MANAGEMENT AGREEMENT
AGREEMENT made as of this 22nd day of July, 2002 by and between LORD
XXXXXX TAX-FREE INCOME TRUST, a Delaware business trust (hereinafter called the
"Trust"), and LORD, XXXXXX & CO., a New York partnership (hereinafter called the
"Investment Manager").
WHEREAS, the Trust and each Series thereof desires to obtain the
investment management services of the Investment Manager and the Investment
Manager is willing to provide services of the nature desired upon the terms and
conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and of other
good and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows:
1. Each Series of the Trust hereby employs the Investment Manager
under the terms and conditions of this Agreement, and the Investment Manager
hereby accepts such employment and agrees to perform supervisory functions of
the Trust with respect to the investment and reinvestment of its property and
assets (whether or not held in trust or in the custody of a bank or trust
company subject to the Trust's direction or control) including, without
limitation, the supervision of its investment portfolios and the recommendation
of investment policies and procedures within the limitations set forth in the
Trust's Registration Statement on file with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940.
The Investment Manager agrees to maintain an adequate organization of
competent persons to perform the supervisory functions mentioned herein.
All recommendations with respect to the investment portfolios will be
made to the Trust's trading department which, with the approval of authorized
officers of the Trust, will execute all trades in accordance with the Trust's
investment procedures.
The Investment Manager reserves the right, in its discretion, to
purchase or otherwise obtain statistical information and services from other
sources, including affiliated persons of the Investment Manager.
Notwithstanding the provisions of this paragraph 1, the investment
policies and procedures and all other actions of the Trust are, and shall at all
times be, subject to the control
1
and direction of its trustees.
2. Each Series of the Trust will pay the Investment Manager for its
services under this Agreement and for the expenses assumed a management fee
computed and payable monthly, at the annual rate of one-half (1/2) of one
percent (1%) of the value of the Series' average daily net assets. The value of
the net assets of each Series shall include all assets of such series held in
trust or in custody of any bank, savings bank or trust company for the Trust,
subject to its control or direction, and shall be determined as provided in the
Declaration and Agreement of Trust of the Trust. The fee shall be paid on the
first day of each month for the preceding month.
The Investment Manager may receive research and other statistical
information from broker-dealers and from other sources and, in accordance with
section 28(e) of the Securities Exchange Act of 1934, a broker-dealer may be
paid a commission for a transaction involving portfolio securities of the Trust
exceeding the amount another broker-dealer would have charged for the same
transaction if it is determined by the Investment Manager in good faith that
such amount of commission is reasonable in relation to the value of the research
services provided by the executing broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the Investment Manager
with respect to the Trust and other accounts (investment companies and other
investment clients) with respect to which it exercises investment discretion.
Such research services may be used by the Investment Manager in serving all its
accounts, and not all of such research services need necessarily be used by the
Investment Manager in connection with its services to the Trust.
It is understood that any supplemental advisory or statistical
services which may be provided to the Trust or to the Investment Manager from
time to time by independent broker-dealers or persons other than the Investment
Manager, for whatever reason, shall not reduce the amount of the fees payable to
the Investment Manager hereunder. It is recognized that such supplementary
advisory or statistical services may be useful to the Investment Manager and the
Trust, but their value is indeterminable and is not to be considered a
substitute for the services provided by the Investment Manager hereunder.
3. It is understood that the services of the Investment Manager are
not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any officer, director, partner or employee thereof, from
providing similar services to other
2
investment companies and other clients (whether or not their investment
objectives and policies are similar to those of the Trust) or to engage in other
activities. When other clients of the Investment Manager desire to purchase or
sell the same portfolio security at the same time as the Trust, it is understood
that such purchases and sales will be made as nearly as practicable on a pro
rata basis in proportion to the amounts desired to be purchased or sold by each
client.
4. Each Series of the Trust will, at its own expense, furnish to the
Investment Manager periodic (but not less than semi-annually) statements of its
books of account, including balance sheets and earnings statements, and all
other information which may reasonably be required, from time to time, by the
Investment Manager, and will, at its own expense, at all times keep the
Investment Manager fully advised as to the cash, securities and other property
then comprising its assets, and furnish daily detailed price makeup sheets with
respect to its investment portfolio and its shares of beneficial interests
outstanding.
