EXHIBIT 5(e)
AMENDED INVESTMENT ADVISORY AGREEMENT
(Tax-Exempt Fund)
AGREEMENT made as of April 22, 1992, between EMERALD
FUNDS, a Massachusetts business trust (herein called the
"Trust"), and XXXXXXX XXXXX TRUST COMPANY, N.A., a national
banking association (herein called the "Investment Adviser"), a
wholly-owned subsidiary of Xxxxxxx Xxxxx, Inc.
WHEREAS, the Trust is registered as an open-end,
management investment company under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Trust and the Investment Adviser have
entered into an Investment Advisory Agreement dated as of
December 7, 1988 under which the Investment Adviser has agreed to
furnish investment advisory and other services to the Trust's
Tax-Exempt Fund; and
WHEREAS, the Trust and the Investment Adviser wish to
amend said Agreement to clarify the provision of sub-advisory
services to the Tax-Exempt Fund pursuant to Section 2 of the
Agreement;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, it is agreed between the parties
hereto as follows:
1. APPOINTMENT.
The Trust hereby appoints the Investment Adviser
to provide the investment advisory and other services set forth
herein to the Trust for its Tax-Exempt Fund for the period and on
the terms set forth in this Agreement. The Investment Adviser
accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
2. SUBCONTRACTORS.
It is understood that the Investment Adviser will
from time to time employ or associate with such person or persons
as the Investment Adviser may believe to be particularly fitted
to assist it in the performance of this Agreement; provided,
however, that the compensation of such person or persons shall be
paid by the Investment Adviser. In addition, notwithstanding any
such employment or association, the Investment Adviser shall
itself (a) establish and monitor general investment criteria and
policies for the Fund, (b) review and analyze on a periodic basis
the Fund's portfolio holdings and transactions in order to
determine their appropriateness in light of the Fund's
shareholder base, and (c) review and analyze on a periodic basis
the policies established by any sub-adviser for the Fund with
respect to the placement of orders for the purchase and sale of
portfolio securities. Without limiting the generality of the
foregoing, it is agreed that investment advisory services to the
Fund shall be provided by a sub-investment adviser (the "Sub-
Adviser") pursuant to a sub-advisory agreement agreeable to the
Trust and approved in accordance with the provisions of the 1940
Act (the 'Sub-Advisory Agreement").
3. DELIVERY OF DOCUMENTS.
The Trust has furnished the Investment Adviser with
copies properly certified or authenticated of each of the
following:
(a) The Trust's Agreement and Declaration of
Trust, as filed with the State Secretary of the
Commonwealth of Massachusetts on March 16, 1988, and
any amendments thereto (such Agreement and Declaration
of Trust, as presently in effect and as it shall from
time to time be amended, is herein called the
"Declaration of Trust");
(b) The Trust's Code of Regulations and any
amendments thereto;
(c) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Investment Adviser
and approving this Agreement;
(d) The Trust's Notification of Registration on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission an March 21, 1988
and any amendments thereto;
(e) The Trust's Registration Statement on Form N-
1A under the Securities Act of 1933 as amended ("1933
Act") (File No. 33-20658) and under the 1940 Act as
filed with the Securities and Exchange Commission on
March 21, 1988 and any amendments thereto; and
(f) The most recent prospectus of the Fund (such
prospectus together with the related statement of
additional information, as presently in effect and all
amendments and supplements thereto, are herein called
"Prospectus").
The Trust will furnish the Investment Adviser from time to time
with copies of all amendments of or supplements to the foregoing,
if any.
