Ceo Employment Agreement

EXHIBIT 10.1 EMPLOYMENT AGREEMENT FOR RODERICK H. DILLON, JR. This Agreement is entered into this 10 th day of August, 2006, by and between Diamond Hill Investment Group, Inc. (hereinafter referred to as the " Employer" ) and Roderick H. Dillon, Jr. (hereinafter referred to as the " Executive" ). WHEREAS , the Executive is currently employed as the President and Chief Executive Officer (" CEO" ) of the Employer pursuant to the terms of an employment agreement, dated May 11, 2000 (the " Prior Agreement" ); WHEREAS , the Employer desires to continue to employ the Executive as its President and CEO; WHEREAS , it is the intention of the Employer that the Executive shall be a long term employee with the Employer, and it is the intention of the Executive that he will be a long term employee with the Employer; provided, however, that the employment relationship between the Employer and the Executive shall be governed by the terms of this Agreement; and WHEREAS , the Executive desires to continue his employment with the Employer in such capacity under the terms of this Agreement which shall supersede the terms of the Prior Agreement; NOW, THEREFORE , and in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and adequacy of which is agreed to by the parties, the Employer and the Executive hereby mutually agree as follows: 1. Employment and Duties . The Employer hereby employs the Executive, and the Executive hereby accepts continued employment with the Employer upon the terms and conditions hereinafter set forth. The Executive will continue to serve the Employer as its President and CEO. In such capacity, the Executive will report directly to the Board of Directors of the Employer (the " Board" ) and have all powers, duties, and obligations as are normally associated with such positions. Subject to the provisions of Paragraph 5 [" Termination of Employment"], the Executive will further perform such other duties and hold such other positions related to the business of the Employer and its Affiliates as may from time to time be reasonably requested of him by the Board; provided that the Executive shall not be required to perform such services that involve a material decrease in the level of responsibility currently maintained by the Executive. For purposes of this Agreement, an " Affiliate" shall mean any corporation (including any non-profit corporation), general or limited partnership, limited


liability company, joint venture, trust, association or organization which is, directly or indirectly, controlled by, or under common control with, the Employer. Except as otherwise set forth in this Agreement, the Executive will devote all of his skills and substantially all of his time and attention to said positions and in furtherance of the business and interests of the Employer and its Affiliates and will not directly or indirectly render any services of a business, commercial or professional nature to any person or organization without the prior written consent of the Board (which consent will not be unreasonably withheld or delayed); provided, however, that the Executive will not be precluded from participation in community, civic, charitable or similar activities which do not unreasonably interfere with his responsibilities hereunder. 2. Term of Employment a. Original Term . This Agreement will be effective upon execution by both parties. The term of employment will begin, or be deemed to have begun, on January 1, 2006 (the " Effective Date" ), and to the extent the Executive' s Compensation (as defined in Section 3, below) is increased, retroactive payments will be made back to the Effective Date within 30 days of the execution of this Agreement. The Agreement will continue through the five-year period ending on the day before the fifth anniversary date of the Effective Date, subject, however, to prior termination or to extension, as herein provided. b. Extension of Term . The Employer and the Executive agree that the Board will review the Executive' s performance with the intent that, if the Executive' s performance so warrants, the Employer may extend the term of this Agreement for additional time periods to be determined in the discretion of the Board and as agreed upon by the Executive. By October 1, 2010, or, in the event that this Agreement is extended as provided for in this Paragraph 2(b), within ninety (90) days preceding the end of any extension period, the Chairman of the Board (the " Chairman" ) will notify the Executive of the Employer' s decision whether or not to grant an extension of this Agreement for an additional time period. In the event that the Chairman fails to notify the Executive, on or before the date described in the preceding sentence, of the decision regarding the extension of the term of this Agreement, the term of this Agreement will automatically be extended for an additional one-year period. 3. Compensation. a. Salary . The Executive will receive an initial annual base salary of a minimum of $360,000, which may be increased on an annual basis, but not decreased without the Executive' s written consent, by the Board during the term of this Agreement. In the event that the Board increases the Executive' s initial base salary, the amount of the initial base salary, together with any increase(s) will be his base salary (hereinafter referred to as the " Base Salary" ). Following the end of each calendar year, and no later than March 15 of each year, the Board will review the Executive' s Base Salary, and in the event that the Company has met profit and growth goals agreed upon between the Board and the Executive, the Base Salary will be increased by a percentage determined by the Board, based upon its review of objective information reflecting the base salaries of executive officers of similarly sized entities in the same business as the


