SCHEDULE 14A
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:
[X] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
[ ] Definitive proxy statement. [ ] Definitive additional materials.
[ ] Soliciting materials pursuant to Rule 14a-11(c) or Rule 14a-12.
DCB FINANCIAL CORP
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(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 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 security 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:
{DCB FINANCIAL CORP STATIONERY}
May 23, 2003
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of DCB
Financial Corp at 4:00 p.m. on Wednesday, June 25, 2003. The meeting will be
held at the Corporate Center, 110 Riverbend Ave., Lewis Center, Ohio.
This is a particularly important shareholder meeting for me as it will be the
first one I am attending since joining the Company as Chief Executive Officer.
Along with the other members of the Board of Directors and management, I look
forward to greeting those shareholders who are able to attend in person.
DCB Financial has come through a challenging year, and your Board of Directors
and management team have developed and begun to implement plans to address
several important goals. These include improving profitability, enhancing
shareholder value and continuing to grow within the excellent markets we serve
with outstanding service, competitive products and community involvement. We
will provide further details of our plans in the next few months. We believe
that by prudently expanding our franchise, we will have the opportunity to
become one of the premier financial institutions in the State of Ohio.
As a native of Delaware, and with over 20 years of banking experience, I can
assure you that our goal of continuing to build the Company's position as the
leading independent community bank in Delaware County has great significance to
me, both personally and professionally.
In addition to the election of three directors, the Board is requesting
shareholder approval of a number of changes to the Company's Articles of
Incorporation and Code of Regulations, as specified in the attached notice of
annual meeting. After our recent experience with a small group of dissident
shareholders, which caused us to postpone our annual meeting, your Board of
Directors, in response to advice of counsel, has recommended these changes. The
intent of these proposed changes is to provide the Company additional
flexibility in raising capital, engaging in potential acquisitions and
protecting itself against undesirable attempts to gain control of the Company.
We believe that the proposed changes will allow the Company to continue as a
strong, independent financial institution serving our local communities. We are
convinced that in the end, this is the best way to advance the interest of the
Company, its employees, the communities it serves and, most importantly, you our
shareholders.
Thank you for your continued loyalty and support.
On behalf of the Board of Directors,
Jeffrey T. Benton
President and Chief Executive Officer
DCB FINANCIAL CORP
110 Riverbend Avenue
Lewis Center, Ohio 43035
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 25, 2003
To The Shareholders OF DCB Financial Corp:
You are hereby notified that the annual meeting of the shareholders of DCB
Financial Corp (the "Company") will be held on June 25, 2003, at 4:00 P.M. at
the Delaware County Bank & Trust Company Corporate Center (110 Riverbend
Avenue), Lewis Center, Ohio, for the purpose of considering and acting upon the
following:
1. ELECTION OF DIRECTORS - To elect Class I directors to hold office until
the expiration of their terms (3 years) expiring at the Annual Meeting
in 2006, or until their successors shall be duly elected and qualified.
2. AUTHORIZATION OF PREFERRED SHARES - To approve amending and restating
the Company's Articles of Incorporation to provide for 2,000,000
authorized preferred shares.
3. ELIMINATION OF CUMULATIVE VOTING - To approve amending and restating
the Company's Articles of Incorporation to eliminate the right of
cumulative voting in the election of directors. An effect of the
amendment to eliminate cumulative voting will be to do both of the
following:
A. TO PERMIT A MAJORITY OF A QUORUM OF THE VOTING POWER IN THE
ELECTION OR REMOVAL OF DIRECTORS TO ELECT OR REMOVE EVERY
DIRECTOR; AND
B. TO PRECLUDE A MINORITY OF A QUORUM OF THE VOTING POWER IN THE
ELECTION OR REMOVAL OF DIRECTORS FROM ELECTING OR PREVENTING THE
REMOVAL OF ANY DIRECTOR.
(Please note that directors will be elected by a plurality of votes and
that the removal of directors is controlled by Article III, Section 5
of the Amended Code of Regulations, which provides for the removal of
directors only upon approval of the holders of 75 percent of the
outstanding shares and only for cause.)
4. OPTING OUT OF THE CONTROL SHARE ACQUISITION STATUTE - To approve
amending the Articles of Incorporation of the Company to choose that
the provisions of Section 1701.831 of the Ohio Revised Code, the
control share acquisition statute not be applicable to the Company.
5. TECHNICAL REVISIONS TO THE ARTICLES OF INCORPORATION - To approve
amending and restating the Company's Articles of Incorporation, as more
fully described in the accompanying proxy statement, to make certain
technical changes and corrections.
6. AMENDMENT AND RESTATEMENT OF THE CODE OF REGULATIONS - To approve
amending and restating the Company's Code of Regulations, as more fully
described in the
accompanying Proxy Statement, including (a) to permit shareholders to
remove a director only for cause, (b) to require shareholders to
provide notice of proposals in advance of shareholder meetings, (c) to
increase the number of shareholders required to call a special meeting
of shareholders to those holding fifty percent of the outstanding
shares, and (d) to modify the manner for amendment of the Code of
Regulations.
7. OTHER BUSINESS - To transact any other business which may properly come
before the meeting or any adjournment of it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF ITS NOMINEES NOTED IN THE
PROXY STATEMENT, AND "FOR" PROPOSALS 2, 3, 4, 5 AND 6.
The Board of Directors has fixed May 15, 2003, as the record date for the
determination of shareholders entitled to notice of and to vote at the annual
meeting. As of the record date there were 4,172,034 shares of the Company's no
par value common stock outstanding. The stock transfer books of the Company will
not be closed prior to the meeting.
A copy of the Company's Annual Report, which includes the Company's audited
Balance Sheets as of December 31, 2002, and 2001, the related audited Statements
of Income, Statements of Changes in Shareholders' Equity, and Statements of Cash
Flows for each of the three years ended December 31, 2002, is enclosed.
By the order of the Board of Directors
May 23, 2003 Jeffrey T. Benton
President and Chief Executive Officer
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YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU
STILL HAVE THE RIGHT TO REVOKE THE PROXY AND VOTE IN PERSON AT THE MEETING IF
YOU SO CHOOSE. IF YOU HAVE ANY QUESTIONS PLEASE CONTACT DONALD R. BLACKBURN AT
DCB FINANCIAL CORP (740/657-7930).
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DCB FINANCIAL CORP
110 Riverbend Avenue
Lewis Center, Ohio 43035
(740) 657-7000
PROXY STATEMENT
---------------
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation, by the Board of Directors of DCB Financial
Corp, 110 Riverbend Avenue, Lewis Center, Ohio 43035, (740) 657-7000, of proxies
to be voted at the annual meeting of the shareholders of DCB Financial Corp to
be held on June 25, 2003, at 4:00 P.M. at the Delaware County Bank & Trust
Company Corporate Center (110 Riverbend Avenue), Lewis Center, Ohio, in
accordance with the foregoing notice.
DCB Financial Corp is a financial services holding company. DCB Financial Corp
is at times hereinafter referred to as the "Company."
The solicitation of proxies on the enclosed form is made on behalf of the Board
of Directors of the Company and will be conducted primarily through the mail.
Please mail your completed proxy in the envelope included with these proxy
materials. In addition to the use of the mail, members of the Board of Directors
and certain officers and employees of the Company or its subsidiaries may
solicit the return of proxies by telephone, facsimile, other electronic media or
through personal contact. Proxies may not be returned through the Internet. The
Directors, officers and employees that participate in such solicitation will not
receive additional compensation for such efforts, but will be reimbursed for
out-of-pocket expenses.
The proxy materials are first being mailed to shareholders on or about May 23,
2003.
Any shareholder executing a proxy has the right to revoke it by the execution of
a subsequently dated proxy, by written notice delivered to the Secretary of the
Company prior to the exercise of the proxy or in person by voting at the
meeting. The shares will be voted in accordance with the direction of the
shareholder as specified on the proxy. In the absence of instruction, the proxy
will be voted "FOR" the election of the management director nominees listed in
this Proxy Statement, and "FOR" each of proposals 2, 3, 4, 5 and 6 described
above, and in the discretion of the proxy committee for any other business that
properly comes before the meeting.
VOTING SECURITIES AND PROCEDURES
Only shareholders of record at the close of business on May 15, 2003, will be
eligible to vote at the Annual Meeting or any adjournment thereof. As of May 15,
2003, the Company had outstanding 4,172,034 shares of no par value common stock.
Shareholders are entitled to one vote for each share of common stock owned as of
the record date, except for the right to vote cumulatively in regard to the
election of directors, as noted below.
The presence in person or by proxy of a majority of the outstanding shares of
common stock of the Company entitled to vote at the meeting will constitute a
quorum at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business at the meeting.
The three nominees for director who receive the largest number of votes cast
"For" will be elected as directors. Shares represented at the annual meeting in
person or by proxy but withheld or otherwise not cast for the election of
directors, including abstentions and broker non-votes, will have no impact on
the outcome of the election for directors.
Shareholders currently have cumulative voting rights with respect to the
election of directors. Cumulative voting rights allow shareholders to vote the
number of shares owned by them times the number of directors to be elected and
to cast such votes for one nominee or to allocate such votes among nominees as
they deem appropriate. Shareholders may exercise cumulative voting rights at the
annual meeting if any shareholder gives at least 48 hours prior written notice
to the President, a Vice President or Secretary of the Company that cumulative
voting is desired and an announcement of that notice is made at the beginning of
the meeting. Shareholders will not be entitled to exercise cumulative voting
unless at least one shareholder properly notifies the Company of their desire to
implement cumulative voting at the Annual Meeting. The Company is soliciting the
discretionary authority to cumulate votes represented by proxy, if such
cumulative voting rights are exercised.
Many of the Company's shareholders hold their shares in "street name"--in the
name of a brokerage firm. If you hold your shares in "street name," please note
that only your brokerage firm can sign a proxy on your behalf. In regard to
proposals 2, 3, 4, 5 and 6, broker non-votes will not be counted as shares voted
in favor of or against the proposal. Because each of proposals 2, 3, 4, 5 and 6
regarding the amendments to the Articles of Incorporation and Code of
Regulations require approval by a majority of the outstanding shares,
abstentions in regard to these proposals will effectively represent a vote
against the proposals. The Board of Directors urges you to contact the person
responsible for your account today, and instruct them to execute a proxy on your
behalf for the annual meeting.
All Directors and Executive Officers of the Company as a group (comprised of 18
individuals), beneficially held 283,039 shares of the Company's common stock as
of May 15, 2003, representing 6.78% of the outstanding common stock of the
Company.
PROPOSAL 1-ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO DIRECTORS AND
OFFICERS
At the annual meeting three (3) Directors will be elected to a three-year term
expiring at the annual meeting in 2006.
The Code of Regulations for the Company provides that the Directors shall be
divided into three Classes, as nearly equal in number as possible. The number of
Directors and year of term expiration for each Class is as follows:
Class I 3 Directors Term Expiration 2006
Class II 4 Directors Term Expiration 2004
Class III 4 Directors Term Expiration 2005
The Board has nominated the following individuals for election as Class I
Directors for terms expiring at the Annual Meeting in 2006. Information
regarding these nominees is set forth as follows. Unless otherwise indicated,
each person has held his or her principal occupation for more than five years.
PRINCIPAL OCCUPATION
NAME AGE DIRECTOR SINCE (1) DURING PAST FIVE YEARS
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Jeffrey T. Benton 50 2003(2) Currently, President
and CEO of the Company
and its wholly owned
subsidiary, The
Delaware County Bank &
Trust Company; formerly
Executive Vice
President, Community
First Bank, Celina,
Ohio; Consultant to the
banking industry;
Senior Vice President
Bank One, N.A.
G. William Parker 68 1976 Chairman of the Company
and The Delaware County
Bank & Trust Company;
Retired Surgeon
Gary M. Skinner 58 1996 President, Hardscrabble Farms
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(1) Includes time served as a director of The Delaware County Bank & Trust
Company prior to the organization of the Company in 1997.
(2) Mr. Benton became President and CEO of the Company under an employment
agreement dated December 18, 2002, which is discussed below. Mr. Benton was
appointed to the Board of Directors of the Company on February 18, 2003.
While it is contemplated that all nominees will stand for election, and the
nominees have confirmed this with the Company, if one or more of the nominees at
the time of the annual meeting should be unavailable or unable to serve as a
candidate for election as a director of the Company, the proxies reserve full
discretion to vote the common shares represented by the proxies for the election
of the remaining nominees and any substitute nominee(s) designated by the Board
of Directors. The Board of Directors knows of no reason why any of the
above-mentioned persons will be unavailable or unable to serve if elected to the
Board. Under Ohio law and the Company's Code of Regulations, the three nominees
receiving the greatest number of votes will be elected as directors.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF THE ABOVE
NOMINEES.
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The following table sets forth certain information with respect to the Class II
and III Directors of DCB Financial Corp:
PRINCIPAL OCCUPATION
NAME AGE DIRECTOR SINCE(1) DURING PAST FIVE YEARS
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C. William Bonner 68 1988 Real Estate Developer
Jerome J. Harmeyer 63 1990 President, Fisher Cast Steel,
a foundry
PRINCIPAL OCCUPATION
NAME AGE DIRECTOR SINCE(1) DURING PAST FIVE YEARS
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Merrill L. Kaufman 68 1988 President, Peoples Store, Inc.,
a retailer
Terry M. Kramer 56 1992 President, Kramer Exploration,
a geologist
Vicki J. Lewis 48 1997 Vice President, Grady Memorial
Hospital
William R. Oberfield 48 1993 President, Oberfield's Concrete
Products
Edward Powers 57 1984 President, R. B. Powers and Company,
a specialty items manufacturer
Adam Stevenson 63 2001 Retired Plant Manager, PPG Industries
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(1) Includes time served as a director of The Delaware County Bank & Trust
Company prior to the organization of the Company in 1997.
