EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among EXCELSIOR TAX-EXEMPT
FUNDS, INC., a Maryland corporation (herein called the "Company"), U.S. TRUST
COMPANY OF CONNECTICUT ("USTCT"), a Connecticut state bank and trust company,
and UNITED STATES TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-
chartered bank and trust company (together with USTCT, the "Investment
Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its Tax-Exempt
Money Fund, Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt Fund
portfolios ("the Funds"), and the Investment Adviser is willing to so render
such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser
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to act as investment adviser to the Company for the Funds for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
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Adviser with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
(c) Resolutions of the Board of Directors of the Company
authorizing the appointment of the Investment Adviser and the execution and
delivery of this Agreement;
(d) Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, on Form N-1A (No.
2-93068) relating to shares of the
Company's Class A Common Shares, $.001 par value, representing interests in the
Short-Term Fund; Class B Common Shares, $.001 par value, representing interests
in the Intermediate-Term Fund; and Class C Common Shares, $.001 par value,
representing interests in the Long-Term Fund ("Shares"), and all amendments
thereto;
(e) Notification of Registration of the Company under the
Investment Company Act of 1940, as amended, on Form N-8A as filed with the
Securities and Exchange Commission on August 31, 1984, and all amendments
thereto; and
(f) Prospectuses of the Company relating to the Shares in effect
under the Securities Act of 1933 (such prospectuses and supplements thereto, as
presently in effect and as from time to time amended and supplemented, herein
called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Board of Directors
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of the Company, the Investment Adviser will provide a continuous investment
program for the Funds, including investment research and management with respect
to all securities, investments, cash and cash equivalents in the Funds. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Company for the Funds.
The Investment Adviser will provide the services rendered by it hereunder in
accordance with the Funds' respective investment objectives and policies as
stated in the Prospectus. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing or carrying
Shares, or make loans to the Company;
(c) will place orders pursuant to its investment determinations
for the Funds either directly with the issuer or with any broker or dealer
selected by it. In placing orders with brokers and dealers, the Investment
Adviser will use its reasonable best efforts to obtain the best net price and
the most favorable execution of its orders, after taking into account all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition
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and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing basis.
Consistent with this obligation, the Investment Adviser may, to the extent
permitted by law, purchase and sell portfolio securities to and from brokers and
dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
any Fund and/or other accounts over which the Investment Adviser or any of its
affiliates exercises investment discretion. Subject to the review of the
Company's Board of Directors from time to time with respect to the extent and
continuation of the policy, the Investment Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research services a commission
for effecting a securities transaction for any Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion. In
no instance will portfolio securities be purchased from or sold to the Funds'
principal underwriter, the Investment Adviser or any affiliated person thereof
except as permitted by the Securities and Exchange Commission;
(d) will maintain books and records with respect to the Funds'
securities transactions and will render to the Company's Board of Directors such
periodic and special reports as the Board may request;
(e) will maintain a policy and practice of conducting its Asset
Management Group independently of its Banking Group. When the Investment Adviser
makes investment recommendations for the Funds, its Asset Management Group
personnel will not inquire or take into consideration whether the issuer of
securities proposed for purchase or sale for the Funds' account are customers of
the Banking Group. In dealing with commercial customers, the Banking Group will
not inquire or take into consideration whether securities of those customers are
held by the Funds; and
(f) will treat confidentially and as proprietary information of
the Company all records and other information relative to the Funds and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where the
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Investment Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. Nothing contained
herein, however, shall prohibit the Investment Adviser from advertising or
soliciting the public generally with respect to other products or services,
regardless of whether such advertisement or solicitation may include prior,
present or potential shareholders of the Company.
4. Services Not Exclusive. The investment management services
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rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
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31a-3 of the Rules under the Investment Company Act of 1940, the Investment
Adviser hereby agrees that all records which it maintains for the Funds are the
property of the Company and further agrees to surrender promptly to the Company
any of such records upon the Company's request. The Investment Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 the records required
to be maintained by Rule 31a-1 of the Rules.
6. Expenses. During the term of this Agreement, the Investment
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Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
In addition, if the expenses borne by any Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which the Shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse such Fund for a portion of any
such excess in an amount equal to the proportion that the fees otherwise payable
to the Investment Adviser bear to the total amount of investment advisory and
administration fees otherwise payable by the Fund up to the amount of the fees
payable to the Investment Adviser during such fiscal year pursuant to paragraph
7 hereof; provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund for a portion of any such excess expenses in an
amount equal to the proportion that the fees otherwise payable to the Investment
Adviser bear to the total amount of investment advisory and administration fees
otherwise payable by the Fund regardless of the amount of fees paid to the
Investment Adviser during such fiscal year to the extent that the securities
regulations of any state in which the Shares are registered or qualified for
sale so require.
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7. Compensation. For the services provided and the expenses assumed
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pursuant to this Agreement, the Company will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, at the following annual rates: .25% of the average
daily net assets of the Short-Term Fund, .35% of the average daily net assets of
the Intermediate-Term Fund and .50% of the average daily net assets of the Long-
Term Fund.
8. Limitation of Liability of the Investment Adviser. The Investment
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Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Company in connection with the matters to which this
Agreement relates, except the Investment Adviser shall be jointly, but not
severally, liable for a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall be effective as of
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the date hereof and, unless sooner terminated as provided herein, shall continue
until July 31, 1997. Thereafter, if not terminated, this Agreement shall
continue in effect as to a particular Fund for successive periods of 12 months
each, provided such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Board of Directors of the
Company 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, and (b) by the Board of Directors of the Company or, with respect to
any Fund, by vote of a majority of the outstanding voting securities of such
Fund; provided, however, that this Agreement may be terminated by the Company as
to any Fund at any time, without the payment of any penalty, by the Board of
Directors of the Company or, with respect to any Fund, by vote of a majority of
the outstanding voting securities of such Fund on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser as to any Fund at any time,
without payment of any penalty, on 90 days' written notice to the Company. This
Agreement will immediately terminate in the event of its assignment. (As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the Investment Company Act of 1940.)
10. Amendment of this Agreement. No provision of this Agreement may
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be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall
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be effective with respect to a Fund until approved by vote of a majority of such
Fund's outstanding voting securities.
11. Miscellaneous. The captions in this Agreement are included for
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convenience of reference only and in no way define or delimit 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 this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by New York law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
Attest:
/s/W. Xxxxx XxXxxxxx, III By:/s/F.S. Wonham
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Secretary President
[Seal]
Attest: U.S. TRUST COMPANY OF CONNECTICUT
/s/Xxxxxxx X. Xxxxx, Xx. By:/s/W. Xxxxxxx Xxxxx
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President & CEO
UNITED STATES TRUST COMPANY OF NEW YORK
Attest:
/s/Xxxxxxx X. Xxxxx, Xx. By:/s/Xxxxxxx X. Xxxxx
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Executive Vice President
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