CO-ADVISORY AND MANAGEMENT AGREEMENT
THIS CO-ADVISORY AND MANAGEMENT AGREEMENT is made as of this___th day of
_____________, 1997, between FIRST FUNDS, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), on behalf of its
CAPITAL APPRECIATION PORTFOLIO (the "Portfolio") and First Tennessee Bank
National Association (the " Co-Adviser").
WHEREAS, the Trust has been organized to operate as an investment company
registered under the Investment Company Act of 1940 (the "1940 Act") with
multiple series of shares (hereinafter referred to as Classes) having varying
preferences, limitations and relative rights, and to invest and reinvest the
assets of the Portfolio in securities pursuant to investment objectives and
policies for the Portfolio;
WHEREAS, the Trust desires to obtain the services, information, advice,
assistance and facilities of an investment adviser and to have an investment
adviser provide or perform for it various investment advisory, statistical,
research, investment adviser selection and counseling and other services with
respect to the Portfolio as set forth more fully herein, but exclusive of
day-to-day investment management services;
WHEREAS, the Trust, under separate agreement (the "Investment Management
Agreement"), has engaged the services of Investment Advisers, Inc. (the
"Investment Adviser") to provide day-to-day investment management of the
Portfolio's assets and securities, to conduct a continuous program of
investment of the Portfolio's assets, and to provide other advisory services as
outlined in such agreement.
NOW, THEREFORE, the Trust, on behalf of the Portfolio, and Co-Adviser agree
as follows:
1. EMPLOYMENT OF THE CO-ADVISER. The Trust hereby employs the Co-Adviser
to provide investment advisory services in the manner set forth in Section 2A of
this Agreement, subject to the direction of the Trustees, for the period, in the
manner, and on the terms hereinafter set forth. The Co-Adviser hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth. The Co-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
or represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. OBLIGATION OF AND SERVICES TO BE PROVIDED BY THE CO-ADVISER. The
Co-Adviser undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. Investment Advisory Services.
(a) The Co-Adviser will provide the Trust with research and
recommendations on investment objectives and guidelines for the
Portfolio.
(b) The Co-Adviser will provide research, analyses and
recommendations on qualified candidates to perform the investment
advisory and, if applicable, sub-advisory duties and
responsibilities for the day-to-day management of a continuous
investment program for the Portfolio and the related functions to
sustain that role.
(c) The Co-Adviser will perform or obtain research and analysis on
the risk characteristics of the Portfolio as well as the
investment performance of the
Investment Adviser, or other investment advisers or sub-advisers,
with respect to the Portfolio and comparisons of its absolute and
relevant performance to relevant indices and investment
universes.
(d) The Co-Adviser will determine and recommend allocation of assets
between multiple active investment advisers, at such time that
the assets of the Portfolio reach such size that multiple active
investment advisers are warranted.
(e) The Co-Adviser may make presentations or reports on behalf of the
Investment Adviser, or other investment advisers or sub-advisers,
(collectively the "Advisers") at the request of the Advisers in
meetings and other settings where the presence of a
representative of any such Advisers is needed or requested but is
unable to attend. Such meetings and settings may include, but
are not limited to, (i) Board of Trustee Meetings, (ii) meetings
with broker-dealers, and (iii) meetings with other channels of
distribution. Such meetings shall not include regulatory
meetings.
(f) The Co-Adviser will monitor and coordinate the activities of the
Advisers with the Portfolio's transfer agent, administrator,
custodian and independent accountants.
(g) The Co-Adviser will monitor purchase and sales transactions,
following settlement thereof, entered into by the Investment
Adviser on behalf of the Portfolio to determine compliance with
prospectus investment limitations and will report to the Board of
Trustees and the officers of the Trust on relevant observations.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Co-Adviser will make available and provide such financial,
accounting and statistical information related to its duties and
responsibilities hereunder as required by the Trustees and necessary
for the preparation of registration statements, reports and other
documents required by federal and state securities laws and such other
information as the Trustees may reasonably request for use by the
Trust and its distributor for the underwriting and distribution of the
Portfolio's shares.
C. Other Obligations and Services.
The Co-Adviser agrees to make available its officers and employees to
the Trustees and officers of the Trust for consultation and
discussions regarding the Co-Adviser's duties hereunder and its
activities with respect to the Portfolio.