There are no family relationships among any of the directors, nominees for
election as directors and executive officers of the Company.
The following table sets forth certain information with respect to the
executive officers of DCB Financial Corp:
OFFICER POSITIONS AND OFFICES HELD WITH COMPANY
NAME AGE SINCE(1) & PRINCIPAL OCCUPATION HELD PAST FIVE YEARS
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Jeffrey T. Benton 50 2002 President and Chief Executive Officer
Formerly Executive Vice President, Community
First Bank, Celina, Ohio;
Consultant to the banking
industry; Senior Vice
President of Bank One,
N.A.
David G. Bernon 58 1991 Senior Vice President, Lending & Branch
Divisions; Vice President-Lending
Donald R. Blackburn 59 1988 Vice President, Customer Relations; Vice
President, Branch Administration
Brian E. Stanfill 44 1998 Vice President, Operations; Delaware County
Administrator prior to 1998
OFFICER POSITIONS AND OFFICES HELD WITH COMPANY
NAME AGE SINCE(1) & PRINCIPAL OCCUPATION HELD PAST FIVE YEARS
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John A. Ustaszewski 37 2001 Vice President and Chief Financial Officer; Vice
President and Risk Manager, Corporate One
prior to 2001
Thomas R. Whitney 54 1996 Vice President and Senior Trust Officer
Cindy J. Harmon 36 2003 Vice President, Human Resources; Roxanne Labs; HR Specialist,
1st Choice, HR Coordinator
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(1) Includes time served as an officer of The Delaware County Bank & Trust
Company
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the number and percentage of shares of common stock
owned by the Directors and Executive Officers of the Company. Each of the
persons named in the following table possesses sole voting and investment power,
except as otherwise shown in the footnotes to the following table. As of the
date of this Proxy Statement, management is not aware of any person who
beneficially owns five percent or more of the Company's common stock.
Previously, the "Davis Group", defined in this proxy statement as those persons
that named themselves as a "group" in the filing of an amended Schedule 13D with
the Securities Exchange Commission ("SEC") on October 31, 2002, held slightly
more than five percent. As reported on a Form 8-K filed with the SEC by the
Company on April 21, 2003, on April 18, 2003 the Company and the Davis Group
entered into a settlement and standstill agreement that will result in the
repurchase of all of the shares of the Company owned by the Davis Group. Please
see the section below entitled "Settlement of Proxy Contest and Litigation" for
a more complete discussion of this matter.
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
NAME MAY 15, 2003 PERCENTAGE
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Jeffrey T. Benton, Director & CEO 4,340 (1) *
William R. Oberfield, Director 19,859 (2) *
G. William Parker, Chairman of the Board of Directors 24,928 *
Gary M. Skinner, Director 20,784 (3) *
C. William Bonner, Director 12,600 (4) *
Merrill L. Kaufman, Director 21,570 (5) *
Terry M. Kramer, Director 49,190 (6) 1.18%
Edward Powers, Director 21,840 *
Jerome J. Harmeyer, Director 52,833 (7) 1.27%
Vicki J. Lewis, Director 16,240 (8) *
Adam Stevenson, Director 1,531 *
David G. Bernon, Executive Officer 5,491 *
Thomas R. Whitney, Executive Officer 10,691 (9) *
All directors, nominees and executive officers
as a group (18 in number) 283,039 6.78%
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*Ownership is less than 1%
(1) Includes beneficial ownership of 540 shares owned by his son and 800
"restricted shares" described in footnote 1 to the Summary
Compensation Table on page 12.
(2) Includes beneficial ownership of 5,320 shares owned by spouse and
spouse's IRA.
(3) Includes beneficial ownership of 8,636 shares owned jointly with
spouse and 667 shares owned by spouse.
(4) Includes beneficial ownership of 12,100 shares in ABL Group, Ltd., the
address for which is 1349 Cameron Ave., Lewis Center, Ohio 43035.
(5) Includes beneficial ownership of 7,596 shares owned jointly with
spouse.
(6) Includes beneficial ownership of 23,420 shares owned by his spouse.
(7) Includes 1,144 shares owned jointly with spouse and 43,639 shares
owned by spouse and spouse's IRA.
(8) Includes beneficial ownership of 15,700 shares owned by spouse.
(9) Includes beneficial ownership of 540 shares which are subject to
shared voting and investment power with his spouse.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board and
through its committees. The Board of Directors of the Company has appointed and
maintains an Audit Committee, Salary Committee and Nominating Committee.
The Audit Committee reviews with the Company's independent auditors, the audit
plan, the scope and results of their audit engagement and the accompanying
management letter, if any; reviews the scope and results of the Company's
internal auditing procedures; consults with the independent auditors and
management with regard to the Company's accounting methods and the adequacy of
its internal accounting controls; approves professional services provided by the
independent auditors; reviews the independence of the independent auditors; and
reviews the range of the independent auditors' audit and nonaudit fees. The
Audit Committee also has been charged with the enforcement of the Code of
Business Conduct and Ethics adopted by the Company's Board of Directors, as
discussed below. The Audit Committee is comprised of Ms. Lewis and Messrs.
Kaufman, Skinner, and Powers. The Audit Committee met four (4) times during
2002.
The Salary Committee functions as the compensation committee of the Board of
Directors and is responsible for administering the Company's employee benefit
plans; setting the compensation of officers; reviewing the criteria that forms
the basis for management's officer and employee compensation recommendations and
reviewing management's recommendations in this regard. The Salary Committee is
comprised of Ms. Lewis and Messrs. Kramer, Stevenson and Parker. The Salary
Committee met four (4) times during 2002.
The Company's Nominating Committee is responsible for making recommendations to
the Board of nominees to fill vacancies created by expiring terms of Directors
and from time to time, making appointments to fill vacancies created prior to
the expiration of a Director's term. The Nominating Committee will consider
nominees recommended by shareholders. The procedure for nominating an individual
as a director is set forth below under the heading "Shareholder Proposals and
Director Nominations." The Committee met two (2) times in 2002. The Nominating
Committee is comprised of Messrs. Kaufman and Powers.
The Board of Directors of the Company meets monthly for its regular meetings and
upon call for special meetings. During 2002, the Board of Directors of the
Company met eighteen (18) times. All Directors of the Company attended at least
75 percent of the Board and Committee Meetings that they were scheduled to
attend during 2002.
Directors are paid a monthly retainer of $250 for serving on the Board, except
for the Chairman of the Board who receives a retainer of $500 per month. In
addition, the Directors receive $250 per board meeting attended and $150 for
each committee meeting attended. Committee Chairs receive $200 for each
Committee Meeting.
CORPORATE GOVERNANCE
The Company recently reviewed its corporate governance policies as a matter of
good business practices and in light of the passage of the Sarbanes-Oxley Act of
2002 ("Sarbanes Oxley"). While many of the corporate governance requirements of
Sarbanes Oxley are not mandatory until 2004, the Company decided to implement
certain corporate governance policies to encourage appropriate conduct among the
members of its Board of Directors, officers and employees. In this regard, the
Board of Directors of the Company adopted a Code of Business Conduct and Ethics
(the "Code") at its meeting on March 18, 2003. The administration of the Code
has been delegated to the Audit Committee of the Board of Directors, a Committee
comprised entirely of "independent directors." The Code addresses topics such as
compliance with laws and regulations, conflicts of interest, confidentiality and
protection of Company assets, fair dealing and accurate and timely periodic
reports, and also provides for enforcement mechanisms. The Board and management
of the Company intends to continue to monitor not only the developing legal
requirements in this area, but also the best practices of comparable companies,
to assure that the Company maintains sound corporate governance practices in the
future.
AUDIT COMMITTEE REPORT
The Audit Committee of DCB Financial Corp's Board of Directors is comprised of
four directors, each of whom is "independent" as that term is defined in Rule
4200(a)(14) of the listing standards of the National Association of Securities
Dealers, Inc. The Committee operates under a written charter adopted by the
Board of Directors. The Committee recommends to the Board of Directors the
selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and the financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Committee's responsibility is to monitor and oversee the processes.
In this context, the Committee has met and held discussions with management and
the independent accountants. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the letter
and written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence. The Committee has
considered whether the provision of non-audit services by the independent
accountants to the Company and its subsidiaries is compatible with maintaining
the independence of the independent accountants.
Based upon the Committee's discussion with management and the independent
accountants and the Committee's review of the representations of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002, filed with the Securities and Exchange Commission.
Edward Powers, Chairman
Vicki J. Lewis
Gary M. Skinner
Merrill L. Kaufman
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning compensation
paid or accrued by the Company and/or its subsidiaries, to or on behalf of the
Company's Chief Executive Officer, its former Chief Executive Officer and two of
its other executive officers who earned more than $100,000 in salary and bonus
for the fiscal year ended December 31, 2002. No other executive officer earned
more than $100,000 in salary and bonus for the fiscal year ended December 31,
2002.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION
LONG TERM
ANNUAL COMPENSATION COMPENSATION
- -------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER ANNUAL RESTRICTED ALL OTHER
POSITION COMPENSATION STOCK COMPENSATION(3)
AWARDS
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
Jeffrey T. Benton 2002 -0- -0- -0- $15,000(1) -0-
President and CEO(1)
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
Larry D. Coburn Former 2002 $166,250 $46,000 -0- -0- $26,899
President and CEO(2)
2001 $171,999 $55,265 -0- -0- $44,218
2000 $171,999 $46,235 -0- -0- $38,603
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
David G. Bernon 2002 $107,040 $7,295 -0- -0- $39,759
Senior Vice President,
Lending and Branch 2001 $101,879 $15,967 -0- -0- $33,418
Division
2000 $101,879 $12,751 -0- -0- $29,174
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
Thomas R. Whitney 2002 $104,834 $7,148 -0- -0- $26,369
Vice President and Senior
Trust Officer 2001 $98,898 $15,500 -0- -0- $20,571
2000 $ 98,898 $12,378 -0- -0- $17,978
- --------------------------- -------- ------------ ---------- ------------------ --------------- -------------------
- ----------
(1) Mr. Benton became the President and Chief Executive Officer of the
Company effective December 18, 2002. Under the terms of his employment
agreement, Mr. Benton is entitled to receive $15,000 in value of common shares
of
the Company measured as of the date of such agreement. This equaled 800 shares
at $18.75, the price of Company's shares as of that date. Mr. Benton has the
right to vote such shares and receive dividends on the shares, however, the
shares do not become fully vested until December 31, 2004. Mr. Benton actually
commenced work at the Company effective January 6, 2003, such that he received
no other compensation for the year 2002.
(2) The Company decided not to continue the employment of Mr. Coburn as the
President and CEO of the Company effective as of October 2, 2002. He received
$23,750 in severance benefits during the year 2002. The terms and conditions of
Mr. Coburn's severance agreement are set forth below.
(3) The amounts shown in this column for the most recent fiscal year were
derived from the following figures: (1) contributions by the Company to the
Company 401(k) plan on behalf of the named executive: Mr. Coburn, $3,149; Mr.
Bernon, $1,605; and Mr. Whitney, $2,883; (2) Supplemental Executive Retirement
Plan accrual; Mr. Bernon, $38,154; and Mr. Whitney, $23,486; and (3) severance
benefits to Mr. Coburn of $23,750.
EMPLOYMENT CONTRACTS
The Company has employment contracts currently in place with Jeffrey T. Benton,
President and CEO of the Company and its subsidiary, The Delaware County Bank
and Trust Company (the "Bank"), David G. Bernon, Senior Vice President - Lending
and Branch Division, and Thomas R. Whitney, Vice President and Senior Trust
Officer of the Bank.
The Company entered into an employment agreement with Mr. Benton on December 18,
2002. The contract provides that Mr. Benton will be the President and Chief
Executive Officer of the Company and The Delaware County Bank and Trust Company
from that date through December 31, 2004. The contract provides for automatic
renewal for successive one-year periods thereafter if Mr. Benton is employed as
of the end of the calendar year. The Company agrees to appoint Mr. Benton to the
Board of Directors of the Company and the Bank, which action has been taken. Mr.
Benton's base salary under the contract is $150,000. Mr. Benton has the
opportunity to earn a performance-based bonus if he meets the criteria
established on an annual basis by the Board of Directors. One half of any such
bonus will be paid in cash within 30 days of the date of determination of the
bonus. The remaining one half of the bonus amount is to be paid in options on
shares of common stock of the Company based upon the price of the stock on the
date of the bonus, with such options vesting over between three to five years.
Mr. Benton's contract provides other typical perquisites including participation
in Company employee benefit plans, reimbursement of moving expenses, club
membership and vacations with pay. In the event of termination, the agreement
provides for payment of 12 months of base salary, unless Mr. Benton is
terminated for "Just Cause" (as defined in the agreement). Mr. Benton is
permitted to terminate the contract and receive his base pay for 12 months in
the event of a change of control, if he resigns within 12 months of such action.
The contract provides for protection of the Company's confidential information
and includes a covenant not to compete during the contract and for two years
thereafter, unless the contract is terminated prior to December 31, 2003, in
which case the covenant is only for one year. Finally, the contract provides for
arbitration of disputes arising under the contract.
