UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __ )
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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 Rule 14a-12
DSA FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number, or
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DSA FINANCIAL CORPORATION
118 WALNUT STREET
LAWRENCEBURG, INDIANA 47025
(812) 537-0940
October 11, 2005
Dear Stockholder:
You are cordially invited to attend the 2005 Annual Meeting of Stockholders of
DSA Financial Corporation (the "Company"), which will be held at the office of
Dearborn Savings Association, F.A. (the "Association") located at 141 Ridge
Avenue, Lawrenceburg, Indiana at 4:00 p.m. (Eastern Standard Time) on November
10, 2005.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the meeting we will also report on the
operations of the Company and the Association, the wholly owned subsidiary of
the Company. Directors and officers of the Company and the Association will be
present to respond to any questions that stockholders may have. Also enclosed
for your review is our Annual Report to Stockholders, which contains detailed
information concerning the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
two directors, the approval of an amendment to the Company's Certificate of
Incorporation, the approval of the Company's 2005 Stock-Based Incentive Plan and
the ratification of the appointment of the independent registered public
accounting firm for the fiscal year ending June 30, 2006. The Board of Directors
of the Company has determined that the matters to be considered at the Annual
Meeting are in the best interest of the Company and its stockholders, and the
Board of Directors unanimously recommends a vote "FOR" each matter to be
considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible even if you currently plan to attend the
Annual Meeting. This will not prevent you from voting in person, but will assure
that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Edward L. Fischer
Edward L. Fischer
President and Chief Executive Officer
DSA FINANCIAL CORPORATION
118 WALNUT STREET
LAWRENCEBURG, INDIANA 47025
(812) 537-0940
NOTICE OF
2005 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 10, 2005
Notice is hereby given that the Annual Meeting of Stockholders of DSA
Financial Corporation (the "Company") will be held at the office of Dearborn
Savings Association, F.A. (the "Association") located at 141 Ridge Avenue,
Lawrenceburg, Indiana, on November 10, 2005 at 4:00 p.m., Eastern Standard Time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of two directors;
2. The approval of an amendment to the Company's Certificate of
Incorporation to reduce the number of authorized shares of
common stock and preferred stock;
3. The approval of the DSA Financial Corporation 2005 Stock-Based
Incentive Plan;
4. The ratification of Grant Thornton LLP as the independent
registered public accounting firm for the fiscal year ending
June 30, 2006; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting
on the date specified above, or on any date or dates to which the Annual Meeting
may be adjourned. Stockholders of record at the close of business on September
29, 2005, are the stockholders entitled to vote at the Annual Meeting, and any
adjournments thereof. A list of stockholders entitled to vote at the Annual
Meeting will be available at the Association, 118 Walnut Street, Lawrenceburg,
Indiana for a period of ten days prior to the Annual Meeting and will also be
available for inspection at the meeting itself.
By Order of the Board of Directors
/s/ Karleen McGraw
Karleen McGraw
Secretary
Lawrenceburg, Indiana
October 11, 2005
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED WITHIN THE UNITED STATES.
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DSA FINANCIAL CORPORATION
118 WALNUT STREET
LAWRENCEBURG, INDIANA 47025
(812) 537-0940
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
November 10, 2005
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of DSA Financial Corporation to be
used at the Annual Meeting of Stockholders of DSA Financial Corporation (the
"Annual Meeting"), which will be held at the office of Dearborn Savings
Association, F.A. located at 141 Ridge Avenue, Lawrenceburg, Indiana, on
November 10, 2005, at 4:00 p.m., Eastern Standard Time, and at all adjournments
of the Annual Meeting. The accompanying Notice of Annual Meeting of Stockholders
and this Proxy Statement are first being mailed to stockholders on or about
October 11, 2005.
Regardless of the number of shares of common stock owned, it is
important that stockholders be represented by proxy or be present in person at
the Annual Meeting. Stockholders are requested to vote by completing the
enclosed Proxy Card and returning it, signed and dated, in the enclosed
postage-paid envelope. Stockholders are urged to indicate the way they wish to
vote in the spaces provided on the proxy card. Proxies solicited by the Board of
Directors of DSA Financial Corporation will be voted in accordance with the
directions given therein. Where no instructions are indicated, signed proxies
will be voted "FOR" the election of the nominees for director named in this
Proxy Statement, "FOR" the amendment to the Company's Certificate of
Incorporation, "FOR" the adoption of the Company's 2005 Stock-Based Incentive
Plan and "FOR" the ratification of Grant Thornton LLP as the independent
registered public accounting firm for the fiscal year ending June 30, 2006.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof.
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof.
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Proxies may be revoked at any time prior to exercise by sending written
notice of revocation to the Secretary of DSA Financial Corporation, Karleen
McGraw, at the address of DSA Financial Corporation shown on the cover page of
this Proxy Statement, or by delivering to DSA Financial Corporation a duly
executed proxy bearing a later date. The presence at the Annual Meeting of any
stockholder who had given a proxy shall not revoke the proxy unless the
stockholder delivers his or her ballot in person at the Annual Meeting or
delivers a written revocation to the Secretary of DSA Financial Corporation
prior to the voting of such proxy. If you are a stockholder whose shares are not
registered in your own name, however, you will need appropriate documentation
from your record holder to vote personally at the Annual Meeting.
The cost of solicitation of proxies in the form enclosed herewith will
be borne by DSA Financial Corporation. Proxies may also be solicited personally
or by mail and telephone by DSA Financial Corporation's directors, officers and
regular employees, without additional compensation therefor. DSA Financial
Corporation will also request persons, firms and corporations holding shares in
their names, or in the name of their nominees, which are beneficially owned by
others, to send proxy material to and obtain proxies from such beneficial
owners, and will reimburse such holders for their reasonable expenses in doing
so.
VOTING SECURITIES
Holders of record of DSA Financial Corporation's common stock, par value
$0.01 per share, as of the close of business on September 29, 2005 are entitled
to one vote for each share then held, except as described below. As of September
29, 2005, DSA Financial Corporation had 1,644,242 shares of common stock issued
and outstanding. The presence, in person or by proxy, of at least a majority of
the total number of shares of common stock outstanding and entitled to vote is
necessary to constitute a quorum at the Annual Meeting. In the event there are
not sufficient votes for a quorum, or to approve or ratify any matter being
presented, at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit the further solicitation of proxies.
In accordance with the provisions of DSA Financial Corporation's
Certificate of Incorporation, record holders of common stock who beneficially
own in excess of 10% of the outstanding shares of common stock (the "Limit") are
not entitled to any vote with respect to the shares held in excess of the Limit.
DSA Financial Corporation's Certificate of Incorporation authorizes the Board of
Directors (i) to make all determinations necessary to implement and apply the
Limit, including determining whether persons or entities are acting in concert,
and (ii) to demand that any person who is reasonably believed to beneficially
own stock in excess of the Limit supply information to DSA Financial Corporation
to enable the Board to implement and apply the Limit.
VOTING PROCEDURES AND METHOD OF COUNTING VOTES
As to the election of Directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote "FOR" the election of the two
nominees proposed by the Board, or to "WITHHOLD AUTHORITY" to vote for the
nominees being proposed. Under Delaware law and DSA Financial Corporation's
Certificate of Incorporation and Bylaws, Directors are elected
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by a plurality of votes cast, without regard to either broker non-votes, or
proxies as to which authority to vote for the nominees being proposed is
withheld.
As to the approval of the amendment to the Certificate of Incorporation,
the proxy card being provided by the Board of Directors enables a stockholder to
check the appropriate box on the proxy card to (i) vote "FOR," (ii) vote
"AGAINST," or (iii) vote to "ABSTAIN" from voting on such matter. The
affirmative vote by a majority of the votes cast at the Annual Meeting, in
person or by proxy, is required to constitute approval by the stockholders.
Broker non-votes and shares as to which the "ABSTAIN" box has been selected will
not be counted as votes cast and will have no effect on the vote on the matter
presented.
As to the approval of the 2005 Stock-Based Incentive Plan, the proxy
card being provided by the Board of Directors enables a stockholder to check the
appropriate box on the proxy card to (i) vote "FOR," (ii) vote "AGAINST," or
(iii) vote to "ABSTAIN" from voting on such matter. The affirmative vote by a
majority of the votes cast at the Annual Meeting, in person or by proxy, is
required to constitute approval by the stockholders. Broker non-votes and shares
as to which the "ABSTAIN" box has been selected will not be counted as votes
cast and will have no effect on the vote on the matter presented.
As to the ratification of the appointment of the independent registered
public accounting firm, the proxy card being provided by the Board of Directors
enables a stockholder to check the appropriate box on the proxy card to (i) vote
"FOR," (ii) vote "AGAINST," or (iii) vote to "ABSTAIN" from voting on such
matter. The affirmative vote by a majority of the votes cast at the Annual
Meeting, in person or by proxy, is required to constitute ratification by the
stockholders. Broker non-votes and shares as to which the "ABSTAIN" box has been
selected will not be counted as votes cast and will have no effect on the vote
on the matter presented.
Proxies solicited hereby will be returned to DSA Financial Corporation,
and will be tabulated by an inspector of election designated by the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons and groups who beneficially own in excess of 5% of the shares of
common stock are required to file certain reports with DSA Financial Corporation
and with the Securities and Exchange Commission (the "SEC") regarding such
ownership pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The following table sets forth, as of September 29, 2005, the
shares of Common Stock beneficially owned by each person known to DSA Financial
Corporation who was the beneficial owner of more than 5% of the outstanding
shares of Common Stock.
AMOUNT OF SHARES OWNED AND
NAME AND ADDRESS OF NATURE OF BENEFICIAL PERCENT OF SHARES OF
BENEFICIAL OWNER OWNERSHIP (1) COMMON STOCK OUTSTANDING
---------------- ------------- ------------------------
David P. Lorey 95,681 5.8%
118 Walnut Street
Lawrenceburg, Indiana 47025
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(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner for purposes of this table, of any shares of
Common Stock if he has shared voting or investment power with respect to
such security, or has a right to acquire beneficial ownership at any
time within 60 days from the date as of which beneficial ownership is
being determined. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares, and
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includes all shares held directly as well as by spouses and minor
children, in trust and other indirect ownership, over which shares the
named individuals effectively exercise sole or shared voting or
investment power.
PROPOSAL 1--ELECTION OF DIRECTORS
Directors of DSA Financial Corporation are generally elected to serve
for a three-year period and until their respective successors shall have been
elected and shall qualify. Two directors will be elected at the Annual Meeting,
each to serve for a three-year period and until a successor has been elected and
qualified. The Board of Directors has nominated Edward L. Fischer and Richard
Meador, III to serve as directors, each of whom currently serves as a member of
the Board of Directors.
