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)
FIRST DEFIANCE FINANCIAL CORP.
601 Clinton Street
Defiance, Ohio 43512
(419) 782-5015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 24,2001
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 Bank
of the Midwest, located at 601 Clinton Street, Defiance, Ohio 43512, Tuesday,
April 24, 2001 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 approve the First Defiance Financial Corp. 2001 Stock
Option and Incentive Plan; 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 9, 2001 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/William J. Small
-------------------
William J. Small
Chairman, President and Chief Executive Officer
Defiance, Ohio
March 21, 2001
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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, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED OR FOLLOW THE INSTRUCTIONS ON THE PROXY CARD
FOR VOTING BY TELEPHONE OR OVER THE INTERNET. IF YOU ATTEND THE ANNUAL 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 BEFORE IT IS EXERCISED.
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PROXY STATEMENT
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First Defiance Financial Corp.
601 Clinton Street
Defiance, Ohio 43512
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2001 ANNUAL MEETING OF SHAREHOLDERS
April 24, 2001
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
Bank of the Midwest ("First Federal") located at 601 Clinton Street, Defiance,
Ohio 43512, on Tuesday April 24, 2001 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 21, 2001.
Proxies
The proxy solicited hereby, if properly submitted 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 matters 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 valid 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.
-1-
Voting Rights
Only shareholders of record at the close of business on March 9,
2001 ("Voting Record Date") will be entitled to notice of and to vote at the
Annual Meeting. On the Voting Record Date, there were 6,863,684 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. The affirmative vote of the holders of a
majority of the total votes eligible to be cast in person or by proxy at the
Annual Meeting is required for approval of the First Defiance Financial Corp.
2001 Stock Option and Incentive Plan ("Option Plan"). The proposal for election
of directors is considered a "discretionary" item upon which brokerage firms may
vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions. The proposal to approve the Option Plan, however,
is considered "non-discretionary" and, therefore, brokerage firms may vote on
behalf of their clients only if the clients have furnished voting instructions
to the brokerage firm. If no voting instructions are given, a "broker non-vote"
will result. A broker non-vote will have the same effect as a vote against the
proposal to approve the Option Plan.
-2-
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"), 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 named executive officers of First
Defiance as a group.
Amount and Nature of
Name of Beneficial Owner or Beneficial Ownership as of Percent of
Number of Persons in Group March 9, 2001 (1) Common Stock
-------------------------- -------------------------- ------------
First Defiance Financial Corp.
Employee Stock Ownership Plan 735,721 (2) 10.72%
Private Capital Management 573,700 (3) 8.36%
Dimensional Fund Advisors, Inc. 544,089 (4) 7.93%
William J. Small 150,834 (5) 2.17%
Don C. Van Brackel 296,340 (6) 4.24%
Dr. John U. Fauster III 67,301 (8)(9) (7)
Dr. Marvin J. Ludwig 70,630 (10)(11) 1.02%
Stephen L. Boomer 51,587 (8) (7)
Thomas A. Voigt 29,089 (12)(13) (7)
Dr. Douglas A. Burgei 31,032 (12) (7)
Gerald W. Monnin 45,929 (14) (7)
Peter Diehl 18,689 (15) (7)
John C. Wahl 137,799 (16) 1.99%
James L. Rohrs 17,479 (17) (7)
Sheldon Brodsky 5,813 (18) (7)
All directors and executive
officers as a group (12 persons) 886,196 (19) 12.11%
(Footnotes on next page)
-3-
(1) Unless otherwise indicated, the named person has sole voting power
and sole investment power with respect to the indicated shares.
(2) Shares owned by First Defiance Financial Corp. 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) Based on Schedule 13G dated February 14, 2001, filed with the
Securities and Exchange Commission, Private Capital Management
("PCM") is an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940. PCM has reported shared
voting and investment power over 551,700 shares of Common Stock.
Gregg J. Powers, President of PCM, has reported shared voting and
investment power over the same 551,700 shares of Common Stock.
Bruce S. Sherman, Chairman of PCM, has reported shared voting and
investment power over 556,700 shares of Common Stock, (including
the 551,700 shares also reported by PCM and Mr. Powers) and sole
voting and investment power over an additional 17,000 shares of
Common Stock. PCM, Mr. Powers and Mr. Sherman have reported
beneficial ownership of 551,700, 551,700 and 573,700 shares of
Common Stock respectively.
(4) Based on Schedule 13G dated February 2, 2001, filed with the
Securities and Exchange Commission, Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under Section
203 of the Investment Advisors Act of 1940, possesses both voting
and investment power over 544,089 shares of Common Stock. All
544,089 shares reported are owned by the entities for which
Dimensional serves as investment advisor, and Dimensional
disclaims beneficial ownership of such securities.
(5) Includes 2,760 shares that vest within 60 days under the 1996
Management Recognition Plan and Trust ("1996 MRP"), 10,150 shares
which have been allocated to Mr. Small's account in the ESOP and
96,980 shares that may be acquired upon the exercise of stock
options.
(6) Includes 109,518 shares owned with shared voting and investment
power, 36,329 shares that Mr. Van Brackel shares voting power,
9,326 shares that vest within 60 days under the 1996 MRP, 24,583
shares that have been allocated to Mr. Van Brackel's account in
the ESOP and 116,584 shares that may be acquired upon the exercise
of stock options.
(7) Less than 1% of the total outstanding shares of Common Stock.
(8) Includes 1,555 shares that vest within 60 days under the 1996 MRP
and 39,854 shares that may be acquired upon the exercise of stock
options.
(9) Includes 1,000 shares owned with shared voting and investment
power.
-4-
(10) Includes 1,555 shares that vest within 60 days under the 1996 MRP
and 34,854 shares that may be acquired upon the exercise of stock
options.
(11) Includes 1,431 shares owned with shared voting and investment
power.
(12) Includes 1,555 shares that vest within 60 days under the 1996 MRP
and 18,264 shares that may be acquired upon the exercise of stock
options.
(13) Includes 1,330 shares owned with shared voting and investment
power.
(14) Includes 1,555 shares that vest within 60 days under the 1996 MRP
and 10,269 shares that may be acquired upon the exercise of stock
options.
(15) Includes 3,000 shares owned with shared voting and investment
power, 1,555 shares that vest within 60 days under the 1996 MRP
and 10,492 shares that may be acquired upon the exercise of stock
options.
(16) Includes 36,329 shares that Mr. Wahl shares voting power, 4,000
shares that vest within 60 days under the 1996 MRP, 13,738 shares
that have been allocated to Mr. Wahl's account in the ESOP and
60,000 shares that may be acquired upon the exercise of stock
options.
(17) Includes 5,000 shares that may be acquired upon the exercise of
stock options.
(18) Includes 1,313 shares that have been allocated to Mr. Brodsky's
account in the ESOP and 500 shares that may be acquired upon the
exercise of stock options.
(19) Includes options to purchase 450,916 shares, 26,971 shares that
vest within 60 days under the 1996 MRP, 50,146 shares allocated to
the accounts of executive officers in the ESOP, and 36,329 shares
held in trust for the 1996 MRP which vest after 60 days for which
Mr. Van Brackel and Mr. Wahl are trustees.
-5-
INFORMATION REGARDING 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, divided into three classes. The members of each class are 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 expiring in 2004, and in
each case until their successors are elected and qualified. The nominees, Mr.
Small, Mr. Boomer and Mr. Diehl, currently serve as directors of First Defiance.
Unless otherwise directed, each valid proxy submitted 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.
