MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT ("Agreement") is made this 23rd day of December,
1999, by and between Xxxx Xxxxx Investment Trust, Inc., a Maryland corporation
("Corporation"), on behalf of Xxxx Xxxxx Opportunity Trust ("Fund") and LMM LLC,
a Delaware limited liability company ("Manager").
WHEREAS, the Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"), of which the Fund is currently the only series; and
WHEREAS, the Corporation wishes to retain the Manager to provide
investment advisory, management, and administrative services to the Fund; and
WHEREAS, the Manager is willing to furnish such services on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. The Corporation hereby appoints the Manager as manager of the Fund for
the period and on the terms set forth in this Agreement. The Manager accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. The Fund shall at all times keep the Manager fully informed with regard
to the securities owned by it, its funds available, or to become available, for
investment, and generally as to the condition of its affairs. It shall furnish
the Manager with such other documents and information with regard to its affairs
as the Manager may from time to time reasonably request.
3. (a) Subject to the supervision of the Corporation's Board of Directors,
the Manager shall regularly provide the Fund with investment research, advice,
management and supervision and shall furnish a continuous investment program for
the Fund's portfolio of securities consistent with the Fund's investment goals
and policies. The Manager shall determine from time to time what securities will
be purchased, retained or sold by the Fund, and shall implement those decisions,
all subject to the provisions of the Corporation's Articles of Incorporation and
Bylaws, the 1940 Act, the applicable rules and regulations of the Securities and
Exchange Commission, and other applicable federal and state law, as well as the
investment goals, policies and limitations of the Fund. The Manager will place
orders pursuant to its investment determinations for the Fund either directly
with the issuer or with any broker or dealer. In placing orders with brokers and
dealers the Manager will attempt to obtain the best net price and the most
favorable execution of its orders; however, the Manager may, in its discretion,
purchase and sell portfolio securities from and to brokers and dealers who
provide the Fund with research, analysis, advice and similar services, and the
Manager may pay to these brokers, in return for research and analysis, a higher
commission or spread than may be charged by other brokers. The Manager shall
also provide advice and recommendations with respect to other aspects of the
business and affairs of the Fund, and shall perform such other functions of
management and supervision as may be directed by the Board of Directors of the
Corporation.
(b) The Fund hereby authorizes any entity or person associated with the
Manager which is a member of a national securities exchange to effect or execute
any transaction on the exchange for the account of the Corporation which is
permitted by Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder, and the Fund hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).
4. (a) The Manager, at its expense, shall furnish the Fund with office
facilities, including space, furniture and equipment, all personnel, and all
services reasonably necessary for the operation of the Fund.
(b) The Manager, at its expense, shall supervise all aspects of the
operations of the Corporation and the Fund including provision and coordination
of transfer agency, custodial services, accounting services (including
overseeing the calculation of the net asset value of the Fund's shares),
corporate secretarial services, legal services, and auditing services subject to
the Board's oversight.
(c) The Manager, at its expense, shall assure the maintenance of all books
and records with respect to the Fund's securities transactions and the keeping
of the Fund's books of account in accordance with all applicable federal and
state laws and regulations. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Manager hereby agrees: that any records which it
maintains for or on behalf of the Fund are the property of the Fund; that such
records will be available upon the request of the Corporation and/or the Fund
for inspection, copying and use by the Corporation and/or the Fund; and to
surrender promptly to the Fund any of such records upon the Fund's request. The
Manager further agrees to arrange for the preservation of the records required
to be maintained by Rule 31a-1 under the 1940 Act for the periods prescribed by
Rule 31a-2 under the 1940 Act. Upon termination of this Agreement, the Manager
will promptly surrender all such records to the Fund or such person as the Fund
and/or Corporation may designate.
(d) The Manager, at its expense, shall supply the Board of Directors and
officers of the Corporation with all statistical information and analyses and
reports reasonably required by them and reasonably available to the Manager.
(e) The Manager will supervise the preparation, filing, and dissemination
of required tax returns, applications, disclosures, and reports with relevant
regulatory authorities including the Securities and Exchange Commission and
state blue sky authorities.
