Exhibit 23(H)(3)
OPERATING SERVICES AGREEMENT
FOR AVALON TRUST COMPANY
This Agreement is made and entered into as of the 15TH day of October,
1999, by and between Declaration Trust, a Pennsylvania business trust ("Trust"),
and Avalon Trust Company, a regulated trust company operating under the laws of
the State of New Mexico ("Manager").
WHEREAS, Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "Act") and is
authorized to issue shares representing interests in an unlimited number of
series of shares of its stock, each series known as a mutual fund; and
WHEREAS, Trust presently issues shares representing interests in, among
others, a series of Trust known as The Water Fund (the "Portfolio"); and
WHEREAS, Manager is an independent trust company operating as a corporation
under the laws of the State of New Mexico and engages in the business of asset
management and the provision of certain other administrative and recordkeeping
services in connection therewith; and
WHEREAS, Manager desires to enter into an arrangement with Trust whereby
Manger assumes responsibility for the costs of certain operational services
which are necessary for the day-to-day operations of the Portfolio for the
compensation and on the terms and conditions hereinafter set forth, and Trust
wishes to accept such an arrangement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, Trust and Manager agree as follows:
1. Obligations of Manager
(a) Services. Manager shall assume responsibility for the payment of the
contractually mandated costs and expenses incurred by entities that have entered
into servicing agreements with the Trust to provide the following services to
the Portfolio in the manner and to the extent that such services are reasonably
necessary for the operation of the Portfolio (collectively the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) dividend disbursing agent, dividend reinvestment agent, transfer agent,
and registrar services and functions (including answering inquiries related to
shareholder Portfolio accounts);
(3) custodian and depository services and functions;
(4) distribution, marketing, and/or underwriting services;
(5) independent pricing services;
(6) preparation of reports describing the operations of the Portfolio,
including the costs of providing such reports to broker-dealers, financial
institutions and other organizations which render services and assistance in
connection with the distribution of shares of the Portfolio;
(7) 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 Trust and Manager dated October 15, 1999),
including maintenance of shareholder records and shareholder information
concerning the status of their Portfolio accounts by investment advisors,
broker-dealers, financial institutions, and other organizations on behalf of
Manager;
(8) shareholder and board of trustees communication services, including the
costs of preparing, printing and distributing notices of shareholders' meetings,
proxy statements, prospectuses, statements of additional information, Portfolio
reports, and other communications to Trust's Portfolio shareholders, as well as
all expenses of shareholders' and board of trustees' meetings, including the
compensation and reimbursable expenses of the trustees of Trust attributable to
the Portfolio;
(9) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of the
Portfolio, and premiums for the fidelity bond maintained by Trust attributable
to the Portfolio 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).
(10) the costs of registering and maintaining the registration of shares of
the Portfolio for sale in the various states and territories of the United
States ("Blue Sky Registrations"). In regard to Blue Sky Registrations, Manager
shall determine, in its sole discretion, the states and territories in which the
shares of the Portfolio shall be registered for sale.
(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) brokers' commissions, issue and transfer taxes, and other costs
chargeable to Trust or the Portfolio in connection with securities transactions
to which Trust or the Portfolio is a party or in connection with securities
owned by Trust or the Portfolio;
(2) interest on indebtedness, if any, incurred by Trust or the Portfolio;
(3) taxes, including franchise, income, issue, transfer, business license,
and other corporate fees payable by Trust or the Portfolio to federal, state,
county, city, or other governmental agents;
(4) expenses of counsel to Trust or the Portfolio relating to litigation;
and
(5) other extraordinary expense of Trust or Portfolio.
(b) Trust and Manager have entered into an Investment Company Services
Agreement with Declaration Service Company ("DSC") and a Distribution Agreement
with Declaration Distributors, Inc. ("DDI") wherein DDI and DSC will provide the
services to the Portfolio as described above. Trust and Manager agree that the
compensation to be paid to DDI and DSC under their respective agreements is fair
and reasonable, and that Trust has the sole authority to amend, terminate, renew
or alter such agreement.
(c) Trust and Manager agree that the compensation to be paid to Manager
under this Agreement may not be sufficient to pay the costs of the Services as
described above, in which event Manager agrees to make up any shortfalls from
its own resources. Conversely, Manager and Trust agree that the compensation to
be paid to Manager under this Agreement may exceed the costs of the Services as
described above, in which event Manager shall be entitled to keep the excess.
Trust and Manager acknowledge and agree that the Portfolio is one of a
number of series of Trust currently offering shares to the public and that each
series of Trust shares responsibility for the payment of certain expenses common
to all such series according to an expense allocation plan previously adopted by
the Board of Trustees of Trust. Trust and Manager expressly warrant, covenant
and agree that the Services to be provided to the Portfolio, and the expenses to
be paid therefore by Manager, are subject to and limited by such expense
allocation plan.
2. Obligations of Trust
(a) Fee. Trust will pay to Manager on the last day of each month a fee at
an annual rate equal to 0.50% of average net asset of the Portfolio, such fee to
be computed daily based upon the net asset value of the Portfolio as determined
by a valuation made in accordance with Trust'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
the Portfolio's net asset value is suspended by the trustees of Trust, the net
asset value of a share of the Portfolio 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. Trust will, from time to time, furnish or otherwise make
available to Manager such information relating to the business and affairs of
the Portfolio as Manager may reasonably require in order to discharge its duties
and obligations hereunder.
3. Term. This Agreement shall remain in effect until October 15, 2001, 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 Trustees of Trust and (2)
a vote of a majority of the trustees of Trust who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party;
provided, however, that;
(a) Trust may, at any time and without the payment of any penalty,
terminate this Agreement upon 60 days written notice to Manager;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder); and
(c) Manager may terminate this Agreement without payment of penalty on 60
days written notice to Trust.
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 Trust: If to Manager:
Declaration Trust Avalon Trust Company
000 Xxxxx Xxxx, Xxxxx 0000 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000 Xxxxx Xx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx Attention: Xxxxx Xxxxxx
President President & Chief Executive Officer
5. Miscellaneous
(a) Choice of Law. This Agreement shall be construed in accordance with the
laws of the State of Pennsylvania and the applicable provisions of the Act. To
the extent the applicable law of the State of Pennsylvania or any of the
provisions of this Agreement conflict with the applicable provisions of the Act,
the provisions of the Act shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the day and year first above written.
DECLARATION TRUST AVALON TRUST COMPANY
_________________________________ ______________________________
By: Xxxxxxx X. Xxxxx By: Xxxxx Xxxxxx
President President & Chief Executive Officer
ATTEST: ATTEST:
_______________________________ ______________________________
By: ___________________________ By: __________________________
Secretary Secretary
[Corporate Seal] [Corporate Seal]
