EMPLOYMENT AGREEMENT
FOR
RODERICK H. DILLON, JR.
This Employment Agreement (the “Agreement”) is entered into this 1st day of
January, 2016, by and between Diamond Hill Capital Management, 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 Chief Executive Officer of
Diamond Hill Investment Group, Inc. (“DHIL”), the parent company to the Employer
pursuant to the terms of an employment agreement containing a term of employment
in such capacity that ends on December 31, 2015; and
WHEREAS, upon the expiration of the term of that employment agreement, the
Executive and the Employer desire that the Executive continue his employment
with the Employer as a portfolio manager (“PM”) pursuant to the terms of this
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.
a.     PM Responsibilities. 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 serve the Employer as
the PM, Co-PM or Assistant PM of Diamond Hill Investment Partners and the
Diamond Hill Long Short Fund. In such capacity, the Executive will be assigned
at least one co-portfolio manager or one assistant portfolio manager for each
Fund that he manages. The Executive will report directly to the Chief Executive
Officer of the Employer (the “CEO”) and have all powers, duties, and obligations
as are normally associated with his position.
b.     Responsibilities to Newly Established Division. On or before December 31,
2016, the Employer will establish a new operating division (the “Division”) to
which the Executive will provide services during the term of this Agreement. For
bookkeeping purposes, the operations of the Division (i.e. all revenues and
expenses) will be maintained separately from the other operations of the
Employer. During the term of this Agreement, the Executive will lead the
Division and will report directly to the CEO. All compensation payable to the
Executive for his duties to the Division will be paid pursuant to the terms of
this Agreement. Unless both parties agree in writing to retain the Division as
an operating division of the Employer, the Division will be converted into an
entity under the control of the Employer (“NewCo”) as soon as practical
following the calendar quarter during which the Division reaches $250,000,000 in
assets under management. In the event that NewCo is established, all revenues
and associated expenses of the Division will flow into NewCo. Upon the inception
of NewCo, the Executive will be granted a 20% ownership interest in such entity
in exchange for the contribution by the Executive of certain assets and
services. The common shares provided to the Executive

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evidencing his ownership interest in NewCo shall be subject to a restriction
requiring the Executive to sell such shares to the Employer if he desires, at
any time, to sell such shares. The amount to be paid to the Executive by the
Company upon any sale described in the preceding sentence shall be determined by
an independent third party appraiser that is mutually agreed to both by the
Executive and the Employer. In addition, the Executive shall be granted a right
of first refusal allowing him to purchase the shares of NewCo held by the
Employer in the event that the Employer wishes to sell such shares. The
operations of NewCo will be governed by the terms of an operating agreement
between the Employer and the Executive. The provisions of such operating
agreement will include, but not be limited to, a description of (i) the
management structure of NewCo; (ii) the amount of time that the Executive will
devote to NewCo; (iii) the staff and resources to be devoted to NewCo; and (iv)
a framework for the allocation of shared expenses of employees of the Employer
who will also provide services to NewCo.
2.    Term of Employment. The term of the Executive’s employment under this
Agreement will begin on January 1, 2016 (the “Effective Date”). 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,
as herein provided.
3.    Compensation.
a.    Salary. The Executive will receive an initial annual base salary of
$200,000, which may be increased on an annual basis, but not decreased without
the Executive’s written consent, at the CEO’s discretion during the term of this
Agreement. In the event that the CEO 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”). The Base
Salary will be payable in accordance with the Employer’s regular payroll payment
practices.
b.    Annual PM Bonus. Each calendar year during the term of this Agreement, the
Executive will be eligible for a bonus related to his PM duties. Such bonus will
be determined based upon the same criteria used to determine incentive
compensation for the other PM’s of the Employer at that time. All bonus payments
to be made pursuant to this Paragraph 3(b) will be paid to the Executive in
either cash or equity awards under the Employer’s equity incentive plan in the
calendar year following the calendar year for which such bonus is earned and
payable no later than March 15th thereof.
c.    Annual Division Bonus. Each calendar year during the term of this
Agreement, the Executive will be eligible for a bonus related to his duties to
the Division. Such bonus will be equal to 20% of the Net Revenue of the Division
for such year. For this purpose, “Net Revenue” of the Division will be
determined based upon the Division’s management fee, less contractual waivers as
disclosed in the applicable prospectus, less external third party fund
administrative expenses. Upon the expiration of the term of this Agreement, in
the event that the Employer has not established NewCo, for each calendar year
thereafter during which NewCo is not in existence, the Executive will continue
to receive an annual payment equal to 20% of the Net Revenue of the Division for
each such year. All payments to be made pursuant to this

