UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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the Registrant
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appropriate box:
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Preliminary
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12
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FIRST
DEFIANCE FINANCIAL CORP.
(Name of
Registrant as Specified in its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
Computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
to
be held
April
22, 2008
and
PROXY STATEMENT
601
Clinton Street
Defiance,
Ohio 43512
(419)
782-5015
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 22, 2008
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
Operations Center of its subsidiary First Federal Bank of the Midwest, located
at 25600 Elliott Road, Defiance, Ohio 43512, Tuesday, April 22, 2008 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)
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To
elect three (3) directors for three-year terms, and until their successors
are elected and qualified; and
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(2)
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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.
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The Board of Directors has fixed March
7, 2008 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.
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BY
ORDER OF THE BOARD OF DIRECTORS
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William
J. Small
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Chairman,
President and Chief Executive Officer
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Defiance,
Ohio
March 21,
2008
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
First
Defiance Financial Corp.
601
Clinton Street
Defiance,
Ohio 43512
2008
ANNUAL MEETING OF SHAREHOLDERS
April 22,
2008
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" or “the Company”).
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 Operations Center of First Federal Bank of the Midwest ("First
Federal") located at 25600 Elliott Road, Defiance, Ohio 43512, on Tuesday April
22, 2008 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,
2008.
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, 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 written notice of
revocation with the Secretary of First Defiance (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.
VOTING
RIGHTS
Only shareholders of record at the
close of business on March 7, 2008 ("Voting Record Date") are entitled to notice
of and to vote at the Annual Meeting. On the Voting Record Date, there were
7,070,669 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. Abstentions
are considered in determining the presence of a quorum.
Directors are elected by a plurality of
the votes cast with a quorum present. Abstentions will not affect the plurality
vote required for the election of directors. 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.
PROPOSAL
1
Election
of Directors
Composition
of the Board
The full Board consists of 11
directors. The Board has determined that John L. Bookmyer, Stephen L. Boomer,
Peter A. Diehl, John U. Fauster III, Thomas A. Voigt, Douglas A. Burgei, Dwain
I. Metzger, Gerald W. Monnin, and Samuel S. Strausbaugh are "independent" as set
forth in (a) section 10A(m)(3) of the Securities Exchange Act of 1934 (15 U.S.C.
78f(m)(3)), (b) Securities and Exchange Commission (SEC) Rule 10A-3(b) (17CFR
240.10A-3(b)), and (c) Rule 4200(a) of the National Association of Securities
Dealers, Inc. The Board is divided into three classes, with two of the classes
having four members and the third having three members. The directors in each
class serve a three-year term. The terms of each class expire at successive
annual meetings so that the stockholders elect one class of directors at each
annual meeting.
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The
current composition of the Board is:
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Directors
whose terms expire at this Annual Meeting
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Dr.
John U. Fauster III
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James
L. Rohrs
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Thomas
A. Voigt
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Directors
whose terms expire at 2009 Annual Meeting
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Douglas
A. Burgei
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Dwain
I. Metzger
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Gerald
W. Monnin
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Samuel
S. Strausbaugh
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Directors
whose terms expire at 2010 Annual Meeting
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John
L. Bookmyer
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Stephen
L. Boomer
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Peter
A. Diehl
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William
J. Small
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The election of three directors will
take place at the Annual Meeting. Mr. Rohrs and Mr. Voigt will be standing for
election. Dr. Fauster is unable to stand for election because he has reached the
board of directors’ mandatory retirement age. Jean A. Hubbard has been nominated
to fill that board seat. Ms. Hubbard also is "independent" as set forth in (a)
section 10A(m)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(m)(3)),
(b) Securities and Exchange Commission (SEC) Rule 10A-3(b) (17CFR 240.10A-3(b)),
and (c) Rule 4200(a) of the National Association of Securities Dealers,
Inc.
If elected, each of the three Director
nominees will serve on the Board until the annual meeting of shareholders in
2011, or until their successors are duly elected and qualified in accordance
with the Company’s Code of Regulations. If any of the three nominees should
become unable to accept election, the persons named on the proxy card as proxies
may vote for other person(s) selected by the Board of the named proxies.
Management has no reason to believe that any of the three nominees for election
named below will be unable to serve.
Your
Board Recommends That Shareholders
Vote
FOR All Three Nominees Listed Below.
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Nominees
For Election as Directors With Terms Expiring at the 2010 Annual
Meeting:
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Jean
A. Hubbard
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Age:
Director
Since:
Committees:
Principal
Occupation:
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50
N/A
N/A
Corporate
Treasurer and Business Manager
of
The Hubbard Company, Defiance, OH
since
2003; Senior Vice President and
Human
Resource Director, Rurban
Financial
Corp., 1990 to 2003
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James
L. Rohrs
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Age:
Director
Since:
Committees:
Principal
Occupation:
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60
2002
Member
of Executive Committee
Executive
Vice President of First Defiance
and
President and Chief Operating
Officer
of First Federal since August 1999
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Thomas
A. Voigt
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Age:
Director
Since:
Committees:
Principal
Occupation:
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65
1995
Chairman
of Long-Range Planning
Committee
and Member of Compensation
and
Corporate Governance Committees.
Member
of Executive Committee on a
rotating
basis.
Vice
President and General Manager of
Bryan
Publishing Company, Bryan, OH
since
1980
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Continuing
Directors With Terms Expiring at the 2009 Annual Meeting:
Douglas
A. Burgei
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Age:
Director
Since:
Committees:
Principal
Occupation:
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53
1995
Chairman
of Corporate Governance
Committee
and Member of Long-Range
Planning
Committee. Member of
Executive
Committee on a rotating basis.
Veterinarian
at Napoleon Veterinary
Clinic,
Napoleon OH since 1978;
Co-Owner
of PetVet / Pampered Pets
Bed
& Biscuit, Napoleon OH (since
2003)
and Ft. Wayne IN (since 2006).
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Dwain
I. Metzger
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Age:
Director
Since:
Committees:
Principal
Occupation:
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66
2005
Member
of Long-Range Planning and
Corporate
Governance Committees.
Member
of Executive Loan Committee
on
a rotating basis.
Self-Employed
Farmer since 1960
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Gerald
W. Monnin
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Age:
Director
Since:
Committees:
Principal
Occupation:
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69
1997
Member
of Compensation, Corporate
Governance
and Long-Range Planning
Committees.
Member of Executive
Committee
on a rotating basis.
Retired
Chairman of the Board and CEO of
Northwest
Controls, formerly of Defiance
OH
since 2004
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Samuel
S. Strausbaugh
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Age:
Director
Since:
Committees:
Principal
Occupation:
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44
2006
Member
of Audit Committee. Member of
Executive
Committee on a rotating basis.
Co-President
and CFO of Defiance Metal
Products,
Defiance OH since September
2006.
CFO of Defiance Metal Products
from
November 1998 to September 2006.
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Continuing
Directors With Terms Expiring at the 2010 Annual Meeting:
John
L. Bookmyer
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Age:
Director
Since:
Committees:
Principal
Occupation:
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43
2005
Chairman
of the Audit Committee, Member
of
Compensation Committee
President
of Blanchard Valley Regional
Health
Center and Executive Vice
President
and Chief Operating Officer and
Chief
Financial Officer of Blanchard Valley
Health
System, Findlay OH since 2001
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Stephen
L. Boomer
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Age:
Director
Since:
Committees:
Principal
Occupation:
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57
1994
Member
of Executive, Audit,
Compensation
and Corporate Governance
Committees.
Mr. Boomer also serves as
Lead
Independent Director
CEO
and President, Arps Dairy, Inc.,
Defiance,
OH since 1997
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Peter
A. Diehl
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Age:
Director
Since:
Committees:
Principal
Occupation:
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57
1998
Chairman
of Compensation Committee
and
Member of Audit and Long-Range
Planning
Committee. Member of
Executive
Committee on a rotating basis
Retired.
Formerly President and CEO of
Diehl,
Inc., Defiance OH from April
1996
to May 2006.
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William
J. Small
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Age:
Director
Since:
Committees:
Principal
Occupation:
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57
1998
Chairman
of Executive Committee
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.
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Board
Committees
The Board of Directors has five
standing committees: Audit Committee, Corporate Governance Committee,
Compensation Committee, Long-Range Planning Committee and Executive Committee.
