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AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT made this 4th day of May,
1993, between FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking
association (herein called the "Investment Adviser") and HIGHLAND CAPITAL
MANAGEMENT CORP., a Delaware corporation (herein called the "Sub-Adviser").
WHEREAS, the Investment Adviser is the investment adviser to First
Funds (herein called the "Trust"), an open-end, diversified, management
investment company of the "series" type, registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Adviser wishes to retain the Sub-Adviser to
provide investment advisory services in connection with the Trust's GROWTH AND
INCOME PORTFOLIO (herein called the "Portfolio") a series of the Trust; and
WHEREAS, the Sub-Adviser is willing to provide such services to the
Investment Adviser upon the conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows
1. Appointment. (a) The Investment Adviser hereby appoints the
Sub-Adviser its subadviser with respect to the Portfolio, as permitted in the
Investment Advisory and Management Agreement between the Investment Adviser and
the Trust dated February 15, 1993 (such Agreement or the most recent successor
advisor agreement between such parties is herein called the "Advisory
Agreement"). The Sub-Adviser accepts such appointment and agrees to use its best
professional judgement to make timely investment decisions for the Portfolio
with respect to the investments of the Portfolio in accordance with the
provisions of this Agreement for the compensation herein provided.
(b) The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Trust or the Investment Adviser in any way or otherwise be deemed an agent of
the Trust or the Investment Adviser.
2. Delivery of Documents. (a) The Investment Adviser shall provide to
the Sub-Adviser copies of the Trust's most recent prospectus and statement of
additional information (as each may be amended or supplemented from time to
time) which relate to any class of shares representing interests in the
Portfolio (each such prospectus and statement of additional information as
presently in effect, and as they shall from time to time be amended and
supplemented, is herein respectively called a "Prospectus" and a "Statement of
Additional Information") .
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(b) The Sub-Adviser will make available and provide to the Investment
Adviser such financial, accounting, and statistical information related to its
duties and responsibilities hereunder as is necessary for the preparation of
registration statements, reports, and other documents required by federal and
state securities laws and such other information as the Trust's Board of
Trustees (herein called the "Trustees") or the Investment Adviser may reasonably
request for use by the Trust and its distributor for the underwriting and
distribution of the Portfolio shares.
3. Sub-Advisory Services to the Portfolio. Subject to the supervision
of the Investment Adviser, the Sub-Adviser will supervise the day-to-day
operations of the Portfolio and perform the following services: (i) provide
investment research and credit analysis concerning the Portfolio's investments,
(ii) conduct a continual program of investment of the Portfolio's assets, (iii)
place orders in accordance with paragraphs 4 to 7 hereof for all purchases and
sales of the investments made for the Portfolio, and (iv) maintain the books and
records required in connection with its duties hereunder. In addition, the
Sub-Adviser will keep the Investment Adviser informed of developments materially
affecting the Trust. The Sub-Adviser will communicate to the Investment Adviser
on each day that a purchase or sale of a security is effected for the Portfolio
(i) the name of the issuer, (ii) the amount of the purchase or sale, (iii) the
name of the broker, dealer, bank or other person (herein called "Brokers"), if
any, through which the purchase or sale will be effected, (iv) the CUSIP number
of the security, if any, (v) the Portfolio to which such purchase or sale
pertains, and (vi) such other information as the Investment Adviser may
reasonably require for purposes of fulfilling its obligations to the Trust under
the Advisory Agreement. The Sub-Adviser will render to the Trustees such
periodic and special reports as the Investment Adviser or the Trustees may
reasonably request, including, if applicable, regular reports of the total
brokerage business placed by it and the manner in which the allocation of such
brokerage business has been accomplished. The Sub-Adviser will provide the
services rendered by it hereunder in accordance with the Portfolio's investment
objectives, policies, and restrictions as stated in its current Prospectus and
Statement of Additional Information. Except for instructions or advice given to
the Sub-Adviser by the Investment Adviser, the Investment Adviser shall not be
responsible or liable for the investment merits of any decision by the
Sub-Adviser to purchase, hold or sell a security for the Portfolio.
