MANAGEMENT AGREEMENT
Management Agreement dated October 1, 1999, between LSA Variable Series
Trust, a Delaware business trust (the "Trust") and LSA Asset Management LLC, a
Delaware limited liability Company, (the "Manager"). In consideration of the
mutual covenants contained herein, the parties agree as follows:
1. APPOINTMENT OF MANAGER
The Trust hereby appoints the Manager, subject to the supervision of the
Trustees of the Trust and the terms of this Agreement, as the investment manager
for each of the Funds of the Trust (the "Funds") specified in Schedule 1 to this
Agreement as it shall be amended by the Manager and the Trust from time to time.
The Manager accepts such appointment and agrees to render the services and to
assume the obligations set forth in this Agreement commencing on its effective
date. The Manager will be an independent contractor and will have no authority
to act for or represent the Trust in any way or otherwise be deemed an agent
unless expressly authorized in this Agreement or another writing by the Trust
and the Manager.
2. DUTIES OF THE MANAGER
a. Subject to the general supervision of the Trustees of the Trust and
the terms of this Agreement, the Manager will at its own expense,
select and contract with investment advisers ("Advisers") to manage
the investments and determine the composition of the assets of the
Funds; provided, that any contract with an Adviser (an "Advisory
Agreement") shall be in compliance with and approved as required by
the Investment Company Act of 1940, as amended ("Investment Company
Act") and the performance thereunder consistent with terms of an
exemptive order granted by the Securities and Exchange Commission
("SEC") permitting the Manager to employ a manager-of-managers
strategy. Subject always to the direction and control of the Trustees
of the Trust, the Manager will monitor compliance of each Adviser with
the investment objectives and related investment policies, as set
forth in the Trust's registration statement filed with the SEC, of any
Fund or Funds under the management of such Adviser, and review and
report to the Trustees of the Trust on the performance of such
Adviser.
b. The Manager will furnish to the Trust the following:
i. necessary office space in the offices of the Manager or in such
other place as may be agreed upon by the parties hereto from time
to time, and all necessary office facilities and equipment;
ii. necessary office personnel, including personnel for the
performance of clerical, accounting and other office functions,
exclusive of those functions (a) related to the investment
subadvisory services to be provided by any Adviser pursuant to an
Advisory Agreement and (b) relating to other services for which
the Trust has contracted with a third party;
iii. accounting, bookkeeping, recordkeeping and related services other
than services in respect of the records relating to any other
services for which the Trust has contracted with a third party
(including any Adviser); and
iv. all other information and services, (other than services of
counsel or independent accountants or investment subadvisory
services to be provided by any Adviser under an Advisory
Agreement), required in connection with the preparation of all
registration statements and prospectuses, all annual, semiannual
and periodic reports to shareholders of the Trust, regulatory
authorities or others, all notices and proxy solicitation
materials furnished to shareholders of the Trust or regulatory
authorities and all tax returns.
c. In addition to negotiating and contracting with Advisers as set forth
in section (2)(a) of this Agreement and providing facilities,
personnel and services as set forth in section (2)(b) at its own
expense, the Manager will pay or cause to be paid:
i. the cost of any advertising or sales literature relating solely
to the Trust;
ii. the cost of printing and mailing prospectuses to persons other
than current holders of Trust shares or variable contracts funded
by Trust shares; and
iii. the compensation of all officers and Trustees of the Trust who
are also directors, officers or employees of the Manager or its
affiliates.
3. EXPENSES ASSUMED BY THE TRUST
The Trust will pay all expenses of its organization, operations and
business not specifically assumed or agreed to be paid by the Manager as
provided in this Agreement or by an Adviser as provided in an Advisory
Agreement. Without limiting the generality of the foregoing, the Trust shall pay
or arrange for the payment of the following:
2
a. any of the costs of printing and mailing all registration statements and
prospectuses, all annual, semiannual and periodic reports to shareholders
of the Trust, regulatory authorities or others, all notices and proxy
solicitation materials furnished to shareholders of the Trust or regulatory
authorities and all tax returns;
b. compensation of the officers and Trustees of the Trust other than those
enumerated in (2.)(c.)(iii.);
c. registration, filing and other fees in connection with requirements of
applicable state and federal regulatory authorities;
d. the charges and expenses of the custodian appointed by the Trust for
custodial services;
e. the charges and expenses of the independent accountants retained by the
Trust;
f. the charges and expenses of any administrative, transfer, bookkeeping, fund
accounting, and compliance testing services, and dividend disbursing agents
appointed by the Trust;
g. broker's commissions and issue and transfer taxes chargeable to the Trust
in connection with securities transactions to which the Trust is a party;
h. taxes and corporate fees payable by the Trust to federal, state or other
governmental agencies;
i. the cost of stock certificates, if any, representing shares of the Trust;
j. legal fees and expenses in connection with the affairs of the Trust,
including registering and qualifying its shares with regulatory
authorities;
k. association membership dues if any;
1. insurance premiums for fidelity and other coverage;
m. expenses of shareholders and Trustees' meetings;
n. pricing shares of the Trust's Funds;
o. interest on borrowings; and
3
p. litigation expenses.