In addition, all directors also serve as directors of First Federal and Messrs
Boomer, Rohrs, Small and Strausbaugh serve as directors of First Insurance and
Investments, a wholly-owned subsidiary of First Defiance. Also, Dr. Fauster (1),
Dr. Burgei and Mr. Strausbaugh serve on the Investment Committee at First
Federal and Mr. Small and Mr. Boomer serve as permanent members of First
Federal’s Trust Committee and Mr. Small, Mr. Rohrs and Mr. Boomer serve as
permanent members of First Federal’s Executive Loan Committee. All other
directors, except for Mr. Bookmyer, serve on First Federal’s Executive Loan
Committee and all other directors, except for Mr. Rohrs and Mr. Bookmyer, serve
on First Federal’s Trust Committees on a rotating basis.
Members of the individual standing
committees are named below:
Audit
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Corporate
Governance
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Compensation
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Long-Range
Planning
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Executive
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J.L.
Bookmyer*
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S.L.
Boomer
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J.L.
Bookmyer
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D.A.
Burgei
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S.L.
Boomer
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S.L.
Boomer
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D.A.
Burgei*
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S.L.
Boomer
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P.A.
Diehl
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D.A.
Burgei**
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P.A.
Diehl
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J.U.
Fauster III (1)
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P.A.
Diehl*
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J.U.
Fauster III (1)
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P.A.
Diehl**
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S.S.
Strausbaugh
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D.I.
Metzger
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G.W.
Monnin
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D.I.
Metzger
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J.U.
Fauster III (1)**
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G.W.
Monnin
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T.A.
Voigt
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G.W.
Monnin
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D.I.
Metzger**
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T.A.
Voigt
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T.A.
Voigt*
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G.W.
Monnin**
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J.L.
Rohrs
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W.J.
Small*
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S.S.
Strausbaugh**
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T.A.
Voigt**
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*
-- Chairperson
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**
-- Denotes Rotating Service
(1)
– Dr. Fauster will retire from the board effective with the 2008 annual
meeting
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The
Audit Committee
is responsible
for (i) the appointment of First Defiance’s independent registered public
accounting firm; (ii) review of the external audit plan and the results of the
auditing engagement; (iii) review of the internal audit plan and results of the
internal audits; (iv) review of reports issued by First Federal’s Compliance
Officer and (v) review of the effectiveness of First Defiance’s system of
internal control, including review of the process used by management to evaluate
the effectiveness of the system of internal control, and (vi) oversight of the
accounting and financial reporting practices of First Defiance. The Audit
Committee has adopted a written charter setting forth these responsibilities. A
copy of the Audit Committee Charter is posted under the Corporate Governance tab
of the Company’s website at
http://www.fdef.com
.
The specific link to the charter is:
http://www.snl.com/Cache/1001133143.PDF?FID=1001133143&O=PDF&T=&D=&IID=102284&Y=
.
The Board of Directors has
determined that Mr. Bookmyer and Mr. Strausbaugh are "Audit Committee financial
experts." The other members of the other Audit Committee, through their past or
current employment as chief executive officers, meet the Nasdaq standard for
financial sophistication. The Committee met five times in 2007.
The Audit
Committee Report is included on page 27 of this proxy statement.
The
Corporate Governance Committee
was established by the Board of Directors to ensure that the Board is
appropriately constituted and conducts its affairs in a manner that will best
serve the
interests
of First Defiance and its shareholders. Specific duties of the Committee include
administering First Defiance’s code of ethics/conflict of interest policy,
administering the process for evaluation of the Chairman and Chief Executive
Officer, monitoring the Board’s continuing education and self-assessment
process, nominating directors to the Board, and conducting an annual assessment
of the Board as a whole including assessment of Board composition and committee
assignments. The Corporate Governance Committee has adopted a written charter
setting forth the responsibilities of the committee. A copy of the Corporate
Governance Committee charter is posted under the Corporate Governance tab of the
Company’s website at
http://www.fdef.com
.
The specific link to the charter
is
http://www.snl.com/Cache/1500017104.PDF?FID=1500017104&O=PDF&T=&D=&IID=102284&Y
=
.
The committee met twice during 2007.
The Board does not have a separate
nominating committee as those functions are performed by the Corporate
Governance Committee and the Board as a whole. The Corporate Governance
committee considers the following criteria in proposing nominations for director
to the full Board: independence; high personal and professional ethics and
integrity; ability to devote sufficient time to fulfilling duties as a director;
impact on diversity of the Board, including skills and other factors relevant to
First Defiance’s business; overall experience in business, education, and other
factors relevant to First Defiance’s business. Shareholders of First Defiance
may also make nominations to the Board of Directors, provided that notice of
such nomination is given in writing to the Secretary of First Defiance not less
than 60 days prior to the anniversary date of the immediately preceding annual
meeting of shareholders. Such notice with respect to director nominations shall
set forth the name, age, business address and residence address (if available)
of the nominee and the number of shares of stock of First Defiance which are
beneficially owned by such nominee. Also, the shareholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporate Governance Committee. No such nominations were received from
shareholders for the 2008 election of directors.
The
Compensation Committee
is responsible for overseeing First Defiance’s compensation programs, including
base salaries, long-term incentive compensation, equity-based compensation and
perquisites and benefit plans. Further description of the Committee’s
responsibilities is set forth under the “Compensation Discussion and Analysis”
below. The Compensation Committee does not have a charter. The Committee also
makes recommendations to the full Board regarding Board of Directors’
compensation. The Committee met seven times in 2007.
The Compensation Committee Report is
included on page 16 of this proxy statement.
The
Executive Committee
generally
has the power and authority to act on behalf of the Board of Directors between
scheduled Board meetings unless specific Board 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 and Mr. Rohrs and Mr. Boomer serve
as permanent members. The remaining directors, with the exception of Mr.
Bookmyer, serve on the Committee on a rotating basis during the year. The
Executive Committee met two times during 2007. The members of the Executive
Committee also serve on the Executive Loan Committee of First Federal, which
meets each week.
Compensation
Committee Interlocks and Insider Participation
Mr. John L. Bookmyer, Mr. Stephen L.
Boomer, Mr. Peter A. Diehl, Mr. Gerald W. Monnin and Mr. Thomas A. Voigt served
on the Compensation Committee during 2007. There were no Compensation Committee
interlocks or insider (employee) participation during 2007.
Board
and Board Committee Meetings
Regular
meetings of the Board of Directors of First Defiance are held quarterly 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 held on a monthly basis and special meetings of the Board of Directors of
First Federal are held from time to time as needed. There were eight meetings of
the Board of Directors of First Defiance and 13 meetings of the Board of
Directors of First Federal held during 2006. 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 2007.
Neither
the Board nor the Corporate Governance Committee has implemented a formal policy
regarding director attendance at the Annual Meeting. Typically, the Board holds
its annual organizational meeting directly following the Annual Meeting, which
results in most directors attending the Annual Meeting. In 2007, all 11
directors attended the Annual Meeting.
Non-management
directors met in three executive sessions in 2007. Mr. Boomer, who has been
designated the lead director, presided over those meetings.
Director
Compensation
The following table provides
information concerning the compensation of directors for the fiscal year ended
December 31, 2007. Except as noted below, all directors are paid at the same
rate. The differences among directors in the table are a function of additional
compensation for chairing a committee, varying number of meetings attended and
corresponding payment of meeting fees.
Each non-employee director received
an annual retainer of $21,000 in 2007 with the exception of Mr. Boomer, the lead
director, who received a retainer of $24,500. In addition each non-employee
director received $400 for each Board meeting attended for either First Defiance
or First Federal Bank. Mr. Boomer and Mr. Strausbaugh are also directors of
First Insurance and Investments, and they receive $400 for each First Insurance
Board meeting attended. Non-employee directors also receive compensation for
each committee meeting attended as follows: Audit Committee -- $500 (chairman
$750); Compensation Committee -- $400 (chairman $600); Executive or First
Federal Bank Executive Loan Committee meetings -- $200; and other First Defiance
and First Federal Board committees -- $300 (chairman $400). Effective January
2008, committee chairs will receive annual retainers as follows: Audit Committee
-- $3,000; Compensation Committee -- $2,000; Corporate Governance Committee and
Long Range Planning Committee -- $1,000. Meeting fees for committee chairs in
2008 are the same as meeting fees for other committee members.