4. Brokerage. The Sub-Adviser may place orders pursuant to its
investment determinations for the Portfolio either directly with the issuer or
with any Brokers. In placing orders, the Sub-Adviser will consider the
experience and skill of the firm's securities traders as well as the firm's
financial responsibility and administrative efficiency. The Sub-Adviser will
attempt to obtain the best price and the most favorable execution of its orders.
Consistent with these obligations, the Sub-Adviser may, subject to the approval
of the Trustees, select Brokers on the basis of the research, statistical, and
pricing services they provide to the Portfolio. A commission paid to such
Brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-Adviser
determined in good faith that such commission is reasonable in terms either of
the transaction or the overall responsibility of the Sub-Adviser to the
Portfolio and its other clients and that the total commissions paid by the
Portfolio will be reasonable in relation to the benefits to the Portfolio over
the long term. In no instance will Portfolio securities be purchased from or
sold to the Trust's principal underwriter, the investment Adviser, the
Sub-Adviser, or any affiliate (as defined in the 0000 Xxx) thereof, except to
the extent permitted by
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SEC exemptive order or by applicable law. The Investment Adviser agrees to
provide the Sub-Adviser a list of Brokers which are "affiliated persons" (as
defined in the 0000 Xxx) of the Trust and the Investment Adviser. The
Sub-Adviser agrees to furnish to the Investment Adviser and to the Trust a list
of Brokers and dealers, which are such "affiliated persons" of the Sub-Adviser.
It is understood that neither the Investment Adviser nor the Sub-Adviser has
adopted a formula for selection of Brokers for the execution of the Portfolio's
investment transactions.
5. Transaction Procedures. All investment transactions on behalf of the
Portfolio will be consummated by payment to or delivery by the duly appointed
custodian for the Portfolio (the "Custodian"), or such depositories or agents
duly appointed by the Trustees and as may be designated by the Custodian in
writing, as custodian for the Portfolio, of all cash and/or securities due to or
from the Portfolio, and the Sub-Adviser shall not have possession or custody
thereof or any responsibility or liability with respect thereto. The Sub-Adviser
in effecting transactions on behalf of the Portfolio shall advise the Custodian
of all investment orders for the Portfolio placed by it with Brokers. The
Investment Adviser shall issue, or cause to be issued, to the custodian such
instructions as may be appropriate in connection with the settlement of any
transaction initiated by the Sub-Adviser. The Portfolio is responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon the giving of proper instructions to the Custodian, the Sub-Adviser shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Sub-Adviser to take appropriate action if the
Custodian fails properly to confirm, execution of the instructions to the
Sub-Adviser in a written form duly agreed upon by the Custodian and the
Sub-Adviser.
6. Compliance with Laws; Confidentiality. (a) The Sub-Adviser agrees
that it will comply with all applicable rules and regulations of all federal and
state regulatory agencies having jurisdiction over the Sub-Adviser in
performance of its duties hereunder (herein called the "Rules"). The Sub-Adviser
will treat confidentially and as proprietary information of the Trust all
records and information relative to the Trust and prior, present or potential
shareholders, and will not use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Investment Adviser
and the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when required to divulge such information by
duly constituted authorities, or when so requested by the Trust.
(b) The Sub-Adviser is not authorized by the Trust or the Investment
Adviser to take any action, including the purchase or sale of securities for the
account of the Portfolio, (a) in contravention of (i) any investment
restrictions set forth-in the 1940 Act and the rules thereunder; (ii) specific
written instructions adopted by the Trustees or the Investment Adviser and
communicated to the Sub-Adviser; or (iii) the investment objectives, policies,
and restrictions of the Portfolio as set forth in the Trust's registration
statement as amended from time to time, or (b) which would have the effect of
causing the Trust to fail to qualify or to cease to qualify as a regulated
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investment company under the Internal Revenue Code of 1986. as amended, or any
succeeding statute.
(c) The Sub-Adviser agrees with respect to the services provided
to the Portfolio that it:
(i) will conform with all applicable rules and
regulations of the Securities and Exchange
Commission ("SEC");
(ii) will not purchase shares of the Portfolio for its
own investment account; and
(iii) will immediately notify the Trust and the
Investment Adviser of the occurrence of any event
which would disqualify the SubAdviser from serving
as investment adviser of an investment company.
