SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
DIAMOND HILL INVESTMENT GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):............
(4) Proposed maximum aggregate value of transaction:......................
(5) Total fee paid: ......................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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:..........................................................
[Logo]
March 26, 2002
Dear Shareholders:
We cordially invite you to attend the Annual Meeting of the
Shareholders of Diamond Hill Investment Group, Inc. (the "Company") to be held
at the Company's office located at 1105 Schrock Road, 8th Floor Board Room,
Columbus, Ohio 43229, on Thursday, May 2, 2002, at 2:00 p.m.
The attached Notice of Annual Meeting and Proxy Statement describes the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of the Company. Directors and officers of the
Company will be present to respond to any appropriate questions you may have. 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. Your vote is
important, regardless of the number of shares you own.
Sincerely,
R. H. Dillon
President & CEO
[Logo]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 2, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Diamond Hill Investment Group, Inc. (the "Company") will be held at the
Company's office located at 1105 Schrock Road, 8th Floor Board Room, Columbus,
Ohio 43229, on Thursday, May 2, 2002, at 2:00 p.m. to consider and act upon the
following matters:
1. To elect three directors to serve on the Board of Directors;
2. To approve the proposed reincorporation of the Company in Ohio
through the merger of the Company into a newly-formed,
wholly-owned Ohio subsidiary; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Any action may be taken on any one of the foregoing proposals at the
Annual Meeting or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned. Pursuant to the Company's
bylaws, the Board of Directors has fixed the close of business on March 15,
2002, as the record date for determination of the shareholders entitled to vote
at the Annual Meeting and any adjournments thereof. A complete list of
shareholders of the Company entitled to vote at the Annual Meeting will be
available for examination for purposes germane to the Annual Meeting by any
shareholder, during the ten days prior to the Annual Meeting, at the Company's
office. You are requested to complete and sign the enclosed form of proxy which
is solicited by the Board of Directors of the Company and to mail it promptly in
the enclosed envelope, or you may vote by phone by using the control number
identified on your proxy or electronically by Internet in accordance with the
instructions on your proxy. The proxy will not be used if you attend, and vote
at, the Annual Meeting in person or if you revoke the proxy prior to the Annual
Meeting.
By order of the Board of Directors
Sandra L. Quinn
Secretary
Columbus, Ohio
March 26, 2002
THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO OBTAIN A QUORUM. AN ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF THE ENVELOPE IS
MAILED IN THE UNITED STATES.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
DIAMOND HILL INVESTMENT GROUP, INC.
TO BE HELD ON MAY 2, 2002
This Proxy Statement is furnished to the shareholders of Diamond Hill
Investment Group, Inc., a Florida corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Shareholders of the Company to be held on May 2, 2002, and any
adjournment thereof. A copy of the Notice of Annual Meeting accompanies this
Proxy Statement. It is anticipated that the mailing of the Proxy Statement will
commence on March 26, 2002. Only shareholders of record at the close of business
on March 15, 2002, the record date for the Annual Meeting (the "Record Date"),
will be entitled to vote at the Annual Meeting.
The purposes of this Annual Meeting are (1) to elect three directors to
serve on the Board of Directors, two for a three year term and one for a one
year term; (2) to approve the proposed reincorporation of the Company in Ohio
through the merger of the Company into a newly-formed, wholly-owned Ohio
subsidiary (the "Reincorporation"); and (3) to transact such other business as
may properly come before the Annual Meeting or any adjournment thereof. The
Company is not currently aware of any other matters which will come before the
Annual Meeting.
The shareholder's form of proxy, when duly executed and received by the
Company will be voted by the proxies at the Annual Meeting as directed. A proxy
returned without direction about business to be transacted at the Annual Meeting
will be voted (i) in favor of the election of Dr. Roger D. Blackwell, Diane D.
Reynolds and R. H. Dillon as directors of the Company and (ii) in favor of the
Reincorporation. The proxies will use their best judgment regarding other
matters that properly come before the Annual Meeting.
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
Summary.......................................................................1
Questions and Answers About the Reincorporation...............................3
Cautionary Statement Regarding Forward-Looking Statements.....................5
The Annual Meeting............................................................6
Revocability of Proxy.........................................................7
Voting Securities and Principal Holders.......................................7
Quorum........................................................................7
Security Ownership of Certain Beneficial Owners and Management................8
Directors and Executive Officers.............................................10
Nominees............................................................10
Directors Whose Terms Continue Until the 2003 Annual Meeting........11
Directors Whose Terms Continue Until the 2004 Annual Meeting........12
Other Executive Officers............................................12
Committees and Annual Meetings...............................................13
Report of the Audit Committee................................................13
Executive Compensation.......................................................17
Summary Compensation Table...................................................17
Fiscal 2001 Aggregated Option Exercises; Fiscal Year End Option Values.......17
Incentive Compensation Plan.........................................18
Stock Option Plan...................................................18
Director Compensation...............................................18
Proposal 1 Election of Directors...........................................18
Proposal 2 Approval of Reincorporation.....................................19
Reasons for the Reincorporation.....................................19
Reincorporation Implemented Through Plan of Merger..................19
Abandonment of Reincorporation......................................20
No Change Will be Made in the Business of the Company...............20
Terms of Directors/Removal of Directors.............................21
Dissenters' Rights..................................................21
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Comparison of Florida and Ohio Law and Corresponding Provisions
of Organizational Documents.........................................23
Anti-Takeover Provisions...................................24
Standards for Directors; Director Liability;
Indemnification............................................26
Amendment of Articles of Incorporation.....................28
Amendment of Code of Regulations/Bylaws....................28
Approval of Mergers and Consolidations.....................29
Dissenters' Rights.........................................29
Preemptive Rights..........................................29
Cumulative Voting..........................................29
Accounting Treatment/Federal Tax Consequences.......................30
Dividends in Arrears................................................30
Federal and State Regulatory Requirements...........................30
Compliance with Section 16(a) of the Exchange Act............................31
Expense and Manner of Solicitation...........................................31
Form 10-KSB..................................................................31
Independent Auditors.........................................................31
Shareholder Proposals for 2003 Annual Meeting................................31
Other Business...............................................................32
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SUMMARY
This summary highlights selected information from this Proxy Statement
concerning only the Reincorporation. It does not contain all of the information
that is important to you. To understand the Reincorporation more fully, you
should carefully read this Proxy Statement and the other documents to which we
refer in this Proxy Statement, including the Agreement and Plan of Merger. Page
references are included in this summary to direct you to a more complete
description of certain topics discussed in this Proxy Statement.
Throughout this Proxy Statement, the term "Merger" refers to the
proposed Reincorporation-related merger of the Company with and into DHO, Inc.,
an Ohio corporation and a wholly-owned subsidiary of the Company ("DHO"). If the
Merger is consummated, the separate existence of the Company will be terminated
and DHO will be the surviving corporation. The term "Merger Agreement" refers to
the Agreement and Plan of Merger by and between the Company and DHO, a copy of
which is included at the back of this Proxy Statement as Appendix A.
THE COMPANIES
Diamond Hill Investment Group, Inc.
1105 Schrock Road
Suite 437
Columbus, Ohio 43229
(800) 733-2265
The Company, an investment advisory services holding company, is a
Florida corporation and has been in existence since April 1990. The Company has
two wholly-owned operating subsidiaries, Diamond Hill Capital Management, Inc.,
an Ohio corporation ("DHCM"), and Diamond Hill Securities, Inc., an Ohio
corporation ("DHS"). DHCM is a Securities and Exchange Commission ("Commission")
registered investment adviser and serves as the advisor to the Diamond Hill
Focus Fund, Diamond Hill Large Cap Fund and Diamond Hill Small Cap Fund open-end
mutual funds. DHCM is also the manager of the general partner of Diamond Hill
Investment Partners, L.P., an Ohio limited investment partnership. DHS is an
NASD registered dealer and a Commission registered adviser. DHS serves as an
advisor to the Diamond Hill Bank & Financial Fund.
DHO, Inc.
1105 Schrock Road
Suite 437
Columbus, Ohio 43229
(800) 733-2265
DHO is an Ohio corporation and a wholly-owned subsidiary of the
Company. DHO currently has no operations or assets, and was formed for the
purpose of consummating the Merger and operating the business and operations of
the Company as an Ohio corporation following the Merger.
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THE REINCORPORATION
(PAGE 19)
Under the Reincorporation, the Company will merge with and into DHO
with DHO being the surviving corporation. Following the Merger, the Company's
State of incorporation will be changed from Florida to Ohio. We encourage you to
read the Merger Agreement because it is the legal document that governs the
Merger.
REASONS FOR THE REINCORPORATION
(PAGE 19)
The Board of Directors of the Company has unanimously recommended the
Reincorporation because it believes the Reincorporation is in the best interests
of the Company and its shareholders and will, among other things, simplify
corporate administration and reduce costs in part by eliminating the Company's
obligation to file certain reports and other documents with the State of
Florida.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
Common Stock, without par value, of the Company ("Shares") is required to
approve the Reincorporation. Directors and executive officers of the Company are
entitled to vote 102,821.8 Shares, or approximately 5.6% of the outstanding
Shares, and have indicated that they will vote their Shares in favor of the
Reincorporation.
DISSENTERS' RIGHTS
(PAGE 21)
If you do not vote in favor of the Reincorporation, you will be
entitled to assert dissenters' rights under Florida law. To perfect your
dissenter's right, you must deliver to the Company before May 2, 2002, written
notice of your intent to demand payment of the fair value of your Shares (if the
Reincorporation is effectuated), and you must not vote your Shares in favor of
the Reincorporation. Your proxy or vote against the Reincorporation will not
constitute this required written notice. For additional information on your
dissenter's rights, see the section of this Proxy Statement entitled
"Dissenters' Rights". The relevant section of Florida law governing this process
is attached to this Proxy Statement as Appendix B.
CONDITIONS TO COMPLETING THE REINCORPORATION
Completion of the Reincorporation depends upon the satisfaction of a
number of conditions, including, among others, that the Company's shareholders
must approve the Reincorporation by a vote of a majority of the outstanding
Shares.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
(PAGE 30)
The Company will not recognize any gain or loss as a result of the
Reincorporation. The Reincorporation will constitute a constitute a
reorganization under Section 368 of the Internal Revenue Code (the "Code"). The
Company's shareholders will recognize no gain or loss as a result of the
Reincorporation and, in determining the federal tax basis and holding period of
their new Shares, will retain the tax basis and include the holding period that
applied to their old Shares. In addition, under Section 368 of the Code, DHO
will not recognize any gain or loss as a result of the Reincorporation and will
succeed without adjustment to the tax attributes of the Company. The Company's
shareholders should consult their own tax advisors about the possible state,
local, or foreign income tax consequences that may result from the
Reincorporation.
QUESTIONS AND ANSWERS ABOUT THE REINCORPORATION
Q: WHY DOES THE COMPANY WANT TO REINCORPORATE IN OHIO?
A: The Company believes that the Reincorporation is in the best interests
of the Company and its shareholders and will, among other things,
simplify corporate administration and reduce costs in part by
eliminating the Company's obligation to file certain reports and other
documents with the State of Florida.
Q: IF I DO NOT VOTE IN FAVOR OF THE REINCORPORATION, WHAT ARE MY RIGHTS?
A: If you are a shareholder of the Company as of the Record Date, you
deliver timely notice and you do not vote in favor of the
Reincorporation, you will have the right under the Florida Business
Corporation Act to demand payment of the fair value of your Shares (if
the Reincorporation is effectuated).
Q: WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE REINCORPORATION?
A: No.
Q: WHEN DO YOU EXPECT THE REINCORPORATION TO BE COMPLETED?
A: We plan to complete the Reincorporation as soon as possible after the
Annual Meeting, assuming the required shareholder approval is obtained
and all of the other conditions have been fulfilled.
Q: WHEN AND WHERE WILL THE ANNUAL MEETING TAKE PLACE?
A: The Annual Meeting will be held at the Company's office located at 1105
Schrock Road, 8th Floor Board Room, Columbus, Ohio 43229, Thursday, May
2, 2002, at 2:00 p.m.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading this Proxy Statement, indicate on your enclosed
proxy card how you want your Shares to be voted on this issue. Then
sign and mail the proxy promptly
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in the enclosed envelope, or vote by phone by using the control number
identified on your proxy or electronically by Internet in accordance
with the instructions on your proxy. The proxy will not be used if you
attend, and vote at, the Annual Meeting in person or if you revoke the
proxy prior to the Annual Meeting.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF
RECORD AND AS A BENEFICIAL OWNER?