Directors may defer their retainer
and/or meeting fees payable to them under the First Defiance Deferred
Compensation Plan. The return on the amounts deferred is dependent on the
investment elections made by the director. The directors’ choices for election
include a number of mutual funds and a First Defiance stock account. Returns
under the plan are calculated to mirror these elections. Because these earnings
are denominated in First Defiance stock or the mutual fund equivalents, such
earnings are not considered to be preferential or above market and are not
reported in the table below. Also directors do not receive perquisites or
personal benefits that have an aggregate value that exceeds
$10,000.
2007
Director Compensation
Director
|
Fees
Earned
or
Paid in
Cash
($)
|
Option
Awards
($)(1)
|
Total
($)
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Bookmyer,
John L.
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$ 35,650
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$ 1,498
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$ 37,148
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Boomer,
Stephen L.
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$ 52,400
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−
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$ 52,400
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Burgei,
Douglas A.
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$ 35,000
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−
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$ 35,000
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Diehl,
Peter A.
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$ 42,000
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−
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$ 42,000
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Fauster,
John U. III
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$ 33,100
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−
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$ 33,100
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Metzger,
Dwain I.
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$ 34,100
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$ 1,498
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$ 35,598
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Monnin,
Gerald W.
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$ 34,400
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−
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$ 34,400
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Strausbaugh,
Samuel S.
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$ 38,400
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$ 1,498
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$ 39,898
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Voigt,
Thomas A.
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$ 37,700
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−
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$ 37,700
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(1)
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The
amounts in the option awards column reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year ended
December 31, 2007 in accordance with FAS 123(R). Assumptions used in the
calculation of this amount are included in footnote 20 to the Company’s
audited financial statements for the fiscal year ended December 31, 2007
included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 14, 2008. These options, which
have an exercise price of $27.41, vest 20% per year over the first five
years of their 10-year term.
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Communication
with Directors
The Board of Directors has adopted a
process by which shareholders may communicate with the directors. Any
shareholder wishing to do so may write to the Board of Directors at the
Company’s principal business address, 601 Clinton St., Defiance, OH 43512. Any
shareholder communication so addressed will be delivered unopened to the
director to whom it is addressed or to the Lead Director if addressed to the
Board of Directors.
Board’s
Role in Strategic Planning
The Board of Directors has the legal
responsibility for overseeing the affairs of the Company and, thus, an
obligation to keep informed about the Company’s business and strategies. This
involvement enables the Board to provide guidance to management in formulating
and developing plans and to exercise independently its decision-making authority
on matters of importance to the Company. Acting as a full Board and through the
Board’s standing committees (Audit Committee, Corporate Governance Committee,
Compensation Committee, Long-Range Planning Committee and Executive Committee),
the Board is fully involved in the Company’s strategic planning
process.
Each year, typically in September,
senior management and the Board hold an extended meeting to focus on corporate
strategy. This session involves presentations from management and input from the
Board regarding the assumptions, priorities and strategies that will form the
basis for management’s operating plan and strategy. At subsequent Board
meetings, the Board continues to review the Company’s progress against its
strategic plan and to exercise oversight and decision-making authority regarding
strategic areas of importance. The role the board plays is inextricably linked
to the development and review of the Company’s strategic plan. Through these
procedures, the Board, consistent with good corporate governance practices,
encourages the long-term success of the Company by exercising sound and
independent business judgment on the strategic issues that are important to the
Company’s business.
EXECUTIVE
OFFICERS
The Board
elects executive officers annually following the Annual Meeting of Shareholders
to serve until the meeting of the Board following the next annual meeting. The
following table sets forth the name of each executive officer as of December 31,
2007 and the principal position and offices he holds with First Defiance. These
officers have served as executive officers of First Defiance or its principal
subsidiary, First Federal, for at least five years.
Name
|
Information
about Executive Officers
|
William
J. Small
|
Chairman,
President and Chief Executive Officer of First Defiance
and
Chairman and Chief Executive Officer of First Federal
|
|
|
James
L. Rohrs
|
Executive
Vice President of First Defiance and President and
Chief
Operating Officer of First Federal
|
|
|
John
C. Wahl
|
Executive
Vice President and Chief Financial Officer of First
Defiance
and First Federal. Mr. Wahl also serves as a director
of
First Federal and First Insurance & Investments.
Mr.
Wahl is 47
|
|
|
Gregory
R. Allen
|
President
of First Federal’s Southern Market Area since
January
2006. Prior to his promotion to President of the Southern
Market
Area, Mr. Allen served as Executive Vice President and
Chief
Lending Officer of First Federal since 1998.
Mr.
Allen is 44
|
|
|
Jeffrey
D. Vereecke
|
President
of First Federal’s Northern Market Area since
January
2008. Prior to his promotion to President of the Northern
Market
Area, Mr. Vereecke served as Executive Vice President,
Retail
Banking. He has served First Federal in a number of
roles
since joining the Company in 1984. Mr. Vereecke is 46
|
|
|
Dennis
E. Rose, Jr.
|
Executive
Vice President of Operations for First Federal
since
2001. Mr. Rose joined First Federal in 1996 and served
as
Corporate Controller prior to his role in operations.
Mr.
Rose is 39
|
|
|
Rachel
L. Ulrich
|
Executive
Vice President of Human Resources of First Defiance
and
First Federal since 2005. Ms. Ulrich joined First Federal as
Director
of Human Resources in 1996. Ms. Ulrich, who is 42,
resigned
her position effective March 21, 2008.
|
|
|
COMPENSATION
DISCUSSION AND ANALYSIS
The following Compensation Discussion
and Analysis describes the material elements of compensation for the First
Defiance executive officers identified in the Summary Compensation Table ("Named
Executive Officers"). The Compensation Committee of the Board (the "Committee")
has responsibility for establishing, implementing and monitoring adherence to
First Defiance’s compensation philosophy.
Compensation
Philosophy and Objectives
The Committee believes the most
effective executive compensation program is one that rewards the achievement of
specific annual, long-term and strategic goals which are established in
conjunction with on-going strategic planning initiatives and the long-term
objective of maximizing shareholder value. The Committee evaluates compensation
provided to key employees to ensure that it remains competitive relative to the
compensation paid to similarly situated executives of peer companies to maintain
the ability to attract and retain qualified employees in key positions. The
Committee believes executive compensation packages provided to the Named
Executive Officers should include both cash and stock-based compensation that
reward performance as measured against predetermined goals.
Roles
of the Committee and Chief Executive Officer in Compensation
Decisions
The Committee makes all compensation
decisions for the Chief Executive Officer and approves all compensation for the
other Named Executive Officers utilizing recommendations made by the Chief
Executive Officer. The Committee also approves all stock-based awards made to
employees. Decisions regarding non-equity compensation of employees who are not
Named Executive Officers are made by the Chief Executive Officer.
2007
Executive Compensation Components
For the
fiscal year ended December 31, 2007, the principal components of compensation
for Named Executive Officers were:
·
Base
salary;
·
Performance-based
incentive compensation;
·
Equity
compensation;
·
Retirement
and other benefits; and
·
Perquisites
and other personal benefits.
Base
Salary
First
Defiance provides Named Executive Officers and other employees with a base
salary to compensate them for services rendered during the fiscal year. The base
salary for each of the Named Executive Officers is generally determined at the
beginning of the year.
The
2007 base salary for the Chief Executive Officer was set in January 2007. In
June 2006, the Committee engaged Mercer Human Resource Consulting ("Mercer"), an
independent global human resource consulting firm, to conduct a review of its
compensation program for the Chief Executive Officer. Mercer provided the
Committee with relevant market data and alternatives to consider when making
compensation decisions for the Chief Executive Officer.
