EXHIBIT 5(a)
MANAGEMENT AGREEMENT
AGREEMENT made this _______, day of ________, 1997, by and between
XXXXXXX XXXXX CONVERTIBLE FUND, INC., a Maryland corporation (hereinafter
referred to as the "Company"), and XXXXXXX XXXXX ASSET MANAGEMENT, L.P., a
Delaware limited partnership (hereinafter referred to as the "Manager").
W I T N E S S E T H:
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WHEREAS, the Company is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company desires to retain the Manager to render management
and investment advisory services to the Company in the manner and on the
terms hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Company on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Company and the Manager hereby agree as follows:
ARTICLE I
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Duties of the Manager
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The Company hereby employs the Manager to act as a manager and
investment adviser of the Company and to furnish or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to policies of, review by and overall control of the Board of
Directors of the Company (the "Directors"), for the period and on the terms
and conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations
herein set forth for the compensation provided for herein. The Manager and
its affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Company in any way or otherwise be
deemed an agent of the Company.
(a) Management and Administrative Services. The Manager shall perform
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(or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Company including
administering shareholder accounts and handling shareholder relations. The
Manager shall provide the Company with office space, equipment and facilities
and such other services as the Manager, subject to review by the Directors,
shall from time to time determine to be necessary or useful to perform its
obligations under this Agreement. The Manager shall also, on behalf of the
Company, conduct relations with custodians, depositories, transfer agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries,
insurers, banks and such other persons in any such other capacity deemed to
be necessary or desirable. The Manager shall generally monitor the Company's
compliance with investment policies and restrictions as set forth in the
currently effective prospectus and statement of additional information
relating to the shares of the Company under the Securities Act of 1933, as
amended (the "Prospectus" and "Statement of Additional Information",
respectively). The Manager shall make reports to the Directors of its
performance of obligations hereunder and furnish advice and recommendations
with respect to such other aspects of the business and affairs of the Company
as it shall determine to be desirable.
(b) Investment Advisory Services. The Manager shall provide (or
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arrange for affiliates to provide) the Company with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Company, shall furnish
continuously an investment program for the Company and shall determine from
time to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Company shall be held in the various securities
in which the Company invests, options, futures, options on futures or cash,
subject always to the restrictions set forth in the Articles of Incorporation
and By-Laws of the Company, as amended from time to time, the provisions of
the Investment Company Act and the statements relating to the Company's
investment objectives, investment policies and investment restrictions as the
same are set forth in the Prospectus and Statement of Additional Information.
The Manager shall also make decisions for the Company as to the manner in
which voting rights, rights to consent to corporate action and any other
rights pertaining to the Company's portfolio securities shall be exercised.
Should the Directors at any time, however, make any definite determination as
to investment policy and notify the Manager thereof in writing, the Manager
shall be bound by such determination for the period, if any, specified in
such notice or until similarly notified that such determination has been
revoked. The Manager shall take, on behalf of the Company, all actions which
it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or
sale of portfolio securities for the Company's account with brokers or
dealers selected by it, and to that end, the Manager is authorized as the
agent of the Company to give instructions to the Custodian of the Company as
to deliveries of securities and payments of cash for the account of the
Company. In connection with the selection of such brokers or dealers and the
placing of such orders with respect to assets of the Company, the Manager is
directed at all times to seek to obtain execution and price within the policy
guidelines determined by the Directors as set forth in the Prospectus and
Statement of Additional Information. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of
1934, as amended, and other applicable provisions of law, the Manager may
select brokers or dealers with which it or the Company is affiliated.
(c) Notice Upon Change in Partners of Manager. The Manager is a
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limited partnership of which Xxxxxxx Xxxxx & Co., Inc. is the sole limited
partner and Princeton Services, Inc. is the sole general partner. The
Manager will notify the Company of any change in the membership of the
partnership within a reasonable time after such change.
ARTICLE II
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Allocation of Charges and Expenses
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(a) The Manager. The Manager assumes and shall pay for maintaining the
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staff and personnel necessary to perform its obligations under this
Agreement, and shall, at its own expense, provide the office space, equipment
and facilities which it is obligated to provide under Article I hereof, and
shall pay all compensation of officers of the Company and all Directors who
are affiliated persons of the Manager.