The table below sets forth certain information regarding DSA Financial
Corporation's Board of Directors and nominees. It is intended that the proxies
solicited on behalf of the Board of Directors will be voted at the Annual
Meeting for the election of the nominees identified below (unless otherwise
directed on the proxy card). If a nominee is unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why the nominees might be unable to serve, if
elected.
POSITION(S) HELD TERM TO EXPIRE SHARES OF COMMON STOCK
WITH DSA FINANCIAL DIRECTOR FOLLOWING FISCAL BENEFICIALLY OWNED ON PERCENT
NAME AGE CORPORATION SINCE(1) YEAR ENDING JUNE 30 SEPTEMBER 29, 2005 OF CLASS
--------------------- --------- ---------------------- ---------- --------------------- ---------------------- ------------
NOMINEES
Edward L. Fischer 53 President, Chief 2002 2005 66,351(2) 4.0%
Executive Officer
and Director
Richard Meador, III 70 Director 1983 2005 5,716 *
DIRECTORS CONTINUING IN OFFICE
Ronald J. Denney 57 Director 1976 2006 44,524(3) 2.7
Dr. Dennis Richter 57 Director 1986 2006 53,868(4) 3.3
Robert P. Sonntag 70 Chairman of the Board 1971 2007 36,131 2.2
David P. Lorey 49 Director 1992 2007 95,681(5) 5.8
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas J. Sicking 65 Vice President N/A N/A 21,522(6) 1.3
Steven R. Doll 53 Vice President and N/A N/A 4,300(7) *
Chief Financial Officer
Delmar C. Schiferl 44 Vice President/Director N/A N/A 5,363(8) *
of Lending
All directors and 333,456 20.3
executive offices as a
group (9 persons)
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* Less than 1%.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner for purposes of this table of any shares of
common stock if he has sole or shared voting or investment power with
respect to such security, or has a right to acquire beneficial ownership
at any time within 60 days from the date as of which beneficial
ownership is being determined. As used herein, "voting power" is the
power to vote or direct the voting of shares and "investment power" is
the power to dispose or direct the disposition of shares.
(2) Includes 13,871 shares held by the employee stock ownership plan and
14,240 shares held by Mr. Fischer's spouse.
(3) Includes 2,714 shares held by a retirement plan of which Mr. Denney is
the trustee with voting power and 339 shares owned by Mr. Denney's
spouse.
(4) Includes 39,954 shares held by a family limited partnership and 1,065
shares held by Dr. Richter's wife in an individual retirement account.
(5) Includes 7,535 shares held by Mr. Lorey's daughters.
(6) Includes 6,585 shares held by the employee stock ownership plan.
(7) Includes 908 shares held by the employee stock ownership plan.
(8) Includes 971 shares held by the employee stock ownership plan.
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DIRECTORS
The principal occupation during the past five years of each director and
executive officer of DSA Financial Corporation is set forth below. All directors
have held their present positions for at least five years unless otherwise
stated.
ROBERT P. SONNTAG has served as the Chairman of the Board of Directors
of Dearborn Savings Association since 1992 and Dearborn Financial Corporation
since its formation in 1999. Mr. Sonntag has served as the President of Sonntag
Accountancy Corporation since 1967.
EDWARD L. FISCHER has served as President of Dearborn Savings
Association since 1996 and Dearborn Financial Corporation since its formation in
1999. Mr. Fischer joined Dearborn Savings Association in 1993 as Chief Financial
Officer and Treasurer.
RONALD J. DENNEY is the funeral director at Fitch Denney Funeral Home,
Inc., located in Lawrenceburg, Indiana, a position he has held since 1973.
DAVID P. LOREY is a private land owner and developer.
RICHARD MEADOR, III is retired. Prior to 1992, Mr. Meador owned Meador's
Fitness Center, located in Lawrenceburg, Indiana since 1974.
DR. DENNIS RICHTER has been self-employed as an optometrist in
Lawrenceburg, Indiana since 1974.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
THOMAS J. SICKING has served as Vice President of Dearborn Savings
Association since January 1997 and Vice President of Dearborn Financial since
its formation in 1999.
STEVEN R. DOLL was hired by Dearborn Savings Association in March 2002.
Mr. Doll served as accounting manager of Sharefax Credit Union, located in
Batavia, Ohio from March 2001 until March 2002, and was Chief Financial Officer
of Ameriana Bank of Ohio, located in Cincinnati, Ohio, from 1993 until December
2001.
DELMAR C. SCHIFERL was hired by Dearborn Savings Association in March
2002, and serves as Vice President/Director of Lending. Prior to joining
Dearborn Savings Association, Mr. Schiferl worked at Advantage Bank from
February 1996 until March 2002.
INDEPENDENT DIRECTORS
The Board of Directors has determined that Directors Denney, Lorey,
Meador, Richter and Sonntag are "independent" are defined in the Nasdaq
corporate governance listing standards. Director Fischer is not considered
"independent" because of his position as an employee of Dearborn Savings
Association.
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COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The business of DSA Financial Corporation and Dearborn Savings
Association is conducted through regular and special meetings of the Board of
Directors and its committees. The Board of Directors of DSA Financial
Corporation met six times during the fiscal year ended June 30, 2005. During the
fiscal year ended June 30, 2005, the Board of Directors of Dearborn Savings
Association held 24 meetings. No director attended fewer than 75% of the total
meetings held by the Board of Directors and the committees on which such
director served, with respect to each of DSA Financial Corporation and Dearborn
Savings Association. The following is a discussion of certain committees of
Dearborn Savings Association. Dearborn Savings Association's Audit Committee
functions as the audit committee of DSA Financial Corporation, and Dearborn
Savings Association's Compensation Committee functions as the compensation
committee of DSA Financial Corporation.
The Executive Committee is authorized to act with the same authority as
the Board of Directors of DSA Financial Corporation between meetings of the
Board. Messrs. Sonntag, Fischer, Meador and Lorey serve as members of this
committee. The Executive Committee did not meet during fiscal 2005.
The Audit Committee consists of Messrs. Sonntag, Richter and Lorey. The
Board of Directors of DSA Financial Corporation has determined that Director
Sonntag qualifies as an "audit committee financial expert" and is serving as
such for the Audit Committee. The Audit Committee met four times during fiscal
2005.
The duties and responsibilities of the Audit Committee include, among
other things:
o retaining, overseeing and evaluating a firm of independent
certified public accountants to audit DSA Financial
Corporation's annual financial statements;
o approving all engagements for audit and non-audit services by
the independent registered public accounting firm;
o reviewing the financial statements and the audit report with
management and the independent registered public accounting
firm; and
o reviewing the adequacy of the audit committee charter.
The Compensation Committee reviews existing compensation, investigates
new and different forms of compensation and makes recommendations with respect
thereto to the Board of Directors. Currently the entire Board serves as this
committee. The Compensation Committee met once during fiscal 2005.
The non-employee directors of DSA Financial Corporation serve as the
Nominating Committee. The Nominating Committee met once during fiscal 2005.
Each member of the Nominating Committee is considered "independent" as
defined in the Nasdaq corporate governance listing standards. DSA Financial
Corporation's Board of
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Directors has adopted a written charter for the Committee, which was previously
attached as an appendix to the Company's Proxy Statement for its 2004 Annual
Meeting of Stockholders.
The duties of the Nominating Committee include the following:
o evaluating current directors for nomination for re-election to
the Board of Directors;
o evaluating other potential candidates for nomination for
election to the Board of Directors;
o if applicable, evaluating and recommending to the Board of
Directors the persons who should be appointed to the Board; and
o reviewing and reassessing the adequacy of the Nominating
Committee Charter annually and recommending any proposed changes
to the Board of Directors for approval.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to DSA
Financial Corporation's business and who are willing to continue in service are
first considered for re-nomination, balancing the value of continuity of service
by existing members of the Board with that of obtaining a new perspective.
Accordingly, the Nominating Committee may choose not to consider an unsolicited
recommendation if no vacancy exists on the Board of Directors and the Board of
Directors does not perceive a need to increase the size, or change the
composition of the Board of Directors. In addition, the Committee is authorized
by its charter to engage a third party to assist in the identification of
director nominees. The Nominating Committee shall have sole authority to approve
related fees and retention terms. The Nominating Committee may appoint a
sub-committee (so long as such committee is composed solely of independent
directors) to assist the Nominating Committee in performing its duties. The
Nominating Committee will apply the criteria for candidates established by the
Board of Directors.
The Nominating Committee will also take into account whether a candidate
satisfies the criteria for "independence" under the Nasdaq corporate governance
listing standards.
PROCEDURES FOR THE NOMINATION OF DIRECTORS BY STOCKHOLDERS. The
Nominating Committee has adopted procedures for the submission of director
nominees by stockholders. If a determination is made that an additional
candidate is needed for the Board of Directors, the Nominating Committee will
consider candidates submitted by DSA Financial Corporation's stockholders.
Stockholders can submit the names of qualified candidates for Director by
writing to our Corporate Secretary at 118 Walnut Street, Lawrenceburg, Indiana
47025. The Corporate Secretary must receive a submission not less than 150 days
prior to the date (month and day) of DSA Financial Corporation's proxy materials
for the preceding year's annual meeting. However, if the date of the annual
meeting is advanced more than 30 days prior to or delayed by more than 30 days
after the anniversary of the preceding year's annual meeting, to be timely the
recommendation for Director must be delivered no later than the close of
business on the
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10th day following the day on which public announcement of the date of such
meeting is first made. The submission must include the following information:
o a statement that the writer is a stockholder and is proposing a
candidate for consideration by the Nominating Committee;
o the name and address of the stockholder as they appear on DSA
Financial Corporation's books, and number of shares of DSA
Financial Corporation's common stock that are owned beneficially
by such stockholder (if the stockholder is not a holder of
record, appropriate evidence of the stockholder's ownership will
be required);
o the name, address and contact information for the candidate, and
the number of shares of common stock of DSA Financial
Corporation that are owned by the candidate (if the candidate is
not a holder of record, appropriate evidence of the
stockholder's ownership should be provided);
o a statement of the candidate's business and educational
experience;
o such other information regarding the candidate as would be
required to be included in the proxy statement pursuant to SEC
Regulation 14A;
o a statement detailing any relationship between the candidate and
DSA Financial Corporation;
o a statement detailing any relationship between the candidate and
any customer, supplier or competitor of DSA Financial
Corporation and its affiliates;
o detailed information about any relationship or understanding
between the proposing stockholder and the candidate; and
o a statement of the candidate that the candidate is willing to be
considered and willing to serve as a Director if nominated and
elected.