4. COMPENSATION OF MANAGER
As compensation for the services rendered and obligations assumed hereunder
by the Manager, the Trust shall pay to the Manager monthly a fee that is equal
on an annual basis to that percentage of the average daily net assets of each
Fund set forth on Schedule 1 attached hereto, which is incorporated by reference
herein (and with respect to any future Fund, such percentage as the Trust and
the Manager may agree to from time to time in writing by a signed Amendment of
Schedule 1 subject to Section 13 herein). Such fee shall be computed and accrued
daily. If the Manager serves as Manager for less than the whole of any period
specified in this Section 4, the compensation to the Manager shall be prorated.
For purposes of calculating the Manager's fee, the daily value of each Fund's
net assets shall be computed by the same method as the Trust uses to compute the
net asset value of that Fund. The Manager will pay all fees owing to each
Adviser, and the Trust shall not be obligated to the Advisers in any manner with
respect to the compensation of such Advisers. The Manager reserves the right to
waive all or a part of its fee.
5. NON-EXCLUSIVITY
The services of the Manager to the Trust are not to be deemed to be
exclusive, and the Manager shall be free to render investment management or
other services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that the directors, officers and
employees of the Manager are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, directors, trustees or employees of any other firm or
corporation, including other investment companies.
6. SUPPLEMENTAL ARRANGEMENTS
The Manager may enter into arrangements with other persons affiliated with
the Manager to better enable it to fulfill its obligations under this Agreement
for the provision of certain personnel and facilities to the Manager.
4
7. LIMITATION OF LIABILITY OF THE MANAGER
a. Absent willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the Manager, the
Manager and/or any of its affiliates and the directors, officers and employees
of the Manager and/or of its affiliates shall not be subject to liability to the
Trust or to any holder of an interest in any Fund for any act or omission in the
course of or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
b. The Trust will indemnify the Manager against, and hold it harmless from,
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from acts or omissions of the
Trust. Indemnification shall be made only after: (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Trust was liable for the damages claimed or (ii) in the absence of such a
decision, a reasonable determination based upon a review of the facts, that the
Trust was liable for the damages claimed, which determination shall be made by
either (a) the vote of a majority of a quorum of Trustees of the Trust who are
neither "interested persons" of the Trust nor parties to the proceeding
("disinterested non-party Trustees") or (b) an independent legal counsel
satisfactory to the parties hereto, whose determination shall be set forth in a
written opinion. The Manager shall be entitled to advances from the Trust for
payment of the reasonable expenses incurred by it in connection with the matter
as to which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the applicable provisions of Delaware law
and the Investment Company Act. The Manager shall provide to the Trust a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification under such law has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Manager shall provide security in form and
amount acceptable to the Trust for its undertaking; (b) the Trust is insured
against losses arising by reason of the advance; or (c) a majority of the
independent Trustees of the Trust, or independent legal counsel in a written
opinion, shall have determined, based on a review of facts readily available to
the Trust at the time the advance is proposed to be made, that there is reason
to believe that the Manager will ultimately be found to be entitled to
indemnification.
8. LIMITATION OF TRUST'S LIABILITY.
The Manager acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its Declaration of Trust.
The Manager agrees that the Trust's obligations hereunder in any case shall be
limited to the Trust and to its assets and that the Manager shall not seek
satisfaction of any such obligation from the holders of the interests in any
Fund nor from any Trustee, officer, employee or agent of the Trust.
5
9. CONFLICTS OF INTEREST
It is understood that Trustees, officers, agents and shareholders of the
Trust are or may be interested in the Manager as directors, officers,
stockholders, or otherwise; that directors, officers, agents and stockholders of
the Manager are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise; that the Manager may be interested in the Trust; and
that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Articles of
Incorporation of the Manager, respectively, or by specific provision of
applicable law.