7. Control by Trust's Board of Trustees. Any recommendations concerning
the Portfolio's investment program proposed by the Sub-Adviser to the Portfolio
and to the Investment Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Sub-Adviser on behalf of the Portfolio pursuant
hereto, shall at all times be subject to any applicable directives of the Board
of Trustees of the Trust.
8. Services Not Exclusive. The Sub-Adviser's services hereunder are not
deemed to be exclusive, and the Sub-Adviser shall be free to render similar
services to others so long as its services under this Agreement are not impaired
thereby.
9. Books and Records. In compliance with the requirements of Rule 31a-3
of the Rules, the Sub-Adviser hereby agrees that all records which it maintains
for the Trust are the property of the Trust and further agrees to surrender
promptly to the Trust and the Investment Adviser any such records upon the
request of the Trust or the Investment Adviser. The SubAdviser further agrees to
preserve for the periods prescribed by Rule 31a-2, the records required to be
maintained by the Sub-Adviser hereunder pursuant to Rule 31a-1 of the Rules.
10. Expenses. During the term of this Agreement, the Sub-Adviser will
bear all expenses in connection with the performance of its services under this
Agreement. The SubAdviser shall not bear certain other expenses related to the
operation of the Trust including, but not limited to: taxes levied against the
Trust, the Portfolio or the Investment Adviser; interest; brokerage fees and
commissions in connection with the purchase and sale of portfolio securities for
the Portfolio; and any extraordinary expense items.
11. Compensation. (a) For the services provided and the expenses
assumed pursuant to this Agreement, the Investment Adviser shall pay the
Sub-Adviser, and the SubAdviser agrees to accept as full compensation therefor,
a sub-advisory fee payable as soon as practicable after the last day of each
month, calculated using an annual rate of .33% (the "Annual Rate").
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(b) The monthly sub-advisory fee to be paid by the Investment Adviser
to the Sub-Adviser shall be determined as of the close of business on the last
business day of each month by multiplying one-twelfth of the Annual Rate by the
Average Portfolio Net Assets (hereinafter defined) calculated monthly as of such
day.
(c) For the purposes of this paragraph, the "Average Portfolio Net
Assets" shall be calculated monthly as of the last business day of each month
and shall mean the sum of the net assets of the Portfolio calculated each
business day during the month divided by the number of business days in the
month (such net assets to be determined as of the close of business each
business day and computed in the manner set forth in the Declaration of Trust of
the Trust).
(d) The Sub-Adviser acknowledges that the Investment Adviser has agreed
with the Trust to reduce the Investment Adviser's compensation for any fiscal
year by the amount, if any, by which the expenses of the Portfolio for such
fiscal year exceed the most restrictive state Blue Sky expense limitation in
effect from time to time, to the extent required by such limitation. The
Sub-Adviser agrees that its compensation for any fiscal year shall be reduced by
the same proportion as the Investment Adviser's compensation is reduced as
described in the preceding sentence, for any fiscal year in which the expenses
of the Portfolio for such fiscal year exceed the most restrictive state Blue Sky
expense limitation in effect from time to time. The Sub-Adviser shall refund to
the Investment Adviser the amount of any reduction of the Sub-Adviser's
compensation pursuant to this paragraph 11(d) as promptly as practicable after
the end of such fiscal year, provided that the Sub-Adviser will not be required
to pay the Investment Adviser an amount greater than the fee paid to the
Sub-Adviser in respect of such year pursuant to this Agreement. As used in this
paragraph ll(d), "expenses" shall mean those expenses included in the most
restrictive state Blue Sky expense limitation, having the broadest specification
in such state's Blue Sky statute, and "expense limitation" means a limit on the
maximum annual expenses which may be incurred by an investment company
determined by multiplying a fixed percentage by the average or by multiplying
more than one such percentage by different specified amounts of the average, of
the values of the investment company's net assets for a fiscal year. The words
"most restrictive state Blue Sky expense limitation" shall be construed to
result in the largest reduction of the Sub-Adviser's compensation for any fiscal
year of the Portfolio; provided, however, that nothing in this Agreement shall
require the Sub-Adviser to reduce its fees if the Investment Adviser is not
required by an applicable statute or regulation referred to above in this
paragraph 11(d) to reduce its fees.