A nomination submitted by a stockholder for presentation by the
stockholder at an annual meeting of stockholders must comply with the procedural
and informational requirements described in DSA Financial Corporation's Bylaws.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD. A stockholder of DSA
Financial Corporation who wants to communicate with the Board of Directors or
with any individual director can write to the Board of Directors or the
individual director, c/o DSA Financial Corporation, 118 Walnut Street,
Lawrenceburg, Indiana 47025. The letter should indicate that the author is a
stockholder and, if shares are not held of record, should include appropriate
evidence of stock ownership. Depending on the subject matter, the President and
Chief Executive Officer will:
o forward the communication to the director or directors to whom
it is addressed;
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o attempt to handle the inquiry directly, or forward the
communication for response by another employee of DSA Financial
Corporation. For example, a request for information about DSA
Financial Corporation or a stock-related matter may be forwarded
to DSA Financial Corporation's stockholder relations officer; or
o not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is unduly
hostile, threatening, illegal or otherwise inappropriate.
The President and Chief Executive Officer shall make those
communications that were not forwarded available to the Directors on request.
ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
DSA Financial Corporation does not have a policy regarding director
attendance at annual meetings of stockholders. All of DSA Financial
Corporation's directors attended the prior year's annual meeting of
stockholders.
CODE OF ETHICS
DSA Financial Corporation has adopted a Code of Ethics that is
applicable to the principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. The Code of Ethics was previously attached as an appendix to the
Company's Proxy Statement for its 2004 Annual Meeting of Stockholders.
Amendments to and waivers from the Code of Ethics will be disclosed on DSA
Financial Corporation's website.
AUDIT COMMITTEE REPORT
In accordance with rules established by the SEC, the Audit Committee has
prepared the following report. The Board of Directors has adopted a written
charter for the Audit Committee, which was previously attached as an appendix to
the Company's Proxy Statement for its 2004 Annual Meeting of Stockholders.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management DSA Financial
Corporation's audited consolidated financial statements for the
fiscal year ended June 30, 2005;
o Discussed with the independent registered public accounting firm
the matters required to be discussed by Statement on Auditing
Standards No. 61, COMMUNICATIONS WITH AUDIT COMMITTEES, as
amended; and
o Received the written disclosures and the letter from the
independent registered public accounting firm required by
Independence Standards Board Standard No. 1, INDEPENDENCE
DISCUSSIONS WITH AUDIT COMMITTEES, and has discussed with the
independent registered public accounting firm their
independence.
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Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in DSA Financial Corporation's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 2005 and be filed with the SEC.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Exchange Act, as amended, except
to the extent that DSA Financial Corporation specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Audit Committee
Robert P. Sonntag
Dennis Richter
David P. Lorey
DIRECTOR COMPENSATION
DIRECTORS FEES. Directors of DSA Financial Corporation are not
compensated for service on DSA Financial Corporation's Board of Directors or
Committees of DSA Financial Corporation's Board of Directors. Each non-employee
director of Dearborn Savings Association receives $14,900 per year, in addition
to the amounts as described below, for service on the Board of Directors. Mr.
Sonntag receives an additional $2,000 as Chairman of the Board of Dearborn
Savings Association, Messrs. Meador and Denney receive $5,000 per year as
members of Dearborn Savings Association's Loan Committee, and Messrs. Lorey,
Richter and Sonntag receive $3,000 per year as members of Dearborn Savings
Association's Asset and Liability and Strategic Planning Committee and $600 per
year as members of Dearborn Savings Association's Audit Committee.
DIRECTOR DEFERRED COMPENSATION AGREEMENTS. Dearborn Savings Association
entered into Director Deferred Compensation Agreements with Messrs. Denney,
Meador, Richter and Sonntag in January 1992 and with Mr. Lorey in August 1992
("Director Agreements"). Pursuant to the Director Agreements, the Directors of
Dearborn Savings Association defer receipt of monthly Board fees of $142 ($250
for Messrs. Lorey and Denney) for a period of up to 156 months. The Director
Agreements provide that at each director's normal retirement following his 70th
birthday, Dearborn Savings Association will begin paying a monthly deferred
compensation benefit of $2,269, $4,221, $659, $1,465 and $595, respectively, for
Messrs. Denney, Lorey, Meador, Richter and Sonntag. In the event a director
defers fees for a period of less than the full deferral period, he shall be
entitled to receive, upon reaching his normal retirement age, a deferred
compensation benefit determined by multiplying the amounts listed above by a
fraction, the numerator of which is equal to the total amount of Board fees that
were actually deferred and the denominator of which is the total amount of Board
fees that would have been deferred during the entire deferral period if all
deferrals had been made. Such benefits shall be payable for 15 years, or at the
election of each director or his beneficiary, in a lump sum. In the event of
death or disability prior to termination of service, a death benefit of the full
10
amount payable if fees were deferred for the entire deferral period shall be
payable to the director's beneficiaries for 15 years.
Dearborn Savings Association has funded its obligations under the
Director Agreements by purchasing single premium life insurance policies. The
directors and their beneficiaries have no rights to the insurance policies
acquired by Dearborn Savings Association and have only the rights of unsecured
general creditors of Dearborn Savings Association. The cash surrender value of
these policies is an asset of Dearborn Savings Association that was valued at
approximately $1.9 million as of June 30, 2005. Each year Dearborn Savings
Association will record an expense which is calculated ratably over the
remaining anticipated years of service of the directors. This expense was
approximately $28,000 during the year ended June 30, 2005.
DIRECTORS' RETIREMENT PLAN. Effective August 1, 2005, Dearborn Savings
Association adopted a retirement plan for directors, which replaces the
directors emeritus program previously adopted by Dearborn Savings Association.
Directors Dennis G. Richter, Ronald J. Denney, Richard B. Meador, and Robert P.
Sonntag participate in the directors' retirement plan. Upon reaching the benefit
age determined in each director's joinder agreement, a director is entitled to a
retirement benefit as set forth in the joinder agreement, payable in monthly
installments over 120 consecutive months. In the event a director dies after
commencement of his retirement benefit payments but before completion of such
payments, the director's beneficiary will receive a continuation of the monthly
benefits for the remainder of the payout period. If a director dies while in the
service of Dearborn Savings Association but prior to attaining his benefit age,
the director's beneficiary will receive a survivor's benefit equal to the
director's full retirement benefit, commencing within 30 days of the director's
death and payable over 120 consecutive months. In addition, upon a director's
death, the beneficiary generally will be entitled to a one-time lump sum death
benefit of $10,000, unless the beneficiary receives a supplemental death benefit
for burial expenses of at least $10,000 under any other non-qualified deferred
compensation plan sponsored by Dearborn Savings Association. In the event a
director's service is voluntarily or involuntarily terminated prior to the
director's benefit age for any reason other than cause, death, disability, or
following a change in control, the director will be entitled to the annuitized
value of his accrued benefit, plus interest accrued on such benefit from the
date of the director's termination until the director's benefit age, payable in
monthly installments throughout the payout period. In the event of a director's
voluntary or involuntary separation from service within three years following a
change in control, other than due to termination for cause, the director will be
entitled to his full retirement benefit as if the director had served until his
benefit age, commencing within 30 days following his separation from service and
payable in monthly installments throughout the payout period.
11
EXECUTIVE COMPENSATION
The following table sets forth for the three years ended June 30, 2005,
certain information as to the total remuneration paid by DSA Financial
Corporation to its Chief Executive Officer. No other officer received total
annual compensation in excess of $100,000 during the fiscal year ended June 30,
2005.
LONG-TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------- --------------------- --------------------------
YEAR RESTRICTED OPTIONS/
NAME AND PRINCIPAL ENDED OTHER ANNUAL STOCK SARS LTIP ALL OTHER
POSITION 6/30 SALARY BONUS COMPENSATION (1) AWARDS (2) (#) PAYOUTS COMPENSATION (3)
--------------------------- ------ ----------- ---------- ----------------- ---------- --------- -------- ----------------
Edward L. Fischer, 2005 $ 92,465 $ 20,000 $ 13,618 $ -- -- $ -- $ 3,423
President, Chief Executive 2004 88,910 20,000 12,100 -- -- -- 5,228
Officer and Director 2003 85,490 17,500 10,785 87,380 -- -- 4,935
------------------------
(1) Includes employer payments for auto insurance, health insurance and
annual dues at a golf club.
(2) Represents the fair market value of shares granted pursuant to the
Dearborn Financial Corporation 2002 Recognition and Retention Plan.
Dividends are paid on the restricted stock and participants can vote the
restricted stock to the extent shares have vested or are available for
issuance. At June 30, 2005 6,918 shares of unvested restricted stock
awards were held by Mr. Fischer.
(3) Includes employer contributions to the Simplified Employee Pension Plan.
EMPLOYMENT AGREEMENTS. Dearborn Savings Association entered into an
employment agreement with President and Chief Executive Officer Edward L.
Fischer on June 23, 2005. DSA Financial Corporation is the signatory to the
agreement for the sole purpose of guaranteeing payments thereunder. The
agreement will have an initial term of three years, and shall automatically
renew on each day so that the remaining term shall be thirty-six (36) full
calendar months, subject to termination on notice as provided in the agreements.
Under the agreement, the initial base salary for Mr. Fischer is $96,165. In
addition to the base salary, the agreement provides for, among other things,
participation in bonus programs and other employee pension benefit and fringe
benefit plans applicable to executive employees. The executive's employment may
be terminated for cause at any time, in which event the executive would have no
right to receive compensation or other benefits for any period after
termination.
Certain events resulting in the executive's termination or resignation
entitle the executive to payments of severance benefits following termination of
employment. In the event the executive's employment is terminated for reasons
other than for cause, disability or retirement, or in the event the executive
resigns during the term of the agreement following (i) failure to elect or
reelect or to appoint or reappoint the executive to his executive position, (ii)
a significant change in the nature or scope of the executive's authority, (iii)
the liquidation or dissolution of Dearborn Savings Association or DSA Financial
Corporation that would affect the status of the executive, or (iv) a breach of
the employment agreement by the applicable corporation, then the executive would
be entitled to a severance payment under the agreement. The severance payment
would be equal to three times the sum of the executive's base salary and the
highest rate of bonus awarded to the executive during the prior three years,
payable, at the executive's election, either in a lump sum or in bi-weekly
installments during the remaining term of the agreement. In the event of a
change in control (as defined in the plan) followed by the involuntary
termination or voluntary resignation of the executive from Dearborn Savings
Association, the executive would be entitled to the payment of a sum equal to
three times base salary and the highest rate of bonus awarded to the executive
during the prior three years, payable, at his election, in a lump sum or
bi-weekly during the remaining term of the agreement.
12
In addition, the executive would be entitled, at Dearborn Savings Association's
expense, to the continuation of substantially comparable life, medical, dental
and disability coverage for a period of thirty-six (36) months from the date of
termination. In the event payments to the executive include an "excess parachute
payment" as defined in the Internal Revenue Code, payments under the employment
agreements with Dearborn Savings Association would be reduced in order to avoid
this result.