The contract with Mr. Bernon initially was entered into for the period from June
1, 1999, through May 31, 2000. The contract is renewed for successive one year
terms upon the written consent of the Bank and Mr. Bernon. The contract provides
for a base salary to be set by the Board's Salary Committee and the employee is
entitled to participate in any bonus and other employee benefit plans. The
contract also provides for a severance payment in the event that the Bank
terminates Mr. Bernon's employment for other than: (i) "Just Cause" (as defined
in the contract) or (ii) Mr. Bernon reaching retirement age. In such a
termination, the Bank is obligated under the contract to pay Mr. Bernon an
amount equal to his monthly salary for up to 12 months or until he accepts other
employment. In the event the Bank is the subject of an acquisition to which Mr.
Bernon does not consent, and his position with the Bank is changed
significantly, Mr. Bernon may voluntarily terminate the contract and receive as
severance an amount equal to the average annual salary he has received from the
Bank for the past five years.
The contract with Mr. Whitney initially was entered into for the period from
August 1, 1996 through December 31, 1996. The contract is renewed for successive
one year terms upon the written consent of the Bank and Mr. Whitney. The
contract provides for a base salary to be set by the Board's Salary Committee
and the employee is entitled to participate in any bonus and other employee
benefit plans. The contract also provides for a severance payment in the event
that the Bank terminates Mr. Whitney's employment for other than: (i) "Just
Cause" (as defined in the contract) or (ii) Mr. Whitney reaching retirement age.
In such a termination, the Bank is obligated under the contract to pay Mr.
Whitney an amount equal to his monthly salary for up to 12 months or until he
accepts
other employment. In the event the Bank is the subject of an acquisition
to which Mr. Whitney does not consent, and his position with the Bank is changed
significantly, Mr. Whitney may voluntarily terminate the contract and receive as
severance an amount equal to the average annual salary he has received from the
Bank for the past five years.
TERMINATION OF THE FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER
In October of 2002, the Company decided not to continue the employment of Larry
D. Coburn, its then President and CEO. On November 1, 2002, the Company and Mr.
Coburn entered into a Resignation, Release, and Post-Employment Covenants
Agreement (the "Resignation Agreement"). Upon execution of the Resignation
Agreement, Mr. Coburn ceased to be an officer, director and employee of the
Company or The Delaware County Bank and Trust Company. The Company agreed to pay
Mr. Coburn 11 months of base salary at $15,833.33 per month, one payment of
$4,666.70, plus one month of accrued vacation pay, less a $27,000 mid-year
prepayment of a year-end bonus. The payments due to Mr. Coburn are to be reduced
by wages or other compensation for services earned by Mr. Coburn from sources
other than the Company. The Company also released Mr. Coburn from any claims
that it may have had against him. In return for the commitments of the Company
in the Resignation Agreement, Mr. Coburn released any claims he had or may have
had against the Company, reaffirmed his commitment to maintain the
confidentiality of information of the Company, agreed to return any Company
owned property, agreed not to solicit Company employees for a period of two
years, agreed to cooperate with the Company in the defense of any legal actions
and agreed not to go to work for any company that had engaged in legal
proceedings against the Company.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 1998, the Company's wholly-owned subsidiary, The Delaware
County Bank and Trust Company, adopted an unfunded, non-qualified supplemental
executive retirement plan (the "Supplemental Retirement Plan"), due to
limitations imposed by federal law on the amount of retirement income that may
be paid through the Company's 401(k) Plan. Under the Supplemental Retirement
Plan, only executive officers named in the Supplemental Retirement Plan or
otherwise designated for participation in the Supplemental Retirement Plan by
the Board of Directors are eligible to participate. As of the date of this proxy
statement, Messrs. Bernon, Whitney and one other former executive officer
participated in the Supplemental Retirement Plan. Mr. Larry Coburn, the former
President and CEO of the Company had participated in the
Plan until the termination of his employment with the Company and the Bank in
October, 2002. Upon his termination, his rights under the Plan ceased.
Each participant in the Supplemental Retirement Plan is entitled to receive
under the Supplemental Retirement Plan at age 62 or upon later retirement, an
amount equal to 70% of the participant's total compensation from January 1, 1998
to age 62, less the participant's 401(k) plan benefits and social security
benefits. Amounts to be paid under the Supplemental Retirement Plan will be paid
monthly over an eighteen-year period. Each participant's compensation for
purposes of determining benefits under the Supplemental Retirement Plan will be
his or her 1998 base salary, increased by 4.5% for each subsequent year of
employment. The rate of annual appreciation on each participant's 401(k) plan
assets, for purposes of determining the amount to subtract in determining
Supplemental Retirement Plan benefits, is assumed to be 8%, and each
participant's annual contribution to his or her 401(k) plan account is assumed
to be 6% of eligible compensation. Because the final benefit to be paid a
participant under the Supplemental Retirement Plan at retirement will vary based
on the level of the Company's contributions to the 401(k) plan, with greater
Company contributions to the 401(k) plan resulting in lesser Supplemental
Retirement Plan benefits, it is not possible to precisely determine an executive
officer's Supplemental Retirement Plan benefit at retirement. The Company has
provided its best estimate of such amount in the Summary Compensation Table set
forth above.
Prorated benefits will be paid in accordance with the terms of the Supplemental
Retirement Plan in the event of the death or disability of a participant or the
acquisition or other change in control of the Company and subsequent termination
of employment of the participant or other diminishment of a participant's
compensation or responsibilities following a change in control of the Company.
In such an event the proration will be based upon the ratio of the number of
years of the participant's employment from January 1, 1998, to the date of the
triggering event to the number of whole years from January 1, 1998, to the date
the participant reaches age 62. Supplemental Retirement Plan benefits accrued
during 2002 for Messrs. Bernon and Whitney were $38,154 and $23,486,
respectively.
REPORT OF THE SALARY COMMITTEE OF DCB FINANCIAL CORP ON COMPENSATION
Under rules established by the Securities and Exchange Commission (the "SEC"),
the Company is required to provide certain data and information in regard to the
compensation and benefits provided to the Company's President and Chief
Executive Officer and, if applicable, the four other most highly compensated
Executive Officers, whose compensation exceeded $100,000 during the Company's
fiscal year. The disclosure includes the use of tables and a report explaining
the rationale and considerations that led to fundamental executive compensation
decisions affecting such officers. The Salary Committee of the Company has the
responsibility of determining the compensation policy and practices with respect
to all Executive Officers. At the direction of the Board of Directors, the
Salary Committee of the Company has prepared the following report for inclusion
in the Proxy Statement.
Compensation Policy. The report reflects the Company's compensation philosophy
as endorsed by the Salary Committee. The Salary Committee makes the
recommendation regarding the level of compensation for all Executive Officers
including Mr. Benton as the President and CEO. Mr. Benton has, and his
predecessor Mr. Coburn had, input into the compensation levels for all Executive
Officers, except himself.
The executive compensation program of the Company has been designed to:
- Support a pay-for-performance policy that rewards Executive Officers
for corporate performance.
- Motivate Executive Officers to achieve strategic business goals.
- Provide competitive compensation opportunities critical to the
Company's long-term success.
Upon the recommendation of the Salary Committee, the Board of Directors approved
Mr. Benton's employment agreement.
The Salary Committee approved compensation increases for all other Executive
Officers of the Company during 2002. Executive Officer salary increase
determinations are based upon an evaluation of each executive's performance
against goals set in the prior year.
The Bank maintains a cash bonus plan (the "Bonus Plan") which allocates a
portion of the Bank's pre-tax income for the purpose of employee cash bonuses on
an annual basis. The Bonus Plan is administered by the Salary Committee. The
award of a bonus to any employee under the terms of the Bonus Plan is
discretionary and is determined by the Board of Directors upon the
recommendation of the Salary Committee.
The Salary Committee has determined that a significant portion of executive
compensation should be payable in an annual bonus which shall be based
principally upon the financial performance of the Company and that of the
individual in attaining his or her established goals.
This Report of Compensation is submitted by the Salary Committee Members: Terry
M. Kramer, G. William Parker, Vicki J. Lewis, Thomas T. Porter and Adam
Stevenson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Larry D. Coburn, the Company's former President and Chief Executive Officer,
served on the Salary Committee of the Company, which is responsible for
compensation matters (see "Report of the Salary Committee" in this Proxy
Statement). Mr. Benton does not serve on the Salary Committee.
Although Mr. Coburn served on the Salary Committee, he did not participate in
any decisions regarding his own compensation as an Executive Officer. Each year,
the Salary Committee recommends the amount of the bonus award (pursuant to the
Bonus Plan described above) and salary for the ensuing year. Mr. Coburn did not
participate in discussions or decision-making relative to his own compensation.
PERFORMANCE GRAPH - FIVE YEAR SHAREHOLDER RETURN COMPARISON
We have set forth below a line-graph presentation comparing cumulative five-year
shareholder returns for the Company, the S&P 500 Market Index, the S&P Banks
Index, the Russell 2000 Index and the Nasdaq Bank Index. The chart below
compares the value of $100 invested on December 31, 1997, in the stock of DCB
Financial Corp, S&P 500 Market Index, the S&P Banks Index, the Russell 2000
Index and the Nasdaq Bank Index.
Previously, the Company has presented its performance compared to that of the
S&P 500 Market Index and the S&P Major Regional Bank Index. However, the Company
believes that the performance of the Russell 2000 Index and the Nasdaq Bank
Index are better benchmarks to compare the performance of the Company, based
upon the size and impact of the economy upon such companies.
On December 31, 2001, Standard & Poor's adopted a new industry classification
methodology for the purpose of calculating its U.S. industry indices. At that
time, the S&P Major Regional Bank Index was discontinued, and a new S&P Banks
Index was created using a new industry classification methodology. For
comparison purposes, both the old and new indices are shown in the table below.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG DCB FINANCIAL CORP., S&P
500 COMPOSITE INDEX, S&P MAJOR REGIONAL BANK INDEX & S&P BANKS INDEX FOR FISCAL
YEAR ENDING DECEMBER 31
[Performance Graph]
<Table>
<Caption>
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
DCB FINANCIAL CORP. $100.00 $ 81.90 $ 69.42 $ 54.34 $ 69.53 $ 97.59
S&P 500 COMPOSITE INDEX $100.00 $128.58 $155.63 $141.46 $124.65 $ 97.10
S&P MAJOR REGIONAL BANK INDEX $100.00 $110.48 $ 94.80 $121.37 $113.15 N/A
S&P BANKS INDEX $100.00 $106.04 $ 91.41 $108.83 $108.85 $107.74
</Table>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
ASSUMES $100 INVESTED ON JANUARY 1, 1998
IN DCB FINANCIAL CORP. COMMON STOCK,
S&P 500 COMPOSITE INDEX, S&P BANKS INDEX &
S&P MAJOR REGIONAL BANKS INDEX
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG DCB FINANCIAL CORP.,
RUSSELL 2000 & NASDAQ BANKS INDEX FOR FISCAL YEAR ENDING DECEMBER 31
[Performance Graph]
<Table>
<Caption>
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
DCB FINANCIAL CORP. $100.00 $ 81.90 $ 69.42 $ 54.34 $ 69.50 $ 97.59
RUSSELL 2000 $100.00 $ 97.45 $118.17 $114.59 $117.44 $ 93.39
NASDAQ BANKS $100.00 $ 88.23 $ 81.19 $ 93.10 $102.48 $107.11
</Table>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
ASSUMES $100 INVESTED ON JANUARY 1, 1998
IN DCB FINANCIAL CORP. COMMON STOCK,
RUSSELL 2000 & NASDAQ BANKS INDEX
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no existing or proposed material transactions between the Company and
any of the Company's executive officers, directors, nominees for director or the
immediate family or associates of any of the foregoing persons, except as
indicated below:
Mr. C. William Bonner, a Director of the Company who is engaged in the real
estate development business, purchased land and built three office complexes
located at 6156 Highland Lakes Avenue, Westerville, Ohio, 10149 Brewster Lane,
Powell, Ohio and 6820 Perimeter Loop Road, Dublin, Ohio. The Delaware County
Bank and Trust Company (at times referred to as the "Bank") entered into a lease
for these office complexes with initial terms of 20 years at a rent of $83,840,
$71,000 and $94,200 per year, respectively. The Board of Directors approved the
lease transactions, with Mr. Bonner abstaining from consideration of the matter.
The Board believes that the rent to be paid to Mr. Bonner and the other terms
and conditions of the lease transactions are comparable to those which would be
available from an unrelated party.
Mr. Bonner is also a principal owner of Rennob, Inc. and Whittington, Inc. The
Bank entered into contracts with Rennob, Inc. and Whittington, Inc. as Project
Coordinator/General Contractor for the construction of the Bank's corporate
headquarters building at 110 Riverbend Avenue, Lewis Center, Ohio, which was
completed in 2001. The Bank paid Rennob, Inc. and Whittington, Inc. a total of
$5,424,847 for their services in connection with the construction of the Bank's
new headquarters building. The Board of Directors approved these contracts with
Mr. Bonner abstaining from consideration of the matter. Management of the
Company and the Bank believe
that the terms and conditions of these contracts were comparable to those which
would have been available from an unrelated party and that the payments made
were at competitive rates.