A: Many Company shareholders are beneficial owners in that they hold their
Shares through a stockbroker, bank or other nominee rather than
directly in their own name. As summarized below, there are some
distinctions between Shares held of record and those owned
beneficially.
Shareholder of Record. If your Shares are registered directly in your
name with the Company's transfer agent, you are considered, with
respect to those Shares, the shareholder of record and this Proxy
Statement is being sent directly to you by the Company. As a
shareholder of record, you have the right to grant your proxy directly
to the Company or to vote in person at the Annual Meeting. The Company
has enclosed a proxy card for your use.
Beneficial Owner. If your Shares are held in a stock brokerage account
or by a bank or other nominee, you are considered the beneficial owner
of the Shares held in street name and this Proxy Statement is being
forwarded to you by your broker or other nominee, who is considered,
with respect to those Shares, the shareholder of record. As the
beneficial owner, you have the right to direct your broker or other
nominee on how to vote. Your broker or other nominee has enclosed a
voting instruction card for your use. If you are a Company shareholder
whose Shares are not registered in your own name, you will need
additional documentation from your broker or other nominee to attend
the Annual Meeting and to vote your Shares at the Annual Meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your Shares only if you provide instructions on
how to vote. You should follow the directions provided to you by your
broker regarding how to instruct your broker to vote your Shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at
the Annual Meeting. If you are the record holder of the Shares, you can
do this in three ways:
o send the Company a written statement that you would like to
revoke your proxy; this written notice must be received by the
Company prior to the date of the Annual Meeting;
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o send the Secretary of the Company a new signed and later-dated
proxy card; this new proxy card must be received by the
Company prior to the date of the Annual Meeting; or
o attend the Annual Meeting and vote in person; however, your
attendance alone will not revoke your proxy.
For Shares held beneficially by you, but not as record holder, you may
change your vote by submitting new voting instructions to your broker
or nominee.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
A: Shares held directly in your name as the shareholder of record may be
voted in person at the Annual Meeting. If you choose to attend, please
bring the enclosed proxy card or proof of identification.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you are the record holder of the Shares and you sign and send in
your proxy and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the Reincorporation.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A: Not voting will have the same effect as voting against the
Reincorporation.
Q: SHOULD I SEND IN MY SHARE CERTIFICATE(S)?
A: No. If the Reincorporation is completed, you may, but are not required
to, exchange your Share certificates.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT THE REINCORPORATION OR HOW I CAN
SUBMIT MY PROXY?
A: If you have more questions about the Reincorporation or how to submit
your proxy, please call Sandra L. Quinn, the Company's Secretary, at
(614) 848-5100, extension 205.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995:
o Certain statements contained in "Summary," "Questions and
Answers About the Reincorporation" and "Proposal 2: Approval
of Reincorporation," including forecasts, projections and
descriptions of anticipated cost savings by the Company, or
the effects of the Reincorporation;
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o any statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "intends,"
"estimates," "projects" or similar expressions; and
o other statements contained in this Proxy Statement regarding
matters that are not historical facts.
Because these forward-looking statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the statements. Shareholders are cautioned not to place undue
reliance on these statements, which speak only as of the date of this Proxy
Statement.
Among the factors that could cause actual results to differ materially
are changes in laws, general economic conditions, fluctuation in interest rates,
increases in costs, level of competition, market acceptance of new and existing
products, capital expenditure amounts and other risks detailed from time to time
in the reports filed by the Company with the Commission.
The cautionary statements contained or referred to in this Proxy
Statement should be considered in connection with any subsequent
written or oral forward-looking statements that may be issued by the
Company or persons acting on its behalf. Except for its ongoing
obligations to disclose material information as required by the federal
securities laws, the Company undertakes no obligation to release
publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this Proxy Statement or to
reflect the occurrence of unanticipated events.
THE ANNUAL MEETING
The Annual Meeting will be held at the Company's office located at 1105
Schrock Road, 8th Floor Board Room, Columbus, Ohio 43229, on Thursday, May 2,
2002, at 2:00 p.m. Only shareholders of record at the close of business on the
Record Date will be entitled to vote at the Annual Meeting.
The purposes of this Annual Meeting are (1) to elect three directors to
serve on the Board of Directors, two for a three year term and one for a one
year term; (2) to approve the Reincorporation; and (3) to transact such other
business as may properly come before the Annual Meeting or any adjournment
thereof. The Company is not currently aware of any other matters which will come
before the Annual Meeting.
Your proxy, when duly executed and received by the Company will be
voted by the proxies at the Annual Meeting as you direct. A proxy returned
without direction about business to be transacted at the Annual Meeting will be
voted (i) in favor of the election of Dr. Roger D. Blackwell, Diane D. Reynolds
and R. H. Dillon as directors of the Company and (ii) in favor of the
Reincorporation. The proxies will use their best judgment regarding other
matters that properly come before the Annual Meeting.
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REVOCABILITY OF PROXY
The execution and delivery of the enclosed form of proxy by a
shareholder will not affect a shareholder's right to attend the Annual Meeting
and vote in person. Any shareholder giving a proxy may revoke it at any time
before it is exercised by delivering a later dated proxy or a written notice of
revocation to the Secretary of the Company at 1105 Schrock Road, Suite 437,
Columbus, Ohio 43229 or by giving notice of revocation at the Annual Meeting.
When a shareholder votes at the Annual Meeting, his or her vote will revoke any
proxy previously granted by the shareholder.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of the Record Date, there were 1,499,766.2 Shares which were
outstanding and entitled to vote at the Annual Meeting. Each Share may cast one
vote on each separate matter of business properly brought before the Annual
Meeting. There are no cumulative voting rights.
Under the rules of the Commission, boxes and a designated space are
provided on the form of proxy for shareholders to mark if they wish either to
abstain on a proposal presented for shareholder approval or to withhold
authority to vote for one or more nominees for election as a director of the
Company. Shares as to which the authority to vote is withheld will be counted
for quorum purposes but will not be counted toward the election of directors or
the approval of the Reincorporation. Abstentions are counted as present for
quorum purposes.
Broker-dealers who hold their customers' Shares in street name may,
under the applicable rules of the self-regulatory organization of which the
broker-dealers are members, sign and submit proxies for such Shares and may vote
Shares on routine matters, which, under such rules, typically include the
election of directors. However, broker-dealers may not vote Shares on other
matters, which would be considered non-routine, without specific instructions
from the customer who owns the Shares. Proxies signed and submitted by
broker-dealers which have not been voted on certain matters as described in the
previous sentence are referred to as broker non-votes. Such proxies count toward
the establishment of a quorum.
QUORUM
The Company can conduct business at the Annual Meeting only if holders
of a majority of the outstanding Shares entitled to vote are present, either in
person or by proxy. Abstentions will be counted in determining whether a quorum
has been reached. Assuming a quorum exists, the affirmative vote of a majority
of the Shares which are entitled to vote is necessary to approve the
Reincorporation. In the event that a quorum is not present at the time the
Annual Meeting is convened, a majority in interest of the holders of the Shares
represented in person or by proxy may adjourn the Annual Meeting, without notice
other than announcement at the Annual Meeting, until holders of the amount of
Shares requisite to constitute a quorum shall attend. At any such adjourned
Annual Meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the Annual Meeting as originally
called.
The Company will bear the cost of the Annual Meeting and the cost of
soliciting proxies, including the cost of mailing the proxy material. In
addition to solicitation by mail, directors,
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officers and employees of the Company (who will not be specifically compensated
for such services) may solicit proxies by telephone or otherwise.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only class of voting securities. The
following table sets forth, as of December 31, 2001, certain information
concerning share ownership of (a) all persons known by the Company to own
beneficially five percent or more of the outstanding Shares, (b) each director,
nominee and named executive officer of the Company, and (c) all executive
officers and directors of the Company, as a group, and the percentage of voting
power (assuming exercise of all options which are currently exercisable). Unless
otherwise indicated, the named persons exercise sole voting and investment power
over the Shares which are shown as beneficially owned by them.
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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
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COMMON SHARES WHICH CAN
BE ACQUIRED UPON
EXERCISE OF OPTIONS OR
NAME AND ADDRESS OF COMMON SHARES WARRANTS EXERCISABLE PERCENT OF
BENEFICIAL OWNER PRESENTLY HELD WITHIN 60 DAYS TOTAL CLASS(2)
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R. H. Dillon (3) 0 80,000 80,000 3.9%
46 East Sycamore Street
Columbus, Ohio 43206
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Larry A. Beres 8,500 8,000 16,500 (4)
7640 Whispering Oaks Trail
Tipp City, Ohio 45371
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Dr. Roger D. Blackwell 20,640 2,000 22,640 (4)
3380 Tremont Road
Columbus, Ohio 43221
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Richard Desich 5,490 2,000 7,490 (4)
36 Lake Avenue
Elyria, Ohio 44036
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Dr. James G. Mathias 18,945.6 13,000 31,945.6 1.6%
7707 Winding Way South
Tipp City, Ohio 45371
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David R. Meuse 41,698.2 0 41,698.2 2%
191 W. Nationwide Blvd.
Suite 600
Columbus, Ohio 43215
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John Rettig 6,548 4,000 10,548 (4)
826 Third Avenue
Fremont, Ohio 43420
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Diane D. Reynolds 0 0 0 --
88 E. Broad Street, St. 900
Columbus, Ohio 43215
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All directors and executive
officers as a group 102,821.8 129,400 232,221.8 11.3%
(10 persons) (5)
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(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all common shares reflected in the table.
(2) The percent of class is based upon (a) the number of Shares owned by
the named person plus the number of Shares as to which the named person
has the right to acquire beneficial ownership upon the exercise of
options or warrants exercisable within 60 days after December 31, 2001,
divided by (b) the total number of Shares which are issued and
outstanding as of December 31, 2001, plus the total number of Shares
which are subject to options or warrants exercisable within 60 days
after December 31, 2001.
(3) Individual named in the Summary Compensation Table.
(4) Represents ownership of less than 1% of the outstanding common shares
of the Company.
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(5) Includes 1,000 Shares and 10,400 Shares subject to options to purchase,
which are currently exercisable, held by Sandra L. Quinn, Vice
President and Secretary of the Company and 10,000 Shares subject to
options to purchase, which are currently exercisable, held by James F.
Laird, Jr., Chief Financial Officer and Treasurer of the Company.
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains the name, position and age of each
director and executive officer of the Company as of March 26, 2002. The Board of
Directors is currently divided into three classes with staggered three-year
terms. One class is subject to election at each annual meeting of shareholders.
Directors are elected to serve until the annual meeting of the shareholders
applicable to the election of Directors for their class, until their successors
are duly elected and qualified or until their earlier resignation, removal from
office, or death. If the Reincorporation is approved, following the effective
date of the Reincorporation, the Company will have nine Directors, the Board of
Directors will cease to be divided into three classes with staggered three-year
terms, and all Directors will be elected for one-year terms at each annual
meeting of shareholders.
The respective background of each director and executive officer is
described immediately following the below table. Each of the executive officers
devotes his or her full-time and efforts to the affairs of the Company.
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NAME POSITION AGE
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R. H. Dillon President and Director 45
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James F. Laird, Jr. Chief Financial Officer and Treasurer 46
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Sandra L. Quinn Vice President and Secretary 36
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Larry A. Beres Director 55
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Dr. Roger D. Blackwell Director 61
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Richard Desich Director 62
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Dr. James G. Mathias Director 49
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David R. Meuse Director 56
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John Rettig Director 61
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Diane D. Reynolds Director 42
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NOMINEES
R. H. Dillon, was appointed President of the Company in May 2000. He
also serves as the Chief Investment Officer of Diamond Hill Capital Management,
Inc. From 1997 through 2000, Mr. Dillon was a Vice President of Loomis, Sayles &
Company. From 1993 through 1997, Mr. Dillon was President and Chief Investment
Officer for Dillon Capital Management, an investment advisory firm acquired by
Loomis, Sayles in 1997. Mr. Dillon received his B.S. and M.A. degrees in
Business Administration with a major in Finance from The Ohio State University
and his M.B.A. degree from the University of Dayton. He received a C.F.A.
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designation from the Institute of Chartered Financial Analysts in 1982. Mr.
Dillon serves on the board of Lutheran Social Services.
Dr. Roger D. Blackwell was elected to serve on the Company's Board of
Directors in February 1999. Dr. Blackwell is a Professor of Marketing at the Max
M. Fisher College of Business at The Ohio State University and is also President
of Roger Blackwell Associates, Inc., a consulting firm in Columbus, Ohio. Dr.
