EXPENSE RECAPTURE AGREEMENT
THIS AGREEMENT is entered into as of this ___ day of ______________, 2004
by and between Veracity Funds and Integrity Asset Management, LLC, each with its
principal place of business at 0000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxxxxx, XX 00000.
WHEREAS, Veracity Funds (the "Trust") is a statutory business trust
organized under the laws of the state of Delaware and registered with the
Securities and Exchange Commission (the "Commission") as an open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to offer an indefinite number of series of
shares (each a "Fund" and together the "Funds") and to further divide such Funds
into various classes; and
WHEREAS, the Trust currently offers the Funds and share classes thereof
listed on Schedule 1 to this Agreement, as such schedule may be amended from
time to time by agreement of the parties; and
WHEREAS, Integrity Asset Management, LLC (the "Advisor") is a limited
liability company organized under the laws of the state of Delaware and is
registered with the Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Advisor serves as investment advisor to each Fund listed on
Schedule 1 to this Agreement pursuant to a written agreement for such services;
and
WHEREAS, the Advisor has paid certain organizational expenses of the Trust
in order to organize the Trust and effect the registration of the Trust and its
shares with the Commission; and
WHEREAS, the Advisor has agreed that for the Trust's first twelve months of
operations it shall waive some or all of its investment advisory fees and/or
reimburse the Fund(s) for certain ongoing expenses in order to assist each Fund
to maintain an overall expense ratio of not greater than 1.50%; and
WHEREAS, the Trust and Advisor desire to enter into an agreement whereby
the Advisor may be afforded the opportunity to recover in future periods
organizational expenses, waived fees and/or reimbursed expenses paid or foregone
by the Advisor on behalf of one or more Funds.
NOW THEREFORE, the parties to this Agreement, for good and adequate
consideration, the receipt and sufficiency of which is acknowledged by each, and
intending to be legally bound thereby, agree as follows:
1. Under no circumstance shall the Advisor reimburse any Fund for brokerage
fees and commissions, interest and other borrowing expenses, taxes and
extraordinary expenses incurred by the Fund.
2. Whenever the Advisor waives a portion of its investment advisory fee and/or
reimburses or pays an expense of one or more Funds (hereinafter referred to
as an "Expense Support") during a month, the Advisor will keep a record of
such Expense Support and shall report the same to the Trust's Fund
Accounting Agent. The Fund Accounting Agent will maintain separate records
of such Expense Reports. For a period of thirty-six (36) months, beginning
on the first day of the month following the month in which the Expense
Support occurred, the Advisor may seek to recover such Expense Support by
giving written notice to the Fund Accounting Agent. The Fund Accounting
Agent shall perform a calculation to determine the extent of the impact on
the applicable Fund(s) expenses ratio of honoring the recovery request. If
the Fund Accounting Agent determines that honoring the request will not
cause the applicable Fund's calculated Total Annual Operating Expense ratio
to exceed 1.40%, then it shall make payment to the Advisor and make
appropriate accounting entries into the books and records of the applicable
Fund(s).
3. It is agreed and understood by the parties that the Advisor has paid all
organizational expenses of the Trust up to and including the date of this
Agreement. The Advisor has maintained records of such expenditures, which
shall be reported to the Trust's Fund Accounting Agent. The Fund Accounting
Agent will maintain separate records of such Expense Reports. For a period
of twelve (12) months, beginning on the first day of the month in which the
Trust is declared effective by the Securities and Exchange Commission, the
Advisor may seek to recover such organizational expenses by giving written
notice to the Fund Accounting Agent. The Fund Accounting Agent shall
perform a calculation to determine the extent of the impact on the
applicable Fund(s) expenses ratio of honoring the recovery request. If the
Fund Accounting Agent determines that honoring the request will not cause
the applicable Fund's calculated Total Annual Operating Expense ratio to
exceed 1.40%, then it shall make payment to the Advisor and make
appropriate accounting entries into the books and records of the applicable
Fund(s).
4. Expenses not recovered by the Advisor pursuant to Paragraphs 3 or 4 above
within the time frames set forth therein shall be forfeit and uncollectable
by the Advisor.
5. This Agreement may be terminated at any time upon thirty days written
notice by any party delivered to the other, and may be terminated at any
time by affirmative vote of a majority of the "Independent" Trustees of the
Trust, upon a finding that continue such Agreement would not be in the best
interests of the Trust's shareholders.
6. No provision of this Agreement may be changed, waived, discharged, or
terminated orally, but only by a written instrument signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought. No material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
7. 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. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of the Agreement shall not be affected thereby.
This Agreement shall be binding on, and shall inure to the benefit of, the
parties hereto and their respective successors.
8. This Agreement may be executed in counterparts by the parties hereto, each
of which shall constitute an original, and all of which, together, shall
constitute one Agreement.
9. This Agreement shall be construed in accordance with, and governed by, the
laws of the State of Kansas, without regard to such jurisdiction's
conflict-of-law statutes.
10. Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service
to the respective parties as follows:
If to the Trust: If to the Adviser:
---------------- ------------------
Veracity Funds Integrity Asset Management, LLC
0000 Xxxxxxxxx Xxxxxx Xx., Xxxxx 0000 0000 Xxxxxxxxx Xxxxxx Xx., Xxxxx 0000
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx
President President
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers designated below as of the day and year first written above.
Attest: VERACITY FUNDS
By: _______________________ By:______________________________
Name: ____________________ Xxxxxxx X. Xxxxx
Title: ______________________ Title: President
Attest: INTEGRITY ASSET MANAGEMENT, LLC.
By: ________________________ By:______________________________
Name: ______________________ Xxxxxxx X. Xxxxx
Title: ______________________ Title: President
SCHEDULE 1
VERACITY FUNDS
PORTFOLIOS OF THE TRUST
AS OF ___________, 2004
The Portfolios offered by the Trust are as follows:
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Name of Portfolio
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Veracity Small-Cap Value Fund
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