5. The Investment Manager shall be under no obligation to pay any
fees, costs, expenses or other charges of the Trust, except for the compensation
of its officers, the compensation, if any, of its trustees who are affiliated
with the Investment Manager, the rental for its office space, and the ordinary
and necessary office and clerical expenses relating to research, statistical
work and supervision of each Series' investment portfolio, to be performed by
the Investment Manager under paragraph 1 of this Agreement. Each Series of the
Trust will pay its own fees, costs, expenses or charges relating to its assets
and operations, including without limitation: office and clerical expenses not
relating to research, statistical work and supervision of its investment
portfolio; fees and expenses of trustees not affiliated with the Investment
Manager; governmental fees; interest charges; taxes; association membership
dues; fees and charges for legal and auditing services; fees and expenses of any
custodians or trustees with respect to custody of its assets; fees, charges and
expenses of dividend disbursing agents, registrars and transfer agents
(including the cost of keeping all necessary shareholder records and accounts,
and of handling any problems relating thereto and the expense of furnishing to
all shareholders statements of their accounts after every transaction including
the expense of mailing); costs and expenses of repurchase and redemption of its
shares; costs and expenses of preparing, printing and mailing to shareholders
ownership certificates, proxy statements and materials, prospectuses, reports
and notices; costs of
3
preparing reports to governmental agencies; brokerage fees and commissions of
every kind and expenses in connection with the execution of portfolio security
transactions (including the cost of any service or agency designed to facilitate
the purchase and sale of portfolio securities); and all postage, insurance
premiums, and any other fee, cost, expense or charge of any kind incurred by and
on behalf of the Trust and not expressly assumed by the Investment Manager under
this Agreement.
Notwithstanding the above, to encourage sales of shares of beneficial
interest in any Series of the Trust, the Investment Manager may, but is not
required to, waive its fee hereunder attributable to such Series and directly
pay or reimburse the Trust for any portion of the operating expenses of such
Series not expressly assumed by the Investment Manager under this Agreement. The
amount of any such expenses so voluntarily paid or reimbursed by the Investment
Manager shall be paid back to the Investment Manager by the applicable Series of
the Trust without interest to the extent provided as follows. No such pay-back
will be made prior to the first day of the calendar quarter after the net assets
of such Series first reach $50 million (the "commencement date"). Thereafter,
until the first day of the calendar quarter after the net assets for such Series
first reach $100 million (the "recalculation date"), if the ratio of operating
expenses of such Series (determined before taking into account any fee waiver or
payment or reimbursement of expenses by the Investment Manager) to average net
assets ("expense ratio") is less than .85%, such Series shall repay the
Investment Manager an amount equal in dollars to the difference between the
expenses included in the determination of such expense ratio and those at an
expense ratio of .85%. The expense ratios will be determined on a full fiscal
year basis and, if the commencement date does not begin at the start of a fiscal
year, the determination will be based on the remaining portion of the fiscal
year annualized. Beginning with the recalculation date, the reimbursement of
expenses shall be measured by the difference between the expenses included in
the determination of such expense ratio and those at an expense ratio of 1.05%.
Any such repayments shall be made promptly (but in any event within 60 days)
after the end of the fiscal years of the Series with respect to which they are
payable, and no such repayment shall exceed the amount of the expenses of the
applicable Series paid or reimbursed by the Investment Manager and not
previously paid back. The amount of any expenses of a Series paid or reimbursed
that is subject to the repayment provisions of this paragraph and not repaid as
provided above prior
4
to termination of this Agreement, or within five full fiscal years after the
commencement date of such Series, whichever first occurs, shall not be repaid to
the Investment Manager.
Notwithstanding any other provision of this Agreement, if expenses
(including management fee hereunder but excluding interest, taxes, brokerage
fees, and where permitted, extraordinary expenses) borne by the Trust in any
fiscal year exceed expense limitations applicable to the Trust imposed by state
securities administrators, as such limitations may be lowered or raised from
time to time, the Investment Manager will reimburse the applicable Series of the
Trust for any such excess. If the Investment Manager pays for other expenses of
the Trust or furnishes without charge to the Trust services the cost of which is
to be borne by the Trust under this Agreement, the Investment Manager shall not
be deemed to have waived its rights under this Agreement to have the Trust pay
for such expenses or provide or pay for such services in the future. The
Investment Manager may also advance the payment of expenses, subject to
reimbursement by the Trust in the ordinary course of business.