12. Limitation on Liability. (a) The Sub-Adviser will not be liable for
any error or judgment or mistake of law or for any loss suffered by the
Investment Adviser, the Portfolio or the Trust in connection with the matters to
which this Agreement relates, except that the Sub-Adviser shall be liable to the
Investment Adviser, the Portfolio or the Trust for 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 gross
negligence on the SubAdviser's part in the performance of its duties or reckless
disregard by it of its obligations or duties under this Agreement.
(b) The Sub-Adviser shall indemnify and hold harmless the Trust, the
Portfolio and the Investment Adviser from any loss, cost, expense or damage
resulting from the failure of the descriptive information furnished by the
Sub-Adviser to be accurate in all material respects at the
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time provided or the failure of the Sub-Advisor to comply in all material
respects with the investment objectives and policies and restrictions as set
forth in the Trust's registration statements as amended from time to time.
13. Duration Amendment and Termination. (a) This Agreement shall
become effective on the date first written above and shall remain in force for a
period of two (2) years from such date, and from year to year thereafter but
only so long as such continuance is specifically approved at least annually by
the Investment Adviser, and (i) by the vote of a majority of the Trustees who
are not interested persons of the Investment Adviser or the SubAdviser, cast in
person at a meeting called for the purpose of voting on such approval and by a
vote of the Trustees or (ii) by the vote of a majority of the outstanding voting
securities of the Portfolio. The aforesaid provision that this Agreement may be
continued "annually" shall be construed in a manner consistent with the 1940 Act
and the rules and regulations thereunder.
(b) This Agreement may be amended at any time, but only by written
agreement between the Investment Adviser and the Sub-Adviser, which amendment is
subject to the approval of the Trustees and the shareholders of the Trust in the
manner required by the 1940 Act, subject to any applicable exemptive order of
the SEC modifying the provisions of the 1940 Act with respect to approval of
amendments of this Agreement.
(c) This Agreement: (i) may at any time be terminated without the
payment of any penalty either by vote of the Trustees or by vote of a majority
of the outstanding voting securities of the Portfolio, on sixty (60) days'
written notice to the Sub-Adviser, (ii) shall immediately terminate in the event
of its assignment; and (iii) may be terminated by the SubAdviser on sixty (60)
days' written notice to the Investment Adviser and by the Investment Adviser on
sixty (60) days' written notice to the Sub-Adviser.
(d) As used in this Section 12, the terms "assignment," "interested
person," and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption issued by the SEC.
(e) All notices, requests, demands or other communications hereunder
shall be in writing and shall be deemed given, if delivered personally, on the
day delivered or if mailed by certified or registered mail, postage prepaid,
return receipt requested, three (3) days after placement in the United States
mail, to the addresses below:
If to Investment Adviser: First Tennessee Bank National Association
c/o C. Xxxxxxx Xxxxx, III
Senior Vice President and Manager
000 Xxx Xxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxx, Esq.
Vice President and Counsel
First Tennessee Bank National Association
000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
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If to Sub-Adviser: Highland Capital Management Corp.
c/o Xxxxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
If to Trust: First Funds
c/o Xxxxxxx Xxxx
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxxx X. Xxxxxxxx, Esq.
Baker, Donelson, Bearman & Xxxxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
14. Shareholder Liability. Sub-Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Portfolio or the Trust, if any, shall be limited in all cases to the Portfolio
and its assets. Sub-Adviser agrees that it shall not seek satisfaction of any
such obligation from the shareholders or any individual shareholder of the
Portfolio or the Trust, nor from the Trustees or any individual Trustee of the
Trust.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any 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. To the extent that state law has
not been preempted by the provisions of any law of the United States heretofore
or hereafter hereafter enacted, as the same may be amended from time to time,
this Agreement shall be administered, construed, and enforced according to the
laws of the State of Tennessee without giving effect to the choice of laws
provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
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Title:
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HIGHLAND CAPITAL MANAGEMENT CORP.
By:
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Title:
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