Upon termination of the executive's employment other than in connection
with a change in control, the executive agrees not to compete with Dearborn
Savings Association for a period of one year following termination of employment
within twenty-five (25) miles of any existing branch of Dearborn Savings
Association, or within twenty-five (25) miles of any office in which Dearborn
Savings Association has filed an application for regulatory approval to
establish an office. Should the executive become disabled, he would be entitled
to the payment of 100% of his base salary for one year following such
termination provided that any amount paid to the executive pursuant to any
disability insurance would reduce the compensation he would receive. In the
event the executive dies while employed by Dearborn Savings Association, the
executive's estate will be paid the executive's base salary for one year and the
executive's family will be entitled to continuation of medical, dental and other
insurance benefits normally provided for an executive's family for one year.
CHANGE IN CONTROL AGREEMENTS. Dearborn Savings Association, F.A. entered
into agreements with three officers of Dearborn Savings Association on June 23,
2005, which would provide certain benefits in the event of a change in control
of Dearborn Savings Association or DSA Financial Corporation. Each of the
agreements provides for a term of twenty-four (24) months. Commencing on each
anniversary date, the Board of Directors may extend any change in control
agreement for an additional year. The change in control agreements enable
Dearborn Savings Association to offer to designated officers certain protections
against termination without cause in the event of a change in control (as
defined in the agreements).
Following a change in control of DSA Financial Corporation or Dearborn
Savings Association, F.A., an officer is entitled to a payment under a change in
control agreement if the officer's employment is involuntarily terminated during
the term of such agreement, other than for cause, as defined, or if the officer
voluntarily terminates employment during the term of such agreement as the
result of a demotion, loss of office or significant authority, reduction in his
annual compensation or benefits, or relocation of his principal place of
employment by more than 30 miles from its location immediately prior to the
change in control. In the event that an officer who is a party to a change in
control agreement is entitled to receive payments pursuant to the change in
control agreement, he will receive a cash payment, subject to applicable
withholding taxes, equal to the product of (x) one-fourth of the sum of (i) base
salary, and (ii) highest rate of bonus awarded to the executive during the prior
three years, multiplied by (y) the number of years the executive has been
employed by Dearborn Savings Association, with a maximum severance payment equal
to two (2) times the product of (i) and (ii), above. In addition to the
severance payment, each covered officer shall receive continued life, health and
dental coverage for a number of months from the date of termination equal to the
number of years the executive has been employed by Dearborn Savings Association.
Notwithstanding any provision to the contrary in the change in control
agreement, payments under the change in
13
control agreements are limited so that they will not constitute an "excess
parachute payment" under Section 280G of the Internal Revenue Code.
RECOGNITION AND RETENTION PLAN. During the fiscal year ended June 30,
2002, Dearborn Financial Corporation adopted, and Dearborn Financial
Corporation's stockholders approved, the Dearborn Financial Corporation 2002
Recognition and Retention Plan (the "Recognition and Retention Plan"). Pursuant
to the Recognition and Retention Plan, 4,240 shares (split adjusted) of common
stock were awarded to each of our non-employee directors, Messrs. Denney, Lorey,
Meador, Richter and Sonntag, and 11,534 shares (split adjusted) were awarded to
President, Chief Executive Officer and Director Fischer. Grants vest over five
years, commencing February 26, 2004.
The following table sets forth information with respect to equity
compensation plans (other than the employee stock ownership plan) that have been
approved by stockholders.
================================ ============================ ======================== =============================
NUMBER OF SECURITIES TO BE
ISSUED UPON EXERCISE OF NUMBER OF SECURITIES
EQUITY COMPENSATION PLANS OUTSTANDING OPTIONS AND WEIGHTED AVERAGE REMAINING AVAILABLE FOR
APPROVED BY STOCKHOLDERS RIGHTS EXERCISE PRICE ISSUANCE UNDER PLAN
-------------------------------- ---------------------------- ------------------------ -----------------------------
Recognition and Retention Plan 19,643 (1) N/A 0
-------------------------------- ---------------------------- ------------------------ -----------------------------
Total 19,643 N/A 0
================================ ============================ ======================== =============================
---------------
(1) Represents shares that have been granted but have not yet vested.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The common stock of DSA Financial Corporation is registered pursuant to
Section 12(g) of the Exchange Act. The officers and directors of DSA Financial
Corporation and beneficial owners of greater than 10% of the Common Stock ("10%
beneficial owners") are required to file reports on Forms 3, 4 and 5 with the
SEC disclosing beneficial ownership and changes in beneficial ownership of the
shares of common stock. SEC rules require disclosure in DSA Financial
Corporation's Proxy Statement and Annual Report on Form 10-KSB of the failure of
an officer, director or 10% beneficial owner of the shares of common stock to
file a Form 3, 4 or 5 on a timely basis. Based on DSA Financial Corporation's
review of such ownership reports, DSA Financial Corporation believes that
Director Lorey filed one late Form 4 with respect to a purchase of 1,000 shares
of common stock, and that no other officer, director or 10% beneficial owner of
DSA Financial Corporation failed to file such ownership reports on a timely
basis for the fiscal year ended June 30, 2005.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Federal law and regulations generally require that all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the general public and
must not involve more than the normal risk of repayment or present other
unfavorable features. However, regulations permit executive officers and
directors to receive the same terms through benefit or compensation plans that
are widely available to other employees, as long as the director or executive
officer is not given preferential treatment compared to the other participating
employees, and Dearborn Savings Association has extended loans to certain of its
executive officers and directors pursuant to these regulations.
14
Other than as described above, all loans, the principal balances of
which exceeded $60,000 at any time during the fiscal year ended June 30, 2005,
made by Dearborn Savings Association to executive officers, directors, immediate
family members of executive officers and directors, or organizations with which
executive officers and directors are affiliated, were 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.
PROPOSAL 2--DECREASE IN AUTHORIZED CAPITAL STOCK
DSA Financial Corporation's authorized capital stock consists of
6,000,000 shares, of which 5,000,000 are common stock, par value $0.01 per
share, and 1,000,000 are preferred stock, par value $0.01 per share. At the
Annual Meeting, DSA Financial Corporation's Board of Directors will ask
stockholders to approve an amendment to the Certificate of Incorporation to
decrease the number of authorized shares of DSA Financial Corporation's capital
stock from 6,000,000 to 2,510,000 shares, of which 2,500,000 will be shares of
common stock and 10,000 will be shares of preferred stock. Following the
amendment, Paragraph A of Article 4 of the Certificate of Incorporation would
read as follows:
A. The total number of shares of all classes of stock that the
Corporation shall have authority to issue is two million, five hundred and ten
thousand (2,510,000) consisting of:
1. Ten thousand (10,000) shares of Preferred Stock, par
value one cent ($0.01) per share (the "Preferred Stock"); and
2. Two million, five hundred thousand (2,500,000) shares of
Common Stock, par value one cent ($0.01) per share (the "Common Stock").
The proposed amendment is identical to the existing text in paragraph A
of Article 4 of the current Certificate of Incorporation, except that the
existing paragraph A provides that the total aggregate number of authorized
shares is 6,000,000, consisting of 5,000,000 shares of common stock and
1,000,000 shares of preferred stock.
OVERVIEW
Under Delaware law, DSA Financial Corporation is required to obtain
approval from its stockholders to amend its Certificate of Incorporation to
decrease the number of shares of capital stock authorized for issuance. After
taking into consideration DSA Financial Corporation's current outstanding equity
obligations, the Board of Directors has determined that it is desirable to
decrease the number of shares of capital stock authorized for issuance.
If approved by DSA Financial Corporation's stockholders, the change in
authorized shares would become effective as soon as reasonably practicable after
the Annual Meeting by filing a Certificate of Amendment to the Certificate of
Incorporation with the Secretary of State of the State of Delaware.
15
REASONS FOR PROPOSAL
DSA Financial Corporation's Certificate of Incorporation currently
authorizes the issuance of up to 6,000,000 shares of capital stock, consisting
of 5,000,000 shares of common stock and 1,000,000 shares of preferred stock. The
following table sets forth DSA Financial Corporation's actual capitalization
based on equity ownership information as of September 29, 2005:
PERCENT OF TOTAL
NUMBER OF SHARES AUTHORIZED
------------------- ----------------
Shares of common stock issued
and outstanding............... 1,644,242 27.4%
Shares of common stock issuable
upon exercise of existing
options....................... -- --
------------- ------------
Total......................... 1,644,242 27.4%
============= ============
As of September 29, 2005, DSA Financial Corporation had 3,355,758 shares
of common stock available for future issuances in excess of the outstanding
shares of common stock. As of September 29, 2005, all 1,000,000 shares of
preferred stock authorized under the Certificate of Incorporation were unissued.
As a Delaware corporation, DSA Financial Corporation pays an annual
corporation franchise tax under Delaware law. The amount of the tax is based
upon the total number of shares authorized by the Certificate of Incorporation.
For the calendar year ended December 31, 2004, DSA Financial Corporation's
annual franchise tax was $31,200, which was a prorated amount over ten months.
DSA Financial Corporation expects that adoption of the proposed amendment will
reduce the annual Delaware franchise tax to approximately $15,700, thereby
resulting in an estimated annual savings to DSA Financial Corporation of
$21,800.
The Board of Directors believes that it will still have available for
issuance a number of authorized shares of common stock and preferred stock that
will be adequate to provide for future stock issuances to meet DSA Financial
Corporation's future corporate needs. The remaining authorized shares would be
available for issuance from time to time at the discretion of the Board of
Directors, without further stockholder action except as may be required for a
particular transaction by law or other agreements and restrictions. The shares
would be issuable for any proper corporate purpose, including future
acquisitions, capital-raising transactions consisting of either equity or
convertible debt, stock splits or issuances under current and future stock
plans.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO DECREASE
THE NUMBER OF SHARES OF COMMON STOCK AND PREFERRED STOCK AUTHORIZED FOR ISSUANCE
UNDER THE CERTIFICATE OF INCORPORATION.
16
PROPOSAL 3 -- APPROVAL OF THE
DSA FINANCIAL CORPORATION 2005 STOCK-BASED INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
DSA Financial Corporation 2005 Stock-Based Incentive Plan (the "2005 Plan"), to
provide officers, employees and directors of DSA Financial Corporation and
Dearborn Savings Association with additional incentives to share in the growth
and performance of DSA Financial Corporation. The following is a summary of the
material features of the 2005 Plan, which is qualified in its entirety by
reference to the provisions of the 2005 Plan attached hereto as Exhibit A.
GENERAL
The 2005 Plan will remain in effect for a period of ten years following
adoption by stockholders. The 2005 Plan authorizes the issuance of up to 110,298
shares of common stock of DSA Financial Corporation pursuant to grants of
incentive and non-statutory stock options, reload options or restricted stock
awards, provided that no more than 42,422 shares may be issued as restricted
stock awards, and no more than 67,876 shares may be issued pursuant to exercise
of stock options. As of September 29, 2005, the last reported trade in our
shares of common stock was for $11.80.
