EXHIBIT 23(E)(III)
UNDERWRITING AGREEMENT
This Agreement made as of April 30, 2004 by and between DIAMOND HILL FUNDS
(the "Trust"), an Ohio business trust and an open-end registered investment
company, and IFS FUND DISTRIBUTORS, INC., a Delaware 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 National Association of Securities
Dealers, Inc. (the "NASD"); 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:
1. Appointment.
The Trust hereby 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.
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 therefor 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 agent for the Trust, to
sell such Shares to the public against orders therefor 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 each Series shall be
the respective net asset value of the Shares of that 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
the Rules of the NASD.
(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
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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 Share 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 buying, selling or trading any securities for its or
their own account 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 Shares ("Shareholders"), to sell Shares to its Shareholders or to
other persons at not less than
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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 therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of the NASD 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 its own expense, will qualify as dealer or
broker, or otherwise, under all applicable state or federal laws required in
order that Shares may be sold in such States as may be mutually agreed upon by
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 information approved by the Trust as
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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.
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all information,
financial statements and other papers 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 certified 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
a fee paid by the Trust's Investment Adviser. Fees shall be paid monthly in
arrears. 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 by the Trust in accordance with agreements between them
as permitted by applicable law, including the Act and rules and regulations
promulgated thereunder. These costs include, but are not limited to, licensing
fees, filing fees, travel and such other expenses as may be incurred by
Underwriter on behalf of the Trust.
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8. Indemnification of 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 against any loss, damage or
expense (including the reasonable costs of investigation) reasonably incurred by
any of them in connection with any claim or in connection with any action, suit
or proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of or is based upon any untrue statement or alleged untrue
statement of a material fact, or the omission or alleged omission to state a
material fact necessary to make the statements not misleading, on the part of
Underwriter or any agent or employee of Underwriter or any other person for
whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Trust. Underwriter
likewise agrees to indemnify and hold harmless the Trust and each such person in
connection with any claim or in connection with any action, suit or proceeding
which arises out of or is alleged to arise out of 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. The term "expenses" for purposes of this and the next
paragraph includes amounts paid in satisfaction of judgments or in settlements
which are made with Underwriter'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.
9. Indemnification of Underwriter.
The Trust agrees to indemnify and hold harmless Underwriter and each
person who has been, is, or may hereafter be a director, officer, employee,
shareholder or control person of Underwriter against any loss, damage or expense
(including the reasonable costs of
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investigation) reasonably incurred by any of them in connection with the matters
to which this Agreement relates, except a loss resulting from 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, for all of which exceptions
Underwriter shall be liable to the Trust. The Trust will advance attorneys' fees
or other expenses incurred by any such person in defending a proceeding, upon
the undertaking by or on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to indemnification.
In order that the indemnification provisions contained in this Paragraph 9
shall apply, it is understood that if in any case the Trust may be asked to
indemnify Underwriter or any other person or hold Underwriter or any other
person harmless, the Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
Underwriter will use all reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the Trust. The Trust
shall have the option to defend Underwriter and any such person against any
claim which may be the subject of this indemnification, and in the event that
the Trust so elects it will so notify Underwriter, and thereupon the Trust shall
take over complete defense of the claim, and neither Underwriter nor any such
person shall in such situation initiate further legal or other expenses for
which it shall seek indemnification under this Paragraph 9. Underwriter shall in
no case confess any claim or make any compromise in any case in which the Trust
will be asked to indemnify Underwriter or any such person except with the
Trust's written consent.
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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.
The Trust shall indemnify and hold harmless Underwriter, its directors,
officers, employees, shareholders, agents, control persons and affiliates of any
thereof from and against any and all losses, damages, claims, suits, actions,
demands, expenses and liabilities (whether with or without basis in fact or
law), including legal fees and expenses and investigation expenses, of any and
every nature which Underwriter may sustain or incur or which may be asserted
against Underwriter by any person (including reasonable counsel fees) that
Underwriter may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court,
administrative or legislative body, in which Underwriter may be involved as a
party or otherwise or with which Underwriter may be threatened, by reason of the
distribution-related activities of the Trust, for the period prior to
Underwriter's assumption of its responsibilities pursuant to this Agreement.
Underwriter shall notify promptly the Trust of the commencement of any
complaint, claim, litigation or proceedings against Underwriter, any of its
directors, officers, employees or others in connection with any shareholder
information for the period prior to Underwriter's assumption of its
responsibilities pursuant to this Agreement. Underwriter shall provide to the
Trust a total of any and all idemnification costs that Underwriter claims
pursuant to this Agreement for the Trust's approval, which approval shall not be
unreasonably withheld.
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In no event shall Underwriter be liable to the Trust or any third party
for any damages, even if advised of the possibility of such damages, in
connection with any distribution-related activity or regulatory requirement for
the period prior to Underwriter's assumption of its responsibilities pursuant to
this Agreement.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Underwriter, (ii) either by action of the
Board of Trustees of the Trust or at a meeting of the Shareholders of the Trust
by the affirmative vote of a majority of the outstanding Shares, and (iii) by a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of Underwriter by vote cast in person at a meeting called for the
purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, 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 May 31, 2005 (unless terminated automatically as
set forth in Section 10), and from year to year thereafter, subject to annual
approval (i) by Underwriter, (ii) by the Board of Trustees of the Trust or a
vote of a majority of the outstanding Shares, and (iii) by a majority of the
Trustees of the Trust who are not interested persons of the Trust or of
Underwriter by vote cast in person at a meeting called for the purpose of voting
on such approval.
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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 provisions 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. Limitation of Liability.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, 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.
15. 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.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the State of
Ohio.
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(b) Any question of interpretation of any term or 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.
17. 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 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxx 00000 and that the
address of Underwriter for this purpose shall be 000 Xxxx Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxxx, Xxxx 00000.
18. 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.
-----------------------
By: Xxxxx X. Xxxxx, Xx.
Its: President
IFS FUND DISTRIBUTORS, INC.
/s/ Xxxxx X. Xxxxxxxxx
----------------------
By: Xxxxx X. Xxxxxxxxx
Its: President
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