SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
DIAMOND HILL INVESTMENT GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:.......
(2) Aggregate number of securities to which transaction applies:..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):............
(4) Proposed maximum aggregate value of transaction:......................
(5) Total fee paid:.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:...............................................
(2) Form, Schedule or Registration Statement No.:.........................
(3) Filing Party:.........................................................
(4) Date Filed:...........................................................
^
Diamond Hill
============
Investment Group, Inc.
April 12, 2004
Dear Shareholders:
We cordially invite you to attend the Annual Meeting of Shareholders of
Diamond Hill Investment Group, Inc. (the "Company") to be held at the Company's
office located at 375 North Front Street, Suite 300, Columbus, Ohio 43215, on
Thursday, May 13, 2004, at 3:00 p.m.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of the Company. Directors and officers of the
Company will be present to respond to any appropriate questions you may have. ON
BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE
ANNUAL Meeting. This will not prevent you from voting in person but will assure
that your vote is counted if you are unable to attend the meeting. Your vote is
important, regardless of the number of shares you own.
Sincerely,
/s/ Ric
R. H. Dillon President & CEO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Diamond
Hill Investment Group, Inc. (the "Company") will be held at the Company's office
located at 375 North Front Street, Suite 300, Columbus, Ohio 43215, on Thursday,
May 13, 2004, at 3:00 p.m. to consider and act upon the following matters:
1. To elect seven directors to serve on the Board of Directors
2. To approve the terms and conditions upon which the Board of Directors
may grant certain types of equity compensation to Company employees;
and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting or on any date or dates to which, by original or later adjournment, the
Annual Meeting may be adjourned. Pursuant to the Company's bylaws, the Board of
Directors has fixed the close of business on March 22, 2004, as the record date
for determination of the shareholders entitled to vote at the Annual Meeting and
any adjournments thereof. A complete list of shareholders of the Company
entitled to vote at the Annual Meeting will be available for examination for
purposes germane to the Annual Meeting by any shareholder, during the ten days
prior to the Annual Meeting, at the Company's office. You are requested to
complete and sign the enclosed form of proxy which is solicited by the Board of
Directors of the Company and to mail it promptly in the enclosed envelope, or
you may vote by phone by using the control number identified on your proxy or
electronically by Internet in accordance with the instructions on your proxy.
The proxy will not be used if you attend, and vote at, the Annual Meeting in
person or if you revoke the proxy prior to the Annual Meeting.
By order of the Board of Directors
/s/ James F. Laird
James F. Laird
Secretary
Columbus, Ohio
April 12, 2004
THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO OBTAIN A QUORUM. AN ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE
IS REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
DIAMOND HILL INVESTMENT GROUP, INC.
TO BE HELD ON MAY 13, 2004
This Proxy Statement is furnished to the shareholders of Diamond Hill
Investment Group, Inc., an Ohio corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Shareholders of the Company to be held on May 13, 2004, and any
adjournment thereof. A copy of the Notice of Annual Meeting accompanies this
Proxy Statement. It is anticipated that the mailing of the Proxy Statement will
commence on April 12, 2004. Only shareholders of record at the close of business
on March 22, 2004, the record date for the Annual Meeting (the "Record Date"),
will be entitled to vote at the Annual Meeting.
The purposes of this Annual Meeting are (1) to elect seven directors to
serve on the Board of Directors for a one year term; (2) to approve the terms
and conditions upon which the Board of Directors may grant certain types of
equity compensation to Company employees; and (3) to transact such other
business as may properly come before the Annual Meeting or any adjournment
thereof. The Company is not currently aware of any other matters that will come
before the Annual Meeting.
The shareholder's form of proxy, when duly executed and received by the
Company, will be voted by the proxies at the Annual Meeting as directed. A proxy
returned without direction about business to be transacted at the Annual Meeting
will be voted in favor of (1) the election of Dr. Roger D. Blackwell, R. H.
Dillon, David P. Lauer, Dr. James G. Mathias, David R. Meuse, William G. Perkins
and Diane D. Reynolds as directors of the Company and (2) the approval of the
terms and conditions of the grants of equity compensation to Company employees.
The proxies will use their best judgment regarding other matters that properly
come before the Annual Meeting.
TABLE OF CONTENTS
SECTION PAGE
------- ----
Questions and Answers About Voting and Voting Procedures.....................1-2
Cautionary Statement Regarding Forward-Looking Statements......................2
The Annual Meeting...........................................................2-3
Revocability of Proxy..........................................................3
Voting Securities and Principal Holders........................................3
Quorum.......................................................................3-4
Security Ownership of Certain Beneficial Owners and Management...............4-5
Directors and Executive Officers.............................................5-7
Nominees and Other Executive Officer.................................5-7
Certain Relationships and Related Transactions.........................7
Committees and Annual Meetings...............................................7-8
Report of the Audit Committee..................................................8
Executive Compensation......................................................9-10
Summary Compensation Table.............................................9
2003 Aggregated Option Execises and Option Values......................9
Securities Authorized for Issuance Under Equity Compensation Plans....10
Incentive Compensation Plan...........................................10
Stock Option Plan.....................................................10
Director Compensation.................................................10
Proposal 1 Election of Directors..............................................11
Proposal 2 Approval of Terms and Conditions of Certain Equity
Compensation Grants.............................................11-14
Compliance with Section 16(a) of the Exchange Act.............................14
Expense and Manner of Solicitation............................................14
Form 10-KSB...................................................................14
Independent Auditors..........................................................14
Shareholder Proposals for 2005 Annual Meeting.................................15
Communications Between Shareholders and the Board of Directors................15
Code of Business Conduct and Ethics...........................................15
Other Business................................................................15
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QUESTIONS AND ANSWERS ABOUT VOTING AND VOTING PROCEDURES
--------------------------------------------------------
Q: WHEN AND WHERE WILL THE ANNUAL MEETING TAKE PLACE?
A: The Annual Meeting will be held at the Company's office located at 375
North Front Street, Suite 300 Columbus Ohio 43215, on Thursday, May 13,
2004, at 3:00 p.m.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading this Proxy Statement, indicate on your enclosed
proxy card how you want your Shares to be voted for the election of
directors and approval of the terms and conditions of certain equity
compensation grants. Then sign and mail the proxy promptly in the enclosed
envelope, or vote by phone by using the control number identified on your
proxy or electronically by Internet in accordance with the instructions on
your proxy. The proxy will not be used if you attend, and vote at, the
Annual Meeting in person or if you revoke the proxy prior to the Annual
Meeting.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD
AND AS A BENEFICIAL OWNER?
A: Many Company shareholders are beneficial owners in that they hold their
Shares through a stockbroker, bank or other nominee rather than directly in
their own name. As summarized below, there are some distinctions between
Shares held of record and those owned beneficially.