Blackwell co-authored one of the leading books on consumers, entitled Consumer
Behavior. It is used by business schools throughout North America, Europe, Asia
and Africa. He has also written twenty-three other books on marketing strategy,
research, and global marketing. His most recent publications are From Mind to
Market, published by HarperBusiness and Customers Rule!, which was released by
Crown/Random House in 2001. Dr. Blackwell received his B.S. and M.S. degrees
from The University of Missouri and his Ph.D. from Northwestern University. He
resides in Columbus, Ohio, and serves on the boards of Airnet Systems, Inc.,
Applied Industrial Technologies (formerly Bearings, Inc.), Frontstep, Inc.,
Flex-Funds, Max & Erma's Restaurants, Intimate Brands and Anthony and Sylvan
Pools.
Diane D. Reynolds became a Director of the Company in April 2001. Ms.
Reynolds is a partner with the law firm of Benesch, Friedlander, Coplan &
Aronoff LLP and focuses her practice on mergers and acquisitions, divestitures,
business law, commercial law, corporate law, antitrust law, real estate, finance
and contracts. Ms. Reynolds has extensive experience in financing matters and in
the purchase and licensing of information technology hardware and software.
Prior to joining her law firm, Ms. Reynolds was engaged in a diverse corporate
practice with two Fortune 500 multinational corporations. She received a B.A. in
1982 from The Ohio State University, a J.D. in 1985 from Capital University and
an M.B.A. in 1999 from the University of Chicago.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2003 ANNUAL MEETING
Larry A. Beres became a Director of the Company in 1995. Mr. Beres is
Executive Vice President of Tooling Technology Group of Dayton, Ohio. He was
formerly President of Formex, Inc., a Dayton, Ohio supplier of systems to the
plastics industry. Mr. Beres graduated from Kent State University with a
Bachelor of Science Degree in Chemistry and has taken courses in the M.B.A.
Program at Kent State University.
Richard Desich became a Director of the Company in December 1999. Since
1974, Mr. Desich has been the owner and President of Mid-Ohio Securities. Mr.
Desich is also President of Equity Oil and Gas Funds Incorporated and General
Principal for Maddie Consulting. He has lectured throughout the United States at
various seminars and conferences on the topic of self-directed Individual
Retirement Accounts. Mr. Desich is a Director of Lorain County Community
College and the Lorain County Community Foundation and of Accel International
Corporation. He graduated from Ohio State University with a B.S. degree in
Finance.
Dr. James G. Mathias became a Director of the Company in 1993. Since
1988, Dr. Mathias has been a veterinarian practicing in Tipp City, Ohio, where
he owns the Tipp City Veterinary Hospital and Wellness Center. Dr. Mathias
attended the University of Texas and completed his education at The Ohio State
University, graduating from the College of Veterinary
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Medicine in 1978. He was a member of the Honor Society of Phi Zeta, a Veterinary
Honor Society. Dr. Mathias is founder and President of the Dayton North Women's
Center and is a speaker on Ratite Medicine. He is also on the Veterinary
Advisory Board of the Iams Company in Dayton, Ohio.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2004 ANNUAL MEETING
David R. Meuse was appointed by the Company's directors to serve on the
Company's Board of Directors in August 2000. Mr. Meuse is a Principal for
Stonehenge Holdings, Inc. ("Stonehenge") of Columbus, Ohio, where he is
responsible for managing its affairs. Prior to joining Stonehenge, Mr. Meuse was
the Chairman and Chief Executive Officer of Banc One Capital Holdings
Corporation ("BCHC"), the holding company for the investment banking, merchant
banking, securities brokerage, investment advisory and insurance activities of
Bank One Corporation. He came to BCHC in 1990 when Bank One Corporation acquired
Meuse, Rinker, Chapman, Endres & Brooks, a regional investment banking firm
which Mr. Meuse founded in 1981. He is an active investor in venture capital and
mezzanine finance opportunities, both personally and through Banc One Capital
Partners Corporation. Mr. Meuse received his B.A. in Political Science from John
Carroll University and subsequently took courses at Cleveland-Marshall College
of Law at Cleveland State University, and the University of Pennsylvania,
Wharton School of Finance, Securities Industry. Mr. Meuse serves on the board of
directors of the following: Alliance One Incorporated, Banc One Investment
Advisors, BBQ Development, Inc., Bluestone Corporation, Bopp-Busch Manufacturing
Company, Central Benefits Mutual Insurance Company, Columbus Association for the
Performing Arts (CAPA)), Columbus Museum of Art, Cornerstone Industrial Group,
MCE Companies, Inc., Omnimold, LLC, Orion Holdings Corporation, ORIX Real Estate
Capital Markets, LLC, RP&C International, Sportsworld Media Group, Stonehenge
Holdings, Inc. and The Columbus Foundation.
John Rettig was elected to the Board of Directors of the Company in
August 1998. Since 1970, Mr. Rettig has been President and C.O.O. of The Quality
Cleaners, Inc.. Mr. Rettig took courses at Bowling Green State University from
1960-1961 studying Business Administration. Mr. Rettig served in the Adjutant
General Corp of the U.S. Army from 1961-1963, and continued his education
through correspondence courses. Mr. Rettig served as Chairman and as a member of
the Board of Trustees for the Sandusky Metropolitan Housing Authority. He is
also on the board of Shoreline Properties, a ResortQuest Company.
OTHER EXECUTIVE OFFICERS
James F. Laird, Jr. was appointed as Chief Executive Officer and
Treasurer of the Company on December 31, 2001, and has served as President of
Diamond Hill Securities, Inc. since July 16, 2001. In his capacity with the
Company, Mr. Laird oversees all financial reporting aspects of the Company. As
President of Diamond Hill Securities, Inc., Mr. Laird's responsibilities are to
oversee broker-dealer operations and to increase distribution of the Diamond
Hill Family of Funds through various broker-dealer channels. Prior to joining
the Company, Mr. Laird was Senior Vice President of Villanova Capital, a
subsidiary of Nationwide, from 1999-2001. He was Vice President and General
Manager from 1995-1999, and Treasurer from 1987-1994, of Nationwide Advisory
Services, Inc. Mr. Laird was also Vice
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President of Cranston Securities from 1986-1987 and worked for KPMG Peat Marwick
from 1980-1986. Mr. Laird received his B.S.B.A. in accounting from The Ohio
State University. He is also a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants. In addition, he holds
several NASD licenses including Series 7, 24, 26, 27, 63.
Sandra L. Quinn began her employment with the Company in early 1991 and
currently serves as its Vice President and Secretary, as well as Vice President
of Human Resources. Since 1992, Ms. Quinn has also been Vice President and
Secretary of the Company's subsidiaries, Diamond Hill Capital Management, Inc.
and Diamond Hill Securities, Inc. From 1993 to 2001, Ms. Quinn was a director of
the Company. Ms. Quinn is currently the Compliance Officer for Diamond Hill
Capital Management, Inc. She was also formerly a Director of Diamond Hill
Capital Management, Inc. From October 1995 through 1998, Ms. Quinn was the
principal for Buckeye Bancstocks, Inc., an intrastate broker-dealer, and is
currently a principal of Diamond Hill Securities, Inc. Ms. Quinn is licensed as
a Uniform Securities Agent (Series 63), Corporate Securities Representative
(Series 62), Uniform Investment Adviser Representative (Series 65), Investment
Company/Variable Contracts Limited Representative (Series 6), and General
Securities Principal (Series 24). She is a member of the American Society of
Corporate Secretaries.
COMMITTEES AND ANNUAL MEETINGS
The Board of Directors held a total of six meetings during the year
ended December 31, 2001. The Board of Directors has three standing committees:
the Audit Committee, the Executive Committee, the Executive Compensation and
Stock Option Committee, and one special committee: the Corporate Governance
Committee. Each Director attended at least 75% of the aggregate of (a) the total
number of Board of Directors' meetings held during the period for which he or
she has been a Director during the last fiscal year, and (b) the total number of
meetings held by all committees of the Board of Directors on which he or she
served during the periods that he or she served during the last fiscal year. The
Board of Directors does not have a nominating committee. The full Board of
Directors selects the nominees for Directors.
The Audit Committee reviews and approves the scope and results of any
outside audit of the Company and the fees therefor and makes recommendations to
the Board of Directors or management concerning auditing and accounting matters
and the selection of independent auditors. The Audit Committee's
responsibilities are outlined further in its written charter which was
previously filed with the Commission. Each member of the Audit Committee
qualifies as independent under the rules and standards of independence of the
National Association of Securities Dealers. The Audit Committee met four times
during the year ended December 31, 2001. The Audit Committee's report relating
to our 2000 fiscal year appears below.
REPORT OF THE AUDIT COMMITTEE
(December 31, 2001)
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that might incorporate future filings, including this
-13-
Proxy Statement, in whole or in part, this report shall not be incorporated by
reference into any such filings.
The Audit Committee consists of three independent directors and
operates under a written charter adopted by the Board of Directors. Annually,
the Audit Committee recommends to the Board of Directors the selection of the
Company's independent auditors. PricewaterhouseCoopers LLP served as the
Company's independent auditors during the year ended December 31, 2001.
Management is responsible for designing and maintaining the Company's
systems of internal controls and financial reporting processes. The Company's
independent auditors are responsible for performing an audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and issuing their report thereon. The Audit Committee's responsibility
is to provide independent, objective oversight of these processes.
Pursuant to this responsibility, the Audit Committee met with
management and the independent auditors throughout the year. The Audit Committee
reviewed the audit plan and scope with the independent auditors, and discussed
the matters required by Statement on Auditing Standards No. 61 (Communication
with Audit Committees). The Audit Committee also met with the independent
auditors, without management present, to discuss the results of their audit
work, their evaluation of the Company's system of internal controls and the
quality of the Company's financial reporting.
In addition, the Audit Committee has discussed with the independent
auditors their independence from the Company and its management, including the
matters in written disclosures and letters from the independent auditors
required by the Independence Standards Board Standard No.1 (Independence
Discussions with Audit Committees).
Management has represented to the Audit Committee that the Company's
consolidated financial statements for the year ended December 31, 2001, were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee reviewed and discussed the consolidated financial statements
with management and the independent auditors. Based on the Audit Committee's
discussions with management and the independent auditors and review of the
report of the independent auditors to the Audit Committee, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited consolidated financial statements be included in the Company's Form
10-KSB for the year ended December 31, 2001, filed with the Commission.
On January 14, 2002, the Company dismissed PricewaterhouseCoopers LLP
as its independent accountants. The Audit Committee and Board of Directors of
the Company participated in and approved the decision to change independent
accountants.
The reports of PricewaterhouseCoopers LLP on the financial statements
of the Company for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle.
In connection with its audits for the two most recent fiscal years and
through January 14, 2002, there have been no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure,
-14-
which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their reports on the Company's financial statements for such years.
The Company engaged Longanbach Giusti Kuck & Hornberger LLC as its new
independent accountants as of January 14, 2002. During the two most recent
fiscal years and through January 14, 2002, the Company has not consulted with
Longanbach Giusti Kuck & Hornberger LLC on either the application of accounting
principles or type of opinion Longanbach Giusti Kuck & Hornberger LLC might
issue on the Company's financial statements.
On January 18, 2002, the Company filed a Form 8-K with the Commission
reporting the dismissal of PricewaterhouseCoopers LLP as its independent
accountants, and the Company's engagement of Longanbach Guisti Kuck & Hornberger
LLC as its new independent accountants. In connection with filing that Form 8-K,
the Company requested that PricewaterhouseCoopers LLP furnish it a letter
addressed to the Commission stating whether or not it agreed with the statements
regarding its dismissal as set forth in the Form 8-K. PricewaterhouseCoopers LLP
provided that letter to the Company (indicating its agreement with the
statements concerning PricewaterhouseCoopers LLP in the Form 8-K); a copy of
that letter is filed as Exhibit 1 to the Form 8-K.
Audit Fees. The aggregate fees billed for professional services
rendered by PricewaterhouseCoopers LLP for the audit of the Company's financial
statements during the year ended December 31, 2001, including the Forms 10-QSB
for such fiscal year, were $12,750, and the aggregate fees billed for
professional services rendered by Longanbach Giusti Kuck & Hornberger, LLP for
the audit of the Company's annual financial statements, including the
preparation of tax returns, for the year ended December 31, 2001, ("Audit
Services") were $30,000.
