SUB-ADVISORY AGREEMENT
XXXX XXXXX TAX-FREE INCOME FUND
AGREEMENT made this 1st day of June, 2000 by and between Xxxx Xxxxx
Fund Adviser, Inc. ("Manager"), a Maryland corporation, and Xxxx Xxxxx Trust,
fsb ("Sub-Adviser"), a federal savings bank, each of which is registered as an
investment adviser under the Investment Advisers Act of 1940.
WHEREAS, Manager is the investment adviser and manager of Xxxx Xxxxx
Tax-Free Income Fund ("Trust"), a non-diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), which has registered distinct series of shares of beneficial
interest (listed in Appendix A), each representing a distinct portfolio of
securities ("Series").
WHEREAS, Manager wishes to retain Sub-Adviser to provide it with
certain investment advisory services in connection with Manager's management of
the Series and the Trust; and
WHEREAS, Sub-Adviser is willing to furnish such services on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. Appointment. Manager hereby appoints Sub-Adviser as investment
adviser for the Series and the Trust for the period and on the terms set forth
in this Agreement. Sub-Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
2. Delivery of Documents. Manager has furnished the Sub-Adviser
with copies properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust and all amendments thereto
(such Declaration of Trust, as presently in effect and as they shall
from time to time be amended, are herein called the "Declaration of
Trust"):
(b) The Trust's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time
be amended, are herein called the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser as investment adviser and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, and the 1940 Act (File No.
811-6223) as filed with the Securities and Exchange Commission,
including all exhibits thereto, relating to shares of common stock
of the Trust (herein called "Shares") and all amendments thereto;
(e) The Series' most recent prospectus(es) (such prospectus(es),
as presently in effect and all amendments and supplements thereto
are herein called the "Prospectus"); and
(f) The Series' most recent statement of additional information
(such statement of additional information, as presently in effect
and all amendments and supplements thereto are herein called the
"Statement of Additional Information").
The Manager will furnish the Sub-Adviser from time to time with copies of all
amendments of or supplements to the foregoing.
3. Investment Advisory Services. (a) Subject to the supervision of
the Trust's Board of Trustees and the Manager, the Sub-Adviser shall regularly
provide the Trust with investment research, advice, management and supervision
and shall furnish a continuous investment program for each Series' portfolio of
securities consistent with the Series' investment objective, policies and
limitations as stated in the Series' current Prospectus and Statement of
Additional Information. The Sub-Adviser shall determine from time to time what
securities will be purchased, retained or sold by each Series, and shall
implement those decisions, all subject to the provisions of the Trust's
Declaration of Trust and By-Laws, the 1940 Act, the applicable rules and
regulations of the Securities and Exchange Commission, and other applicable
federal and state law, as well as the investment objective, policies, and
limitations of the Series. The Sub-Adviser will place orders pursuant to its
investment determinations for the Series either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers, the
Sub-Adviser will attempt to obtain the best net price and the most favorable
execution of its orders; however, the Sub-Adviser may, in its discretion,
purchase and sell portfolio securities from and to brokers and dealers who
provide the Series with research, analysis, advice and similar services, and the
Sub-Adviser may pay to these brokers, in return for research and analysis, a
higher commission than may be charged by other brokers. In no instance will
portfolio securities be purchased from or sold to the Sub-Adviser or any
affiliated person thereof except in accordance with the rules, regulations or
orders promulgated by the Securities and Exchange Commission pursuant to the
0000 Xxx. The Sub-Adviser shall also perform such other functions of management
and supervision as may be requested by the Manager and agreed to by the
Sub-Adviser.
(b) The Sub-Adviser will maintain or oversee the maintenance of all
books and records with respect to the securities transactions of the Series in
accordance with all applicable federal and state laws and regulations, and will
furnish the Board of Trustees of the Trust with such periodic and special
reports as the Board or the Manager reasonably may request.
(c) The Trust has authorized any entity or person associated with
the Sub-Adviser which is a member of a national securities exchange to effect
any transaction on the exchange for the account of a Series which is permitted
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by Section 11(a) of the Securities Exchange Act of 1934 or Rule 11a2-2(T)
thereunder, and the Trust hereby consents to the retention by such person
associated with the Sub-Adviser of all permissible compensation for such
transactions, including compensation, in accordance with Rule
11a2-2(T)(a)(2)(iv).
