UNDERWRITING AGREEMENT
This Agreement made as of April 30, 2009 by and between DIAMOND HILL FUNDS (the “Trust”), an
Ohio business trust and an open-end registered investment company, and BHIL DISTRIBUTORS, INC., an
Ohio corporation (“Underwriter”).
WHEREAS, the Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the “Act”); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and Exchange Commission
and a member of the Financial Industry Regulatory Authority (“FINRA”); and
WHEREAS, the Trust and Underwriter are desirous of entering into an agreement providing for
the distribution by Underwriter of shares of beneficial interest (the “Shares”) of each series of
the Trust (the “Series”);
NOW, THEREFORE, in consideration of the promises and agreements of the parties contained
herein, the parties agree as follows:
3. Appointment.
(a) The Trust appoints Underwriter as its exclusive agent for the distribution of the Shares,
and Underwriter hereby accepts such appointment under the terms of this Agreement. While this
Agreement is in force, the Trust shall not sell any Shares except on the terms set forth in this
Agreement. Notwithstanding any other provision hereof, the Trust may terminate, suspend or withdraw
the offering of Shares whenever, in its sole discretion, it deems such action to be desirable.
(b) Underwriter may engage in such activities as both parties deem appropriate in connection
with the promotion and sale of the Shares, including those activities listed on Schedule A attached
hereto, which may be amended from time to time. Underwriter shall have no obligation to make any
payments to any third parties, whether as financing of commissions, sales concessions or similar
payments; finder’s fees; compensation; or otherwise, unless: (i) Underwriter has received a
corresponding payment from the Trust as described in Section 7 of this Agreement, from the Trust’s
investment adviser or from another source as may be permitted by applicable law, and (ii) such
corresponding payment has been approved by the Trust’s Board of Trustees.
(c) In its capacity as distributor of the Shares, all activities of the Underwriter and its
officers, agents, and employees shall comply with all applicable laws, rules and regulations,
including, without limitation, the Investment Company Act of 1940, all applicable rules and
regulations promulgated by the Securities and Exchange Commission thereunder, and all applicable
rules and regulations adopted by any securities association registered under the Securities
Exchange Act of 1934. During the term of this Agreement, Underwriter shall maintain its legal
status as a distributor and
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shall comply with applicable laws, rules and regulations, including those of the FINRA applicable
to it. Underwriter shall review written advertisements and sales literature for compliance with
FINRA requirements.
2. Sale and Repurchase of Shares.
(a) Underwriter will have the right, as agent for the Trust, to enter into dealer agreements
with responsible investment dealers, and to sell Shares to such investment dealers against orders
therefore at the public offering price (as defined in subparagraph 2(d) hereof) stated in the
Trust’s effective Registration Statement on Form N-1A under the Securities Act of 1933, as amended,
including the then-current prospectus and statement of additional information (the “Registration
Statement”). Upon receipt of an order to purchase Shares from a dealer with whom Underwriter has a
dealer agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as an agent for the Trust, to sell such Shares to
the public against orders thereof at the public offering price.
(c) Underwriter will also have the right to take, as agent for the Trust, all actions which,
in Underwriter’s judgment, are necessary to carry into effect the distribution of the Shares
(d) The public offering price for the Shares of the each Series shall be the respective net
asset value of the Shares of the Series then in effect, plus any applicable sales charge determined
in the manner set forth in the Registration Statement or as permitted by the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall any
applicable sales charge exceed the maximum sales charge permitted by FINRA Rules.
(e) The net asset value of the Shares of each Series shall be determined in the manner
provided in the Registration Statement, and when determined shall be applicable to transactions as
provided for in the Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust. Underwriter shall have no
duty to inquire into or liability for the accuracy of the net asset value per Shares as calculated.
(f) On every sale, the Trust shall receive the applicable net asset value of the Shares
promptly, but in no event later than the third business day following the date on which Underwriter
shall have received an order for the purchase of the Shares.
(g) Upon receipt of purchase instructions, Underwriter will transmit such instructions to the
Trust or its transfer agent for registration of the Shares purchased.
