ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of August 8, 2002 between DIAMOND HILL CAPITAL
MANAGEMENT, INC. ("DHCM"), an Ohio corporation, and INTEGRATED FUND SERVICES,
INC. ("Integrated"), an Ohio corporation.
WHEREAS, Diamond Hill Funds (the "Trust") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which is divided into several series of shares; and
WHEREAS, the Trust has engaged DHCM to act as investment adviser to and
perform certain administrative services for the Trust; and
WHEREAS, DHCM wishes to employ the services of Integrated to perform
certain services for the Trust, including serving as administrative services
agent, accounting services and pricing agent and transfer, shareholder servicing
and dividend disbursing agent; and
WHEREAS, Integrated wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, DHCM and Integrated agree as follows:
1. APPOINTMENT.
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DHCM hereby employs Integrated as agent to perform those services
described in this Agreement for the Trust. Integrated shall act under such
appointment and perform the obligations thereof upon the terms and conditions
hereinafter set forth.
2. DOCUMENTATION.
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DHCM will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing
the original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of the Agreement and Declaration of Trust and the
Bylaws of the Trust and each amendment thereto;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Integrated;
E. Copies of all agreements with service providers, including advisory
agreements, sub-advisory agreements, underwriting and dealer agreements and
custody agreements in effect;
F. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the future by the Trust
and for which Integrated is to act as plan agent; and
G. Such other certificates, documents or opinions which Integrated
may, in its discretion, deem necessary or appropriate in the proper performance
of its duties.
ADMINISTRATION
3. TRUST ADMINISTRATION.
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Subject to the direction and control of the Trustees of the Trust,
Integrated shall perform the services to the Funds detailed in Schedule A.
4. TAXES.
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Integrated will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and make available for
mailing to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed.
5. FORM N-SAR.
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Integrated shall maintain such records within its control and shall be
requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
ACCOUNTING
6. CALCULATION OF NET ASSET VALUE.
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Integrated will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. Integrated will calculate the net asset
value of each series of the Trust and the per share net asset value of each
series of the Trust, in accordance with the Trust's current prospectus and
statement of additional information, once daily as of the time selected by the
Trust's Board of Trustees. Integrated will prepare and maintain a daily
valuation of all securities and other assets of the Trust in accordance with
instructions from a designated officer of the Trust and in the manner set forth
in the Trust's current prospectus and statement of additional information. In
valuing securities of the Trust, Integrated may contract with, and rely upon
market quotations provided by, outside services.
7. PAYMENT OF TRUST EXPENSES.
-------------------------
Integrated shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an
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officer or other authorized agent of the Trust, Integrated shall prepare checks
in the appropriate amounts which shall be signed by an authorized officer of
Integrated and mailed to the appropriate party.
8. OTHER SERVICES.
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Subject to the direction and control of the Trustees of the Trust,
Integrated shall perform the services to the Funds detailed in Schedule B.
TRANSFER AGENCY
9. INTEGRATED TO RECORD SHARES.
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Integrated shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Integrated shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust. Integrated shall not handle physical shares.
10. INTEGRATED TO VALIDATE TRANSFERS.
--------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Integrated of certificates, if any, in proper form for transfer, Integrated
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Integrated shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Integrated.
11. RECEIPT OF FUNDS.
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Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, Integrated
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, Integrated shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
12. PURCHASE ORDERS.
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Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Integrated to establish a
shareholder account, Integrated shall, as of the next determination of net asset
value after receipt of such order in accordance with the
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Trust's then current prospectus and statement of additional information, compute
the number of shares due to the shareholder, credit the share account of the
shareholder, subject to collection of the funds, with the number of shares so
purchased, shall notify the Trust in writing or by computer report at the close
of each business day of such transactions and shall mail to the shareholder
and/or dealer of record a notice of such credit when required by applicable
securities laws or regulations.
13. RETURNED CHECKS.
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In the event that Integrated is notified by the Trust's Custodian that
any check or other order for the payment of money is returned unpaid for any
reason, Integrated will:
A. Give prompt notification to the Trust of the non-payment of said
check;
B. In the absence of other instructions from the Trust, take such
steps as may be necessary to redeem any shares purchased on the basis of such
returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by Integrated pursuant to this Agreement.