Shareholder of Record. If your Shares are registered directly in your name
with the Company's transfer agent, you are considered, with respect to
those Shares, the shareholder of record and this Proxy Statement is being
sent directly to you by the Company. As a shareholder of record, you have
the right to grant your proxy directly to the Company or to vote in person
at the Annual Meeting. The Company has enclosed a proxy card for your use.
Beneficial Owner. If your Shares are held in a stock brokerage account or
by a bank or other nominee, you are considered the beneficial owner of the
Shares held in street name and this Proxy Statement is being forwarded to
you by your broker or other nominee, who is considered, with respect to
those Shares, the shareholder of record. As the beneficial owner, you have
the right to direct your broker or other nominee on how to vote. Your
broker or other nominee has enclosed a voting instruction card for your
use. If you are a Company shareholder whose Shares are not registered in
your own name, you will need additional documentation from your broker or
other nominee to attend the Annual Meeting and to vote your Shares at the
Annual Meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your Shares only if you provide instructions on how
to vote. You should follow the directions provided to you by your broker
regarding how to instruct your broker to vote your Shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
Annual Meeting. If you are the record holder of the Shares, you can do this
in three ways:
o Send the Company a written statement that you would like to revoke
your proxy; this written notice must be received by the Company prior
to the date of the Annual Meeting;
o Send the Secretary of the Company a new signed and later-dated proxy
card; this new proxy card must be received by the Company prior to the
date of the Annual Meeting; or
o Attend the Annual Meeting and vote in person; however, your attendance
alone will not revoke your proxy.
For Shares held beneficially by you, but not as record holder, you may
change your vote by submitting new voting instructions to your broker or
nominee.
-1-
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
A: Shares held directly in your name as the shareholder of record may be voted
in person at the Annual Meeting. If you choose to attend, please bring the
enclosed proxy card or proof of identification.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you are the record holder of the Shares and you sign and send in your
proxy and do not indicate how you want to vote, your proxy will be counted
as a vote in favor of the director nominees and in favor of the proposed
equity compensation grants.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT HOW I CAN SUBMIT MY PROXY?
A: If you have more questions about how to submit your proxy, please call
James F. Laird, the Company's Secretary, at (614) 255-3353.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
---------------------------------------------------------
The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995:
o Any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends," "estimates,"
"projects" or similar expressions; and
o Other statements contained in this Proxy Statement regarding matters
that are not historical facts.
Because these forward-looking statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the statements. Shareholders are cautioned not to place undue
reliance on these statements, which speak only as of the date of this Proxy
Statement.
Among the factors that could cause actual results to differ materially are
changes in laws, general economic conditions, fluctuation in interest rates,
increases in costs, level of competition, market acceptance of new and existing
products, capital expenditure amounts and other risks detailed from time to time
in the reports filed by the Company with the Commission.
The cautionary statements contained or referred to in this Proxy Statement
should be considered in connection with any subsequent written or oral
forward-looking statements that may be issued by the Company or persons acting
on its behalf. Except for its ongoing obligations to disclose material
information as required by the federal securities laws, the Company undertakes
no obligation to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date of this Proxy
Statement or to reflect the occurrence of unanticipated events.
THE ANNUAL MEETING
------------------
The Annual Meeting will be held at the Company's office located at 375
North Front Street, Suite 300, Columbus, Ohio 43215, on Thursday, May 13, 2004,
at 3:00 p.m. Only shareholders of record at the close of business on the Record
Date will be entitled to vote at the Annual Meeting.
The purposes of this Annual Meeting are (1) to elect seven directors to
serve on the Board of Directors for a one-year term; (2) to consider and approve
the terms and conditions upon which the Board of Directors may grant certain
types of equity compensation to Company employees; and (3) to transact such
other business as may properly come before the Annual Meeting or any adjournment
thereof. The Company is not currently aware of any other matters, which will
come before the Annual Meeting.
-2-
Your proxy, when duly executed and received by the Company will be voted by
the proxies at the Annual Meeting as you direct. A proxy returned without
direction about business to be transacted at the Annual Meeting will be voted in
favor of (1) the election of Dr. Roger D. Blackwell, R. H. Dillon, David P.
Lauer, Dr. James G. Mathias, David R. Meuse, William G. Perkins and Diane D.
Reynolds as directors of the Company and (2) the approval of the terms and
conditions of grants of equity compensation to Company employees. The proxies
will use their best judgment regarding other matters that properly come before
the Annual Meeting.
REVOCABILITY OF PROXY
---------------------
The execution and delivery of the enclosed form of proxy by a shareholder
will not affect a shareholder's right to attend the Annual Meeting and vote in
person. Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering a later-dated proxy or a written notice of revocation to
the Secretary of the Company at 375 North Front Street, Suite 300 Columbus, Ohio
43215 or by giving notice of revocation at the Annual Meeting. When a
shareholder votes at the Annual Meeting, his or her vote will revoke any proxy
previously granted by the shareholder.
VOTING SECURITIES AND PRINCIPAL HOLDERS
---------------------------------------
As of the Record Date, there were 1,526,903 Shares that were outstanding and
entitled to vote at the Annual Meeting. Each Share may cast one vote on each
separate matter of business properly brought before the Annual Meeting. There
are no cumulative voting rights.
Under the rules of the Commission, boxes and a designated space are
provided on the form of proxy for shareholders to mark if they wish to withhold
authority to vote for one or more nominees for election as a director of the
Company and/or if they wish to abstain from voting on the proposal regarding the
equity compensation grants. Shares as to which the authority to vote is withheld
will be counted for quorum purposes but will not be counted toward the election
of directors. Abstentions are counted as present for quorum purposes.
Broker-dealers who hold their customers' Shares in street name may, under
the applicable rules of the self-regulatory organization of which the
broker-dealers are members, sign and submit proxies for such Shares and may vote
Shares on routine matters, which, under such rules, typically include the
election of directors. However, broker-dealers may not vote Shares on other
matters, such as the approval of the equity compensation grants, which would be
considered non-routine, without specific instructions from the customer who owns
the Shares. Therefore, the Board of Directors encourages shareholders to
instruct their broker-dealer as to how to vote their shares. Proxies signed and
submitted by broker-dealers, which have not been voted on certain matters as
described in the previous sentence, are referred to as broker non-votes. Such
proxies count toward the establishment of a quorum.