In making compensation decisions for
the Chief Executive Officer, the Committee compared each element of compensation
against a peer group of publicly-traded banks located primarily in the Midwest
or adjacent states with assets ranging between $750 million to $2.7 billion
(collectively, the "Compensation Peer Group"). The Compensation Peer Group
utilized in 2006 consists of the following companies, which the Committee
believes engage in similar lines of business:
·
First
Place Financial Corp, Warren, OH
|
·
Mercantile Bank Corp., Grand Rapids, MI
|
·
Firstbank
Corp., Alma, MI
|
·
Oak Hill Financial, Inc., Jackson, OH
|
·
German
American Bancorp, Inc. Jasper, IN
|
·
Ohio Valley Banc Corp., Gallipolis, OH
|
·
Horizon
Bancorp, Inc., Michigan City, IN
|
·
Old Second Bancorp, Inc., Aurora, IL
|
·
Integra
Bank Corp., Evansville, IN
|
·
Peoples Bancorp Inc., Marietta, OH
|
·
Lakeland
Financial Corp., Warsaw, IN
|
·
Pinnacle Financial Partners, Inc., Nashville, TN
|
·
LNB
Bancorp Inc., Lorain, OH
|
·
Princeton National Bancorp, Inc., Princeton, IL
|
·
Macatawa
Bank Corp., Holland, MI
|
·
QCR Holdings, Inc., Moline, IL
|
·
MBT
Financial Corp., Monroe, MI
|
·
S Y Bancorp, Inc., Louisville,
KY
|
For
comparison purposes, First Defiance’s asset size was comparable to the median
asset size of the Compensation Peer Group and its net income for 2005, excluding
one-time acquisition related charges, is also comparable to the median net
income level of the Compensation Peer Group. First Defiance’s market value as of
March 2006 of $187 million was less than the median market value of the
Compensation Peer Group of $275 million, but more than the 25th percentile of
market value of the Compensation Peer Group of $128 million.
In
September 2006, as a result of the compensation review completed by Mercer which
stated that the Chief Executive Officer’s base salary lagged the median base
salary of the Compensation Peer Group by what was deemed an unacceptable amount,
the Committee raised the base salary of the Chief Executive Officer from
$253,050 to $265,650. When the committee adjusted the base salary of the Chief
Executive Officer in 2006, it was with the understanding that increases to reach
the median base salary of the Compensation Peer Group would be made over a
period of several years. Effective January 1, 2007, the Compensation Committee
increased the base salary of the Chief Executive Officer by 5% to
$278,930.
Base
salaries for Named Executive Officers other than the Chief Executive Officer are
determined based upon recommendations made by the Chief Executive Officer. While
First Defiance has no defined guidelines, the Chief Executive Officer generally
compares the base salary levels of the Named Executive Officers with the median
levels of public companies of similar asset size and geographic location to
First Defiance. Salary information provided in the America’s Community Bankers
Compensation and Benefits Survey, the Ohio Bankers’ League Compensation and
Benefits Survey and the SNL Bank and Thrift Director Compensation Review were
utilized for setting 2007 salaries. General market conditions in the First
Defiance market area, experience and performance levels of the Named Executive
Officer and the guidelines for percentage increases that the Board establishes
overall for all employees of First Defiance were also considered.
In 2007,
the Compensation Committee engaged Findley Davies, Inc., an independent regional
human resources firm, to perform an analysis of Executive and Director
Compensation. Following the completion of their study, base salaries for the
Chief Executive Officer and the other named executive officers were established
for 2008. The Compensation Committee has reviewed Findlay Davies’
recommendations for changes to the incentive compensation structure but has not
yet finalized the incentive compensation plans for the named executive officers
for 2008.
Performance-Based
Incentive Compensation
The Board
believes that a significant amount of Named Executive Officer compensation
should be performance based. Named Executive Officers have an opportunity to
earn cash bonuses based on the achievement of performance targets that are
established at the beginning of each year by the Committee. The 2007 target
bonus component for each of the Named Executive Officers was as
follows:
Named
Executive Officer
|
Bonus
Potential
at
Target
(%
of Base Salary)
|
Bonus
Potential
at
Target
($)
|
William
J. Small
|
45%
|
$125,519
|
John
C. Wahl
|
35%
|
$56,490
|
James
L. Rohrs
|
35%
|
$64,610
|
Gregory
R. Allen
|
35%
|
$52,535
|
Jeffrey
D. Vereecke
|
30%
|
$34,530
|
The 2007
First Defiance performance targets and related payout percentages of the bonus
potential are described below. Each of the four established targets is weighted
as a percent of the total payout:
Bonus
Formula Component
|
Threshold
(50%
Payout)
|
Target
(100%
Payout)
|
Maximum
(150%
Payout)
|
Earnings
Per Share (50% weighting)
|
$2.07
|
$2.18
|
$2.44
|
Revenue
Growth
1
(20% weighting)
|
3.5%
|
6.0%
|
11.0%
|
Return
on Average Equity (20% weighting)
|
9.0%
|
10.0%
|
12.0%
|
Return
on Average Assets (10% weighting)
|
0.88%
|
1.00%
|
1.25%
|
1 –
Revenue growth is determined based on net interest income after provision
for loan losses plus non-interest
income.
|
When the Threshold performance level is
not achieved, the payout percentage for that component of the bonus calculation
is zero. If the performance level for a component is between the Threshold and
Target or between the Target and the Maximum amount, the payout percentage is
prorated. For 2007, the overall total bonus payout percentage was determined as
follows:
Bonus
Component
|
Actual
Result
|
Payout
Percentage
Achieved
|
Weighting
%
|
Computed
Factor
|
Earnings
Per Share
|
$1.94
|
-0-
|
x 50%
|
= -0-
|
Revenue
Growth
|
2.39%
|
-0-
|
x 20%
|
= -0-
|
Return
on Average Equity
|
8.48%
|
-0-
|
x 20%
|
= -0-
|
Return
on Average Assets
|
0.90%
|
60.0%
|
x 10%
|
= 6.0%
|
|
Total
Bonus Payout
Percentage
|
6.0%
|
The resulting total bonus payout
percentage is then multiplied by the respective bonus potential for each Named
Executive Officer to determine his bonus. The Committee retains the discretion
to adjust the bonus for the Named Executive Officers based on a number of
factors, including achievement of individual objectives and other factors as
determined by the Committee. For 2007, the Committee recognized that incentive
targets were not met in part, because of a number of factors outside of
management’s control including both the national and local economy. In response,
the committee approved the allocation of a total of $100,000 of discretionary
bonuses to be allocated among Senior and Executive Vice Presidents of First
Federal. Mr. Small, Mr. Wahl and Mr. Rohrs were not included in that allocation.
The discretionary pool was allocated based on the officer’s base compensation
relative to the base compensation of all senior officers eligible for the
payout.
The
2007 bonus payouts were as follows:
Named
Executive
Officer
|
Target
Bonus
Potential
($)
|
Computed
Bonus
Payout
(%)
|
Computed
Bonus
Amount
($)
|
Discretionary
Payment
|
Total
Bonus
Payout
|
William
J. Small
|
$125,519
|
X
|
6.0%
|
=
|
$7,531
|
$
-0-
|
$
7,531
|
John
C. Wahl
|
$
56,490
|
X
|
6.0%
|
=
|
$3,389
|
$
-0-
|
$
3,389
|
James
L. Rohrs
|
$
64,610
|
X
|
6.0%
|
=
|
$3,877
|
$
-0-
|
$
3,877
|
Gregory
R. Allen
|
$
52,535
|
X
|
6.0%
|
=
|
$3,152
|
$15,932
|
$19,084
|
Jeffrey
D. Vereecke
|
$
34,530
|
X
|
6.0%
|
=
|
$2,072
|
$10,472
|
$12,544
|
Equity
Based Compensation
First Defiance utilizes stock options
to link shareholder value and long-term executive incentive compensation and to
provide an opportunity for increased equity ownership by executives. Significant
levels of stock options were granted to the Named Executive Officers at the time
they were named to their current positions. Since then, the Committee has not
granted Named Executive Officers a substantially higher level of stock option
awards than are awarded to other officers of First Defiance. Generally, all of
the Named Executive Officers are awarded option grants of 1,000 options on an
annual basis.
Stock option awards are typically
granted annually at the April board meeting. Options are awarded at the Nasdaq
Global Market closing price of First Defiance’s common stock on the date of the
grant. Stock options granted to First Defiance employees have never been dated
on any date other than the grant date.
Options granted under First Defiance’s
stock option plans vest at a rate of 20% per year over the first five years of
the ten-year option term. Vesting and exercise rights cease upon termination of
employment except in the case of death, disability or retirement. Prior to the
exercise of the option, the holder has no rights as a shareholder with respect
to the shares subject to such option, including voting rights and the right to
receive dividends.
