Exhibit 23D(2)
EXPENSE RECAPTURE AGREEMENT
THIS AGREEMENT is entered into as of this 30th day of March, 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 1.50%, 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 1.50%, 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.
2
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 Kentucky, 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 Advisor:
---------------- ------------------
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 Chief Executive Officer
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
3
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: Chief Executive Officer
SCHEDULE 1
VERACITY FUNDS
PORTFOLIOS OF THE TRUST
AS OF MARCH 30, 2004
The Portfolios offered by the Trust are as follows:
------------------------------------------------
Name of Portfolio
------------------------------------------------
Veracity Small Cap Value Fund
------------------------------------------------
------------------------------------------------
------------------------------------------------
4