QUORUM
------
The Company can conduct business at the Annual Meeting only if holders of a
majority of the outstanding Shares entitled to vote are present, either in
person or by proxy. Abstentions will be counted in determining whether a quorum
has been reached. In the event that a quorum is not present at the time the
Annual Meeting is convened, a majority in interest of the holders of the Shares
represented in person or by proxy may adjourn the Annual Meeting, without notice
other than announcement at the Annual Meeting, until holders of the amount of
Shares requisite to constitute a quorum shall attend. At any such adjourned
Annual Meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the Annual Meeting as originally
called.
The Company will bear the cost of the Annual Meeting and the cost of
soliciting proxies, including the cost of mailing the proxy material. In
addition to solicitation by mail, directors, officers and employees of the
Company (who will not be specifically compensated for such services) may solicit
proxies by telephone or otherwise.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
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not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The Company's Common Stock is the only class of voting securities. The
following table sets forth, as of December 31, 2003, certain information
concerning share ownership of (a) all persons known by the Company to own
beneficially five percent or more of the outstanding Shares, (b) each director,
nominee and named executive officer of the Company, and (c) all executive
officers and directors of the Company, as a group, and the percentage of voting
power (assuming exercise of all options which are currently exercisable). Unless
otherwise indicated, the named persons exercise sole voting and investment power
over the Shares, which are shown as beneficially owned by them.
---------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------------------------------
COMMON SHARES WHICH
CAN BE ACQUIRED UPON
COMMON EXERCISE OF OPTIONS
SHARES OR WARRANTS PERCENT
NAME AND ADDRESS OF BENEFICIAL PRESENTLY EXERCISABLE OF
OWNER HELD (1) WITHIN 60 DAYS TOTAL CLASS(3)
---------------------------------------------------------------------------------------------------
R. H. Dillon (4) 13,812(2) 160,000 173,812 9.3%
308 Jackson Street
Columbus, Ohio 43206
---------------------------------------------------------------------------------------------------
James F. Laird (4) 6,462(2) 30,000 36,462 1.9%
5277 Brynwood Drive
Columbus, Ohio 43220
---------------------------------------------------------------------------------------------------
Dr. Roger D. Blackwell 30,640 2,000 32,640 1.7%
3380 Tremont Road
Columbus, Ohio 43221
---------------------------------------------------------------------------------------------------
David P. Lauer 3,000 0 3,000 (5)
5386 Dunniker Park Drive
Dublin, OH 43017
---------------------------------------------------------------------------------------------------
Dr. James G. Mathias 28,945 13,000 41,945 2.2%
7707 Winding Way South
Tipp City, Ohio 45371
---------------------------------------------------------------------------------------------------
David R. Meuse (6) 120,000 0 120,000 6.4%
191 W. Nationwide Blvd., Suite 600
Columbus, Ohio 43215
---------------------------------------------------------------------------------------------------
William G. Perkins 0 0 0 --
4 Millington Court
Columbus, Georgia 31904
---------------------------------------------------------------------------------------------------
Diane D. Reynolds 3,000 0 3,000 (5)
372 W. Seventh Avenue
Columbus, Ohio 43201
---------------------------------------------------------------------------------------------------
All directors and executive 164,076 205,000 369,076 19.6%
officers as a group (8 persons)
---------------------------------------------------------------------------------------------------
___________
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all common shares reflected in the table.
(2) A portion of the shares are held in the Company's 401(k) Plan, in which the
Trustees of the 401(k) Plan possess the voting power and restrictions exist
with respect to the power to dispose of these shares.
(3) The percent of class is based upon (a) the number of Shares owned by the
named person plus the number of Shares as to which the named person has the
right to acquire beneficial ownership upon the exercise of options or
warrants exercisable within 60 days after December 31, 2003, divided by (b)
the total number of Shares which are issued and
-4-
outstanding as of December 31, 2003 plus the total number of Shares which
are subject to options or warrants exercisable within 60 days after
December 31, 2003.
(4) Individual named in the Summary Compensation Table.
(5) Represents ownership of less than 1% of the outstanding common shares of
the Company.
(6) Mr. Meuse owns approximately 65% of Sarsen Investments Inc., LLC which owns
120,000 shares of the Company's common stock.
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
The following table contains the name, position and age of each director
and executive officer of the Company as of March 22, 2004. Each member of the
Board of Directors is subject to election at each annual meeting of
shareholders. Directors are elected to serve until the next annual meeting of
the shareholders, until their successors are duly elected and qualified or until
their earlier resignation, removal from office, or death.
The respective background of each director and executive officer is
described immediately following the below table. Each of the executive officers
devotes his or her full-time and efforts to the affairs of the Company.
---------------------------------------------------------------------------
NAME POSITION AGE
---------------------------------------------------------------------------
R. H. Dillon President and Director 47
---------------------------------------------------------------------------
James F. Laird, Jr. Chief Financial Officer, Secretary 47
and Treasurer
---------------------------------------------------------------------------
Dr. Roger D. Blackwell Director 63
---------------------------------------------------------------------------
David P. Lauer Director 61
---------------------------------------------------------------------------
Dr. James G. Mathias Director 51
---------------------------------------------------------------------------
David R. Meuse Director 58
---------------------------------------------------------------------------
William G. Perkins Director 49
---------------------------------------------------------------------------
Diane D. Reynolds Director 44
---------------------------------------------------------------------------
NOMINEES
DR. ROGER D. BLACKWELL became director of the Company in February 1999. Dr.
Blackwell is a Professor of Marketing and Logistics at the Max M. Fisher College
of Business at The Ohio State University and is also President and CEO of Roger
Blackwell Associates, Inc., a consulting firm in Columbus, Ohio. Dr. Blackwell
co-authored one of the leading books on consumers, entitled Consumer Behavior.
It is used by business schools throughout North America, Europe, Asia and
Africa. He has also written twenty-three other books on marketing strategy,
research, and global marketing. His most recent publications are From Mind to
Market, published by HarperBusiness and Customers Rule!, which was released by
Crown/Random House in 2001. Dr. Blackwell received his B.S. and M.S. degrees
from The University of Missouri and his Ph.D. from Northwestern University. He
resides in Columbus, Ohio, and serves on the boards of Applied Industrial
Technologies (formerly Bearings, Inc.), Flex-Funds, Max & Erma's Restaurants and
Anthony and Sylvan Pools.
R. H. DILLON was appointed President of the Company in May 2000. He also
serves as the Chief Investment Officer of Diamond Hill Capital Management, Inc.
From 1997 through 2000, Mr. Dillon was a Vice President of Loomis, Sayles &
Company. From 1993 through 1997, Mr. Dillon was President and Chief Investment
Officer for Dillon Capital Management, an investment advisory firm acquired by
Loomis, Sayles in 1997. Mr. Dillon received his B.S and M.A. degrees in Business
Administration with a major in Finance from The Ohio State University and his
M.B.A. degree from the University of Dayton. He received a C.F.A. designation
from the Institute of Chartered Financial Analysts in 1982.