(h) Nothing in this Agreement shall prevent Underwriter or any affiliated person (as defined
in the Act) of Underwriter from acting as underwriter or distributor for any other person, firm or
corporation (including other investment companies) or in any way limit or restrict Underwriter or
any such affiliated person from
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buying, selling or trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that Underwriter expressly represents
that it will undertake no activities which, in its judgment, will adversely affect the performance
of its obligations to the Trust under this Agreement.
(i) Underwriter, as agent of and for the account of the Trust, may repurchase the Shares at
such prices and upon such terms and conditions as shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any time directly to the holders of the
Shares (“Shareholders”), to sell Shares to its Shareholders or to any other persons at not less
than net asset value and to issue Shares in exchange for substantially all the assets of any
corporation or trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number of Shares. Underwriter, as agent for
the Trust, undertakes to sell Shares on a best-efforts basis only against orders therefore.
5. FINRA Rules, etc.
(a) Underwriter will conform to FINRA Rules and the securities laws of any jurisdiction in
which it sells, directly or indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a dealer agreement to
conform to the applicable provisions hereof and the Registration Statement with respect to the
public offering price of the Shares, and neither Underwriter nor any such dealers shall withhold
the placing of purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient copies of any agreements, plans or
other materials it intends to use in connection with any sales of Shares in adequate time for the
Trust to file and clear them with the proper authorities before they are put in use, and not to use
them until so filed and cleared.
(d) Underwriter, at is own expense, will qualify as dealer or broker, or otherwise, under all
applicable state of federal laws required in order that Shares may be sold in such States as may be
mutually agreed upon by both the parties.
(e) Underwriter shall not make, or permit any representative, broker or dealer to make, in
connection with any sale or solicitation of a sale of the Shares, any representations concerning
the Shares except those contained in the then-current prospectus and statement of additional
information covering the Shares and in printed
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information covering the Shares approved by the Trust as information supplemental to such
prospectus and statement of additional information. Copies of the then-effective prospectus and
statement of additional information and any such printed supplemental information will be supplied
by the Trust to Underwriter in reasonable quantities upon request.
(f) Trust agrees to use its best efforts to maintain its registration as a diversified
open-end management investment company under the Investment Company Act of 1940, to register and
maintain registration of its Shares under the Securities Act of 1933, to qualify such Shares with
the appropriate states and to comply with applicable laws, rules and regulations applicable to it.
6. Records and Documents to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all information, financial statements and
other documents which Underwriter may reasonably request for use in connection with the
distribution of the Shares, and this shall include, but shall not be limited to, one copy, upon
request by Underwriter, of all financial statements prepared for the Trust by independent public
accountants.
7. Fees and Expenses.
For performing its services under this Agreement, Underwriter will receive an annual fee,
paid, as applicable, either through front-end sales load, 12b-1 fees or fees paid from Diamond Hill
Capital Management, Inc., the Trust’s Administrator. Fees shall be paid monthly in arrears and are
outlined in the Underwriting Fee Agreement dated April 30, 2009. This Agreement is incorporated by
reference into the Underwriting Fee Agreement.
The Trust shall promptly reimburse Underwriter for any expenses which are to be paid by the
Trust in accordance with the following paragraph. In the performance of its obligations under this
Agreement, Underwriter will pay only the costs incurred in qualifying as a broker or dealer under
state and federal laws and in establishing and maintaining its relationships with the dealers
selling the Shares. All other costs in connection with the offering of the Shares will be paid in
accordance with agreements between the Trust, Underwriter and/or the Trust’s Administrator as
permitted by applicable law, including the Act and rules and regulations promulgated thereunder.
These cost include, but are not limited to, licensing fees, filing fees, travel and such others
expenses as may be incurred by Underwriter on behalf of the Trust.