Financial Information Systems Design and Implementation Fees; All Other
Fees. Neither PricewaterhouseCoopers LLP nor Longanbach Giusti Kuck &
Hornberger, LLP rendered any professional services described in paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X (17 C.F.R. 210.2-01), or any other
professional services, other than the Audit Services, for the Company during the
year ended December 31, 2001. The Audit Committee determined that, the absence
of any such services was compatible with maintaining the independence of
PricewaterhouseCoopers LLP and Longanbach Giusti Kuck & Hornberger, LLP.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY:
LARRY A. BERES
RICHARD DESICH
JOHN RETTIG
The Corporate Governance Committee was formed for the purpose of (i)
evaluating whether the Company should change its state of incorporation from
Florida to another state and (2) evaluating the size and composition of the
Company's Board of Directors. The members of the Corporate Governance Committee
as of December 31, 2001, were Larry A. Beres, Richard
-15-
Desich and Diane D. Reynolds. The Corporate Governance Committee held one
meeting during the year ended December 31, 2001.
The Executive Committee is authorized, when it is impractical or not in
the best interest of the Company to wait until a Board of Directors meeting for
approval, to take any and all action or incur any obligations which could be
taken or incurred by the full Board of Directors. The members of the Executive
Committee as of December 31, 2001, were Dr. Roger D. Blackwell, R. H. Dillon and
David R. Meuse. The Executive Committee did not hold any meetings during the
year ended December 31, 2001.
The Executive Compensation and Stock Option Committee has overall
responsibility with respect to designing, approving, and evaluating the
executive compensation plans, policies, and programs of the Company. The
Executive Compensation and Stock Option Committee is responsible for
establishing the relationship between pay levels and corporate performance and
returns to shareholders and to monitor the results of such policies to assure
that the compensation payable to the Company's executives provides overall
competitive pay levels, creates proper incentives to enhance shareholder value,
and rewards superior performance. The Committee has the authority to delegate
responsibility for the day-to-day management of executive compensation payable
to the officers of the Company. In addition, the Executive Compensation and
Stock Option Committee reviews proposals made by the President of the Company to
award stock options under the 1993 Non-Qualified and Incentive Stock Option Plan
(the "1993 Plan") to officers, key employees, and individuals that participate
in the development and growth of the Company. The 1993 Plan is intended to
encourage officers and key employees of the Company to acquire or increase their
ownership of the Company on reasonable terms. The opportunity provided is
intended to foster in participants a strong incentive to put forth maximum
effort for the continued success and growth of the Company and its subsidiaries,
to aid in retaining individuals who put forth such efforts, and to assist in
attracting the best available individuals to the Company and its subsidiaries in
the future. The members of the Executive Compensation and Stock Option Committee
as of December 31, 2001, were Larry A. Beres, Dr. James G. Mathias and John
Rettig. The Executive Compensation Committee did not hold any meetings during
the year ended December 31, 2001, but approved three written actions without a
meeting during such period.
-16-
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or payable by the
Company during the calendar years ended December 31, 2001, 2000 and 1999, to the
President of the Company and to certain other named executive officers of the
Company.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
- ------------------------------------------------------------------------------------------------------------------
NAME OF PRINCIPAL SECURITIES UNDERLYING ALL
AND POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) OTHER ($)
- ------------------------------------------------------------------------------------------------------------------
R. H. Dillon (1) 2001 150,000 0 -- --
President and Chief Executive 2000 96,435 0 80,000 (2) --
Officer
- ------------------------------------------------------------------------------------------------------------------
Jeffrey C. Barton (3) 2001 100,000 0 -- --
Vice President and Chief 2000 100,000 0 -- --
Financial Officer 1999 100,000 11,144 6,500 --
- ------------------------------------------------------------------------------------------------------------------
- --------------
(1) Mr. Dillon became President of the Company in May, 2000.
(2) Excludes 120,000 warrants which are not exercisable within 60 days
after December 31, 2001.
(3) Mr. Barton resigned as Vice President and Chief Financial Officer of
the Company effective as of December 31, 2001.
FISCAL 2001 AGGREGATED OPTION EXERCISES; FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the exercise of
stock options by each of the Company's named executive officers during fiscal
2001 and the fiscal year end value of unexercised options.
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR END (#) FISCAL YEAR END ($) (1)
- ------------------------------------------------------------------- ----------------------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------
R. H. Dillon 0 -- 80,000 120,000 0 0
- ------------------------------------------------------------------------------------------------------------------
Jeffrey C. Barton 0 -- 6,500 0 0 --
- ------------------------------------------------------------------------------------------------------------------
- --------------
(1) Value is based on the December 31, 2001, closing price of $4.00 per
Share on the NASDAQ Small Cap Market.
-17-
INCENTIVE COMPENSATION PLAN
All full-time executive employees of the Company are eligible to
participate in the Company's Incentive Compensation Plan (the "IC Plan"). The IC
Plan provides that a bonus fund will be established in an amount equal to 20% of
the pre-tax realized profits of the Company in excess of a 15% pre-tax return on
equity. The amount of the bonus fund is calculated each fiscal quarter on a
cumulative basis. The allocation of the bonus fund is to be made by the
President of the Company. The Company did not incur any expense under the IC
Plan for the year ended December 31, 2001.
STOCK OPTION PLAN
The 1993 Plan authorizes the grant of options to purchase an aggregate
of 500,000 Shares. The 1993 Plan provides that the Board of Directors, or a
committee appointed by the Board, may grant options and otherwise administer the
1993 Plan. The exercise price of each incentive stock option or non-qualified
stock option must be at least 100% of the fair market value of the Shares at the
date of grant, and no such option may be exercisable for more than ten years
after the date of grant. However, the exercise price of each incentive stock
option granted to any shareholder possessing more than 10% of the combined
voting power of all classes of capital stock of the Company on the date of grant
must not be less than 110% of the fair market value on that date, and no such
option may be exercisable more than five years after the date of grant.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is entitled to
receive a fee of $500 plus travel expenses for each directors' meeting attended.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated Dr. Roger D.
Blackwell, R. H. Dillon and Diane D. Reynolds for election to the Board of
Directors of the Company. Each such nominee is a member of the existing Board of
Directors. Dr. Blackwell and Ms. Reynolds have been nominated to hold office for
three year terms expiring at the annual meeting of shareholders in 2005. Mr.
Dillon has been nominated to hold office for a one year term expiring at the
next annual meeting of shareholders in 2003. However, if the Reincorporation is
approved, following the effective date of the Reincorporation, the Board of
Directors will be comprised of nine members, will cease to be divided into three
classes with staggered three-year terms, and all Directors will be elected for
one-year terms at each annual meeting of shareholders.
A proposal to elect Dr. Blackwell, Mr. Dillon and Ms. Reynolds will be
presented to the shareholders at the Annual Meeting. The three nominees
receiving the highest number of votes will be elected.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF DR. BLACKWELL, MR. DILLON AND MS. REYNOLDS.
-18-
PROPOSAL 2
APPROVAL OF REINCORPORATION
On February 7, 2002, the Board of Directors adopted resolutions
approving and recommending that the shareholders approve the Reincorporation.
The Reincorporation is to be accomplished by merging the Company with and into
its newly formed Ohio subsidiary, DHO, with DHO being the surviving corporation.
DHO will change its name to Diamond Hill Investment Group, Inc. upon completion
of this Merger. The Reincorporation will change the Company's State of
incorporation from Florida to Ohio.
REASONS FOR THE REINCORPORATION
The Company is seeking to change its State of incorporation to Ohio for
a number of reasons. First, the Company's principal executive offices and
operations are in Ohio and the Company conducts its Board of Director and
shareholder meetings in Ohio. The Company has no offices, employees or assets in
Florida. In addition, reincorporating the Company in Ohio will simplify
corporate administration and reduce costs in part by eliminating the Company's
obligation to file certain reports and other documents with the State of
Florida. Accordingly, the Company's Board of Directors believes that it is more
appropriate for Ohio law to govern the rights and interests of the Company and
its shareholders rather than Florida law.
Moreover, the Reincorporation will also provide benefits to
shareholders and directors that are not available under Florida law. Under Ohio
law, the Company's shareholders will be entitled to the benefits of statutory
provisions that are designed to encourage negotiated (as opposed to hostile)
takeovers of Ohio corporations, and its directors will be entitled to the
benefit of a higher standard of proof imposed on persons who seek to impose
personal liability on them. For additional information, see "Comparison of
Florida and Ohio Law and Corresponding Provisions of Organizational Documents"
below.
FOR THE FOREGOING REASONS, AND AFTER TAKING INTO CONSIDERATION OTHER
DIFFERENCES BETWEEN FLORIDA AND OHIO CORPORATION LAW, THE COMPANY'S BOARD OF
DIRECTORS HAS CONCLUDED THAT THE REINCORPORATION IS IN THE BEST INTEREST OF THE
COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE REINCORPORATION.
REINCORPORATION IMPLEMENTED THROUGH PLAN OF MERGER
If the Reincorporation is approved, the Company will be merged with and
into DHO pursuant to the terms of the Merger Agreement. Upon the completion of
the Merger, each outstanding Share will automatically be converted into one
common share, without par value, of DHO ("DHO Shares"), and each outstanding
fractional Share will automatically be converted into that fractional DHO Share,
so that the holders of Shares will own a corresponding number of DHO Shares.
None of the authorized preferred shares of DHO will be issued and outstanding at
the time of the Reincorporation. Each outstanding certificate representing a
Share or Shares will continue to represent the same number of DHO Shares. THUS,
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR
EXISTING SHARE CERTIFICATES FOR DHO SHARE CERTIFICATES. We anticipate that the
Shares will continue to be traded on the NASDAQ Small
-19-
Cap Market without interruption and that delivery of existing Share certificates
of the Company will constitute "good delivery" of DHO Shares in transactions
subsequent to the Merger.
Each option to purchase Company Shares granted under the 1993 Plan that
is outstanding immediately prior to the effective time of the Merger will, as a
result of the Merger and without any action on the part of the holders of such
options, be converted into and become an option to purchase the same number of
DHO Shares. All such options will be at the same option price and subject to the
same terms and conditions as the existing options to purchase Shares.
The articles of incorporation of the surviving corporation will be in
the form attached to this Proxy Statement as Appendix C. With the exception of a
reduction in the number of authorized Shares, the addition of one director to
the board of directors and the elimination of the staggered board, the articles
of incorporation of the surviving corporation will be substantially the same as
the Company's current articles of incorporation in all material respects (after
changing references to the different States of incorporation and the corporate
law thereof). See "Comparison of Florida and Ohio Law and Corresponding
Provisions of Organizational Documents." As set forth in the articles of
incorporation of the surviving corporation, the name of the surviving
corporation shall be "Diamond Hill Investment Group, Inc."
The DHO code of regulations will be the code of regulations of the
surviving corporation in the Merger. A copy of the code of regulations of DHO
will be available to any shareholder upon request to the Company.
ABANDONMENT OF REINCORPORATION
The Company anticipates that the Merger will become effective as soon
as practicable after shareholder approval of the Reincorporation. However, the
Company's Board of Directors may terminate the Merger Agreement prior to the
effective time of the Merger, before or after shareholder approval of the
Reincorporation, if the Board of Directors determines that doing so would be in
the best interests of the Company. The Merger Agreement may also be amended by
the Company and DHO prior to the effective time of the Merger, except that after
shareholder approval of the Reincorporation, the Merger Agreement may not be
amended to change the amount or kind of shares to be received in the Merger by
the shareholders of the Company, any term of the articles of incorporation or
the code of regulations of the Company, or any of the terms and conditions of
the Merger Agreement if such alteration or change would adversely affect the
shareholders of the Company. The Board of Directors has made no determination as
to any circumstances which may prompt a decision to terminate the
Reincorporation or amend the Merger Agreement.
NO CHANGE WILL BE MADE IN THE BUSINESS OF THE COMPANY
The Reincorporation will effect a change in the legal domicile of the
Company and other changes of a legal nature, the most significant of which are
described in this Proxy Statement. The Reincorporation will not result in any
change in the business or the assets, liabilities or net worth of the Company.
For reasons unrelated to the Reincorporation, the Company will be moving its
principal executive offices to 375 North Front Street, Suite 300, Columbus, Ohio
43215 on or around May 10, 2002. The officers of the Company will remain the
same after the
-20-
Reincorporation. Following the Reincorporation, there will be nine members of
the Board of Directors as follows: R. H. Dillon, Larry A. Beres, Dr. Roger D.
Blackwell, Richard Desich, Dr. James G. Mathias, David R. Meuse, John Rettig and
Diane D. Reynolds, with one vacancy which the Board of Directors expects to
promptly fill. There will not be any change in the Company's employee benefit
plans and arrangements.