14. DIVIDENDS AND DISTRIBUTIONS.
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The Trust shall furnish Integrated with appropriate evidence of
Trustee action authorizing the declaration of dividends and other distributions.
Integrated shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Integrated shall, as agent for each shareholder
who so requests, invest the dividends and other distributions in full and
fractional shares in accordance with the Trust's then current prospectus and
statement of additional information. If a shareholder has elected to receive
dividends or other distributions in cash, then Integrated shall disburse
dividends to shareholders of record in accordance with the Trust's then current
prospectus and statement of additional information. Integrated shall, on or
before the mailing date of such checks, notify the Trust and the Custodian of
the estimated amount of cash required to pay such dividend or distribution, and
the Trust shall instruct the Custodian to make available sufficient funds
therefore in the appropriate account of the Trust. Integrated shall mail to the
shareholders periodic statements, as requested by the Trust, showing the number
of full and fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, Integrated shall prepare and file with
the Internal Revenue Service, and when required, shall address and mail to
shareholders, such returns and information relating to dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations.
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15. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
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Integrated shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
Integrated, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned.
Integrated shall use its best efforts to contact the shareholders affected and
to follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
16. REDEMPTIONS AND EXCHANGES.
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A. Integrated shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Integrated. Upon its approval of such
redemption transactions, Integrated, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Integrated shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Integrated and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired subject to approval and verification of the appropriate
amounts by the Trust in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by Integrated. If Integrated or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions in accordance with the Trust's then current prospectus and
statement of additional information, Integrated shall notify the shareholder
indicating the reason therefore.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, Integrated, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust, shall review and approve all exchange requests and shall, on behalf of
the Trust's shareholders, process such approved exchange requests.
C. Integrated shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefore in the appropriate account of the Trust. Procedures for
effecting redemption orders accepted from shareholders or dealers of record by
telephone or other methods shall be established by mutual agreement between
Integrated and the Trust consistent with the Trust's then current prospectus and
statement of additional information.
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D. The authority of Integrated to perform its responsibilities under
Xxxxxxxxx 00, Xxxxxxxxx 14, and this Paragraph 16 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
17. AUTOMATIC WITHDRAWAL PLANS.
--------------------------
Integrated will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by Integrated from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and Integrated will
withdraw from a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal payment pursuant
to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for payment date already past may
be issued upon request by the shareholder.
18. WIRE-ORDER PURCHASES.
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Integrated will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Integrated. Upon receipt of any check drawn or endorsed to the Trust (or
Integrated, as agent) or otherwise identified as being payment of an outstanding
wire-order, Integrated will stamp said check with the date of its receipt and
deposit the amount represented by such check to Integrated's deposit accounts
maintained with the Custodian. Integrated will cause the Custodian to transfer
federal funds in an amount equal to the net asset value of the shares so
purchased to the Trust's account with the Custodian, and will notify the Trust
before noon of each business day of the total amount deposited in the Trust's
deposit accounts, and in the event that payment for a purchase order is not
received by Integrated or the Custodian on the tenth business day following
receipt of the order, prepare a National Association of Securities Dealers
("NASD") "notice of failure of dealer to make payment."
19. TAXES.
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Integrated shall withhold such sums as are required to be withheld
under applicable federal and state income tax laws, rules and regulations.
20. OTHER PLANS.
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Integrated will process such accumulation plans, automatic withdrawal
plans, group programs and other plans or programs for investing in shares of the
Trust mutually agreed upon by Integrated and the Trust in accordance with the
Trust's current prospectus and statement of additional information and will act
as plan agent for shareholders pursuant to the terms of such plans and programs
duly executed by such shareholders, if so agreed upon by Integrated and the
Trust.
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21. RECORDKEEPING AND OTHER INFORMATION.
-----------------------------------
A. Prior to the commencement of Integrated's responsibilities under
this Agreement, if applicable, the Trust shall deliver or cause to be delivered
over to Integrated (i) an accurate, certified list of shareholders of the Trust,
showing each shareholder's address of record, number of shares owned and whether
such shares are represented by outstanding share certificates and (ii) all
shareholders records, files, and other materials necessary or appropriate for
proper performance of the functions assumed by Integrated under this Agreement
including, without limitation, special instructions regarding withholding,
dividend options and householding (collectively referred to as the "Materials").
