation program.
(2) Bonus amounts reflect amounts earned during the fiscal year as determined
by the Compensation Committee, including amounts which are paid in the
following year.
(3) Does not include amounts attributable to miscellaneous benefits received by
executive officers. In the opinion of management of First Defiance the
costs to First Defiance of providing such benefits to any individual
executive during the year ended December 31, 1997 did not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus reported for the
individual.
(4) Represents the grant of 8,000 shares of restricted Common Stock to Mr. Wahl
in April, 1997 and 46,634, 13,800, 12,000 and 13,800 shares of restricted
Common Stock to Messrs. Van Brackel, Small, Wahl and Boesling,
respectively, in April, 1996 under the 1996 MRP. Mr. Small received an
additional grant of 20,200 shares in July, 1996 under the 1996 MRP. All
shares granted under this program vest 20% per year over five years on the
anniversary date of the grant. Unvested shares are forfeited upon
termination or retirement. The awards to Messrs. Van Brackel, Small, Wahl
and Boesling had a fair value at December 31, 1997 of $746,144, $544,000,
$320,000 and $220,800 respectively.
(5) Consists of amounts allocated by First Defiance on behalf of Messrs. Van
Brackel, Small, Wahl and Boesling pursuant to First Defiance's Employee
Stock Ownership Plan.
-15-
<PAGE>
Stock Options
The following table provides information relating to option grants made
pursuant to the 1996 Stock Option Plan and the 1993 Stock Incentive Plan to the
individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
Potential realizable value at
assumed rates of stock price
Individual Grants appreciation for option terms
------------------------------------------------------------- ------------------------------
Percent
Number of of total
securities options
underlying granted to
options employees Exercise Expiration
Executive Officer granted in 1997 Price date 5% 10%
- ----------------- ------- ------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
John C. Wahl 10,000 (1) 21.4% $13.00 2007 $81,800 $207,200
</TABLE>
(1) Options were granted under the 1993 Stock Incentive Plan and are fully
vested.
The following table sets forth certain information concerning exercises
of stock options granted pursuant to the Company's 1993 Stock Incentive Plan by
the named executive officers during the year ended December 31, 1997 and options
held at December 31, 1997 under the 1993 Stock Incentive Plan and the 1996 Stock
Option Plan.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Shares Number of
Acquired on Value Securities Underlying Unexercised Value of Unexercised Options at
Name Exercise Realized Options at Year End Year End (1)
---- ----------- -------- ------------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Don C. Van Brackel 8,750 $94,019 79,337 93,267 $765,191 $512,968
William J. Small --- --- 39,020 68,080 211,750 379,500
John C. Wahl --- --- 36,000 24,000 169,250 132,000
John W. Boesling --- --- 32,808 27,600 332,074 151,800
</TABLE>
- ----------
(1) Based on a per share market price of $16.00 at December 31, 1997 and
exercise prices ranging from $4.63 per share to $13.00 per share.
-16-
<PAGE>
Report of the Compensation Committee
In order to provide compensation levels comparable to its peers and to
provide incentives for achieving improved performance the Compensation Committee
recommended and the Board of Directors adopted on February 15, 1993 an
incentive-based executive salary program which will provide management with a
base salary targeted at approximately 62.5% of total cash compensation with the
remaining 37.5% consisting of an incentive bonus. Under the program, management
would attain targeted levels of compensation only upon realizing prescribed
levels of performance established by the Board. For 1997, $265,260 in bonuses
was allocated to the executive officers named in the Summary Compensation Table
set forth under "Executive Compensation". Comparable amounts for 1996 and 1995
were $214,753 and $180,750 respectively.
The Committee evaluates the base salaries of the executive officers of
First Defiance and First Federal annually. An executive officer's base salary is
determined based upon longevity with First Defiance, the effectiveness of such
individual in performing his duties, peer averages at the position in question
and First Defiance's overall performance. No particular weight is assigned to
these variables. The base salary component alone, while designed to be
competitive with peer group averages, is not designed to produce top levels of
compensation for the executive officers of First Defiance and First Federal when
compared to its peer group. The incentive component, as described below, which
requires First Defiance to achieve specific goals before additional compensation
is paid, is the element which is designed to make total compensation for each of
the executive officers comparable or better than the comparable executive
compensation for the executive officers in First Defiance's peer group.