-6-
Information Regarding 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
NOMINEES BE ELECTED AS DIRECTORS
NOMINEES FOR DIRECTOR WITH THREE-YEAR TERMS EXPIRING IN 2004
Positions Held in Director
Name Age First Defiance Since (1)
----------------- --- --------------------------- ---------
William J. Small 50 Chairman, President
and Chief Executive Officer 1998
Stephen L. Boomer 50 Director 1994
Peter A. Diehl 50 Director 1998
DIRECTORS WITH TERMS EXPIRING IN 2002
Positions Held in Director
Name Age First Defiance Since (1)
----------------- --- --------------------------- ---------
Dr. John U. Fauster 63 Director 1975
Dr. Marvin J. Ludwig 74 Director 1979
Thomas A. Voigt 58 Director 1995
(Footnotes on next page)
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DIRECTORS WITH TERMS EXPIRING IN 2003
Positions Held in Director
Name Age First Defiance Since (1)
----------------- --- --------------------------- ---------
Don C. Van Brackel 62 Director, Vice Chairman 1979
Dr. Douglas A. Burgei 46 Director 1995
Gerald W. Monnin 62 Director 1997
----------------------
(1) Each director also serves as a director of First Federal, a wholly
owned subsidiary of First Defiance. The indicated year includes service
as a director of 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 served as President, Chairman of the
Board and Chief Executive Officer of First Defiance and Chairman of the Board
and Chief Executive Officer of First Federal since January 1, 1999. He
previously served as President and Chief Operating Officer of First Federal from
June 1996 through December 31, 1998 and before that he served as Senior Vice
President responsible for lending from July 1, 1994. Mr. Small is also Chairman
of the Executive Committee, the Loan Review Committee, and The Leader Mortgage
Board Committee and a member of the Investment and Trust Committees of First
Federal. He is also Chairman of First Insurance and Investments' Board of
Directors.
Stephen L. Boomer. Mr. Boomer is President/Chief Executive Officer and
co-owner of Arps Dairy Inc., Defiance, Ohio, a processor and distributor of
dairy products. He has been a director since August 1994 and currently serves as
Chairman of the Audit Committee and as a member of the MRP - Stock Options
Committee and the Trust Committee as well as the First Insurance and Investments
Board. He also serves on the Executive and Loan Review Committees on a rotating
basis during the year.
-8-
Peter A. Diehl. Mr. Diehl 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. He has been a director since April 1998
and currently serves on the Audit, Long Range Planning and Compensation
Committees as well as the First Insurance and Investments Board. He also serves
on the Executive and Loan Review Committees on a rotating basis during the year.
John U. Fauster III, D.D.S. Dr. Fauster retired from the practice of
dentistry during 2000. Prior to that he was affiliated with the Defiance Dental
Group, Defiance, Ohio. He has been a director since 1975 and currently serves as
a member of its Audit, Investment 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 since 1979 and currently serves as Chairman of the MRP - Stock
Options Committee and as a member of the Compensation, Audit and The Leader
Mortgage Board Committees and serves on the Executive and Loan Review Committees
on a rotating basis during the year.
Thomas A. Voigt. Mr. Voigt is Vice President and general manager of the
Bryan Publishing Company, commercial printers and publishers of 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 as a member of the Compensation and MRP - Stock
Options Committees and serves on the Executive and Loan Review Committees on a
rotating basis during the year.
Don C. Van Brackel. Mr. Van Brackel has served as Vice Chairman of the
First Defiance Board of Directors since January 1, 1999. Prior to that, Mr. Van
Brackel served as Chairman of the Board of Directors and Chief Executive Officer
of First Defiance and First Federal, from January 1, 1995 until his retirement
on December 31, 1998. He was President and Managing Officer of First Federal
from July 1992 until June 1996 and has been a director 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. Mr. Van
Brackel is a member of the Executive, Loan Review, Investment, Long Range
Planning, Compensation, Trust and The Leader Mortgage Board Committees.
-9-
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 a member of the MRP - Stock Options, Investment and Long
Range Planning Committees and serves on the Executive and Loan Review Committees
on a rotating basis.
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 as chairman of the Compensation Committee and as a
member of the Long Range Planning, MRP - Stock Options and The Leader Mortgage
Board Committees and serves on the Executive and Loan Review Committees on a
rotating basis during the year.
Executive Officers Who Are Not Directors
The following sets forth certain information regarding the executive
officers of First Defiance and subsidiaries who are not directors or nominees,
including their business experience for at least the past five years.
James L. Rohrs, Age 53. Mr. Rohrs joined First Defiance in August 1999
as President and Chief Operating Officer of First Federal. Prior to joining
First Defiance, Mr. Rohrs was employed by Huntington National Bank for 27 years.
From 1994 to 1999 Mr. Rohrs served as Business Banking Product Manager for
Huntington's bank-wide small business market segment. Prior to that he was
regional executive for Huntington's Northwest Ohio region. Mr. Rohrs is a member
of the First Federal Board of Directors.
Sheldon Brodsky, Age 58. Mr. Brodsky was appointed President and Chief
Executive Officer of The Leader Mortgage Company on July 1, 2000. He previously
served as President and Chief Operating Officer of The Leader Mortgage Company
from January 1, 2000 until July 1, 2000 and as Executive Vice President and
Chief Financial Officer of The Leader Mortgage Company from 1987 until December
31, 1999.
John C. Wahl, Age 40. Mr. Wahl was promoted to Executive Vice President
of First Defiance and First Federal in November 1998. He previously 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.
Prior to joining First Defiance he was a senior manager with Ernst & Young LLP,
the Company's independent auditors.
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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.
SEC regulations require that First Defiance disclose any Section 16
filing that was not made by the appropriate due date. Based on a review of the
filings for 2000, First Defiance determined that a Form 4 for Peter A. Diehl was
not filed by the applicable due date.
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 13
meetings of the Board of Directors of First Federal held during 2000. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of First Defiance or First Federal, as applicable, and meetings held
by all committees of the Board on which the director served during 2000.
The Boards of Directors of First Defiance and First Federal have
established various committees, including Executive, Audit, Compensation, Long
Range Planning, MRP - Stock Options and The Leader Mortgage Board 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 articles of incorporation or code of
regulations or its Board of Directors. As Chairman of the Board, Mr. Small
serves as Chairman of the Executive Committee. Mr. Van Brackel serves as a
permanent member of the Executive Committee. The seven remaining directors serve
on the Committee on a rotating basis during the year. The Executive Committee
met 52 times during 2000.
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 in connection
with internal audit procedures performed by firms engaged by the Audit
Committee. Drs. Ludwig and Fauster, and Messrs. Diehl and Boomer serve as
members of this committee. In January 2000 the Audit Committee adopted and the
full Board of Directors ratified a formal Audit Committee Charter which is
attached to this proxy statement as Appendix A.
-11-
The Compensation Committee, consisting of Messrs. Monnin, Voigt, Diehl
and Van Brackel and Dr. Ludwig was established by the Board of Directors to
oversee the compensation programs provided to First Defiance's management
including base salaries, bonuses and benefit plans.
First Defiance does not have a nominating committee. Nominations are
made by the full Board of Directors.
-12-
Report of the Audit Committee
The Audit Committee is comprised of four directors, all of whom are
considered "independent" under rule 4200(a)(14) of the National Association of
Securities Dealers' listing standards.
The Audit Committee oversees First Defiance's financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal control. In fulfilling its oversight responsibilities,
the Committee reviewed with management the audited financial statements in the
Annual Report on Form 10-K, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards. In addition, the
Committee has discussed with the independent auditors the auditors' independence
from management and the Company, including the matters in the written
disclosures required by the Independence Standards Board, and considered the
compatibility of non-audit services with the auditors' independence.