DAVID P. LAUER, CPA became a director in May 2002. From June of 1997
through March of 2001, Mr. Lauer served as President and Chief Operating Officer
of Bank One - Columbus. Prior to June 1997, he was a partner with Deloitte &
Touche for nineteen years; he retired from Deloitte & Touche in 1997. He serves
on the board of Airnet
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Systems, Huntington Bancshares, Metatec International, R. G. Barry, Wendy's
International and W. W Williams Company.
DR. JAMES G. MATHIAS became a Director of the Company in 1993. Since 1988,
Dr. Mathias has been a veterinarian practicing in Tipp City, Ohio, where he owns
the Tipp City Veterinary Hospital and Wellness Center. Dr. Mathias attended the
University of Texas and completed his education at The Ohio State University,
graduating from the College of Veterinary Medicine in 1978. He was a member of
the Honor Society of Phi Zeta, a Veterinary Honor Society. Dr. Mathias is
founder and President of the Dayton North Women's Center and is a speaker on
Ratite Medicine. He is also on the Veterinary Advisory Board of the Iams Company
in Dayton, Ohio.
DAVID R. MEUSE became a director of the Company in August 2000. Since 1999,
Mr. Meuse has been a Principal for Stonehenge Holdings, Inc. ("Stonehenge") of
Columbus, Ohio, where he is responsible for managing its affairs. From 1990 to
1999, Mr. Meuse was the Chairman and Chief Executive Officer of Banc One Capital
Holdings Corporation ("BCHC"), the holding company for the investment banking,
merchant banking, securities brokerage, investment advisory and insurance
activities of Bank One Corporation. He came to BCHC in 1990 when Bank One
Corporation acquired Meuse, Rinker, Chapman, Endres & Brooks, a regional
investment banking firm, which Mr. Meuse founded in 1981. He is an active
investor in venture capital and mezzanine finance opportunities, both personally
and through Banc One Capital Partners Corporation. Mr. Meuse received his B.A.
in Political Science from John Carroll University and subsequently took courses
at Cleveland-Marshall College of Law at Cleveland State University, and the
University of Pennsylvania, Wharton School of Finance, Securities Industry. Mr.
Meuse serves on the board of directors of the following: Alliance One
Incorporated, Banc One Investment Advisors, Central Benefits Mutual Insurance
Company, ORIX Capital Markets, LLC, RP&C International, Columbus Association for
the Performing Arts, The Columbus Foundation Governing Committee, The Columbus
Partnership, Prospect Bank, and Stonehenge Financial Holdings, Inc.
WILLIAM G. PERKINS became director of the Company in May 2002. Mr. Perkins
currently serves as President and Chief Operating Officer of Synovus Financial
Management Services and Chief Executive Officer of Synovus Securities, Inc. in
Columbus, Georgia. In his current role, Mr. Perkins is responsible for the
brokerage, trust, insurance and private banking businesses of Synovus Financial
Corp., a $19 billion financial services company headquartered in Columbus.
Synovus is the parent company for 39 community banks located in Georgia,
Alabama, Florida, South Carolina and Tennessee as well as Synovus Trust Company
with over $8 billion in client assets, Synovus Securities, Inc., a full-service
brokerage firm with 55 investment consultants in 23 offices overseeing over $2
billion in client assets and Synovus Insurance Services which provides a
comprehensive array of insurance products to clients of all 39 Synovus affiliate
banks. Additionally, Synovus owns 80.8% of TSYS, Total System Services, Inc.,
one of the world's largest processors of credit, debit, affinity and stored
value cards. Synovus has consistently been recognized as one of the highest
performing financial services firms in the industry and has also been
consistently rated as one of the best companies to work for in America by
Fortune Magazine.
Prior to joining Synovus in June 1998, Mr. Perkins was with First Commerce
Corporation in Louisiana from 1987 to 1998. He served in a series of leadership
roles in trust, private banking and brokerage. His last assignment was a
President and CEO of Marquis Investments, LLC, First Commerce's investment
brokerage subsidiary. He began his financial services career in 1981 as a retail
broker in the Baton Rouge office of A.G. Edwards. Mr. Perkins is a 1976 graduate
of Texas Christian University and completed the Trust and Private Banking
Executive Management Program at the Wharton School of Business, University of
Pennsylvania in 1993. Mr. Perkins serves on the board of directors of Synovus
Securities, Inc., Synovus Trust Company, NA, Synovus Investment Advisors and
GLOBALT Inc.
DIANE D. REYNOLDS became a Director of the Company in April 2001. Ms.
Reynolds is a partner with the law firm of Benesch, Friedlander, Coplan &
Aronoff LLP and focuses her practice on mergers and acquisitions, divestitures,
business law, commercial law, corporate law, antitrust law, real estate, finance
and contracts. Ms. Reynolds has extensive experience in financing matters and in
the purchase and licensing of information technology hardware and software.
Prior to joining her law firm, Ms. Reynolds was engaged in a diverse corporate
practice with two Fortune 500 multinational corporations. She received a B.A. in
1982 from The Ohio State University, a J.D. in 1985 from Capital University and
an M.B.A. in 1999 from the University of Chicago.
There are no family relationships among the directors or executive officers
of the Company.
-6-
OTHER EXECUTIVE OFFICER
JAMES F. LAIRD, JR. was appointed as Chief Financial Officer and Treasurer
of the Company on December 31, 2001 and has served as President of Diamond Hill
Securities, Inc. since July 16, 2001. On January 1, 2003, Mr. Laird was
appointed as Secretary. In his capacity with the Company, Mr. Laird oversees all
financial and corporate aspects of the Company. As President of Diamond Hill
Securities, Inc., Mr. Laird's responsibilities are to oversee broker-dealer
operations and to increase distribution of the Diamond Hill Family of Funds
through various broker-dealer channels. Prior to joining the Company, Mr. Laird
was Senior Vice President of Villanova Capital, a subsidiary of Nationwide, from
1999-2001. He was Vice President and General Manager from 1995-1999, and
Treasurer form 1987-1994, of Nationwide Advisory Services, Inc. Mr. Laird was
also Vice President of Cranston Securities from 1986-1987 and worked for KPMG
Peat Marwick from 1980-1986. Mr. Laird received his B.S.B.A. in accounting from
The Ohio State University. He is also a Certified Public Accountant and a member
of the American Institute of Certified Public Accountants. In addition, he holds
several NASD licenses including Series 7, 24, 26, 27, and 63.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William G. Perkins has been a director of the Company since 2002 and serves
as CEO of Synovus Securities, Inc. in Columbus, Georgia. As of December 31,
2003, the Company manages $77 million in separately managed account and mutual
fund assets for clients of Synovus Securities, Inc., representing approximately
30% of the Company's assets under management. Mr. Perkins receives no
compensation or remuneration from the Company in connection with this
relationship. Synovus Securities, Inc. receives compensation for distribution of
the Diamond Hill Funds, such compensation is comparable to that paid to other
third party broker dealers providing similar services.