3. COVENANTS BY CO-ADVISER. The Co-Adviser agrees with respect to the
services provided to the Portfolio that it:
(a) will comply with all applicable rules and regulations of the
Securities and Exchange Commission ("SEC") and will in addition
conduct its activities under this Agreement in accordance with
the Portfolio's current registration statement and applicable
regulations of the Office of the Comptroller of the Currency
pertaining to the investment advisory activities of national
banks which are applicable to the Co-Adviser;
(b) will not make loans to any person for the purpose of purchasing
or carrying Trust or Portfolio shares, or make loans to the Trust
or the Portfolio;
(c) will not purchase shares of the Trust or the Portfolio for its
own investment account;
(d) will maintain all books and records with respect to its duties
set forth herein, and furnish the Trustees such periodic and
special reports as the Trustees may request with respect to the
Portfolio;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and
the Portfolio and prior, present or potential shareholders (other
than any information which Co-Adviser may have obtained about
shareholders from other business relationships with such
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 Trust, which approval shall not be unreasonably
withheld and may not be withheld and will be deemed granted where
the Co-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when so requested by
the Trust or when otherwise required or permitted by law); and
(f) will, to the best of its knowledge and ability, immediately
notify the Trust of the occurrence of any event which would
disqualify Co-Adviser or the Investment Adviser from serving as
investment adviser of an investment company.
4. EXPENSES OF THE PORTFOLIO. The Portfolio or Trust will pay, or will
enter into arrangements that require third parties to pay, all expenses other
than those expressly assumed by the Co-Adviser herein, which expenses payable by
the Portfolio or Trust shall include:
(a) Expenses of all audits by independent public accountants;
(b) Expenses of transfer agent, registrar, dividend disbursing agent
and shareholder recordkeeping services;
(c) Expenses of custodial services including recordkeeping services
provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(e) Salaries and other compensation of any of its executive officers
or employees, if any, who are not officers, directors,
stockholders or employees of the Co-Adviser, the Administrator or
the Distributor;
(f) Taxes levied against the Portfolio;
(g) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Portfolio;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to Trustees and shareholder meetings
of the Trust and the Portfolio, the preparation and mailings of
prospectuses and reports of the Portfolio to its existing
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Portfolio's legal existence, and the
registration of shares with federal and state securities
authorities;
(j) Legal fees, including the legal fees related to the registration
and continued qualification of the Portfolio's shares for sale;
(k) Costs of printing any share certificates representing shares of
the Portfolio;
(l) Fees and expenses of Trustees who are not affiliated persons, as
defined in the 1940 Act, of the Co-Adviser, the Investment
Adviser, the Distributor or any of their affiliates; and
(m) Its pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or of other insurance premiums.
5. ACTIVITIES AND AFFILIATES OF THE CO-ADVISER. The Trustees acknowledge
that Co-Adviser, or one or more of its affiliates, may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that Co-Adviser, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts (such
individuals, entities and accounts hereinafter referred to as Affiliated
Accounts). Subject to the provisions of paragraph 2 hereof, the Trustees agree
that Co-Adviser or its affiliates may give advice or exercise investment
responsibility and take such other action with respect to other Affiliated
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Portfolio, provided that Co-Adviser acts in
good faith and in accordance with applicable law or as permitted by an exemption
order issued by the SEC, and provided further, that it is Co-Adviser's policy
to allocate within its reasonable discretion, investment opportunities to the
Portfolio over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Portfolio and any specific investment restrictions applicable thereto.
The Trust acknowledges that one or more of the Affiliated Accounts may at any
time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Portfolio may have an interest from time
to time, whether in transactions which involve the Portfolio or otherwise. The
Co-Adviser shall not have any obligation to acquire for the Portfolio a position
in any investment which any Affiliated Account may acquire, and the Portfolio
shall have no first refusal, coinvestment or other rights in respect of any
investment, either for the Portfolio or otherwise.
6. COMPENSATION OF THE CO-ADVISER. (a) For all services provided to the
Portfolio pursuant to this Agreement, the Trust shall pay the Co-Adviser, and
the Co-Adviser agrees to accept as full compensation therefor, an investment
advisory fee, payable as soon as practicable after the last day of each month,
calculated using an annual rate of 0.15% of the average daily net assets of the
Portfolio (the "Annual Rate"). The monthly investment advisory fee to be paid
by the Trust to the Co-Adviser shall be determined as of the close of business
on the last business day of each month by multiplying one-twelfth of the Annual
Rate by the Average Portfolio Net Assets (hereinafter defined), calculated
monthly as of such day.