The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The Committee held five meetings during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2000 for filing with the SEC. The Committee
and the Board have also approved the selection of Ernst & Young LLP as the
Company's independent auditors for the year ended December 31, 2001.
Stephen L. Boomer, Audit Committee Chair
Marvin J. Ludwig, Audit Committee Member
John U. Fauster, III, Audit Committee Member
Peter A. Diehl, Audit Committee Member
March 19, 2001
-13-
PROPOSAL TO ADOPT THE 2001 STOCK OPTION AND INCENTIVE PLAN
General. The Board of Directors of First Defiance has authorized
the 2001 Stock Option and Incentive Plan (the "2001 Plan"). The 2001 Plan must
be approved by the affirmative vote of the holders of a majority of the shares
of First Defiance represented in person or by proxy at the Annual Meeting. The
Board of Directors of First Defiance recommends that the shareholders of First
Defiance approve the 2001 plan.
The following is a summary of the terms of the 2001 Plan and is
qualified in its entirety by reference to the full text of the 2001 Plan, a copy
of which is attached hereto as Appendix B.
Purpose, Administration and Eligibility. The purposes of the 2001
Plan include rewarding and providing incentives to the directors and employees
of First Defiance and its subsidiaries (the "Company"). The 2001 Plan will be
administered by a committee of directors composed of at least two directors of
First Defiance (the "Committee"). All nine directors and approximately 100
employees of the Company are eligible to participate in the 2001 Plan. The
Committee shall grant options under the 2001 Plan on the basis of an individual
participant's position, duties and responsibilities, the value of the
individual's services to the Company and any other factor the Committee deems
relevant.
The 2001 Plan will terminate on April 24, 2011. Without further
approval of the shareholders, the Board of Directors may terminate the 2001 Plan
prior to that date or may amend it from time to time in such respects as the
Board of Directors may deem advisable, except that the Board of Directors may
not, without the approval of the shareholders, make any amendment which would:
(a) increase the aggregate number of shares of Common Stock that may be issued
under the 2001 Plan (except for adjustments to reflect certain changes in the
capitalization of First Defiance); (b) materially modify the requirements as to
eligibility for participation in the 2001 Plan; or (c) materially increase the
benefits accruing to participants under the 2001 Plan. Notwithstanding the
foregoing, the Board of Directors may amend the 2001 Plan to take into account
changes in applicable securities, federal income tax and other applicable laws.
Effect on Existing Stockholders. A maximum of 343,000 shares of
Common Stock will be reserved for issuance by First Defiance upon the granting
of options to certain directors and employees of the Company from time to time
under the 2001 Plan. Any shares of Common Stock issued under the 2001 Plan will
be authorized but unissued shares or issued shares that have been reacquired by
First Defiance. As of March 9, 2001, there were 6,863,684 shares of Common Stock
outstanding. As Common Stock is issued to directors and officers of First
Defiance who receive and exercise options under the 2001 Plan, the voting power
of the directors and officers of First Defiance over the outcome of the vote on
any matters submitted to First Defiance's shareholders, including changes of
control, will increase.
-14-
Option Terms. The exercise price for options granted under the
2001 Plan will be determined by the Committee at the time of the grant, but in
no event will the exercise price be less than 100% of the fair market value of
the Common Stock on the date of grant. No stock option will be exercisable after
the expiration of ten years from the date of the grant. Options granted under
the 2001 Plan may be "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). If an
ISO is granted to a participant who owns more than 10% of First Defiance's
outstanding Common Stock at the time the ISO is granted, the exercise price of
the ISO may not be less than 110% of the fair market value of the Common Stock
on the date of the grant and the ISO shall not be exercisable after the
expiration of five years from the date of the grant.
Upon the termination of a participant's directorship or
employment due to death, disability or retirement, all options held by the
participant will vest. If the participant's directorship or employment is
terminated due to death or disability, the options must be exercised within 12
months of such termination. If the participant's directorship or employment is
terminated due to retirement, the participant has five years to exercise the
options. Notwithstanding the foregoing, any option intended to qualify as an ISO
must be exercised within three months of retirement. If a participant is
"Terminated for Cause," as defined in the 2001 Plan, any option that has not
been exercised shall terminate as of the date of such Termination for Cause. An
option may not be transferred or assigned other than by will or in accordance
with the laws of descent and distribution.
First Defiance will receive no monetary consideration for the
granting of options under the 2001 Plan. Upon the exercise of options, First
Defiance will receive payment in cash or, if acceptable to the Committee, shares
of Common Stock of First Defiance or surrendered outstanding stock options.
Tax Treatment of Incentive Stock Options. A participant who is
granted an ISO will not recognize taxable income either on the date of the grant
or on the date of exercise, although the alternative minimum tax may apply. Upon
disposition of Common Stock acquired from the exercise of an ISO, long-term
capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. If the participant disposes of the Common Stock within two years
of the date of the grant or within one year from the date of the transfer of the
Common Stock to the participant (a "Disqualifying Disposition"), however, then
the participant will recognize ordinary income, as opposed to capital gain, at
the time of disposition in an amount generally equal to the lesser of (i) the
amount of gain realized on the disposition, or (ii) the difference between the
fair market value of the shares received on the date of exercise and the
exercise price. Any remaining gain or loss is treated as a short-term or
long-term capital gain or loss, depending upon the period of time the Common
Stock has been held.
The Company is not entitled to a tax deduction upon either the
exercise of an ISO or the disposition of Common Stock acquired pursuant to such
exercise, except to the extent that the participant recognizes ordinary income
in a Disqualifying Disposition. Ordinary income from a
-15-
Disqualifying Disposition will constitute compensation but will not be subject
to tax withholding, nor will it be considered wages for payroll tax purposes.
The Company reserves the right to require tax withholding if it determines that
such withholding is necessary to comply with changes in the Code.
If the holder of an ISO pays the exercise price, in whole or in
part, with previously acquired Common Stock, the exchange should not affect the
ISO tax treatment of the exercise. Upon such exchange, and except as otherwise
described herein, no gain or loss is recognized by the participant upon
delivering previously acquired Common Stock to First Defiance, and shares of
Common Stock received by the participant equal in number to previously acquired
shares of Common Stock exchanged therefor will have the same basis and holding
period for long-term capital gain purposes as the previously acquired shares of
Common Stock. (The participant, however, will not be able to utilize the prior
holding period for the purpose of satisfying the ISO statutory holding period
requirements for avoidance of a Disqualifying Disposition.) Shares of Common
Stock received by the participant in excess of the number of shares previously
acquired will have a basis of zero and a holding period that commences as of the
date the shares are transferred to the participant upon the exercise of the ISO.
If the exercise of an ISO is effected using Common Stock previously acquired
through the exercise of an ISO, the exchange of such previously acquired shares
will be considered a disposition of such shares for the purpose of determining
whether a Disqualifying Disposition has occurred.
Tax Treatment of Non-qualified Options. A participant receiving
an option that does not qualify as an ISO (a "Non-qualified Option") generally
does not recognize taxable income on the date of the grant of the option. The
participant must recognize ordinary income generally at the time of exercise of
a Non-qualified Option in the amount of the difference between the fair market
value of the shares on the date of exercise and the option price. The ordinary
income received will constitute compensation for which tax withholding by the
Company generally will be required. The amount of ordinary income recognized by
a participant will be deductible by the Company in the year that the participant
recognizes the income if the Company complies with the applicable withholding
requirement.