6. The Investment Manager agrees that it shall observe and be bound by
all of the provisions of the Declaration of Trust (including any amendments
thereto) of the Trust which shall in any way limit or restrict or prohibit or
otherwise regulate any action by the Investment Manager.
7. Other than to abide by the provisions hereof and render the
services called for hereunder in good faith, the Investment Manager assumes no
responsibility under this Agreement and, having so acted, the Investment Manager
shall not be held liable or accountable for any mistakes of law or fact, or for
any error or omission of its officers, directors, partners or employees, or for
any loss or damage arising or resulting therefrom suffered by the Trust or any
of its shareholders, creditors, trustees or officers; provided however, that
nothing herein shall be deemed to protect the Investment Manager against any
liability to the Trust or to its shareholders by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties hereunder, or by
reason of the reckless disregard of its obligations and duties hereunder. The
Investment Manager shall not be responsible for any action of the Trustees of
the Trust in following or declining to follow any advice or recommendation of
the Investment Manager.
8. Neither this Agreement nor any other transaction between the
parties hereto pursuant to this Agreement shall be invalidated or in any way
affected by the fact that any or
5
all of the trustees, officers, shareholders, or other representatives of the
Trust are or may be interested in the Investment Manager, or any successor or
assignee thereof, or that any or all of the trustees, officers, shareholders, or
other representatives of the Trust are or may be interested in the Investment
Manager, or any successor or assignee thereof, or that any or all of the
directors, officers, partners, or other representatives of the Investment
Manager are or may be interested in the Trust, except as otherwise may be
provided in the Investment Company Act of 1940, as amended. The Investment
Manager in acting hereunder shall be an independent contractor and not any agent
of the Trust.
9. This Agreement shall become effective upon the date hereof and
shall continue in force for two years from the date hereof, and is renewable
annually thereafter by specific approval of the trustees of the Trust or by vote
of a majority of the outstanding voting securities of the Trust; any such
renewal shall be approved by the vote of a majority of the trustees who are not
parties to this Agreement or interested persons of the Investment Manager or of
the Trust, cast in person at a meeting called for the purpose of voting on such
renewal.
This Agreement may be terminated without penalty at any time by the
trustees of the Trust on 60 days' written notice. This Agreement shall
automatically terminate in the event of its assignment. The terms "interested
persons", "assignment" and "vote of a majority of the outstanding voting
securities" shall have the same meaning as those terms are defined in the
Investment Company Act of 1940 as amended.
10. The Investment Manager reserves the right to grant the use of the
name "LORD XXXXXX" or "LORD, XXXXXX & CO.", or any derivative thereof, to any
other investment company, or business enterprise. The Investment Manager
reserves the right to withdraw from the Trust the use of the name "LORD XXXXXX"
and the use of its registered service xxxx; at such time of withdrawal of the
right to use the name "LORD XXXXXX", the Investment Manager agrees that the
question of continuing this Agreement may be submitted to a vote of the Trust's
shareholders. In the event of such withdrawal or the termination of this
Agreement, for any reason, the Trust will, on the written request of the
Investment Manager, take such action as may be necessary to change its name and
eliminate all reference to the words "LORD XXXXXX" in any form, and will no
longer use such registered service xxxx.
6
11. The obligations of the Trust, including those imposed hereby, are
not personally binding upon, nor shall resort be had to the private property of,
any of the trustees, shareholders, officers, employees or agents of the Trust
individually, but are binding only upon the assets and property of the Trust.
Any and all personal liability, either at common law or in equity, or by statute
or constitution, of every such trustee, shareholder, officer, employee or agent
for any breach by the Trust of any agreement, representation or warranty
hereunder is hereby expressly waived as a condition of and in consideration for
the execution of this Agreement by the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed
by its duly authorized officers and its corporate seal to be affixed hereto, and
the Investment Manager has caused this Agreement to be executed by one of its
partners all on the day and year first above written.
LORD XXXXXX TAX-FREE INCOME TRUST
By: /s/ Xxxxxxxxx X. Xxxxxxx
------------------------
Vice President
/s/ Xxxxxxxx X. Xxxxxx
----------------------
Assistant Secretary
LORD, XXXXXX & CO.
By: /s/ Xxxx X Xxxxxxx
------------------
A Partner
7