For 1997, the Board of Directors determined that First Defiance fully
realized prescribed levels of performance. In making this determination the
Board of Directors considered asset quality, community activities, efficiency of
operations, implementation of strategic objectives, return on average assets,
return on average equity, and overall accomplishments.
In 1997 the Board of Directors made allocations under the 1996 MRP and 1993
Stock Option Plans to certain of its executive officers. The bases of the
allocations were the contributions made by the executive officer to First
Defiance and the responsibilities of the executive officer within the First
Defiance organization. The stock awards allocated under the MRP were also
designed to provide an incentive to executive officers to contribute to First
Defiance's future success.
By the Compensation Committee: M.J. Ludwig, Chairman, J.U. Fauster, III,
J.M. Zachrich, T.A. Voigt
-17-
<PAGE>
Performance Graph
The following graph compares the yearly cumulative total return on the
Common Stock from the closing price on the date of First Defiance's conversion
in 1993 to a stock company with (i) the yearly cumulative total return on the
stocks included in the Nasdaq Stock Market Index (for United States companies)
and (ii) the yearly cumulative total return on stocks included in the Nasdaq
Bank Stock Index. All of these cumulative returns are computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the applicable years.
First Defiance Financial Corp
(including predecessors)
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
<TABLE>
<CAPTION>
Period Ending
----------------------------------------------------------------
Index 7/20/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Defiance Financial Corp. 100.00 101.72 103.19 173.70 218.00 288.46
NASDAQ - Total US 100.00 110.83 108.33 153.21 188.44 231.25
NASDAQ Bank Index 100.00 104.62 104.24 155.25 204.96 346.27
</TABLE>
-18-
<PAGE>
Directors' Compensation
During the year ended December 31, 1997, each member of the Board of
Directors of First Defiance received an annual fee of $16,580 plus an additional
fee of $400 per Board meeting attended. Outside Directors have the option to
defer up to $5,000 of their annual fees pursuant to a deferred compensation
plan. Directors also received a $500 annual fee for each committee they serve
on, with the exception of rotating service on the Executive Committee, for which
they received $100 per meeting held during their term as members.
In 1997, the non-employee directors received grants under the 1996 Stock
Option Plan to purchase an aggregate of 29,145 shares of Common Stock at
exercise prices of between $12.625 and $13 per share
Employment Agreements
First Federal has entered into employment agreements with Messrs. Van
Brackel, Small, Wahl, Boesling and Cooper (the "Executives"). The form of
employment agreement for each Executive is substantially the same and provides
each officer with a three-year term of employment commencing on the date of the
agreement. On the first anniversary of each agreement and each anniversary
thereafter, the Board of Directors of First Federal shall consider and review
extension of the terms of each agreement and shall continue to extend under such
terms unless either party gives notice of non-renewal to the other party.
The employment agreements are terminable with or without cause by First
Federal. The Executives have no right to compensation or other benefits pursuant
to the employment agreement for any period after voluntary termination or
termination by First Federal for cause, disability, retirement or death.
However, in the event that (i) an Executive terminates his employment because of
failure of First Federal to comply with any material provision of the employment
agreement or (ii) the employment agreement was terminated by an Executive for
Good Reason, as defined, an Executive would be entitled to 2.99 times the
average annual compensation paid to him by First Federal during the five most
recent taxable years ending during the calendar year in which the notice of
termination occurs or such portion of such period in which the Executive served
as senior officer of First Federal as well as continued participation in
employee benefit plans of First Federal (other than retirement plans and stock
compensation plans) until the expiration of the remaining term of employment.
"Good Reason" would generally be defined in the employment agreements to include
the assignment by First Federal to the Executive of any duties which, in the
Executive's good faith determination, are materially inconsistent with the
Executive's positions, duties, responsibilities and status with First Federal
prior to such assignment or prior to a change in control of First Federal.
The employment agreements provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
-19-
<PAGE>
280G of the Internal Revenue Code of 1986, then such payments and benefits
received thereunder would be reduced, in the manner determined by First
Defiance, by the amount, if any, which is the minimum necessary to result in no
portion of the payments and benefits being nondeductible by First Defiance for
federal income tax purposes. Excess parachute payments generally would be
defined as payments in excess of three times the recipient's average annual
compensation from First Defiance includable in the recipients gross income
during the most recent five taxable years ending before the date on which a
change in control of First Defiance or other triggering events occurred ("base
amount"). A recipient of excess parachute payments is subject to a 20% excise
tax on the amount by which such payments exceed the base amount, in addition to
regular income taxes, and payments in excess of the base amount would not be
deductible by First Defiance as compensation expense for federal income tax
purposes.
