COVA SERIES TRUST
SUB-ADVISORY AGREEMENT
This Agreement is made between COVA INVESTMENT ADVISORY CORPORATION, an Illinois
corporation, having its principal place of business in Oakbrook Terrace,
Illinois (hereinafter referred to as the "Advisor"), X.X. Xxxxxx Investment
Management Inc., a Delaware corporation, having its principal place of business
in New York, New York (hereinafter referred to as the "Sub-Advisor") and Cova
Series Trust, a Massachusetts business trust (hereinafter referred to as the
"Trust").
WHEREAS, the Trust, an open-end diversified management investment company, as
that term is defined in the Investment Company Act of 1940, as amended (the
"Act"), that is registered as such with the Securities and Exchange Commission
has appointed Advisor as investment adviser for and to the Quality Bond
Portfolio, the International Equity Portfolio, the Select Equity Portfolio, the
Large Cap Stock Portfolio and the Small Cap Stock Portfolio, each being a
sub-trust of the Trust (referred to individually as the "Sub-Trust"), pursuant
to the terms of an investment advisory agreement between the Trust and Advisor
("Investment Advisory Agreement");
WHEREAS, Sub-Advisor is engaged in the business of rendering investment
management services; and
WHEREAS, Advisor desires to retain Sub-Advisor to provide certain investment
management services for the Sub-Trusts as more fully described below;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Retention of Sub-Advisor. Advisor hereby retains Sub-Advisor to assist
Advisor in its capacity as investment adviser for the Sub-Trusts. Subject to the
oversight and review of Advisor and the Board of Trustees of the Trust,
Sub-Advisor shall manage the investment and reinvestment of the assets of the
Sub-Trusts. Sub-Advisor will determine in its discretion, subject to the
oversight and review of Advisor, the investments to be purchased or sold, will
provide Advisor with records concerning its activities which Sub-Advisor is
required to maintain by applicable law or regulation, and will render regular
reports as Advisor may reasonably request to Advisor and to officers and
Trustees of the Trust concerning its discharge of the foregoing
responsibilities.
Subject to paragraph 5 hereof, Sub-Advisor, in its supervision of the
investments of the Sub-Trusts, will be guided by each Sub-Trust's investment
objectives and policies and the provisions and restrictions contained in the
Declaration of Trust and By-Laws of the Trust and as set forth in the
Registration Statement and exhibits as may be on the file with the Securities
and Exchange Commission, all as communicated by Advisor to Sub-Advisor.
Sub-Advisor shall be deemed to be an independent contractor under this Agreement
and, unless otherwise expressly provided or authorized, shall have no authority
to act for or represent the Trust or any Sub-Trust in any way or otherwise be
deemed an agent of the Trust or any Sub-Trust.
2. Fee. Advisor shall pay to Sub-Advisor, for all services rendered to the
Sub-Trusts by Sub-Advisor hereunder, the sub-advisory fees set forth in Exhibit
A attached hereto. During the term of this Agreement, Sub-Advisor will bear all
expenses incurred by it in the performance of its duties hereunder. The expenses
not to be borne by the Sub-Advisor include, without limitation, the following:
organizational costs, taxes, interest, brokerage fees and commissions,
Directors' fees, Securities and Exchange Commission fees and state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
outside auditing and legal expenses, costs of independent pricing services,
costs of maintaining existence, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing stockholders, costs of
stockholders' reports and meetings, and any extraordinary expenses.
3. Term. The term of this Agreement shall begin on the date of its execution and
shall remain in effect for two years from that date and from year to year
thereafter, subject to the provisions for termination and all of the other terms
and conditions hereof, if such continuation is specifically approved at least
annually in the manner required by the Act. This Agreement shall be submitted to
the shareholders of the Trust and each Sub-Trust for approval at a shareholders'
meeting and shall automatically terminate if not approved by a majority of the
shares of the Sub-Trust present and voting at such meeting.
4. Termination. This Agreement may be terminated at any time without the payment
of any penalty, by a majority of the Board of Trustees of the Trust, by a vote
of the majority of the outstanding shares of beneficial interest of any
Sub-Trust or by the Sub-Advisor on sixty (60) days written notice to the
Advisor.
