UNDERWRITING AGREEMENT
THIS AGREEMENT is made as of May 1, 2002, by and between Diamond Hill Funds, fka
The BSG Funds, an Ohio business trust (the "Trust"), and Diamond Hill
Securities, Inc., fka Banc Sock Financial Services, Inc., an Ohio corporation
("Underwriter").
WHEREAS, the Trust is an 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 of the current, and any future, series of shares of the
Trust (collectively, 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 of any Series
whenever, in its sole discretion, it deems such action to be desirable.
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2. SALE AND REPURCHASE OF SHARES.
a. Underwriter will have the right, as agent for the Trust, to enter into
dealer agreements with registered and qualified dealers, and to sell
Shares to such dealers against orders therefore at the public offering
price (as defined in subparagraph 2(e) hereof) less a discount
determined by Underwriter, which discount shall not exceed the amount
of the sales charge 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 have the right, as agent for the Trust, to sell such
Shares to the public against orders therefore at the public offering
price.
c. Underwriter will also have the right, as agent for the Trust, to sell
Shares at their net asset value to such persons as may be approved by
the Trustees of the Trust, all such sales to comply with the
provisions of the Act and the rules and regulations of the securities
and Exchange Commission promulgated thereunder.
d. 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.
e. The public offering price for the Shares of each Series (and, with
respect to each Series offering multiple classes of Shares, the Shares
of each Class of such Series) shall be the respective net asset value
of the Shares of that Series (or Class of that
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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 Conduct
Rules of the NASD.
f. The net asset value of the Shares of each Series (or Class of a
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 (or each Class of a 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.
g. 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. Underwriter shall have the right
to retain the sales charge less any applicable dealer discount.
h. Upon receipt of purchase instructions, Underwriter will transmit such
instructions to the Trust or its transfer agent for registration of
the Shares purchased.
i. As additional compensation for its activities under this Agreement,
the Underwriter shall receive all contingent deferred sales charges
imposed on redemptions, if any. Whether and at what rate a contingent
deferred sales charge will be imposed with respect to a redemption
shall be determined in accordance with, and in the manner set forth in
the Registration Statement.
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j. 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.
k. 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. Such
price shall reflect the subtraction of the contingent deferred sales
charge, if any, computed in accordance with and in the manner set
forth in the Registration Statement. At the end of each business day,
the Underwriter shall notify the Trust and the Trust's transfer agent
of the number of shares redeemed, and the identity of the shareholders
or dealers offering Shares for repurchase. Upon such notice, the trust
shall pay the Underwriter the net asset value of the redeemed shares
in cash or in the form of a credit against monies due the Trust from
the Underwriter as proceeds from the sale of Shares. The Trust
reserves the right to suspend such repurchase right upon written
notice to the Underwriter. The Underwriter further agrees to act as
agent for the Trust to receive and transmit promptly to the Trust's
transfer agent, shareholder and dealer requests for redemption of
Shares.
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3. SALES 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 approved by Underwriter
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. COMPLIANCE WITH NASD AND GOVERNMENT RULES.
a. Underwriter will conform to the Conduct Rules of the NASD and the
securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
b. Underwriter, at its own expense, will pay the costs incurred in
establishing and maintaining its relationship with the dealers selling
the Shares. Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions hereof
and the Registration Statement, 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.
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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 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. EXPENSES TO BE BORNE BY TRUST. The Trust will bear the following expenses:
a. preparation, setting in type, printing of sufficient copies of the
prospectus and statement of additional information for distribution to
shareholders, and the distribution to shareholders of the prospectus
and statement of additional information;
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b. preparation, printing and distribution of reports and other
communications to shareholders;
c. registration of the Shares under the federal securities law;
d. qualification of the Shares for sale in the jurisdictions designated
by Underwriter;
e. qualification of the Trust as a dealer or broker under the laws of
jurisdictions designated by Underwriter as well as qualification of
the Trust to do business in any jurisdiction, if Underwriter
determines that such qualification is necessary or desirable for the
purpose of facilitating sales of the Shares;
f. maintaining facilities for the issue and transfer of the Shares;
g. supplying information, prices and other data to be furnished by the
Trust under this Agreement; and
h. any original issue taxes or transfer taxes applicable to the sale or
delivery of the Shares of certificate therefore.
8. SERVICES TO AND ACTIONS FOR TRUST, NOT UNDERWRITER. Any person, even though
also a director, officer, employee, shareholder or agent of Underwriter,
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 (other than services or business in connection with
Underwriter's duties hereunder), to be rendering such services to or acting
solely for the Trust and not as a director, officer, employee, shareholder
or agent, or one under the control or direction of Underwriter, even though
paid by it.