It is anticipated that a similar agreement will be entered into with Mr.
Vereecke.
-20-
<PAGE>
Pension Plan
First Defiance maintained a defined benefit pension plan (the "Pension
Plan") covering all employees that had attained 21 years of age and had
completed one full year of service (consisting of 1,000 hours worked during the
year). Effective on November 30, 1997, First Defiance terminated the defined
benefit plan. The accrued benefits for all participants in the Pension Plan were
vested as of that date. Participants will have the option of 1) purchasing an
annuity equal to the benefit earned under the plan, 2) receiving the present
value of the accrued benefit in the form of a cash payment, or 3) receiving the
present value of the accrued benefit in a roll-over contribution to a qualified
IRA or defined contribution plan. On January 1, 1998, the Company reactivated a
401(k) profit sharing plan which had not been utilized since 1993.
In general, the Pension Plan provided for benefits payable monthly at
normal retirement age, which is age 65, or the tenth anniversary of joining the
Pension Plan. The monthly payments equaled an amount based on a participant's
average monthly compensation over the five consecutive years which produced the
highest monthly average within the last ten completed years of employment. The
monthly benefit equaled 2% of a participant's average monthly compensation
multiplied by his or her total number of years of service up to a maximum of 30
years. The compensation covered by the Pension Plan was equal to the employee's
salary and bonus, which for executives is included in the Summary Compensation
Table as their salary and bonus.
The following table illustrates the approximate annual benefit payable
under the Pension Plan to participants commencing at age 65, assuming various
levels of compensation and years of service.
<TABLE>
<CAPTION>
Amount of Annual Retirement Benefit
with Credited Service of: (1)
Average ---------------------------------------------------------------------------
Annual Salary 15 Years 20 Years 25 Years 30 Years
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 30,000 $ 9,000 $ 12,000 $ 10,000 $ 18,000
40,000 12,000 16,000 20,000 24,000
60,000 18,000 24,000 30,000 36,000
80,000 24,000 32,000 40,000 48,000
100,000 30,000 40,000 50,000 60,000
120,000 36,000 48,000 60,000 72,000
140,000 42,000 56,000 70,000 84,000
160,000 48,000 64,000 80,000 96,000
180,000 54,000 72,000 90,000 108,000
200,000 60,000 80,000 100,000 120,000
220,000 66,000 88,000 110,000 120,000(2)
240,000 72,000 96,000 120,000 120,000(2)
260,000 78,000 104,000 120,000(2) 120,000(2)
280,000 84,000 110,000 120,000(2) 120,000(2)
</TABLE>
-21-
<PAGE>
(1) Benefit amounts shown are on a "ten year certain and life" basis (i.e.,
payments during the life of the employee with a minimum of 120 payments
guaranteed) without reduction for Social Security benefits.
(2) The maximum benefit payable under a defined benefit plan was $120,000.
As of November 30, 1997 (the termination date of the Pension Plan), Messrs.
Van Brackel, Small, Wahl and Boesling had five years, three years, three years
and 26 years respectively, of credited service under the Pension Plan.
Indebtedness of Management
First Defiance has had no loans outstanding since January 1, 1997 in excess
of $60,000 to any director, nominee for election as a director or executive
officer of First Defiance, any member of the immediate family of any such person
or to certain corporations, organizations or trusts affiliated with any such
person, except loans made in the ordinary course of business 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.
Since 1989, federal regulations have prohibited a savings and loan
association from making loans to directors and executive officers on terms more
favorable than those available to other parties. A recent change in federal
regulations permits loans to be made to directors and executive officers on
favorable terms, subject to certain limitations, pursuant to a program widely
available to employees and that does not discriminate in favor of directors,
executive officers or principal shareholders. First Defiance has not extended a
loan to any director or executive officer on favorable terms since the
regulation was changed.
-22-
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of First Defiance has appointed Ernst & Young LLP as
independent auditors for First Defiance for the year ending December 31, 1998.