This Agreement will terminate five (5) business days after the Sub-Advisor
receives written notice of the termination of the Investment Advisory Agreement.
Notwithstanding any provision of this Agreement, this Agreement may not be
canceled by the Advisor without the approval of a majority of the Board of
Trustees of the Trust.
This Agreement shall automatically terminate in the event of its assignment (as
defined in the Act). The Sub-Advisor may employ or contract with any other
person, persons, corporation, or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out its obligations and duties
under this Agreement.
5. Guidelines and Reports. The Advisor agrees on an on-going basis to provide or
cause to be provided to the Sub-Advisor guidelines, which may include each
Sub-Trust's current prospectus and statement of additional information, to be
revised as provided below (the "Guidelines"), setting forth limitations by
dollar amount or percentage of net assets, on the types of securities in which
the Sub-Trusts are permitted to invest or investment activities in which the
Sub-Trusts are permitted to engage. Among other matters, the Guidelines shall
set forth clearly the limitations imposed upon the Sub-Trusts as a result of
relevant diversification requirements under state and federal law pertaining to
insurance products, including, without limitation, the provisions of Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Guidelines shall remain in effect until 12:00 p.m. on the third business day
following actual receipt by the Sub-Advisor of a written notice, denominated
clearly as such, setting forth revised Guidelines. Sub-Advisor agrees to provide
quarterly reports to Advisor, executed by a duly authorized officer of
Sub-Adviser, within ten (10) business days of the close of each calendar quarter
certifying as to compliance with said Guidelines. In addition to the quarterly
reports, Advisor may request and Sub-Advisor agrees to provide Section 817
diversification compliance reports at more frequent intervals, as reasonably
requested by Advisor.
The Advisor agrees to cause to be delivered to a person designated in writing
for such purpose by the Sub-Advisor, within ten (10) business days after each
quarter end and within ten (10) business days after each month end when the
result of the prior quarter's test reflected short-three income exceeding 20% of
total income, or more often as necessary, a written report dated the date of its
delivery (the "Report") with respect to each Sub-Trust's compliance for its
current fiscal year with the short-three test set forth in Section 851 (b)(3) of
the Code (the "short-three test"). The Report shall include in chart form the
Sub-Trust's gross income (within the meaning of Section 851 of the Code) from
the beginning of the current fiscal year to the date of the Report and its
cumulative income and gains described in Section 851 (b)(3) of the Code for such
period. The Report shall be required only as long as the short-three test
remains a requirement of the Code. The Trust and the Advisor agree that the
Sub-Advisor may rely on the Guidelines and the Report without independent
verification of their accuracy.
6. Liability and Indemnification. The Sub-Advisor shall not be liable for any
error in judgment or of law, or for any loss suffered by the Trust or any
Sub-Trust in connection with the matters to which this Agreement relates, except
(1) a loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Sub-Advisor in the performance of its obligations and duties or
(2) by reason of its reckless disregard of its obligations and duties under this
Agreement. The Advisor agrees to indemnify and hold harmless the Sub-Advisor
from and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising, from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder, provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for any loss suffered by the Trust
or the Advisor due to the Sub-Advisor's willful misfeasance, bad faith or gross
negligence on its part in the performance of its obligations and duties or from
reckless disregard of its obligations and duties under this Agreement.
7. Brokerage. The Sub-Advisor shall place all orders for the purchase and sale
of portfolio securities for the accounts of the Sub-Trusts with broker-dealers
selected by the Sub-Advisor. In executing portfolio transactions and selecting
broker-dealers, the Sub-Advisor will use its best efforts to seek best execution
on behalf of the Sub-Trusts. In assessing the best execution available for any
transaction, the Sub-Advisor 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 Sub-Advisor
may also consider the brokerage and research services (as those terms are used
in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Sub-Trusts and/or other accounts over which the Sub-Advisor or an affiliate of
the Sub-Advisor (to the extent permitted by law) exercises investment
discretion. The Sub-Advisor is authorized to cause the Sub-Trusts to pay a
broker-dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Sub-Trusts which is in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Sub-Advisor determines in good faith that such
commission is 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.
8. Amendment. This Agreement may be amended at any time by agreement of the
parties, provided that the amendment shall be approved in the manner required by
the Act.
9. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Illinois.