If, at the time of exercise, the sale of the Common Stock could
subject the participant to short-swing profit liability under Section 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), such person generally
will not recognize ordinary income until the date that the participant is no
longer subject to such Section 16(b) liability. Upon such date, the participant
will recognize ordinary income in an amount equal to the fair market value of
the Common Stock on such date less the option exercise price. Nevertheless, the
participant may elect under Section 83(b) of the Code within 30 days of the date
of exercise to recognize ordinary income as of the date of exercise, without
regard to the restriction of Section 16(b).
Shares of Common Stock acquired upon the exercise of a
Non-qualified Option will have a tax basis equal to their fair market value on
the exercise date, or other relevant date on which ordinary income is
recognized, and the holding period for the shares generally will begin on the
date of exercise or such other relevant date. Upon subsequent disposition of the
-16-
Common Stock, the participant will recognize long-term capital gain or loss if
the participant has held the shares for more than one year prior to disposition,
or short-term capital gain or loss if the participant has held the shares for
one year or less.
If a holder of a Non-qualified Option pays the exercise price, in
whole or in part, with previously acquired Common Stock, the participant will
recognize ordinary income in the amount by which the fair market value of the
shares received exceeds the exercise price. The participant will not recognize
gain or loss upon delivering such previously acquired Common Stock to First
Defiance. Shares of Common Stock received by a participant equal in number to
the previously acquired shares exchanged therefor will have the same basis and
holding period as such previously acquired shares. Shares of Common Stock
received by a participant in excess of the number of such previously acquired
shares will have a basis equal to the fair market value of such additional
shares as of the date ordinary income is recognized. The holding period for such
additional Common Stock will commence as of the date of exercise or such other
relevant date.
No awards will be granted under the 2001 Plan prior to its
approval by the shareholders of First Defiance. Future grants under the 2001
Plan will be made in the discretion of the Committee, and accordingly, are not
yet determinable.
The Board of Directors recommends a vote FOR the approval of
the 2001 Plan.
-17-
EXECUTIVE COMPENSATION
Summary
The following table sets forth a summary of certain information
concerning the compensation awarded 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 its subsidiaries whose total compensation during the year ended
December 31, 2000 exceeded $100,000. Positions are listed as of December 31,
2000.
Annual Compensation (4) Long Term Compensation
------------------------ ------------------------------------ All Other
Name and Year Salary (1)(2) Bonus Awards Compensation
Principal Position (3) ------------------------------------ (6) (7)
Stock Securities
Grants (5) Underlying Options
---------------------------------------------------------------------------------------------------------------------------------
William J Small, 2000 $197,200 $76,325 --- --- $21,639
Chairman, President and 1999 192,000 56,857 --- --- 21,221
Chief Executive Officer 1998 152,000 --- --- --- 31,816
John C. Wahl, 2000 $125,000 $36,695 --- --- $20,340
Executive Vice 1999 117,000 26,246 --- --- 17,070
President, Chief Financial Officer and 1998 115,000 --- --- --- 30,965
Treasurer
James L. Rohrs, Exec. V.P.,
President and Chief Operating 2000 $135,000 $44,594 --- 600 $2,693
Officer of First Federal 1999 43,735 --- $34,920 25,000 ---
Sheldon Brodsky,
President and Chief Executive 2000 $170,040 $60,648 --- --- $199,764
Officer of The Leader
Mortgage Company
(Footnotes on next page)
-18-
(1) Includes amounts deferred by Messrs. Small, Wahl and Rohrs pursuant to
First Defiance's deferred compensation program.
(2) Mr. Rohrs 1999 compensation is from his August 30, 1999 hire date.
(3) Bonus amounts reflect amounts earned during the fiscal year as
determined by the Compensation Committee, including amounts which are
paid in the following year.
(4) 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 each of the years presented did not exceed
the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual.
(5) Represents the grant of 3,211 shares of restricted Common Stock to Mr.
Rohrs in August, 1999 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 award to Mr. Rohrs had a fair value at December 31,
2000 of $34,920.
(6) Consists of amounts allocated by First Defiance on behalf of Messrs.
Small, Wahl, Rohrs and Brodsky pursuant to the ESOP and matching and
profit sharing contributions pursuant to First Defiance's 401(k) Plan.
(7) Mr. Brodsky's amount includes a scheduled retention bonus of $178,125.
-19-
Stock Options
The following table provides information relating to option
grants made in 2000 to the individuals named in the Summary Compensation Table.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
Potential realizable value at
assumed annual rates of stock price
Individual Grants appreciation for option terms
------------------------------------------------------------ --------------------------------
Percent of
Number of total options
securities granted to
underlying employees in Exercise Expiration
Executive Officer options granted 2000 Price date 5% 10%
-------------------------------------------------------------------------------------------------------------------------
James L. Rohrs 600 (1) 100.0% $10.52 2010 $3,968 $10,058
(1) The Options granted are fully exercisable 6 months from the December 18,
2000 grant date.
The following table sets forth certain information concerning
options held at December 31, 2000 under the 1993 Stock Incentive Plan and the
1996 Stock Option Plan. No options were exercised by any of the named executives
during 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Shares Number of Value of Unexercised In-the-Money
Acquired on Value Securities Underlying Unexercised Options at Year End
Name Exercise Realized Options at Year End (1)
------------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------- ------------------------------------
William J. Small --- --- 73,060 34,040 $30,590 $7,648
James L. Rohrs --- --- 5,000 20,600 -0- 215
Sheldon Brodsky --- --- 500 2,000 -0- -0-
John C. Wahl --- --- 54,000 6,000 12,750 2,250
----------------------------
(1) Based on a per share market price of $10.875 at December 31, 2000 and
exercise prices ranging from $10.375 per share to $13.00 per share.
-20-
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 an incentive-based
executive salary program which will provide the Chief Executive Officer with a
base salary targeted at approximately 70% of total cash compensation with the
remaining 30% consisting of an incentive bonus. Other members of senior
management participate under a similar program, with base targets ranging from
75% to 80% of total compensation and incentive bonus targets ranging from 20% to
25%. Under the program, senior management would attain targeted levels of
compensation only upon realizing prescribed levels of performance established by
the Board.
The Committee evaluates the base salaries of the executive officers of
First Defiance and its subsidiaries 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 its
subsidiaries 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 with executive
compensation for executive officers in First Defiance's peer group.
For 2000, the Board of Directors prescribed that certain target
measurements be met in order to fund the executive compensation pool. The
components measured included diluted earnings per share, growth in combined net
interest income and non-interest income, and the efficiency ratio. The Plan
provides for threshold, target and maximum payout levels with achievement of
targets resulting in 100% payouts. The formula provides for payouts in excess of
100% of the bonus pools if target levels are exceeded. Based on 2000 financial
results, 101.93% of the targeted executive bonus pool was funded.
Gerald W. Monnin, Compensation Committee Chair
Marvin J. Ludwig, Compensation Committee Member
Thomas A. Voigt, Compensation Committee Member
Peter A. Diehl, Compensation Committee Member
Don C. Van Brackel, Compensation Committee Member
-21-
Performance Graph
The following graph compares the yearly cumulative total return on the
Common Stock for the last five years with (i) the yearly cumulative total return
on the stocks included in the Nasdaq Stock Market Index (for United States
companies), (ii) the yearly cumulative total return on stocks included in the
Nasdaq Bank Stock Index and (iii) the SNL Midwest Thrift 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.