4. Services Not Exclusive. The Sub-Adviser's services hereunder are
not deemed to be exclusive, and the Sub-Adviser shall be free to render similar
services to others. It is understood that persons employed by the Sub-Adviser to
assist in the performance of its duties hereunder might not devote their full
time to such service. Nothing herein contained shall be deemed to limit or
restrict the right of the Sub-Adviser or any affiliate of the Sub-Adviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all books and
records which it maintains for the Trust are property of the Trust and further
agrees to surrender promptly to the Trust or its agents any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for the period
prescribed by Rule 31a-2 under the 1940 Act, any such records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Sub-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 a Series.
7. Compensation. For the services which the Sub-Adviser will render
to the Manager and the Trust under this Agreement, the Manager, on behalf of
each Series, will pay the Sub-Adviser a fee, computed daily and paid monthly, at
the annual rate of such Series' average daily net assets that is set forth in
Appendix A to this Agreement, net of any waivers or reimbursements by the
Manager of its fee. Fees due to the Sub-Adviser hereunder shall be paid promptly
to the Sub-Adviser by the Manager following its receipt of fees from the Trust.
If this Agreement is terminated as of any date not the last day of a calendar
month, a final fee shall be paid promptly after the date of termination and
shall be based on the percentage of days of the month during which the Agreement
was still in effect.
8. Limitation of Liability. The Sub-Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Manager
or by the Trust in connection with the performance of this Agreement; provided,
that nothing in this Agreement shall protect the Sub-Adviser against any
liability to the Manager, the Trust or its shareholders 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 its part in the performance of its duties or from reckless
disregard by it of its obligations or duties under this Agreement.
9. Definitions. As used in this Agreement, the terms "securities"
and "net assets" shall have the meanings ascribed to them in the Declaration of
Trust; and the terms "assignment," "interested person," and "majority of the
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outstanding voting securities" shall have the meanings given to them by Section
2(a) of the 1940 Act, subject to such exemptions or modifications as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order.
10. Duration and Termination. This Agreement will become effective
June 1, 2000, provided that it shall have been approved by the Trust's Board of
Trustees. If not earlier terminated, this Agreement shall continue in effect
with respect to a Series for successive annual periods, provided that such
continuance is specifically approved at least annually (i) by the Trust's Board
of Trustees or (ii) by a vote of a majority (as defined in the 0000 Xxx) of the
outstanding voting securities of that Series, provided that in either event the
continuance is also approved by a majority of the Trust's Trustees who are not
interested persons (as defined in the 0000 Xxx) of the Trust or of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable with respect to any or all
Series without penalty, by vote of the Trust's Board of Trustees, by vote of a
majority (as defined in the 0000 Xxx) of the outstanding voting securities of
the affected Series, by the Manager or by the Sub-Adviser, on not less than 60
days' notice to the Trust and/or the other party(ies) and will be terminated
immediately upon any termination with respect to the Trust of the Investment
Advisory and Management Agreement between Manager and the Trust dated June 1,
2000, or upon the mutual written consent of the Manager, the Sub-Adviser, and
the Trust. Termination of this Agreement with respect to a Series shall in no
way affect continued performance with regard to any other Series of the Trust.
This Agreement will automatically and immediately terminate in the event of its
assignment.
11. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
12. Amendments. No provision of this Agreement may 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 material amendment of this Agreement shall be
effective with respect to a Series until approved by vote of the holders of a
majority of the outstanding voting securities of that Series.
13. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter 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 constitution or
effect. Should any part of this Agreement 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 on and shall inure to the
benefit of the parties hereto and their respective successors.
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed by their officers thereunto duly authorized.
Attest: XXXX XXXXX FUND ADVISER, INC.
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxxx X. Xxxxxx
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Name:
Title:
Attest: XXXX XXXXX TRUST, FSB
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxxx X. Xxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxx
Title: Vice Chairman, LM Trust
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APPENDIX A
Series Fee Rate
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Xxxx Xxxxx Maryland Tax-Free Income Trust 0.50%
Xxxx Xxxxx Pennsylvania Tax-Free Income Trust 0.50%
Xxxx Xxxxx Tax-Free Intermediate-Term Income Trust 0.50%
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