COMMITTEES AND ANNUAL MEETINGS
------------------------------
The Board of Directors held a total of five meetings during the year ended
December 31, 2003. The Board of Directors has two standing committees: the
Executive Committee and the Audit Committee. Each Director attended at least 75%
of the aggregate of (a) the total number of Board of Directors' meetings held
during the period for which he or she has been a Director during the last fiscal
year, and (b) the total number of meetings held by all committees of the Board
of Directors on which he or she served during the periods that he or she served
during the last fiscal year. The Company does not have a formal policy regarding
board members' attendance at annual meetings, although all directors are
encouraged to attend the annual meeting. Last year, all directors attended the
annual meeting.
EXECUTIVE COMMITTEE
The Executive Committee is authorized, when it is impractical or not in the
best interest of the Company to wait until a Board of Directors meeting for
approval, to take any and all action or incur any obligations which could be
taken or incurred by the full Board of Directors. The members of the Executive
Committee as of December 31, 2003, were David R. Meuse (Chairman), Dr. Roger D.
Blackwell and Dr. James G. Mathias. The Executive Committee did not hold any
meetings during the year ended December 31, 2003.
DIRECTOR NOMINATION PROCESS
Given the relatively small size of the Company and its Board of Directors,
the Company does not believe that a standing nominating committee is necessary.
All of the Company's directors participate in the consideration of director
nominees. Although the Company does not have a formal charter governing the
nomination of directors, it does have an explicit list of criteria that the
Board uses to assess potential directors. It is the Company's expectation that
candidates for the Board of Directors will at the least possess significant
skill and experience in financial services, accounting, marketing, operations,
legal matters and in other areas that are important to the success of the
Company.
Director nominees are recommended for the Board's selection by any of the
members of the Board of Directors, a majority of whom are independent. The
Company will consider director candidates recommended by shareholders, and the
Company does not alter the manner in which it evaluates candidates, including
the minimum criteria set forth above, based upon the source of the director
nomination.
-7-
AUDIT COMMITTEE
The Audit Committee reviews and approves the scope and results of any
outside audit of the Company and the fees therefore and makes recommendations to
the Board of Directors or management concerning auditing and accounting matters
and the selection of independent auditors. The Audit Committee also conducts
appropriate reviews of all related party transactions for potential conflicts of
interest situations on an ongoing basis, and all such transactions are approved
by the Audit Committee. The Audit Committee's responsibilities are outlined
further in its written charter, a copy of which is attached to this Proxy
Statement as Exhibit A. Each member of the Audit Committee qualifies as
independent under the rules and standards of independence of the Securities and
Exchange Commission (the "SEC") and The NASDAQ Stock Market, Inc. ("Nasdaq").
The Board has determined that the Chairman of the Audit Committee, David P.
Lauer, qualifies as a "financial expert" as defined by applicable rules of the
SEC and as "financially sophisticated" as defined by applicable Nasdaq rules.
The Audit Committee met four times during the year ended December 31, 2003 and
its report relating to the Company's 2003 fiscal year appears below.
REPORT OF THE AUDIT COMMITTEE
-----------------------------
(December 31, 2003)
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that might incorporate future filings, including this Proxy Statement, in whole
or in part, this report shall not be incorporated by reference into any such
filings.
The Audit Committee in 2003 was comprised of three independent directors
operating under a written charter adopted by the Board of Directors. Annually,
the Audit Committee recommends to the Board of Directors the selection of the
Company's independent auditors. BKR Longanbach, Giusti, LLC served as the
Company's independent auditors during the year ended December 31, 2003.
Management is responsible for designing and maintaining the Company's
systems of internal controls and financial reporting processes. The Company's
independent auditors are responsible for performing an audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and issuing their report thereon. The Audit Committee's responsibility
is to provide independent, objective oversight of these processes.
Pursuant to this responsibility, the Audit Committee met with management
and the independent auditors throughout the year. The Audit Committee reviewed
the audit plan and scope with the independent auditors, and discussed the
matters required by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). The Audit Committee also met with the independent auditors,
without management present, to discuss the results of their audit work, their
evaluation of the Company's system of internal controls and the quality of the
Company's financial reporting.
In addition, the Audit Committee has discussed with the independent
auditors their independence from the Company and its management, including the
matters in written disclosures and letters from the independent auditors
required by the Independence Standards Board Standard No.1 (Independence
Discussions with Audit Committees).
Management has represented to the Audit Committee that the Company's
consolidated financial statements for the year ended December 31, 2003, were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee reviewed and discussed the consolidated financial statements
with management and the independent auditors. Based on the Audit Committee's
discussions with management and the independent auditors and review of the
report of the independent auditors to the Audit Committee, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited consolidated financial statements be included in the Company's Form
10-KSB for the year ended December 31, 2003, filed with the Commission.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY:
DAVID P. LAUER, CHAIRMAN
DIANE D. REYNOLDS
WILLIAM G. PERKINS
-8-
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation paid or payable by the
Company during the calendar years ended December 31, 2003, 2002 and 2001, to the
President of the Company and to the Treasurer/Chief Financial Officer of the
Company.
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-----------------------------------------------------------------------------------------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) OTHER ($)
-----------------------------------------------------------------------------------------------
R. H. Dillon 2003 150,000 0 -- --
President and Chief 2002 150,000 0 -- --
Executive Officer 2001 150,000 0 -- --
-----------------------------------------------------------------------------------------------
James F. Laird (1) 2003 147,750 0 -- --
Treasurer and Chief 2002 139,125 0 -- --
Financial Officer 2001 33,750 0 60,000 --
-----------------------------------------------------------------------------------------------
_____________
(1) Mr. Laird became Treasurer and CFO of the Company in December 2001,
President of DHS in July 2001 and was appointed Secretary of the Company in
January 2003.
2003 AGGREGATED OPTION EXERCISES AND OPTION VALUES
The following table sets forth information concerning the exercise of stock
options by each of the Company's named executive officers during fiscal 2003 and
the fiscal year end value of unexercised options.
----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR END (#) YEAR END ($) (1)
----------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED
ON VALUE
EXERCISE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------------------
R. H. Dillon 0 -- 160,000 40,000 -- --
----------------------------------------------------------------------------------------------------------
James F. Laird 0 -- 30,000 30,000 50,700 50,700
----------------------------------------------------------------------------------------------------------
______________
(1) Value is based on the December 31, 2003, closing price of $6.94 per Share
on the NASDAQ Small Cap Market.