{GRAPHIC-GRAPH PLOTTED TO DATA POINTS LISTED BELOW]
First Defiance Financial Corp
Period Ending
-----------------------------------------------------------------------------
Index 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
---------------------------------------------------------------------------------------------------------------
First Defiance Financial Corp. 100.00 125.50 166.06 151.80 115.65 125.68
NASDAQ - Total US 100.00 123.04 150.69 212.51 394.92 237.62
NASDAQ Bank Index 100.00 132.04 221.06 219.64 211.14 241.08
SNL Midwest Thrift Index 100.00 125.99 203.04 187.60 155.96 210.34
-22-
Directors' Compensation
During the year ended December 31, 2000, each outside 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
and service on The Leader Mortgage Board Committee. For service on the Executive
Committee, Outside directors received $100 per meeting attended during their
term as members. For service on The Leader Mortgage Board Committee, outside
directors received $500 for each meeting attended. For service on the First
Insurance and Investments Board, outside directors received $300 for each
meeting attended.
Mr. Van Brackel, formerly Chairman, President and CEO, assumed the
responsibilities of Vice Chairman of the Board on January 1, 1999. In that
capacity, Mr. Van Brackel is paid an annual salary of $63,000 for a three-year
period. Mr. Van Brackel is receiving that salary in lieu of any other director's
compensation. He has the option to defer up to $10,000 of his annual salary
pursuant to the deferred compensation plan. Mr. Small does not receive any
additional compensation for his service on the Board of Directors.
In 2000, Mr. Diehl received a grant under the 1996 Stock Option Plan to
purchase an aggregate of 1,943 shares of Common Stock at a $8.25 exercise price.
Employment Agreements
First Defiance has entered into employment agreements with Messrs.
Small, Rohrs, and Wahl (the "Executives"). The form of employment agreement for
the Executives is substantially the same and provides each officer with a
three-year term of employment commencing on the date of the agreement. On the
anniversary of each agreement, the Board of Directors of First Defiance shall
consider and review the 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
Defiance. 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 Defiance for cause, disability, retirement or death.
However, in the event that (i) an Executive terminates his employment because of
failure of First Defiance to comply with any material provision of the
employment agreement or (ii) the employment agreement is 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 Defiance 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 Defiance as well as continued
participation in employee benefit plans of First Defiance (other than retirement
plans and stock
-23-
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 Defiance 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 Defiance
prior to such assignment or prior to a change in control of First Defiance.
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
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.
First Defiance entered into an employment agreement with Mr. Brodsky
upon the acquisition of The Leader Mortgage Company. This agreement was for a
term of three years, expiring on July 1, 2001. Under the agreement, in addition
to a minimum base salary, Mr. Brodsky is entitled to receive annual retention
bonuses of $178,125 upon execution of the agreement and on the first and second
anniversary of the agreement. He is to receive an additional $178,125 on July 1,
2001 in consideration for a covenant not to compete. The agreement can be
terminated at any time by First Defiance with or without cause. However, if the
agreement is terminated without cause, First Defiance must continue to pay Mr.
Brodsky his base salary and non-compete payment for the remainder of his term.
-24-
Indebtedness of Management
First Defiance has had no loans outstanding during 2000 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.
-25-
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as the Company's independent auditors
for the fiscal year ended December 31, 2000, and has reported on the Company's
consolidated financial statements. Fees for the last fiscal year paid to Ernst &
Young LLP were as follows:
Audit Fees: During the year ended December 31, 2000, First
Defiance incurred fees totaling $125,000 to Ernst & Young LLP for professional
services in connection with the audit of First Defiance's annual financial
statements and the review of financial statements included in First Defiance's
Forms 10-Q.
Financial Information Systems Design and Implementation Fees:
During the 2000 fiscal year, First Defiance incurred no fees to Ernst & Young
LLP for professional accounting services to design, implement or manage,
hardware or software that collects or generates information significant to First
Defiance's financial statements
All Other Fees: During fiscal year 2000, First Defiance incurred
fees totaling $248,840 to Ernst & Young LLP for all accounting services other
than the services discussed in "Audit Fees". These fees including audit related
services of $129,740, and nonaudit services of $119,100. Audit related services
generally include fees for pension and mortgage banking compliance audits,
accounting consultations, internal audit services, and SEC registration
statements. The Audit Committee has determined that the provision of these
additional services is compatible with maintaining Ernst & Young LLP's
independence.
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.
-26-
OTHER MATTERS
Each proxy confers discretionary authority on the Board of Directors of
First Defiance to vote the proxy for 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.
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 21, 2001. 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. In addition, if a shareholder intends
to present a proposal at the 2002 annual meeting of shareholders of First
Defiance without including the proposal in the proxy solicitation materials
relating to that meeting, and if the proposal is not received by February 4,
2002, then the proxies designated by the Board of Directors of First Defiance
for the 2002 annual meeting may vote proxies in their discretion on any such
proposal without mention of such matter in the proxy solicitation materials or
on the proxy card for such meeting.
-27-
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Shareholders of First Defiance as of the Voting Date for the Annual
Meeting are being provided with a copy of First Defiance's Annual Report to
Shareholders and Form 10-K for the year ended December 31, 2000 ("Annual
Report"). Included in the Annual Report are the consolidated financial
statements of First Defiance as of December 31, 2000 and 1999 and for each of
the years in the three-year period ended December 31, 2000, 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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John W. Boesling, Secretary
------------------------------
John W. Boesling, Secretary
March 21, 2001
Defiance, Ohio
-28-
APPENDIX A
Audit Committee Charter
Approved by Audit Committee: January 24, 2000
Approved by Board of Directors: January 24, 2000
Organization
The audit committee of the Board of Directors of First Defiance Financial Corp.
("The Company") shall be comprised of three or more directors as determined by
the Board. Each member will be independent of management and the Company.
Members of the audit committee shall be considered independent if they have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company. All audit committee members will
be financially literate, and at least one member will have accounting or related
financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the Company,
and the quality and integrity of financial reports of the Company. In so doing,
it is the responsibility of the audit committee to maintain free and open
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the Company.
Meetings
The committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
committee should meet at least annually with management, the internal auditors,
and the independent accountants in separate executive sessions to discuss any
matters the committee or each of these groups believe should be discussed
separately. The committee may ask members of management or others to attend
meetings and provide pertinent information as necessary.
Responsibilities
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
A-1
APPENDIX A
o Obtain the full board of directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
divisions and subsidiaries.
o Have a clear understanding with the independent auditors that they are
ultimately accountable to the board of directors and the audit
committee, as the shareholders' representatives, who have the ultimate
authority in deciding to engage, evaluate, and if appropriate,
terminate their services.
o Review and concur with management's approach to the internal audit
function.
o If management elects to outsource the internal audit function, the
committee should review and concur with management's selection,
termination, or replacement of firms.
o If management elects to retain the internal audit function in house,
the committee should review and concur with management's appointment,
termination, or replacement of the director of internal audit.
o Review the independence and authority of internal audit's reporting
obligations, the proposed audit plans for the coming year, and the
coordination of such plans with the independent auditors. Review the
qualifications of the Internal Auditor to specific areas within the
audit plan.
o Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
adequacy of the independent auditor's compensation, and at the
conclusion thereof review such audit or review, including any comments
or recommendations of the independent auditors.
o Review with the independent auditors, the Company's internal auditor,
and financial and accounting personnel, the adequacy and effectiveness
of the accounting and financial controls of the Company, and elicit any
recommendations for the improvement of such internal controls or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of
internal controls to expose any payments, transactions, or procedures
that might be deemed illegal or otherwise improper. Further, the
committee periodically should review Company policy statements to
determine their adherence to the code of conduct.
o Review reports received from regulators and review other legal and
regulatory matters that may have a material effect on the financial
statements or related company compliance policies.