The 2005 Plan will be administered by the entire Board of Directors or a
committee appointed by the Board of Directors, which will include two or more
directors of DSA Financial Corporation who must be "non-employee directors," as
such term is defined for purposes of Rule 16(b) of the Exchange Act. For
purposes of the 2005 Plan, both the entire Board of Directors and the committee
are referred to as the "Committee." The Committee has full and exclusive power
within the limitations set forth in the 2005 Plan to make all decisions and
determinations regarding the selection of participants and the granting of
awards; establishing the terms and conditions relating to each award; adopting
rules, regulations and guidelines for carrying out the 2005 Plan's purposes; and
interpreting and otherwise construing the 2005 Plan. The 2005 Plan also permits
the Board of Directors or the Committee to delegate to one or more officers of
DSA Financial Corporation the Committee's power to (i) designate officers and
employees who will receive awards, and (ii) determine the number of awards to be
received by them. Each award shall be on such terms and conditions, consistent
with the 2005 Plan, as the Committee administering the 2005 Plan may determine.
ELIGIBILITY
Employees and non-employee directors of DSA Financial Corporation or its
subsidiaries are eligible to receive awards under the 2005 Plan. There are five
non-employee directors of DSA Financial Corporation and six employees eligible
to participate in the 2005 Plan.
17
TYPES OF AWARDS
The Committee may determine the type and terms and conditions of awards
under the 2005 Plan. Awards may be granted in a combination of incentive and
non-statutory stock options, reload options or restricted stock awards. Awards
may include the following:
STOCK OPTIONS. A stock option gives the recipient or "optionee" the
right to purchase shares of common stock at a specified price for a specified
period of time. The exercise price shall not be less than the fair market value
on the date the stock option is granted. Fair market value for purposes of the
2005 Plan means the average of the closing high bid and low asked price of the
common stock as reported on the OTC Electronic Bulletin Board (or the average of
the high and low quoted sales prices of the common stock on the Nasdaq Stock
Market) on the day the option is granted or, if the common stock is not traded
on the date of grant, the fair market value shall be determined by the Committee
in good faith on an appropriate basis. Stock options may not be granted with a
term that is longer than ten years from the date of grant.
RELOAD OPTIONS. Reload options entitle the holder, who has delivered
shares that he or she owns as payment of the exercise price for option stock, to
a new option to acquire additional shares equal in amount to the shares he or
she has traded. Reload options may also be granted to replace option shares
retained by the employer for payment of the option holder's withholding tax. The
option price at which additional shares of stock can be purchased by the option
holder through the exercise of a reload option is equal to the market value of
the shares on the date the original option is exercised. The option period
during which the reload option may be exercised expires at the same time as that
of the original option that the holder has exercised. Reload options issued on
the exercise of incentive stock options may be incentive stock options or
non-statutory stock options.
STOCK AWARDS. Stock awards under the 2005 Plan will be granted only in
whole shares of common stock. Stock awards will be subject to conditions
established by the Committee which are set forth in the award agreement. Any
stock award granted under the 2005 Plan will be subject to vesting as determined
by the Committee. Awards will be evidenced by agreements approved by the
Committee which set forth the terms and conditions of each award.
TRANSFERABILITY OF AWARDS. Generally, all awards, except non-statutory
stock options, granted under the 2005 Plan will be nontransferable except by
will or in accordance with the laws of intestate succession. Stock awards may be
transferable pursuant to a qualified domestic relations order. At the
Committee's sole discretion, non-statutory stock options may be transferred for
valid estate planning purposes that are permitted by the Internal Revenue Code
and the Exchange Act. During the life of the participant, awards can only be
exercised by him or her. The Committee may permit a participant to designate a
beneficiary to exercise or receive any rights that may exist under the 2005 Plan
upon the participant's death.
CHANGE IN CONTROL. Upon the occurrence of an event constituting a change
in control of DSA Financial Corporation as defined in the 2005 Plan, all stock
options will become fully vested, and all stock awards then outstanding shall
vest free of restrictions.
18
EFFECT OF TERMINATION OF SERVICE. Unless the Committee specifies
otherwise at the time an award is granted, upon the occurrence of the
participant's termination of service due to death, disability or normal
retirement, all unvested stock options and stock awards made to the participant
will become fully vested. Unless the Committee specifies otherwise, a person who
is a member of the Board of Directors shall not be deemed to have retired until
service as a director or director emeritus has ceased.
TAX CONSEQUENCES
The following are the material federal tax consequences generally
arising with respect to awards granted under the 2005 Plan. The grant of an
option will create no tax consequences for an optionee or DSA Financial
Corporation. The optionee will have no taxable income upon exercising an
incentive stock option and DSA Financial Corporation will receive no deduction
when an incentive stock option is exercised. Upon exercising a non-statutory
stock option, the optionee must recognize ordinary income equal to the
difference between the exercise price and the fair market value of the stock on
the date of exercise, and DSA Financial Corporation will be entitled to a
deduction for the same amount. The tax treatment for an optionee on a
disposition of shares acquired through the exercise of an option depends on how
long the shares have been held and whether such shares were acquired by
exercising an incentive stock option or a non-statutory stock option. Generally,
there will be no tax consequences to DSA Financial Corporation in connection
with the disposition of shares acquired pursuant to an option, except that DSA
Financial Corporation may be entitled to a deduction if shares acquired pursuant
to an incentive stock option are sold before the required holding periods have
been satisfied.
With respect to other awards granted under the 2005 Plan that are
settled either in cash or in stock, the participant must recognize ordinary
income equal to the cash or the fair market value of shares or other property
received and DSA Financial Corporation will be entitled to a deduction for the
same amount. With respect to awards that are settled in stock, the participant
must recognize ordinary income equal to the fair market value of the shares
received at the time the shares became transferable or not subject to
substantial risk of forfeiture, whichever occurs earlier. DSA Financial
Corporation will be entitled to a deduction for the same amount.
NEW PLAN BENEFITS TABLE
Grants and awards under the 2005 Plan are discretionary and the
Committee has not yet determined to whom awards will be made and the terms and
conditions of such awards. As a result, no information is provided concerning
the benefits to be delivered under the 2005 Plan to any individual or group of
individuals.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
THE DSA FINANCIAL CORPORATION 2005 STOCK-BASED INCENTIVE PLAN.
19
PROPOSAL 4--RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
DSA Financial Corporation's independent registered public accounting
firm for the fiscal year ended June 30, 2005 were Grant Thornton LLP. The Audit
Committee of the Board of Directors has reappointed Grant Thornton LLP to
continue as the independent registered public accounting firm of DSA Financial
Corporation for the fiscal year ending June 30, 2006, subject to ratification of
such appointment by the stockholders. It is expected that a representative of
Grant Thornton LLP will attend the Annual Meeting and will be given the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from stockholders present at the Annual
Meeting.
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by Grant Thornton LLP during the fiscal years
ended June 30, 2005 and 2004:
AUDIT FEES. The aggregate fees billed to DSA Financial Corporation by
Grant Thornton LLP for professional services rendered by Grant Thornton LLP for
the audit of DSA Financial Corporation's annual financial statements and
services that are normally provided by Grant Thornton LLP in connection with
statutory and regulatory filings and engagements was $50,480 and $25,900 during
the years ended June 30, 2005 and 2004, respectively.
AUDIT RELATED FEES. The aggregate fees billed to DSA Financial
Corporation by Grant Thornton LLP for assurance and related services rendered by
Grant Thornton LLP that are reasonably related to the performance of the audit
of and review of the financial statements and that are not already reported in
"Audit Fees," above, was $5,880 and $61,205 during the years ended June 30, 2005
and 2004, respectively. Included in audit-related fees for the years ended June
30, 2005 and 2004, are $3,000 and $60,810, respectively, in fees in connection
with DSA Financial Corporation's stock offering.
TAX FEES. The aggregate fees billed to DSA Financial Corporation by
Grant Thornton LLP for professional services rendered by Grant Thornton LLP for
tax compliance, tax advice and tax planning was $4,600 and $3,950 during the
years ended June 30, 2005 and 2004, respectively. These services primarily
included the review of tax returns and quarterly tax provisions.
ALL OTHER FEES. The aggregate fees billed to DSA Financial Corporation
by Grant Thornton LLP that are not described above was $220 and $450 during the
years ended June 30, 2005 and 2004, respectively.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF
INDEPENDENT AUDITOR
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to particular service or category of services and is
generally subject to a specific budget. The Audit Committee has delegated
pre-approval authority to its Chairman when expedition of services is necessary.
The independent registered
20
public accounting firm and management are required to periodically report to the
full Audit Committee regarding the extent of services provided by the
independent registered public accounting firm in accordance with this
pre-approval, and the fees for the services performed to date. For the years
ended June 30, 2005 and 2004, 100% of audit related fees, tax fees and all other
fees were approved by the Audit Committee prior to engagement.
The Audit Committee has considered whether the provision of non-audit
services, which relate primarily to tax services rendered, is compatible with
maintaining Grant Thornton LLP's independence. The Audit Committee concluded
that performing such services does not affect Grant Thornton LLP's independence
in performing its function as auditor of DSA Financial Corporation.
THE AUDIT COMMITTEE RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF DSA FINANCIAL CORPORATION FOR THE FISCAL YEAR ENDING JUNE 30,
2006.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
The Bylaws of DSA Financial Corporation provide an advance notice
procedure for certain business, or nominations to the Board of Directors, to be
brought before an annual meeting. In order for a stockholder to properly bring
business before an annual meeting, or to propose a nominee to the Board, the
stockholder must give written notice to the Secretary of DSA Financial
Corporation not less than ninety (90) days before the date fixed for such
meeting; provided, however, that in the event that less than one hundred (100)
days notice or prior public disclosure of the date of the annual meeting is
given or made, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. The notice must include the stockholder's name, record address, and
number of shares owned, describe briefly the proposed business, the reasons for
bringing the business before the annual meeting, and any material interest of
the stockholder in the proposed business. In the case of nominations to the
Board of Directors, certain information regarding the nominee must be provided.
Nothing in this paragraph shall be deemed to require DSA Financial Corporation
to include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal that does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
The date on which the 2006 Annual Meeting of Stockholders is expected to
be held is November 10, 2005. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2006 Annual
Meeting of Stockholders must be given to DSA Financial Corporation no later than
August 10, 2005.
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STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in DSA Financial Corporation's
proxy material for next year's Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at DSA Financial
Corporation's office, 118 Walnut Street, Lawrenceburg, Indiana 47025, no later
than June 13, 2006. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Karleen McGraw
Karleen McGraw
Secretary
Lawrenceburg, Indiana
October 11, 2005
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EXHIBIT A
DSA FINANCIAL CORPORATION
2005 STOCK-BASED INCENTIVE PLAN
1. PURPOSE OF PLAN.
The purposes of this 2005 Stock-Based Incentive Plan are to provide
incentives and rewards to those employees and directors largely responsible for
the success and growth of DSA Financial Corporation and its Affiliates, and to
assist all such corporations in attracting and retaining directors, executives
and other key employees with experience and ability.