The Trust shall on behalf of each applicable series or class indemnify and hold
Integrated harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to any error, omission, inaccuracy or other deficiency of the
Materials, or out of the failure of the Trust to provide any portion of the
Materials or to provide any information in the Trust's possession or control
reasonably needed by Integrated to perform the services described in this
Agreement.
B. Integrated shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Integrated for the periods and
in the places required by Rules 31a-1 and 31a-2 under the 1940 Act. The
retention of such records shall be at the expense of the Trust. Integrated shall
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Trust or its agents, or any regulatory agency having authority over the
Trust.
22. SHAREHOLDER RECORDS.
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Integrated shall maintain records for each shareholder account showing
the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and realized
long-term gains;
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F. Any instructions from a shareholder including all forms furnished
by the Trust and executed by a shareholder with respect to (i) dividend or
distribution elections and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
I. Any stop or restraining order placed against a shareholder's
account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the Internal
Revenue Code of 1986, as amended; and
K. Any information required in order for Integrated to perform the
calculations contemplated under this Agreement.
23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
--------------------------------------
Integrated will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. Integrated will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
Integrated will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust. Integrated will maintain all NASD
correspondence necessary to adhere to all NASD regulations.
24. ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM.
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Integrated will provide the Anti-Money Laundering Compliance Program
Service (AML Service) in accordance with the Service Description Document
(Schedule C). Integrated accepts the AML Service delegation and will allow
federal examiners to obtain information and records relating to the AML Service
and to inspect Integrated in connection with Integrated's implementation and
operation of the Client's AML Service.
GENERAL PROVISIONS
25. SHAREHOLDER INFORMATION.
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Nonpublic personal shareholder information shall remain the sole
property of the Trust. Such information shall not be disclosed or used for any
purpose except in connection with the performance of the duties and
responsibilities described herein or as required or permitted by law. The
provisions of this paragraph shall survive the termination of this Agreement.
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The parties agree to comply with any and all regulations promulgated
by the SEC or other applicable laws regarding the confidentiality of shareholder
information.
26. DATA ACCESS AND PROPRIETARY INFORMATION.
---------------------------------------
The Trust acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Trust by Integrated as part of the Trust's ability to
access certain Trust-related data ("Customer Data") maintained by Integrated on
data bases under the control and ownership of Integrated or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of substantial
value to Integrated or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Trust agrees to treat all Proprietary
Information as proprietary to Integrated and further agrees that it shall not
divulge any Proprietary Information to any person or organization except as may
be provided hereunder.
27. OTHER INFORMATION TO THE TRUST.
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Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Integrated will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
28. COOPERATION WITH ACCOUNTANTS.
----------------------------
Integrated shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
29. SPECIAL SERVICES AND EXCEPTION PROCESSING.
-----------------------------------------
A. Integrated may provide special reports upon the request of the
Trust or the Trust's investment adviser, which may result in an additional
charge, the amount of which shall be agreed upon between the parties.
B. Integrated may provide such other services with respect to the
Trust as may be reasonably requested by the Trust, which may result in an
additional charge, the amount of which shall be agreed upon between the parties.
C. Integrated may provide exception processing upon the request of the
Trust or the Trust's investment adviser, which may result in an additional
charge, the amount of which shall be agreed upon between the parties. Exception
processing includes, but is not limited to, processing which:
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(i) requires Integrated to use methods and procedures other than
those usually employed by Integrated to perform its obligations under this
Agreement;
(ii) involves the provision of information to Integrated after
the commencement of the nightly processing cycle of Integrated's transfer
agency, administration and/or fund accounting processing system; or
(iii) requires more manual intervention by Integrated, either in
the entry of data or in the modification or amendment of reports generated by
Integrated's transfer agency, administration and/or fund accounting processing
system than is usually required.
30. FURTHER ACTIONS.
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Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
31. SUBCONTRACTING.
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Integrated may, at its expense, and, upon prior written approval from
the Trust, subcontract with any entity or person concerning the provision of the
services contemplated hereunder; provided, however, that Integrated shall not be
relieved of any of its obligations under this Agreement by the appointment of
such subcontractor and provided further, that Integrated shall be responsible
for all acts of such subcontractor as if such acts were its own.
