INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement made the 19th day of August 1993, by and between KEYSTONE
INSTITUTIONAL ADJUSTABLE RATE FUND, a Massachusetts business trust (the "Fund"),
and KEYSTONE CUSTODIAN FUNDS, INC., 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 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 one fund which is in excess of the amount of
commission another 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 discretion 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 broker's
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
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 or 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 a
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 Group, Inc. or otherwise; that
directors, officers and agents of the Adviser and its affiliates or stockholders
of Keystone Group, 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 of 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 July 1,
1993 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 persons, 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 at any time 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 at any time 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/ Xxxxx X. Xxxxxxxx, Xx.
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Title: Treasurer
KEYSTONE CUSTODIAN FUNDS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: Chairman
