FEE WAIVER AND OPERATING EXPENSES LIMITATION AGREEMENT
FEE
WAIVER AND
OPERATING
EXPENSES LIMITATION AGREEMENT
THIS AGREEMENT (the
"Agreement"), dated as of the ___ day of _________, 2009, is by and between
Fairholme Funds, Inc. (the "Company"), on behalf of its series The Fairholme
Focused Income Fund (the "Fund"), and Fairholme Capital Management, LLC (the
"Manager").
WITNESSETH:
WHEREAS, the Manager renders
investment management and other services to the Fund pursuant to the terms and
provisions of an Investment Management Agreement between the Company, on behalf
of the Fund, and the Manager dated as of the ___ day of ____________ 2009, (the
"Investment Management Agreement"); and
WHEREAS, the Fund is
responsible for, and has assumed the obligation for, payment of certain expenses
pursuant to the Investment Management Agreement that have not been assumed by
the Manager; and
WHEREAS, the Manager desires
to waive its management fee and/or limit the Fund's Operating Expenses (as that
term is defined in Paragraph 2 of this Agreement) pursuant to the terms and
provisions of this Agreement, and the Company (on behalf of the Fund) desires to
allow the Manager to implement the waiver and/or limits;
NOW THEREFORE, in
consideration of the covenants and the mutual promises hereinafter set forth,
the parties, intending to be legally bound hereby, mutually agree as
follows:
1. FEE WAIVER/LIMIT ON
OPERATING EXPENSES. The Manager hereby agrees to waive its
management fee and/or limit the Fund's current Operating Expenses to an annual
rate, expressed as a percentage of the Fund's daily average net assets, of 0.50%
of the Fund's daily average net assets (the "Annual Limit"). In the
event that the current Operating Expenses of the Fund, as accrued each month,
exceed its Annual Limit, the Advisor will, if necessary, pay to the Fund, on a
monthly basis, the excess expense within fifteen (15) calendar days, or such
other period as determined by the Board of Directors of the Company, of being
notified that an excess expense payment is due. In the event
that the Board of Directors of the Company determines that an excess expense
payment due date be other than fifteen (15) calendar days, the Company will
provide the Manager with ten (10) calendar days written notice prior to the
implementation of such other excess expense payment due date.
2. DEFINITION. For
purposes of this Agreement, the term "Operating Expenses" with respect to the
Fund, is defined to include all expenses necessary or appropriate for the
operation of the Fund, including the Manager's management fee detailed in the
Investment Management Agreement (the "Management Fee") and other expenses
corresponding to services assumed by the Manager pursuant to the Investment
Management Agreement, but does not include any taxes, interest, brokerage
commissions, acquired fund fees and expenses, expenses incurred in connection
with any merger or reorganization, or extraordinary expenses such as
litigation.
3. REIMBURSEMENT OF FEE
WAIVER AND/OR EXPENSES. The Manager retains its right to
receive reimbursement of any amount (the "Waived Amount") corresponding to its
waiver of the Management Fee or to its payment of Operating Expenses made
hereunder. Any such Waived Amount is subject to reimbursement by the
Fund to the Manager, if so requested by the Manager, in subsequent fiscal years
provided that the aggregate amount paid by the Fund for Operating Expenses for
such fiscal year (taking into account any reimbursement) does not exceed the
applicable limitation on Operating Expenses for that year or, if no such
limitation is effective for that year, the Management Fee payable by the Fund to
the Manager for that year. Under this Agreement, the Manager may recoup from the
Fund reimbursement of any Waived Amount made in any fiscal year of the Fund over
the following three fiscal years of the Fund. Any such reimbursement
is also contingent upon Board of Directors review and approval at time the
reimbursement is made.
4. TERM. This
Agreement shall become effective on the date specified herein and shall remain
in effect for a period of one year, unless sooner terminated as provided in
Paragraph 5 of this Agreement.
5. TERMINATION.
This Agreement may be terminated at any time, and without payment of any
penalty, by the Board of Directors of the Company, on behalf of the Fund, upon
sixty (60) days' written notice to the Manager. This Agreement may not be
terminated by the Manager without the consent of the Board of Directors of the
Company, which consent will not be unreasonably withheld. This Agreement will
automatically terminate if the Investment Management Agreement is terminated,
with such termination effective upon the effective date of the Investment
Management Agreement's termination.
6. ASSIGNMENT. This
Agreement and all rights and obligations hereunder may not be assigned by a
party without the written consent of the other party.
7. SEVERABILITY. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute or rule, or shall be otherwise rendered invalid, the remainder
of this Agreement shall not be affected thereby.
8. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Maryland without giving effect to the conflict of laws
principles thereof; provided that nothing herein shall be construed to preempt,
or to be inconsistent with, any federal law, regulation or rule, including the
Investment Company Act of 1940, and the Investment Advisers Act of 1940, and any
rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and attested by
their duly authorized officers, all on the day and year first above
written.
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FAIRHOLME
FUNDS, INC.
on
behalf of the Fund
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FAIRHOLME CAPITAL
MANAGEMENT, LLC |
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By: ____________________________
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By: _______________________________
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Name:
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Name:
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Title:
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Title:
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SK 22146 0013
1037378
