INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement made the 11th day of December, 1996, by and between KEYSTONE
INSTITUTIONAL ADJUSTABLE RATE FUND, a Massachusetts business trust (the
"Fund"), and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware corporation
(the "Adviser").
WHEREAS, the Fund and the Adviser wish to enter into an agreement setting
forth the terms on which the Adviser will perform certain services for the
Fund.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage and administer the
operation of the Fund, to supervise the provision of services to the Fund by
others and to manage the investment and reinvestment of the assets of the Fund
in conformity with the Fund's investment objectives and restrictions as may be
set forth from time to time in the Fund's then current prospectus and
statement of additional information, if any, and other governing documents,
all subject to the supervision of the Board of Trustees of the Fund, for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment and agrees during such period, at its own expense, to
render the services and to assume the obligations set forth herein for the
compensation provided herein. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of the Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and in selecting broker-
dealers, the Adviser will use its best efforts to seek best execution on
behalf of the Fund. In assessing the best execution available for any
transaction, the Adviser shall consider 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-
dealer, and the reasonableness of the commission, if any (all for the specific
transaction and on a continuing basis). In evaluating the best execution
available, and in selecting the broker-dealer to execute a particular
transaction, the Adviser may also consider the brokerage and research services
(as those terms are used in Section 28(e) of the Securities Exchange Act of
1934 (the "1934 Act")) provided to the Fund and/or other accounts over which
the Adviser or an affiliate of the Adviser exercises investment discretion.
The Adviser is authorized to pay a broker-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-dealer
would have charged for effecting that transaction if, but only if, the 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-
dealer viewed in terms of that particular transaction or in terms of all of
the accounts over which investment descretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Fund office space
in the offices of the Adviser or in such other place as may be agreed upon by
the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Fund, for members of the Adviser's organization to serve
without salaries from the Fund as officers or, as may be agreed from time to
time, as agents of the Fund. The Adviser assumes and shall pay or reimburse
the Fund for: (1) the compensation (if any) of the Trustees of the Fund who
are affiliated with the Adviser or with its affiliates, or with any adviser
retained by the Adviser, and of all officers of the Fund as such; (2) all
expenses of the Adviser incurred in connection with its services hereunder;
(3) all charges and expenses of any custodian or depository appointed by the
Fund for the safekeeping of its cash, securities and other property; (4) all
charges and expenses for bookkeeping and auditors; (5) all charges and
expenses of any transfer agents and registrars appointed by the Fund; (6) all
costs of certificates representing shares of the Fund; (7) all fees and
expenses involved in registering and maintaining registrations of the Fund and
of its shares with the Securities and Exchange Commission ("Commission") and
registering or qualifying its shares under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the Commission and other authorities; (8) expenses of preparing, printing
and mailing prospectuses and statements of additional information to
shareholders of the Fund; (9) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing notices, reports and proxy
materials to shareholders of the Fund; and (10) all charges and expenses of
filing annual and other reports with the Commission and other authorities. The
Fund assumes and shall pay all other expenses of the Fund, including, without
limitation; (1) all fees of all Trustees of the Fund who are not affiliated
with the Adviser or any of its affiliates, or with any adviser retained by the
Adviser; (2) all brokers' fees, expenses and commissions and issue and
transfer taxes chargeable to the Fund in connection with transactions
involving securities and other property to which the Fund is a party; (3) all
taxes and business trust fees payable by the Fund to federal, state or other
governmental agencies; (4) all interest costs of the Fund; (5) all charges and
expenses of legal counsel to the Fund and to the Trustees of the Fund in
connection with routine legal matters relating to the Fund, including, without
limitation, legal services rendered in connection with the Fund's existence,
business trust and financial structure and relations with its shareholders,
registrations and qualifications of securities under federal, state and other
laws and issues of securities, including all charges and expenses of legal
counsel to the Fund in connection with extraordinary matters, including,
without limitation, any litigation involving the Fund, its Trustees, officers,
employees of agents; and (6) all extraordinary expenses and charges of the
Fund. In the event the Adviser provides any of these services or pays any of
these expenses, the Fund will promptly reimburse the Adviser therefor.
The services of the Adviser to the Fund hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others.
