SUB-INVESTMENT ADVISORY AGREEMENT
Exhibit (5)(d)
(Tax-Exempt Fund)
AGREEMENT made as of January 9, 1998 between XXXXXXX CAPITAL ADVISORS,
INC., a wholly-owned indirect subsidiary of Xxxxxxx Xxxxx, Inc. (herein called
the "Adviser"), and XXXXXX SQUARE MANAGEMENT CORPORATION, a Delaware corporation
(herein called the "Sub-Adviser").
WHEREAS, EMERALD FUNDS, a Massachusetts business trust (herein called
the "Trust"), is registered as an open-end, management investment company under
the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, pursuant to an Investment Advisory Agreement by and between
the Trust and the Adviser (herein called the "Investment Advisory Agreement"),
the Adviser has agreed to furnish investment advisory services to the Trust with
respect to its Tax-Exempt Fund investment portfolio (the "Fund"); and
WHEREAS, the Investment Advisory Agreement authorizes the Adviser
to sub-contract investment advisory services with respect to the Fund to the
Sub-Adviser pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been so approved, and the Sub-Adviser is
willing to furnish sub-advisory services to the Fund upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby appoints the Sub-Adviser to act as sub-investment
adviser to the Trust's Tax-Exempt Fund for the period and on the terms set forth
in this Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Adviser and the
Trust's Board of Trustees, the Sub-Adviser will provide a continuous
investment program for the Fund, including investment research and management
with respect to all securities, investments, cash and cash equivalents in the
Fund. The Sub-Adviser will determine from time to time what securities and
other investments will be purchased, retained or sold by the Fund. The
Sub-Adviser will provide the services rendered by it under this Agreement in
accordance with the investment criteria and policies established from time to
time for the Fund by the Adviser, the Fund's investment objective, policies
and restrictions as stated in the Trust's Prospectus and Statement of
Additional Information for the Fund, and resolutions of the Trust's Board of
Trustees.
The Sub-Adviser further agrees that it will:
(a) Provide information to the Fund's accountant for the purpose of
updating the Fund's cash availability throughout the day as required;
(b) Maintain historical tax lots for each portfolio security held by
the Fund;
(c) Transmit trades to the Trust's custodian for proper settlement;
(d) Maintain all books and records with respect to the Fund that are
required to be maintained under Rule 31a-1(f) under the 1940 Act;
(e) Supply the Trust and its Board of Trustees with reports,
statistical data and economic information as requested; and
(f) Prepare a quarterly broker security transaction summary and, if
requested in advance, monthly security transaction listing for the Fund.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its activities
under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has investment
responsibilities;
(c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or dealer.
In executing portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms available for
any
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transaction, the Sub-Adviser shall consider all factors that 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. In evaluating the best
overall terms available, and in selecting the broker-dealer to execute a
particular transaction, the Sub-Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Fund or other accounts over
which the Sub-Adviser or an affiliate of the Sub-Adviser exercises investment
discretion. The Sub-Adviser is authorized, subject to the prior approval of
the Adviser and the Trust's Board of Trustees, to pay to a broker or dealer
who provides such brokerage and research services a commission for executing
a portfolio 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, but only if, the Sub-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
that particular transaction or in terms of the overall responsibilities of
the Sub-Adviser to the Fund. In addition, the Sub-Adviser is authorized to
take into account the sale of shares of the Trust in allocating purchase and
sale orders for portfolio securities to brokers or dealers (including brokers
and dealers that are affiliated with the Adviser, Sub-Adviser or the Trust's
principal underwriter), provided that the Sub-Adviser believes that the
quality of the transaction and the commission are comparable to what they
would be with other qualified firms. In no instance, however, will portfolio
securities be purchased from or sold to the Adviser, Sub-Adviser, the Trust's
principal underwriter or any affiliated person of either the Trust, the
Adviser, Sub-Adviser, or the principal underwriter, acting as principal in
the transaction, except to the extent permitted by the Securities and
Exchange Commission; and
(d) will maintain a policy and practice of conducting its
sub-investment advisory services hereunder independently of its, and any of
its affiliates', commercial banking operations. When the Sub-Adviser makes
investment recommendations for the Fund, its investment advisory personnel
will not inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers of its, or
any of its affiliates', commercial department. In dealing with commercial
customers, the commercial department of the Sub-Adviser, or any of its
affiliates, will not inquire or take into consideration whether securities of
those customers are held by the Fund.