Some of the directors of the Company, as well as the companies with which such
directors are associated, are customers of, and have had banking transactions
with the Bank in the ordinary course of the Bank's business and the Bank expects
to have such ordinary banking transactions with such persons in the future. In
the opinion of management of the Company and the Bank, all loans and commitments
to lend included in such transactions were made in compliance with applicable
laws on substantially the same terms, including interest rates and collateral,
as those prevailing for comparable transactions with other persons of similar
creditworthiness and did not involve more than a normal risk of collectibility
or present other unfavorable features.
The Bank expects to have in the future banking transactions in the ordinary
course of its business with directors, officers and principal shareholders, and
their associates on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for comparable
transactions with others and which do not involve more than the normal risk of
collectibility or present other unfavorable features.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such forms furnished to the Company or
written representations that no such forms were required, the Company believes
that, except as noted below, during 2002 all Section 16(a) filing requirements
applicable to its officers and Directors were complied with. The Company has no
shareholders who are ten percent beneficial owners. Mr. Benton, the President
and CEO of the Company filed one late Form 4 in regard to 800 "restricted
shares" granted as a part of his employment agreement described above. In
addition, each of Messrs. Bernon, Blackburn, Stanfill, Taylor, Ustaszewski, and
Whitney filed one late Form 4 in connection with the granting of eight shares to
all persons that were employees of the Company on December 31, 2002.
SETTLEMENT OF PROXY CONTEST AND LITIGATION
As most of our shareholders are aware, on April 18, 2003, the Company
entered into a settlement and standstill agreement (the "Settlement Agreement")
with S. Robert Davis and a few other shareholders. This "Davis Group" had
nominated three persons to serve as directors and had advanced a shareholder
proposal for consideration at the previously scheduled annual meeting. The
Company issued a press release and filed a form 8-K with the Securities and
Exchange Commission ("SEC") on April 21, 2003 concerning the Settlement
Agreement. A copy of the Settlement Agreement was included as a part of that
filing. As a part of the Settlement Agreement, the Davis Group agreed to
withdraw the three nominees for directors of the Company and withdraw the
shareholder proposal that had been advanced. Further, the Settlement Agreement
requires that the members of the Davis Group refrain from taking certain actions
in regard to the Company, including purchasing shares, commencing or
participating in a tender offer for Company shares, acquiring assets from the
Company or the Bank, soliciting proxies in
regard to Company shares, submitting shareholder proposals, seeking control of
the Company or filing any litigation or taking other legal action against the
Company. In return for such commitments from the Davis Group, the Company agreed
to repurchase all of the shares owned by the Davis Group, up to 245,000 shares,
for a per share price of $23.75. A portion of the purchase price already has
been paid into escrow with a third party escrow agent, with the balance of the
funds expected to be paid by June 17, 2003. The Company is currently in the
process of obtaining a loan from a third party financial institution to pay the
balance of its obligations under the Settlement Agreement.
On March 31, 2003, prior to the negotiation of the Settlement
Agreement, the United States District Court for the Southern District of Ohio
(the "Court") entered judgment in favor of the Company and all other defendants
in an action (the "Suit") brought by Mr. Davis. Mr. Davis brought the Suit
allegedly as a shareholder derivative action naming the Company, its Board of
Directors, the members of the Board of Directors, and the Company's former Chief
Executive Officer as defendants. Mr. Davis alleged to have sent correspondence
constituting a demand under Ohio law for inspection of the books and records of
account of the Company and its subsidiary, The Delaware County Bank and Trust
Company, and alleged that defendants did not respond to this correspondence
prior to the deadline set forth therein. The Court found that Mr. Davis'
allegations did not state a cause of action for which the Court has subject
matter jurisdiction, and the Suit was dismissed at Mr. Davis' costs in favor of
DCB and the other defendants.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
On March 13, 2003 the Audit Committee of the Board of Directors of the
Company, upon authority delegated to it by the Company's Board of Directors,
dismissed Crowe Chizek and Company LLP ("Crowe Chizek") as the Corporation's
independent public accountant for all periods commencing on or after January 1,
2003. On March 13, 2003 the Audit Committee also engaged the firm of Grant
Thornton, LLP ("Grant Thornton") as its new independent public accountant,
effective for the fiscal year beginning January 1, 2003. Grant Thornton was
engaged to provide independent audit services for the Company and its
subsidiaries and to provide certain non-audit services including advice on
accounting, tax and reporting matters. The Board of Directors expects that a
representative of each of Crowe Chizek and Grant Thornton will be present at the
annual meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
Crowe Chizek's report on the consolidated financial statements of the
Company for the fiscal years ended December 31, 2001 and 2002 did not contain an
adverse opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2001 and December 31, 2002,
as well as during the subsequent interim period ending on March 28, 2003, there
were no disagreements between the Company and Crowe Chizek on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Crowe Chizek, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports.
During the Company's two most recent fiscal years ended December 31,
2001, and December 31, 2002, and the subsequent interim period through March 13,
2003, the Company did not consult with Grant Thornton, LLP regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of SEC Regulation S-K.
DCB Financial Corp's independent accountants billed the aggregate fees
shown below for audit, financial information systems design and implementation,
and other services rendered to DCB Financial Corp and its subsidiaries for the
year 2002. Audit fees include fees billed in connection with the audit of the
Company's annual financial statements, as well as fees billed for the review of
the unaudited financial statements contained in the Company's periodic reports
on Form 10-Q, as filed with the Securities and Exchange Commission. Fees under
"All Other Fees" include fees incurred in connection with assisting the Company
to fulfill its reporting obligations under FDICIA (The Federal Deposit Insurance
Company Improvement Act) required now that the Company's total assets exceeded
$500 Million, as well as certain internal audit fees.
Audit Fees $85,680
Financial Information Systems Design and $ 0
Implementation Fees
All Other Fees $69,324
GENERAL OVERVIEW OF PROPOSALS TO AMEND THE ARTICLES OF INCORPORATION AND
CODE OF REGULATIONS OF THE COMPANY
Partly in response to the recent experience involving the Davis Group
as described above under the heading "Settlement of Proxy Contest and
Litigation", and partly to provide greater flexibility to the Board of Directors
in the operation of the Company, the Board of Directors is proposing the
adoption of certain amendments to the Company's Articles of Incorporation and
Code of Regulations. These proposed amendments are described below as proposals
2, 3, 4, 5 and 6. The Board of Directors believes that had the Company's
Articles of Incorporation and Code of Regulations contained certain of the
proposed provisions, most notably the elimination of cumulative voting, the
Company would have been in a better position to defend itself against the
potential election of the directors nominated by the dissident shareholders. In
addition, certain of the provisions, such as the right to issue preferred stock
will provide the Company with greater flexibility in raising capital in the
future, while at the same time providing the ability to defend the Company
against unwanted advances seeking control or sale of the Company. The Board of
Directors believes that the Company will be in a better overall position with
the Amended and Restated Articles of Incorporation and Code of Regulations and
requests your support.
PROPOSAL 2
PROPOSAL TO AMEND AND RESTATE THE ARTICLES OF INCORPORATION TO PROVIDE FOR
2,000,000 AUTHORIZED PREFERRED SHARES
The Board of Directors has approved and determined to submit to the
shareholders for approval a proposal to amend and restate the Company's Articles
of Incorporation to establish a class of preferred shares, consisting of
2,000,000 authorized shares. If adopted, the proposed
amendment will enable the Company, at the option of the Board of Directors, to
issue series of preferred shares in a manner calculated to take advantage of
financing techniques which may provide a lower effective cost of capital to the
Company. The proposed amendment, if adopted, will also provide significantly
greater flexibility to the Board of Directors in structuring the terms of equity
securities that may be issued by the Company.
If the proposed amendment is approved by shareholders, the Board of
Directors will be authorized, without further shareholder approval, to issue
preferred shares on the terms that the Board determines appropriate, in its
discretion. For example, the Board will be able to determine the voting rights,
dividend or distribution rate, dates for payment of dividends or distributions,
whether dividends are cumulative, that is, whether dividends must first be paid
on outstanding preferred shares that are issued before common share dividends
are paid, liquidation prices, redemption rights and prices, any sinking fund
requirements, any conversion rights and any restrictions on the issuance of any
series of preferred shares. The preferred shares may be issued with voting or
conversion rights which could adversely affect the voting power of the holders
of common shares.
The purpose for establishing the class of preferred shares is to give
the Company the flexibility to take advantage of various business opportunities,
including financings, raising additional capital, shareholders' rights plans and
other corporate purposes.
With several exceptions, such as to eliminate fractional shares, the
Ohio General Corporation Law requires that in order for the Board of Directors
of the Company to have the power generally to act for the Company to purchase or
redeem its shares, the Articles of Incorporation must authorize it. The
Company's Articles of Incorporation presently authorize the Board of Directors
to purchase or redeem its common shares. If these proposals are approved, that
authorization will be continued and will be extended to include authorization
for the Board of Directors to redeem or repurchase all securities issued by the
Company generally, unless the express terms of any particular shares exclude
that right.
In addition, as part of this Proposal 2, the Board of Directors also
seeks to eliminate the current provision in the Company's Articles of
Incorporation that provides that "each shareholder shall be entitled to one vote
for each share of stock standing in his name on the books of the Company." If
this Proposal 2 is adopted, the Articles of Incorporation will provide that
holders of common shares will continue to have one vote for each common share.
The voting rights of any preferred shares to be issued in the future by the
Company would be established by the Board of Directors, in their discretion.
PROPOSAL 3
ELIMINATION OF CUMULATIVE VOTING
The Board of Directors believes that it would be in the best interest
of the Company and its shareholders to eliminate the right of shareholders to
vote cumulatively in the election of directors.
The Articles of Incorporation now provide cumulative voting rights to
shareholders in the election of directors, so long as at least one shareholder
gives written notice at least 48 hours in advance of the shareholder meeting of
his or her desire to exercise cumulative voting rights in the election of
directors at that meeting. This allows shareholders to vote the number of common
shares owned by them times the number of directors to be elected at the
shareholders' meeting and to cast that number of votes for one nominee or
allocate the votes among the nominees in any manner they want.
The Board of Directors does not consider cumulative voting to be in the
best interest of the Company or its shareholders. For a Board of Directors to
work effectively for all shareholders, each director should feel a
responsibility to the shareholders as a whole and not to any special group of
minority shareholders. Minority shareholders voting cumulatively could result in
a relatively small number of shares being responsible for the election of one or
more directors whose loyalty would be primarily to the minority group
responsible for their election, rather than to the Company and all its
shareholders. If Proposal 3 is approved, no director will be elected by a
special interest group of minority shareholders.
The proposed amendment to eliminate cumulative voting in the election
of directors may render more difficult the representation of minority
shareholders on the Board of Directors and have the effect of entrenching
existing management. The proposed amendment will indirectly eliminate the
ability of a hostile minority shareholder to attain representation on the Board
of Directors. This proposal is not in response to any current effort by a
shareholder, or a group of shareholders, to remove any director or otherwise
gain representation for any special interest on the Board. However, it is partly
in response to the previous effort by the Davis Group to place representatives
on the Board of Directors. This matter is more fully discussed in the section of
this proxy statement entitled "Settlement of Proxy Contest and Litigation."
PROPOSAL 4
OPTING OUT OF THE OHIO CONTROL SHARE ACQUISITION STATUTE
We propose to add a provision to the Articles of Incorporation by which
the Company will elect to opt out of coverage of an Ohio anti-takeover statute,
which is commonly referred to as the "Ohio Control Share Acquisition Act." This
provision is set forth in Article SEVENTH of the proposed Amended and Restated
Articles of Incorporation.
The "Ohio Control Share Acquisition Act" provides that certain notice
and informational filings and special shareholder meetings and voting procedures
must occur prior to consummation of a proposed "control share acquisition,"
which is defined as any acquisition of shares of an "issuing public corporation"
that would entitle the acquirer, directly or indirectly, alone or with others,
to exercise or direct the voting power of the issuing public corporation in the
election of directors within any of the following ranges:
- one-fifth or more but less than one-third of the voting power;
- one-third or more but less than a majority of the voting power; or
- a majority or more of the voting power.
An "issuing public corporation" is an Ohio corporation with fifty or more
shareholders that has its principal place of business, principal executive
offices, or substantial assets within the State of Ohio, and as to which no
valid close corporation agreement exists. The Company currently meets the
definition of an issuing public corporation. Assuming compliance with the notice
and informational filing requirements prescribed by the Ohio Control Share
Acquisition Act, the proposed control share acquisition may take place only if,
at a special meeting of shareholders at
which at least a majority of the voting power is represented in person or by
proxy, the acquisition is approved by both:
- - a majority of the voting power of the corporation represented in person or
by proxy at the meeting, and
- - a majority of the voting power at the meeting exercised by shareholders,
excluding:
- the acquiring shareholder,
- directors of the corporation who are also employees and officers, and
- persons who acquire specified amounts of shares after the first public
disclosure of the proposed control share acquisition.
The Ohio Control Share Acquisition Act does not apply to a corporation whose
articles of incorporation or code of regulations provides that it does not
apply. We believe that other provisions of the Amended Articles of Incorporation
and Amended Code of Regulations of the Company will adequately and more
effectively protect the interests of the Company and its shareholders against
the acquisition of controlling share interests that are not approved by the
Board of Directors.
PROPOSAL 5
TECHNICAL REVISIONS TO THE ARTICLES OF INCORPORATION
The Board of Directors believes that it would be in the best interest
of the Company and its shareholders to amend and restate the Company's Articles
of Incorporation to eliminate or change certain provisions of the Articles of
Incorporation that are now inappropriate in light of the other changes proposed
to the Articles of Incorporation.
