MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of March 15, 2001, between XXXXXXXX
TAX-AWARE FUND, INC. a Maryland corporation (the "Corporation"), and J. & X.
XXXXXXXX & CO. INCORPORATED, a Delaware corporation (the "Manager").
In consideration of the mutual agreements herein made, the parties
hereto agree as follows:
1. Duties of the Manager. The Manager shall manage the affairs of the
Corporation including, but not limited to, continuously providing the
Corporation with investment management services, including investment research,
advice and supervision, determining which securities shall be purchased or sold
by the Corporation, making purchases and sales of securities on behalf of the
Corporation and determining how voting and other rights with respect to
securities of the Corporation shall be exercised, subject in each case to the
control of the Board of Directors of the Corporation and in accordance with the
objectives, policies and principles set forth in the Registration Statement and
Prospectus of the Corporation and the requirements of the Investment Company Act
of 1940, as amended (the "1940 Act") and other applicable law. In performing
such duties, the Manager shall provide such office space, such bookkeeping,
accounting, internal legal, clerical, secretarial and administrative services
(exclusive of, and in addition to, any such services provided by any others
retained by the Corporation) and such executive and other personnel as shall be
necessary for the operations of the Corporation. The Corporation understands
that the Manager also acts as the manager of all of the investment companies in
the Xxxxxxxx Group.
Subject to Section 36 of the 1940 Act, the Manager shall not be liable
to the Corporation for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the management of
the Corporation and the performance of its duties under this Agreement except
for willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement.
2. Expenses. (a) The Manager shall pay all of its expenses arising from
the performance of its obligations under Section 1, and shall pay any salaries,
fees and expenses of the directors of the Corporation who are employees of the
Manager or its affiliates. Except as otherwise provided in paragraph (b) of this
Section 2, the Manager shall not be required to pay any other expenses of the
Corporation, including, but not limited to, direct charges relating to the
purchase and sale of portfolio securities, interest charges, credit commitment
fees, fees and expenses of independent attorneys and auditors, taxes and
governmental fees, cost of stock certificates and any other expenses (including
clerical expenses) of issue, sale, repurchase or redemption of shares, expenses
of registering and qualifying shares for sale, expenses of printing and
distributing reports, notices and proxy materials to shareholders, expenses of
corporate data processing and related services, shareholder recordkeeping and
shareholder account services, expenses of printing and filing reports and other
documents filed with governmental agencies,
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expenses of printing and distributing prospectuses, expenses of annual and
special shareholders' meetings, fees and disbursements of transfer agents and
custodians, expenses of disbursing dividends and distributions, fees and
expenses of directors of the Corporation who are not employees of the Manager or
its affiliates, membership dues in the Investment Company Institute, insurance
premiums and extraordinary expenses such as litigation expenses.
(b) Notwithstanding anything to the contrary in paragraph (a) of this
Section 2, the Manager has agreed that, during the term of this Agreement until
October 31, 2002, if the expenses (but excluding any compensation paid to the
Manager pursuant to this Agreement, any amounts paid by the Corporation pursuant
to the written plan adopted under Rule 12b-1 under the 1940 Act, interest on
borrowing, and any extraordinary expenses) exceeds 0.50% (the "Expense Cap") of
the Corporation's average net assets (the "Excess Corporation Expenses") in any
fiscal year, the Manager shall reimburse the Corporation for an amount equal to
the Excess Corporation Expenses.
3. Compensation. (a) As compensation for the services performed and the
facilities and personnel provided by the Manager pursuant to Section 1, the
Corporation will pay the Manager promptly after the end of each month a fee,
calculated on each day during such month, by multiplying the Applicable Fee Rate
(as determined below) by the Corporation's net assets at the close of business
on the previous day and dividing the amount so determined by the number of days
in the fiscal year. The Applicable Fee Rate shall be:
(i) For the period from the commencement of the Corporation's
operations through the last day of the calendar month that
includes the one-year anniversary of the commencement date, an
annual rate of 1.00%.
(ii) Thereafter, an annual rate equal to 1.00%, increased or
decreased once each month as of the first day of the month
(the "Monthly Performance Adjustment").
(iii) The "Monthly Performance Adjustment" for each month
shall be a percentage rate determined by: (a) taking the
difference of (x) the cumulative percentage After-Tax
Investment Performance of the Corporation (including dividends
and other distributions and net of all expenses, including the
fees payable pursuant to this Agreement) over the preceding 12
calendar months (the "Measurement Period"), and (y) the
cumulative percentage change in the Xxxxxxx 1000 Growth Index
over the same period (including the value of dividends paid
during the period on stocks included in the Index); and (b)
multiplying the result by 0.10 and rounding the result to the
nearest 0.01%, provided, however, that the maximum Performance
Adjustment will not exceed +0.50% or -0.50%.