Retirement
and Other Benefits
All employees of First Defiance,
including the Named Executive Officers, are eligible to participate in the First
Defiance Financial Corp. 401(k) Employee Savings Plan (the "Savings Plan") and
the First Defiance Employee Stock Ownership Plan (the "ESOP").
The Savings Plan is a tax-qualified
retirement savings plan pursuant to which all employees are able to contribute
up to the limit prescribed by the Internal Revenue Service to the Savings Plan
on a before-tax basis. First Defiance matches 50% of the first 6% of pay that is
contributed to the Savings Plan. All employee contributions to the Savings Plan
are fully vested upon contribution and First Defiance’s matching contribution is
vested upon completion of a minimum service requirement.
The ESOP is a tax qualified plan under
which shares of First Defiance common stock are allocated annually to
participant accounts based on the participant’s compensation relative to
compensation of all active participants in the Plan. The compensation of
participants, including the Named Executive Officers, is limited to the Internal
Revenue Service mandated maximum of $225,000 in 2007 for purposes of calculating
the annual allocation of shares. Shares allocated to participant accounts are
fully vested when the participant has completed three years of service.
Participants in the ESOP hold full voting privileges for shares allocated to
their account. Additional shares are allocated to participant accounts in lieu
of dividends earned on allocated shares.
The Named Executive Officers are
entitled to participate in the First Defiance Deferred Compensation Plan.
Pursuant to this plan, Named Executive Officers can defer up to 80% of their
base salary and up to 100% of bonus payments. The First Defiance Deferred
Compensation Plan is discussed in further detail under the heading "Nonqualified
Deferred Compensation" on page 20.
Perquisites
and Other Personal Benefits
First Defiance provides Named Executive
Officers with perquisites and other personal benefits that the Company and the
Committee believe are reasonable and consistent with its overall compensation
program to better enable the Company to attract and retain employees for key
positions. The Committee periodically reviews the levels of perquisites and
other personal benefits provided to Named Executive Officers.
In 2007, each of the Named Executive
Officers was provided with either the use of company automobile or a $600
monthly automobile allowance. The Committee determined that the practice of
providing company automobiles would be discontinued for all employees, including
the Named Executive Officers, and replaced with a monthly automobile allowance
unless the employee drives more than 15,000 business miles in a year. The
automobiles were phased out as existing leases expired in 2007. Employees who
drive more than 15,000 business miles in a year will retain a company owned
automobile in lieu of an automobile allowance. Each Named Executive Officer also
is entitled to receive a country club membership. Mr. Vereecke opted not to
receive a country club membership in 2007. Named Executive officers are also
entitled, upon relocation, to receive reimbursement for certain reasonable
expenses associated with the costs of such relocation. There were no relocations
of executive officers in 2007.
Each
Named Executive Officer is entitled to receive life insurance proceeds equal to
two times the executive’s base salary, provided that the executive is employed
by the Company at the time of his death. Approximately one half of such coverage
(i.e., one times base salary) is provided as part of the Company’s group life
insurance program that is offered to all full-time employees, and the balance is
provided as an inducement for employees to consent to allowing the Company to
insure them under their Bank Owned Life Insurance program.
The value
of these perquisites is included in column (i) of the "Summary Compensation
Table" on page 17.
The
Company has entered into Employment Agreements with certain key employees,
including the Named Executive Officers. The employment agreements include
provisions for severance payments upon a change of control and are designed to
promote stability and continuity of senior management. Information regarding
applicable payments under such agreements for the named executive officers is
provided under the heading "Potential Payments Upon Termination or Change in
Control" beginning on page 21.
Tax
and Accounting Implications
Nonqualified
Deferred Compensation
On October 22, 2004, The American Jobs
Creation Act of 2004 was signed into law, changing the tax rules applicable to
nonqualified deferred compensation arrangements. While the final regulations
have not become effective yet, the Company believes it is operating in good
faith compliance with the statutory provisions which were effective January 1,
2005. A more detailed discussion of the Company’s
nonqualified
deferred compensation arrangements is provided on page 20 under the heading
"Nonqualified Deferred Compensation."
Accounting
for Stock-Based Compensation
Beginning on January 1, 2006, the
Company began accounting for its stock option plans in accordance with the
requirements of FASB Statement No. 123(R)
Share-Based
Payment.
COMPENSATION
COMMITTEE REPORT
The First Defiance Compensation
Committee has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management and, based on such
review and discussions, the Compensation Committee recommended to the Board that
the Compensation Discussion and Analysis be included in this Proxy
Statement.
|
THE
COMPENSATION COMMITTEE
|
|
Peter
Diehl, Chairman
|
|
John
Bookmyer
|
|
Stephen
Boomer
|
|
Gerald
W. Monnin
|
|
Thomas
A. Voigt
|
Summary
Compensation Table
The table below summarizes the total
compensation paid or earned by each of the Named Executive Officers for the
fiscal years ended December 31, 2007 and 2006. The Named Executive Officers are
the Company’s Chief Executive Officer, Chief Financial Officer, and three other
most highly compensated executive officers.
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(i)
|
(j)
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive
Plan
Compen-
sation
($)(3)
|
All
Other
Compen-
sation
($)(4)
|
Total
($)
|
William
J. Small
Chairman of
the Board
&
Chief Executive Officer
|
2007
2006
|
$ 278,932
257,250
|
−
−
|
−
−
|
$ 5,377
4,160
|
$
7,531
113,818
|
$ 25,858
31,257
|
$ 317,698
406,485
|
|
|
|
|
|
|
|
|
|
John
C. Wahl
Executive
Vice President
&
Chief Financial Officer
|
2007
2006
|
$ 161,400
155,900
|
−
−
|
−
−
|
$ 10,193
8,976
|
$ 3,389
53,648
|
$ 28,467
28,144
|
$ 203,449
246,668
|
|
|
|
|
|
|
|
|
|
James
L. Rohrs
Executive
Vice President
&
President of First
Federal
Bank
|
2007
2006
|
$ 184,600
178,350
|
−
−
|
−
$17,427
|
$ 10,193
26,281
|
$
3,877
61,374
|
$ 25,565
35,378
|
$ 224,235
318,810
|
|
|
|
|
|
|
|
|
|
Gregory
R. Allen
First
Federal Bank
President
of Southern
Market
Area
|
2007
2006
|
$ 150,100
145,000
|
$ 15,932
−
|
−
−
|
$ 21,647
32,942
|
$
3,152
49,897
|
$ 23,286
44,020
|
$ 214,117
271,859
|
|
|
|
|
|
|
|
|
|
Jeffrey
D. Vereecke
First
Federal Bank
Executive
Vice President
Retail
|
2007
|
$ 115,100
|
$ 10,472
|
−
|
$
6,505
|
$
2,072
|
$ 14,403
|
$ 148,552
|
|
(1)
|
The
amount in column (e) reflects amounts for grants made in 2001 to the
extent the vesting period for such grant fell in
2006.
|
|
(2)
|
The
amounts in column (f) reflect the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2007
and 2006, in accordance with FAS 123(R) of awards pursuant to the Stock
Option Plans and thus include amounts from awards granted in and prior to
2007 and 2006. Assumptions used in the calculation of this amount are
included in footnote 20 to the Company’s audited financial statements for
the fiscal year ended December 31, 2007 included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
March 14, 2008.
|
|
(3)
|
The
amounts in column (g) reflect the cash awards to the named individuals
under the Company’s Performance Based Incentive Compensation Plan which is
discussed in further detail on page 13 under the heading “Performance
Based Incentive Compensation”.
|
|
(4)
|
The
amount shown as “All Other Compensation” includes the following
perquisites and personal benefits:
|
Name
|
Club
Membership
|
Automobile
Allowance
or
Personal
Use
of
Company
Automobile
|
401(k)
Match
|
ESOP
Allocation
|
Value
of
Life
Insurance
|
Employee
Stock
Purchase
Plan
Match
(a)
|
William
J. Small
|
$ 4,963
|
$ 2,129
|
$ 6,750
|
$ 9,112
|
$ 1,104
|
$ 1,800
|
John
C. Wahl
|
$ 4,963
|
$ 5,845
|
$ 6,750
|
$ 8,782
|
$
326
|
$ 1,800
|
James
L. Rohrs
|
$ 4,963
|
$ 1,640
|
$ 6,750
|
$ 9,112
|
$ 1,300
|
$ 1,800
|
Gregory
R. Allen
|
$ 4,702
|
$ 2,348
|
$ 6,048
|
$ 8,164
|
$
224
|
$ 1,800
|
Jeffrey
D. Vereecke
|
$ -0-
|
$ 4,663
|
$ 3,453
|
$ 5,977
|
$
310
|
$
-0-
|
2007
Grants of Plan-Based Awards
The following table provides
information on stock options granted in 2007 to each of the Named Executive
Officers. There is no assurance that the grant date fair value of option awards
will ever be realized. The amount included in the column labeled “Grant Date
Fair Value of Stock and Option Awards” is the aggregate FAS 123(R) value of all
awards made in 2007. In contrast, the Summary Compensation Table includes only
the portion of that value that was expensed in 2007.