10. REGULATION
The Manager shall submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
11. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of its execution or the
date that it has been approved by shareholders of the Trust and/or the Board of
Trustees of the Trust in the manner required by the Investment Company Act. The
Agreement will continue in effect for a period of more than two years from the
date of its execution only so long as such continuance is specifically approved
at least annually either by the Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Trust, provided that in
either such event the continuance shall also be approved by the vote of a
majority of the Trustees of the Trust who are not interested persons (as defined
in the Investment Company Act) of any party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The required
shareholder approval of the Agreement or any continuance of the Agreement shall
be effective with respect to any Fund if a majority of the outstanding voting
securities of the series (as defined in Rule 18f-2(h) under the Investment
Company Act) of shares of that Fund votes to approve the Agreement or its
continuance, notwithstanding that the Agreement or its continuance may not have
been approved by a majority of the outstanding voting securities of (a) any
other Fund affected by the Agreement or (b) all the Funds of the Trust.
6
If the shareholders of a series of any Fund fail to approve the Agreement
or any continuance of the Agreement, the Manager will continue to act as
investment Manager with respect to such Fund pending the required approval of
the Agreement or its continuance or of a new contract with the Manager or a
different Manager or other definitive action; provided, that the compensation
received by the Manager in respect of such Fund during such period will be no
more than its actual costs incurred in furnishing investment advisory and
management services to such Fund or the amount it would have received under the
Agreement in respect of such Fund, whichever is less.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Fund by the
vote of a majority of the outstanding voting securities of the shares of such
Fund, on sixty days written notice to the Manager, or by the Manager on sixty
days' written notice to the Trust. This Agreement will automatically terminate,
without payment of any penalty, in the event if its assignment (as defined in
the Investment Company Act).
12. PROVISION OF CERTAIN INFORMATION BY MANAGER
The Manager will promptly notify the Trust in writing of the occurrence of
any of the following events:
a. the Manager fails to be registered as an investment adviser under the
Investment Advisers Act of 1940 or under the laws of any jurisdiction in
which the Manager is required to be registered as an investment adviser in
order to perform its obligations under this Agreement;
b. the Manager is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust; and
c. the chief executive officer or controlling stockholder of the Manager or
the Fund manager of any Fund changes.
13. AMENDMENTS TO THE AGREEMENT
This Agreement may be materially amended by the parties only if such
amendment is specifically approved by the vote of a majority of the outstanding
voting securities of each of the Funds affected by the amendment and by the vote
of a majority of the Trustees of the Trust 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. The required shareholder approval shall be effective
with respect to any Fund if a majority of the outstanding voting securities of
the shares of that Fund vote to approve the amendment, notwithstanding that the
amendment may not have been approved by a majority of the outstanding voting
securities of (a) any other Fund affected by the amendment or (b) all the Funds
of the Trust.
7
14. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
15. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part thereof.
16. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust to the
attention of its Secretary or Manager to the attention of its Secretary, in
person or by registered mail or a private mail or delivery service providing the
sender with notice of receipt. Notice shall be deemed given on the date
delivered or mailed in accordance with this section.
17. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
18. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of Delaware, or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of Delaware, or any of the
provisions in this Agreement, conflict with applicable provisions of the
Investment Company Act, the latter shall control.
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] LSA VARIABLE SERIES TRUST
By: /s/Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Secretary and Chief Compliance Officer
[SEAL] LSA ASSET MANAGEMENT LLC
By: /s/Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: President
9
SCHEDULE 1
1. Focused Equity Fund: 0.95% of the current net assets of the Fund.
2. Growth Equity Fund: 0.85% of the current net assets of the Fund.
3. Disciplined Equity Fund: 0.75% of the current net assets of the Fund.
4. Value Equity Fund: 0.80% of the current net assets of the Fund.
5. Balanced Fund: 0.80% of the current net assets of the Fund.
6. Emerging Growth Equity Fund: 1.05% of the current net assets of the Fund.
The percentage fee for each Fund shall be accrued for each calendar day and
the sum of the daily fee accruals shall be payable monthly to the Manager. The
daily fee accruals will be computed by multiplying the fraction of one over the
number of calendar days in the year by the applicable annual rate described in
the preceding paragraph, and multiplying this product by the net assets of the
Fund as determined in accordance with the Trust's prospectus and statement of
additional information as of the close of business on the previous business 'day
on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of such month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs. 10
10