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Paragraph 3(c) will be paid to the Executive in cash in the calendar year
following the calendar year for which such amount is earned and payable no later
than March 15th thereof.
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, deferred 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
PM’s of the Employer. In addition, the Executive will receive additional paid
vacation as agreed upon between the Employer and the Executive. 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 PM’s,
including reasonable travel expenses related to the Executive’s travel to Ohio
from his primary base of employment in Florida. 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. Wherever used in this Paragraph 5, the word
“terminate” or “termination” shall mean a “separation from service” of the
Executive from the Employer within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and Treasury Regulation §
1.409A-1(h), except in the event of the Executive’s death.
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 receive the following
payments and benefits within thirty (30) days following the date of the
Executive’s death:
i. any Base Salary that is accrued but unpaid, the value of any unused vacation
(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 a pro-rata portion of the annual bonus
payment specified in Section 3(b) above, and such payment shall be made no later
than March 15th of the calendar year following

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the calendar year for which such bonus is earned (the payments described in
Paragraphs 5(a)(i) and (ii) are hereinafter collectively referred to as the
“Accrued Obligations”).
In the absence of a beneficiary designation by the Executive, or, if the
Executive’s designated beneficiary does not survive him, the Accrued Obligations
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 that the Executive suffers from a Permanent Disability. For
purposes of this Agreement, “Permanent Disability” means that the Executive is
determined to be disabled under the terms of the Employer’s long term disability
insurance. In the event that the Employer elects to terminate the Executive’s
employment pursuant to this subparagraph, the Executive will receive the Accrued
Obligations within thirty (30) days following the date of his termination of
employment.
c.    Termination of Employment for Cause. The Employer may terminate the
Executive’s employment upon written notice at any time for “Cause” if such Cause
is reasonably determined by the CEO (provided the Executive does not fully cure
the effect of the event giving rise to “Cause” to the Employer’s reasonable
satisfaction within thirty (30) days following his receipt of notice of
termination from the Employer). For purposes of this Agreement, the term “Cause”
means that the Executive has:
i. caused the Employer or any entity under common control with the Employer (an
“Affiliate”), other than pursuant to the advice of the Employer’s legal counsel,
to violate a law which, in the opinion of the Employer’s legal counsel, is
reasonable grounds for a civil or criminal enforcement action by the U.S.
Securities and Exchange Commission or other regulatory agency, civil penalties
in excess of $250,000 or criminal penalties against the Employer, an Affiliate
or the Board of Directors of DHIL;
ii. engaged in conduct which constitutes a material violation of the established
written policies or procedures of the Employer regarding the conduct of its
employees, including policies regarding the Employer’s Compliance Program,
sexual harassment of employees and use of illegal drugs or substances in the
course of his employment with the Employer;
iii. committed fraud, or acted with willful misconduct or gross negligence, in
carrying out his duties under this Agreement;
iv. been convicted of any crime involving moral turpitude or a violation of
federal or state securities or investment adviser laws; or
vi. committed a breach of any material covenant, provision, term, condition,
understanding or undertaking set forth in this Agreement.
In the event that the Employer terminates the Executive’s employment for Cause,
the Executive will receive the Accrued Obligations (but for purposes of this
Section 5(c) only, shall

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not include any portion of the annual bonus payment specified in Section 3(b)
above) within thirty (30) days following the date of his termination of
employment.
d.    Termination Without Cause. The Employer may terminate the Executive’s
employment for any reason upon ninety (90) days prior written notice to the
Executive. If the Executive’s employment is terminated by the Employer for any
reason other than the reasons set forth in subparagraphs (a), (b) or (c) of this
Paragraph 5, subject to the applicable provisions of Section 409A of the Code,
the Executive will receive the following payments and benefits within thirty
(30) days following the date of his termination of employment:
i. the Accrued Obligations; and
ii. a single lump sum payment equal to twelve (12) months of the Base Salary
applicable to the Executive on the date of termination of employment.
e.    Voluntary Termination by Executive. The Executive may resign and terminate
his employment with the Employer for any reason whatsoever upon not less than
one hundred eighty (180) days prior written notice to the Employer. In the event
that the Executive terminates his employment voluntarily pursuant to this
Paragraph 5(e), the Executive will receive the Accrued Obligations within thirty
(30) days following the date of his termination of employment.
f.    End of Term of Agreement. In the event that the Executive remains employed
by the Employer at the end of the term of this Agreement, the terms of this
Agreement shall terminate. Under such circumstances, the Executive will continue
as an “at will” employee of the Employer and will continue to perform the duties
of a PM of the Employer. From and after any termination of the Executive's
employment for any reason, the Employer will continue to have a non-exclusive,
royalty-free license to use the Dillon Valuation Model (the “DVM”) and the
Diamond Hill Valuation-Weighted Model (the “DHVW”) in connection with the
Employer's business.
6.    Intellectual Property. The Executive agrees to communicate to the
Employer, promptly and fully, and to assign to the Employer all intellectual
property developed or conceived solely by the Executive, or jointly with others,
during the term of his employment, which are within the scope of either the
Employer’s business or the business of an affiliate of the Employer, or which
utilized Employer materials or information. For purposes of this Agreement,
“intellectual property” means inventions, discoveries, business or technical
innovations, creative or professional work product, or works of authorship but
shall not include the DVM or the DHVW, which shall at all times be and remain
owned by the Executive. The Executive further agrees to execute all necessary
papers and otherwise to assist the Employer, at the Employer’s sole expense, to
obtain patents, copyrights or other legal protection as the Employer deems fit.
Any such intellectual property is to be the property of the Employer whether or
not patented, copyrighted or published.
7.    Assignment and Survivorship of Benefits. The rights and obligations of the
Employer under this Agreement will inure to the benefit of, and will be binding
upon, the