|
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards
|
All
Other
Option
|
|
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($
/ sh)
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)
|
|
|
|
|
|
|
William
J. Small
|
4/16/07
|
$62,759
|
$125,519
|
$188,279
|
1,000
|
$27.41
|
$ 5,330
|
John
C. Wahl
|
4/16/07
|
$28,245
|
$
56,490
|
$
84,735
|
1,000
|
$27.41
|
$ 5,330
|
James
L. Rohrs
|
4/16/07
|
$32,305
|
$
64,610
|
$
96,915
|
1,000
|
$27.41
|
$ 5,330
|
Gregory
R. Allen
|
4/16/07
|
$26,267
|
$
52,535
|
$
78,803
|
1,000
|
$27.41
|
$ 5,330
|
Jeffrey
D. Vereecke
|
4/16/07
|
$17,265
|
$
34,530
|
$
51,795
|
1,000
|
$27.41
|
$ 5,330
|
Outstanding
Equity Awards at Fiscal Year-End 2007
The following table provides
information concerning unexercised options for each Named Executive Officer
outstanding as of the end of the most recently completed fiscal year. Each
outstanding award is represented by a separate row which indicates the number of
securities underlying the award. The table also discloses the exercise price and
the expiration date.
|
Option
Awards
|
Name
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of Securities
Underlying
Unexercised
Options
(1)
(#)
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
William
J. Small
|
800
|
200
|
$ 19.53
|
04/20/2013
|
|
600
|
400
|
$ 27.13
|
04/18/2014
|
|
400
|
600
|
$ 25.89
|
04/18/2015
|
|
200
|
800
|
$ 26.47
|
05/21/2016
|
|
−
|
1,000
|
$ 27.41
|
04/16/2017
|
|
|
|
|
|
John
C. Wahl
|
4,000
|
1,000
|
$ 19.53
|
04/20/2013
|
|
600
|
400
|
$ 27.13
|
04/18/2014
|
|
800
|
1,200
|
$ 25.89
|
04/18/2015
|
|
200
|
800
|
$ 26.47
|
05/21/2016
|
|
−
|
1,000
|
$ 27.41
|
04/16/2017
|
|
|
|
|
|
James
L. Rohrs
|
25,000
|
−
|
$ 11.56
|
08/29/2009
|
|
600
|
−
|
$ 10.52
|
12/17/2010
|
|
40,000
|
−
|
$ 14.00
|
09/16/2011
|
|
4,000
|
1,000
|
$ 19.53
|
04/20/2013
|
|
600
|
400
|
$ 27.13
|
04/18/2014
|
|
800
|
1,200
|
$ 25.89
|
04/18/2015
|
|
200
|
800
|
$ 26.47
|
05/21/2016
|
|
−
|
1,000
|
$ 27.41
|
04/16/2017
|
|
|
|
|
|
Gregory
R. Allen
|
11,700
|
−
|
$ 14.00
|
09/16/2011
|
|
4,000
|
1,000
|
$ 19.56
|
01/19/2013
|
|
4,000
|
1,000
|
$ 19.53
|
04/20/2013
|
|
3,000
|
2,000
|
$ 27.13
|
04/18/2014
|
|
800
|
1,200
|
$ 25.89
|
04/18/2015
|
|
400
|
1,600
|
$ 26.47
|
05/21/2016
|
|
−
|
1,000
|
$ 27.41
|
04/16/2017
|
|
|
|
|
|
Jeffrey
D. Vereecke
|
25,000
|
−
|
$ 15.50
|
04/18/2008
|
|
800
|
200
|
$ 19.53
|
04/20/2013
|
|
600
|
400
|
$ 27.13
|
04/18/2014
|
|
800
|
1,200
|
$ 25.89
|
04/18/2015
|
|
200
|
800
|
$ 26.47
|
05/21/2016
|
|
−
|
1,000
|
$ 27.41
|
04/16/2017
|
(1)
|
All
options listed above vest at a rate of 20% per year over the first five
years of the ten-year option term.
|
Option
Exercises and Stock Vested In 2007
The following table provides
information concerning exercises of stock options and vesting of stock awards
during the most recently completed fiscal year for each of the Named Executive
Officers on an aggregated basis. The table reports the number of securities for
which the options were exercised; the aggregate dollar value realized upon
exercise of options. The value realized upon vesting of stock awards does not
include accrued dividends and interest, which is included in "All Other
Compensation" in the Summary Compensation Table.
|
Option
Awards
|
Name
|
Number
of Shares
Acquired on Exercise
(#)
|
Value
Realized on
Exercise
($)
|
William
J. Small
|
−
|
$
−
|
John
C. Wahl
|
10,000
|
$ 144,100
|
James
L. Rohrs
|
−
|
$
−
|
Gregory
R. Allen
|
−
|
$ −
|
Jeffrey
D. Vereecke
|
−
|
$
−
|
Nonqualified
Deferred Compensation
Pursuant to the First Defiance Deferred
Compensation Plan, certain executives, including Named Executive Officers, as
well as the directors of First Defiance Financial Corp. may defer receipt of up
to 80% of their base compensation and up to 100% of non-equity incentive plan
compensation and, in the case of directors up to 100% of directors fees.
Deferral elections are made by eligible executives or directors in December of
each year for amounts to be earned in the following year.
Amounts deferred in the First Defiance
Deferred Compensation Plan may be invested in any funds available under the
Plan. The table below shows the funds available under the Plan and their annual
rate of return for the calendar year ended December 31, 2007, as reported by the
administrator of the Plan.
Name
of Fund
|
Rate
of Return
|
Name
of Fund
|
Rate
of Return
|
MainStay
VP Cash Management
|
4.84%
|
MainStay
VP Midcap Core
|
5.03%
|
T.
Rowe Limited Term Bond
|
5.49%
|
Royce
Small Cap
|
(2.14%)
|
Fidelity
VIP Investment Grade Bond: IC
|
4.35%
|
Royce
Micro Cap
|
3.98%
|
PIMCO
VIT Total Return: AC
|
8.76%
|
MainStay
VP International Equity
|
4.93%
|
American
Century VP Value: CI 2
|
(5.29%)
|
UIF
U.S. Real Estate
|
(17.07%)
|
Fidelity
VIP Contrafund: IC
|
17.59%
|
Fidelity
VIP Freedom Lifestyle Fund 2020
|
10.23%
|
Janus
AS Forty: IS
|
36.99%
|
Fidelity
VIP Freedom Lifestyle Fund 2030
|
11.37%
|
Benefits under the First Defiance
Deferred Compensation Plan are generally paid beginning the year following the
executive’s retirement or termination. However, the Plan does have provisions
for scheduled "in-service" distributions from the plan and it also allows for
hardship withdrawals upon the approval of the Compensation Committee. Retirement
benefits are paid either in a lump sum or in scheduled installment payments when
the executive’s termination is considered a retirement. All other distributions
are made in lump sum payments.
The following table provides
information with respect to the Named Executive Officers participation in the
First Defiance Deferred Compensation Plan. All contributions to the First
Defiance Deferred Compensation plan are made by the executives participating in
the Plan. There are no contributions by First Defiance and none of the Named
Executive Officers received a withdrawal or distribution under the
Plan.