First, it should be noted that the Board of Directors, pursuant to the
provisions of Section 1701.70(B)(7) of the Ohio Revised Code, has adopted a
resolution to amend Article SECOND of the Company's Articles of Incorporation,
to state that the location of the Company's principal office shall be in Lewis
Center, Delaware County, Ohio.
Assuming the approval of proposal 2 regarding the authorization of a
class of preferred stock, Articles FOURTH and FIFTH of the Company's Articles of
Incorporation will be modified to take into account the impact of a new class of
shares on the common shares of the Company.
The introductory language to the Articles of Incorporation has also
been revised in recognition of the fact that the Articles of Incorporation are
being restated.
IF PROPOSALS 2, 3, 4 AND 5 ARE APPROVED, THE ARTICLES OF INCORPORATION
OF THE COMPANY WILL BE AMENDED AND RESTATED AS SET FORTH IN THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION ATTACHED AS EXHIBIT A TO THIS PROXY
STATEMENT.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS APPROVES AND RECOMMENDS TO THE SHAREHOLDERS THE ADOPTION
OF PROPOSALS 2, 3, 4 AND 5, WHICH WILL RESULT IN THE AMENDMENT AND RESTATEMENT
OF THE COMPANY'S ARTICLES OF INCORPORATION AS SET FORTH IN EXHIBIT A TO THIS
PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL 6
ADOPTION OF THE AMENDED AND RESTATED CODE OF REGULATIONS
The Board of Directors believes that it is in the best interest of the
Company and its shareholders to amend and restate the Company's Code of
Regulations, as set forth in Exhibit B to this Proxy Statement. The Company's
Code of Regulations was adopted in 1997 in connection with the organization of
the Company, and has not been amended since then. The Board of Directors
believes that certain provisions of the current Code of Regulations are no
longer appropriate, and that certain provisions should be added to better serve
the Company and its shareholders.
DIRECTOR REMOVAL
Article III, Section 5 of the Company's current Code of Regulations
contains a provision requiring a vote of 75% of the shareholders to remove one
or more directors.
We propose to add provisions to the Code of Regulations that will
maintain the seventy-five percent vote of the outstanding shares of the Company
to remove any director, but add a further requirement that such removal may only
be for "cause" as defined in the Code of Regulations. This provision is set
forth in Article III, Section 5 of the Amended Code of Regulations, which is
attached as Exhibit B to this Proxy Statement.
This provision will make it more difficult for shareholders to remove a
director from the Company's Board of Directors once that director is elected or
appointed to fill a vacancy.
We believe that this provision is appropriate and in the interest of
the Company and shareholders since it will enable directors to act during their
terms of office to make the decisions and judgements required of the Board with
a greater sense of stability.
ADVANCE NOTICE OF SHAREHOLDER PROPOSALS
We propose to add a new Article II, Section 8 to the Company's Code of
Regulations requiring shareholders to give the Company advance notice of any
proposal a shareholder would like to make in connection with any shareholder
meeting.
We believe that it is appropriate to require shareholders to notify the
Company in advance of a shareholder meeting of proposals in order that they may
be addressed in a more orderly fashion at the meeting.
The Company's Code of Regulations in Article III, Section 3, already
has a prior notification provision for nominations of directors by shareholders.
NUMBER OF DIRECTORS
The Amended and Restated Code of Regulations has been amended in
accordance with the provisions of the existing Code of Regulations to confirm
that the current number of directors serving the Company is 11. This number has
been properly reduced over time from the number 14 that is referenced in the
existing Code of Regulations.
SPECIAL MEETINGS OF SHAREHOLDERS
We propose that the Company's Code of Regulations be amended to require
that special meetings of the shareholders may be called by shareholders only if
the shareholders calling the meeting own at least 50% of the outstanding shares.
This provision is set forth in Article II, Section 2 of the Amended Code of
Regulations, which is attached as Exhibit B to this Proxy Statement.
Shareholders owning 25% of the outstanding shares may call a special
meeting of shareholders under the current Code of Regulations. Ohio law permits
the Company to require at least 50% of its shareholders to act to call a special
meeting. The Board of Directors believes that it is appropriate to make this
amendment to ensure that a minority group of shareholders cannot call a special
meeting of shareholders.
AMENDING CERTAIN PROVISIONS
We propose to add provisions to the Company's Code of Regulations to
require a supermajority of shareholders to amend or eliminate certain sections
of the Amended Code of Regulations. These provisions regarding the ability to
amend the Code of Regulations are set forth in Article X of the Amended Code of
Regulations, which is attached as Exhibit B to this Proxy Statement.
The current Code of Regulations requires the affirmative vote of a
majority of the voting power of shareholders, or the written consent of holders
of at least two-thirds of the outstanding shares of the Company to amend or
repeal the Code of Regulations. The Amended Code of Regulations will provide
that it may be amended by the affirmative vote of a majority of the voting power
of shareholders, with several important exceptions. Changes that would affect
the provisions of the Code of Regulations dealing with the number of directors,
the classification, election and term of office of directors, the method of
nomination of directors, removal of directors and amendments to the Code of
Regulations, will require approval by holders of 80% of the Company's
outstanding shares, unless the changes are first approved by two-thirds of the
Company's directors. We believe that these particular provisions are
sufficiently important to the governance of the Company that they should not be
changed without the approval of at least two-thirds of the Board of Directors,
unless they are approved by shareholders owning eighty percent of the Company's
shares.
The Board of Directors has conditioned the effectiveness of any of
these sub-proposals on the adoption of the entire Amended Code of Regulations.
Therefore, all the proposed changes to the Company's Code of Regulations are to
be considered together as Proposal 6.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS APPROVES AND RECOMMENDS TO THE SHAREHOLDERS THE ADOPTION
OF THIS PROPOSAL 6, WHICH WILL RESULT IN THE AMENDMENT AND RESTATEMENT OF THE
COMPANY'S CODE OF REGULATIONS AS SET FORTH IN EXHIBIT B TO THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
POSSIBLE ANTI-TAKEOVER EFFECT OF PROPOSALS
Several of the proposed amendments to the Company's Articles of
Incorporation and Code of Regulations may discourage unilateral tender offers or
other attempts to take over and acquire the business of the Company. The
following summarizes those Proposals which might have a potential
"anti-takeover" effect. The following discussion contains all material
disclosure about those Proposals but may not contain all of the information that
is pertinent to each investor. You should refer in each case to the Amended and
Restated Articles of Incorporation and Amended and Restated Code of Regulations,
which are attached to this Proxy Statement as Exhibit A and Exhibit B,
respectively.
- - AUTHORIZED PREFERRED SHARES. See Article Fourth, B. of the Amended Articles
of Incorporation Exhibit A. The availability of authorized but unissued
preferred shares could discourage third parties from attempting to gain
control of the Company, since the Board of Directors could authorize the
issuance of preferred shares in a private placement or otherwise to one or
more persons. The issuance of these shares could dilute the voting power of
a person attempting to acquire control of the Company, increase the cost of
acquiring control or otherwise hinder the efforts of the other person to
acquire control. Such shares also could be used to adopt a shareholder
rights plan to attempt to avoid and undesirable takeover of the Company.
- - REMOVAL OF DIRECTORS. See Article III, Section 5 of the Amended Code of
Regulations at Exhibit B. Directors may be involuntarily removed from
office before their term expires only for cause and if holders of at least
75% of the Company's common shares vote in favor of removal at a meeting of
shareholders. This provision may make it difficult for any person who may
attempt to take over the Company to remove elected directors before the end
of their term.
- - SPECIAL SHAREHOLDERS MEETINGS. See Article II, Section 2 of the Amended
Code of Regulations at Exhibit B. A special shareholders meeting may only
be called by the Chairman of the Board of Directors, the President of the
Company, the Board of Directors or holders of at least 50% of the
outstanding common shares. Because certain actions may only be taken at a
shareholders meeting and because regular shareholders meetings occur
annually, it would be more difficult for a potential acquirer to obtain
shareholder approval of changes necessary to facilitate an acquisition.
- - RESTRICTIONS ON BUSINESS AT SHAREHOLDER MEETINGS. See Article II, Section 8
of the Amended Code of Regulations at Exhibit B. Generally, business at the
Company's shareholders meetings is restricted to the purpose of the meeting
described in the notice (if it is a special shareholders' meeting),
business that the Board of Directors wishes to be taken up at the meeting
(regardless of whether it is a special or regular meeting) or which is
brought before the meeting pursuant to a timely written notice to the
President by one or more shareholders. A notice is deemed timely if it is
received at the Company's executive offices at least 60 days prior to the
meeting date. The required contents of the notice by the shareholder are
contained in the Amended Code of Regulations and must be strictly complied
with in order for a shareholder proposal to be considered. These
restrictions, while helpful in assuring orderly and informed shareholders'
meetings, have the effect of making it more difficult for someone
attempting to acquire control of the Company to bring matters before any
shareholders' meeting, including amendments to the Articles of
Incorporation and Code of Regulations.
- - ELIMINATION OF CUMULATIVE VOTING. See Article EIGHTH of the Amended
Articles of Incorporation of the Company at Exhibit A. As described above,
the elimination of cumulative voting will have the effect of restricting
the ability of a minority of shareholders to elect a representative to the
Company's Board of Directors. While the Board of Directors believes that
any representative on the Board of Directors should work in the best
interest of all shareholders, the elimination of cumulative voting will
restrict the ability of a minority group to be represented on the Board of
Directors.
- - "OPTING OUT" OF SECTION 1701.831 OF THE OHIO REVISED CODE. Taking the
action to cause Section 1701.831 to be inapplicable to the Company is
deemed by the Board of Directors to be appropriate for the reasons
mentioned above. This and certain other provisions of the Company's
Articles of Incorporation and Code of Regulations will require a potential
acquirer to negotiate with the Board of Directors, which is charged with
the duty of acting in the best interest of all shareholders. However,
opting out will have the effect of removing the decision as to a sale or
merger of the Company from the shareholders until the Board of Directors
has had the opportunity to consider and recommend action on such matters to
the shareholders.
- - AMENDMENT OF ARTICLES AND CODE. Generally, Ohio Corporation law requires
amendments to corporate articles of incorporation to be approved by at
least two-thirds of all votes entitled to be voted. Ohio Corporation law
also generally requires amendments to a corporate code of regulations to be
approved by at least a majority of all votes entitled to be voted. Ohio law
permits a Company's articles of incorporation and code of regulations to
change these shareholder voting requirements within limits. The Amended
Articles of Incorporation continues to provide that a majority vote of the
outstanding shares is required to approve most amendments to the Articles
of Incorporation. The Amended Code of Regulations continues to require a
majority vote of the outstanding shares to make most amendments to the Code
of Regulations. However, the Amended Articles of Incorporation and Amended
Code of Regulations increase the percentage of voting shares outstanding
required to change the certain provisions of the Amended Articles of
Incorporation or Amended Code of Regulations, absent prior approval by at
least two-thirds of the Company's directors. These provisions include
Articles SIXTH and SEVENTH of the Articles of Incorporation, and Article
III, Sections 1, 2, 3 or 5 and Article X of the Code of Regulations.
These provisions have the effect of making it difficult to change these
provisions of the Amended Articles of Incorporation and Amended Code of
Regulations without the approval of the Board of Directors. The effect of these
provisions may be to make it more difficult for a person who desires to acquire
control of the Company to do so without the cooperation of the incumbent Board
of Directors.
The Company also has provisions in its current Articles of
Incorporation that make a takeover of the Company without the approval of the
Company's Board of Directors more difficult. Article SIXTH of the Company's
Articles of Incorporation contains "supermajority" and "fair price" provisions.
These provisions require the affirmative vote of 80% of the Company's
outstanding voting power to approve certain business transactions (such as
mergers or disposition of substantially all of its assets) involving an
"interested shareholder", defined as another person or entity owning ten percent
or more of the outstanding capital stock of the Company, unless first approved
by two-thirds of the Company's directors not affiliated with the interested
shareholder. The Articles of Incorporation also require the approval of 66-2/3%
of the outstanding shares, exclusive of shares held by the interested
shareholder, or the payment of a
"fair price," as defined in the Articles of Incorporation, for any shares
acquired by an interested shareholder unless approved by two-thirds of the
directors who are not affiliated with the interested shareholder. The intent of
these provisions is to attempt to force any proposed acquirer of the Company to
negotiate with the Board of Directors.
The Company is also subject to a set of provisions under Ohio law,
which is referred to as the "Merger Moratorium Statute." The Merger Moratorium
Statute regulates certain business combinations between a "public company" and
an "interested shareholder" such as mergers or disposition of substantially all
of the Company's assets. Subject to certain exceptions, these transactions are
prohibited for a three-year period. Prior to the end of the three-year period, a
prohibited transaction may take place provided certain conditions are satisfied.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS APPROVES AND RECOMMENDS TO THE SHAREHOLDERS THE ADOPTION
OF PROPOSALS 2, 3, 4, 5 AND 6 WHICH WILL RESULT IN THE AMENDMENT AND RESTATEMENT
OF THE COMPANY'S ARTICLES OF INCORPORATION AND CODE OF REGULATIONS AS SET FORTH
IN EXHIBIT A AND EXHIBIT B TO THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
If any shareholder of the Company wishes to submit a proposal to be included in
next year's Proxy Statement and acted upon at the annual meeting of the Company
to be held in 2004, the proposal must be received by the Secretary of the
Company at the principal executive offices of the Company, 110 Riverbend Avenue,
Lewis Center, Ohio 43035, prior to the close of business on December 16, 2003.