2. DEFINITIONS.
(A) "Affiliate" means any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Sections 424(e) and
424(f) of the Code.
(B) "Association" means Dearborn Savings Association, F.A.
(C) "Award" means one or more of the following: Restricted Stock
Awards, Stock Options and other types of Awards, as set forth in Section 6 of
the Plan.
(D) "Board of Directors" means the board of directors of the
Company.
(E) "Change in Control" means a change in control of a nature that:
(i) would be required to be reported in response to Item
1(a) of the current report on Form 8-K, as in effect on
the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or
(ii) results in a Change in Control of the Association or the
Company within the meaning of the Home Owners' Loan Act,
as amended ("HOLA"), and applicable rules and
regulations promulgated thereunder, as in effect at the
time of the Change in Control; or
(iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (a) any "person"
(as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of Company's
outstanding securities except for any securities
purchased by the Association's employee stock ownership
plan or trust; or (b) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority
thereof, provided that any person becoming a director
subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose
nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he were a member of the
Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all
the assets of the Association or the Company or similar
transaction in which the Association or Company is not
the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the
Company, by someone other than the current management of
the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company
or similar transaction with one or more corporations as
a result of which the outstanding shares of the class of
securities then subject to the Plan
are exchanged for or converted into cash or property or
securities not issued by the Company; or (e) a tender
offer is made for 25% or more of the voting securities
of the Company and the shareholders owning beneficially
or of record 25% or more of the outstanding securities
of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror.
Notwithstanding anything in this subsection to the
contrary, a Change in Control shall not be deemed to
have occurred upon the conversion of the Company's
mutual holding company parent to stock form, or in
connection with any reorganization used to effect such a
conversion.
(F) "Code" means the Internal Revenue Code of 1986, as amended.
(G) "Committee" means the committee designated, pursuant to Section
3 of the Plan, to administer the Plan.
(H) "Common Stock" means the common stock of the Company, par value
$0.01 per share.
(I) "Company" means DSA Financial Corporation and any entity that
succeeds to the business of DSA Financial Corporation.
(J) "Disability" means a physical or mental condition, determined by
the Committee after review of those medical reports deemed satisfactory for such
purpose, which renders the Participant totally and permanently incapable of
engaging in any substantial gainful employment based on the Participant's
education, training and experience.
(K) "Employee" means any person employed by the Company or an
Affiliate. Directors who are also employed by the Company or an Affiliate shall
be considered Employees under the Plan.
(L) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(M) "Exercise Price" means the price at which an individual may
purchase a share of Common Stock pursuant to an Option.
(N) "Fair Market Value" means closing high bid and low asked price
with respect to a share of Common Stock as quoted on the National Association of
Securities Dealers' "Electronic Bulletin Board" or any similar system then in
use, or if the shares of Common Stock listed on the Nasdaq Stock Market, the
average of the high and low quoted sales prices on the day in question or, if
there have been no sales on such date, the mean between the closing high bid and
low asked quotations with respect to a share of Common Stock on such date, or if
none of the foregoing is applicable, the fair market value on such date of a
share of Common Stock as the Committee shall determine in good faith on an
appropriate basis.
(O) "Incentive Stock Option" means a Stock Option granted under the
Plan, that is intended to meet the requirements of Section 422 of the Code.
(P) "Non-Statutory Stock Option" means a Stock Option granted to an
individual under the Plan that is not intended to be and is not identified as an
Incentive Stock Option, or an Option granted under the Plan that is intended to
be and is identified as an Incentive Stock Option, but that does not meet the
requirements of Section 422 of the Code.
(Q) "OTS" means the Office of Thrift Supervision.
(R) "Option" or "Stock Option" means an Incentive Stock Option or a
Non-Statutory Stock Option, as applicable.
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(S) "Outside Director" means a member of the Board(s) of Directors
of the Company or an Affiliate who is not also an Employee.
(T) "Participant" means an Employee or Outside Director who is
granted an Award pursuant to the terms of the Plan.
(U) "Plan" means this DSA Financial Corporation 2005 Stock-Based
Incentive Plan.
(V) "Reload Option" means an option to acquire shares of Common
Stock equivalent to the number of shares (i) used by a Participant to pay for an
Option, or (ii) deducted from any distribution in order to satisfy income tax
required to be withheld, based upon the terms set forth in Section 6.1(a)(v) of
the Plan.
(W) "Restricted Stock" means shares of Common Stock granted under
the Plan that are subject to forfeiture until satisfaction of the conditions of
their grant.
(X) "Restricted Stock Award" means an Award of shares of restricted
stock granted to an individual pursuant to Section 6(b) of the Plan.
(Y) "Retirement" means retirement from employment with the Company
or an Affiliate on or after the Employee's attainment of age 65; provided,
however, that unless the Committee specifies otherwise, an Employee who is also
a member of the Board of Directors, shall not be deemed to have retired until
both service as an Employee and as a member of the Board of Directors has
ceased. "Retirement" with respect to an Outside Director means termination of
service on the board(s) of directors of the Company or any Affiliate in
accordance with applicable Company policy following the provision of written
notice to such board(s) of directors of the Outside Director's intention to
retire. Notwithstanding the foregoing, unless the Committee specifies otherwise,
a director shall not be deemed to have retired if such director becomes a
director emeritus following his termination of service as a director.
3. ADMINISTRATION.
(A) The Committee shall administer the Plan. The Committee shall
consist of the entire Board of Directors, or two or more disinterested directors
of the Company, who shall be appointed by the Board of Directors. A member of
the Board of Directors shall be deemed to be disinterested only if he or she
satisfies: (i) such requirements as the Securities and Exchange Commission may
establish for non-employee directors administering plans intended to qualify for
exemption under Rule 16b-3 (or its successor) of the Exchange Act; and (ii) if,
considered appropriate by the Board of Directors in its sole discretion, such
requirements as the Internal Revenue Service may establish for outside directors
acting under plans intended to qualify for exemption under Section 162(m)(4)(C)
of the Code. The Board of Directors or the Committee may also delegate, to the
extent permitted by applicable law and not inconsistent with Rule 16b-3, to one
or more officers of the Company, its powers under this Plan to (a) designate the
officers and employees of the Company who will receive Awards and (b) determine
the number of Awards to be received by them, pursuant to a resolution that
specifies the total number of rights or options that may be granted under the
delegation, provided that no officer may be delegated the power to designate
himself or herself as a recipient of such options or rights.
(B) Subject to paragraph (a) of this Section 3, the Committee shall:
(i) select the individuals who are to receive grants of
Awards under the Plan;
(ii) determine the type, number, vesting requirements and
other features and conditions of Awards made under the
Plan;
(iii) interpret the Plan and Award Agreements (as defined
below); and
(iv) make all other decisions related to the operation of the
Plan.
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(C) Each Award granted under the Plan shall be evidenced by a
written agreement (i.e., an "Award Agreement"). Each Award Agreement shall
constitute a binding contract between the Company or an Affiliate and the
Participant, and every Participant, upon acceptance of an Award Agreement, shall
be bound by the terms and restrictions of the Plan and the Award Agreement. The
terms of each Award Agreement shall be set in accordance with the Plan, but each
Award Agreement may also include any additional provisions and restrictions
determined by the Committee. In particular, and at a minimum, the Committee
shall set forth in each Award Agreement:
(i) the type of Award granted;
(ii) the Exercise Price for any Option;
(iii) the number of shares or rights subject to the Award;
(iv) the expiration date of the Award;
(v) the manner, time and rate (cumulative or otherwise) of
exercise or vesting of the Award; and
(vi) the restrictions, if any, placed on the Award, or upon
shares which may be issued upon the exercise or vesting
of the Award.
The Chairman of the Committee and such other directors and employees as
shall be designated by the Committee are hereby authorized to execute Award
Agreements on behalf of the Company or an Affiliate and to cause them to be
delivered to the recipients of Awards granted under the Plan.
4. ELIGIBILITY.
Subject to the terms of the Plan, Employees and Outside Directors, as
the Committee shall determine from time to time, shall be eligible to
participate in the Plan.
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS.
5.1 Shares Available. Subject to the provisions of Section 7, the
capital stock that may be delivered under this Plan shall be shares of the
Company's authorized but unissued Common Stock and any shares of its Common
Stock held as treasury shares.
5.2 Share Limits. Subject to adjustments, if any, provided in
Section 8 (and except for shares awarded pursuant to the exercise of a Reload
Option) the maximum number of shares of Common Stock that may be delivered
pursuant to Awards granted under this Plan (the "Share Limit") equals 110,298
shares. The following limits also apply with respect to Awards granted under
this Plan:
(A) The maximum number of shares of Common Stock that may be
delivered pursuant to Stock Options granted under this Plan is 67,876 shares.
The maximum number of Stock Options that may be granted to any employee is
16,969 shares.
(B) The maximum number of shares of Common Stock that may be
delivered pursuant to Restricted Stock Awards granted under this Plan is 42,422
shares.
5.3 Awards Settled in Cash, Reissue of Awards and Shares. To the
extent that an Award is settled in cash or a form other than shares of Common
Stock, the shares that would have been delivered had there been no such cash or
other settlement shall not be counted against the shares available for issuance
under this Plan. Shares that are subject to or underlie Awards which expire or
for any reason are cancelled or terminated, are forfeited, fail to vest, or for
any other reason are not paid or delivered under this Plan shall again be
available for subsequent Awards under this Plan. Shares that are exchanged by a
Participant or withheld
28
by the Company as full or partial payment in connection with any Award under the
Plan, as well as any shares exchanged by a Participant or withheld by the
Company to satisfy the tax withholding obligations related to any Award under
the Plan, shall be available for subsequent Awards under this Plan.
5.4 Reservation of Shares; No Fractional Shares; Minimum Issue. The
Company shall at all times reserve a number of shares of Common Stock sufficient
to cover the Company's obligations and contingent obligations to deliver shares
with respect to Awards then outstanding under this Plan. No fractional shares
shall be delivered under this Plan. The Committee may pay cash in lieu of any
fractional shares in settlements of Awards under this Plan. No fewer than 100
shares may be purchased on exercise of any Award unless the total number
purchased or exercised is the total number at the time available for purchase or
exercise under the Award.
6. AWARDS.
6.1 The Committee shall determine the type or types of Award(s) to
be made to each selected eligible individual. Awards may be granted singly, in
combination or in tandem. Awards also may be made in combination or in tandem
with, in replacement of, as alternatives to, or as the payment form for grants
or rights under any other employee or compensation plan of the Company. The
types of Awards that may be granted under this Plan are:
(A) STOCK OPTIONS.
