SERVICE PLAN AND AGREEMENT
WITH
INTEGRITY ASSET MANAGEMENT, LLC
FOR NO-LOAD CLASS SHARES OF
VERACITY FUNDS
This Service Plan and Agreement (the "Plan") is dated as of the 30th day of
March, 2004, by and between Veracity Funds (the "Trust"), on behalf of each of
its series (collectively, the "Funds" and individually, a "Fund") and Integrity
Asset Management, LLC (the "Advisor").
1. THE PLAN. This Plan is each Fund's written service plan for No-Load Class
shares of each Fund (the "Shares"), designed to comply with the provisions
of Rule 12b-1 as it may be amended from time to time (the "Rule") under the
Investment Company Act of 1940 (the "1940 Act"). Pursuant to this Plan,
each Fund will compensate the Advisor for its services in connection with
the personal service and maintenance of shareholder accounts that hold
Shares ("Accounts"). The Trust, on behalf of each Fund, may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The terms and provisions of this Plan
shall be interpreted and defined in a manner consistent with the provisions
and definitions contained in (i) the Trust's Xxxxxxxxxxxx Xxxxxxxxx, (xx)
xxx 0000 Xxx, (xxx) the Rule, (iv) Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., or any applicable
amendment or successor to such rule (the "NASD Conduct Rules") and (v) any
conditions pertaining either to distribution-related expenses or to a plan
of distribution to which the Trust is subject under any order on which the
Trust relies, issued at any time by the U.S. Securities and Exchange
Commission ("SEC").
2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has provided administrative support services with
respect to Shares held by Customers (defined below) of the Recipient;
(ii) shall furnish the Advisor (on behalf of each Fund) with such
information as the Advisor shall reasonably request to answer such
questions as may arise concerning the sale of Shares; and (iii) has
been selected by the Advisor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Trust's Board of
Trustees who are not "interested persons" (as defined in the 0000 Xxx)
of the Trust and who have no direct or indirect financial interest in
the operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which
such Recipient provides administrative support services or is a
custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such
Recipient's Customers, but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that more than one person or entity would otherwise qualify as
Recipients as to the same Shares, the Recipient which is the dealer of
record on the Funds' respective books as determined by the Advisor
shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. PAYMENTS FOR ADMINISTRATIVE SUPPORT SERVICES.
(a) PAYMENTS TO THE ADVISOR. In consideration of the payments made by the
Trust to the Advisor under this Plan, the Advisor shall provide
administrative support services to the Funds. Such services include
administrative support services rendered in connection with Shares (1)
sold in purchase transactions, (2) issued in exchange for shares of
another investment company for which the Advisor serves as distributor
or sub-distributor, or (3) issued pursuant to a plan of reorganization
to which a Fund is a party. If the Board believes that the Advisor may
not be rendering appropriate administrative support services in
connection with the sale of Shares, then the Advisor, at the request
of the Board, shall provide the Board with a written report or other
information to verify that the Advisor is providing appropriate
services in this regard. For such services, the Funds will make the
following payments to the Advisor:
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(i) ADMINISTRATIVE SUPPORT SERVICE FEES. Within ten (10) days of the
end of each month, the Trust, on behalf of each Fund, will make
payment in the amount of 0.0208% (0.25% on an annual basis) of the
average of the aggregate net asset value of each Fund's Shares
computed as of the close of each business day (the "Service Fee")
during that month. Such Service Fee payments received from the Trust,
on behalf of each Fund, will compensate the Advisor for providing
administrative support services with respect to Accounts. The
administrative support services in connection with Accounts may
include, but shall not be limited to, the administrative support
services that a Recipient may render as described in Section 3(b)(i)
below.
(ii) At the request of the Advisor, such payments may be made directly
by the Trust to Recipients with whom the Trust has entered into
agreements related to this Plan.
(b) PAYMENTS TO RECIPIENTS. The Advisor is authorized under the Plan to
pay Recipients service fees for rendering administrative support
services with respect to Accounts. However, no such payments shall be
made to any Recipient for any quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum amount
("Minimum Qualified Holdings"), if any, that may be set from time to
time by a majority of the Independent Trustees. All fee payments made
by the Advisor hereunder are subject to reduction or chargeback so
that the aggregate service fee payments and Advance Service Fee
Payments do not exceed the limits on payments to Recipients that are,
or may be, imposed by the NASD Conduct Rules. The Advisor may make
Plan payments to any "affiliated person" (as defined in the 0000 Xxx)
of the Advisor if such affiliated person qualifies as a Recipient or
retain such payments if the Advisor qualifies as a Recipient.