10. Registration as an Investment Advisor. Advisor and Sub-Advisor hereby
acknowledge each is registered as an investment adviser under the Investment
Advisers Act of 1940, it will use its reasonable best efforts to maintain such
registration, and it will promptly notify the other if it ceases to be so
registered, if its registration is suspended for any reason, or if it is
notified by any regulatory organization or court of competent jurisdiction that
it should show cause why its registration should not be suspended or terminated.
11. Services to Other Companies or Accounts. The Trust and the Adviser
understand that the Sub-Adviser now acts, will continue to act and may act in
the future as investment adviser to fiduciary and other managed accounts and as
investment adviser to other investment companies, and the Trust and the Adviser
have no objection to the Sub-Adviser so acting, provided that whenever a
Sub-Trust and one or more other accounts or investment companies advised by the
Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a methodology believed
to be equitable to each entity. The Sub-Adviser agrees to allocate similar
opportunities to sell securities. The Trust and the Adviser recognize that, in
some cases, this procedure may limit the size of the position that may be
acquired or sold for a Sub-Trust. In addition, the Trust understands that the
persons employed by the Sub-Adviser to assist in the performance of the
Sub-Adviser's duties hereunder will not devote their full time to such service
and nothing contained herein shall be deemed to limit or restrict the right of
the Sub-Adviser or any affiliate of the Sub-Adviser to engage in and devote time
and attention to other business or to render services of whatever kind or
nature.
12. Books and Records. In compliance with the requirements of Rule 31a-3 under
the Act, the Sub-Adviser hereby agrees that all records which it maintains for
the Sub-Trusts are the property of the Trust and further agrees to surrender
promptly to the Trust copies of any of such records upon the Trust's or the
Adviser's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Act the records relating to its activities
hereunder required to be maintained by Rule 31a-1 under the Act and to preserve
the records relating to its activities hereunder required by Rule 204-2 under
the Investment Advisers Act of 1940, as amended, for the period specified in
said Rule.
13. Disclosure. Neither the Trust nor the Advisor shall, without the prior
written consent of the Sub-Adviser, make representations regarding the
Sub-Adviser or any affiliates in any disclosure document, advertisement, sales
literature or other promotional materials. Sub-Adviser shall respond in writing
within ten (10) business days of any such request for prior written consent from
Adviser or any affiliate and in the event Sub-Adviser does not respond in
writing, Sub-Adviser shall be deemed to have disapproved the disclosure
document, advertisement, sales literature or other promotional materials
submitted to Sub-Adviser.
14. Miscellaneous. All notices provided for by this Agreement shall be in
writing and shall be deemed given when received, against appropriate receipt, by
the President in the case of the Sub-Adviser, the President in the case of the
Adviser, and the Trust's Secretary in the case of the Trust, or such other
person a party shall designate by notice to the other parties. 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. This Agreement constitutes
the entire agreement among the parties hereto and supersedes any prior agreement
among the parties relating to the subject matter hereof. The paragraph headings
of this Agreement are for convenience of reference and do not constitute a part
hereof.
Witness the due execution hereof this _____ day of __________ .
Attest: COVA INVESTMENT ADVISORY
CORPORATION
______________________________ By: ___________________________
Attest: X.X. XXXXXX INVESTMENT
MANAGEMENT INC.
______________________________ By: ___________________________
Attest: COVA SERIES TRUST
______________________________ By: ___________________________
EXHIBIT A
COVA SERIES TRUST
SUB-ADVISORY COMPENSATION
For all services rendered by Sub-Advisor hereunder, Advisor shall pay to
Sub-Advisor and Sub-Advisor agrees to accept as full compensation for all
services rendered hereunder, fees at the end of each calendar month equal to a
percentage of the average daily net assets of the Sub-Trusts as follows:
Portfolio Average Daily Net Assets % Per Annum
--------------- ------------------------- -------------
Quality Bond Portfolio First $75 million .30 of 1%
Over $75 million .25 of 1%
International First $50 million .60 of 1%
Equity Portfolio Over $50 million .50 of 1%
Select Equity Portfolio First $50 million .50 of 1%
Over $50 million .40 of 1%
Large Cap .40 of 1%
Stock Portfolio
Small Cap .60 of 1%
Stock Portfolio