A-2
APPENDIX A
o Inquire of management, the internal auditor, and the independent
auditors about significant risks or exposures and assess the steps
management has taken to minimize such risks to the Company.
o Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan.
o Engage the independent auditors to perform timely reviews of interim
financial statements following procedures set forth in Statement of
Auditing Standard (SAS) No. 71, or such other auditing standards that
may in time modify, supplement or replace SAS 71. Such review should be
completed prior to the Company filing its form 10-Q.
o Review the quarterly financial statements with financial management and
the independent auditors prior to the filling of the Form 10-Q (or
prior to the press release of results, if possible) to determine that
the independent auditors do not take exception to the disclosure and
content of the financial statements, and discuss any other matters
required to be communicated to the committee by the auditors. The chair
of the committee or his designee may represent the entire committee for
purposes of this review.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the
shareholders. Also review with financial management and the independent
auditors their judgements about the quality, not just acceptability, of
accounting principles and the clarity, consistency, and completeness of
the Company's accounting information contained in the financial
statements and related disclosures. Discuss items that may have a
significant impact on the representational faithfulness, verifiability,
neutrality, and consistency of the accounting information. Review with
financial management and the independent auditors the results of their
timely analysis of significant financial reporting issues and
practices, including changes in, or adoptions of, accounting principles
and disclosure practices, and discuss any other matters required to be
communicated to the committee by the auditors.
o Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the audit committee without
members of management present. Among the items to be discussed in these
meetings are the independent auditors' evaluation of the Company's
financial, accounting, and auditing personnel, and the cooperation that
the independent auditors received during the course of audit.
o Review accounting and financial human resources and succession planning
within the Company.
A-3
APPENDIX A
o Report the results of the annual audit to the Board of Directors.
Request that the independent auditors attend the full board of
directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions.
o On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services as required by Independence Standards Board Standard No.1.
Independence Discussions with Audit Committees. In addition, review
with the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
board of directors take, appropriate action to ensure the continuing
independence of the auditors.
o Disclose in the annual proxy statement in connection with the annual
meeting of shareholders at which directors are to be elected a
statement that audit committee members are independent.
o Disclose in the annual proxy statement in connection with the annual
meeting of shareholders at which directors are to be elected as
statement which states: (1) the audit committee has reviewed and
discussed the audited financial statements with management, (2) the
audit committee has discussed with the independent auditors the matters
required to be discussed by SAS 61, as may be modified or supplemented
and (3) the audit committee has received the written disclosures and
the letter from the independent auditors required by ISB Standard No.
1, as may be modified or supplemented, and has discussed with the
auditors the auditors' independence. The audit committee should then
state whether, based on the reviews and discussions referred to above,
it recommended to the Board of Directors that the financial statements
be included in the Annual Report on Form 10-K for the last fiscal year
for filing with the SEC. This disclosure is to appear over the printed
names of each voting member of the audit committee.
o Submit the minutes of all meetings of the audit committee to, or
discuss the matters discussed at each committee meeting with, the Board
of Directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose it in
its judgment that is appropriate.
o Include a copy of this Charter in the proxy statement at least
triennially or the year after any significant amendment to the Charter.
A-4
APPENDIX B
FIRST DEFIANCE FINANCIAL CORP.
2001 STOCK OPTION AND INCENTIVE PLAN
1. Purpose. The purpose of the First Defiance Financial Corp.
2001 Stock Option and Incentive Plan (this "Plan") is to promote and advance the
interests of First Defiance Financial Corp. (the "Company") and its shareholders
by enabling the Company to reward directors and employees of the Company and any
Subsidiary (hereinafter defined), and to strengthen the mutuality of interests
between the directors and employees and the Company's shareholders by providing
directors and employees with a proprietary interest in pursuing the long-term
growth, profitability and financial success of the Company.
2. Definitions. For purposes of this Plan, the following terms
shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended, or any successor thereto, together with rules, regulations and
interpretations promulgated thereunder.
(c) "Committee" means the Committee of the Board constituted
as provided in Section 3 of this Plan.
(d) "Common Shares" means the common shares, $0.01 par value
per share, of the Company or any security of the Company issued in
substitution, in exchange or in lieu thereof.
(e) "Company" means First Defiance Financial Corp., an Ohio
corporation, or any successor corporation.
(f) "Employment" means regular employment with the Company or
a Subsidiary and does not include service as a director only.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any successor statute.
(h) "Fair Market Value" shall be determined as follows:
(i) If the Common Shares are quoted on The Nasdaq Stock Market
at the date of the grant of the Stock Option, then the Fair Market
Value shall be the mean between the closing bid and closing asked
quotation for a Common Share on the grant date on The Nasdaq Stock
Market.
B-1
APPENDIX B
(ii) If the Common Shares are traded on a national securities
exchange at the time of grant of the Stock Option, then the
Fair Market Value shall be the average of the highest and the
lowest selling price on such exchange on the date such Stock
Option is granted or, if there were no sales on such date,
then on the next prior business day on which there was a sale.
(iii) If the Common Shares are not traded on a national
securities exchange or quoted on The Nasdaq Stock Market, then
the Fair Market Value shall be as determined by the Committee.
(i) "Incentive Stock Option" means any Stock Option that is
intended to be and is specifically designated as an "incentive stock
option" within the meaning of Section 422 of the Code.
(j) "Non-Qualified Stock Option" means any Stock Option that
is not specifically designated as an Incentive Stock Option.
(k) "Participant" means an employee or director of the Company
or a Subsidiary who is granted a Stock Option under this Plan. For the
purposes of the granting of any Incentive Stock Option under this Plan,
the term "Participant" shall include only employees of the Company or a
Subsidiary.
(l) "Plan" means the First Defiance Financial Corp. 2001 Stock
Option and Incentive Plan, as set forth herein and as it may be
hereafter amended
from time to time.
(m) "Stock Option" means an award to purchase Common Shares
granted pursuant to the provisions of Section 6 of this Plan.
(n) "Subsidiary" means any corporation or entity in which the
Company directly or indirectly controls 50% or more of the total voting
power of such corporation or entity and includes, without limitation,
First Federal Bank of the Midwest, First Insurance and Investments,
Inc. and The Leader Mortgage Company, LLC.
(o) "Terminated for Cause" means any removal of a director or
discharge of an employee for the personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of a
material provision of any law, rule or regulation (other than traffic
violations or similar offenses) or a material violation of a final
cease-and-desist order or for any other action of a director or
employee which results in a substantial financial loss to the Company
or a Subsidiary.
B-3
APPENDIX B
3. Administration.
(a) This Plan shall be administered by the Committee to be
comprised of not fewer than two of the members of the Board. The
members of the Committee shall be appointed from time to time by the
Board. Members of the Committee shall serve at the pleasure of the
Board, and the Board may from time to time remove members from, or add
members to, the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business. An action
approved in writing by all of the members of the Committee then serving
shall be as effective as if the action had been taken by unanimous vote
at a meeting duly called and held. Notwithstanding the foregoing, if,
at the time a Stock Option is granted, the Committee includes directors
who are also employees of the Company, the grant of the Stock Option
must be approved by the entire Board.