On any other proposal raised by a shareholder for next year's annual meeting,
the Company intends that proxies received by it will be voted in the interest of
the Company in accordance with the judgement of the Board of Directors, unless
notice of the proposal is received by the Company not later than February 28,
2004.
The Company's Code of Regulations establishes advance notice procedures as to
the nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors. In order to make a director nomination at
a shareholder meeting it is necessary that you notify the Company in writing not
less than 90 days in advance of the meeting. In addition, the notice must meet
all other requirements contained in our Code of Regulations. Any shareholder who
wishes to take such action should obtain a copy of our Code of Regulations and
may do so by written request addressed to the Secretary of the Company at the
principal executive offices of the Company.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters that may
come before the meeting. However, the enclosed Proxy will confer discretionary
authority with respect to matters which are not known to the Board of Directors
at the time of printing and which may properly come before the meeting. A COPY
OF THE COMPANY'S 2002 REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
ON FORM 10-K, AS AMENDED, WILL BE AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS ON
REQUEST. Address all requests, in writing, for this document to Donald
R. Blackburn, Vice President & Secretary, The Delaware County Bank and Trust
Company, 110 Riverbend Avenue, Lewis Center, Ohio 43035.
We also undertake to deliver promptly, upon written or oral request, a separate
copy of this Proxy Statement or the Annual Report, as applicable, to a
shareholder at a shared address to which a single copy of the document was
delivered. Requests for these documents should also be addressed to Donald R.
Blackburn, Vice President, The Delaware County Bank and Trust Company, 110
Riverbend Avenue, Lewis Center, Ohio 43035, (740) 657-7930.
By Order of the Board of Directors of DCB Financial Corp
Jeffrey T. Benton
President and Chief Executive Officer
EXHIBIT A
PROPOSED FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
DCB FINANCIAL CORP.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DCB FINANCIAL CORP.
*****
Pursuant to Sections 1701.01 et seq. of the Revised Code of Ohio, the
following shall be the Articles of Incorporation for DCB Financial Corp.:
FIRST: The name of said Corporation shall be DCB Financial Corp.
SECOND: The place in the State of Ohio where its principal office is
to be located is Lewis Center, Delaware County.
THIRD: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations may be
formed under Sections 1701.01 to 1701.98 inclusive of the Ohio Revised Code.
FOURTH: The number of shares (collectively the "Shares") that the
Corporation is authorized to have outstanding is Nine Million Five Hundred
Thousand (9,500,000), consisting of: (i) 7,500,000 common shares, no par value
(the "Common Shares"); and (ii) 2,000,000 preferred shares, no par value (the
"Preferred Shares"). The Shares shall have the following terms:
A. Common Shares:
-------------
The holders of the Common Shares are entitled at all times to
one (1) vote for each Share and to such dividends as the Board of Directors
(herein called the "Board") may in its discretion periodically declare, subject,
however, to any voting and dividend rights of the holders of the Preferred
Shares. In the event of any liquidation, dissolution or winding up of the
Corporation, the remaining assets of the Corporation after the payment of all
debts and necessary expenses shall be distributed among the holders of the
Common Shares pro rata in accordance with their respective Share holdings,
subject, however, to the rights of the holders of the Preferred Shares then
outstanding. The Common Shares are subject to all of the terms and provisions of
the Preferred Shares as established by the Board in accordance with this Article
FOURTH.
B. Preferred Shares:
----------------
The Board is hereby expressly authorized in its discretion to
adopt amendments to the Articles to provide for the issuance of one (1) or more
series of Preferred Shares; to establish periodically the number of Shares to be
included in each such series; and to fix the designation, powers, preferences,
voting rights, dividend rights and other rights of the Preferred Shares of each
such series and any qualifications, limitations or restrictions thereof, to the
fullest extent permitted by law. Preferred Shares redeemed or otherwise acquired
by the Corporation shall become authorized but unissued Preferred Shares, shall
be unclassified as to series, and may thereafter be reissued in the same manner
as other authorized but unissued Preferred Shares.
FIFTH. The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the
Corporation, or of the Directors, or of all of the shareholders:
The Board of Directors is expressly authorized to set apart, out of any
of the funds of the Corporation available for dividends, a reserve or reserves
for any proper purpose or to abolish any such reserve in the manner in which it
was created. Except as otherwise provided in these Articles, the Corporation is
hereby authorized to purchase or redeem through action of the Board, without the
approval of the holders of any Shares of any class and upon such terms and
conditions as the Board determines: (1) Shares of any class or series issued by
the Corporation, subject to the express terms of such Shares; (2) any
security or other obligation of the Corporation which may confer upon the holder
thereof the right to convert such security or obligation into Shares of any
class or series authorized by these Articles; (3) any security or other
obligation which may confer upon the holder thereof the right to purchase Shares
of any class or series authorized by these Articles; and (4) Shares of any class
or series issued by the Corporation if and when any holder of such Shares
desires to (or, upon the happening of any event, is required to) sell such
Shares.
The Corporation may in its regulations confer powers upon its Board of
Directors in addition to the powers and authorities conferred upon it expressly
by Sections 1701.01 et seq. of the Revised Code of Ohio.
Subject to Articles SIXTH and SEVENTH, any amendments to the Articles
of Incorporation may be made from time to time, and any proposal or proposition
requiring the action of shareholders may be authorized from time to time by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation.
Any meeting of the shareholders or the Board of Directors may be held
at any place within or without the State of Ohio in the manner provided for in
the regulations of the Corporation.
SIXTH: FAIR PRICE AND SUPER VOTE REQUIREMENT
A. DEFINITIONS AS USED IN THIS ARTICLE SIXTH
(1) "Affiliate" or "Associate" shall have the respective
meanings given to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting
Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has by itself or with others (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly,
by any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
(i) any merger or consolidation of the Corporation or any
of its subsidiaries with or into an Interested Shareholder, regardless of which
person is the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, or other
disposition (in one transaction or a series of transactions) from the
Corporation or any of its subsidiaries to an Interested Shareholder, or from an
Interested Shareholder to the Corporation or any of its subsidiaries, of assets
having an aggregate Fair Market Value of twenty percent (20%) or more of the
Corporation's total stockholders' equity;
(iii) the issuance, sale or other transfer by the
Corporation or any subsidiary thereof of any securities of the Corporation or
any subsidiary thereof to an Interested Shareholder (other than an issuance or
transfer of securities which is effected on a pro rata basis to all shareholders
of the Corporation);
2
(iv) the acquisition by the Corporation or any of its
subsidiaries of any securities of an Interested Shareholder;
(v) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder;
(vi) any reclassification or recapitalization of
securities of the Corporation if the effect, directly or indirectly, of such
transaction is to increase the relative voting power of an Interested
Shareholder; or
(vii) any agreement, contract or other arrangement
providing for or resulting in any of the transactions described in this
definition of Business Combination.
(4) "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the time that
the Interested Shareholder became an Interested Shareholder; any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
approved to succeed a Continuing Director by the Continuing Directors; any
member of the Board of Directors who is appointed to fill a vacancy on the Board
of Directors who is unaffiliated with the Interested Shareholder and is approved
by the Continuing Directors.
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national
securities exchange or quoted in the National Association of Securities Dealers
Automated Quotations System (or any successor thereof), the highest sales price
or bid quotation, as the case may be, reported for securities of the same class
or series traded on a national securities exchange or in the over-the-counter
market during the 30-day period immediately prior to the date in question, or if
no such report or quotation is available, the fair market value as determined by
the Continuing Directors; and
(ii) in the case of other securities and of other property
or consideration (other than cash), the Fair Market Value as determined by the
Continuing Directors; provided, however, in the event the power and authority of
the Continuing Directors ceases and terminates pursuant to Subdivision F of this
Article SIXTH as a result of there being less than five Continuing Directors at
any time, then (a) for purposes of clause (ii) of the definition of "Business
Combination," any sale, lease, exchange, mortgage, pledge, or other disposition
of assets from the Corporation or any of its subsidiaries to an Interested
Shareholder or from an Interested Shareholder to the Corporation or any of its
subsidiaries, regardless of the Fair Market Value thereof, shall constitute a
Business Combination, and (b) for purposes of paragraph 1 of Subdivision D of
this Article SIXTH, in determining the amount of consideration received or to be
received per share by the Independent Shareholders in a Business Combination,
there shall be excluded all consideration other than cash and the Fair Market
Value of securities listed on a national securities exchange or quoted in the
National Association of Securities Dealers Automated Quotations System (or any
successor thereof) for which there is a reported sales price or bid quotation,
as the case may be, during the 30-day period immediately prior to the date in
question.
(6) "Independent Shareholder" shall mean shareholders of the
Corporation other than the Interested Shareholder engaged in or proposing the
Business Combination.
(7) "Interested Shareholder" shall mean: (a) any person (other
than the Corporation or any of its subsidiaries), and (b) the Affiliates and
Associates of such person, who, or which together, are:
(i) the beneficial owner, directly or indirectly, of 10%
or more of the outstanding Voting Stock or were within the two-year period
immediately prior to the date in question the beneficial owner, directly or
indirectly, of 10% or more of the then outstanding Voting Stock; or
3
(ii) an assignee of or other person who has succeeded to
any shares of the Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no Trust Department, or designated
fiduciary or other trustee of such Trust Department of the Corporation or a
subsidiary of the Corporation, or other similar fiduciary capacity of the
Corporation with direct voting control of the outstanding Voting Stock shall be
included or considered as an Interested Shareholder. Further, no profit-sharing,
employee stock ownership, employee stock purchase and savings, employee pension,
or other employee benefit plan of the Corporation or any of it subsidiaries, and
no trustee of any such plan in its capacity as such trustee, shall be included
or considered as an Interested Shareholder.
(8) A "Person" shall mean an individual, partnership, trust,
corporation, or other entity and includes any two or more of the foregoing
acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors of the Corporation.
B. SUPERMAJORITY VOTE TO EFFECT BUSINESS COMBINATION. No Business
Combination shall be effected or consummated unless:
(1) Authorized and approved by the Continuing Directors and,
if otherwise required by law to authorize or approve the transaction, the
approval or authorization of shareholders of the Corporation, by the affirmative
vote of the holders of such number of shares as is mandated by the Ohio Revised
Code; or
(2) Authorized and approved by the affirmative vote of holders
of not less than 80% of the outstanding Voting Stock voting together as a single
class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of this
Article SIXTH.
C. FAIR PRICE REQUIRED TO EFFECT BUSINESS COMBINATION. No
Business Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in
Subdivision D of this Article SIXTH have been satisfied; or
(2) Authorized and approved by the Continuing Directors; or
(3) Authorized and approved by the affirmative vote of holders
of not less than 66 2/3% of the outstanding Voting Stock held by all Independent
Shareholders voting together as a single class.
Any authorization and approval required by this Subdivision C
is in addition to any authorization and approval required by Subdivision B of
this Article SIXTH.
D. CONDITIONS AND REQUIREMENTS TO FAIR PRICE. All the following
conditions and requirements must be satisfied in order for clause (1) of
Subdivision C of this Article SIXTH to be applicable.
(1) The cash and Fair Market Value of the property, securities
or other consideration to be received by the Independent Shareholders in the
Business Combination per share for each class or series of capital stock of the
Corporation must not be less than the sum of:
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(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and similar payments) paid
by the Interested Shareholder in acquiring any shares of such class or series,
respectively, and, in the case of Preferred Stock, if greater, the amount of the
per share redemption price; and
(ii) the amount, if any, by which interest on the per
share price, calculated at the Treasury Bill Rate from time to time in effect,
from the date the Interested Shareholder first became an Interested Shareholder
until the Business Combination has been consummated, exceeds the per share
amount of cash dividends received by the Independent Shareholders during such
period. The "Treasury Bill Rate" means for each calendar quarter, or part
thereof, the interest rate of the last auction in the preceding calendar of
91-day United States Treasury Bills expressed as a bond equivalent yield.
For purposes of this paragraph (1) per share amounts shall be
appropriately adjusted for any recapitalization, reclassification, stock
dividend, stock split, reserve split, or other similar transaction. Any Business
Combination which does not result in the Independent Shareholders receiving
consideration for or in respect of their shares of capital stock of the
Corporation shall not be treated as complying with the requirements of this
paragraph (1).
(2) The form of the consideration to be received by the
Independent Shareholders owning the Corporation's shares must be the same as was
previously paid by the Interested Shareholder(s) for shares of the same class or
series; provided, however, if the Interested Shareholder previously paid for
shares of such class or series with different forms of consideration, the form
of the consideration to be received by the Independent Shareholders owning
shares of such class or series must be in the form as was previously paid by the
Interested Shareholder in acquiring the largest number of shares of such class
or series previously acquired by the Interested Shareholder, provided, further,
in the event no shares of the same class or series had been previously acquired
by the Interested Shareholder, the form of consideration must be cash. The
provisions of this paragraph (2) are not intended to diminish the aggregate
amount of cash and Fair Market Value of any other consideration that any holder
of the Corporation's shares is otherwise entitled to receive upon the
liquidation or dissolution of the Corporation, under the terms of any contract
with the Corporation or an Interested Shareholder, or otherwise.