(b) The Company. The Company assumes and shall pay or cause to be paid
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all other expenses of the Company (except for the expenses paid by the
Distributor), including, without limitation: redemption expenses, expenses
of portfolio transactions, expenses of registering shares under federal and
state securities laws, pricing costs (including the daily calculation of net
asset value), expenses of printing shareholder reports, stock certificates,
prospectuses and statements of additional information, Securities and
Exchange Commission fees, interest, taxes, custodian and transfer agency
fees, fees and actual out-of-pocket expenses of Directors who are not
affiliated persons of the Manager, fees for legal and auditing services,
litigation expenses, costs of printing proxies and other expenses related to
shareholder meetings, and other expenses properly payable by the Company. It
is also understood that the Company will reimburse the Manager for its costs
in providing accounting services to the Company. The Distributor will pay
certain of the expenses of the Company incurred in connection with the
continuous offering of Company shares.
ARTICLE III
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Compensation of the Manager
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(a) Management Fee. For the services rendered, the facilities
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furnished and expenses assumed by the Manager, the Company shall pay to the
Manager at the end of each calendar month a fee based upon the average daily
value of the net assets of the Company, as determined and computed in
accordance with the description of the determination of net asset value
contained in the Prospectus and Statement of Additional Information, at the
annual rate of 0.60% of the average daily net assets of the Company,
commencing on the day following effectiveness hereof. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above. Subject to the provisions of
subsection (b) hereof, payment of the Manager's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by subsection (b) hereof. During any period when
the determination of net asset value is suspended by the Directors, the net
asset value of a share as of the last business day prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of
each succeeding business day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of the
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Company, including amounts payable to the Manager pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Company imposed by
applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Manager shall
reduce its management fee by the extent of such excess and, if required
pursuant to any such laws or regulations, will reimburse the Company in the
amount of such excess; provided, however, to the extent permitted by law,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the
Company. Whenever the expenses of the Company exceed a pro rata portion of
the applicable annual expense limitations, the estimated amount of
reimbursement under such limitations shall be applicable as an offset against
the monthly payment of the management fee due to the Manager. Should two or
more such expense limitations be applicable as at the end of the last
business day of the month, that expense limitation which results in the
largest reduction in the Manager's fee shall be applicable.
ARTICLE IV
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Sub-Advisory Agreement
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The Manager may enter into a separate sub-advisory agreement with
Xxxxxxx Xxxxx Asset Management U.K. Limited ("MLAM U.K.") in which the
Manager may contract for sub-advisory services and pay MLAM U.K. compensation
for its services out of the compensation received hereunder pursuant to
Article III. Such sub-advisory agreement will be coterminous with this
Management Agreement.
ARTICLE V
Limitation of Liability of the Manager
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The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission
in the management of the Company, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article V, the term "Manager" shall include any affiliates of the Manager
performing services for the Company contemplated hereby and directors,
officers and employees of the Manager and such affiliates.
ARTICLE VI
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Activities of the Manager
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The services of the Manager to the Company are not to be deemed to be
exclusive, and the Manager and any person controlled by or under common
control with the Manager (for purposes of this Article VI referred to as
"affiliates") is free to render services to others. It is understood that
Directors, officers, employees and shareholders of the Company are or may
become interested in the Manager and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers,
employees and shareholders of the Manager and its affiliates are or may
become similarly interested in the Company, and that the Manager and
directors, officers, employees, partners and shareholders of its affiliates
may become interested in the Company as shareholder or otherwise.
ARTICLE VII
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Duration and Termination of this Contract
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This Agreement shall become effective as of the date of the commencement
of operations of the Company as an open-end investment company and shall
remain in force until ________, 1999 and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Directors,
or by the vote of a majority of the outstanding voting securities of the
Company, and (ii) a majority of those Directors 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 such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Company, or by the Manager, on sixty days' written notice
to the other party. This Agreement shall automatically terminate in the
event of its assignment.
ARTICLE VIII
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Amendments of this Agreement
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This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Company, and (ii) a majority of those Directors 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 such approval.
ARTICLE IX
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Definitions of Certain Terms
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The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under the Investment Company Act.
ARTICLE X
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Governing Law
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This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXX XXXXX CONVERTIBLE FUND, INC.
By
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Title:
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By
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Title:
