EXHIBIT 10.5
October 24, 2001
Xxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Dear Xxxxx:
We are pleased to offer you this letter of employment in the position
described below as part of Diamond Hill Capital Management, Inc. (the
"Company"). This letter, if accepted by your signing the "Acceptance" below and
returning a signed copy, is intended to constitute a formal agreement legally
binding upon both of us (this "Agreement"), subject to the following terms and
conditions.
1. POSITION. You will become as of a mutually agreed date or such date as you
can work a transition out of your current responsibilities ("Effective
Date") President of our NASD broker-dealer (the "Broker-Dealer"), Diamond
Hill Securities, Inc., subject to the direction of the Company's CEO and
the overall authority of the Company's and the Broker Dealer's respective
Boards of Directors, subject to all of the Company's policies and
procedures regarding its employees except to the extent superseded by this
Agreement.
2. REGULAR COMPENSATION. For your services during the term of this Agreement,
you will be paid a salary at the gross annual rate (prior to all taxes and
other withholdings) of $135,000. The gross annual rate will be subject to
annual adjustments of $9,000 after each year of service based upon the
evaluation of your performance during that year on the same basis as other
executives. This will be paid in accordance with the Company's customary
practices applicable to its executives.
3. BONUS. You will be entitled as a bonus to participate in the Company's
stock option and incentive compensation plan. Under that plan you will be
granted (a) as of the Effective Date an option to purchase 50,000 Company
shares at the then market price and (b) at each anniversary of your
Effective Date during the term of this Agreement a similar option to
purchase 50,000 Company shares at the same price, subject to approval of
the Company's stock option and executive compensation committee. You will
be eligible for future grants of options pursuant to the terms of that
plan.
4. VACATION. You will accrue and be paid for vacation (which may be taken at
such times and in such increments as you may choose) of up to four weeks
annually on the same basis as other executives of the Company.
5. OTHER BENEFITS. You will be entitled to participate in all employee benefit
plans, practices, and programs maintained by the Company and made available
to its executives generally and as may be in effect from time to time.
6. TERM. The term of this Agreement will be for the five-year period
commencing with the Effective Date; provided, however, that upon the
expiration of such period, the term of this Agreement will be automatically
extended for a period of one year, unless either you or the Company gives
written notice to the other at least 30 days prior thereto that the term of
this Agreement will not be so extended. Notwithstanding the foregoing, all
employees of the Company are "at will," and accordingly your employment
will be terminated upon death or disability and may be terminated at any
time, including during the term of this Agreement:
(a) Discharge. By the Company's giving written notice of discharge at
least 30 days before the effective date of termination, provided that
if such discharge is claimed by the Company to be for Cause (as
defined herein), the notice of such discharge will state such Cause;
and
(b) Resignation. By your giving written notice of resignation to the CEO
of the Company at least 30 days before the effective date of
termination, provided that if the resignation is claimed by you to be
for Good Reason (as defined herein), the notice of such resignation
will state such Good Reason.
7. COMPENSATION UPON TERMINATION. If you are discharged for Cause or resign
without Good Reason, you will not be entitled to any compensation other
than any earned but unpaid salary at the gross annual rate then in effect
for your service through the effective date of your termination. If during
term of this Agreement you are discharged without Cause or you resign for
Good Reason, in addition to the foregoing you will be entitled to continued
payment of your salary at the gross annual rate then in effect for a period
of one year after the effective date of termination reduced by any
employment compensation earned by you elsewhere on or after the beginning
of the 6th calendar month following the effective date of this termination.
