Exhibit 23H(1)
DISTRIBUTION AGREEMENT
This Agreement is made as of _________, 2004 by and among
VERACITY FUNDS (the "Trust"), a Delaware business trust, Integrity Asset
Management, LLC, a Delaware limited liability company, and Ultimus Fund
Distributors, LLC, an Ohio limited liability company ("Distributor").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Distributor 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 Distributor are desirous of entering into an
agreement providing for the distribution by Distributor of shares of beneficial
interest (the "Shares") of each series of shares of the Trust listed on Schedule
A attached hereto (the "Series"), as such Schedule A may be amended from time to
time;
NOW, THEREFORE, in consideration of the premises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Trust hereby appoints Distributor as its exclusive agent for the
distribution of the Shares, and Distributor 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) Distributor 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 Act and 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 Distributor has a
dealer agreement, Distributor will promptly cause such order
to be filled by the Trust. All dealer agreements shall be in
such form as has been approved by the Trust.
(b) Distributor 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) Distributor will also have the right to take, as agent for the
Trust, all actions which, in Distributor's reasonable
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 each Series shall be
calculated by the Trust or by another entity on behalf of the
Trust. Distributor 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 Distributor
shall have received an order for the purchase of the Shares.
(g) Upon receipt of purchase instructions, Distributor will
transmit such instructions to the Trust or its transfer agent
for the issuance and registration of the Shares purchased.
(h) Nothing in this Agreement shall prevent Distributor or any
affiliated person (as defined in the Act) of Distributor from
acting as distributor for any other person, firm or
corporation (including other investment companies) or in any
way limit or restrict Distributor or any such affiliated
person from buying, selling or trading any securities for its
or their own account or for the accounts of others from whom
it or they may be acting; provided, however, that Distributor
expressly represents that it will undertake no activities
which, in its reasonable judgment, will adversely affect the
performance of its obligations to the Trust under this
Agreement.
(i) Distributor, 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 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.
Distributor does not agree to sell any specific number of Shares.
Distributor, as agent for the Trust, undertakes to sell Shares on a
best efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) In providing services hereunder, Distributor will comply with
the Rules of the NASD, the federal securities laws and the
rules thereunder and the securities laws and regulations of
each state and other jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Distributor will require each dealer with whom Distributor 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 Distributor
nor any such dealers shall withhold the placing of purchase
orders so as to make a profit thereby.
(c) Distributor 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 reasonably 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. At the request of the Trust,
Distributor will assume responsibility for the review and
clearance of all advertisements and sales literature.
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(d) Distributor, 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) Distributor 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 Distributor in reasonable quantities upon
request.
6. Records to be supplied by Trust.
The Trust shall furnish to Distributor copies of all information,
financial statements and other papers which Distributor 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 Distributor, of all financial statements prepared for
the Trust by independent public accountants.
7. Fees and Expenses.
For performing its services under this Agreement, Distributor will
receive a fee from the Trust or the Adviser in accordance with
agreements between them as permitted by applicable laws, including the
Act and rules and regulations promulgated thereunder. The fee is $6,000
per annum, and shall be paid on a monthly basis. The Trust or its
investment adviser shall promptly reimburse Distributor for any
expenses that are to be paid by the Trust in accordance with the
following paragraph.
In the performance of its obligations under this Agreement, Distributor
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 or
the Adviser in accordance with agreements between them as permitted by
applicable laws, including the Act and rules and regulations
promulgated thereunder. These costs include, but are not limited to,
licensing fees, filing fees (including NASD), travel and such other
expenses as may be incurred by Distributor on behalf of the Trust.
Notwithstanding the foregoing, Distributor agrees that it shall not be
entitled to receive any fee from the Trust or to be reimbursed by the
Trust for any distribution or offering related costs unless and until
the Trust has adopted a plan of distribution pursuant to Rule 12b-1
which permits the payment of such fee or the reimbursement of such
costs.
8. Indemnification of Trust.
Distributor agrees to indemnify and hold harmless the Trust and each
person who has been, is, or may hereafter be a Trustee, officer,
employee, shareholder or control person of the Trust against any loss,
damage or expense (including the reasonable costs of investigation and
reasonable attorneys' fees) 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 (i) 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 Distributor or any agent or employee of
Distributor or any other person for whose acts Distributor is
responsible, unless such statement or omission was made in reliance
upon written information furnished by the Trust; (ii) Distributor'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
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Shares; and (iii) Distributor's failure to comply with applicable laws
and the Rules of the NASD. The Distributor 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. 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 Distributor'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 Distributor.