Employer. The Base Salary will be payable in accordance with the Employer' s regular payroll payment practices. b. Bonus . Each calendar year during which the Employer has in effect a performance-based compensation plan (the " Performance Plan" ) in compliance with the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the " Code" ), the Executive will be eligible for bonus compensation equal to a specified percentage of a bonus pool established for employees of the Employer (the " Bonus" ). Such bonus pool will be based upon the attainment of goals and objectives which may include average assets under management, investment advisory revenue and target operating profit margin for the relevant calendar year. The Executive' s percentage of the bonus pool will be determined by the Compensation Committee of the Board, based upon his satisfaction of certain performance criteria, including, but not limited to, investment performance of client portfolios and his overall contribution to the investment team and to the firm. All bonus payments to be made pursuant to this Paragraph 3(b) will be made pursuant to the terms and conditions of the Performance Plan and will be paid to the Executive in either cash or equity awards under the Employer' s Equity Incentive Plan no later than March 15 th of the calendar year following the calendar year for which such bonus is payable. 4. Fringe Benefits and Expenses. a Fringe Benefits . The Employer will provide the Executive with all health and life insurance coverages, disability programs, tax-qualified retirement plans, equity compensation programs, paid holidays, paid vacation, perquisites, and such other fringe benefits of employment as the Employer may provide from time to time to actively employed senior executives of the Employer; and consistent with the foregoing the Executive shall be entitled to a minimum of the following benefits during the term of this Agreement: (i) standard health insurance of such coverage and term as provided by the Employer to actively employed senior executives of the Employer; (ii) a minimum of six (6) weeks paid vacation each year, based on current year Base Salary; (iii) continued participation in the Employer' s 401(k) retirement savings plan; (iv) participation in such other health, disability, insurance, pension, profit sharing or other employee benefit plan that the Employer may establish from time to time in which the Executive is otherwise eligible to participate.Notwithstanding any provision contained in this Agreement, the Employer may discontinue or terminate at any time any employee benefit plan, policy or program, now existing or hereafter


adopted, to the extent permitted by the terms of such plan, policy or program and will not be required to compensate the Executive for such discontinuance or termination. b. Expenses . The Employer shall reimburse the Executive for all reasonable travel, industry, entertainment, and out-of-pocket and miscellaneous expenses incurred by the Executive in connection with the performance of his business activities under this Agreement in accordance with the existing policies and procedures of the Employer pertaining to reimbursement of such expenses to senior executives. In addition, the Employer agrees to reimburse the Executive for reasonable legal expenses in connection with the review and analysis of this Agreement by an attorney selected by the Executive, in an amount not to exceed $10,000. 5. Termination of Employment. a. Death of Executive . The Executive' s employment hereunder will terminate upon his death and the Executive' s beneficiary (as designated by the Executive in writing with the Employer prior to his death) will be entitled to the following payments and benefits: i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of unused vacation days), and any business expenses that are unreimbursed- all, as of the date of termination of employment; and ii. any rights and benefits (if any) provided under plans and programs of the Employer, determined in accordance with the applicable terms and provisions of such plans and programs, including but not limited to a pro rata portion of the Bonus payment specified in Paragraph 3(b), above, and such payment shall be made no later than March 15th of the calendar year following the calendar year for which such Bonus is payable. In the absence of a beneficiary designation by the Executive, or, if the Executive' s designated beneficiary does not survive him, payments and benefits described in this subparagraph will be paid to the Executive' s estate. b. Disability . The Executive' s employment hereunder may be terminated by the Employer upon 45 days written notice from the Employer following the determination, as set forth immediately below, that he suffers from a Permanent Disability. For purposes of this Agreement, " Permanent Disability" means a disability that, in the opinion of the Employer, renders, or will render, the Executive unable to perform his duties under this Agreement by reason of any medically determinable impairment, which can be expected to result in death, or which has lasted or can be expected to last, for a continuous period of at least twelve months. If the Executive disagrees with the Employer' s decision that the Executive' s disability renders or will render him unable to perform his duties under this Agreement, such dispute shall be resolved by a panel of three physicians: one physician to be chosen by the Employer, one physician to be chosen by the Executive, and a third physician to be chose by the first two physicians. Each


physician shall have the opportunity to examine the Executive and the decision of a majority of the physicians on the panel shall be binding on the Employer and the Executive, and shall be rendered within 45 days after the third physician is appointed to the panel. The cost of the physicians shall be paid by the Employer. During any period that the Executive fails to perform his duties hereunder as a result of a Permanent Disability (" Disability Period" ), the Executive will continue to receive his Base Salary at the rate then in effect for such period until his employment is terminated pursuant to this subparagraph; provided, however, that payments of Base Salary so made to the Executive will be reduced by the sum of the amounts, if any, that were payable to the Executive at or before the time of any such salary payment under any disability benefit plan or plans of the Employer and that were not previously applied to reduce any payment of Base Salary. In the event that the Employer elects to terminate the Executive' s employment pursuant to this subparagraph, the Executive will be entitled to the following payments and benefits: i. any Base Salary ...