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4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to
be exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
To the extent that the purchase or sale of securities or other investments of
the same issuer may be deemed by the Sub-Adviser to be suitable for two or more
accounts managed by the Sub-Adviser, the available securities or investments may
be allocated in a manner believed by the Sub-Adviser to be equitable to each
account. It is recognized that in some cases this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtainable for or disposed of by the Fund.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the Fund
are the property of the Trust and further agrees to surrender promptly to the
Trust any of such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by it under this Agreement.
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, commodities and other investments (including
brokerage commissions and other transaction costs, if any) purchased or sold for
the Fund. In addition, if in any fiscal year the aggregate expenses of the Fund
(as defined under the securities regulations of any state having jurisdiction
over the Fund) exceed the expense limitations of any such state, the Sub-Adviser
will reimburse the Trust, to the extent required by state law, for 50% of such
excess expenses of the Fund; PROVIDED that to the extent the Adviser reimburses
the Trust for such expenses, then the Sub-Adviser will make its reimbursement
hereunder to the Adviser instead; and PROVIDED FURTHER that such reimbursement
will not be required to the extent that the Sub-Adviser's fee has been reduced
pursuant to Section 7 hereof as a result of reimbursements made by the Adviser
to the Trust. The Sub-Adviser's obligation with respect to the Fund is limited
to the amount of its fees hereunder from the Fund. Such reimbursement, if any,
will be estimated and accrued daily and paid on a monthly basis.
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7. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser will accept
as full compensation therefor, a fee, computed daily and payable monthly, at the
annual rate of .15% of the average daily net assets of the Fund minus such
amount, if any, that the Adviser has reimbursed the Trust in the event the
aggregate expenses of the Fund exceed the expense limitations of any state
having jurisdiction over the Fund. Such fee shall be a separate charge to the
Fund and shall be the several (and not joint or joint and several) obligation of
the Fund. The fees payable by the Adviser under this Section 7 for the period
beginning on the date of this Agreement and ending on the date the shareholders
of the Fund approve this Agreement shall be maintained in an interest-bearing
escrow account until such time as the Fund's shareholders approve the payment of
such fees to the Sub-Adviser. If the Fund's shareholders do not approve the
payment to the Sub-Adviser of such fees for such period, the balance in the
escrow account shall be paid to the Fund. The Sub-Adviser acknowledges that it
shall not be entitled to any further compensation from either the Adviser or the
Trust in respect of the services provided and expenses assumed by it under this
Agreement.
8. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable to
the Trust for any loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or any loss resulting from willful
misfeasance, bad faith or negligence on the part of the Sub-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 will become effective as of the date first above
written. Unless sooner terminated as provided herein this Agreement shall
continue in effect until May 9, 1998 and, if approved by the shareholders of
the Fund on or before such date, shall continue in effect for an additional
period ending on November 30, 1998. Thereafter, if not terminated, this
Agreement shall automatically continue in effect for successive annual
periods ending on November 30, PROVIDED such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of voting
such approval, and (b) by the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to the Fund at any time,
without the payment of any penalty, by the Adviser or by the Trust (by vote
of the Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Fund), on sixty days' written notice to the
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Sub-Adviser, or by the Sub-Adviser, on sixty days' written notice to the
Trust, provided that in each such case, notice shall be given simultaneously
to the Adviser. In addition, notwithstanding anything herein to the
contrary, in the event of the termination of the Investment Advisory
Agreement with respect to the Fund for any reason (whether by the Trust, by
the Adviser or by operation of law) this Agreement shall terminate upon the
effective date of such termination of the Investment Advisory Agreement.
This Agreement will also immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall
have the same meaning 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. No amendment of this Agreement shall be effective until approved by
vote of a majority of the outstanding voting securities of the Fund.
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 the benefit of the parties
hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this
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instrument to be executed by their officers designated below as of the day
and year first above written.
XXXXXXX CAPITAL ADVISORS, INC.
BY: /s/ Xxxx X. Xxxxx
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TITLE: PRESIDENT
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XXXXXX SQUARE MANAGEMENT
CORPORATION
BY: /s/ Xxxxxx X. Xxxxx, Xx.
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TITLE: VICE-PRESIDENT
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