32. COMPENSATION.
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For performing its services under this Agreement, DHCM shall pay
Integrated a monthly fee with respect to each series of the Trust in accordance
with the schedules attached hereto as Schedule D.
33. EXPENSES.
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Integrated shall furnish, at its expense and without cost to DHCM the
services of its personnel to the extent that such services are required to carry
out its obligations under this Agreement. All costs and expenses not expressly
assumed by Integrated under this Paragraph 33 shall be paid by DHCM, including,
but not limited to, costs of meetings of the Board of Trustees and shareholders
of the Trust, as well as costs and expenses for all regulatory filings, postage,
envelopes, checks, drafts, continuous forms, bank charges, reports,
communications, proxies, statements and other materials, file interface expenses
(e.g., Fanmail, Broker Browser, Expeditor, other distribution partners), label
file creation, Blue Sky filing fees, telephone, telegraph and remote
transmission lines, EDGARization, printing, confirmations, fulfillment and any
other shareholder correspondence, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), pro rata expenses for
preparation of Integrated's Fund Accounting and Transfer Agent SAS 70 reports,
costs and fees, including employee time and system expenses, associated with
exception processing and resolution of errors not caused by Integrated, and any
and all
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assessments, taxes or levies assessed on Integrated for services provided under
this Agreement. Postage for mailings of dividends, proxies, reports and other
mailings to all shareholders shall be advanced to Integrated three business days
prior to the mailing date of such materials.
34. REFERENCES TO INTEGRATED OR THE TRUST.
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A. Neither the Trust nor its agents shall circulate any printed matter
which contains any reference to Integrated without the prior written approval of
Integrated, excepting solely such printed matter as merely identifies Integrated
as Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Integrated in draft form, allowing sufficient time
for review by Integrated and its counsel prior to any deadline for printing.
B. Integrated shall not circulate any printed matter which contains
any reference to the Trust without the prior written approval of the Trust,
excepting solely such printed matter as merely identifies the Trust as a client
of Integrated. Integrated will submit printed matter requiring approval to the
Trust in draft form, allowing sufficient time for review by the Trust and its
counsel prior to any deadline for printing.
35. EQUIPMENT FAILURES.
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In the event of equipment failures beyond Integrated's control,
Integrated shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. Integrated shall endeavor to enter
into one or more agreements making provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
36. INDEMNIFICATION OF INTEGRATED.
-----------------------------
A. Integrated may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Integrated nor its directors, officers, employees,
shareholders, agents, control persons or affiliates of any thereof shall be
subject to any liability for, or any damages, including consequential damages,
expenses or losses incurred by the Trust in connection with any error of
judgment, mistake of law, any act or omission connected with or arising out of
any services rendered under or payments made pursuant to this Agreement or any
other matter to which this Agreement relates, except by reason of willful
misfeasance, bad faith or negligence on the part of any such persons in the
performance of the duties of Integrated under this Agreement or by reason of
reckless disregard by any of such persons of the obligations and duties of
Integrated under this Agreement. Integrated may apply to the Trust at any time
for instructions and may consult counsel for the Trust, or its own counsel, and
with accountants and other experts with respect to any matter arising in
connection with its duties hereunder, and Integrated shall not be liable or
accountable for any action taken or omitted by it in good faith in accordance
with such instruction, or with the opinion of such counsel, accountants, or
other experts. Integrated shall not be held to have notice of any change of
authority of any officers, employees, or agents of the Trust until receipt of
written notice thereof have been received by Integrated from the Trust.
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B. Any person, even though also a director, officer, employee,
shareholder or agent of Integrated, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Integrated or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, DHCM shall
indemnify and hold harmless Integrated, 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
Integrated may sustain or incur or which may be asserted against Integrated by
any person by reason of, or as a result of: (i) any action taken or omitted to
be taken by Integrated in good faith in reliance upon any certificate,
instrument, order or share certificate believed by it to be genuine and to be
signed, countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Integrated in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Integrated or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder; nor shall indemnification under this subparagraph
apply in the event that DHCM brings a legal action against Integrated for any
act or omission connected with or arising out of any services render under this
Agreement.