The Trust agrees to indemnify and hold harmless Distributor and each
person who has been, is, or may hereafter be a director, officer,
employee, shareholder or control person of Distributor against any
loss, damage or expense (including the reasonable costs of
investigation and reasonable attorneys' fees) reasonably incurred by
any of them in connection with the matters to which this Agreement
relates, except a loss resulting from the failure of Distributor or any
such other person to comply with applicable law or the terms of this
Agreement, or 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 Distributor's duties or from the
reckless disregard by any of such persons of Distributor's obligations
and duties under this Agreement, for all of which exceptions
Distributor 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 Distributor or any other person or hold
Distributor 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 Distributor 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 Distributor 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 Distributor,
and thereupon the Trust shall take over complete defense of the claim,
and neither Distributor nor any such person shall in such situation
initiate further legal or other expenses for which it shall seek
indemnification under this Paragraph 9. Distributor shall in no case
confess any claim or make any compromise in any case in which the Trust
will be asked to indemnify Distributor or any such person except with
the Trust's written consent.
Notwithstanding any other provision of this Agreement, Distributor
shall be entitled to receive and act upon advice of counsel (who may be
counsel for the Trust or its own counsel) and shall be without
liability for any action reasonably taken or thing reasonably done
pursuant to such advice, provided that such action is not in violation
of applicable federal or state laws or regulations.
10. Representations of the Parties.
(a) The Trust certifies to Distributor that: (1) as of the date of
the execution of this Agreement, each Series that is in
existence as of such date has an unlimited number of
authorized shares, and (2) this Agreement has been duly
authorized by the Trust and, when executed and delivered by
the Trust, will constitute a legal, valid and binding
obligation of the Trust, enforceable against the Trust in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and
secured parties.
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(b) Distributor represents and warrants that: (1) the various
procedures and systems which Distributor has implemented with
regard to safeguarding from loss or damage attributable to
fire, theft, or any other cause the records and other data of
the Trust and Distributor's records, data, equipment
facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such
changes therein from time to time as are required for the
secure performance of its obligations hereunder, and (2) this
Agreement has been duly authorized by Distributor and, when
executed and delivered by Distributor, will constitute a
legal, valid and binding obligation of Distributor,
enforceable against Distributor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and
remedies of creditors and secured parties.
11. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment by Distributor. This
Agreement may be amended only if such amendment is approved (i) by
Distributor and (ii) by the Board of Trustees of the Trust, including
the approval of a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Distributor by vote cast in
person at a meeting called for the purpose of voting on such approval.
Either the Trust or Distributor 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 for an initial term of two (2) years from the
date of its execution (unless terminated as set forth in Section 11),
and shall continue in effect from year to year thereafter, subject to
annual approval of such continuance by the Board of Trustees of the
Trust, including the approval of a majority of the Trustees of the
Trust who are not interested persons of the Trust or of Distributor by
vote cast in person at a meeting called for the purpose of voting on
such approval.
13. 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 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. If a matter relates only to a
particular series of the Trust, that series shall be solely responsible
for all liabilities in connection with such matter, and the Distributor
agrees that resort shall be had solely to the assets of such series for
the payment or performance thereof.
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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.
(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, with a copy to the
Trust's counsel, at such address as such other party may designate for
the receipt of such notice. Such notice will be effective upon receipt.
Until further notice to the other party, it is agreed that the address
of the Trust and the Adviser for this purpose shall be 0000 Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxx 00000, Attn: Xxxxxxx X.
Xxxxx; and that the address of Distributor for this purpose shall be
000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxx 00000, Attn: Xxxxxx X.
Xxxxxx.
18. Execution
This Agreement may be executed by one or more counterparts, each of
which shall be deemed an original, but all of which together will
constitute one in the same instrument.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the Trust and Distributor have each caused this
Agreement to be signed in duplicate on their behalf, all as of the day and year
first above written.
ATTEST: VERACITY FUNDS
By:
----------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx
Its: President
ATTEST: ULTIMUS FUND DISTRIBUTORS, LLC
By:
----------------------------------- ------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President
ATTEST: INTEGRITY ASSET MANAGEMENT, LLC
By:
----------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx
Its: Chief Executive Officer
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SCHEDULE A
TO THE DISTRIBUTION AGREEMENT BETWEEN
VERACITY FUNDS, INTEGRITY ASSET MANAGEMENT, LLC
AND
ULTIMUS FUND DISTRIBUTORS, LLC
FUND PORTFOLIOS
Veracity Small Cap Value Fund
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