-9-
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2003 with respect to
shares of the Company's common stock that may be issued under our existing
equity compensation plans, including the 1993 Non-Qualified and Incentive Stock
Option Plan.
-----------------------------------------------------------------------------------------------------
(A) (B) (C)
-----------------------------------------------------------------------------------------------------
PLAN CATEGORY NUMBER OF SECURITIES WEIGHTED-AVERAGE NUMBER OF SECURITIES
TO BE ISSUED UPON EXERCISE PRICE OF REMAINING AVAILABLE FOR
EXERCISE OF OUTSTANDING FUTURE ISSUANCE UNDER EQUITY
OUTSTANDING OPTIONS, OPTIONS, WARRANTS COMPENSATION PLANS (EXCLUDING
WARRANTS AND RIGHTS AND RIGHTS SECURITIES REFLECTED IN
COLUMN (A))
-----------------------------------------------------------------------------------------------------
EQUITY COMPENSATION 340,602 $14.00 --(3)
PLANS APPROVED BY
SECURITY HOLDERS (1)
-----------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS NOT APPROVED BY
SECURITY HOLDERS (2) 200,000 8.00 --
-----------------------------------------------------------------------------------------------------
TOTAL 540,602 $14.47 --
-----------------------------------------------------------------------------------------------------
___________
(1) Consists of the 1993 Non-Qualified and Incentive Stock Option Plan.
(2) Consists of a Warrant to purchase shares of current stock of the Company
issued to Roderick H. Dillon, Jr. on May 11, 2000. The Warrant originally
granted Mr. Dillon the right to purchase 1,000,000 shares of common stock
at a purchase price of $1.60 per share, which terms were automatically
adjusted as a result of the 1 for 5 reverse stock split in September 2001,
resulting in Mr. Dillon having the right to purchase 200,000 shares of
common stock at $8.00 per share.
(3) The 1993 Stock Option Plan expired by its terms in November 2003.
INCENTIVE COMPENSATION PLAN
All full-time executive employees of the Company are eligible to
participate in the Company's Incentive Compensation Plan (the "IC Plan"). The IC
Plan provides that a bonus fund will be established in an amount equal to 20% of
the pre-tax realized profits of the Company in excess of a 15% pre-tax return on
equity. The amount of the bonus fund is calculated each fiscal quarter on a
cumulative basis. The allocation of the bonus fund is to be made by the
President of the Company. The Company did not incur any expense under the IC
Plan for the year ended December 31, 2003.
STOCK OPTION PLAN
The Company's 1993 Non-Qualified and Incentive Stock Option Plan expired by
its terms in November 2003. The Company has no current plans to propose a
replacement or new option plan to the shareholders for approval.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is entitled to receive
a fee of $500 plus travel expenses for each directors' meeting attended.
-10-
PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------
The Board of Directors of the Company has nominated R. H. Dillon, Dr. Roger
D. Blackwell, David P. Lauer, Dr. James G. Mathias, David R. Meuse, William G.
Perkins and Diane D. Reynolds for election to the Board of Directors of the
Company to hold office for one-year terms in 2004 expiring at the annual meeting
of shareholders. Each such nominee is a member of the existing Board of
Directors.
The Company's board of directors formed a special Corporate Governance
Committee on August 30, 2001 to examine certain corporate governance issues and
to report to the full board on November 1, 2001. The Corporate Governance
Committee, among other things, recommended that the Company's board be reduced
to as few as six directors and that all but one director should be independent,
as defined by the Nasdaq rules. Based upon that recommendation, the board, at
its February 13, 2003 meeting, nominated seven existing board members, all but
one being independent, for election by shareholders at the 2003 Annual
Shareholder Meeting. The nominations were based upon consideration of factors
that the committee had suggested should be important, including independence,
competence in general business matters, experience and competence in financial,
operational and marketing matters, and willingness to assist the Company in
business development efforts.
A proposal to elect R. H. Dillon, Dr. Roger D. Blackwell, David P. Lauer,
Dr. James G. Mathias, David R. Meuse, William G. Perkins and Diane D. Reynolds
will be presented to the shareholders at the Annual Meeting. The seven nominees
receiving the highest number of votes will be elected.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF R. H. DILLON, DR. ROGER D. BLACKWELL, DAVID P. LAUER, DR. JAMES G.
MATHIAS, DAVID R. MEUSE, WILLIAM G. PERKINS AND DIANE D. REYNOLDS.
PROPOSAL 2 - APPROVAL OF TERMS AND CONDITIONS OF CERTAIN EQUITY
---------------------------------------------------------------
COMPENSATION GRANTS
-------------------
Certain of the Company's directors, officers and employees have from time
to time received grants of options to acquire shares of the Company's Common
Stock pursuant to the Company's 1993 Non-Qualified and Incentive Stock Option
Plan (the "Plan"). The Plan by its terms expired in November 2003, which results
in the Company being currently unable, pursuant to applicable rules of the
Nasdaq (subject to certain limited exceptions), to issue any form of equity
compensation to the Company's current directors, officers, employees or
consultants without first obtaining the approval of the Company's shareholders.
Through a written action taken on March 15, 2004 and upon the
recommendation of management, the Board unanimously approved, subject to
shareholder approval, a limited grant of restricted stock and restricted stock
units to three key Company employees: Chris Bingaman, Tom Schindler and Bill
Zox. Specifically, the Board approved, subject to shareholder approval, a grant
of an aggregate of 75,000 shares of restricted stock and restricted stock units
to those key employees, each of them to receive a combination of 25,000 shares
of restricted stock and restricted stock units. The award of such shares and
units will be made pursuant to the terms contained in the form of the Diamond
Hill Investment Group, Inc. Agreement For Restricted Stock and Restricted Stock
Units attached to this Proxy Statement as Exhibit B.
Chris, Tom and Bill are each employed by the Company as investment
analysts. In the opinion of both management and the Board, each of Chris, Bill
and Tom has been, and will continue to be, an important part of the Company's
continued improvement and progress towards achieving its long-term performance
goals. In the opinion of management and the Board, retaining Chris, Tom and Bill
on a long-term basis is vital and in the best interests of the Company and its
shareholders. Management and the Board believe that granting the shares of
restricted stock and restricted stock units, as described in greater detail
below, will motivate each of them to remain employed by the Company for at least
the next five years. Therefore, management and the Board recommend that the
shareholders approve these awards.