-2-
4. SERVICES.
Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will be responsible for the
management of, and 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 Investment Adviser will determine from time to
time what securities and other investments will be purchased,
retained or sold by the Fund. The Investment Adviser will
provide the services rendered by it under this Agreement in
accordance with the Fund's investment objective, policies and
restrictions as stated in the Prospectus and resolutions of the
Trust's Board of Trustees. Without limiting the generality of
the foregoing, the Investment Adviser is hereby specifically
authorized to invest and reinvest the assets of the Fund, in its
discretion as investment adviser, in (i) variable amount demand
notes of corporate borrowers held by the Investment Adviser in
its capacity as fiduciary, agent and custodian and (ii)
securities of other investment companies whether or not the same
are advised or managed by the Investment Adviser or another
affiliated person of the Trust. The Investment Adviser further
agrees that it will:
(a) Establish and monitor general investment
criteria and policies for the Fund;
(b) Update the Fund's cash availability
throughout the day as required;
(c) Maintain historical tax lots for each
portfolio security held by the Fund;
(d) Transmit trades to the Trust's custodian for
proper settlement;
(e) Maintain appropriate books and records with
respect to the Fund's securities transactions;
(f) Supply the Trust and its Board of Trustees
with reports, statistical data and economic information
as requested; and
(g) Prepare a quarterly broker security
transaction summary and, if requested in advance,
monthly security transaction listing for the Fund.
5. OTHER COVENANTS.
The Investment Adviser agrees that it:
-3-
(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 Investment 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 transaction, the Investment 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 Investment 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 and other accounts over
which the Investment Adviser or an affiliate of the
Investment Adviser exercises investment discretion.
The Investment Adviser is authorized, subject to the
prior approval of 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 investment 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 Investment Adviser to the Fund.
In addition, the Investment 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 Investment
Adviser, Sub-Adviser or the Trust's principal
underwriter), provided that the Investment Adviser
-4-
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
Investment Adviser, Sub-Adviser, the Trust's principal
underwriter, or any affiliated person of either the
Trust, the Investment 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 investment advisory services hereunder
independently of the commercial banking operations of
its affiliates. When the Investment Adviser makes
investment recommendations for the Fund, its investment
advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed
for purchase or sale for the Fund's account are
customers of the commercial department of any of the
Investment Adviser's affiliates. In dealing with
commercial customers, the Investment Adviser's
affiliates will not inquire or take into consideration
whether securities of those customers are held by the
Fund.
6. SERVICES NOT EXCLUSIVE.
The services furnished by the Investment Adviser
hereunder are deemed not to be exclusive, and the Investment
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
Investment Adviser to be suitable for two or more accounts
managed by the Investment Adviser, the available securities or
investments may be allocated in a manner believed by the
Investment 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.
7. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for each 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 Investment Adviser
further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by
Rule 3la-1 under the 1940 Act.
-5-
8. EXPENSES.
During the term of this Agreement, the Investment
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 charges, 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
Investment Adviser will reimburse the Trust, to the extent
required by state law, for 50% of such excess expenses of the
Fund. The Investment Adviser's obligation is not limited to the
amount of its fees hereunder. Such reimbursement, if any, will
be estimated and accrued daily and paid on a monthly basis.
9. COMPENSATION.
For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment
Adviser, and the Investment Adviser will accept as full
compensation therefor from the Trust, a fee, computed daily and
payable monthly, at the annual rate of .25% of the average daily
net assets of 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.
10. LIMITATION OF LIABILITY.
The Investment 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 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 negligence on
the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement.
11. DURATION AND TERMINATION.
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided herein,
shall continue in effect until November 30, 1992. 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 on such approval, and (b) by the Trust's
-6-
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 Trust (by vote of the
Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund), or by the Investment
Adviser, on sixty days' written notice. 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 persons" and "assignment" shall have the
same meaning as such terms have in the 1940 Act.)
12. 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.
13. 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 New York law.
14. NAMES.
The names "Emerald Funds" and "Trustees of Emerald
Funds" refer respectively to the Trust created and the Trustees,
as trustees but not individually or personally, acting from time
to time under an Agreement and Declaration of Trust dated March
15, 1988, which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities, and are not
binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust
Property, and all persons dealing with any class of shares of the
-7-
Trust must look solely to the Trust Property belonging to such
class for the enforcement of any claims against the Trust.
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.
EMERALD FUNDS
(a Massachusetts
business trust)
Attest:
/s/ Xxxxxxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
----------------------------- -------------------------
[Seal]
Attest: XXXXXXX XXXXX TRUST
COMPANY, N.A.
By /s/ XxXxxxx Xxxxx, Jr.
----------------------------- ------------------------
[Seal]
-8-