(iv) The "After-Tax Investment Performance" of the Corporation
for each Measurement Period shall be calculated in accordance
with the formula set forth in Item 21(b)(2) of SEC Form N-1A,
or any successor provision thereto providing
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for the calculation of average annual total returns after
taxes on distributions (but not taxes on redemptions of
shares).
(b) If the Manager shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated.
4. Purchase and Sale of Securities. The Manager shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers (including the Manager or an affiliate of the Manager) as the
Manager shall deem appropriate in order to carry out the policy with respect to
portfolio transactions as set forth in the Registration Statement and Prospectus
of the Corporation or as the Board of Directors of the Corporation may direct
from time to time. In providing the Corporation with investment management and
supervision, it is recognized that the Manager will seek the most favorable
price and execution, and, consistent with such policy, may give consideration to
the research, statistical and other services furnished by brokers or dealers to
the Manager for its use, to the general attitude of brokers or dealers toward
investment companies and their support of them, and to such other considerations
as the Board of Directors of the Corporation may direct or authorize from time
to time.
Notwithstanding the above, it is understood that it is desirable for
the Corporation that the Manager have access to supplemental investment and
market research and security and economic analysis provided by brokers who
execute brokerage transactions at a higher cost to the Corporation than may
result when allocating brokerage to other brokers on the basis of seeking the
most favorable price and execution. Therefore, the Manager is authorized to
place orders for the purchase and sale of securities for the Corporation with
such brokers, subject to review by the Corporation's Board of Directors from
time to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Manager in connection with its services to other clients as well as the
Corporation.
The placing of purchase and sale orders may be carried out by the
Manager or any wholly-owned subsidiary of the Manager.
If, in connection with purchases and sales of securities for the
Corporation, the Manager or any subsidiary of the Manager may, without material
risk, arrange to receive a soliciting dealer's fee or other underwriter's or
dealer's discount or commission, the Manager shall, unless otherwise directed by
the Board of Directors of the Corporation, obtain such fee, discount or
commission and the amount thereof shall be applied to reduce the compensation to
be received by the Manager pursuant to Section 3 hereof.
Nothing herein shall prohibit the Board of Directors of the Corporation
from approving the payment by the Corporation of additional compensation to
others for consulting services, supplemental research and security and economic
analysis.
5. Term of Agreement. This Agreement shall continue in full force and
effect until December 31, 2002, and from year to year thereafter if such
continuance is approved in the manner required by the 1940 Act if the Manager
shall not have notified the Corporation in
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writing at least 60 days prior to such December 31 or prior to December 31 of
any year thereafter that it does not desire such continuance. This Agreement may
be terminated at any time, without payment of penalty by the Corporation, on 60
days' written notice to the Manager, by vote of the Board of Directors of the
Corporation or by vote of a majority of the outstanding voting securities of the
Corporation (as defined by the 1940 Act). This Agreement shall automatically
terminate in the event of its assignment (as defined by the 1940 Act).
6. Right of Manager In Corporate Name. The Manager and the Corporation
each agree that the word "Xxxxxxxx", which comprises a component of the
Corporation's name, is a property right of the Manager. The Corporation agrees
and consents that (i) it will only use the word "Xxxxxxxx" as a component of its
corporate name and for no other purpose, (ii) it will not purport to grant to
any third party the right to use the word "Xxxxxxxx" for any purpose, (iii) the
Manager or any corporate affiliate of the Manager may use or grant to others the
right to use the word "Xxxxxxxx", or any combination or abbreviation thereof, as
all or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Manager, the Corporation will take such action as may be required
to provide its consent to the use of the word "Xxxxxxxx", or any combination or
abbreviation thereof, by the Manager or any corporate affiliate of the Manager,
or by any person to whom the Manager or an affiliate of the Manager shall have
granted the right to such use; and (iv) upon the termination of any management
agreement into which the Manager and the Corporation may enter, the Corporation
shall, upon request by the Manager, promptly take such action, at its own
expense, as may be necessary to change its corporate name to one not containing
the word "Xxxxxxxx" and following such change, shall not use the word
"Xxxxxxxx", or any combination thereof, as a part of its corporate name or for
any other commercial purpose, and shall use its best efforts to cause its
officers, directors and stockholders to take any and all actions which the
Manager may request to effect the foregoing and to reconvey to the Manager any
and all rights to such word.
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon either of the parties, to do anything in violation of
any applicable laws or regulations.
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IN WITNESS WHEREOF, the Corporation and the Manager have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
XXXXXXXX TAX-AWARE FUND, INC.
By /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
J. & X. XXXXXXXX & CO. INCORPORATED
By /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx
President
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