-11-
Description of Awards
Pursuant to the Award Agreement, each recipient will receive a total of
25,000 shares of restricted stock and restricted stock units. None of the
recipients will pay any cash or other consideration in exchange for such shares
and units; instead, each recipient must remain employed by the Company up and
through the fifth anniversary of the initial award (subject to limited
accelerated vesting events as described below). Absent an acceleration of the
vesting schedule, a recipient will forfeit all of the shares and units if he
ceases to be employed by the Company prior to the fifth anniversary of the
initial award.
At the time of the initial award, each recipient will receive 5,000 shares
of restricted stock that will one-time vest on the date that is five years from
the date of the award. Each recipient will also receive a grant of 20,000
restricted stock units, which will vest 20% per year over the next five years.
This will result in each recipient receiving 5,000 shares of restricted stock
upon each anniversary of the initial award date. Those shares of restricted
stock will be subject to a vesting schedule that will result in each grant of
5,000 shares of restricted stock vesting at one time on the fifth anniversary of
the award date. The following table explains this structure further:
Year Award Vesting Schedule
---- ----- ----------------
2004 5,000 shares of restricted stock One-time vest in 5 years
20,000 restricted stock units 25% per year over 4 years
2005 5,000 shares of restricted stock One-time vest in 4 years
2006 5,000 shares of restricted stock One-time vest in 3 years
2007 5,000 shares of restricted stock One-time vest in 2 years
2008 5,000 shares of restricted stock One-time vest in 1 year
2009 None; 25,000 shares of restricted stock fully vested
As described in the above table, on the fifth anniversary of the initial
award date, each of the recipients will be fully vested in 25,000 shares of the
Company's common stock. Although the shares will at that point be fully vested,
such shares will not be registered under the Securities Exchange Act and will
therefore be considered "restricted securities" pursuant to SEC Rule 144.
Value of Awards
Because of the structure of the awards to Chris, Tom and Bill the current
value of the awards is not determinable; as the Company is unable to project the
value of shares of restricted stock to be awarded, and that vest, at some future
date. As of December 31, 2003, the closing price of the Company's common stock
was $6.94 per share. Based upon an assumption that the shares of restricted
stock awarded to the recipients (i) were awarded all at one time instead of over
a five-year period, (ii) were fully vested at the time of the award, (iii) not
"restricted securities" pursuant to SEC Rule 144 and therefore able to be
disposed of in open market transactions and (iv) the volume for the Company's
common stock were sufficiently high to permit a liquidation of the awarded
stock, and using the closing price as of December 31, 2003, the value of the
award to each recipient would be $173,500.
Other Material Terms of Award
Dividend and Voting Rights
--------------------------
Although the shares of restricted stock, when granted, will remain subject
to the vesting schedule described above, the recipients will be entitled upon
receipt of the awards to full voting and dividend rights (to the extent that the
Company were to declare a dividend). Other than dividend and voting rights,
until such shares are fully vested the recipients will have no other rights as
shareholders pursuant to the Company's Articles of Incorporation or Code of
Regulations or by applicable law.
-12-
Acceleration of Vesting
-----------------------
Upon the occurrence of certain events or conditions described below, the
vesting schedule described above may be accelerated, such that all shares of
restricted stock then held by a recipient will immediately vest in full, and any
restricted stock units then held by the recipient will immediately vest, as will
the shares of restricted stock issued upon the vesting of the restricted stock
units. In other words, upon an acceleration of the vesting schedule, a recipient
shall immediately be fully vested in 25,000 shares of restricted stock.
Acceleration of vesting will, or in the case of number five below, may,
occur upon the following, each as defined in the Award Agreement:
1. A "Change of Control" of the Company;
2. The termination of the employment of the employee by the Company
without "Cause";
3. The termination of the employment of the employee by the employee for
"Good Reason";
4. The death or disability of the employee as defined in the Internal
Revenue Code; or
5. At such time and upon such terms as the Board in its discretion
determines.
Forfeiture Upon Termination of Employment
-----------------------------------------
Unless the vesting schedule is accelerated as described above, in the event
that Chris, Tom or Bill terminates his employment with the Company without Good
Reason, or if such employment is terminated by the Company with Cause, prior to
the fifth anniversary of the initial award, all of the shares of Restricted
Stock then held by him shall be deemed repurchased by the Company for the
purchase price paid by him (which is $0), and each unvested Restricted Stock
Unit then held by him will be cancelled.
Adjustments to Number of Shares and Units
-----------------------------------------
The number of shares of restricted stock and restricted stock units granted
to each recipient will be appropriately adjusted to reflect any stock split,
stock dividend or other change in the Company's capital stock which may be made
after the date of the initial award.
Amendments to Award
-------------------
Under current applicable rules of the Nasdaq (or such other system or
exchange upon which the Company's shares are then traded), the award agreements
cannot be materially amended without shareholder approval. Other than (i)
amendments that the Company reasonably believes are not material and (ii) the
acceleration and adjustment provisions described above, the award agreements are
by their terms not able to be materially amended without shareholder approval,
if such approval would then be required by applicable law, rules or regulations.
Federal Income Tax Consequences of Award
The following is a brief summary of the general federal income tax
consequences of the awards described above based on federal income tax laws in
effect as of April 12, 2004. This summary is not intended to be exhaustive and
does not describe any foreign, local or state tax consequences.
RESTRICTED STOCK. Unless a recipient makes an election under Section 83(b)
of the Internal Revenue Code, restricted stock awards are not included in his
income until the award vests. At vesting, the recipient is taxed, at ordinary
income rates, on the fair market value of the stock on the vesting date. Any
subsequent appreciation in the stock price would be taxed at capital gains
rates, assuming the stock has been held for a period of more than one year from
the date of vesting.
Within thirty days of receipt of a restricted stock award, a recipient may
elect, under Section 83(b), to include in ordinary income on the date of receipt
of the restricted stock the fair market value of the stock (without taking into
account any restrictions other than those which by their terms never lapse). Any
subsequent appreciation would then be eligible for capital gain treatment,
assuming the stock has been held for a period of more than one year from the
date of the grant.
-13-
In general, the Company is entitled to a deduction equal to the amount
included in the recipient's ordinary income in the year in which such amount is
reported for tax purposes by the recipient, provided the Company satisfies
applicable withholding and reporting requirements.
RESTRICTED STOCK UNITS. As restricted stock units are unfunded and
unsecured promises to issue restricted stock at a future date, a grant of
restricted stock units is not a taxable event to the recipient. Once a
restricted stock unit award vests and the recipient receives restricted stock,
the federal income tax consequences described above will apply to the award of
restricted stock.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF PROPOSAL TWO.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
-------------------------------------------------
Section 16(a) of the Exchange Act requires executive officers and directors
of the Company, and persons who beneficially own more than ten percent (10%) of
the Shares, to file initial reports of ownership and reports of changes in
ownership with the Commission. Executive officers, directors and persons who
beneficially own more than ten percent (10%) of the Shares are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
reports they file. Based solely upon a review of Forms 3 and 4 furnished to the
Company, management of the Company believes that there were no reports filed
late during the year ended December 31, 2003.