(b) For purposes of this paragraph 6, the "Average Portfolio Net
Assets" shall be calculated monthly as of the last business day of each month
and shall mean the sum of the net assets of the Portfolio calculated each
business day during the month divided by the number of business days in the
month (such
net assets to be determined as of the close of business each business day and
computed in the manner set forth in the Declaration of Trust of the Trust) .
7. PROXIES. The Trustees will vote all proxies solicited by or with
respect to the issuers of securities, in which assets of the Portfolio may be
invested from time to time, unless the Trustees delegate such right to the
Investment Adviser.
8. LIABILITIES OF THE CO-ADVISER.
(a) The Co-Adviser will not be liable for any error or judgment or
mistake of law or for any loss suffered by the Portfolio or the
Trust in connection with the matters to which this Agreement
relates, except that the Co-Adviser shall be liable to the
Portfolio and the Trust 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 Co-Adviser in the
performance of duties or reckless disregard by it of its
obligations or duties under this Agreement.
(b) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or the Co-Adviser, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
9. RENEWAL, AMENDMENT AND TERMINATION.
(a) This Agreement shall become effective on the date first written
above and shall remain in force for a period of two (2) years
from such date and from year to year thereafter but only so long
as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Trustees who are not
interested persons of the Portfolio or the Co-Adviser, cast in
person at a meeting called for the purpose of voting on such
approval and by a vote of the Board of Trustees or (ii) by the
vote of a majority of the outstanding voting securities of the
Portfolio. The aforesaid provision that this Agreement may be
continued "annually" shall be construed in a manner consistent
with the 1940 Act and the rules and regulations thereunder.
(b) This Agreement may be amended at any time, but only by written
agreement between the Trust and the Co-Adviser, which amendment
is subject to the approval of the Trustees and the shareholders
of the Trust in the manner required by the 1940 Act, subject to
any applicable exemption order of the SEC modifying the
provisions of the 1940 Act with respect to approval of amendments
to this Agreement.
(c) This Agreement:
(i) may at any time be terminated without the payment of any
penalty either by vote of the Trustees or by vote of a
majority of the outstanding voting securities of the
Portfolio, on sixty (60) days' written notice to the
Co-Adviser;
(ii) shall immediately terminate in the event of its
assignment; and
(iii) may be terminated by the Co-Adviser on sixty (60) days'
written notice to the Trust.
(d) As used in this Section 9, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and
the rules and regulations thereunder, subject to any applicable
orders of exemption issued by the SEC.
10. BOOKS AND RECORDS. (a) The Trustees shall provide to the Co-Adviser
copies of the Trust's most recent prospectus and statement of additional
information (as each may be amended or supplemented from time to time) which
relate to any class of shares representing interests in the Portfolio.
(b) In compliance with the requirements of Rule 3la-3 of the rules
promulgated under the 1940 Act ("Rules"), the Co-Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Co-Adviser further agrees to preserve for the periods
prescribed by Rule 3la-2, the records required to be maintained by the
Co-Adviser hereunder pursuant to Rule 3la-1 of the Rules.
11. NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed given, if delivered
personally, on the day delivered or if mailed, by certified or registered mail,
postage prepaid, return receipt requested, three (3) days after placement in the
United States mail, to the addresses below:
If to Trust: First Funds
c/o Xxxxx X. Xxxxx
ALPS Mutual Fund Services, Inc.
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxxxxxxxxxx, Esq.
Baker, Donelson, Bearman, Caldwell, P.C.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Co-Adviser: C. Xxxxxxx Xxxxx, III
c/o: First Tennessee Bank
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
With a copy to: Xxxxxx Xxxxx, Esq.
First Tennessee Bank National Corporation
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
12. 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.
13. LIMITATION ON LIABILITY. Co-Adviser is hereby expressly put on notice
of the limitation of shareholder liability as set forth in the Declaration of
Trust and agrees that obligations assumed by the Portfolio pursuant to this
Agreement shall be limited in all cases to the Portfolio and its assets.
Co-Adviser agrees that it shall not seek satisfaction of any such obligation
from the shareholders or any individual shareholder of the Portfolio, nor from
the Trustees or any individual Trustee of the Portfolio.
14. GOVERNING LAW. To the extent that state law has not been 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, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Tennessee without giving effect to the choice of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
FIRST FUNDS
By:
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Xxxxxxx X. Xxxxxxx, President
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
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