The Committee may, subject to the limitations of this Plan and
the availability of shares of Common Stock reserved but not previously awarded
under the Plan, grant Stock Options to Employees and Outside Directors, subject
to terms and conditions as it may determine, to the extent that such terms and
conditions are consistent with the following provisions:
Exercise Price. The Exercise Price shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock on the date
of grant.
Terms of Options. In no event may an individual exercise an
Option, in whole or in part, more than ten (10) years from the date of grant.
Non-Transferability. Unless otherwise determined by the
Committee, an individual may not transfer, assign, hypothecate, or dispose of an
Option in any manner, other than by will or the laws of intestate succession.
The Committee may, however, in its sole discretion, permit the transfer or
assignment of a Non Statutory Stock Option, if it determines that the transfer
or assignment is for valid estate planning purposes and is permitted under the
Code and Rule 16b-3 of the Exchange Act. For purposes of this Section 6.1(a), a
transfer for valid estate planning purposes includes, but is not limited to,
transfers:
(1) to a revocable inter vivos trust, as to which an
individual is both settlor and trustee;
(2) for no consideration to: (a) any member of the
individual's Immediate Family; (b) a trust
solely for the benefit of members of the
individual's Immediate Family; (c) any
partnership whose only partners are members of
the individual's Immediate Family; or (d) any
limited liability corporation or other corporate
entity whose only members or equity owners are
members of the individual's Immediate Family.
(3) For purposes of this Section, "Immediate Family"
includes, but is not necessarily limited to, a
Participant's parents, grandparents, spouse,
children, grandchildren, siblings (including
half brothers and sisters), and individuals who
are family members by adoption. Nothing
contained in this Section shall be construed to
require the Committee to give its approval to
any transfer or assignment of any Non-Statutory
Stock Option or portion thereof, and approval to
transfer or assign any Non-Statutory Stock
Option or portion thereof does not mean that
such approval will be given with respect to any
other Non-Statutory
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Stock Option or portion thereof. The transferee
or assignee of any Non-Statutory Stock Option
shall be subject to all of the terms and
conditions applicable to such Non-Statutory
Stock Option immediately prior to the transfer
or assignment and shall be subject to any other
conditions prescribed by the Committee with
respect to such Non-Statutory Stock Option.
Special Rules for Incentive Stock Options. Notwithstanding the
foregoing provisions, the following rules shall further apply to grants of
Incentive Stock Options:
(1) If an Employee owns or is treated as owning, for
purposes of Section 422 of the Code, Common
Stock representing more than ten percent (10%)
of the total combined voting securities of the
Company at the time the Committee grants the
Incentive Stock Option (a "10% Owner"), the
Exercise Price shall not be less than one
hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the date of grant.
(2) An Incentive Stock Option granted to a 10% Owner
shall not be exercisable more than five (5)
years from the date of grant.
(3) To the extent the aggregate Fair Market Value of
shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the
first time by an Employee during any calendar
year under the Plan or any other stock option
plan of the Company, exceeds $100,000, or such
higher value as may be permitted under Section
422 of the Code, Incentive Stock Options in
excess of the $100,000 limit shall be treated as
Non-Statutory Stock Options. Fair Market Value
shall be determined as of the date of grant for
each Incentive Stock Option.
(4) Each Award Agreement for an Incentive Stock
Option shall require the individual to notify
the Committee within ten (10) days of any
disposition of shares of Common Stock under the
circumstances described in Section 421(b) of the
Code (relating to certain disqualifying
dispositions).
Simultaneously with the grant of any Option to a Participant, the
Committee may grant the Participant the right to receive a Reload Option with
respect to all or some of the shares covered by such Option. The right to
receive a Reload Option may be granted to a Participant who satisfies all or
part of the exercise price of the Option with shares of Common Stock (as
described in Section 14(c) below), provided, however, that the right to receive
a Reload Option upon the exercise of an Option shall expire upon the termination
of employment or service. The Reload Option represents an additional Option to
acquire the same number of shares of Common Stock as is used by the Participant
to pay for the original Option or to replace Common Stock withheld by the
Association for payment of a Participant's withholding tax under Section 9.5. A
Reload Option is subject to all of the same terms and conditions as the original
Option, including the remaining Option exercise term, except that (i) the
exercise price of the shares of Common Stock subject to the Reload Option will
be determined at the time the original Option is exercised, (ii) such Reload
Option will conform to all provisions of the Plan at the time the original
Option is exercised, and (iii) a Reload Option issued on the exercise of an
Incentive Stock Option may be an Incentive Stock Option or a Non-statutory Stock
Option, subject to the application of the limitation set forth in Code Section
422(d). Once a Reload Option is issued on the exercise of an Option, no further
reload will be permitted on the exercise of such Reload Option.
(B) RESTRICTED STOCK AWARDS.
The Committee may make grants of Restricted Stock Awards, which shall
consist of the grant of some number of shares of Common Stock to an individual
upon such terms and conditions as it may determine, to the extent such terms and
conditions are consistent with the following provisions:
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(i) Grants of Stock. Restricted Stock Awards may only be
granted in whole shares of Common Stock.
Non-Transferability. Except to the extent permitted by the Code, the
rules promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(1) The recipient of a Restricted Stock Award grant
shall not sell, transfer, assign, pledge, or
otherwise encumber shares subject to the grant
until full vesting of such shares has occurred.
For purposes of this section, the separation of
beneficial ownership and legal title through the
use of any "swap" transaction is deemed to be a
prohibited encumbrance.
(2) Unless otherwise determined by the Committee,
and except in the event of the Participant's
death or pursuant to a qualified domestic
relations order, a Restricted Stock Award grant
is not transferable and may be earned only by
the individual to whom it is granted during his
or her lifetime. Upon the death of a
Participant, a Restricted Stock Award is
transferable by will or the laws of descent and
distribution. The designation of a beneficiary
shall not constitute a transfer.
(3) If the recipient of a Restricted Stock Award is
subject to the provisions of Section 16 of the
Exchange Act, shares of Common Stock subject to
the grant may not, without the written consent
of the Committee (which consent may be given in
the Award Agreement), be sold or otherwise
disposed of within six (6) months following the
date of grant.
Issuance of Certificates. Unless otherwise held in trust and registered
in the name of the Plan trustee (if appointed by the Company), reasonably
promptly after the date of grant of shares of Common Stock pursuant to a
Restricted Stock Award, the Company shall cause to be issued a stock certificate
evidencing such shares, registered in the name of the Participant to whom the
Restricted Stock Award was granted; provided, however, that the Company may not
cause a stock certificate to be issued unless it has received a stock power duly
endorsed in blank with respect to such shares. Each stock certificate shall bear
the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions
against transfer) contained in the DSA Financial Corporation
2005 Stock-Based Incentive Plan and the related Award Agreement
entered into between the registered owner of such shares and DSA
Financial Corporation or its Affiliates. A copy of the Plan and
Award Agreement is on file in the office of the Corporate
Secretary of DSA Financial Corporation."
This legend shall not be removed until the individual becomes vested in
such shares pursuant to the terms of the Plan and Award Agreement. Each
certificate issued pursuant to this Section 6.1(b) shall be held by the Company
or its Affiliates, unless the Committee determines otherwise.
Treatment of Dividends. Participants are entitled to all dividends and
other distributions declared and paid on all shares of Common Stock subject to a
Restricted Stock Award, from and after the date such shares are awarded or from
and after such later date as may be specified by the Committee in the Award
Agreement, and the Participant shall not be required to return any such
dividends or other distributions to the Company in the event of forfeiture of
the Restricted Stock Award. In the event the Committee establishes a trust for
the Plan, the Committee may elect to distribute dividends and other
distributions at the time the Restricted Stock Award vests or pay the dividends
(or other distributions) directly to the Participants. Voting of Restricted
Stock Awards. Participants who are granted Restricted Stock Awards may vote or
direct the Plan trustee to vote, as applicable, all unvested shares of Common
Stock subject to their Restricted Stock Awards.
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6.2 Payments and Deferrals. Payment for Awards may be made in the
form of cash, Common Stock, or combinations thereof as the Committee shall
determine, and with such restrictions as it may impose. The Committee may also
require or permit Participants to elect to defer the issuance of shares or the
settlement of Awards in cash under such rules and procedures as it may establish
under this Plan. The Committee may also provide that deferred settlements
include the payment or crediting of interest or other earnings on the deferral
amounts, or the payment or crediting of dividend equivalents where the deferred
amounts are denominated in shares.
6.3 Consideration for Awards. The Exercise Price for any Award
granted under this Plan or the Common Stock to be delivered pursuant to an
Award, as applicable, may be paid by means of any lawful consideration as
determined by the Committee, including, without limitation, one or a combination
of the following methods:
(A) cash, check payable to the order of the Company, or electronic
funds transfer;
(B) the delivery of previously owned shares of Common Stock;
(C) reduction in the number of shares otherwise deliverable pursuant
to the Award; or
(D) subject to such procedures as the Committee may adopt, pursuant
to a "cashless exercise" with a third party who provides financing for the
purposes of (or who otherwise facilitates) the purchase or exercise of Awards.
In no event shall any shares newly-issued by the Company be issued for less than
the minimum lawful consideration for such shares or for consideration other than
consideration permitted by applicable state law. In the event that the Committee
allows a Participant to exercise an Award by delivering shares of Common Stock
previously owned by such Participant and unless otherwise expressly provided by
the Committee, any shares delivered which were initially acquired by the
Participant from the Company (upon exercise of a stock option or otherwise) must
have been owned by the Participant at least six months as of the date of
delivery. Shares of Common Stock used to satisfy the Exercise Price of an Option
shall be valued at their Fair Market Value on the date of exercise. The Company
will not be obligated to deliver any shares unless and until it receives full
payment of the Exercise Price and any related withholding obligations under
Section 9.5, or until any other conditions applicable to exercise or purchase
have been satisfied. Unless expressly provided otherwise in the applicable Award
Agreement, the Committee may at any time eliminate or limit a Participant's
ability to pay the purchase or Exercise Price of any Award or shares by any
method other than cash payment to the Company.
7. EFFECT OF TERMINATION OF SERVICE ON AWARDS.
7.1 General. The Committee shall establish the effect of a
termination of employment or service on the continuation of rights and benefits
available under an Award or this Plan and, in so doing, may make distinctions
based upon, among other things, the cause of termination and type of Award.
Unless the Committee shall specifically state otherwise at the time an Award is
granted, all Awards to an Employee or Outside Director shall vest immediately
upon such individual's death, Disability or Retirement.