Name
|
Executive
Contributions
in Last
Fiscal
Year
($)
|
Aggregate
Earnings
in
Last Fiscal Year
($)
|
Aggregate
Balance at
Last
Fiscal Year End
($)
|
William
J. Small
|
$ 15,000
|
$ 16,737
|
$ 215,371
|
John
C. Wahl
|
$ 21,544
|
$ 11,932
|
$ 127,782
|
James
L. Rohrs
|
$
-0-
|
$ 14,604
|
$ 118,473
|
Gregory
R. Allen
|
$ 13,000
|
$ 17,178
|
$ 122,967
|
Jeffrey
D. Vereecke
|
$ -0-
|
$
-0-
|
$
-0-
|
Potential
Payments Upon Termination or Change in Control
The table below summarizes the
estimated payments to be made under each contract, agreement, plan or
arrangement which provides for payments to a Named Executive Officer at,
following, or in connection with any termination or employment including by
resignation, severance, retirement, disability or a constructive termination; by
a change of control of the Company, or by a change in the Named Executive
Officer’s responsibilities (that may not result in a termination of
employment).
The amounts shown assume that such
termination was effective as of December 31, 2007, and thus include amounts
earned through such time and are estimates of the amounts which would be paid
out to the executives upon their termination. The actual amounts to be paid out
can only be determined at the time of such executive’s separation from the
Company.
Payments
Made Upon Termination
Regardless of the manner in which a
Named Executive Officer’s employment terminates, the executive is entitled to
receive amounts earned during the term of employment. Such amounts
include:
|
·
|
non-equity
incentive compensation earned during the fiscal
year;
|
|
·
|
amounts
contributed under the First Defiance Deferred Compensation
Plan;
|
|
·
|
unused
vacation pay; and
|
|
·
|
amounts
accrued and vested through the Company’s 401(k)
Plan
|
Payments
Made Upon Retirement
In the event of retirement of a Named
Executive Officer, in addition to the items identified above, the executive will
be entitled to the following:
|
·
|
vesting
of all outstanding unvested stock
options;
|
|
·
|
a
prorated share of the annual allocation of benefits under the First
Defiance Employee Stock Ownership Plan;
and
|
|
·
|
executives
who meet minimum age and years of service requirements are entitled to
continue to participate in the Company’s health and welfare benefits.
These benefits are the same as retiree medical benefits offered to all
employees of First Defiance and are more fully described in Note 16 to the
Financial Statements
|
Payments
Made Upon Death or Disability
In the event of the death or disability
of a Named Executive Officer, in addition to the benefits listed under the
headings "Payments Made upon Termination" and "Payments Made Upon Retirement"
above, the Named Executive Officer will receive benefits under the Company’s
disability plan or payments under the Company’s life insurance plans, as
appropriate.
Payments
Made Upon Change of Control
Each Named Executive Officer has
entered into an employment agreement with First Defiance and First Federal, the
terms of which are similar for Messrs Small, Wahl, Rohrs and Allen. Pursuant to
their agreements, if the executive’s employment is terminated following a change
of control (other than termination by the Company for cause or by reason of
death or disability) or if the executive terminates his employment in certain
circumstances defined in the employment agreements which constitute "good
reason", in addition to the benefits listed under the heading "Payments Made
Upon Termination" the Named Executive Officer will receive a lump sum severance
payment of 2.99 times the employee’s average annual compensation for the five
most recent taxable years ending during the calendar year in which the Notice of
Termination occurs. Under the agreements, compensation is defined as base salary
plus non-equity incentive bonus.
Further,
all unvested stock options held by Messrs Small, Wahl, Rohrs and Allen will
automatically vest and become exercisable in the event of a change in control.
Such unvested options do not vest in the event of termination for reasons other
than retirement, death or disability, even if such termination is for "good
reason."
Mr.
Vereecke has entered into a Change of Control and Non-Compute Agreement. Under
the terms of his agreement, in the event his employment is terminated within six
months prior to a change of control or within one year after a change of
control, Mr. Vereecke is entitled to receive an amount equal to his annual
salary most recently set prior to the occurrence of the change in
control.
The
employment agreements entered into with Mr. Small, Mr. Rohrs, Mr. Wahl, and Mr.
Allen were filed as exhibits 10.1, 10.2, 10.3, and 10.4 respectively to Form 8-K
filed with the Securities and Exchange Commission on October 1,
2007.
Generally,
pursuant to the agreements, a change of control has the meaning set forth in
Section 409(A)(a)(2)(A)(v) of the Internal Revenue Code of 1986, as
amended.
Executive
Benefits and Payments upon Termination
|
Voluntary
Termination
|
For
Cause
Termination
|
Involuntary
Not
for
Cause
Or
Voluntary
Good
Reason
Termination
|
Involuntary
Change
of
Control
Termination
(CIC)
|
Death
|
Disability
|
William
J. Small
|
|
|
|
|
|
|
Severance
|
$ −
|
$ −
|
$1,008,101
|
$1,008,101
|
$
−
|
$ −
|
Accelerated Vesting of
stock options
|
$ −
|
$ −
|
$
−
|
$
498
|
$
498
|
$ 498
|
John
C. Wahl
|
|
|
|
|
|
|
Severance
|
$ −
|
$ −
|
$ 576,692
|
$
576,692
|
$
−
|
$ −
|
Accelerated Vesting of
stock options
|
$ −
|
$ −
|
$
−
|
$
2,490
|
$2,490
|
$ 2,490
|
James
L. Rohrs
|
|
|
|
|
|
|
Severance
|
$ −
|
$ −
|
$ 661,379
|
$
661,379
|
$
−
|
$ −
|
Accelerated Vesting of
stock options
|
$ −
|
$ −
|
$
−
|
$
2,490
|
$2,490
|
$ 2,490
|
Gregory
R. Allen
|
|
|
|
|
|
|
Severance
|
$ −
|
$ −
|
$ 521,674
|
$
521,674
|
$
−
|
$ −
|
Accelerated Vesting of
stock options
|
$ −
|
$ −
|
$
−
|
$
4,950
|
$4,950
|
$ 4,950
|
Jeffrey
D. Vereecke
|
|
|
|
|
|
|
Severance
|
$ −
|
$ −
|
$
−
|
$
115,100
|
$ −
|
$ −
|
Accelerated Vesting of
stock options
|
$ −
|
$ −
|
$
−
|
$
498
|
$
498
|
$ 498
|
|
|
|
|
|
|
|
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 persons 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 executive officers of First
Defiance as a group.
|
Common
Stock
|
Name
of Beneficial Owner
|
Shares
Owned
|
Right
to Acquire
Beneficial
Ownership
Under
Options
Exercisable
Within
60 Days
|
Percent
of
Class
(a)
|
Phantom
Stock
Units
(b)
|
First
Defiance Financial Corp.
Employee
Stock Ownership Plan
|
550,027
|
(c)
|
|
7.78%
|
|
Private
Capital Management
|
674,144
|
(d)
|
|
9.53%
|
|
Dimensional
Fund Advisors, Inc.
|
552,786
|
(e)
|
|
7.82%
|
|
John
L. Bookmyer
|
1,061
|
|
400
|
−
|
3,065
|
Stephen
L. Boomer
|
13,514
|
(f)
|
|
−
|
|
Dr.
Douglas A. Burgei
|
18,993
|
(f)
|
|
−
|
|
Peter
A. Diehl
|
12,202
|
|
|
−
|
|
Dr.
John U. Fauster III
|
23,450
|
(f)
|
|
−
|
|
Jean
A. Hubbard
|
4,500
|
(f)
|
|
−
|
|
Dwain
I. Metzger
|
1,945
|
|
400
|
−
|
|
Gerald
W. Monnin
|
40,778
|
(f)
|
|
−
|
|
James
L. Rohrs
|
32,084
|
|
72,400
|
1.47%
|
|
William
J. Small
|
113,236
|
(f)
|
2,800
|
1.64%
|
|
Samuel
S. Strausbaugh
|
1457
|
|
400
|
−
|
596
|
Thomas
A. Voigt
|
14,273
|
(f)
|
|
−
|
|
Gregory
R. Allen
|
17,464
|
|
27,500
|
−
|
|
Jeffrey
D. Vereecke
|
44,207
|
(f)
|
3,600
|
|
|
John
C. Wahl
|
82,360
|
(f)
|
7,400
|
1.27%
|
|
All
current directors and executive
officers
as a group (16 persons)
|
438,395
|
|
159,952
|
8.25%
|
3,661
|
(a)
|
If
no percent is provided, the number of shares is less than 1% of the total
outstanding shares of Common Stock
|
(b)
|
Represents
phantom shares denominated in First Defiance Financial Corp. Common Stock
under the First Defiance Deferred Compensation Plan. Phantom shares are
investment units allocated to participants’ accounts. The value per unit
tracks the total return of First Defiance Financial Corp. stock. The First
Defiance Deferred Compensation Plan does not own any shares of First
Defiance Financial Corp. stock.
|
(footnotes
continued on next page)
(c)
|
Shares
owned by First Defiance Financial Corp. Employee Stock Ownership Plan, 601
Clinton St., Defiance, OH ("ESOP") which have been allocated to persons
listed in this table are also included in those persons’ holdings: Mr.