For this purpose,
(a) "Cause" exists if you engage in conduct demonstrably and materially
injurious to the goodwill and reputation of the Company; cause the
Company, other than pursuant to the advice of Company legal counsel,
to violate a law which, in the opinion of Company legal counsel, is
reasonable grounds for civil or criminal penalties against the Company
or its Board of Directors; engage in conduct which constitutes a
violation of the established written policies or procedures of the
Company regarding the conduct of its employees, including policies
regarding sexual harassment of employees and use of illegal drugs or
substances; fail within 30 days after receipt of notice to cure any
violations of your covenants under the heading "Covenants" of this
Agreement; without due cause fail within 30 days after receipt of
notice to follow any lawful order given by or under direction of the
Company's or the Broker-Dealer's Board of Directors; or do not correct
within 30 days after receipt of notice any act or omission that, in
the opinion of the Company's legal counsel, gives rise to a cause of
action by the Company personally against You to specifically enforce
or restrain some action for purpose of avoiding some loss or damage,
or to recover losses or damages, for an amount in excess of $10,000.
(b) "Good Reason" exists in the absence of Cause (1) if you cease to hold
position and title of President of the Broker-Dealer as contemplated
under the heading "Position" of this Agreement, or a position and
title of a more senior position which you accept; there is any
reduction in or a material delay in payment of salary as provided in
this Agreement; you become disabled (to the extent that you cannot,
with reasonable accommodation, effectively perform the requirements of
your position) and are unable to effectively perform your
responsibilities under this Agreement; or the Company does not correct
within 30 days after receipt of notice any act or omission that gives
rise to a cause of action by you personally against the Company to
specifically enforce or restrain some action for purpose of avoiding
some loss or damage, or to recover losses or damages, for an amount in
excess of $10,000; and (2) for a period of one year from the date of
any Change in Control.
(c) "Change in Control" occurs if
(1) A purchase or other acquisition by any person, entity or group of
persons (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended ("the Exchange Act")
or any comparable successor provisions), directly or indirectly,
which results in the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of such person,
entity or group of persons equaling fifty percent or more of the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors ("Voting Securities"); excluding, however, any
acquisition (A) by the Company or any person controlled by the
Company or the Board of Directors of the Company, (B) by any
employee benefit plan or related trust sponsored or maintained by
the Company, (C) by you, or (D) by another group including you,
but only if you and other executives of the Company control such
group;
(2) A change, within any rolling two-year period beginning with any
date on or after the Effective Date, in the composition of the
Board such that the individuals who constitute the Board (the
"Incumbent Board") at the beginning of such rolling period cease
for any reason to constitute at least a majority of the Board;
provided, however, that for purposes of this definition, any
individual who becomes a member of the Board after the Effective
Date, whose election, or nomination for election, by the
Company's security-holders was approved by a vote of at least a
majority of those individuals who are members of the Board and
who were also members of the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board;
and provided, further however, that any such individual whose
initial assumption of office occurs as a result of or in
connection with either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of any person
other than the Board shall not be so considered as a member of
the Incumbent Board;
(3) A merger, reorganization or consolidation to which the Company is
a party or a sale or other disposition of all or substantially
all of the assets of the Company (each, a "Corporate
Transaction"); excluding however, any Corporate Transaction
pursuant to which (A) persons who were security holders of the
Company immediately prior to such Corporate Transaction do
(solely because of their Voting Securities owned immediately
prior to Corporate Transaction) own immediately thereafter more
than 50 percent of the combined voting power entitled to vote in
the election of directors of the then outstanding securities or
the company surviving the Corporate Transaction and (B)
individuals who constitute the Incumbent Board will immediately
after the consummation of the Corporate Transaction constitute at
least a majority of the members of the board of directors of the
company surviving such Corporate Transaction;
(4) Approval by the security-holders of the Company of a plan of
complete liquidation or dissolution of the Company; or
(5) Any change in the Company's CEO or the person serving as the
chief executive officer of the Company to someone other than
Xxxxxxxx X. Xxxxxx, Xx.
8. COVENANTS. Without the prior consent of the Company, you will not, directly
or indirectly:
(a) No Unauthorized Competing Concern. During the term of your employment,
engage in any other duties or pursuits requiring your active personal
services that will conflict with your ability or objectivity in
performing your obligations under this Agreement;
(b) No Unauthorized Disclosure. During the term of your employment and
thereafter, make or cause to be made any unauthorized disclosure or
other use (within the meaning of Section 1333.51 of the Ohio Revised
Code) of any confidential information regarding the Company or any of
its activities and operations, except to the extent reasonably
necessary or appropriate in connection with the performance by you of
your employment responsibilities; or
(c) No Unauthorized Solicitation. During the term of your employment and
for a period of one year thereafter, either alone or in conjunction
with another party, interfere with or harm, or attempt to interfere
with or harm, the relationship of the Company (or any of its
subsidiaries or affiliates) with any person who is then an employee,
customer, or supplier of the Company (or any of its subsidiaries or
affiliates).