(b) The Committee is authorized to construe and interpret this
Plan and to make all other determinations necessary or advisable for
the administration of this Plan. The Committee may designate persons
other than members of the Committee to carry out its responsibilities
under such conditions and limitations as it may prescribe. Any
determination, decision or action of the Committee in connection with
the construction, interpretation, administration or application of this
Plan shall be final, conclusive and binding upon all persons
participating in this Plan and any person validly claiming under or
through persons participating in this Plan. The Company shall effect
the granting of Stock Options under this Plan, in accordance with the
determinations made by the Committee, by execution of instruments in
writing in a form approved by the Committee.
4. Duration of, and Common Shares Subject to, this Plan.
(a) Term. This Plan shall terminate on the date which is ten
(10) years from the effective date of the Plan, except with respect to
Stock Options then outstanding.
(b) Common Shares Subject to Plan. Common Shares that may be
issued under this Plan may be either authorized and unissued shares or
issued shares which have been reacquired by the Company. No fractional
shares shall be issued under this Plan. The maximum number of Common
Shares that may be issued pursuant to Stock Options granted under this
Plan, subject to adjustment as provided in Section 10 of this Plan,
shall be 343,00 Common Shares. If any Stock Options are forfeited,
terminated or exchanged for other Stock Options, or expire unexercised,
the Common Shares which were subject to such Stock Options shall again
be available for Stock Options under this Plan to the extent of such
forfeiture, termination or expiration.
B-3
APPENDIX B
5. Eligibility and Grants. Persons eligible for Stock Options
under this Plan shall consist of directors and employees of the Company or a
Subsidiary whose performance or potential contribution, in the judgment of the
Committee, will benefit the future success of the Company or a Subsidiary. In
selecting the directors and employees to whom Stock Options will be awarded and
the number of shares subject to such Stock Options, the Committee shall consider
the position, duties and responsibilities of the directors and employees, the
value of their services to the Company and the Subsidiaries and any other
factors the Committee may deem relevant.
6. Stock Options.
(a) Grant. Stock Options granted under this Plan may be in the
form of Incentive Stock Options or Non-Qualified Stock Options, and
such Stock Options shall be subject to the terms and conditions set
forth in this Plan, shall be in such form as the Committee may from
time to time approve and shall contain such additional terms and
conditions as the Committee shall deem desirable, not inconsistent with
the express provisions of the Plan.
(b) Stock Option Price. The per share exercise price of a
Stock Option shall be determined by the Committee at the time of grant;
provided, however, that in no event shall the exercise price of a Stock
Option be less than 100% of the Fair Market Value of the Common Shares
on the date of the grant of such Stock Option. Notwithstanding the
foregoing, in the case of a Participant who owns Common Shares
representing more than 10% of the outstanding Common Shares at the time
an Incentive Stock Option is granted, the exercise price shall in no
event be less than 110% of the Fair Market Value of the Common Shares
at the time such Incentive Stock Option is granted.
(c) Stock Option Terms. Subject to the right of the Company to
provide for earlier termination in the event of any merger, acquisition
or consolidation involving the Company, the term of each Stock Option
shall be fixed by the Committee; provided, however, that the term of
Incentive Stock Options will not exceed ten years after the date the
Incentive Stock Option is granted; provided further, however, that in
the case of a Participant who owns a number of Common Shares
representing more than 10% of the Common Shares outstanding at the time
the Incentive Stock Option is granted, the term of the Incentive Stock
Option shall not exceed five years.
(d) Exercisability. Exercisability of Stock Options shall be
determined by the Committee at the time of grant. With respect to
Incentive Stock Options granted under this Plan, to the extent the
aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the number of shares with respect to which
Incentive Stock Options are exercisable under all plans of the Company
or a Subsidiary for the first time by a Participant during any calendar
year exceeds
B-4
APPENDIX B
$100,000, or such other limit as may be required by the Code, such
Stock Options shall be Non-Qualified Stock Options to the extent of
such excess.
(e) Method of Exercise. A Stock Option may be exercised, in
whole or in part, by giving written notice of exercise to the Company
specifying the number of Common Shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price in cash
or, if acceptable to the Committee in its sole discretion, in Common
Shares already owned by the Participant, or by surrendering outstanding
Stock Options. The Committee may also permit Participants, either on a
selective or aggregate basis, simultaneously to exercise Stock Options
and sell Common Shares thereby acquired, pursuant to a brokerage or
similar arrangement approved in advance by the Committee, and use the
proceeds from such sale as payment of the purchase price of such
shares. In such event, the Committee may permit the exercise price to
be paid as soon as practicable after exercise.
7. Termination and Change of Control.
(a) General rule. Except as otherwise provided in paragraph
(b) or (c) of this Section 7, any Stock Option which has not yet become
exercisable shall terminate and be of no further force or effect when
any Participant who was a director ceases to be a director of the
Company or any Subsidiary or when any Participant who was an employee
ceases to be an employee of the Company or any Subsidiary, and, unless
the Committee shall specifically state otherwise at the time a Stock
Option is granted or thereafter, any Stock Option which has become
exercisable shall terminate if it is not exercised within three months
of the termination of Board membership or Employment, as applicable.
(b) Death, Disability or Retirement. Unless the Committee
shall specifically state otherwise at the time a Stock Option is
granted, all Stock Options granted under this Plan shall become
exercisable in full on the date of termination of a Participant's
Employment or directorship with the Company or a Subsidiary because of
his death, disability or retirement. Further, unless the Committee
shall specifically state otherwise at the time a Stock Option is
granted or thereafter, all Stock Options shall terminate if not
exercised within 12 months of the Participant's death or disability or
within five years of the Participant's retirement. Notwithstanding the
foregoing, any option intended to qualify as an Incentive Stock Option
must be exercised within three months of a Participant's retirement.
(c) Termination for Cause. Unless the Committee shall
specifically state otherwise at the time a Stock Option is granted, in
the event the Employment or the directorship of a Participant is
Terminated for Cause, any Stock Option that has not been exercised
shall thereupon terminate and be of no further force or effect.
B-5
APPENDIX B
(d) Change of Control All outstanding Stock Options shall
become immediately exercisable in the event of a change in control of
the Company, as determined by the Committee. For purposes of this
Section 7, "change in control" shall mean the acquisition, directly or
indirectly, of the beneficial ownership (within the meaning of the term
"beneficial ownership" as defined under Section 13(d) of the Exchange
Act and the rules promulgated thereunder) of 25% or more of the
outstanding voting securities of the Company by any person, trust,
entity or group.
8. Non-transferability of Stock Options. No Stock Option under
this Plan, and no rights or interests therein, shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, Stock Options are
exercisable only by, and payments in settlement of Stock Options will be payable
only to, the Participant or his or her legal representative.
9. No Limitation on Certain Corporate Actions. The existence of
this Plan and the Stock Options granted hereunder shall not affect or restrict
in any way the right or power of the Board or the shareholders of the Company to
make or authorize the following: any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business; any merger, acquisition or consolidation of the Company; any issuance
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Company's capital stock or the rights thereof; the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business; or any other corporate act or proceeding, including any
merger or acquisition which would result in the exchange of cash, stock of
another company or options to purchase the stock of another company for any
Stock Option outstanding at the time of such corporate transaction or which
would involve the termination of all Stock Options outstanding at the time of
such corporate transaction.
10. Adjustments Upon Changes in Capitalization. In the event of
any change in capitalization affecting the Common Shares of the Company, such as
a stock dividend, stock split, recapitalization, merger, consolidation,
spin-off, split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Shares, including a
distribution (other than normal cash dividends) of company assets to
shareholders, such proportionate adjustments, if any, as the Board in its
discretion may deem appropriate to reflect such change shall be made with
respect to the aggregate number of Common Shares for which Stock Options in
respect thereof may be granted under this Plan, the maximum number of Common
Shares which may be sold or awarded to any Participant, the number of Common
Shares covered by each outstanding Stock Option, and the exercise price per
share in respect of outstanding Stock Options.