Rohrs – 4,654 shares, Mr. Small – 17,889 shares, Mr. Allen – 5,156 shares,
Mr. Vereecke – 16,712 shares, Mr. Wahl – 21,702 shares, and all directors
and executive officers as a group – 75,514
shares.
|
(d)
|
Based
on Schedule 13G filed with the Securities and Exchange Commission (the
"SEC") on February 14, 2008, Private Capital Management, 8889 Pelican Bay
Blvd. Suite 500, Naples, FL 34108 ("PCM") is an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940. PCM
reported shared voting and investment power over 674,144 shares of Common
Stock.
|
(e)
|
Based
on Schedule 13G filed with the SEC on February 6, 2008, Dimensional Fund
Advisors LP., 1299 Ocean Avenue, Santa Monica, CA 90401 ("Dimensional"),
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, possesses sole voting and investment power over
552,786 shares of Common Stock. All 552,786 shares reported are owned by
the entities for which Dimensional serves as investment advisor, and
Dimensional disclaims beneficial ownership of such
securities.
|
(f)
|
Includes
shares of Common Stock in which beneficial owners share voting and/or
investment power as follows: 10,125 held jointly by Mr. Boomer and his
spouse; 5,312 shares held jointly by Dr. Burgei and his spouse; 1,000
shares held by Dr. Fauster’s spouse; 3,500 shares held in the Hubbard
Company Retirement Plan 401(k) for which Ms. Hubbard is a trustee; 40,778
held in Mr. Monnin’s trusts for which he is a trustee; 280 shares and
53,240 shares which Mr. Small owns jointly with his children and spouse
respectively; 1,744 shares held by Mr. Voigt’s spouse; 464 shares owned
jointly by Mr. Vereecke and his son and 1,844 shares held in custodial
account for minor children for which either Mr. Vereecke or his spouse is
custodian; and 20,000 shares, 2,000 shares, 443 shares and 155 shares held
by Mr. Wahl’s spouse, jointly by Mr. Wahl and his spouse, held in
custodial accounts for minor children for which Mr. Wahl’s is custodian,
and held in a trust for which Mr. Wahl is
trustee.
|
RELATED
PERSON TRANSACTIONS
All
directors and executive officers have commercial, consumer or mortgage banking
relationships with First Federal and a number have insurance relationships
through First Insurance & Investments. All loans or deposits made to
directors and executive officers (i) were made in the ordinary course of
business; (ii) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans or
deposits with persons not related to First Federal; and (iii) did not involve
more than the normal risk of collectibility or present other unfavorable
features.
First
Federal has a policy which covers all loans to directors and executive officers.
In accordance with that policy, any loan request for directors or executive
officers, which when aggregated with other extensions of credit from First
Federal exceeds $500,000 requires prior Board of Directors approval. Loans to
executive officers, which when aggregated with existing extensions of credit are
less than $500,000, do not require prior Board of Directors approval but must be
reported at the next Board meeting. Loans to directors, which when aggregated
with existing extensions of credit are less than $500,000, do not require Board
approval and are not required to be reported to the Board at the next Board
meeting. However, all loan transactions with related persons are reported to and
ratified by the audit committee quarterly. First Defiance’s policy is that it
will not enter into related person transactions that are outside of normal
banking relationships.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires First Defiance’s executive
officers and directors, and persons who own more than ten percent of Common
Stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5
with the Securities and Exchange Commission and to provide First Defiance with a
copy of such form. Based on First Defiance’s review of the copies of such forms
it has received, First Defiance believes that its executive officers and
directors complied with all filing requirements applicable to them with respect
to transactions during the fiscal year ended December 31, 2007.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The independent auditors for the fiscal
year ended December 31, 2007 were the independent registered public accounting
firm Crowe Chizek and Company LLC. The Audit Committee has reappointed Crowe
Chizek and Company LLC to continue as independent aucitors for First Defiance
for the year ended December 31, 2008. Crowe Chizek also served as the Company’s
independent registered public accounting firm for the fiscal year ended December
31, 2006 and has reported on the Company’s consolidated financial
statements.
The
following table sets forth the aggregate fees that were incurred for audit and
non-audit services provided by Crowe Chizek in 2007 and 2006. The table lists
audit fees, audit related fees, tax fees and all other fees.
Services
Rendered
|
|
2007
|
|
|
2006
|
|
Audit
Fees
|
|
$
|
264,000
|
|
|
$
|
252,000
|
|
Audit
Related Fees
|
|
|
22,075
|
|
|
|
20,500
|
|
Tax
Fees
|
|
|
44,050
|
|
|
|
48,025
|
|
Other
|
|
|
−
|
|
|
|
−
|
|
Total
fees paid
|
|
$
|
330,125
|
|
|
$
|
320,525
|
|
Audit
related fees relate to services for employee benefit plan audits, compliance
services and services related to accounting consultations relating to the
Company’s mergers and acquisitions activity. Tax fees include the following
amounts paid to Crowe Chizek in 2007 and 2006:
Tax
Services Rendered
|
|
2007
|
|
|
2006
|
|
Tax
return preparation
|
|
$
|
24,045
|
|
|
$
|
20,000
|
|
Other
tax compliance
|
|
|
20,005
|
|
|
|
28,025
|
|
Total
Tax Fees
|
|
$
|
44,040
|
|
|
$
|
48,025
|
|
Representatives of Crowe Chizek 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.
REPORT
OF THE AUDIT COMMITTEE
The Audit Committee is comprised of
four directors, all of whom are considered “independent” under rule 4200(a)(15)
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 also reviews the effectiveness of First
Defiance’s system of internal controls, including a review of the process used
by management to evaluate the effectiveness of the system of internal
control.
The Committee reviewed with the
independent registered public accounting firm which is responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, its judgment as to the quality,
not just the acceptability, of the Company’s accounting principles and such
other matters as are required to be discussed under their professional
standards. In addition, the Committee has discussed with the independent
registered public accounting firm the auditor’s 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 also pre-approved all
professional services provided to the Company by the independent registered
public accounting firm.
The Committee discussed with the
Company’s internal auditor and independent registered public accounting firm the
overall scope and plans for their respective audits. The Committee meets with
the internal auditor and independent registered public accounting firm, 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
2007.
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, 2007
for filing with the SEC. The Committee and the Board have also approved the
selection of Crowe Chizek and Company LLC as the Company’s independent
registered public accounting firm for the year ending December 31,
2008.
John
Bookmyer, Audit Committee Chair
Stephen
L. Boomer, Audit Committee Member
Peter A.
Diehl, Audit Committee Member
Samuel S.
Strausbaugh, Audit Committee Member
March 13,
2008
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. First Defiance will also pay the standard charges and expenses of
brokerage houses, voting trustees, banks, associations and other custodians,
nominees and fiduciaries who are record holders of Common Stock not beneficially
owned by them, for forwarding the proxy materials to, and obtaining proxies
from, the beneficial owners of First Defiance Common Stock entitled to vote at
the Annual Meeting.
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 16,
2008. 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
2008 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 January 30, 2009, then the proxies designated by
the Board of Directors of First Defiance for the 2009 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.
ANNUAL
REPORTS AND FINANCIAL STATEMENTS
Shareholders of First Defiance as of
the Voting Record 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, 2007 ("Annual Report"). Included in the Annual Report are the
consolidated financial statements of First Defiance as of December 31, 2007 and
2006 and for each of the years in the three-year period ended December 31, 2007,
prepared in accordance with generally accepted accounting principles, and the
related reports of First Defiance's independent registered public accounting
firm. The Annual Report is not a part of this Proxy Statement.
|
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
William
J. Small, Chairman, President and
|
|
Chief
Executive Officer
|
March 21,
2008
Defiance,
Ohio