D. Notwithstanding anything to the contrary in this Agreement, in no
event shall Integrated be liable to DHCM, the Trust or any third party for any
special, consequential, punitive or incidental damages, even if advised of the
possibility of such damages.
37. TERMINATION
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A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect until May 31, 2005 ("Initial
Term") and shall continue in force for three (3) years thereafter ("Renewal
Term"), but only so long as such continuance is approved (1) by Integrated, (2)
DHCM, (3) the Trust, (4) by a vote of a majority of the Trust's Trustees who are
not parties to this Agreement or interested persons (as defined in the 0000 Xxx)
of any such party, and (5) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Any party may terminate this Agreement at the end of the Initial
Term or at the end of any subsequent Renewal Term by giving the other parties at
least one hundred twenty (120) days' prior written notice of such termination
specifying the date fixed therefore. In the event this Agreement is terminated
by DHCM prior to the end of the Initial Term or any
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subsequent Renewal Term DHCM shall make a one-time cash payment to Integrated in
consideration of services provided under this Agreement, and not as a penalty,
equal to the remaining balance of the fees payable to Integrated under this
Agreement through the end of the Initial Term or Renewal Term, as applicable.
DHCM shall likewise reimburse Integrated for any out-of-pocket expenses and
disbursements ("out-of-pocket expenses") reasonably incurred by Integrated in
connection with the services provided under this Agreement within 30 days of
notification to DHCM of such out-of-pocket expenses regardless of whether such
out-of-pocket expenses were incurred before or after the termination of this
Agreement.
C. If a party materially fails to perform its duties and obligations
hereunder (a "Defaulting Party") resulting in a material loss to another party
or parties, such other party or parties (the "Non-Defaulting Party") may give
written notice thereof to the Defaulting Party, which such notice shall set
forth with sufficient detail the nature of the breach. The Defaulting Party
shall have ninety (90) days from its receipt of notice to cure the breach. If
such material breach shall not have been remedied to commercially reasonable
operating standards, the Non-Defaulting Party may terminate this Agreement by
giving sixty (60) days written notice of such termination to the Defaulting
Party. If Integrated is the Non-Defaulting Party, its termination of this
Agreement shall not constitute a waiver of any rights or remedies with respect
to services it performed prior to such termination, or the right of Integrated
to receive such compensation as may be due as of the date of termination or to
be reimbursed for all reasonable out-of-pocket expenses. In all cases,
termination by the Non-Defaulting Party shall not constitute a waiver by the
Non-Defaulting Party of any other rights it might have under this Agreement or
otherwise against a Defaulting Party.
D. In the case of the following transactions, not in the ordinary
course of business, namely, the merger of the Trust, or a series of the Trust,
into or the consolidation of the Trust, or a series of the Trust, with another
investment company, the sale by the Trust, or a series of the Trust, of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Trust, or a series of the Trust, and
distribution of its assets, this Agreement will terminate and Integrated shall
be released from any and all obligations hereunder upon the payment of the fees,
disbursements and expenses due to Integrated through the end of the then current
term of this Agreement. The parties acknowledge and agree that the liquidated
damages provision set forth above in paragraph B shall be applicable in those
instances in which Integrated is not retained to provide administration, fund
accounting and/or transfer agency services respectively subsequent to the
transactions listed above.
E. Integrated will be entitled to collect from DHCM all reasonable
expenses incurred in conjunction with termination of this Agreement, including
but not limited to out-of-pocket expenses, employee time, system fees and fees
charged by third parties with whom Integrated has contracted.
38. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent Integrated or any affiliated
person (as defined in the 0000 Xxx) of Integrated from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Integrated
13
expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to DHCM under
this Agreement.
39. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Integrated to perform any services for the Trust
which services could cause Integrated to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Integrated, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction, it being acknowledged that the Trust is relying on the best
efforts of Integrated.
40. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of DHCM 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 DHCM, 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.
41. 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.
42. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio. 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 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations 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 SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
14
43. NOTICES.
-------
All notices required or permitted under this Agreement shall be in
writing (including telex and telegraphic communication) and shall be (as elected
by the person giving such notice) hand delivered by messenger or courier
service, telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to:
To DHCM: Diamond Hill Capital Management, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxx 00000-0000
Attention: X.X. Xxxxxx
To Integrated: Integrated Fund Services, Inc.
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
or to such other address as any party may designate by notice complying with the
terms of this Paragraph 43. Each such notice shall be deemed delivered (a) on
the date delivered if by personal delivery; (b) on the date telecommunicated if
by telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method or e-mail; and (d) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
44. AMENDMENT.
---------
This Agreement may not be amended or modified except by a written
agreement executed by all parties.
45. BINDING EFFECT.
--------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
46. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
47. FORCE MAJEURE.
-------------
Integrated assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its control, including and without limitation, acts of God,
interruption of power or other utility,
15
transportation, mail, or communication services, acts of civil or military
authority, sabotages, war, insurrection, riots, national emergencies, explosion,
flood, accident, earthquake or other catastrophe, fire, strike or other labor
problems, legal action, present or future law, governmental order, rule or
regulation, or shortages of suitable parts, materials, labor or transportation.
48. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
DIAMOND HILL CAPITAL MANAGEMENT, INC.
By: /s/ X.X. Xxxxxx
---------------------------
X.X. Xxxxxx
Its: President
INTEGRATED FUND SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxxx
Its: President
16
Schedule A
In consideration of the compensation detailed in this Agreement, Integrated
shall perform the following Administrative services:
1. Prepare and file post-effective amendments to the registration
statements and other documents on behalf of the series with the
Securities and Exchange Commission and other federal and state
regulatory authorities as required by law.
2. Coordinate the scheduling of Board of Trustees' meetings, prepare the
appropriate reports to the trustees and record and maintain the
minutes.
3. Qualify each series for sale in various states ("blue sky" filings).
4. Maintain all books and records of each series as required by federal
and state laws.
5. Coordinate the preparation, filing and distribution of proxy materials
and periodic reports as required by law.
6. Coordinate and monitor third-party services.
7. Provide reports necessary for the Investment Advisor to monitor
compliance with federal and state rules and regulations.
8. Provide officers for the Trust, if desired.
9. Prepare and maintain the necessary journals and schedules to report
the required information on Form N-SAR.
10. Prepare financial statements and supporting statements, footnotes, per
share information and schedule of investments for the inclusion in the
semiannual and annual reports.
11. Conduct Investment Company Institute Compliance Training for Fund
management and the investment adviser.
17
Schedule B
In consideration of the compensation detailed in this Agreement, Integrated
shall perform the following Accounting services:
1. Calculate net asset value and per share net asset value in accordance
with the 1940 Act and the Trust's prospectus.
2. Record all security transactions including appropriate gains and
losses from the sale of portfolio securities.
3. Record interest income and dividend income.
4. Record each series' capital share activities based upon purchase and
redemption transactions received by the transfer agent.
5. Calculate a daily cash figure for investment purposes.
6. Monitor and seek authorization for payment of expenses of each series.
7. Periodically report to the Trust or its authorized agents share
purchases and redemptions and trial balances of each series.
8. Prepare the necessary supporting computations on a book and tax basis
to ensure each series complies with the requirements of Section 851 of
the Internal Revenue Code.
9. Facilitate and perform tax planning and administration.
10. Monitor all tax compliance calculations to ensure that each series
qualifies as a regulated investment company pursuant to Subchapter M
of the Internal Revenue Code.
11. Assist independent accountants with the annual audit by preparing
necessary annual audit work papers.
12. Generate series performance calculations (including after-tax returns)
and automated report dissemination.
13. Maintain complete, accurate and current all records with respect to
the Trust required to be maintained by the Trust under the Internal
Revenue Code of 1986, as amended (the "Code"), and under the rules and
regulations of the 1940 Act, and preserve said records in the manner
and for the periods prescribed in the Code and the 1940 Act.
18
Schedule C
ANTI-MONEY LAUNDERING PROGRAM SERVICE
In consideration of the compensation detailed in this Agreement, Integrated as
Transfer Agent for Client shall perform the procedures described below as
required by the USA PATRIOT Act of 2001 (the "Act") and applicable sections of
the Bank Secrecy Act and the Internal Revenue Service Code.