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9. INDEMNIFICATION.
a. The Trust agrees to indemnify, defend and hold the Underwriter, its
officers, directors, employees, shareholders and agents, and any
person who controls the Underwriter within the meaning of Section 15
of the 1933 Act (hereinafter referred to as "Covered Person"), free
and harmless from and against any and all claims, demands, liabilities
and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in
connection therewith) which a Covered Person may incur under the 1933
Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a material fact or alleged untrue statement of
a material fact contained in the Registration Statement or arising out
of or based upon any omission or alleged omission to state a material
fact required to be stated in the Registration Statement or necessary
to make the statements therein not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based
upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information
furnished in writing by the Underwriter to the Trust for use in the
Registration Statement; provided, however, that this indemnity
agreement shall not inure to the benefit of any person who is also an
officer or trustee of the Trust or who controls the Trust within the
meaning of Section 15 of the 1933 Act, unless a court of competent
jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public
policy as expressed in the 1933 Act; and further provide, that in no
event shall anything
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contained herein be so construed as to protect the Underwriter against
any liability to the Trust or to the shareholders of any Series to
which the Underwriter would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations under
this Agreement.
b. The Underwriter agrees to indemnify, defend, and hold the Trust, its
officers, trustees, employees, shareholders and agents, and any person
who controls the Trust within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigation or
defending against such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its trustees,
officers, employees, shareholders and agents, or any such controlling
person may incur under the 1933 Act or under common law or otherwise
arising out of or based upon any untrue statement of a material fact
or alleged untrue statement of a material fact contained in
information furnished in writing by the Underwriter to the Trust for
use in the Registration Statement, or arising out of or based upon any
omission or alleged omission to state a material fact in connection
with such information required to be stated in the Registration
Statement necessary to make such information not misleading.
c. A party seeking indemnification hereunder (the "Indemnitee") shall
give prompt written notice to the party from whom indemnification is
sought ("Indemnitor") of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to
indemnity under this Section; provided, however, that
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failure to notify the Indemnitor of such written assertion or claim
shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume
the defense of any suit brought to enforce a claim subject to this
Agreement and such defense shall be conducted by counsel chosen by the
Indemnitor and satisfactory to the Indemnitee; provided, however, that
if the defendants include both the Indemnitee and the Indemnitor, and
the Indemnitee shall have reasonably concluded that there may be one
or more legal defenses available to it which are different from or
additional to those available to the Indemnitor ("conflict of
interest"), the Indemnitor shall not have the right to elect to defend
such claim on behalf of the Indemnitee, and the Indemnitee shall have
the right to select separate counsel to defend such claim on behalf of
the Indemnitee. In the event that the Indemnitor elects to assume the
defense of any suit pursuant to the preceding sentence and retains
counsel satisfactory to the Indemnitee, the Indemnitee shall bear the
fees and expenses of additional counsel retained by it except for
reasonable investigation costs which shall be borne by the Indemnitor.
If the Indemnitor (i) does not elect to assume the defense of a claim,
(ii) elects to assume the defense of a claim but chooses counsel that
is not satisfactory to the Indemnitee or (iii) has no right to assume
the defense of a claim because of a conflict of interest, the
Indemnitor shall advance or reimburse the Indemnitee, at the election
of the Indemnitee, reasonable fees and disbursements of any counsel
retained by Indemnitee, including reasonable investigation costs.
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10. ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees or other
expenses incurred by a Covered Person in defending a proceeding only to the
extent permitted by the 1933 Act and the Act.
11. 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.
12. EFFECTIVE PERIOD OF THIS AGREEMENT. This Agreement shall take effect upon
its execution and shall remain in full force and effect until May 31, 2003,
(unless terminated automatically as set forth in Paragraph 11) 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 case
in person at a meeting called for the purpose of voting on such approval.
13. LIMITATION OF TRUST'S LIABILITY. The term "Diamond Hill Funds" means and
refers to the Trustees from time to time serving under the Trust's Amended
and Restated Agreement and Declaration of Trust as the same may
subsequently hereto be amended. It is
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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, as provided in the Amended and Restated Agreement and
Declaration of Trust of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust and signed by
the officers of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any
liability on them personally, but shall bind only the trust property of the
Trust as provided in its Amended and Restated Agreement and Declaration of
Trust. A copy of the Amended and Restated Agreement and Declaration of
Trust of the Trust is on file with the Secretary of State of Ohio.
14. 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.
15. SUCCESSOR INVESTMENT COMPANY. Unless this Agreement has been terminated in
accordance with Paragraph 11, 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 a reorganization, recapitalization or
change of domicile.
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.
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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, regulations 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 for this purpose the
address of the Trust shall be 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxx
00000, and of the Underwriter shall be 0000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxx, Xxxx 00000. However, on or about May 10, 2002, the new address of
the Trust and the Underwriter will be 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxx 00000.
19. COUNTERPARTS. This Agreement may be 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.
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20. 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.
21. FORCE MAJEURE. If Underwriter shall be delayed in its performance of
services or prevented entirely or in part from performing services due to
causes or events beyond its control, including and without limitation, acts
of God, interruption of power or other utility, transportation or
communication services, acts of civil or military authority, sabotages,
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, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of
such delay or non-performance.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this Agreement to
be signed on its behalf, all of the day and year first above written.
ATTEST: DIAMOND HILL FUNDS
/s/ Xxxxxx X. Xxxxx BY: /s/ Xxxxx X. Xxxxx
------------------------------- -------------------------------
Xxxxxx X. Xxxxx, Secretary Xxxxx X. Xxxxx, President
ATTEST: DIAMOND HILL SECURITIES, INC.
/s/ Xxxxxx X. Xxxxx BY: /s/ Xxxxx X. Xxxxx
------------------------------- -------------------------------
Xxxxxx X. Xxxxx, Secretary Xxxxx X. Xxxxx, President
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