Exhibit 23(E)(2)
DISTRIBUTION AGREEMENT
FOR THE WATER FUND
THIS AGREEMENT, dated as of the 15th day of October, 1999, is made by and
between Declaration Trust ("Trust"), a Pennsylvania unincorporated business
trust operating as an open-end, management investment company registered under
the Investment Company Act of 1940, as amended (the "Act"), on behalf of the
Water Fund, a separate series of the Trust, Avalon Trust Company ("Adviser"), an
independent trust company duly organized as a corporation under the laws of the
State of New Mexico, and Declaration Service Company ("Declaration"), a
corporation duly organized under the laws of the Commonwealth of Pennsylvania
(collectively, the "Parties").
WITNESSETH THAT:
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 r withdraw the offering
of the Portfolio's Shares whenever, in its sole discretion, it deems such action
to be desirable, and Distributor shall process no further orders for Shares
after it receives notice of such termination, suspension or withdrawal.
2. Trust Documents. Trust has provided Distributor with properly certified
or authenticated copies of the following Portfolio related documents in effect
on the date hereof: the Trust 's organizational documents, including Declaration
of Trust and by-laws; the Portfolio's most current Prospectus and Statement of
Additional Information; and resolutions of Trust 's Board of Trustees
authorizing the appointment of Distributor and approving this Agreement. Trust
shall promptly provide to Distributor copies, properly certified or
authenticated, of all amendments or supplements to the foregoing. Trust shall
provide to Distributor copies of all other information which Distributor may
reasonably request for use in connection with the distribution of Shares,
including, but not limited to, a certified copy of all financial statements
prepared for the Portfolio by its independent public accountants. Trust shall
also supply Distributor with such number of copies of the Portfolio's current
Prospectus, Statement of Additional Information and shareholder reports as
Distributor shall reasonably request.
3. Distribution Services. Distributor shall sell and repurchase Shares of
the Portfolio as set forth below, subject to the registration requirements of
the 1933 Act and the rules and regulations thereunder, and the laws governing
the sale of securities in the various states ("Blue Sky Laws"):
a. Distributor, as agent for the Trust, shall sell Portfolio Shares to the
public against orders therefor at the public offering price as determined in
accordance with the Portfolio's then current Prospectus and Statement of
Additional Information.
b. The net asset value of the Portfolio's Shares shall be determined in the
manner provided in the Portfolio's then current Prospectus and Statement of
Additional Information. The net asset value of the Shares shall be calculated by
Trust or by another entity on behalf of Trust. Distributor shall have no duty to
inquire into or liability for the accuracy of the net asset value per Share as
calculated.
c. Upon receipt of purchase instructions, Distributor shall transmit such
instructions to Trust or its transfer agent for registration of the Portfolio
Shares purchased.
d. Distributor shall also have the right to take, as agent for the
Portfolio, all actions which, in the Distributor's judgment, are necessary to
effect the distribution of Portfolio Shares.
e. Nothing in this Agreement shall prevent Distributor or any "affiliated
person" from buying, selling or trading any Portfolio securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Distributor expressly agrees that it shall not
for its own account purchase any Shares of the Portfolio except for investment
purposes and that it shall not for its own account sell any such Shares except
for redemption of such Shares by the Portfolio, and that it shall not undertake
activities which, in its judgment, would adversely affect the performance of its
obligations to the Portfolio under this Agreement.
f. Distributor, as agent for the Portfolio, shall repurchase Shares at such
prices and upon such terms and conditions as shall be specified in the
Portfolio's Prospectus.
4. Distribution Support Services. In addition to the sale and repurchase of
Portfolio Shares, Distributor shall perform the following distribution support
services: Review of sales and marketing literature and submission to the NASD;
NASD record keeping; and quarterly reports to Trust 's Board of Trustees. Such
distribution support services may also include: fulfillment services, including
telemarketing, printing, mailing and follow-up tracking of sales leads; and
licensing Adviser or Trust personnel as registered representatives of the
Distributor and related supervisory activities.
