Exhibit 5(c)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, UNITED STATES
TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and trust
company (together with USTCT, "U.S. Trust"), and United States Trust Company of
California, a national bank organized under the laws of the United States
(herein called "U.S. Trust California").
WHEREAS, Excelsior Tax-Exempt Funds, Inc. (the "Company") is registered
as an open-end, management investment company under the Investment Company Act
of 1940;
WHEREAS, U.S. Trust is the investment adviser to the Company's
California Tax-Exempt Income Fund (the "Fund");
WHEREAS, U.S. Trust desires to retain U.S Trust California to render
investment sub-advisory services to the Company for the Fund, and U.S. Trust
California 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. U.S. Trust hereby appoints U.S. Trust California to act
as investment sub-adviser to the Company for the Fund for the period and on the
terms set forth in this Agreement. U.S. Trust California accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. U.S. Trust has furnished U.S. Trust
California 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 U.S. Trust as the
investment adviser for the Fund and the execution and delivery of
the Investment Advisory Agreement with respect to the Fund;
(d) Resolutions of the Board of Directors of the Company
authorizing the appointment of U.S. Trust California as the Fund's investment
sub-adviser and the execution and delivery of this Agreement;
(e) Post-Effective Amendment No. 19 to the Company's
Registration Statement under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended (the "1940 Act"), on Form N-1A (No.
2-93068) relating to the Company's shares representing interests in the Fund;
(f) Notification of Registration of the Company under the 1940
Act, as amended, on Form N-8A as filed with the Securities and Exchange
Commission on August 31, 1984, and all amendments thereto; and
(g) Prospectuses and statements of additional information of
the Company relating to the Company's shares representing interests in the Fund
in effect under the Securities Act of 1933 (such prospectuses, statements of
additional information and supplements thereto, as presently in effect and as
from time to time amended and supplemented, herein called the "Prospectus").
U.S. Trust will furnish U.S Trust California from time to time
with copies of all amendments of or supplements to the foregoing, if any.
3. Sub-Advisory Services. Subject to the supervision of the
Board of Directors of the Company and the oversight of U.S. Trust, U.S. Trust
California will provide a continuous investment program for the Fund, including
investment research and management with respect to all securities and
investments of the Fund. U.S. Trust California will determine, subject to U.S.
Trust's approval, what securities and other investments will be purchased,
retained or sold by the Company for the Fund including, with the assistance of
U.S. Trust if required, the Fund's investments in futures. U.S. Trust California
will provide the services rendered by it hereunder in accordance with the Fund's
investment objectives and policies as stated in the Prospectus. U.S. Trust
California 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;
-2-
(b) will not make loans for the purpose of purchasing or
carrying Fund shares, or make loans to the Company;
(c) will manage the Fund's overall cash positions;
(d) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer selected by it. In placing orders with brokers and dealers, U.S. Trust
California 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 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, U.S. Trust California 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 the Fund and/or other
accounts over which U.S. Trust California 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 xxxxxx,
X.X. Trust California is authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if U.S. Trust
California 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 U.S. Trust California 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 Fund's principal underwriter, U.S.
Trust, U.S. Trust California or any affiliated person thereof except as
permitted by the Securities and Exchange Commission;
(e) will maintain books and records with respect to the
securities and other investment transactions entered into pursuant to this
Agreement and will render to U.S. Trust and the Company's Board of Directors
such periodic and special reports as they may request;
(f) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and
prior, present or potential shareholders, and will not use such records and
information for
-3-
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 U.S.
Trust California 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 U.S. Trust California 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 sub-advisory
services rendered by U.S. Trust California hereunder are not to be deemed
exclusive, and U.S. Trust California 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 31a-3 under the 0000 Xxx, X.X. Xxxxx Xxxxxxxxxx hereby agrees that all
records which it maintains for the Fund are the property of the Company and
further agrees to surrender promptly to the Company any of such records upon the
Company's request. U.S. Trust California further agrees to preserve for the
periods prescribed by Rule 31a-2 the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, U.S. Trust
California will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including brokerage commissions and other transaction
charges, if any) purchased for the Fund.
In addition, U.S. Trust California will pay U.S. Trust an
amount equal to 83% of each expense reimbursement made by U.S. Trust to the
Company with respect to the Fund under the second paragraph of Section 6 of the
Investment Advisory Agreement relating to the Fund.
7. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, U.S. Trust will pay U.S. Trust California
and U.S. Trust California will accept as full compensation therefor a fee,
computed daily and payable monthly, at the annual rate of .50% of the average
daily net assets of the Fund.
8. Limitation of Liability of the Sub-Adviser. U.S. Trust
California 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,
-4-
except 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 U.S. Trust California
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 become
effective upon its execution as of the date first written above and, unless
sooner terminated as provided herein, shall continue until through July 31,
1997. Thereafter, if not terminated, this Agreement shall continue in effect as
to the Fund for successive periods of 12 months each, provided such continuance
is specifically approved at least annually 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 by the Board of Directors
of the Company or the vote of a majority of the outstanding voting securities of
the Fund; provided, however, that this Agreement may be terminated as to the
Fund at any time, without the payment of any penalty, by U.S. Trust or by the
Company (by the Board of Directors of the Company or by vote of a majority of
the outstanding voting securities of the Fund) on 60 days' written notice to
U.S. Trust California, and will automatically terminate upon the termination of
the Investment Advisory Agreement between U.S. Trust and the Company with
respect to the Fund. This Agreement may be terminated as to the Fund by U.S.
Trust California at any time, without payment of any penalty, on 90 days'
written notice to the Company and U.S. Trust. 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 1940 Act.)
10. Amendment of this Agreement. 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 amendment of this
Agreement shall be effective with respect to the Fund until approved by vote of
a majority of the Fund's outstanding voting securities.
11. Miscellaneous. 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 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
-5-
the benefit of the parties hereto and their respective successors and shall be
governed by New York law.
-6-
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.
U.S. TRUST COMPANY
Attest: OF CONNECTICUT
/s/ Xxxxxxx X. Xxxxx, Xx. By: /s/ W. Xxxxxxx Xxxxx
--------------------------- -----------------------------
President & CEO
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
/s/ Xxxxxxx X. Xxxxx, Xx. By: /s/ Xxxxxxx X. Xxxxx
--------------------------- -----------------------------
Executive Vice President
UNITED STATES TRUST COMPANY
Attest: OF CALIFORNIA
/s/ Xxxx Xxxxxxxxx By: /s/ X. Xxxxxxx
--------------------------- -----------------------------
President & CEO
-7-