8. Indemnification of the Trust.
Underwriter agrees to indemnify and hold harmless the Trust and each person who has been, is,
or may hereafter be a trustee, director, officer, employee, shareholder or control person of the
Trust (“Trust Indemnitees”) against any loss, damage or expense (including the reasonable costs of
investigating or defending any claim,
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action, suit or proceeding and any reasonable counsel fees) reasonably incurred by Trust
Indemnitees in connection with any claim or in connection with any action, suit or proceeding
(“Claims”) to which any of them may be a party, which arises out of or is alleged to arise out of
or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Trust-related advertisement or sales literature, or upon the
omission or alleged omission to state a material fact in such materials necessary to make the
statements therein not misleading, which untrue statement, alleged untrue statement, omission, or
alleged omission, was furnished in writing, or omitted from the relevant writing furnished, as the
case may be, to the Trust by the Underwriter or any agent or employee of Underwriter or any other
person for whose acts Underwriter is responsible, for use in the Registration Statement or in
corresponding statements made in any advertisement or sales literature, unless such statement or
omission was made in reliance upon written information furnished by the Trust; (b) the willful
misfeasance, bad faith or negligence of the Underwriter in the performance of its obligations under
this Agreement, or the Underwriter’s reckless disregard of its obligations under this Agreement,
(c) the Underwriter’s failure to comply with laws, rules and regulations applicable to it in
connection with its activities hereunder; or (d) Underwriter’s failure to exercise reasonable care
and diligence with respect to its services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares; provided, however, that the
Underwriter’s agreement to indemnify the Trust Indemnitees pursuant to this Paragraph 8 shall not
be construed to cover any Claims (A) arising out of or based upon the willful misfeasance, bad
faith or negligence of the Trust in the performance of its obligations under this Agreement or the
Trust’s reckless disregard of its obligations under this Agreement; or (B) arising out of or based
upon the Trust’s failure to comply with laws, rules and regulations applicable to it in connection
with its activities hereunder. The term “expenses” for purposes of Paragraphs 8 and 9 includes
amounts paid in satisfaction of judgments or in settlements which are made with the indemnifying
party’s consent. The foregoing rights of indemnification shall be in addition to any other rights
to which the Trust or each such person may be entitled as a matter of law.
In the event of a Claim for which the Trust Indemnitees may be entitled to indemnification
hereunder, the Trust shall fully and promptly advise the Underwriter in writing of all pertinent
facts concerning such Claim, but failure to do so in good faith shall not affect the Underwriter’s
indemnification obligations under this Agreement except to the extent that the Underwriter is
materially prejudiced thereby. The Underwriter will be entitled to assume the defense of any suit
brought to enforce any such Claim if such defense shall be conducted by counsel of good standing
chosen by the Underwriter and approved by the Trust, which approval shall not be unreasonably
withheld. In the event any such suit is not based solely on an alleged untrue statement, omission,
or wrongful act on the Underwriter’s part, the Trust shall have the right to participate in the
defense. In the event the Underwriter elects to assume the defense of any such suit and retain
counsel of good standing so approved by the Trust, the Trust Indemnitees in such suit shall bear
the fees and expenses of any additional counsel retained by any of them, but in any case where the
Underwriter does not elect to assume the defense of any such suit or in case the Trust reasonably
withholds approval of counsel
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chosen by the Underwriter, the Underwriter will reimburse the Trust Indemnitees named as defendants
in such suit, for the reasonable fees and expenses of any counsel retained by them to the extent
related to a Claim covered under this Paragraph 8. The Underwriter’s indemnification agreement
contained in this Paragraph 8 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Trust Indemnitees, and shall survive the delivery of any
Shares.