TERMS OF DIRECTORS/REMOVAL OF DIRECTORS
Approval of the Reincorporation will change the terms of office of
directors but will have no effect on the manner in which directors may be
removed from office. Following completion of the Merger, the Board of Directors
will no longer be staggered, there will be nine Directors rather than eight and
each of the remaining Directors will serve a one year term of office. Directors
will continue to be subject to removal from office by the vote of the holders of
a majority of the voting power entitling them to elect Directors in place of
those to be removed.
DISSENTERS' RIGHTS
Shareholders of the Company who so desire are entitled to relief as a
dissenting shareholder under Section 607.1302 of the Florida Business
Corporation Act. A shareholder will be entitled to assert dissenter's rights
only if the shareholder has delivered to the Company before May 2, 2002, (the
date of the Annual Meeting), written notice of the shareholder's intent to
demand payment of the fair value of the shareholder's Shares of the Company (if
the Reincorporation is effectuated), and that shareholder does not vote the
Shares in favor of the Reincorporation. A proxy or vote against the
Reincorporation will not constitute the notice required to be delivered to the
Company demanding payment of the fair value of the Shares.
The written demand for payment must be mailed or delivered to: Sandra
L. Quinn, Diamond Hill Investment Group, Inc., 1105 Schrock Road, Suite 437,
Columbus, Ohio 43229.
The "fair value", with respect to a dissenter's Shares means, under
Florida law, the value of the Shares as of the close of business on the day
prior to the date of the Annual Meeting.
Within ten (10) days after the Annual Meeting, the Company will give
written notice of the adoption of the Reincorporation (if the Reincorporation
was approved) to each shareholder who filed a notice of intent to demand payment
for such shareholder's Shares. Within twenty (20) days after the giving of
notice to those shareholders, any such shareholder who elects to dissent from
the Reincorporation and perfect dissenter's rights shall file with the Company a
notice of such election, stating the shareholder's name and address, the number
of Shares as to which the shareholder dissents, and a demand for payment of the
fair value of those Shares. Any shareholder failing to file such election to
dissent within such twenty (20) day period shall be bound by the terms of the
Reincorporation. Any shareholder filing an election to dissent shall also
deposit the Share certificates with the Company simultaneously with the filing
of the election to dissent.
Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided under Florida law and shall
not be entitled to vote or exercise any other rights of a shareholder of the
Company. A notice of election may be withdrawn in writing by the shareholder at
any time before an offer is made by the Company to pay the fair value of the
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Shares. After such offer by the Company, no notice of election may be withdrawn
unless the Company consents thereto. However, the right of such shareholder to
be paid the fair value of the Shares shall cease, and the shareholder shall be
reinstated to have all rights as a shareholder of the Company as of the filing
of the notice of election, if:
(a) the demand is promptly withdrawn;
(b) the shareholders of the Company do not approve the
Reincorporation, or the Reincorporation is otherwise abandoned
by the Company;
(c) no demand or petition for the determination of the fair value
of the Shares by a court has been made or filed within the
time provided under Florida law; or
(d) a court of competent jurisdiction determines that the
shareholder is not entitled to any relief under Florida law.
Within ten (10) days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within ten (10)
days after the Reincorporation is effected, whichever is later (but in no case
later than ninety (90) days from the date the shareholders of the Company
approve the Reincorporation), the Company shall make a written offer to each
dissenting shareholder to pay an amount the Company estimates to be the fair
value for such Shares. The Company's notice and offer shall be accompanied by:
(a) a balance sheet of the Company as of the latest available day
and not more than twelve (12) months prior to the date of the
offer; and
(b) a profit and loss statement of the Company for the twelve (12)
month period ended on the date of the balance sheet.
If within thirty (30) days after the making of this Company offer, any
shareholder accepts the offer, payment for that shareholder's Shares shall be
made within ninety (90) days after the making of such offer or the effective
date of the Reincorporation, whichever is later. Upon payment of the agreed
value, the dissenting shareholder shall cease to have any interest in such
Shares.
If the Company fails to make the offer within the period specified in
the paragraph above, or if it makes the offer and any dissenting shareholder
fails to accept that offer within the period of thirty (30) days thereafter,
then the Company, within thirty (30) days after receipt of a written demand from
any dissenting shareholder given within sixty (60) days after the date on which
the Reincorporation was effected, shall, or at its election at any time within
such period of sixty (60) days may, file an action in any court of competent
jurisdiction in the county in Florida where the registered office of the Company
is located requesting that the fair value of such Shares be determined. The
court shall also determine whether each dissenting shareholder, as to whom the
Company requests the court to make such determination, is entitled to receive
payment for the Shares. If the Company fails to institute the proceeding as
discussed herein, any dissenting shareholder may do so in the name of the
Company. All dissenting shareholders (whether or not residents of the State of
Florida), other than shareholders who have agreed with the Company as to the
value of their Shares, shall be made parties to the proceeding as an action
against their
-22-
Shares. The Company shall serve a copy of the initial pleading in such
proceeding upon each dissenting shareholder who is a resident of Florida in the
manner provided by law for the service of a summons and complaint, and upon each
non-resident dissenting shareholder either by registered or certified mail and
publication or in such other manner as is permitted by law. All shareholders who
are proper parties to the proceeding are entitled to judgment against the
Company for the amount of the fair value of their Shares.
The court may, if it so elects, appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question of fair
value. The appraiser shall have such power and authority as is specified in the
order of their appointment or an amendment thereof.
The Company shall pay each dissenting shareholder the amount found to
be due that shareholder within ten (10) days after final determination of the
proceedings. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such Shares. The judgment may, at the discretion
of the court, include a fair rate of interest, to be determined by the court.
The cost and expenses of any such proceeding shall be determined by the
court and shall be assessed against the Company, but all or any part of such
costs and expenses may be apportioned and assessed as the court deems equitable
against any or all of the dissenting shareholders who are parties to the
proceeding, to whom the Company has made an offer to pay for the Shares, if the
court finds that the action of such shareholders in failing to accept such offer
was arbitrary, vexatious or not in good faith. The expenses shall include
reasonable compensation, and reasonable expenses of, the appraisers, but shall
exclude the fees and expenses of counsel for, and experts employed, by any
party. If the fair value of the Shares, as determined, materially exceeds the
amount which the Company offered to pay, or if no offer was made, the court in
its discretion may award to any shareholder who is a party to the proceeding
such sum as the court determines to be reasonable compensation to any attorney
or expert employed by the shareholder in the proceeding.
COMPARISON OF FLORIDA AND OHIO LAW AND CORRESPONDING PROVISIONS OF
ORGANIZATIONAL DOCUMENTS
The rights of the Company's shareholders are currently governed by the
Company's articles of incorporation, the Company's bylaws and Florida law. If
the Reincorporation is approved by the Company's shareholders, upon the
effectiveness of the Merger, the rights of the Company's shareholders would be
governed by the surviving corporation's articles of incorporation and code of
regulations, and by Ohio law. Although it is not practical to compare all of the
differences between the laws of Ohio and Florida and our existing organizational
documents and those of the surviving corporation, the following is a summary of
differences that we believe may significantly affect the rights of our
shareholders. This summary is not intended to be relied upon as an exhaustive
list or complete description of all differences. The identification of specific
similarities and differences is not meant to indicate that other equally or more
significant similarities and differences do not exist. Such similarities and
differences can be examined in full by reference to Ohio law, Florida law and
corporate organizational documents of the Company and the surviving corporation.
-23-
ANTI-TAKEOVER PROVISIONS
Both Florida and Ohio law contain provisions that are intended to
benefit companies that are the object of takeover attempts and their
shareholders. The Company, however, cannot avail itself of the benefits of
Section 607.0902 of the Florida Business Corporation Act, Florida's
control-share acquisition statute. This statute applies only to Florida
corporations that have their principal place of business or principal office in
Florida, or that have substantial assets in Florida, and that meet certain other
requirements with respect to the ownership of their shares by Florida residents.
The Company does not meet these requirements.
As an Ohio corporation, the surviving corporation would be subject to
the provisions of the Ohio Control Share Acquisition Act (Sections 1701.831 and
1701.832 of the Ohio General Corporation Law ("OGCL")), the Ohio Business
Combination Statute (Chapter 1704 of the OGCL - also known as the Merger
Moratorium Statute), and the Ohio Profit Recovery Statute (Section 1707.043 of
the OGCL). Ohio law generally allows a corporation to elect not to be covered by
these statutes by including provisions in its articles of incorporation making
these statutes inapplicable to the corporation. However, the articles of
incorporation of the surviving corporation do not contain any such provisions,
and accordingly, these statutes will apply to the Company if the Reincorporation
is approved. ALTHOUGH THESE STATUTES MAY HAVE AN ANTI-TAKEOVER EFFECT AND MAY
MAKE TENDER OFFERS, PROXY CONTESTS AND CERTAIN MERGERS MORE DIFFICULT, THE
PURPOSE OF THESE STATUTES IS TO PROMOTE DISCLOSURE OF INFORMATION AND TO
ENCOURAGE POTENTIAL ACQUIRERS OF A CORPORATION TO NEGOTIATE WITH THE
CORPORATION'S BOARD OF DIRECTORS AND TO MAKE A FINANCIALLY ATTRACTIVE,
NON-COERCIVE OFFER FOR THE CORPORATION. As described below, the Company believes
that these statutes are more beneficial than detrimental to corporations and
their shareholders.
Ohio Control Share Acquisition Act. The Ohio Control Share Acquisition
Act is designed to give shareholders a reasonable opportunity to express their
views on a proposed shift of control by requiring prior shareholder approval of
any "control share acquisition" of an "issuing public corporation" (a definition
the Company would meet if it were to reincorporate under Ohio law). This Act
applies not only to traditional tender offers but also to open market purchases,
privately negotiated transactions and transactions in which a public corporation
originally issues securities. Briefly summarized, a "control share acquisition"
is the acquisition of sufficient shares of an issuing public corporation to give
the person who acquired the shares voting power that falls within one of the
following ranges in regard to the election of directors: one-fifth or more but
less than one-third, one-third or more but less than a majority, or a majority
or more. Any person who seeks to make a control share acquisition must first
deliver to the issuing public corporation a statement that sets forth certain
information about the person and the proposed acquisition of shares. Following
the delivery of this statement, the directors of the issuing public corporation
are required to call a special meeting of shareholders within a certain time
period for the purpose of asking shareholders to vote on the proposed control
share acquisition. For the control share acquisition to proceed, it must be
authorized by the affirmative vote of a majority of the shares represented at
the special meeting and by a majority of all such shares that are not
"interested shares," defined to include shares owned by the person seeking to
make the control share acquisition and by certain officers and directors of the
issuing public corporation.
-24-
The provisions of the Ohio Control Share Acquisition Act would provide
shareholders the assurance that they will have adequate time to evaluate the
proposal of the person seeking to make a control share acquisition of the
Company. These provisions would also provide assurance that shareholders will be
permitted to vote on whether to authorize such person's purchase program in the
same manner and with the same proxy information that would be available to the
shareholders if a proposed merger of the surviving corporation were before them.
Finally, these provisions would provide assurance to shareholders that the
interests of all shareholders will be taken into account in connection with the
proposed control share acquisition and that all shareholders are more likely to
be treated equally regarding the price to be offered for their shares if the
proposed control share acquisition is approved.
The procedural requirements of the Ohio Control Share Acquisition Act
could render approval of any control share acquisition difficult in that a
majority of the voting power of the surviving corporation, excluding "interested
shares," would have to be represented at the meeting and voted in favor of the
control share acquisition. This corporate defense against persons seeking to
acquire control may discourage or prevent offers that some shareholders might
find financially attractive. On the other hand, the need on the part of the
acquiring person to convince the shareholders of the surviving corporation of
the value and validity of his or her offer may cause the offer to be more
financially attractive. The Company's Board of Directors believes that the
potential benefit of the procedures contemplated by the Ohio Control Share
Acquisition Act substantially outweighs the disadvantage that shareholders may
not have the opportunity to consider or to accept certain offers.
Ohio Business Combination Statute. The Ohio Business Combination
Statute prohibits a wide range of business combinations and other transactions
(including mergers, consolidations, asset sales, loans, disproportionate
distributions of property and disproportionate issuances or transfers of shares
or rights to acquire shares) between an issuing public corporation and an
"interested shareholder" (any person who owns shares representing at least 10%
of the voting power of the corporation) for a period of three years after the
person becomes an interested shareholder. The prohibition does not apply,
however, if, prior to the date on which the person became an interested
shareholder, the directors approve either the business combination or other
transaction or the purchase of shares by the interested shareholder. The Ohio
Business Combination Statute is designed to prevent many of the self-dealing
activities that often accompany highly-leveraged acquisitions by prohibiting an
interested shareholder from using the corporation or its assets or shares for
his or her own benefit. The Ohio Business Combination Statute is also designed
to encourage potential tender offerors to negotiate with a corporation's board
of directors to ensure that shareholders receive fair and equitable
consideration for their shares.