7.2 Events Not Deemed Terminations of Employment or Service. Unless
Company policy or the Committee provides otherwise, the employment relationship
shall not be considered terminated in the case of (a) sick leave, (b) military
leave, or (c) any other leave of absence authorized by the Company or the
Committee; provided that, unless reemployment upon the expiration of such leave
is guaranteed by contract or law, such leave is for a period of not more than 90
days. In the case of any Employee on an approved leave of absence, continued
vesting of the Award while on leave may be suspended until the Employee returns
to service, unless the Committee otherwise provides or applicable law otherwise
requires. In no event shall an Award be exercised after the expiration of the
term set forth in the Award Agreement.
7.3 Effect of Change of Affiliate Status. For purposes of this Plan
and any Award, if an entity ceases to be an Affiliate of the Company, a
termination of employment or service shall be deemed to have occurred with
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respect to each individual who does not continue as an Employee or Outside
Director with another entity within the Company after giving effect to the
Affiliate's change in status.
8. ADJUSTMENTS; ACCELERATION UPON A CHANGE IN CONTROL.
8.1 Adjustments. Upon, or in contemplation of, any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split ("stock split"); any merger, combination,
consolidation, or other reorganization; any spin-off, split-up, or similar
extraordinary dividend distribution with respect to the Common Stock (whether in
the form of securities or property); any exchange of Common Stock or other
securities of the Company, or any similar, unusual or extraordinary corporate
transaction affecting the Common Stock; or a sale of all or substantially all
the business or assets of the Company in its entirety; then the Committee shall,
in such manner, to such extent (if any) and at such times as it deems
appropriate and equitable under the circumstances:
(A) proportionately adjust any or all of: (1) the number and
type of shares of Common Stock (or other securities) that thereafter may be made
the subject of Awards (including the specific Share Limits, maximums and numbers
of shares set forth elsewhere in this Plan); (2) the number, amount and type of
shares of Common Stock (or other securities or property) subject to any or all
outstanding Awards; (3) the grant, purchase, or Exercise Price of any or all
outstanding Awards; (4) the securities, cash or other property deliverable upon
exercise or payment of any outstanding Awards; or (5) the performance standards
applicable to any outstanding Awards; or
(B) make provision for a cash payment or for the assumption,
substitution or exchange of any or all outstanding Awards, based upon the
distribution or consideration payable to holders of the Common Stock.
8.2 The Committee may adopt such valuation methodologies for
outstanding Awards as it deems reasonable in the event of a cash or property
settlement and, in the case of Options, may base such settlement solely upon the
excess if any of the per share amount payable upon or in respect of such event
over the Exercise Price or base price of the Award. With respect to any Award of
an Incentive Stock Option, the Committee may not make an adjustment that causes
the Option to cease to qualify as an Incentive Stock Option without the consent
of the affected Participant.
8.3 Upon any of the events set forth in Section 8.1, the Committee
may take such action prior to such event to the extent that the Committee deems
the action necessary to permit the Participant to realize the benefits intended
to be conveyed with respect to the Awards in the same manner as is or will be
available to stockholders of the Company generally. In the case of any stock
split or reverse stock split, if no action is taken by the Committee, the
proportionate adjustments contemplated by Section 8.1(a) above shall
nevertheless be made.
8.4 Automatic Acceleration of Awards. Upon a Change in Control of
the Company, each Option then outstanding shall become fully vested and all
Restricted Stock Awards then outstanding shall fully vest free of restrictions.
9. MISCELLANEOUS PROVISIONS.
9.1 Compliance with Laws. This Plan, the granting and vesting of
Awards under this Plan, the offer, issuance and delivery of shares of Common
Stock, the acceptance of promissory notes and/or the payment of money under this
Plan or under Awards are subject to compliance with all applicable federal and
state laws, rules and regulations (including, but not limited to, state and
federal securities laws) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of securities law counsel for the
Company, be necessary or advisable in connection therewith. The person acquiring
any securities under this Plan will, if requested by the Company, provide such
assurances and representations to the Company as may be deemed necessary or
desirable to assure compliance with all applicable legal and accounting
requirements.
9.2 Claims. No person shall have any claim or rights to an Award (or
additional Awards, as the case may be) under this Plan, subject to any express
contractual rights to the contrary (set forth in a document other than this
Plan).
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9.3 No Employment/Service Contract. Nothing contained in this Plan
(or in any other documents under this Plan or in any Award Agreement) shall
confer upon any Participant any right to continue in the employ or other service
of the Company, constitute any contract or agreement of employment or other
service or affect an Employee's status as an employee-at-will, nor interfere in
any way with the right of the Company to change a Participant's compensation or
other benefits, or terminate his or her employment or other service, with or
without cause. Nothing in this Section 9.3, however, is intended to adversely
affect any express independent right of such Participant under a separate
employment or service contract other than an Award Agreement.
9.4 Plan Not Funded. Awards payable under this Plan shall be payable
in shares of Common Stock or from the general assets of the Company. No
Participant, beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock, except
as expressly provided otherwise) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related documents),
nor the creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
beneficiary or other person. To the extent that a Participant, beneficiary or
other person acquires a right to receive payment pursuant to any Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
9.5 Tax Withholding. Upon any exercise, vesting, or payment of any
Award, or upon the disposition of shares of Common Stock acquired pursuant to
the exercise of an Incentive Stock Option prior to satisfaction of the holding
period requirements of Section 422 of the Code, the Company shall have the
right, at its option, to:
(A) require the Participant (or the Participant's personal
representative or beneficiary, as the case may be) to pay or provide for payment
of at least the minimum amount of any taxes which the Company may be required to
withhold with respect to such Award or payment; or
(B) deduct from any amount otherwise payable in cash to the
Participant (or the Participant's personal representative or beneficiary, as the
case may be) the minimum amount of any taxes which the Company may be required
to withhold with respect to such cash payment.
In any case where a tax is required to be withheld in connection with the
delivery of shares of Common Stock under this Plan, the Committee may, in its
sole discretion (subject to Section 9.1) grant (either at the time of the Award
or thereafter) to the Participant the right to elect, pursuant to such rules and
subject to such conditions as the Committee may establish, to have the Company
reduce the number of shares to be delivered by (or otherwise reacquire) the
appropriate number of shares, valued in a consistent manner at their Fair Market
Value or at the sales price, in accordance with authorized procedures for
cashless exercises, necessary to satisfy the minimum applicable withholding
obligation on exercise, vesting or payment. In no event shall the shares
withheld exceed the minimum whole number of shares required for tax withholding
under applicable law. The Company may, with the Committee's approval, accept one
or more promissory notes from any Participant in connection with taxes required
to be withheld upon the exercise, vesting or payment of any Award under this
Plan; provided, however, that any such note shall be subject to terms and
conditions established by the Committee and the requirements of applicable law.
9.6 Effective Date, Termination and Suspension, Amendments.
(A) This Plan is effective upon receipt of shareholder
approval. Unless earlier terminated by the Board, this Plan shall terminate at
the close of business on the day before the tenth anniversary of the effective
date. After the termination of this Plan either upon such stated expiration date
or its earlier termination by the Board, no additional Awards may be granted
under this Plan, but previously granted Awards (and the authority of the
Committee with respect thereto, including the authority to amend such Awards)
shall remain outstanding in accordance with their applicable terms and
conditions and the terms and conditions of this Plan.
(B) Board Authorization. Subject to applicable laws and
regulations, the Board of Directors may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan, in whole or in part; provided,
however, that no amendment may have the effect of repricing Options. No Awards
may be granted during any period that the Board of Directors suspends this Plan.
A-10
(C) Stockholder Approval. To the extent then required by
applicable law or any applicable listing agency or required under Sections 162,
422 or 424 of the Code to preserve the intended tax consequences of this Plan,
or deemed necessary or advisable by the Board, any amendment to this Plan shall
be subject to stockholder approval.
(D) Limitations on Amendments to Plan and Awards. No
amendment, suspension or termination of this Plan or change affecting any
outstanding Award shall, without the written consent of the Participant, affect
in any manner materially adverse to the Participant any rights or benefits of
the Participant or obligations of the Company under any Award granted under this
Plan prior to the effective date of such change. Changes, settlements and other
actions contemplated by Section 8 shall not be deemed to constitute changes or
amendments for purposes of this Section 9.6.
9.7 Governing Law; Compliance with Regulations; Construction;
Severability.
(A) This Plan, the Awards, all documents evidencing Awards
and all other related documents shall be governed by, and construed in
accordance with, the laws of the State of Indiana, except to the extent that
federal law shall apply.
(B) Severability. If a court of competent jurisdiction holds
any provision invalid and unenforceable, the remaining provisions of this Plan
shall continue in effect.
(C) Plan Construction; Rule 16b-3. It is the intent of the
Company that the Awards and transactions permitted by Awards be interpreted in a
manner that, in the case of Participants who are or may be subject to Section 16
of the Exchange Act, qualify, to the maximum extent compatible with the express
terms of the Award, for exemption from matching liability under Rule 16b-3
promulgated under the Exchange Act. Notwithstanding the foregoing, the Company
shall have no liability to any Participant for Section 16 consequences of Awards
or events affecting Awards if an Award or event does not so qualify.
9.8 Captions. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
9.9 Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board of Directors or the Committee to
grant Awards or authorize any other compensation, with or without reference to
the Common Stock, under any other plan or authority.
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REVOCABLE PROXY
DSA FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 10, 2005
The undersigned hereby appoints the proxy committee of the Board of
Directors of DSA Financial Corporation (the "Company"), with full powers of
substitution to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company that the undersigned is entitled to vote
at the 2005 Annual Meeting of Stockholders ("Meeting") to be held at the office
of Dearborn Savings Association, F.A. located at 141 Ridge Avenue, Lawrenceburg,
Indiana, at 4:00 p.m., (Eastern Standard Time) on November 10, 2005. The proxy
committee is authorized to cast all votes to which the undersigned is entitled
as follows:
FOR VOTE WITHHELD
1. The election as directors of the nominees listed [ ] [ ]
below (except as marked to the contrary below)
for a three-year term:
Edward L. Fischer
Richard Meador, III
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY
INDIVIDUAL NOMINEE, MARK "WITHHELD" AND WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED.
_____________________________________________
_____________________________________________
FOR AGAINST ABSTAIN
2. The approval of an amendment to the Company's
Certificate of Incorporation to reduce the [ ] [ ] [ ]
number of authorized shares of common stock and
preferred stock.
FOR AGAINST ABSTAIN
3. The approval of the DSA Financial Corporation
2005 Stock-Based Incentive Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. The ratification of the appointment of Grant
Thornton LLP as independent registered public [ ] [ ] [ ]
accounting firm for the fiscal year ending June
30, 2006.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THE
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect. This proxy may also be revoked by sending written notice to
the Secretary of the Company at the address set forth on the Notice of Annual
Meeting of Stockholders, or by the filing of a later dated proxy statement prior
to a vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of notice of the Meeting, a proxy statement dated
October 11, 2005, and audited financial statements.
Dated: _________________, 2005 [ ] Check Box if You Plan to
Attend Meeting
__________________________________ __________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________________ __________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
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