EXPENSE AND MANNER OF SOLICITATION
----------------------------------
The expenses of the solicitation of the proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the Notice, form of
proxy, Proxy Statement and return envelopes, the handling and tabulation of
proxies received, and charges of brokerage houses and other institutions,
nominees or fiduciaries for forwarding such documents to beneficial owners, will
be paid by the Company. In addition to the mailing of the proxy material,
solicitation may be made in person or by telephone by officers or directors of
the Company (none of whom have been employed to specifically solicit
shareholders).
FORM 10-KSB
-----------
The Form 10-KSB for the Company for the year ended December 31, 2003, is
enclosed herewith but is not a part of the proxy solicitation material.
INDEPENDENT AUDITORS
--------------------
The Company has selected BKR Longanbach, Giusti, LLC as the Company's
independent auditors for the 2004 fiscal year and to audit the financial
statements of the Company for the year ended December 31, 2003. A representative
of BKR Longanbach, Giusti, LLC is expected to be present to respond to
appropriate questions and to make such statements as he or she may desire. For
the years ended December 31, 2003 and 2002, the following fees apply:
Year Ended Year Ended
12/31/2003 12/31/2002
---------- ----------
Audit $ 30,200 $ 24,993
Audit related -- --
Tax 5,500 5,000
Other -- --
---------- ----------
Total $ 35,700 $ 29,993
========== ==========
It is the policy of the Audit Committee to pre-approve the services of the
independent accountants and present that approval to the Board of Directors. For
the years ended December 31, 2003 and 2002, 100% of the independent accountants'
fees were pre-approved by the Audit Committee
-14-
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
---------------------------------------------
Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with Commission regulations and the Company's
bylaws. Should a shareholder wish to have a proposal appear in the Company's
Proxy Statement for next year's annual meeting, under the regulations of the
Commission, the proposal must be received by the Secretary of the Company at 375
North Front Street Columbus, Ohio 43215, on or before December 10, 2004. If a
shareholder intends to present a proposal at next year's annual meeting but does
not intend to seek the inclusion of such proposal in the Company's Proxy
Statement, such proposal must be received by the Company prior to February 25,
2005, or the Company's management proxies will be entitled to use their
discretion voting authority should such proposal be raised without any
discussion of the matter in the Proxy Statement.
COMMUNICATIONS BETWEEN SHAREHOLDERS AND THE BOARD OF DIRECTORS
--------------------------------------------------------------
The Company does not have a formal process for shareholders to send
communications to the board of directors. Given the relatively small size of the
Company and its Board of Directors, the relatively small number of record
holders of the Company's shares, and the Board's consistent practice of being
open to receiving direct communications from shareholders, the Company believes
that it is not necessary to implement a formal process for shareholders to send
communication to the Board. The Company's practice is to forward any
communication addressed to the Board of Directors to the members of the Board.
CODE OF BUSINESS CONDUCT AND ETHICS
-----------------------------------
At a regular Company board of directors meeting on February 5, 2004 the
board unanimously approved a Code of Business Conduct and Ethics that applies to
all directors, officers and employees. A copy of this Code is attached to this
Proxy Statement as Exhibit C.
OTHER BUSINESS
--------------
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed Proxy to vote
on such matters in accordance with their best judgment.
The prompt completion, execution, and delivery of your Proxy will be
appreciated. Whether or not you expect to attend the Annual Meeting, please
complete and sign the Proxy and return it in the enclosed envelope, or vote your
proxy electronically via the Internet or telephonically.
-15-
PROXY
DIAMOND HILL INVESTMENT GROUP, INC.
375 NORTH FRONT STREET, SUITE 300
COLUMBUS, OHIO 43215
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 13, 2004
The undersigned appoints R. H. Dillon and James F. Laird, and each of them,
as proxies, with power to appoint his substitute, and authorizes each of them to
represent and to vote, as designated on the reverse hereof, all the shares of
Common Stock, without par value, of Diamond Hill Investment Group, Inc. (the
"Shares") held of record by the undersigned at the close of business on March
22, 2004 at the 2004 Annual Meeting of Shareholders of Diamond Hill Investment
Group, Inc. (the "Company") to be held on May 13, 2004 or at any adjournment
thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no directive is made, the Shares
represented by this Proxy will be voted "FOR" the election of the named nominees
for directors and for the approval of certain equity compensation grants. If any
other matters are properly brought before the Annual Meeting or any adjournment
thereof, the Shares represented by this Proxy will be voted in the discretion of
the proxies on such matters as the directors may recommend.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders dated April 12, 2004, the Proxy Statement furnished
therewith, and the Company's Form 10-KSB for the year ended December 31, 2003.
Any proxy heretofore given to vote the Shares which the undersigned is entitled
to vote at the Annual Meeting of Shareholders is hereby revoked.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
--------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
DIAMOND HILL INVESTMENT GROUP, INC.
VOTING BY TELEPHONE OR INTERNET IS QUICK, EASY AND IMMEDIATE. As a Diamond Hill
Investment Group, Inc. shareholder, you have the option of voting your shares
electronically through the Internet or on the telephone, eliminating the need to
return the proxy card. Your electronic vote authorizes the named proxies to vote
your shares in the same manner as if you marked, signed, dated and returned the
proxy card. Votes submitted electronically over the Internet or by telephone
must be received by 7:00 p.m., Eastern Standard Time, on May 12, 2004.
TO VOTE YOUR PROXY BY INTERNET
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WWW.CONTINENTALSTOCK.COM
Have your proxy card available when you access the above website. Follow the
prompts to vote your shares.
TO VOTE YOUR PROXY BY PHONE
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1 (800) 293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card available
when you call. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY OR BY
PHONE.
TO VOTE YOUR PROXY BY MAIL
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Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
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PROXY Please mark your vote like this: [X]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
1. To elect the nominees named 2. To approve the terms and
below as directors for a conditions of certain equity
one-year term. Nominees: compensation grants.
R. H. Dillon, Dr. Roger D. Blackwell, |_| For |_| Abstain
David P. Lauer, Dr. James G. Mathias,
David R. Meuse, William G. Perkins |_| Against
and Diane D. Reynolds.
|_| For |_| Withhold COMPANY ID:
|_| For all (except Nominee(s)
written below): PROXY NUMBER:
NOMINEES' NAME(S) HERE
ACCOUNT NUMBER:
SIGNATURE _______________________SIGNATURE______________________DATE __________
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.