5. Reasonable Efforts. Distributor shall use all reasonable efforts in
connection with the distribution of Portfolio Shares. Distributor shall have no
obligation to sell any specific number of Portfolio Shares and shall only sell
Shares against orders received therefor. Trust shall retain the right to refuse
at any time to sell any Portfolio Shares for any reason deemed adequate by it.
6. Compliance. In furtherance of the distribution services being provided
hereunder, Distributor, Adviser and Trust agree as follows:
a. Distributor shall comply with the Rules of Conduct of the NASD and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
Shares.
b. Distributor shall require each dealer with whom Distributor has a
selling agreement to conform to the applicable provisions of the Portfolio's
most current Prospectus and Statement of Additional Information, with respect to
the public offering price of the Portfolio's Shares.
c. Trust and/or Adviser, as applicable, each agree to furnish to
Distributor sufficient copies of any agreements, plans, communications with the
public or other materials it intends to use in connection with any sales of
Portfolio Shares in a timely manner in order to allow Distributor to review,
approve and file such materials with the appropriate regulatory authorities and
obtain clearance for use. Trust and/or Adviser, as applicable, each agree not to
use any such materials until so filed and cleared for use by appropriate
authorities and Distributor.
d. Distributor, at its own expense, shall qualify as a broker or dealer, or
otherwise, under all applicable Federal or state laws required to permit the
sale of Portfolio Shares in such states as shall be mutually agreed upon by the
parties; provided, however that Distributor shall have no obligation to register
as a broker or dealer under the Blue Sky Laws of any and reports prepared for
use in connection with the offering of Shares for sale to the public;
advertising in connection with such offering, including public relations
services, sales presentations, media charges, preparation, printing and mailing
of advertising and sales literature; data processing necessary to support a
distribution effort; distribution and shareholder servicing activities of
broker-dealers and other financial institutions; filing fees required by
regulatory authorities for sales literature and advertising materials; any
additional out-of-pocket expenses incurred in connection with the foregoing and
any other costs of distribution.
8. Compensation. For the distribution and distribution support services
provided by Distributor pursuant to the terms of the Agreement, Adviser shall
pay to Distributor, on the last day of each month, an annual fee of $20,000,
such fee to be paid in equal monthly installments. Adviser shall also reimburse
Distributor for its out-of-pocket expenses related to the performance of its
duties hereunder, including, without limitation, telecommunications charges,
postage and delivery charges, record retention costs, reproduction charges and
traveling and lodging expenses incurred by officers and employees of the
Distributor. Adviser shall pay Distributor's monthly invoices for distribution
fees and out-of-pocket expenses within ten days of the respective month-end. If
this Agreement becomes effective subsequent to the first day of the month or
terminates before the last day of the month, Adviser shall pay to Distributor a
distribution fee that is prorated for that part of the month in which this
Agreement is in effect. All rights of compensation and reimbursement under this
Agreement for services performed by Distributor as of the termination date shall
survive the termination of this Agreement.
Upon receipt of an invoice therefor, Adviser agrees to pay such fees within
ten (10) calendar days. In addition, Adviser agrees to reimburse Declaration for
any out-of-pocket expenses paid by Declaration on behalf of the Portfolio within
ten (10) calendar days of Adviser's receipt of an invoice therefor. In the event
Adviser is unable to pay such invoices for services or out-of-pocket expenses,
for any reason, Trust agrees to pay Declaration the full amount(s) due within
ten (10) additional business days.
9. Use of Distributor's Name. Trust shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Portfolio in a
manner not approved prior thereto in writing by Distributor; provided, however,
that Distributor shall approve all uses of its and its affiliates' names that
merely refer in accurate terms to their appointments or that are required by the
Securities and Exchange Commission (the "SEC") or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
10. Use of Trust's Name. Neither Distributor nor any of its affiliates
shall use the name of Trust or material relating to the Portfolio on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto by Trust; provided, however, that
Trust shall approve all uses of its name that merely refer in accurate terms to
the appointment of Distributor hereunder or that are required by the SEC or any
state securities commission; and further provided, that in no event shall such
approval be unreasonably withheld.