(3) From the date the Interested Shareholder first became an
Interested Shareholder until the Business Combination has been consummated, the
following requirements must be complied with unless the Continuing Directors
otherwise approve:
(i) the Interested Shareholder has not received, directly
or indirectly, the benefit (except proportionately as a shareholder) of any
loan, advance, guaranty, pledge, or other financial assistance, tax credit or
deduction, or other benefit from the Corporation or any of its subsidiaries;
(ii) there shall have been no failure to declare and pay
in full, when and as due or scheduled, any dividends required to be paid on any
class or series of the Corporation's shares;
(iii) there shall have been (a) no reduction in the annual
rate of dividends paid on Common Shares of the Corporation (except as necessary
to reflect any split of such shares), and (b) an increase in the annual rate of
dividends as necessary to reflect reclassification (including a reverse split),
recapitalization or any similar transaction which has the effect of reducing the
number of outstanding Common Shares; and
(iv) there shall have been no amendment or other
modification to any profit-sharing, employee stock ownership; employee stock
purchase and savings, employee pension or other employee benefit plan of the
Corporation or any of its subsidiaries, the effect of which is to change in any
manner the provisions governing the voting of any shares of capital stock of the
Corporation in or covered by such plan.
5
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations under it (or any subsequent
provisions replacing that Act and the rules and regulations under it) has been
mailed at least 30 days prior to the completion of the Business Combination to
the holders of all outstanding Voting Stock. If deemed advisable by the
Continuing Directors, the proxy or information statement shall contain a
recommendation by the Continuing Directors as to the advisability (or
inadvisability) of the Business Combination and/or an opinion by an investment
banking firm, selected by the Continuing Directors and retained at the expense
of the Corporation, as to the fairness (or unfairness) of the Business
Combination to the Independent Shareholders.
E. OTHER APPLICABLE VOTING REQUIREMENT. The affirmative votes or
approvals required to be received from shareholders of the Corporation under
Subdivisions B, C and H of this Article SIXTH are in addition to the vote of the
holders of any class of shares of capital stock of the Corporation otherwise
required by law, or by other provisions of these Articles of Incorporation, or
by the express terms of the shares of such class. The affirmative votes or
approvals required to be received from shareholders of the Corporation under
Subdivisions B, C and H of this Article SIXTH shall apply even though no vote or
a lesser percentage vote, may be required by law, or by other provisions of
these Articles of Incorporation, or otherwise. Any authorization, approval or
other action of the Continuing Directors under this Article SIXTH is in addition
to any required authorization, approval or other action of the Board of
Directors.
F. CONTINUING DIRECTORS. All actions required or permitted to be taken
by the Continuing Directors shall be taken with or without a meeting by the vote
or written consent of two-thirds of the Continuing Directors, regardless of
whether the Continuing Directors constitute a quorum of the members of the Board
of Directors then in office. In the event that the number of Continuing
Directors is at any time less than five, all power and authority of the
Continuing Directors under this Article SIXTH shall thereupon cease and
terminate, including, without limitation, the authority of the Continuing
Directors to authorize and approve a Business Combination under Subdivisions B
and C of this Article SIXTH and to approve a successor Continuing Director.
Two-thirds of the Continuing Directors shall have the power and duty, consistent
with their fiduciary obligations, to determine for the purpose of this Article
SIXTH, on the basis of information known to them:
(1) Whether any person is an Interested Shareholder;
(2) Whether any person is an Affiliate or Associate of another;
(3) Whether any person has an agreement, arrangement, or
understanding with another or is acting in concert with another; and
(4) The Fair Market Value of property, securities or other
consideration (other than cash).
The good faith determination of the Continuing Directors on such
matters shall be binding and conclusive for purposes of this Article SIXTH.
G. EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS. Nothing
contained in this Article SIXTH shall be construed to relieve any Interested
Shareholder from any fiduciary obligations imposed by law.
H. REPEAL. Notwithstanding any other provisions of these Articles of
Incorporation (and notwithstanding the fact that a lesser percentage vote may be
required by law or other provision of these Articles of Incorporation), the
provisions of this Article SIXTH may not be repealed, amended, supplemented or
otherwise modified, unless:
(1) The Continuing Directors (or, if there is no Interested
Shareholder, a majority vote of the whole Board of Directors of the Corporation)
recommend such repeal, amendment, supplement
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or modification and such repeal, amendment or modification is approved by the
affirmative vote of the holders of not less than a simple majority of the
outstanding Voting Stock; or
(2) Such repeal, amendment, supplement or modification is approved
by the affirmative vote of holders of (a) not less than 80% of the outstanding
Voting Stock voting together as a single class, and (b) not less than 66 2/3% of
the outstanding Voting Stock held by all shareholders other than Interested
Shareholders voting together as a single class.
I. FURTHER CONSIDERATIONS TO EFFECT BUSINESS COMBINATION. No Business
Combination shall be effected or consummated unless, in addition to the
consideration set forth in Subdivisions B, C, D and E of this Article SIXTH, the
Board of Directors of the Corporation, including the Continuing Directors shall
consider all of the following factors and any other factors which it (they) deem
relevant:
(1) The Social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
(2) The business and financial conditions and earnings prospects of
the Interested Shareholder, including, but not limited to, debt service and
other existing or likely financial obligations of the Interested Shareholder,
and the possible effect on other elements of the communities in which the
Corporation and its subsidiaries operate or are located, and
(3) The competence, experience and integrity of the Interested
Shareholder and his (its) or their management.
SEVENTH: The Corporation shall not be subject to the provisions of
Section 1701.831 of the Ohio Revised Code regarding "control share acquisitions"
of shares of the Corporation. This Article SEVENTH shall not be repealed,
amended, supplemented or otherwise modified unless such action is approved using
the same voting procedures set forth in Article SIXTH, subparagraph H.
EIGHTH: Shareholders of the Corporation shall have no preemptive right
to purchase shares when issued by the Corporation. No holder of any shares of
any class shall have the right to vote cumulatively in the election of the Board
of Directors.
NINTH: The Corporation shall indemnify its present and past Directors,
officers, employees and agents, and such other persons as it shall have powers
to indemnify, to the full extent permitted under, and subject to the limitations
of, Title 17 of the Ohio Revised Code. Additionally, and subject to the
limitations set forth below, the Corporation shall indemnify its present and
past Directors for personal liability for monetary damages resulting from breach
of their fiduciary duty as Directors. Notwithstanding the above, no
indemnification for personal liability shall be provided for: (i) any breach of
the Directors' duty of loyalty to the Corporation or its stockholder; (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) illegal distribution of dividends; and (iv) any
transaction from which the Director derived an improper personal benefit.
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EXHIBIT B
PROPOSED FORM OF AMENDED AND RESTATED
CODE OF REGULATIONS OF
DCB FINANCIAL CORP.
AMENDED AND RESTATED
CODE OF REGULATIONS
OF
DCB FINANCIAL CORP.
(ADOPTED JUNE 25, 2003)
ARTICLE 1
Offices
Section 1. PRINCIPAL OFFICE. The principal office of the Company shall
be at such place in the County of Delaware, Ohio, as may be designated from time
to time by the Board of Directors.
Section 2. OTHER OFFICES. The Corporation shall also have offices at
such other places without, as well as within, the State of Ohio, as the Board of
Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. ANNUAL MEETING. The annual meeting of the shareholders of
this Corporation for the purpose of fixing or changing the number of directors
of the Corporation, electing directors and transacting such other business as
may come before the meeting, shall be held at such time as may be fixed by the
Board of Directors by resolution from time to time.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Chairman of the Board of Directors, President, or a
majority of the Board of Directors acting with or without a meeting, or by
shareholders owning, in the aggregate, not less than fifty percent (50%) of the
stock of the Corporation.
Section 3. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the main office of the Corporation unless the Board of Directors decides that a
meeting shall be held at some other place within or without the State of Ohio
and causes the notices thereof to so state.
Section 4. NOTICE OF MEETINGS. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting stating the day, hour, and
place and the purpose or purposes thereof shall be served upon or mailed to each
shareholder of record (a) as of the day next preceding the day on which notice
is given or (b) if a record date therefor is duly fixed, of record as of said
date. Notice of such meeting shall be mailed, postage prepaid, at least ten (10)
days prior to the date thereof. If mailed, it shall be directed to a shareholder
at his address as the name appears upon the records of the Corporation.
Section 5. WAIVER OF NOTICE. Any shareholder, either before or after
any meeting, may waive any notice required to be given by law or under these
Regulations; and whenever all of the shareholders entitled to vote shall meet in
person or by proxy and consent to holding a meeting, it shall be valid for all
purposes without call or notice, and at such meeting any action may be taken.
Section 6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
the shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and a meeting may be held, as adjourned,
without further notice. A majority of the votes cast shall decide every question
or matter submitted to the shareholders at any meeting, unless otherwise
provided by law or by the Articles of Incorporation.
Section 7. PROXIES. Any shareholder of record who is entitled to attend
a shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meetings or to vote thereat
or to assent or give consent in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing signed by such
shareholder, which need not be sealed, witnessed or acknowledged.
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A telegram, cablegram, wireless message or photogram appearing to have
been transmitted by a shareholder, or a photograph, photostatic facsimile or
equivalent reproduction of a writing appointing a proxy or proxies shall be a
sufficient writing.
No appointment of a proxy shall be valid after the expiration eleven
(11) months after it is made, unless the writing specifies the date on which it
is to expire or the length of time it is to continue in force.
Section 8. BUSINESS TO BE CONDUCTED AT MEETING. At any meeting of
shareholders, the only business that shall be conducted is that which has been
properly brought before the meeting. To be properly brought before a meeting of
shareholders, business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the directors, otherwise
properly brought before the meeting by or at the direction of the directors or
otherwise properly brought before the meeting by a shareholder. For business to
be properly brought before a meeting of shareholders by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days prior to the meeting. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the meeting: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of the shareholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder, and (iv) any material interest of such
shareholder in such business.
Notwithstanding anything in the Regulations of the Corporation to the
contrary, no business shall be conducted at a meeting of shareholders except in
accordance with the procedures set forth in this Section 8.
The Chairman of the meeting of shareholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 8
in which event any such business not properly brought before the meeting shall
not be acted upon.
Section 9. VOTING. At any meeting of the shareholders, each shareholder
of the Corporation shall, except as otherwise provided by law or by the Articles
of Incorporation or by these Regulations, be entitled to one (1) vote in person
or by proxy for each share of the corporation registered in his name on the
books of the Corporation: (a) on the record date for the determination of
shareholders entitled to vote at such meeting, notwithstanding the prior or
subsequent sale, or other disposal of such share or shares or transfer of the
same on the books of the Corporation on or after the record date; or (b) if no
such record date shall have been fixed, then at the time of such meeting.
Section 10. ACTION WITHOUT MEETING. Any action which may be authorized
or taken at any meeting of shareholders may be authorized or taken without a
meeting in a writing or writings signed by all of the holders of shares who
would be entitled to notice of a meeting of the shareholders held for such
purpose. Such writing or writings shall be filed with or entered upon the
records of the Corporation.
ARTICLE III
DIRECTORS
Section 1. NUMBER OF DIRECTORS. The number of Directors constituting
the entire Board shall not be less than three (3) nor more than twenty-five
(25), the exact number of Directors to be determined from time to time by a
majority vote of the whole Board of Directors of the Corporation, or by a vote
of stockholders owning at least 80% of the total outstanding shares of the
Corporation's common stock at an annual meeting or special meeting called for
such purpose, and such exact number shall be eleven (11) until otherwise so
determined; provided, however, that any increase or decrease in the number of
Directors resulting from an action by a majority of the whole Board as herein
provided for, shall be subject to a limitation of two (2) persons in any one
calendar year.
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Section 2. ELECTION AND TERM OF DIRECTORS. The Board of Directors shall
be divided into three (3) classes, as nearly equal in number as the then total
number of Directors constituting the whole Board permits, with the term of
office of one class expiring each year. No decrease in the number of Directors
shall shorten the term of any incumbent Director. At each annual meeting of
stockholders, the successors to the class of Directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
Section 3. NOMINATIONS. Nominations of persons for election to the
Board of the Corporation at a meeting of the Shareholders may be made by or at
the direction of the Board of Directors or may be made at a meeting of
Shareholders by any Shareholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Section 3 of Article III. Such nominations, other than those made
by or at the direction of the Board, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a Shareholder's
notice shall be delivered to or mailed and received at the principal office of
the Corporation not less than ninety (90) days prior to the meeting. Such
Shareholder's notice to the Secretary shall set forth (a) as to each person whom
the Shareholder proposes to nominate for election or reelection as a Director,
(i) the name, age, business address and residence address of the persons, (ii)
the principal occupation or employment of the person, and (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the person and (b) as to the Shareholder giving the notice (i) the name
and record address of the Shareholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
Shareholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as Director of the
Corporation. No person shall be eligible for election as a Director of the
Corporation at a meeting of the Shareholders unless nominated in accordance with
the procedures set forth herein. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and the defective nomination shall be
disregarded.
Section 4. VACANCIES. In case of any vacancy in the Board of Directors,
through death, resignation, disqualification, newly created directorships
resulting from an increase in the number of Directors then in office, or other
cause, the remaining Directors, by an affirmative vote of a majority thereof,
although less than a quorum, may elect a successor to hold office for the
unexpired portion of the term of the Director whose place is vacant until the
election and qualification of his successor.
Section 5. REMOVAL. Subject to the rights of the holders of any series
of Preferred Shares then outstanding, directors may be removed from office at
any time, but only for cause, and only by the affirmative vote of the holders of
not less than seventy-five percent (75%) of the voting power of the outstanding
Shares entitled to vote generally in the election of directors, voting together
as a single class. Directors may also be removed by action of the Board of
Directors for the reasons provided by the Ohio Revised Code.