4. As compensation for the Adviser's services to the Fund during the
period of this Agreement, the Fund will pay to the Adviser a fee at the annual
rate of 0.30% of the average daily net asset value of the shares of the Fund.
A pro rata portion of the fee shall be payable in arrears at the end of
each day or calendar month as the Adviser may from time to time specify to the
Fund. If and when this Agreement terminates, any compensation payable
hereunder for the period ending with the date of such termination shall be
payable upon such termination. Amounts payable hereunder shall be promptly
paid when due.
5. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from the Adviser's willful
misfeasance, bad faith, gross negligence or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also
an officer, director, partner, employee, or agent of the Adviser who may be or
become an officer, trustee, employee or agent of the Fund, shall be deemed,
when rendering services to the Fund or acting on any business of the Fund
(other than services or business in connection with the Adviser's duties
hereunder), to be rendering such services to or acting solely for the Fund and
not as an officer, director, partner, employee, or agent or one under the
control or direction of the Adviser even though paid by it. The Fund agrees to
indemnify and hold the Adviser harmless from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the 1934 Act, the
Investment Company Act of 1940 (the "1940 Act" ) and any state and foreign
securities and blue sky laws, as amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which the Adviser takes or
does or omits to take or do hereunder provided that the Adviser shall not be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the performance
of its duties, or from reckless disregard by it of its obligations and duties
under the Agreement.
6. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable independent public accountant or organization of
public accountants who shall render a report to the Fund.
7. Subject to and in accordance with the Declaration of Trust of the Fund,
the Articles of Incorporation of the Adviser and the governing documents of
any adviser, it is understood that trustees, directors, officers, agents and
shareholders of the Fund or any Adviser are or may be interested in the
Adviser (or any successor thereof) as directors and officers of the Adviser or
its affiliates, as stockholders of Keystone Investments, Inc. or otherwise;
that directors, officers and agents of the Adviser and its affiliates or
stockholders of Keystone Investments, Inc. are or may be interested in the
Fund or any Adviser as trustees, directors, officers, shareholders or
otherwise; that the Adviser (or any such successor) is or may be interested in
the Fund or any such Adviser as shareholder, or otherwise; and that the effect
or any such adverse interests shall be governed by said Declaration of Trust
of the Fund, Articles of Incorporation of the Adviser and governing documents
of any such adviser.
8. This Agreement shall continue in effect after December 10, 1998, only
so long as (1) such continuance is specifically approved at least annually by
the Board of Trustees of the Fund or by a vote of a majority of the
outstanding voting securities of the Fund, and (2) such renewal has been
approved by the vote of a majority of Trustees of the Fund who are not
interested pesons, as that term is defined in the 1940 Act, of the Adviser or
of the Fund, cast in person at a meeting called for the purpose of voting on
such approval.
9. On sixty days' written notice to the Adviser, this Agreement may be
terminated without the payment of any penalty at any time by the Board of
Trustees of the Fund or by vote of the holders of a majority of the
outstanding voting securities of the Fund; and on sixty days' written notice
to the Fund, this Agreement may be terminated without the payment of any
penalty at any time by the Adviser. This Agreement shall automatically
terminate upon its assignment (as that term is defined in the 1940 Act). Any
notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postage prepaid, to the other party at the main office of
such party.
10. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution by the Fund shall have
been first approved by the vote of the holders of a majority of the
outstanding voting securities of the Fund and by the vote of a majority of
Trustees of the Fund who are not interested persons (as that term is defined
in the 0000 Xxx) of the Adviser, any predecessor of the Adviser or of the
Fund, cast in person at a meeting called for the purpose of voting on such
approval. A "majority of the outstanding voting securities of the Fund" shall
have, for all purposes of this Agreement, the meaning provided therefor in the
1940 Act.
11. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
12. The provisions of the Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
13. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts. This instrument is executed on
behalf of the Trustees of the Fund as trustees and not individually, and the
obligations of this instrument are not binding upon the Trustees or holders of
shares of the Fund individually but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day and year first above written.
KEYSTONE INSTITUTIONAL ADJUSTABLE
RATE FUND
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: XXXXXX X. XXXXXXX
Title: Chairman of the Board
KEYSTONE INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxxxxxx X. Van Antwerp
--------------------------------------
Name: XXXXXXXX X. VAN ANTWERP
Title: Senior Vice President