11. Liability of Distributor. The duties of Distributor shall be limited to
those expressly set forth herein, and no implied duties are assumed by or may be
asserted against Distributor hereunder. Distributor shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Portfolio in
connection with the matters to which this Agreement relates, except to the
extent of a loss resulting from willful misfeasance, bad faith or negligence, or
reckless disregard of its obligations and duties under this Agreement. As used
in this Section 11 and in Section 12 (except the second paragraph of Section
12), the term "Distributor" shall include directors, officers, employees and
other agents of the Distributor.
12. Indemnification of Distributor. Trust shall indemnify and hold harmless
Distributor against any and all liabilities, losses, damages, claims and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and investigation expenses incident thereto) which Distributor may
incur or be required to pay hereafter, in connection with any action, suit or
other proceeding, whether civil or criminal, before any court or administrative
or legislative body, in which Distributor may be involved as a party or
otherwise or with which the Distributor may be threatened, by reason of the
offer or sale of the Portfolio's Shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of Distributor who
may be or become an officer, director, employee or agent of Trust, shall be
deemed, when rendering services to Trust or acting on any business of the
Portfolio (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for Trust
and not as a director, officer, employee, shareholder or agent, or one under the
control or direction of Distributor, even though receiving a salary from the
Distributor.
Trust agrees to indemnify and hold harmless Distributor, and each person
who controls the Distributor within the meaning of Section 15 of the 1933 Act,
or Section 20 of the Securities Exchange Act of 1934, as amended ("1934 Act"),
against any and all liabilities, losses, damages, claims and expenses, joint or
several (including, without limitation, reasonable attorneys' fees and
disbursements and investigation expenses incident thereto) to which they, or any
of them, may become subject under the 1933 Act, the 1934 Act, the 1940 Act or
other Federal or state laws or regulations, at common law or otherwise, insofar
as such liabilities, losses, damages, claims and expenses (or actions, suits or
proceedings in respect thereof) arise out of or relate to any untrue statement
or alleged untrue statement of a material fact contained in the Portfolio's
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by Trust and provided by Trust
to Distributor for Distributor's use hereunder, or which arise out of or relate
to any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading.
Distributor (or any person controlling the Distributor) shall not be
entitled to indemnity hereunder for any liabilities, losses, damages, claims or
expenses (or actions, suits or proceedings in respect thereof) resulting from
(i) an untrue statement or omission or alleged untrue statement or omission made
in the Portfolio's Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to Trust by the Distributor specifically for
use therein or (ii) Distributor's own willful misfeasance, bad faith, negligence
or reckless disregard of its duties and obligations in the performance of this
Agreement.
Distributor agrees to indemnify and hold harmless Trust and each person who
controls Trust within the meaning of Section 15 of the 1933 Act, or Section 20
of the 1934 Act, against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws, at common law or otherwise, insofar as
such liabilities, losses, damages, claims or expenses arise out of or relate to
any untrue statement or alleged untrue statement of a material fact contained in
the Portfolio's Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to Trust by Distributor specifically for use
therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
13. Dual Employees. Adviser and Trust each agree that only its employees
who are registered representatives of Distributor ("dual employees") shall offer
or sell Shares of the Portfolio and further agrees that the activities of any
such employees as registered representatives of Distributor shall be limited to
offering and selling Portfolio Shares. If there are dual employees, one employee
of Adviser or Trust, as applicable, shall register as a principal of Distributor
and assist Distributor in monitoring the marketing and sales activities of the
dual employees. Adviser shall maintain errors and omissions and fidelity bond
insurance policies providing reasonable coverage for its employees activities
and shall provide copies of such policies to Distributor. Adviser and Trust
shall indemnify and hold harmless Distributor against any and all liabilities,
losses, damages, claims and expenses (including reasonable attorneys' fees and
disbursements and investigation costs incident thereto) arising from or related
to Adviser's or Trust's, as applicable, employees' activities as registered
representatives of Distributor, including, without limitation, any and all such
liabilities, losses, damages, claims and expenses arising from or related to the
breach by such dual employees of any rules or regulations of the NASD or SEC.