The Ohio Business Combination Statute would encourage potential tender
offerors to negotiate with the surviving corporation's Board of Directors to
ensure that the shareholders receive fair and equitable consideration for their
Shares. However, the Ohio Business Combination Statute may present potential
pitfalls for some shareholders in that some common corporate actions, such
granting employee stock options and making loans to interested shareholders in
the ordinary course of business, may be encompassed by the Ohio Business
Combination Statute.
-25-
The Company's Board of Directors believes that the limitation on
business combinations and other transactions between the surviving corporation
and an interested shareholder provided by the Ohio Business Combination Statute
substantially outweigh the disadvantage that shareholders may not have the
opportunity to consider or approve such transactions until a period of three
years has elapsed after a person becomes an interested shareholder.
Ohio Profit Recovery Statute. The Ohio Profit Recovery Statute (Section
1707.043 of the OGCL) allows an Ohio corporation to seek to recover profits
earned on the sale of the corporation's equity securities by a person who
publicly discloses an intention to acquire control of the corporation. The
purpose of this statute is to guard against efforts to manipulate the price of
the corporation's equity securities. Certain profits cannot be recovered,
including profits that do not exceed $250,000, profits earned more than eighteen
months prior to the date on which the public disclosure was made, and profits
earned by a person who establishes in court that his or her motive was not to
manipulate the price of the security. The Company's Board of Directors believes
that the Profit Recovery Statute would be beneficial to shareholders in that
this statute makes it unattractive for a person to seek to manipulate the price
of the surviving corporation's equity securities, potentially at the expense of
shareholders.
Ohio Control Bid Statute. The Ohio Control Bid Statute (Sections
1707.041 and 1707.042 of the OGCL) is designed to give shareholders of a
"subject company" (a definition the surviving corporation may meet depending
upon the ownership of its equity securities) full disclosure of all material
information relating to a control bid for shares made pursuant to a tender
offer. A control bid is the purchase (or offer to purchase) of any equity
security of a subject company from a resident of Ohio if, after the purchase,
the person making the purchase would own more than 10% of any class of the
issued and outstanding equity securities of the company. A control bid also
occurs when the person purchasing the equity security (or offering to purchase)
is the subject company itself, the purchase or offer is made at a time when a
control bid from another person is pending, and the purchase would reduce the
number of issued and outstanding shares of the company by more than 10%.
The Ohio Control Bid Statute requires the person making the tender
offer to file with the Ohio Division of Securities a document that discloses the
materials used in the tender offer along with information about the person
making the tender offer and the tender offer itself. This information must also
be given to the corporation that is the subject of the tender offer. The Ohio
Division of Securities reviews this material and, within five days of the filing
of the material, may suspend the control bid if it determines that the person
making the tender offer has not complied with all of the disclosure
requirements. Any such suspension may remain in effect until the Ohio Division
of Securities conducts a hearing and determines that the disclosure provisions
of the Ohio Control Bid Statute have been satisfied. The Company's Board of
Directors believes that shareholders would benefit from the Control Bid Statute
in that it would give them a statutory right to receive important information
about any person seeking to take over the surviving corporation, a right
enforced by the Ohio Division of Securities.
STANDARDS FOR DIRECTORS; DIRECTOR LIABILITY; INDEMNIFICATION
The standards that apply to directors of a corporation are generally
the same under Florida and Ohio law. Directors must act in good faith, with the
care that an ordinarily prudent
-26-
person in a like position would exercise under similar circumstances, and in a
manner they reasonably believe to be in the best interests of the corporation.
Florida and Ohio law are also generally the same in regard to the factors
directors may consider in discharging their fiduciary duties, including deciding
whether to resist a change in control of the corporation. In addition to the
interests of shareholders, directors may also take into consideration the
interests of the corporation's employees, suppliers, creditors and customers,
the economy of the state and nation, community and societal considerations, the
long-term and the short-term interests of the corporation and its shareholders,
and the possibility that these interests may be best served by the continued
independence of the corporation. The circumstances under which a director may be
held personally liable are different under Florida and Ohio law. Under Florida
law, directors may be held personally liable for damages for breach of a
fiduciary duty only if the breach constituted one of the following: a violation
of criminal law, a transaction from which they derived an improper personal
benefit, a vote for or consent to an unlawful distribution to shareholders, a
conscious disregard for the best interests of the corporation or willful
misconduct (in a derivative action), or a reckless act or omission or an act or
omission committed in bad faith or with malicious purpose or in a manner
exhibiting wanton and willful disregard of human rights, safety or property (in
a third party action). Ohio law is similar in that directors may be held
personally liable for damages for breach of a fiduciary duty. However, under
Ohio law, the plaintiff must prove by clear and convincing evidence (a higher
standard of proof than the preponderance of the evidence standard that is
normally used in civil actions) that a director's action or omission was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. This higher
standard of proof, however, does not affect the liability of directors for
unlawful loans, dividends or distributions.
The right of directors, officers, and employees to be indemnified by
the corporation for expenses (including attorney's fees) incurred by them in
defending a legal action brought against them are generally the same under
Florida and Ohio law. Both provide that a corporation has the power to indemnify
directors, officers, and employees of the corporation against liability and
expenses, including attorney's fees and amounts paid in settlement, provided
that the director, officer, or employee acted in good faith and in a manner he
or she reasonably believed to be in (or not opposed to) the best interests of
the corporation and, with respect to a criminal action, if he or she had no
reasonable cause to believe that his or her conduct was unlawful. Both Florida
and Ohio law also authorize a corporation to pay expenses incurred by directors,
officers, or employees as they are incurred. However, in regard to the
advancement of expenses, there is one important difference between Florida and
Ohio law: Ohio law - but not Florida law - requires a corporation to pay
expenses incurred by a director (but not an officer or employee) in defending an
action as the expenses are incurred, provided that the director agrees to repay
the expenses if it is proved by clear and convincing evidence that he or she is
not entitled to be indemnified and if he or she agrees to cooperate with the
corporation in regard to the action. Finally, both Florida and Ohio law require
a corporation to indemnify a director, officer, or employee of the corporation
against expenses to the extent that the director, officer, or employee is
successful on the merits or otherwise in defending the action.
In general, Ohio law provides greater protections to directors against
personal liability, which in turn gives directors greater freedom to act in a
manner that they believe is in the best interest of the corporation and its
shareholders. Moreover, the Company's Board of Directors believes that the
additional protections provided by Ohio law would benefit both the surviving
-27-
corporation and its shareholders by making it easier for the surviving
corporation to attract and retain highly qualified individuals to serve as
independent directors.
AMENDMENT OF ARTICLES OF INCORPORATION
Under Florida law, in order to amend the articles of incorporation
(with respect to any material amendment), the amendment must be proposed by the
board of directors to the shareholders and recommended for adoption (unless the
board determines that, because of a conflict of interest or other special
circumstances, it should make no recommendation and communicates its basis for
its determination to the shareholders with the amendment), and the shareholders
entitled to vote on the amendment must approve it by a majority of the votes
entitled to be cast on the amendment (i) by any voting group with respect to
which the amendment would create dissenters' rights, and (ii) by a majority of
the votes of every other voting group entitled to vote on the amendment. The
articles of incorporation or the board of directors may provide for a greater
voting requirement.
Ohio law provides that an amendment to a corporation's articles of
incorporation must be adopted by the affirmative vote of the holders of shares
entitling them to exercise two-thirds of the voting power of the corporation,
or, if provided for in the articles, a different proportion but not less than a
majority of the voting power. The articles of incorporation of the surviving
corporation provided that a majority of the voting power of the surviving
corporation is required to amend the articles.
AMENDMENT OF CODE OF REGULATIONS/BYLAWS
Under Florida law, a corporation's bylaws may be amended by the board
of directors unless (i) the articles of incorporation reserve the power to amend
the bylaws generally (or a particular bylaw provision) exclusively to the
shareholders, or (ii) the shareholders, in amending the bylaws generally (or a
particular bylaw provision), have expressly provided that the board of directors
may not amend the bylaws or that particular bylaw provision. The shareholders
may amend the bylaws even though the bylaws may also be amended by the board of
directors. A bylaw provision that fixes a greater quorum or voting requirement
for shareholders than is required under the Florida Business Corporation Act may
not be amended by the board of directors. A bylaw that fixes a greater quorum or
voting requirement for the board of directors may be amended (i) if originally
adopted by the shareholders, by the shareholders, or (ii) if originally adopted
by the board of directors, either by the shareholders or by the board of
directors; provided, however, that a bylaw amended by the shareholders that
fixes a greater quorum or voting requirement for the board of directors may
provide that it may be amended only by a specified vote of either the
shareholders or the board of directors.
Under Ohio law the code of regulations of a corporation may be amended
by the shareholders at a meeting by the affirmative vote of the holders of
shares entitling them to exercise the majority of the voting power, or, without
a meeting, by the written consent of the holders of shares entitling them to
exercise not less than a majority of the voting power.
-28-
APPROVAL OF MERGERS AND CONSOLIDATIONS
Although Florida law and Ohio law differ with respect to the
shareholder vote required to approve a merger or consolidation, approval of the
Reincorporation will have no effect on the vote required by the surviving
corporation's shareholders. Under Florida law, unless a corporation's articles
of incorporation provide otherwise, a merger or consolidation must be approved
by a majority of all shares entitled to vote on the matter. Generally, under
Ohio law, unless a corporation's articles of incorporation provide otherwise,
approval of these types of matters requires the affirmative vote of two-thirds
of all shares entitled to vote. The articles of incorporation of the surviving
corporation provide that a majority of the voting power of the surviving
corporation is required to approve a merger or consolidation.
DISSENTERS' RIGHTS
Dissenters' rights (the right of a shareholder to dissent from a
transaction and to have the corporation purchase his or her shares at their fair
cash value) are slightly different under Florida and Ohio law. Under Florida
law, shareholders have the right to dissent from a merger or a sale of
substantially all of the assets of the corporation, except when a shareholder
vote is not required or the corporation's shares are listed on a national
securities exchange, traded on the NASDAQ National Market System, or held of
record by not fewer than 2,000 shareholders. This exception is not available if
the corporation's articles of incorporation provide otherwise; the Company's
articles do not provide otherwise. Shareholders also have dissenters' rights
with respect to amendments to the corporation's articles of incorporation that
may adversely affect the rights or preferences of shareholders. Under Ohio law,
shareholders have the right to dissent from any amendment to the corporation's
articles of incorporation that adversely affects the class of shares owned by
the dissenting shareholder and from certain mergers, consolidations, business
combinations and majority share acquisitions. No exception is made under Ohio
law for a merger or sale of assets involving a corporation with shares traded on
the NASDAQ or a national securities exchange, or which has a certain number of
shareholders.
PREEMPTIVE RIGHTS
Florida law and Ohio law are similar with respect to preemptive rights
(the right to maintain a proportionate interest in a corporation), and
accordingly, approval of the Reincorporation will have no effect on these rights
of the Company's shareholders. Under both Florida and Ohio law, shareholders of
a corporation do not have preemptive rights unless the corporation's articles of
incorporation grant shareholders these rights. The Company's shareholders do not
have preemptive rights under Florida law because the Company's articles of
incorporation do not grant these rights to the shareholders. Shareholders will
not have preemptive rights if the Reincorporation is approved because the
articles of incorporation of the surviving corporation do not grant, and
expressly deny, shareholders these rights.
CUMULATIVE VOTING
Approval of the Reincorporation will give shareholders the right to
cumulate their votes in the election of Directors of the Company. Under Florida
law, shareholders of a corporation do not have cumulative voting rights unless
the corporation's articles of incorporation grant
-29-
shareholders these rights. In contrast, under Ohio law, shareholders of a
corporation have cumulative voting rights unless the corporation's articles of
incorporation expressly deny shareholders these rights. The Company's
shareholders do not have cumulative voting rights under Florida law because the
Company's articles of incorporation do not grant these rights to the
shareholders. However, shareholders will have cumulative voting rights if the
Reincorporation is approved because the articles of incorporation of the
surviving corporation do not expressly deny shareholders these rights.
ACCOUNTING TREATMENT/FEDERAL TAX CONSEQUENCES
Applying generally accepted accounting principles, the Company will not
recognize any gain or loss as a result of the Reincorporation. In addition, the
consolidated financial statements of DHO immediately after the Reincorporation
will be identical to those of the Company immediately prior to the
Reincorporation.