11. Amendment and Termination of this Plan. Without further
approval of the shareholders, the Board may at any time terminate this Plan, or
may amend it from time to time in such respects as the Board may deem advisable,
except that the Board may not, without approval of the shareholders, make any
amendment which would (a) increase the aggregate
B-6
APPENDIX B
number of Common Shares that may be issued under this Plan (except for
adjustments pursuant to Section 10 of this Plan), (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c) materially
increase the benefits accruing to Participants under this Plan. Notwithstanding
the foregoing, the Board may amend this Plan to take into account changes in
applicable securities, federal income tax and other applicable laws.
12. Modification of Options. The Board may authorize the
Committee to direct the execution of an instrument providing for the
modification of any outstanding Stock Option which the Board believes to be in
the best interests of the Company; provided, however, that no such modification,
extension or renewal shall confer on the holder of such Stock Option any right
or benefit which could not be conferred on him by the grant of a new Stock
Option at such time and shall not materially decrease the Participant's benefits
under the Stock Option without the consent of the holder of the Stock Option,
except as otherwise permitted under this Plan.
13. Miscellaneous.
(a) Tax Withholding. The Company shall have the right to
deduct from any settlement, including the delivery of Common Shares,
made under this Plan any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes. If Common Shares
are used to satisfy tax withholding, such shares shall be valued based
on the Fair Market Value when the tax withholding is required to be
made.
(b) No Right to Employment. Neither the adoption of this Plan
nor the granting of any Stock Option shall confer upon any employee of
the Company or a Subsidiary any right to continued Employment with the
Company or a Subsidiary, as the case may be, nor shall it interfere in
any way with the right of the Company or a Subsidiary to terminate the
Employment of any of its employees at any time, with or without cause.
(c) Annulment of Stock Options. The grant of any Stock Option
payable in Common Shares is provisional until the Participant becomes
entitled to the certificate in settlement thereof. In the event the
Employment or the directorship of a Participant is Terminated for
Cause, any Stock Option which is provisional shall be annulled as of
the date of such termination.
(d) Other Company Benefit and Compensation Programs. Payments
and other benefits received by a Participant under a Stock Option made
pursuant to this Plan shall not be deemed a part of a Participant's
regular, recurring compensation for purposes of the termination,
indemnity or severance pay law of any country and shall not be included
in, nor have any effect on, the determination of benefits under any
B-7
APPENDIX B
other employee benefit plan or similar arrangement provided by the
Company or a Subsidiary unless expressly so provided by such other plan
or arrangement, or except where the Committee expressly determines that
a Stock Option or portion of a Stock Option should be included to
accurately reflect competitive compensation practices or to recognize
that a Stock Option has been made in lieu of a portion of competitive
annual cash compensation. Stock Options under this Plan may be made in
combination with or in tandem with, or as alternatives to, grants,
stock options or payments under any other plans of the Company or a
Subsidiary. This Plan notwithstanding, the Company or any Subsidiary
may adopt such other compensation programs and additional compensation
arrangements as it deems necessary to attract, retain and reward
directors and employees for their service with the Company and its
Subsidiaries.
(e) Securities Law Restrictions. No Common Shares shall be
issued under this Plan unless counsel for the Company shall be
satisfied that such issuance will be in compliance with applicable
federal and state securities laws. Certificates for Common Shares
delivered under this Plan may be subject to such stop-transfer orders
and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Shares
are then listed, and any applicable federal or state securities law.
The Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(f) Stock Option Agreement. Each Participant receiving a Stock
Option under this Plan shall enter into an agreement with the Company
in a form specified by the Committee agreeing to the terms and
conditions of the Stock Option and such related matters as the
Committee shall, in its sole discretion, determine.
(g) Cost of Plan. The costs and expenses of administering this
Plan shall be borne by the Company.
(h) Governing Law. This Plan and all actions taken hereunder
shall be governed by and construed in accordance with the laws of the
State of Ohio.
(i) Effective Date. This Plan shall be effective upon adoption
by the Board. This Plan shall be submitted to the shareholders of the
Company for approval at an annual or special meeting of shareholders to
be held no later than twelve months after the effective date.
B-8
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST DEFIANCE FINANCIAL CORP. ANNUAL MEETING OF SHAREHOLDERS
April 24, 2001
1:00 p.m. local time
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 authorizes 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 9, 2001 at the Annual Meeting of Shareholders to be held at
the home office of its subsidiary, First Federal Bank, located at 601 Clinton
Street, Defiance, Ohio 43512, on Tuesday, April 24, 2001, at 1:00 p.m., Eastern
Time, and any adjournment thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR
VOTE VIA THE INTERNET OR BY TELEPHONE.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
FIRST DEFIANCE FINANCIAL CORP.-- ANNUAL MEETING, APRIL 24, 2001
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Call toll free 1-877-210-0269 on a Touch Tone telephone and follow the
instructions on the reverse side. There isNO CHARGE to you for this call.
2. Via the Internet at www.proxyvoting.com/fdef and follow the instructions.
or
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE VOTE
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
[X] Please mark your
votes as indicated
in this example
1. ELECTION OF DIRECTORS FOR THREE-YEAR TERM EXPIRING IN 2004.
Nominees for a three-year term expiring in 2004:
(01) William J. Small, (02) Stephen L. Boomer
(03) Peter A. Diehl
With- For all
[ ] For [ ] hold [ ] Except
INSTRUCTION: To withhold authority to vote for any nominee(s), mark "For All
Except" and write that nominee(s') name(s) in the space provided below. Please
be sure to sign and date Date this Proxy in the box below.
--------------------------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
2. Approval of the First Defiance Financial Corp.
Stock Option and Incentive Plan.
[ ] 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 PROPOSAL 1 AND "FOR" PROPOSAL 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.
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) ON THIS CARD. When signing as an
attorney, executor, administrator, trustee or guardian, please give full title.
If a corporation or partnership, write in the full corporate or partnership name
and have the President or other authorized officer sign. If shares are held
jointly, each holder should sign, but only one signature is required.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE INSTRUCTIONS
BELOW
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
VOTE BY TELEPHONE/INTERNET
QUICK o o o EASY o o o IMMEDIATE
Your telephone/internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
Please have this card handy when you call. You'll need it in front of you in
order to complete the voting process.
VOTE BY PHONE: You will be asked to enter the Control Number(look
below at right).
OPTION A: To vote as the Board of Directors recommends on ALL proposals,
press 1. Your vote will be confirmed.
OPTION B: If you choose to vote on each proposal separately, press 0.You
will hear these instructions:
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. To vote FOR ALL NOMINEES EXCEPT for
certain of the nominees, press 0 and listen to the
instructions.
Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0. When asked, you must confirm your vote by
pressing 1.
VOTE BY INTERNET: The web address is www.proxyvoting.com/fdef
You will be asked to enter the Control Number(look below at right).
If you vote by telephone or internet, DO NOT mail back your proxy.
THANK YOU FOR VOTING
FOR TELEPHONE/
Call o o o Toll Free o o o On a Touch Tone Telephone INTERNET VOTING:
1-877-210-0269 - ANYTIME CONTROL NUMBER
There is NO CHARGE to you for this call
TELEPHONE/INTERNET VOTING DEADLINE: 12 midnight-April 23, 2001