SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
DSA Financial Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
........................................................
2) Aggregate number of securities to which transaction applies:
........................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
........................................................
4) Proposed maximum aggregate value of transaction:
........................................................
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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. located at 141 Ridge Avenue, Lawrenceburg,
Indiana at 4:00 p.m. (Indiana 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 Dearborn Savings Association, F.A., the wholly
owned subsidiary of the Company. Directors and officers of the Company and
Dearborn Savings 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,
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. located at 141 Ridge Avenue, Lawrenceburg, Indiana, on
November 10, 2005 at 4:00 p.m., Indiana 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, 2005; 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 Dearborn Savings Association, F.A., 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
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.
--------------------------------------------------------------------------------
DSA Financial Corporation
118 Walnut Street
Lawrenceburg, Indiana 47025
(812) 537-0940
-----------------------------
PROXY STATEMENT
-----------------------------
ANNUAL MEETING OF STOCKHOLDERS
November 10, 2005
-----------------------------
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., Indiana 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
10, 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 (the "Exchange Act").
The following table sets forth, as of September 29, 2005, the shares of Common
Stock beneficially owned by each person who was the beneficial owner of more
than 5% of the outstanding shares of Common Stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership (1) Outstanding
------------------------ ------------------ -------------------
David P. Lorey
118 Walnut Street
Lawrenceburg, Indiana 47025
---------------------------
(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.
Term to Expire Shares of Common
Position(s) Held With Following Fiscal Stock Beneficially
DSA Financial Director Year Ending Owned on Percent of
Name Age Corporation Since (1) June 30 September 29, 2005 Class
---------------------- ------- ----------------------- --------- ------------------ -------------------- ----------
NOMINEES
Edward L. Fischer 52 President, Chief 2002 2005 64,874(2) 2.7
Executive Officer
and Director
Richard Meador, III 69 Director 1983 2005 5,716 *
DIRECTORS CONTINUING IN OFFICE
Ronald J. Denney 56 Director 1976 2006 44,524(3) 2.7
Dr. Dennis Richter 56 Director 1986 2006 53,868(4) 3.3
Robert P. Sonntag 70 Chairman of the Board 1971 2008 36,131 2.2%
David P. Lorey 48 Director 1992 2008 80,658(5) 4.9
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas J. Sicking 64 Vice President N/A N/A 20,988(6) 1.3
Steven R. Doll 52 Vice President and N/A N/A 3,434(7) *
Chief Financial
Officer
Delmar C. Schiferl 43 Vice President/Director N/A N/A 4,457(8) *
of Lending
---------------------
* Less than 1%.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, 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 12,293 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 7,035 shares held by Mr. Lorey's daughters.
(6) Includes 6,049 shares held by the employee stock ownership plan.
(7) Includes 64 shares held by the employee stock ownership plan.
(8) Includes 61 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 Dearborn Financial Corporation (the
predecessor of DSA Financial Corporation) met ___ times during fiscal 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 Dearborn 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 one time 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 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 to be elected 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 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 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 each for the
preceding year's annual meeting. However, if the date of the annual meeting is
advanced more the 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;
8
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 Securities Exchange Act of 1934,
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 $_________ per year, in addition to the
amount deferred as described below, for service on the Board of Directors. In
addition, 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 $____ 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 $___________ during the year ended June 30, 2005.
Executive Compensation
The following table sets forth for the three years ended June 30, 2005,
certain information as to the total remuneration paid by Dearborn 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 Other Annual Restricted Options/ All Other
Name and Principal Ended Compensation Stock SARS LTIP Compensation
Position 6/30 Salary Bonus (1) Awards (2) (#) Payouts (3)
------------------------- ----- --------- --------- ------------ ---------- -------- -------- ------------
Edward L. Fischer, 2005 $________ $________ $_______ $ -- -- $ -- $________
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 _______ 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 plans to enter an
employment agreement with President and Chief Executive Officer Edward L.