The Company has been advised by its legal counsel that, for federal
income tax purposes, the Reincorporation will constitute a reorganization under
Section 368 of the Code. Under Section 368 of the Code, the Company's
shareholders will recognize no gain or loss as a result of the Reincorporation
and, in determining the federal tax basis and holding period of their new
Shares, will retain the tax basis and include the holding period that applied to
their old Shares. In addition, under Section 368 of the Code, neither the
Company nor DHO will recognize any gain or loss as a result of the
Reincorporation, and DHO will succeed without adjustment to the tax attributes
of the Company.
Although the state and local income tax consequences of the
Reincorporation are expected to be the same as the federal income tax
consequences described above, the Company's shareholders should consult their
own tax advisors about the possible state, local, or foreign income tax
consequences that may result from the Reincorporation.
DIVIDENDS IN ARREARS
There are no dividends in arrears on the Company's Shares.
FEDERAL AND STATE REGULATORY REQUIREMENTS
With the exception of obtaining shareholder approval of the
Reincorporation, the Company is not subject to any other federal or state
regulatory requirement in connection with the Reincorporation. The vote required
to approve the Reincorporation is a majority of the Shares outstanding and
entitled to vote at the Annual Meeting.
A proposal to reincorporate the Company in Ohio will be presented to
the shareholders at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE REINCORPORATION.
-30-
COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires executive officers and
directors of the Company, and persons who beneficially own more than ten percent
(10%) of the Shares, to file initial reports of ownership and reports of changes
in ownership with the Commission. Executive officers, directors and persons who
beneficially own more than ten percent (10%) of the Shares are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
reports they file. Based solely upon a review of Forms 3 and 4 furnished to the
Company, management of the Company believes that there were no reports filed
late during the year ended December 31, 2001.
EXPENSE AND MANNER OF SOLICITATION
The expenses of the solicitation of the proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the Notice, form of
proxy, Proxy Statement and return envelopes, the handling and tabulation of
proxies received, and charges of brokerage houses and other institutions,
nominees or fiduciaries for forwarding such documents to beneficial owners, will
be paid by the Company. In addition to the mailing of the proxy material,
solicitation may be made in person or by telephone by officers or directors of
the Company (none of whom have been employed to specifically solicit
shareholders).
FORM 10-KSB
The Form 10-KSB for the Company for the year ended December 31, 2001,
is enclosed herewith but is not a part of the proxy solicitation material.
INDEPENDENT AUDITORS
The Company has selected Longanbach Giusti Kuck & Hornberger, LLP as
the Company's independent auditors for the 2002 fiscal year and to audit the
financial statements of the Company for the year ended December 31, 2001. A
representative of Longanbach Giusti Kuck & Hornberger, LLP is expected to be
present to respond to appropriate questions and to make such statements as he or
she may desire.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Shareholders are entitled to submit proposals on matters appropriate
for shareholder action consistent with Commission regulations and the Company's
bylaws. Should a shareholder wish to have a proposal appear in the Company's
Proxy Statement for next year's annual meeting, under the regulations of the
Commission, the proposal must be received by the Secretary of the Company at
375 North Front Street, Suite 300, Columbus, Ohio 43215, on or before November
26, 2002. If a shareholder intends to present a proposal at next year's annual
meeting but does not intend to seek the inclusion of such proposal in the
Company's Proxy Statement, such proposal must be received by the Company prior
to February 7, 2003, or the Company's management proxies will be entitled to use
their discretion voting authority should such proposal be raised without any
discussion of the matter in the Proxy Statement.
-31-
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at
the Annual Meeting. However, if any other business properly comes before the
Annual Meeting, it is the intention of the persons named in the enclosed Proxy
to vote on such matters in accordance with their best judgment.
The prompt completion, execution, and delivery of your Proxy will be
appreciated. Whether or not you expect to attend the Annual Meeting, please
complete and sign the Proxy and return it in the enclosed envelope, or vote your
proxy electronically via the Internet or telephonically.
-32-
Appendix A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
__________, 2002, is made by and between Diamond Hill Investment Group, Inc., a
Florida corporation ("Diamond Hill-Florida"), and DHO, Inc., an Ohio corporation
and a wholly-owned subsidiary of Diamond Hill-Florida ("DHO").
W I T N E S S E T H:
-------------------
WHEREAS, Diamond Hill-Florida, as the sole shareholder of DHO, desires
to effect a merger of Diamond Hill-Florida with and into DHO (the "Merger")
pursuant to the provisions of the Florida Business Corporation Act (the "FBCA")
and the Ohio General Corporation Law (the "OGCL"); and
WHEREAS, Diamond Hill-Florida and DHO intend that the Merger qualify as
a "reorganization" within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended; and
WHEREAS, the respective Boards of Directors of Diamond Hill-Florida and
DHO have determined that the Merger is desirable and in the best interests of
each corporation and that the Merger be consummated in accordance with the terms
and subject to the conditions set forth in this Agreement. The sole shareholder
and the Board of Directors of DHO have adopted and approved this Agreement. The
Board of Directors of Diamond Hill-Florida has adopted and approved this
Agreement and directed that it be submitted for approval by the shareholders of
Diamond Hill-Florida.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the provisions of the FBCA and
the OGCL, at the Effective Time (as defined in Section 6 below), Diamond
Hill-Florida shall be merged with and into DHO. DHO shall be the surviving
corporation and shall continue its corporate existence under the laws of the
State of Ohio. At the Effective Time, the separate corporate existence of
Diamond Hill-Florida shall cease. DHO, in its capacity as the corporation
surviving the merger, is sometimes referred to in this Agreement as the
"Surviving Corporation."
Section 2. Effect of the Merger. At the Effective Time, the Merger
shall have the effects provided for in this Agreement and in Sections 607.1106
and 607.1107 of the FBCA and Section 1701.82 of the OGCL.
Section 3. Articles of Incorporation; Code of Regulations. The Articles
of Incorporation of the Surviving Corporation shall be the Articles of
Incorporation attached as Exhibit A to this Agreement (the "Articles of
Incorporation"). The Articles of Incorporation shall be filed with the Ohio
Secretary of State as an exhibit to the Certificate of Merger filed with
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that office. The Code of Regulations of the Surviving Corporation shall be the
Code of Regulations of DHO in effect immediately prior to the Effective Time.
Section 4. Directors of the Surviving Corporation. At and after the
Effective Time, and until changed in the manner provided in the Code of
Regulations or the Articles of Incorporation of the Surviving Corporation or as
otherwise provided by law, the number of directors of the Surviving Corporation
shall be the same number of directors of DHO in effect immediately prior to the
Effective Time. At the Effective Time, each person who is a director of DHO
immediately prior to the Effective Time shall be a director of the Surviving
Corporation. Each such person shall serve as a director of the Surviving
Corporation for the balance of the term for which such person was elected a
director of DHO and until his or her successor is duly elected and qualified in
the manner provided in the Code of Regulations or the Articles of Incorporation
of the Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the Code of
Regulations or the Articles of Incorporation of the Surviving Corporation or as
otherwise provided by law.
Section 5. Officers of the Surviving Corporation. At the Effective
Time, each person who is an officer of DHO immediately prior to the Effective
Time shall be an officer of the Surviving Corporation in accordance with the
Code of Regulations of the Surviving Corporation holding the same office as he
or she held in DHO immediately prior to the Effective Time.
Section 6. Effective Time. The Merger shall become effective at 11:59
p.m. on ____________, 2002 (the "Effective Time").
Section 7. Cancellation and Conversion of Shares. At the Effective
Time, each common share, without par value, of DHO issued and outstanding
immediately prior to the Effective Time (the "DHO Shares") shall, by virtue of
the Merger and without any action on the part of the holder of the DHO Shares,
be cancelled. Further, by virtue of the Merger and without any action on the
part of the holder of the shares of Common Stock, without par value, of
Diamond-Hill Florida (the "Diamond Hill-Florida Shares"), each Diamond
Hill-Florida share issued and outstanding immediately prior to the Effective
Time shall be converted into one fully paid and nonassessable common share,
without par value, of the Surviving Corporation (the "Surviving Corporation
Shares"), and each fractional Diamond Hill-Florida Share shall be converted into
such fractional Surviving Corporation Share, which such Surviving Corporation
Shares shall thereafter constitute all of the issued and outstanding capital
stock of the Surviving Corporation.
Section 8. Effect of Conversion. At and after the Effective Time, each
share certificate which, immediately prior to the Effective Time, represented
outstanding Diamond Hill-Florida Shares (a "Diamond Hill-Florida Certificate")
shall be deemed for all purposes to evidence ownership of, and to represent, the
number of Surviving Corporation Shares into which the Diamond Hill-Florida
Shares represented by such Diamond Hill-Florida Certificate immediately prior to
the Effective Time have been converted pursuant to Section 7 of this Agreement.
The registered owner of any Diamond Hill-Florida Certificate outstanding
immediately prior to the Effective Time, as such owner appears in the books and
records of Diamond Hill-Florida or its transfer agent immediately prior to the
Effective time, shall, until such Diamond Hill-Florida Certificate is
surrendered for transfer or exchange, have and be
A-2
entitled to exercise any voting and other rights with respect to and to receive
any dividends or other distributions on the Surviving Corporation Shares into
which the Diamond Hill-Florida Shares represented by any such Diamond
Hill-Florida Certificate have been converted pursuant to Section 7 of this
Agreement.
Section 9. Exchange of Certificates. Each holder of a Diamond
Hill-Florida Certificate may, but shall not be required to, surrender such
Diamond Hill-Florida Certificate to the Surviving Corporation or its transfer
agent for cancellation after the Effective Time, and upon such surrender, shall
be entitled to receive from the Surviving Corporation or its transfer agent a
certificate (a "Surviving Corporation Certificate") representing the number of
Surviving Corporation Shares into which the Diamond Hill-Florida Shares
represented by such Diamond Hill-Florida Certificate have been converted
pursuant to Section 7 of this Agreement. If any such Surviving Corporation
Certificate is to be issued in a name other than that in which the Diamond
Hill-Florida Certificate surrendered for exchange is registered, it shall be a
condition of such exchange that the Diamond Hill-Florida Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall either pay any transfer or
other taxes required by reason of the issuance of the Surviving Corporation
Certificate in a name other than that of the registered holder of the Diamond
Hill-Florida Certificate surrendered or establish to the satisfaction of the
Surviving Corporation or its transfer agent that such tax has been paid or is
not applicable.
Section 10. Stock Option Plan. Each option to purchase Diamond
Hill-Florida Shares granted under the Diamond Hill-Florida 1993 Non-Qualified
and Incentive Stock Option Plan (the "Stock Option Plan") that is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder of any such option, be converted
into and become an option to purchase the same number of Surviving Corporation
Shares as the number of Diamond Hill-Florida Shares that were subject to such
option immediately prior to the Effective Time at the same option price per
share and upon the same terms and subject to the same conditions as are in
effect at the Effective Time. The Surviving Corporation shall reserve for
purposes of the Stock Option Plan a number of Surviving Corporation Shares equal
to the number of Diamond Hill-Florida Shares reserved by Diamond Hill-Florida
for issuance under the Stock Option Plan as of the Effective Time. As of the
Effective Time, the Surviving Corporation shall automatically assume the Stock
Option Plan and all obligations of Diamond Hill-Florida under the Stock Option
Plan, including the outstanding options granted or awarded pursuant thereto.
Section 11. Approval. This Agreement shall be submitted for approval by
the shareholders of Diamond Hill-Florida prior to the Effective Time. The
obligations of the parties to consummate the Merger shall be subject to the
approval of the Merger and this Agreement by the Shareholders of Diamond
Hill-Florida on or prior to the Effective Time.
Section 12. Dissenters' Rights. Shareholders of Diamond Hill-Florida
who dissent from the Merger pursuant to Section 607.1320 of the FBCA may be
entitled, if they comply with the provisions of the FBCA regarding the rights of
dissenting shareholders, to be paid the fair value of their Diamond Hill-Florida
Shares if the Merger is effectuated.
A-3
Section 13. Filing of Merger Documents. Prior to the Effective Time,
DHO shall file a certificate of merger with the Secretary of State of the State
of Ohio and Diamond Hill-Florida shall file articles of merger with the Florida
Department of State.
Section 14. Amendment. Subject to applicable law, this Agreement may be
amended, modified or supplemented by written agreement of Diamond Hill-Florida
and DHO, after authorization of such action by their respective Boards of
Directors, at any time prior to the Effective Time, except that after the
approval contemplated by Section 11 of this Agreement, no amendment shall (a)
alter or change the amount or kind of shares to be received in the Merger by the
holders of shares of either Diamond Hill-Florida or DHO, (b) alter or change any
term of the Articles of Incorporation or the Code of Regulations of DHO, or (c)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of shares of either
Diamond Hill-Florida or DHO.