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(f) The Manager shall authorize and permit any of its directors, officers
and employees, who may be elected as directors or officers of the Fund, to serve
in the capacities in which they are elected.
5. (a) Other than as herein specifically indicated, the Manager shall not
be responsible for the Fund's expenses. Specifically, the Manager will not be
responsible, except to the extent of the reasonable compensation of employees of
the Fund whose services may be used by the Manager hereunder, for any of the
following expenses of the Fund: advisory fees; distribution fees; interest,
taxes, governmental fees, fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; the
cost (including brokerage commissions or charges, if any) of securities
purchased or sold by the Fund and any losses in connection therewith; fees of
custodians, transfer agents, registrars or other agents; legal expenses; expense
of preparing share certificates; expenses relating to the redemption or
repurchase of the Fund's shares; expenses of registering and qualifying the
Fund's shares for sale under applicable federal and state law; expenses of
preparing, setting in print, printing and distributing prospectuses, reports,
notices and dividends to the Fund's shareholders; costs of stationery; costs of
stockholders and other meetings of the Fund; directors' fees; audit fees; travel
expenses of officers, directors and employees of the Corporation, if any; and
the Corporation's pro rata portion of premiums on any fidelity bond and other
insurance covering the Corporation and its officers, directors and employees.
(b) For the period ending December 31, 2000, the Manager shall pay any of
the Fund's expenses, including organizational expenses but excluding interest,
taxes, brokerage commissions and extraordinary expenses of the Fund which
exceed, in the aggregate, an annual rate of 1.99% of the Fund's average daily
net assets attributable to the Primary Class of shares ("Expense Limit");
provided, however, that in order to determine the Manager's liability for the
Fund's expenses over the Expense Limit, the amount of allowable year-to-date
expenses shall be computed daily by pro-rating the Expense Limit based on the
number of days elapsed within the fiscal year of the Fund ("Pro-Rated
Limitation"). The Pro-Rated Limitation shall be compared to the expenses of the
Fund recorded through the prior day in order to produce the allowable expenses
to be recorded for the current day ("Allowable Expenses"). If the Fund's
management fee and other expenses for the current day exceed the Allowable
Expenses, the management fee for the current day shall be reduced by such excess
("Unaccrued Fees"). In the event the excess exceeds the amount due as the
management fee, the Manager shall be responsible to the Fund for the additional
excess ("Other Expenses Exceeding Limit"). If at any time up through and
including December 31, 2000, the Fund's management fee and other expenses for
the current day are less than the Allowable Expenses, the differential shall be
due to the Manager as payment of cumulative Unaccrued Fees (if any) or as
payment for cumulative Other Expenses Exceeding Limit (if any). If cumulative
Unaccrued Fees or cumulative Other Expenses Exceeding Limit remain at December
31, 2000, these amounts shall be paid to the Manager in the future provided
that: (1) such payment shall be made to the Manager no later than the end of the
third fiscal year after the year in which the Unaccrued Fees or Other Expenses
Exceeding Limit was incurred; and (2) such payment shall only be made to the
extent that it does not result in the Fund's aggregate expenses exceeding an
expense limit of 1.99% of its average daily net assets attributable to the
Primary Class of shares.
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6. The Manager may enter into a contract ("Sub-Management Agreement") with
a sub-manager in which the Manager delegates to such sub-manager any or all of
its duties specified in Paragraphs 3 and 4 hereunder, provided that such
Sub-Management Agreement imposes on the sub-manager at least the same conditions
and standard of care to which the Manager would be subject in performing the
same duties hereunder, and further provided that such Sub-Management Agreement
meets all requirements of the 1940 Act and rules thereunder.
7. No director, officer or employee of the Corporation or Fund shall
receive from the Corporation any salary or other compensation as such director,
officer or employee while he is at the same time a director, officer, or
employee of the Manager or any affiliated company of the Manager. This paragraph
shall not apply to directors, executive committee members, consultants and other
persons who are not regular members of the Manager's or any affiliated company's
staff.