14. Force Majeure. Distributor shall not be liable for any delays or errors
occurring by reason of circumstances not reasonably foreseeable and beyond its
control, including, but not limited, to acts of civil or military authority,
national emergencies, work stoppages, fire, flood, catastrophe, acts of God,
insurrection, war, riot or failure of communication or power supply. In the
event of equipment breakdowns which are beyond the reasonable control of
Distributor and not primarily attributable to the failure of Distributor to
reasonably maintain or provide for the maintenance of such equipment,
Distributor shall, at no additional expense to Adviser or Trust, take reasonable
steps in good faith to minimize service interruptions, but shall have no
liability with respect thereto.
15. Scope of Duties. Distributor and Trust shall regularly consult with
each other regarding Distributor's performance of its obligations and its
compensation under the foregoing provisions. In connection therewith, Trust
shall submit to Distributor at a reasonable time in advance of filing with the
SEC copies of any amended or supplemented Registration Statement of the
Portfolio (including exhibits) under the 1940 Act and the 1933 Act, and at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Trust
on behalf of the Portfolio. Any change in such materials that would require any
change in Distributor's obligations under the foregoing provisions shall be
subject to Distributor's approval. In the event that a change in such documents
or in the procedures contained therein increases the cost or burden to
Distributor of performing its obligations hereunder, Distributor shall be
entitled to receive reasonable compensation therefore.
16. Duration. This Agreement shall become effective as of the date first
above written, and shall continue in force for two years from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Trustees of Trust, and (ii) the vote
of a majority of those Trustees of Trust who are not interested persons of
Trust, and who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on the
approval.
17. Termination. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial two year term as set forth in
Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the majority
of the Trustees who are not interested persons of Trust, upon not less than 60
days prior written notice to Distributor.
d. Distributor may terminate this Agreement upon not less than 60 days
prior written notice to Trust.
Upon the termination of this Agreement, Adviser shall pay to Distributor
such compensation and out-of-pocket expenses as may be payable for the period
prior to the effective date of such termination. In the event that Trust
designates a successor to any of Distributor's obligations hereunder,
Distributor shall, at the expense and direction of Trust, transfer to such
successor all relevant books, records and other data established or maintained
by Distributor pursuant to the foregoing provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. Amendment. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by Distributor, Adviser and Trust and shall not become
effective unless its terms have been approved by the majority of the Trustees of
Trust and by a majority of those Trustees who are not "interested persons" of
Trust or any party to this Agreement.
19. Non-Exclusive Services. The services of Distributor rendered to Trust
on behalf of the Portfolio are not exclusive. Distributor may render such
services to any other investment company.
20. Definitions. As used in this Agreement, the terms "assignment,"
"interested person" and "affiliated person" shall have the respective meanings
specified in the 1940 Act and the rules enacted thereunder as now in effect or
hereafter amended.
21. Confidentiality. Distributor shall treat confidentially and as
proprietary information of Trust all records and other information relating to
the Portfolio and prior, present or potential shareholders and shall not use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by Trust or Adviser.
22. Notice. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 20 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to Trust: (b) if to Adviser: (c) if to Distributor:
Declaration Trust Avalon Trust Company Declaration Distributors, Inc.
000 Xxxxx Xxxx, Xxxxx 0000 000 Xxxxxxx Xxx., Xxxxx 000 000 Xxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000 Xxxxx Xx, XX 00000-0000 Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx Attn: Xxxxx Xxxxxx Attn: Xxxxxxx X. Xxxxx
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. Governing Law. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. Entire Agreement. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
Declaration
Declaration Trust Avalon Trust Company Distributors, Inc.
__________________ ______________________ ________________________
Xxxxxxx X. Xxxxx Xxxxx Xxxxxx Xxxxxxx X. Xxxxx
President President and CEO Chief Executive Officer