Section 15. Abandonment. At any time prior to the Effective Time, the
Board of Directors of either Diamond Hill-Florida or DHO, or both, may terminate
this Agreement notwithstanding approval of this Agreement by the sole
shareholder of DHO or by the shareholders of Diamond Hill-Florida, or by both.
Section 16. Miscellaneous.
(a) Counterparts. This Agreement and any amendments hereto may
be executed in one or more counterparts, each of which shall be deemed
to be a duplicate original, but all of which taken together shall
constitute one and the same instrument.
(b) Captions. The captions contained in this Agreement are for
convenience of reference only, do not form a substantive part of this
Agreement and shall not restrict or enlarge any substantive provision
of this Agreement.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws, and not the conflicts
laws, of the State of Ohio.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of
the parties hereto.
(e) Other Instruments. The parties hereto agree to execute
such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.
A-4
IN WITNESS WHEREOF, this Agreement has been duly executed by each of
the parties hereto as of the day and year first set forth above.
DIAMOND HILL INVESTMENT GROUP, INC.
By:
-----------------------------------
Its:
----------------------------------
DHO, INC.
By:
-----------------------------------
Its:
----------------------------------
A-5
Appendix B
Dissenters' Rights Under Florida Law
607.1301 DISSENTERS' RIGHTS; DEFINITIONS. The following definitions apply to
ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of the
shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the shareholders'
vote authorizing the proposed action was taken, the date on which the
corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.
(1) Any shareholder of a corporation has the right to dissent from, and obtain
payment of the fair value of his or her shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the
merger, or
2. If the corporation is a subsidiary that is merged
with its parent under s. 607.1104, and the
shareholders would have been entitled to vote on
action taken, except for the applicability of
s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation, other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange pursuant to s.
607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within 1 year
after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a
control-share acquisition;
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(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which
will be acquired, if the shareholder is entitled to vote on
the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such
amendment would adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached
to any of his or her shares;
2. Altering or abolishing the voting rights pertaining
to any of his or her shares, except as such rights
may be affected by the voting rights of new shares
then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or
reclassification of any of his or her shares, when
such exchange, cancellation, or reclassification
would alter or abolish the shareholder's voting
rights or alter his or her percentage of equity in
the corporation, or effecting a reduction or
cancellation of accrued dividends or other arrearages
in respect to such shares;
4. Reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or
abolishing any provision relating to any sinking fund
for the redemption or purchase of any of his or her
shares, or making any of his or her shares subject to
redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends
of any of the shareholder's preferred shares which
had theretofore been cumulative;
6. Reducing the stated dividend preference of any of the
shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on
any of the shareholder's preferred shares upon
voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder
is entitled to dissent and obtain payment for his or her
shares.
(2) A shareholder dissenting from any amendment specified in paragraph (1)(e)
has the right to dissent only as to those of his or her shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in his
or her name. In that event, the shareholder's rights shall be determined as if
the shares as to which he or she has dissented and his or her other shares were
registered in the names of different shareholders.
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(4) Unless the articles of incorporation otherwise provide, this section does
not apply with respect to a plan of merger or share exchange or a proposed sale
or exchange of property, to the holders of shares of any class or series which,
on the record date fixed to determine the shareholders entitled to vote at the
meeting of shareholders at which such action is to be acted upon or to consent
to any such action without a meeting, were either registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her shares
under this section may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(1)(a) If a proposed corporate action creating dissenters' rights under
s. 607.1302 is submitted to a vote at a shareholders' meeting, the
meeting notice shall state that shareholders are or may be entitled to
assert dissenters' rights and be accompanied by a copy of ss. 607.1301,
607.1302, and 607.1320. A shareholder who wishes to assert dissenters'
rights shall:
1. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for his
or her shares if the proposed action is effectuated, and
2. Not vote his or her shares in favor of the proposed action. A
proxy or vote against the proposed action does not constitute
such a notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of ss. 607.1301, 607.1302, and
607.1320 to each shareholder simultaneously with any request for the
shareholder's written consent or, if such a request is not made, within
10 days after the date the corporation received written consents
without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the corporation
shall give written notice of such authorization or consent or adoption of the
plan of merger, as the case may be, to each shareholder who filed a notice of
intent to demand payment for his or her shares pursuant to paragraph (1)(a) or,
in the case of action authorized by written consent, to each shareholder,
excepting any who voted for, or consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or her, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating the shareholder's name and address, the number, classes, and series of
shares as to which he or she dissents, and a demand for payment of the fair
value of his or her shares. Any shareholder failing to file such election to
dissent within the period set forth shall be bound by the terms of the proposed
corporate action. Any shareholder filing an election to dissent shall deposit
his or her certificates
B-3
for certificated shares with the corporation simultaneously with the filing of
the election to dissent. The corporation may restrict the transfer of
uncertificated shares from the date the shareholder's election to dissent is
filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
or her shares. After such offer, no such notice of election may be withdrawn
unless the corporation consents thereto. However, the right of such shareholder
to be paid the fair value of his or her shares shall cease, and the shareholder
shall be reinstated to have all his or her rights as a shareholder as of the
filing of his or her notice of election, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim,
if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this
section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this
section.
(5) Within 10 days after the expiration of the period in which shareholders may
file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date
and not more than 12 months prior to the making of such offer;
and
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if
the corporation was not in existence throughout such 12-month
period, for the portion thereof during which it was in
existence.
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(6) If within 30 days after the making of such offer any shareholder accepts the
same, payment for his or her shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his or her shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him or her within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate of
interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of such
costs and expenses may be apportioned and assessed as the court deems equitable
against any or all of the dissenting shareholders who are parties to the
proceeding, to whom the corporation has made an offer to pay for the shares, if
the court finds that the action of such shareholders in failing to accept such
offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
B-5
(10) Shares acquired by a corporation pursuant to payment of the agreed value
thereof or pursuant to payment of the judgment entered therefor, as provided in
this section, may be held and disposed of by such corporation as authorized but
unissued shares of the corporation, except that, in the case of a merger, they
may be held and disposed of as the plan of merger otherwise provides. The shares
of the surviving corporation into which the shares of such dissenting
shareholders would have been converted had they assented to the merger shall
have the status of authorized but unissued shares of the surviving corporation.
B-6
Appendix C
ARTICLES OF INCORPORATION
OF
DIAMOND HILL INVESTMENT GROUP, INC.
The undersigned, desiring to form a corporation for profit under
Chapter 1701 of the Ohio Revised Code, does hereby certify:
FIRST: The name of the corporation shall be Diamond Hill Investment
Group, Inc.
SECOND: The place in Ohio where the principal office of the corporation
is to be located is in the City of Columbus, County of Franklin.
THIRD: The purpose for which the corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under Sections
1701.01 to 1701.98 of the Ohio Revised Code.
FOURTH: The authorized number of shares of the corporation shall be
Eight Million (8,000,000), consisting of Seven Million (7,000,000) common
shares, each without par value, and One Million (1,000,000) preferred shares,
each without par value.
The directors of the corporation are authorized to adopt amendments to
the Articles in respect to any unissued preferred shares and thereby to fix or
change, to the fullest extent now or hereafter permitted by Ohio law: the
division of such shares into series and the designation and authorized number of
shares of each series; the dividend or distribution rights, which may be
cumulative or noncumulative; the dividend rate, amount or proportion; the
dividend participation rights and preferences; the liquidation rights,
preferences and price; the redemption rights and price; the sinking fund
requirements; the voting rights; the pre-emptive rights; the conversion rights;
the restrictions on issuance of shares; the rights of alteration of
C-1
express terms; and such other rights, preferences and limitations as shall not
be inconsistent with this Article FOURTH or Ohio law.
FIFTH: The directors of the corporation shall have the power to cause
the corporation from time to time and at any time to purchase, hold, sell,
transfer or otherwise deal with (A) shares of any class or series issued by it,
(B) any security or other obligation of the corporation which may confer upon
the holder thereof the right to convert the same into shares of any class or
series authorized by the articles of the corporation, and (C) any security or
other obligation which may confer upon the holder thereof the right to purchase
shares of any class or series authorized by the articles of the corporation. The
corporation shall have the right to repurchase, if and when any shareholder
desires to sell, or on the happening of any event is required to sell, shares of
any class or series issued by the corporation. The authority granted in this
Article Fifth of these articles shall not limit the plenary authority of the
directors to purchase, hold, sell, transfer or otherwise deal with shares of any
class or series, securities, or other obligations issued by the corporation or
authorized by its articles.
SIXTH: No shareholder of the corporation shall have, as a matter of
right, the pre-emptive right to purchase or subscribe for shares of any class,
now or hereafter authorized, or to purchase or subscribe for securities or other
obligations convertible into or exchangeable for such shares or which by
warrants or otherwise entitle the holders thereof to subscribe for or purchase
any such share.
SEVENTH: Notwithstanding any provision of the Ohio Revised Code
requiring for any purpose the vote, consent, waiver or release of the holders of
shares of the corporation entitling them to exercise two-thirds or any other
proportion of the voting power of the corporation or of any class or classes of
shares thereof, such action, unless expressly provided
C-2
otherwise by statute, may be taken by the vote, consent, waiver or release of
the holders of shares entitling them to exercise not less than a majority of the
voting power of the corporation or of such class or classes.
C-3
PROXY
DIAMOND HILL INVESTMENT GROUP, INC.
1105 SCHROCK ROAD, SUITE 437
COLUMBUS, OHIO 43229
This Proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Shareholders, May 2, 2002
The undersigned hereby appoints R. H. Dillon and Sandra L. Quinn and
each of them, proxies of the undersigned, with full power of substitution, to
attend the Annual Meeting of Shareholders of Diamond Hill Investment Group, Inc.
(the "Company") to be held on May 2, 2002, or any adjournment thereof, and to
vote all shares of Common Stock, without par value, of the Company (the
"Shares") which the undersigned is entitled to vote at such Annual Meeting or at
any adjournment thereof as set forth below:
This Proxy when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no directive is made, the Shares
represented by this Proxy will be voted "FOR" the election of the named nominees
for directors and "FOR" the proposal to reincorporate the Company in Ohio. If
any other matters are properly brought before the Annual Meeting or any
adjournment thereof, the Shares represented by this Proxy will be voted in the
discretion of the proxies on such matters as the directors may recommend.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders dated March 26, 2002, the Proxy Statement furnished
therewith, and the Company's Form 10-KSB for the year ended December 31, 2001.
Any proxy heretofore given to vote the Shares which the undersigned is entitled
to vote at the Annual Meeting of Shareholders is hereby revoked.
SEE REVERSE PLEASE MARK, SIGN, DATE AND RETURN THE SEE REVERSE
SIDE PROXY CARD PROMPTLY IN THE ENCLOSED SIDE
ENVELOPE, UNLESS VOTING ELECTRONICALLY.
Please mark your
vote like this: |X|
1. To elect the nominees named below as 2. To approve the proposed reincorporation in Ohio.
directors. Nominees: Dr. Roger D. Blackwell
(term of three years), R. H. Dillon (term of [ ] For [ ] Against [ ] Abstain
one year) and Diane D. Reynolds (term of three
years).
[ ] For [ ] Withhold
[ ] For all (except Nominee(s) written below):
IF YOU WISH TO VOTE ELECTRONICALLY, PLEASE READ THE INSTRUCTIONS BELOW.
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
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Signature
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Date
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Signature
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Date
Please sign exactly as your name or names
appear hereon. Joint owners should each sign.
Executors, administrators, trustees,
guardians and others should give their full
title. Corporations and partnerships should
sign in their full name by their president or
another authorized person.
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FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
DIAMOND HILL INVESTMENT GROUP, INC.
You can now vote your Shares electronically through the Internet or the
telephone. This eliminates the need to return the Proxy card. Your electronic
vote authorizes the named proxies to vote your Shares in the same manner as if
you marked, signed, dated and returned the Proxy card.
TO VOTE YOUR PROXY ELECTRONICALLY
www.continentalstock.com
Have your Proxy card in hand when you access the above Web Site. You
will be prompted to enter the Company number, Proxy number and account number to
create an electronic ballot. Follow the prompts to vote your Shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your Proxy card above, detach it and return it in
the postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
1-800-293-8533
Use any touch-tone telephone to vote your Proxy. Have your Proxy card
in hand when you call. You will be prompted to enter the Company number, Proxy
number and account number. Follow the voting instructions to vote your Shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF YOU VOTED ELECTRONICALLY.