Fischer. DSA Financial Corporation will be a 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 expected to be $88,910, subject to normal
adjustments to reflect annual salary increases for the fiscal year ending June
30, 2005. 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
11
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. 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 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. intends to
enter into severance agreements with three other officers of Dearborn Savings
Association, which would provide certain benefits in the event of a change in
control of Dearborn Savings Association or DSA Financial Corporation. Each of
the severance 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). These protections against termination
without cause in the event of a change in control are frequently offered by
other financial institutions, and Dearborn Savings Association may be at a
competitive disadvantage in attracting and retaining key employees if it does
not offer similar protections.
Following a change in control of DSA Financial Corporation or Dearborn
Savings Association, F.A., an officer is entitled to a payment under the change
in control agreement if
12
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
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, _____ shares (split adjusted) of Dearborn
Financial Corporation common stock were awarded to each of our non-employee
directors, Messrs. Denney, Lorey, Meador, Richter and Sonntag, and ______ shares
(split adjusted) were awarded to President, Chief Executive Officer and Director
Fischer. Grants vest over five years, commencing February 26, 2004.
====================================================================================================================
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 (1) N/A 0
--------------------------------------------------------------------------------------------------------------------
Total 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 no
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.
13
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.
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 $.01 per share, and
1,000,000 are preferred stock, par value $0.01 per share (the "Preferred
Stock"). 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
14
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.
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................... %
Shares of common stock issuable upon
exercise of existing options.. -- --
-------------- --------------
Total......................... %
============== ==============
As of September 29, 2005, DSA Financial Corporation had ___________ 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 $31,214. DSA Financial Corporation expects that
adoption of the proposed amendment will reduce the annual Delaware franchise tax
to $12,590, thereby resulting in an estimated annual savings to DSA Financial
Corporation of $18,624.
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 the DSA Financial
Corporation's obligations described above and for 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.
15
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.
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 $___________.
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
disinterested directors of DSA Financial Corporation who must be "non-employee
directors," as such term is defined for purposes of Rule 16(b) of the Securities
Exchange Act of 1934. 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 outside directors of DSA Financial Corporation or its
subsidiaries are eligible to receive awards under the 2005 Plan. There are five
outside directors of DSA Financial Corporation and ___________ employees
eligible to participate in the 2005 Plan.
16
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.
Stock options are either "incentive" stock options or "non-qualified" stock
options. Incentive stock options have certain tax advantages and must comply
with the requirements of Section 422 of the Internal Revenue Code. Only
employees are eligible to receive incentive stock options. Shares of common
stock purchased upon the exercise of a stock option must be paid for in full at
the time of exercise (i) either in cash or with stock of DSA Financial
Corporation which was owned by the participant for at least six months prior to
delivery, or (ii) by reduction in the number of shares deliverable pursuant to
the stock option, or (iii) subject to a "cashless exercise" through a third
party. Cash may be paid in lieu of any fractional shares under the 2005 Plan and
generally no fewer than 100 shares may be purchased on exercise of an award
unless the total number of shares available for purchase or exercise pursuant to
an award is less than 100 shares. Stock options are subject to vesting
conditions and restrictions as determined by the Committee.
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.
17
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 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.
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.
18
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.
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, 2004 was 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 shareholders 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 $_________ and $_________ 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 $_________ and $61,205 during the years ended June 30,
2005 and 2004, respectively. Included in audit-related fees for the year ended
June 30, 2004 are $60,810 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 $_________ 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.
19
All Other Fees. The aggregate fees billed to DSA Financial Corporation by
Grant Thornton LLP that are not described above was $_________ 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 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
20
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 8, 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.
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
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.
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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.
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(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.
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(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.
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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.
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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 118,783 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 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
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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.
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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 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
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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.
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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.
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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.
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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.
A-11
IN WITNESS WHEREOF, DSA Financial Corporation has caused the Plan to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested as of the __________ day of ___________________, 2005.
Date Approved by Stockholders:________________________________
Effective Date:_______________________________________________
ATTEST: DSA FINANCIAL CORPORATION
____________________________ ________________________________
Secretary
A-12
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., (Indiana time) on November 10, 2005. The proxy committee
is authorized to cast all votes to which the undersigned is entitled as follows:
VOTE
FOR 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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