For the purposes of this Section, "cause" shall mean: (i) declaration
of unsound mind by order of court; (ii) conviction of a felony or misdemeanor
involving moral turpitude; (iii) a final judgment by a court of competent
jurisdiction that the director committed a gross dereliction of his or her
duties as a director which resulted in material injury to the Corporation; (iv)
a final judgment by a court of competent jurisdiction that the director
willfully violated any banking law, rule, regulation or final cease-and-desist
order entered by federal or state banking regulators; or (v) a final judgment by
a court of competent jurisdiction that the director engaged in intentional
misconduct or a knowing violation of law, and that such misconduct or violation
resulted in both material injury to the Corporation and an improper substantial
personal benefit.
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ARTICLE IV
POWERS, MEETING, AND COMPENSATION OF DIRECTORS
Section 1. MEETINGS OF THE BOARD. A meeting of the Board of Directors shall be
held immediately following the adjournment of each shareholders' meeting at
which directors are elected, or within sixty (60) days thereafter, and notice of
such meeting need not be given.
The Board of Directors may, by bylaws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board of Directors, President, Executive Vice
President (if one is appointed and serving at such time), Senior Vice President
(if one is appointed and serving at such time), or any two (2) members of the
Board.
Notice of any special meeting of the Board of Directors shall be mailed
to each director, addressed to him at his residence or usual place of business,
at least two (2) days before the day on which the meeting is to be held, or
shall be sent to him at such place by telegraph, cable, radio or wireless, or be
given personally or by telephone, not later than the day before the day on which
the meeting is to be held. Every such notice shall state the time and place of
the meeting but need not state the purposes thereof. Notice of any meeting of
the Board need not be given to any director, however, if waived by him in
writing or by telegraph, cable, radio, wireless, or telephonic communication
whether before or after such meeting is held, or if he shall be present at such
meeting; and any meeting of the Board shall be a legal meeting without any
notice thereof having been given, if all the directors shall be present thereat.
Meetings of the Board shall be held at the office of the Corporation,
or at such other place, within or without the State of Ohio, as the Board may
determine from time to time and as may be specified in the notice thereof.
Meetings of the Board of Directors may also be held by the utilization of
simultaneous telephonic communications linking all directors present at such
meetings, and all such business conducted via such telephonic communication
shall be considered legally enforceable by the Corporation.
Section 2. QUORUM. A majority of the Board of Directors serving in such
capacity shall constitute a quorum for the transaction of business, provided
that whenever less than a quorum is present at the time and place appointed for
any meeting of the Board, a majority of those present may adjourn the meeting
from time to time, without notice other than by announcement at the meeting,
until a quorum shall be present.
Section 3. ACTION WITHOUT MEETING. Any action may be authorized or
taken without a meeting in a writing or writings signed by all the directors,
which writing or writings shall be filed with or entered upon the records of the
Corporation.
Section 4. COMPENSATION. The directors shall receive compensation for
their services in an amount fixed by resolution of the Board of Directors.
Section 5. BYLAWS. For the government of its actions, the Board of
Directors may adopt bylaws consistent with the Articles of Incorporation and
these Regulations.
ARTICLE V
COMMITTEES
The Board of Directors may by resolution provide such standing or
special committees as it deems desirable, and discontinue the same at its
pleasure. Each such committee shall have such powers and perform such duties,
not inconsistent with law, as may be delegated to it by the Board of Directors.
Vacancies in such committees may be filled by the Board of Directors.
4
ARTICLE VI
OFFICERS
Section 1. GENERAL PROVISIONS. The Board of Directors shall elect a
President, such number of Vice Presidents as the Board may from time to time
determine, a Secretary and Treasurer, and, in its discretion, a Chairman of the
Board of Directors and a Vice Chairman of the Board of Directors. If no such
Chairman of the Board is elected by the Board of Directors, the President of the
Corporation shall act as presiding officer of the Corporation. The Board of
Directors may from time to time create such offices and appoint such other
officers, subordinate officers and assistant officers as it may determine. The
President and the Chairman of the Board shall be, but the other officers need
not be, chosen from among the members of the Board of Directors.
Section 2. TERMS OF OFFICE. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors and, unless sooner removed by
the Board of Directors, until the reorganization meeting of the Board of
Directors following the date of their election and until their successors are
chosen and qualified.
A vacancy in any office, however created, may be filled by the Board of
Directors.
ARTICLE VII
DUTIES OF OFFICERS
Section 1. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one be
elected, shall preside at all meetings of the shareholders and Board of
Directors and shall have such other powers and duties as may be prescribed by
the Board of Directors or by law.
Section 2. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board,
if one be elected, shall preside at all meetings of the shareholders and the
Board of Directors, in the absence of the Chairman of the Board. The Vice
Chairman shall have such powers and duties as may be prescribed by the Board of
Directors, or prescribed by the Chairman of the Board, or by law.
Section 3. PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall exercise supervision over the business of
the Corporation and over its several officers, subject, however, to the control
of the Board of Directors. In the absence of or if a Chairman of the Board shall
not have been elected or a Vice Chairman shall not have been elected, the
President shall preside at meetings of the shareholders and Board of Directors.
He shall have authority to sign all certificates for shares and all deeds,
mortgages, bonds, contracts, notes and other instruments requiring his
signature; and shall have all the powers and duties prescribed by law and such
others as the Board of Directors may from time to time assign to him.
Section 4. VICE PRESIDENTS. The Vice Presidents shall perform such
duties as are conferred upon them by these regulations or as may from time to
time be assigned to them by the Board of Directors, the Chairman of the Board or
the President. At the request of the President, or in his absence or disability,
the Vice President, designated by the President (or in the absence of such
designation, the Vice President designated by the Board), shall perform all the
duties of the President, and when so acting, shall have all the powers of the
President. The authority of Vice Presidents to sign in the name of the
Corporation all certificates for shares and authorized deeds, mortgages, bonds,
contracts, notes and other instruments, shall be coordinated with like authority
of the President. Any one or more of the Vice Presidents may be designated as an
"Executive Vice President" or a "Senior Vice President."
Section 5. THE SECRETARY. The Secretary shall issue notices of all
meetings for which notice shall be required to be given, shall keep the minutes
of all meetings, shall have charge of the corporate seal, if any, and corporate
record books, shall cause to be prepared for each meeting of shareholders the
list of shareholders entitled to vote thereat, and shall have such other duties
and powers as may be assigned to or vested in him by the Board of Directors, the
Executive Committee or the President.
5
Section 6. THE TREASURER. The Treasurer shall have the custody of all
moneys and securities of the Corporation and shall keep adequate and correct
accounts of the Corporation's business transactions, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, stated capital and
shares. The funds of the Corporation shall be deposited in the name of the
Corporation by the Treasurer in such depositories as the Board of Directors may
from time to time designate. The Treasurer shall have such other duties and
powers as may be assigned to or vested in him by the Board of Directors, the
Executive Committee or the President.
Section 7. ASSISTANT AND SUBORDINATE OFFICERS. The Board of Directors
may appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors and perform such duties as the Board of Directors may prescribe.
The Board of Directors may, from time to time, authorize any officers
to appoint and remove assistant and subordinate officers, to prescribe their
authority and duties, and to fix their compensation.
Section 8. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the Corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director.
ARTICLE VIII
CERTIFICATES FOR SHARES
Section 1. FORM AND EXECUTION. Certificates for shares shall be issued
to each shareholder in such form as shall be approved by the Board of Directors.
Such certificates shall be signed by the Chairman of the Board of Directors or
the President or a Vice President and by the Secretary of the Corporation, which
certificates shall certify the number and class of shares held by the
shareholder in the Corporation, but no certificates for shares shall be
delivered until such shares are fully paid. When such a certificate is
countersigned by an incorporated transfer agent or registrar, the signature of
any of said officers of the Corporation may be a facsimile, or engraved, stamped
or printed. Although any officer of the Corporation whose manual or facsimile
signature is affixed to a share certificate shall cease to be such officer
before the certificate is delivered, such certificate, nevertheless, shall be
effective in all respects when delivered.
Such certificate for shares shall be transferable in person or by
attorney, but, except as hereinafter provided in the case of lost, mutilated or
destroyed certificates, no transfers of shares shall be entered upon the records
of the Corporation until the previous certificates, if any, given for the same
shall have been surrendered and canceled.
Section 2. LOST, MUTILATED OR DESTROYED CERTIFICATES. If any
certificate for shares is lost, mutilated or destroyed, the Board of Directors
may authorize the issuance of a new certificate in place thereof, upon such
terms and conditions as it may deem advisable. The Board of Directors in its
discretion may refuse to issue such new certificates until the Corporation has
been indemnified by a final order or decree of a court of competent jurisdiction
and may, in its sole discretion, require a bond prior to issuance of any such
new certificate.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall end on the 31st day of
December in each year, or on such other day as may be fixed from time to time by
the Board of Directors.
6
ARTICLE X
AMENDMENTS
Section 1. These Regulations may be altered, changed or amended in any
respect or superseded by new Regulations in whole or in part, by the affirmative
vote of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation.
Section 2. Notwithstanding the provisions of Article X, Section 1
hereof and notwithstanding the fact that a lesser percentage may be specified by
law or any other provision of these Regulations, the amendment, alteration,
change or repeal of, or adoption of any provisions inconsistent with, Article
III, Sections 1, 2, 3 or 5 or this Article X, of these Regulations shall require
the affirmative vote of the holders of shares entitling them to exercise at
least eighty (80%) percent of the voting power of the Corporation, unless such
amendment, alteration, change, repeal or adoption has been recommended by at
least two-thirds of the members of the Board of Directors of the Corporation
then in office, in which event the provisions of Article X, Section 1 hereof
shall apply.
PROXY FOR ANNUAL MEETING OF
DCB FINANCIAL CORP
LEWIS CENTER, OHIO
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of
DCB Financial Corp, Lewis Center, Ohio, do hereby nominate, constitute, and
appoint Jerome J. Harmeyer, Vicki J. Lewis, William R. Oberfield and Adam
Stevenson, or any one of them (with full power of substitution for me and in my
name, place and stead) to vote all the common stock of said Company, standing in
my name on its books on May 15, 2003, at the Annual Meeting of its shareholders
to be held on June 25, 2003, at 4:00 P.M. (local time) at the Delaware County
Bank & Trust Company Corporate Center (110 Riverbend Avenue), Lewis Center,
Ohio, or any postponements or adjournments thereof with all the powers the
undersigned would possess if personally present as follows. By appointing the
above named persons as proxy for me, I give them the right to vote cumulatively
in the election of directors and to cast the number of votes among the nominees
noted below in such proportion as they shall deem appropriate, in their sole
discretion, unless I have withheld my vote for any nominee, in which case votes
shall not be cast for that person. This proxy revokes all prior proxies given by
the undersigned.
1. To elect three (3) members of Class I (term to expire 2006) to the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES.
Nominees:
- ---------
Jeffrey T. Benton For All Nominees [ ]
G. William Parker
Gary M. Skinner Withhold Authority to Vote For all Nominees [ ]
(To Withhold Authority for an individual
nominee, check the "For All Nominees" box
and draw a line through the name of such
nominee)
2. AUTHORIZATION OF PREFERRED SHARES - To approve amending and restating
the Company's Articles of Incorporation to provide for 2,000,000
authorized preferred shares
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 2.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. ELIMINATION OF CUMULATIVE VOTING - To approve amending and restating
the Company's Articles of Incorporation to eliminate the right of
cumulative voting in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 3.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. OPTING OUT OF THE CONTROL SHARE ACQUISITION STATUTE - To approve
amending the Articles of Incorporation of the Company to choose that
the provisions of Section 1701.831 of the Ohio Revised Code, the
control share acquisition statute not be applicable to the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 4.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. TECHNICAL REVISIONS TO THE ARTICLES OF INCORPORATION - To approve
amending and restating the Company's Articles of Incorporation, as more
fully described in the proxy statement, to make certain technical
changes and corrections, and therefore to adopt the Amended and
Restated Articles of Incorporation in the form of Exhibit A attached to
the proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 5.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. AMENDMENT AND RESTATEMENT OF THE CODE OF REGULATIONS - To approve
amending and restating the Company's Code of Regulations, as more fully
described in the proxy statement. Approval will result in the adoption
of the Amended and Restated Code of Regulations in the form of Exhibit
B attached to the proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL 6.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
THIS PROXY IS SOLICITED BY MANAGEMENT AND CONFERS AUTHORITY TO VOTE "FOR" THE
NOMINEES NOTED ABOVE, AND "FOR" EACH OF PROPOSALS 2, 3, 4, 5 AND 6 ABOVE UNLESS
OTHERWISE MARKED. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY
SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT. ALL SHARES
REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS NOMINATED BY THE
BOARD OF DIRECTORS AND "FOR" EACH OF PROPOSALS 2, 3, 4, 5 AND 6. This proxy may
be revoked prior to its exercise by either written notice or personally at the
meeting or by a subsequently dated proxy.
- ------------------------------ -------------------------------------
(STOCKHOLDER SIGNATURE) (DATE)
- ------------------------------ -------------------------------------
(STOCKHOLDER SIGNATURE) (DATE)
--------------------------
INSERT LABEL
--------------------------
(WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, PLEASE
GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. ALL JOINT OWNERS
SHOULD SIGN.)