OPERATING SERVICES AGREEMENT
ATC FUNDS, INC.
As Amended
November 9, 2001 and February 21, 2002
This Agreement, made and entered into as of the 1st day of December
2000 and amended on November 9, 2001, by and between ATC Funds, Inc., a Maryland
corporation (the "Fund"), and Avalon Trust Company, a New Mexico state chartered
trust company (hereinafter referred to as "Manager"), is further amended as of
this 21st day of February 2002.
WHEREAS, the Fund is an open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in an indefinite number of
series (each a "Portfolio"); and
WHEREAS, Manager is authorized to act as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of asset
management and the provision of certain other administrative and recordkeeping
services in connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for
the provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolios set forth in Exhibit A attached to this
Agreement, as such Exhibit A may be amended from time to time by agreement of
the parties, in the manner and on the terms and conditions hereinafter set
forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the Fund and Manager agree as follows:
1. Obligations of Manager
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt of
written approval of the Fund, arrange for other companies to provide, the
following services to the Portfolio(s) in the manner and to the extent
that such services are reasonably necessary for the operation of the
Portfolio(s) (collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of
any independent public accountants;
(2) non-litigation related legal and compliance services, including
the expenses of maintaining registration and qualification of the
Fund and the Portfolio(s) under federal, state and any other
applicable laws and regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) independent pricing services;
(6) sub-accounting and recordkeeping services and functions (other
than those books and records required to be maintained by Manager
under the Investment Advisory Agreement between the Fund and
Manager dated December 1, 2000), including maintenance of
shareholder records and shareholder information concerning the
status of their Portfolio(s) accounts by investment advisors,
broker-dealers, financial institutions, and other organizations on
behalf of Manager;
(7) shareholder and board of directors communication services,
including the costs of preparing, printing and distributing
notices of shareholders' meetings, proxy statements, prospectuses
and statements of additional information for existing
shareholders, Portfolio reports, and other communications to
shareholders, as well as all expenses of shareholders' and board
of directors' meetings, including the compensation and
reimbursable expenses of the directors of the Fund;
(8) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares
of the Portfolio(s), and premiums for the fidelity bond maintained
by the Fund pursuant to Section 17(g) of the Act and rules
promulgated thereunder (except for such premiums as may be
allocated to third parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of Paragraph 1(a)
above, the Services shall not include and Manager will not be responsible
for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund or the Portfolio(s) in connection with
securities transactions to which the Fund or the Portfolio(s) is a
party or in connection with securities owned by the Fund or the
Portfolio(s);
(2) the interest on indebtedness, if any, incurred by the Fund or the
Portfolio(s);
(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the
Portfolio(s) to federal, state, county, city, or other governmental
agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the
Portfolio(s); and
(5) any other extraordinary expense of the Fund or Portfolio(s).
(c) Books and Records. All books and records prepared and maintained by Manager
for the Fund under this Agreement shall be the property of the Fund and,
upon request therefor, Manager shall surrender to the Fund such of the
books and records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for maintaining the
staff, personnel, space, equipment and facilities necessary to perform its
obligations under this Agreement.
2. Obligations of the Fund
(a) Fee. The Fund will pay to Manager on the last day of each month a fee at an
annual rate equal to the percentages of average net assets of each Portfolio
subject to this Agreement set forth on Exhibit B to this Agreement, as such
Exhibit B may be amended from time to time by agreement of the parties, such
fees to be computed daily based upon the net asset value of the Portfolio(s) as
determined by a valuation made in accordance with the Portfolio's procedure for
calculating Portfolio net asset value as described in the Portfolio's Prospectus
and/or Statement of Additional Information. During any period when the
determination of a Portfolio's net asset value is suspended by the directors of
the Fund, the net asset value of a share of the Portfolio(s) as of the last
business day prior to such suspension shall, for the purpose of this Paragraph
2(a), be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
(b) Information. The Fund will, from time to time, furnish or otherwise make
available to Manager such information relating to the business and affairs of
the Portfolio(s) as Manager may reasonably require in order to discharge its
duties and obligations hereunder.
3. Term. This Agreement shall remain in effect until December 1, 2002, and from
year to year thereafter provided such continuance is approved at least annually
by (1) the vote of a majority of the Board of Directors of the Fund or (2) a
vote of a "majority" (as that term is defined in the Investment Company Act of
1940) of the Fund's outstanding securities; provided, however, that;
(a) at any time and without the payment of any penalty, the Fund may
terminate this Agreement upon 90 days written notice to Manager;
(b) this Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) at any time and without the payment of any penalty, Manager may
terminate this Agreement upon 90 days written notice to the Fund.
4. Notices. 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 Fund: If to the Adviser:
--------------- ------------------
ATC Funds, Inc. Avalon Trust Company
000 Xxxxxxx Xxxxxx, Xxxxx 000 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xx, Xxx Xxxxxx 87501-2052 Xxxxx Xx, Xxx Xxxxxx 00000-0000
Xxxxx Xxxxxx Xxxx Xxxxxxxxxxx
President Senior Vice President
5. Miscellaneous
(a) Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access to the
personnel and records of Manager in order to enable such representatives to
monitor the quality of services being provided and the level of fees due
Manager pursuant to this Agreement. In addition, Manager shall promptly
deliver to the Board of Directors of the Fund such information as may
reasonably be requested from time to time to permit the Board of Directors
to make an informed determination regarding continuation of this Agreement
and the payments contemplated to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance with the
laws of the State of Maryland and the applicable provisions of the Act. To
the extent the applicable law of the State of Maryland or any of the
provisions herein conflict with the applicable provisions of the Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
ATC FUNDS, INC. AVALON TRUST COMPANY
------------------------------- -----------------------------
By: Xxxxx Xxxxxx By: Xxxx Xxxxxxxxxxx
Its: President Its: Senior Vice President
ATTEST: ATTEST:
-----------------------------
By: C. Xxxxxxx Xxxxxxxx By: __________________________
Secretary Secretary
Exhibit A
Portfolios Subject to
Investment Advisory Agreement
Between ATC Funds, Inc. and
Avalon Trust Company dated
December 1, 2000
and
Amended November 9, 2001 and February 21, 2002
The Education Fund
The Water Fund
Exhibit B
Pricing Schedule for
Portfolios Subject to
Investment Advisory Agreement
Between ATC Funds, Inc. and
Avalon Trust Company dated
December 1, 2000
and
Amended November 9, 2001 and February 21, 2002
Name of Portfolio Annual Fee
----------------- ----------
The Education Fund 0.50%
The Water Fund 0.50%