9. Indemnification of Underwriter
The Trust agrees to indemnify and hold harmless each person who has been, is, or may hereafter
be a director, officer, employee, shareholder or control person of Underwriter (“Underwriter
Indemnitees”) against any loss, damage or expense (including the reasonable costs of investigating
or defending any claim, action, suite or proceeding and any reasonable counsel fees) reasonably
incurred by Underwriter Indemnitees in connection with any claim or in connection with any action,
suit or proceeding (“Claims”) to which any of them may be a party, which arises out of or is
alleged to arise out of or is based upon : (a) the Underwriter acting as distributor of the Trust
and each Series; (b) the Underwriter or any subsidiary or affiliate of the Underwriter acting as a
member of the National Securities Clearing Corporation (or any successor or other entity performing
similar functions) (“NSCC”) on behalf of the Trust; (c) the Underwriter or any subsidiary or
affiliate of the Underwriter entering into selling agreements, dealer agreements, participation
agreements, NSCC Trust SERV or Networking agreements or similar agreements (collectively, “Dealer
Agreements”) with financial intermediaries on behalf of the Trust; (d) any of the following: (i)
any untrue statement, or alleged untrue statement, of a material fact contained in any Registration
Statement, (ii) any omission, or alleged omission, to state a material fact required to be stated
in any Registration Statement or necessary to make the statements therein not misleading, or (iii)
any untrue statement, or alleged untrue statement, of a material fact in any Trust-related
advertisement or sales literature, or any omission, or alleged omission, to state a material fact
required to be stated therein to make the statements therein not misleading, in either case
notwithstanding the exercise of reasonable care in the preparation or review thereof by the
Underwriter; (e) the material breach by the Trust of any provision of this Agreement; provided,
however, that the Trust’s agreement to indemnify the Underwriter Indemnitees pursuant to this
Paragraph 9 shall not be construed to cover any Claims (A) pursuant to subsection (d) above to the
extent such untrue statement, alleged untrue statement, omission, or alleged omission, was
furnished in writing, or omitted from the relevant writing furnished, as the case may be, to the
Trust by the Underwriter for use in the Registration Statement or in corresponding statements made
in the prospectus, advertisement or sales literature; (B) arising out of or based upon the willful
misfeasance, bad faith or negligence, including clerical errors and mechanical failures, on the
part of any of such persons in the performance of Underwriter’s duties or from the reckless
disregard by any of such persons of Underwriter’s obligations and duties under this Agreement, or
(C) arising out of or based upon the Underwriter’s failure to comply with laws, rules and
regulations applicable to it in connection with its activities hereunder, for all of which
exceptions Underwriter shall be liable to the Trust.
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In the event of a Claim for which the Underwriter Indemnitees may be entitled to
indemnification hereunder, the Underwriter shall fully and promptly advise the Trust in writing of
all pertinent facts concerning such Claim,
but failure to do so in good faith shall not affect the Trust’s indemnification obligations under
this Agreement except to the extent that the Trust is materially prejudiced thereby. The Trust will
be entitled to assume the defense of any suit brought to enforce any such Claim if such defense
shall be conducted by counsel of good standing chosen by the Trust and approved by the Underwriter,
which approval shall not be unreasonably withheld. In the event any such suit is not based solely
on an alleged untrue statement, omission, or wrongful act on the Trust’s part, the Underwriter
shall have the right to participate in the defense. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing so approved by the Underwriter, the
Underwriter Indemnitees in such suit shall bear the fees and expenses of any additional counsel
retained by any of them, but in any case where the Trust does not elect to assume the defense of
any such suit or in case the Underwriter reasonably withholds approval of counsel chosen by the
Trust, the Trust will reimburse the Underwriter Indemnitees named as defendants in such suit, for
the reasonable fees and expenses of any counsel retained by them to the extent related to a Claim
covered under this Paragraph 9. The Trust’s indemnification agreement contained in this Paragraph 9
shall remain operative and in full force and effect regardless of any investigation made by or on
behalf of the Underwriter Indemnitees, and shall survive the delivery of any Shares.
Notwithstanding any other provision of this Agreement, Underwriter shall be entitled to
receive and act upon advice of counsel (who may be counsel for the Trust or its own counsel) and
shall be without liability for any action reasonably taken or thing reasonably done pursuant to
such advice, provided that such action is not in violation of applicable federal or state laws or
regulations.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without payment of any penalty, in the event of
its assignment. This Agreement may be amended only if such amendment is approved (i) by Underwriter
and (ii) either by action of the Board of Trustees of the Trust, including a majority of the
Trustees of the Trust who are not “interested persons” of the Trust or of Underwriter as that term
is defined in the Investment Company Act of 1940 (“Independent Trustees”) or by the affirmative
vote of a majority of the outstanding Shares of the Trust.