8. As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Fund shall pay the Manager, as promptly as possible
after the last day of each month, a fee, computed daily at an annual rate of
1.00% of the average daily net assets of the Fund up to $100 million and 0.75%
of the average daily net assets of the Fund in excess of $100 million. The first
payment of the fee shall be made as promptly as possible at the end of the month
succeeding the effective date of this Agreement, and shall constitute a full
payment of the fee due the Manager for all services prior to that date. If this
Agreement is terminated as of any date not the last day of a calendar month, a
final fee shall be paid promptly after the date of termination and shall be
based on the percentage of days of the month during which the contract was still
in effect. The average daily net assets of the Fund shall in all cases be based
only on business days and be computed as of the time of the regular close of
business of the New York Stock Exchange, or such other time as may be determined
by the Board of Directors of the Corporation. Each such payment shall be
accompanied by a statement prepared either by the Fund or by a reputable firm of
independent accountants which shall show the amount properly payable to the
Manager under this Agreement and the detailed computation thereof.
9. The Manager assumes no responsibility under this Agreement other than
to render the services called for hereunder, in good faith, and shall not be
responsible for any action of the Board of Directors of the Corporation in
following or declining to follow any advice or recommendations of the Manager;
provided, that nothing in this Agreement shall protect the Manager against any
liability to the Fund or its shareholders to which the Manager would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
10. Nothing in this Agreement shall limit or restrict the right of any
director, officer, managing member or employee of the Manager who may also be a
director, officer, or employee of the Corporation or the Fund, to engage in any
other business or to devote his time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a dissimilar
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nature, nor to limit or restrict the right of the Manager to engage in any other
business or to render services of any kind, including investment advisory and
management services, to any other corporation, firm, individual or association.
11. As used in this Agreement, the term "net assets" shall have the
meaning ascribed to it in the Articles of Incorporation of the Corporation and
the terms "assignment," "interested person," and "majority of the outstanding
voting securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
12. This Agreement will become effective with respect to the Fund on the
above written date, provided that it shall have been approved by the
Corporation's Board of Directors and by the shareholders of the Fund in
accordance with the requirements of the 1940 Act and, unless sooner terminated
as provided herein, will continue in effect for two years from the above written
date. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive annual periods ending on the same date
of each year, provided that such continuance is specifically approved at least
annually (i) by the Corporation's Board of Directors or (ii) by a vote of a
majority of the outstanding voting securities of the Fund, provided that in
either event the continuance is also approved by a majority of the Corporation's
Directors who are not "interested persons" of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval.
13. This Agreement is terminable with respect to the Fund without penalty
by the Corporation's Board of Directors, by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on not less than
sixty (60) days' notice to the other party and will be terminated upon the
mutual written consent of the Manager and the Corporation. This Agreement shall
terminate automatically in the event of its assignment by the Manager and shall
not be assignable by the Corporation without the consent of the Manager.
14. The Manager agrees that for services rendered to the Fund, or
indemnity due in connection with service to the Fund, it shall look only to
assets of the Fund for satisfaction and that it shall have no claim against the
assets of any other portfolios of the Corporation.
15. 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, and no material amendment of the Agreement shall be effective until
approved by vote of the holders of a majority of the Fund's outstanding voting
securities.
16. This Agreement embodies the entire agreement and understanding between
the parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof. Should any part of this Agreement 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
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on and shall inure to the benefit of the parties hereto and their respective
successors.
17. This Agreement shall be construed in accordance with the laws of the
State of Maryland, without giving effect to the conflicts of laws principles
thereof, and in accordance with the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
Attest: XXXX XXXXX INVESTMENT TRUST, INC.
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxxx X. Xxxxxx
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Xxxx X. Xxxxx Xxxxxxxx X. Xxxxxx
President
Attest: LMM LLC
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxx, III
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Xxxx X. Xxxxx Xxxxxxx X. Xxxxxx, III
Managing Member
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