Ernst & Young LLP served as the Company's independent auditors for the fiscal
year ended December 31, 1997, and has reported on the Company's consolidated
financial statements. Representatives of the firm will be present at the annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from shareholders.
The Board of Directors has the responsibility for the selection of the
Company's independent auditors. Although shareholder ratification is not
required for the selection of Ernst & Young LLP, and although such ratification
will not obligate the Company to continue the services of such firm, The Board
of Directors is submitting the selection for ratification with a view towards
soliciting the shareholders' opinion thereon, which may be taken into
consideration in future deliberations. If the appointment is not ratified, the
Board of Directors must then determine whether to appoint other auditors before
the end of the current fiscal year, and in such case, shareholders' opinions
would be taken into consideration.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Ernst & Young LLP as independent auditors for the year ending
December 31, 1998.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of First Defiance to vote the proxy with respect to the
election of any person as a director if the nominee is unable to serve or for
good cause will not serve, matters incident to the conduct of the meeting, and
upon such other matters as may properly come before the Annual Meeting.
Management is not aware of any business to come before the Annual Meeting other
than those matters described in this Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by First Defiance. First
Defiance 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 the Common Stock. In addition to solicitations by
mail, directors, officers and employees of First Defiance may solicit proxies
personally or by telephone without additional compensation.
-23-
<PAGE>
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have included in the proxy
solicitation materials to be used in connection with the next Annual Meeting of
Shareholders of First Defiance must be received at the main office of First
Defiance no later than November 20, 1998. If such proposal is in compliance with
all of the requirements of Rule 14a-8 under the 1934 Act, it will be included in
the Proxy Statement and set forth on the form of proxy issued for the next
Annual Meeting of Shareholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Shareholders of First Defiance as of the Voting Date for the Annual Meeting
are being forwarded a copy of First Defiance's Annual Report to Shareholders for
the year ended December 31, 1997 ("Annual Report"). Included in the Annual
Report are the consolidated financial statements of First Defiance as of
December 31, 1997 and 1996 and for each of the years in the three-year period
ended December 31, 1997, prepared in accordance with generally accepted
accounting principles, and the related report of First Defiance's independent
public accountants. The Annual Report is not a part of this Proxy Statement.
Upon receipt of a written request, First Defiance will furnish to any
shareholder without charge a copy of its Annual Report on Form 10-K filed with
the SEC under the 1934 Act for the year ended December 31, 1997. Upon written
request, First Defiance will furnish to any such shareholder a copy of the
exhibits to the Annual Report on Form 10-K. Such written requests should be
directed to First Defiance Financial Corp., 601 Clinton Street, Defiance, Ohio
43512, Attention: John C. Wahl, Sr. Vice President and Chief Financial Officer.
The Annual Report on Form 10-K is not a part of this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John W. Boesling
-------------------
John W. Boesling, Secretary
March 23, 1998
Defiance, Ohio
-24-
<PAGE>
REVOCABLE PROXY
FIRST DEFIANCE FINANCIAL CORP.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST DEFIANCE
FINANCIAL CORP. FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 21, 1998 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of First Defiance
Financial Corp. (the "Company") as proxies, each with power to appoint his
substitute, and hereby authorized them to represent and vote, as designated
below, all the shares of Common Stock of the Company held of record by the
undersigned on March 6, 1998 at the Annual Meeting of Shareholders to be held at
the home office of its subsidiary, First Federal Savings and Loan, located at
601 Clinton Street, Defiance, Ohio 43512, on Tuesday, April 21, 1998, at 1:00
p.m., Eastern Time, and any adjournment thereof.
1. ELECTION OF DIRECTORS FOR THREE-YEAR TERM EXPIRING IN 2001
[ ] FOR [ ] WITHHOLD [ ] EXCEPT
Nominees for a three-year term expiring in 2001:
Stephen L. Boomer, William J. Small, Peter A. Diehl
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT by the Board of Directors of Ernst & Young
LLP as the Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES OF THE COMPANY'S
COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD
OF DIRECTORS SPECIFIED IN ITEM 2 AND OTHERWISE AT THE DISCRETION OF THE PROXIES.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT THE
ANNUAL MEETING.
<PAGE>
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST DEFIANCE FINANCIAL CORP.
Please sign this exactly as your name(s) appear(s) on this proxy card. When
signing in a representative capacity, please give title. When shares are held
jointly, only one holder need sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
