XXXXXX TAX EXEMPT INCOME FUND
MANAGEMENT CONTRACT
Management Contract dated as of July 1, 1999 between XXXXXX TAX EXEMPT
INCOME FUND, a Massachusetts business trust (the "Fund"), and XXXXXX
INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an investment
program for the Fund, will determine what securities shall be purchased,
held, sold or exchanged by the Fund and what portion, if any, of the assets
of the Fund shall be held uninvested and shall, on behalf of the Fund, make
changes in the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by the
officers and personnel referred to in Section 1(d), the Manager will also
manage, supervise and conduct the other affairs and business of the Fund
and matters incidental thereto. In the performance of its duties, the
Manager will comply with the provisions of the Agreement and Declaration of
Trust and By-laws of the Fund and its stated investment objectives,
policies and restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies which the
Trustees may from time to time determine, and shall exercise the same care
and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the Fund
as provided in Section 1(d), will furnish (1) all necessary investment and
management facilities, including salaries of personnel, required for it to
execute its duties faithfully; (2) suitable office space for the Fund; and
(3) administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the affairs of the
Fund, including determination of the Fund's net asset value, but excluding
shareholder accounting services. Except as otherwise provided in Section
1(d), the Manager will pay the compensation, if any, of the officers of the
Fund.
(c) The Manager, at its expense, shall place all orders for the purchase
and sale of portfolio investments for the Fund's account with brokers or
dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall use its best
efforts to obtain for the Fund the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In
using its best efforts to obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind the Fund's best interests
at all times, shall consider all factors it deems relevant, including by
way of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer in other transactions.
Subject to such policies as the Trustees may determine, the Manager shall
not be deemed to have acted unlawfully or to have breached any duty created
by this Contract or otherwise solely by reason of its having caused the
Fund to pay a broker or dealer that provides brokerage and research
services to the Manager an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction, if the Manager
determines in good faith that such amount of 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 Manager's overall responsibilities with respect to the
Fund and to other clients of the Manager as to which the Manager exercises
investment discretion. The Manager agrees that in connection with
purchases or sales of portfolio investments for the Fund's account, neither
the Manager or any officer, director, employee or agent of the Manager
shall act as a principal or receive any commission other than as provided
in Section 3.
(d) The Fund will pay or reimburse the Manager for (i) the compensation of
the Vice Chairman of the Fund and of persons assisting him in this office,
as determined from time to time by the Trustees of the Fund, (ii) the
compensation in whole or in part of such other officers of the Fund and
persons assisting them as may be determined from time to time by the
Trustees of the Fund, and (iii) the cost of suitable office space,
utilities, support services and equipment of the Vice Chairman and persons
assisting him and, as determined from time to time by the Trustees of the
Fund, all or a part of such costs attributable to the other officers and
persons assisting them whose compensation is paid in whole or in part by
the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund.
(e) The Manager shall not be obligated to pay any expenses of or for the
Fund not expressly assumed by the Manager pursuant to this Section 1 other
than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Manager, and in any person
controlled by or under common control with the Manager, and that the
Manager and any person controlled by or under common control with the
Manager may have an interest in the Fund. It is also understood that the
Manager and persons controlled by or under common control with the Manager
have and may have advisory, management service or other contracts with
other organizations and persons, and may have other interests and
businesses.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Manager's services
rendered, for the facilities furnished and for the expenses borne by the
Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee,
computed and paid quarterly at the lesser of (i) an annual rate of 0.50% of
the average net asset value of the Fund or (ii) the following annual rates:
(a) 0.60% of the first $500 million of the average net asset value of the Fund;
(b) 0.50% of the next $500 million of such average net asset value;
(c) 0.45% of the next $500 million of such average net asset value;
(d) 0.40% of the next $5 billion of such average net asset value;
(e) 0.375% of the next $5 billion of such average net asset value;
(f) 0.355% of the next $5 billion of such average net asset value;
(g) 0.340% of the next $5 billion of such average net asset value; and
(h) 0.33% of any excess thereafter.
Such average net asset value shall be determined by taking an average of
all the determinations of such net asset value during such quarter at the
close of business on each business day during such quarter while this
Contract is in effect. Such fee shall be payable for each fiscal quarter
within 30 days after the close of such quarter.
The fees payable by the Fund to the Manager pursuant to this Section 3
shall be reduced by any commissions, fees, brokerage or similar payments
received by the Manager or any affiliated person of the Manager in
connection with the purchase and sale of portfolio investments of the Fund,
less any direct expenses approved by the Trustees incurred by the Manager
or any affiliated person of the Manager in connection with obtaining such
payments.
In the event that expenses of the Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the
Fund are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof. In the event that the expenses of the Fund
exceed any expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such terms and
conditions as the Manager may prescribe in such notice, the compensation
due the Manager shall be reduced, and, if necessary, the Manager shall
assume expenses of the Fund, to the extent required by such expense
limitation.
If the Manager shall serve for less than the whole of a quarter, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment be approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Fund, and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract by not more
than sixty days' nor less than thirty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by the affirmative
vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Trustees of the Fund who are not interested persons of the
Fund or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second anniversary
of its execution, or upon the expiration of one year from the effective
date of the last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority of
the outstanding shares of the Fund" means the affirmative vote, at a duly
called and held meeting of shareholders of the Fund, (a) of the holders of
67% or more of the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting are present
in person or by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting, whichever
is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 (the "1940 Act") and
the Rules and Regulations thereunder, subject, however, to such exemptions
as may be granted by the Securities and Exchange Commission under said Act;
the term "specifically approve at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services"
shall have the meaning given in the Securities Exchange Act of 1934 and the
Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund,
or to any shareholder of the Fund, for any act or omission in the course
of, or connected with, rendering services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date, and supersedes the
Management Contract dated January 20, 1997.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property
of the Fund.
IN WITNESS WHEREOF, XXXXXX TAX EXEMPT INCOME FUND and XXXXXX INVESTMENT
MANAGEMENT, INC. have each caused this instrument to be signed in duplicate
on its behalf by its President or a Vice President thereunto duly
authorized, all as of the day and year first above written.
XXXXXX TAX EXEMPT INCOME FUND XXXXXX INVESTMENT MANAGEMENT, INC.
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxx X. Silver
By:----------------------- By:------------------------
Xxxxxxx X. Xxxxxx Xxxxxx X. Silver
Executive Vice President Senior Managing Director