1. Develop and implement an anti-money laundering program reasonably
designed to detect activities indicative of money laundering and
achieve compliance with such regulatory requirements.
2. Monitor the accounts of Fund shareholders for suspicious activities.
3. Implement training programs to educate its officers and employees
regarding its and the Client's anti-money laundering policies and
procedures.
4. Designate a compliance officer with sufficient authority to oversee
Integrated's anti-money laundering policies and procedures and to
interact with the Client's Patriot Act Compliance Officer.
5. Conduct an independent audit of the Client's anti-money laundering
policies and procedures on an annual basis.
6. Provide the Client with a report of the independent audit findings.
7. Provide appropriate Federal agencies with information and records
relating to the Client's anti-money laundering program upon request,
including access to inspect Integrated's activities related to the
Client's anti-money laundering program.
8. File Suspicious Activity Reports (SARs) or IRS Form 8300 reports as
may be required.
9. Check shareholder names against lists of known or suspected terrorists
or terrorist organizations such as those persons and organizations
listed on Treasury's Office of Foreign Assets Control (OFAC) or the
Securities and Exchange Commission's Control List.
10. Comply with Customer Identification Verification requirements.
11. Retain records on behalf of the Client as required by the Act.
19
Schedule D
August 8, 2002
Administration
--------------
Percentage Rate Average Daily Net Assets
--------------- ------------------------
0.110% First $ 500,000,000
0.070% Second 500,000,000
0.050% Over 1,000,000,000
The annual minimum fee per series is $45,000, with an additional $7,500 per
additional class of shares.
Fund Accounting
---------------
Percentage Rate Average Daily Net Assets
--------------- ------------------------
0.040% First $ 500,000,000
0.030% Second 500,000,000
0.025% Over 1,000,000,000
The annual minimum fee per series is $30,000, with an additional $7,500 per
additional class of shares.
Transfer Agency and Shareholder Services
----------------------------------------
Each series is charged an annual per account charge of $25 for each retail
class and $22 for each institutional class. The annual minimum fee for each
retail class is $30,000 and for each institutional class is $24,000.
Anti-Money Laundering Program Service Fee:
Reimbursement for Out-of-Pocket Expense
---------------------------------------
Each series will reimburse Integrated for out-of-pocket expenses incurred
in the performance of its services under this Agreement.
Annual Fees During Initial Term of Agreement
--------------------------------------------
Notwithstanding the fee schedule set forth above, Integrated shall, during
the Initial Term, receive a minimum fee from DHCM for Administration, Fund
Accounting and Transfer Agency services for the Trust's series set forth on
Schedule E of $300,000 in year one, $420,000 in year two and $510,000 in year
three. These annual fees shall be prorated as services are provided by
Integrated in an amount mutually agreed upon by Integrated and DHCM.
20
Schedule E
August 8, 2002
Diamond Hill Focus Fund
Diamond Hill Small Cap Fund
Diamond Hill Large Cap Fund
Diamond Hill Bank & Financial Fund
Diamond Hill Short Term Fixed Income
Diamond Hill Strategic Income Fund
21
Addendum to
Administration, Accounting and Transfer Agency Agreement
Between
Diamond Hill Capital Management, Inc. and
Integrated Fund Services, Inc.
Diamond Hill Capital Management, Inc. ("DHCM") understands and agrees that
Integrated Fund Services, Inc. ("Integrated") shall assume its duties under the
Administration, Accounting and Transfer Agency Agreement, dated August 8, 2002,
on a schedule to be mutually agreed upon by the parties. It is expressly
understood and agreed that until such time as Integrated assumes its duties as
Administrator, Fund Accountant or Transfer Agent, respectively, Integrated shall
have no responsibility to perform duties other than those assumed. It is further
expressly understood and agreed that Integrated shall be paid only for those
services actually assumed and performed.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed as of the day and year first above written.
DIAMOND HILL CAPITAL MANAGEMENT, INC.
By: /s/ X.X. Xxxxxx
---------------------------
X.X. Xxxxxx
Its: President
INTEGRATED FUND SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxxx
Its: President
22