You acknowledge by signing below that breach of any these covenants
may result in irreparable injury and damage to the Company for which
the Company may have no adequate remedy at law. Accordingly, you agree
that in the event of any such breach or any threat of breach, the
Company shall, in addition to any other remedies or damages available
to it at law or in equity, be entitled to immediate and permanent
injunctive relief restraining such breach or threatened breach,
without having to prove damages. In addition, the Company will be
entitled to all costs and expenses, including reasonable attorneys'
fees and costs in enforcing these covenants. These covenants and the
remedies of the Company will survive any termination of this
Agreement.
9. RESOLUTION OF DISPUTE. Any disputes arising under this Agreement, including
any dispute as to the existence of Cause or Good Reason, will be resolved
exclusively as follows:
(a) Negotiation. You and the Company will attempt in good faith to resolve
any such dispute promptly by negotiation. Either may give the other
written notice of any dispute not resolved in the normal course of
business, stating that party's position and designating a
representative of that party to proceed with negotiations. Within 10
days after delivery of the notice, the receiving party will submit to
the other a written response, stating the responding party's position
and designating a representative of the responding party to proceed
with negotiations. Within 20 days after delivery of the disputing
party's notice, the designated representative of each party to the
dispute will meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to
resolve the dispute. All reasonable requests for information made by
one party to the other will be honored.
(b) Mediation. If any issues are not resolved by negotiation as provided
herein within 30 days of delivery of the disputing party's notice or
if the parties fail to meet within the 20-day period specified above,
either pary may then institute mediation proceedings to resolve the
dispute by delivering written demand for mediation (the "Mediation
Demand") to the other party to the dispute. A copy of the Mediation
Demand will be simultaneously delivered to the nearest office of the
American Arbitration Association (the "Association"). Mediation
proceedings will commenced not later than 30 days after delivery of
the Mediation Demand under the Association's commercial mediation
rules.
(c) Arbitration. If any issues not resolved by mediation as provided
herein within 60 days of delivery of the Mediation Demand or if
mediator does not begin proceedings within 30 days of delivery of the
Mediation Demand, either party may then institute arbitration
proceedings to resolve any unresolved issues by delivering written
demand for arbitration (the "Arbitration Demand") to the other party
to the dispute. A copy of the Arbitration Demand will be
simultaneously delivered to the same office of the Association that
the Mediation Demand had been delivered. Arbitration proceedings will
commence no later than 30 days after delivery of the Arbitration
Demand under the Association's commercial arbitration rules.
(d) General Rules. Any negotiation, mediation and arbitration under this
Section will be conducted in Columbus, Ohio. The forgoing negotiation,
mediation and arbitration will be the exclusive remedy of the parties
for resolution of any such dispute other than the Company's right to
specifically enforce covenants under the heading "Covenants" of this
Agreement.
10. GOVERNING LAW. Your employment will be governed by the law of Ohio, and any
legal proceedings or other action regarding your employment or the terms
and conditions thereof or otherwise arising out of this Agreement will be
brought exclusively in courts located in Ohio having appropriate
jurisdiction. We each agree that any process may be served upon each of us
in any manner authorized by Ohio law for any such legal proceeding or other
action.
If you have any questions regarding the terms of this letter, please do not
hesitate to let me know. You may accept by signing the "Acceptance" below
and returning the signed copy of this letter.
Diamond Hill Capital Management, Inc.
By: /S/ X.X. Xxxxxx
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Title: Chief Executive Officer
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ACCEPTANCE
/S/ Xxxxx X. Xxxxx
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Signature