In consideration of the services provided by Recipients, the Advisor
shall make the following payments to Recipients:
(i) SERVICE FEE. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Advisor shall
make service fee payments to that Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed 0.0625% (0.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of each Fund's
Shares, computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient or
by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time
by a majority of the Independent Trustees.
Alternatively, the Advisor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (A) "Advance Service
Fee Payments" at a rate not to exceed 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings, sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed
0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the
close of each business day, constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers for a
period of more than one (1) year. At the Advisor's sole option,
Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares
are redeemed less than one year after the date such Shares were sold,
the Recipient is obligated to and will repay the Advisor on demand a
pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to,
the following: answering routine inquiries concerning the Funds,
assisting in the establishment and maintenance of accounts or
sub-accounts in the Funds and processing Share redemption
transactions, making the Funds' investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Advisor or the Funds may reasonably
request.
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(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the
Advisor or to any Recipient, but not to exceed the maximum rates set
forth above, and/or (ii) direct the Advisor to increase or decrease
any Minimum Holding Period, any maximum period set by a majority of
the Independent Trustees during which fees will be paid on Shares
constituting Qualified Holdings owned beneficially or of record by a
Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Advisor shall notify all Recipients of
any Minimum Qualified Holdings, Maximum Holding Period and Minimum
Holding Period that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such
provisions in a supplement or Statement of Additional Information or
amendment to or revision of the prospectus or Statement of Additional
Information of the Fund shall constitute sufficient notice.
(d) The Service Fee on Shares is subject to reduction or elimination under
the limits that apply to such fees under the NASD Conduct Rules
relating to sales of shares of open-end funds.
(e) Under the Plan, payments may also be made to Recipients by Integrity
Asset Management, LLC. ("Integrity") from its own resources.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth
below. It may be presumed that a Recipient has provided administrative
support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the
Plan. If either the Advisor or the Board believes that,
notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate administrative support services for Accounts,
then the Advisor, at the request of the Board, shall require the
Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate services in this regard.
If the Advisor or the Board of Trustees still is not satisfied after
the receipt of such report, either may take appropriate steps to
terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary
hereunder shall terminate. Additionally, in their discretion a
majority of the Trust's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient,
whereupon such person's or entity's rights as a third-party
beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make
the Funds or the Trust liable to make any payment whatsoever to any
person or entity other than directly to the Advisor. The Advisor has
no obligation to pay any Service Fees to any Recipient if the Advisor
has not received payment of Service Fees from the Trust, on behalf the
Funds.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of persons to be Independent Trustees of the Trust
shall be committed to the discretion of the incumbent Independent Trustees.
Nothing herein shall prevent the incumbent Independent Trustees from
soliciting the views or the involvement of others in such selection or
nomination as long as the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent Trustees.
5. REPORTS. While this Plan is in effect, the Treasurer of the Trust shall
provide written reports to the Trust's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly.
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6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the
0000 Xxx) of each Fund's outstanding voting No-Load Class shares; (ii) such
termination shall be on not more than sixty days' written notice to any
other party to the agreement; (iii) such agreement shall automatically
terminate in the event of its "assignment" (as defined in the 1940 Act);
(iv) such agreement shall go into effect when approved by a vote of the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (v) such agreement shall,
unless terminated as herein provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually
by a vote of the Board and its Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person
at a meeting, for the purpose of voting on this Plan. Unless terminated as
hereinafter provided, it shall continue in effect until renewed by the
Board in accordance with the Rule and thereafter from year to year or as
the Board may otherwise determine but only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the No-Load Class
Shareholders of the relevant Funds at a meeting called for that purpose and
all material amendments must be approved by a vote of the Board and of the
Independent Trustees.
This Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 0000 Xxx) of each Fund's outstanding No-Load Class voting
shares voting separately. In the event of such termination, the Board and
its Independent Trustees shall determine whether the Advisor shall be
entitled to payment from the Fund of all or a portion of the Service Fee
and/or the Asset-Based Sales Charge in respect of Shares sold prior to the
effective date of such termination.
8. SEVERABILITY. The terms of this Plan shall severable with respect to each
Fund.
Veracity Funds
on behalf of each of its series
By: /s/Xxxx X. Xxxxx
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Xxxx X. Xxxxx, Treasurer
Integrity Asset Management, LLC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxx X. Xxxxx, Chief Executive Officer
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