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successors and assigns of the Employer, if the Employer shall at any time be
merged or consolidated into, or with, any other company, or if substantially all
of the assets of the Employer are transferred to another company, then the
provisions of this Agreement will be binding upon and inure to the benefit of
the company resulting from such merger or consolidation or to which such assets
have been transferred, and this provision will apply in the event of any
subsequent merger, consolidation, or transfer.
8.    Notices. Any notice given to either party to this Agreement will be in
writing, and will be deemed to have been given when delivered personally or sent
by certified mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, at the address indicated below or to such changed address
as such party may subsequently give notice of:
If to the Employer:    Diamond Hill Capital Management, Inc.
325 John H. McConnell Blvd., Suite 200
Columbus, Ohio 43215
Attn.: CEO

If to the    Roderick H. Dillon, Jr.
Executive:    At the last address on file
    with the Employer
9.    Indemnification. The Executive shall be indemnified by the Employer to the
extent provided in the case of officers under the Employer's Articles of
Incorporation or Regulations, to the maximum extent permitted under applicable
law. The Employer shall use commercially reasonable efforts to continue its
Director and Officer Liability Insurance ("DOL Insurance") under substantially
similar terms and with claim limits not lower than $10,000,000 or the amounts as
in existence prior to the termination of employment. The DOL Insurance shall be
maintained for at least seven (7) years from termination of employment and
without limiting the foregoing, the Executive shall not be excluded from
coverage under the DOL Insurance during such period.
10.    Taxes. Anything in this Agreement to the contrary notwithstanding, all
payments required to be made hereunder by the Employer to the Executive will be
subject to withholding of such amounts relating to taxes as the Employer may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Employer may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
11.    Arbitration; Enforcement of Rights. Any controversy or claim arising out
of, or relating to this Agreement, or the breach thereof, will be settled by
arbitration in the city of Columbus, Ohio, in accordance with the Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof.

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All legal and other fees and expenses, including, without limitation, any
arbitration expenses, incurred by the Executive in connection with seeking in
good faith to obtain or enforce any right or benefit provided for in this
Agreement, or in otherwise pursuing any right or claim, will be paid by the
Employer, to the extent permitted by law, provided that the Executive is
successful in whole or in part as to such claims as the result of litigation,
arbitration, or settlement.
In the event that the Employer refuses or otherwise fails to make a payment when
due and is ultimately decided that the Executive is entitled to such payment,
such payment will be increased to reflect an interest equivalent for the period
of delay, compounded annually, equal to the prime or base lending rate used by
Bank of America, and in effect as of the date the payment was first due.
12.    Governing Law/Captions/Severance. This Agreement will be construed in
accordance with, and pursuant to, the laws of the State of Ohio. The captions of
this Agreement will not be part of the provisions hereof, and will have no force
or effect. The invalidity or unenforceability of any provision of this Agreement
will not affect the validity or enforceability of any other provision of this
Agreement. Except as otherwise specifically provided in this paragraph, the
failure of either party to insist in any instance on the strict performance of
any provision of this Agreement or to exercise any right hereunder will not
constitute a waiver of such provision or right in any other instance.
13.    Entire Agreement/Amendment. This instrument contains the entire agreement
of the parties relating to the subject matter hereof, and the parties have made
no agreement, representations, or warranties relating to the subject matter of
this Agreement that are not set forth herein. This Agreement may be amended only
by mutual written agreement of the parties. However, by signing this Agreement,
the Executive agrees without any further consideration, to consent to any
amendment necessary to avoid penalties under Code Section 409A.
14.    Section 409A of the Code. This Agreement is intended to comply with, or
be exempt from, the requirements of Section 409A of the Code, as applicable,
and, to the maximum extent permitted by law, shall be operated, administered and
construed consistent with this intent. Nothing herein shall be construed as the
guarantee of any particular tax treatment to the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
DIAMOND HILL CAPITAL MANAGEMENT, INC.
By:
 
/s/ Christopher M. Bingaman
 
 
Christopher M. Bingaman
 
 
Chief Executive Officer
 
 
 
 
 
/s/ Roderick H. Dillon, Jr.
 
 
Roderick H. Dillon, Jr.

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