Either the Trust or Underwriter may at any time terminate this Agreement on one hundred and
twenty (120) days written notice delivered or mailed, postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and shall remain in full force and effect
until April 30, 2010 (unless terminated automatically as set forth in
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Paragraph 10), and from year to year thereafter, subject to annual approval (i) by a majority of
the Board of Trustees of the Trust, including a majority of the Independent Trustees cast in person
at a meeting called for the purpose of voting on such renewal or (ii) by a vote of a majority of
the outstanding Shares of the Trust. .
12. New Series
The terms and provisions of this Agreement shall become automatically applicable to any
additional series of the Trust established during the initial or renewal term of this Agreement.
13. Successor Investment Trust.
Unless this Agreement has been terminated in accordance with Paragraph 10, the terms and
provision of this Agreement shall become automatically applicable to any investment company which
is a successor to the Trust as a result of reorganization, recapitalization or change of domicile.
14. Anti-Money Laundering Compliance.
(a) The Underwriter and the Trust each acknowledges that it is a financial institution subject
to the USA Patriot Act of 2001 and the Bank Secrecy Act (collectively, the “AML Acts”), which
require, among other things, that financial institutions adopt compliance programs to guard against
money laundering. Each represents and warrants to the other that it is in compliance with and will
continue
to comply with the AML Acts and applicable regulations in all relevant respects. The
Underwriter shall also provide written notice to each person or entity with which it entered an
agreement prior to the date hereof with respect to sale of the Trust’s Shares, such notice
informing such person of anti-money laundering compliance obligations applicable to financial
institutions under applicable laws and, consequently, under applicable contractual provisions
requiring compliance with laws.
(b) The Underwriter shall include specific contractual provisions regarding anti-money
laundering compliance obligations in agreements entered into by the Underwriter with any dealer
that is authorized to effect transactions in Shares of the Trust.
(c) Each of Underwriter and the Trust agrees that it will take such further steps, and
cooperate with the other as may be reasonably necessary, to facilitate compliance with the AML
Acts, including but not limited to the provision of copies of its written procedures, policies and
controls related thereto (“AML Operations”). Underwriter undertakes that it will grant to the
Trust, the Trust’s Anti-Money Laundering Officer and regulatory agencies, reasonable access to
copies of Underwriter’s AML Operations, books and records pertaining to the Trust only. It is
expressly understood and agreed that the Trust and the Trust’s compliance officer shall have no
access to any of Underwriter’s AML Operations, books or records pertaining to other clients of
Underwriter.
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15. Limitation of Liability.
It is expressly agreed that the obligation of the Trust hereunder shall not be binding upon
any of the Trustees, shareholder, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such,
and neither such authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust.
16. Severability.
In the event any provision of this Agreement is determined to be void or unenforceable, such
determination shall not affect the remainder of this Agreement, which shall continue to be in
force.
17. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the State of Ohio.
(b) Any question of interpretation of any term of provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the Act and to interpretation thereof, if any, by the United
States courts or in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation or order.
18. Notices.
Any notices under this Agreement shall be in writing, addressed and delivered or mailed
postage paid to the other party at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is agreed that the address of the Trust
for this purpose shall be 000 Xxxx X. XxXxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, XX 00000 and that the
address of Underwriter for this purpose shall be 0000 X. Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX
00000.
19. Counterparts.
This Agreement may be executed in one or more counterparts, and by the parties hereto on
separate counterparts, each of which shall be deemed an original but all of which together shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Trust and Underwriter have each caused this Agreement to be signed in
duplicate on their behalf, all as of the day and year first above written.
| DIAMOND HILL FUNDS |
||||
| /s/ Xxxxx X. Xxxxx, Xx. | ||||
| Name: | Xxxxx X. Xxxxx, Xx. | |||
| Title: | President | |||
| BHIL DISTRIBUTORS, INC. |
||||
| /s/ Xxxxx X. Xxxxxxxxx | ||||
| Name: | Xxxxx X. Xxxxxxxxx | |||
| Title: | President | |||
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In exchange for the fees described in Paragraph 7, Underwriter shall perform the following
services:
1. Solicit and deliver orders for sale of Shares;
2. Undertake advertising and promotion of Shares as it believes reasonable in connection
with solicitation of Shares;
3. Compensate dealers for activities described under the Dealer Agreement to sell Shares
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