SUB-ADVISORY AGREEMENT
BETWEEN
LSA Asset Management LLC, a
Delaware limited liability company
and
XXXXXXX XXXXX ASSET MANAGEMENT,
a separate operating division of
XXXXXXX, XXXXX & CO.
It is hereby agreed by and between LSA Asset Management LLC (the "Manager") and
XXXXXXX XXXXX ASSET MANAGEMENT, a separate operating division of XXXXXXX XXXXX &
CO. (the "Adviser"), as follows:
1.
ENGAGEMENT OF ADVISER. LSA Variable Series Trust, a Delaware business trust (the
"Trust") has entered into an Investment Management Agreement with the Manager on
behalf of the Xxxxxxx Xxxxx Growth Equity Fund (the "Fund"). The Manager is
authorized, with the approval of the Board of Trustees of the Trust (the "Board"
or "Trustees" as the context requires), to retain the Adviser to provide
investment advisory services to the Manager in connection with the management of
the Fund. Manager hereby engages the services of Adviser in furtherance of its
Investment Management Agreement with the Trust. Pursuant to this Sub-Advisory
Agreement and subject to the supervision of the Manager and the Board, and in
cooperation with any administrator appointed by the Manager (the
"Administrator"), the Adviser will manage the investment and reinvestment of the
assets of the Fund.
In this regard, Adviser will determine in its discretion the securities to
be purchased or sold, will provide Manager with records concerning its
activities which Manager or the Trust is required to maintain, and will render
regular reports to the Manager, the Trustees and the Board concerning its
discharge of the foregoing responsibilities. Adviser will discharge the
foregoing responsibilities subject to the control of the Board and in compliance
with such policies as the Board may from time to time establish, and in
compliance with the objectives, policies, and limitations for the Fund set forth
in the Fund's then-current prospectus and statement of additional information.
Manager represents that the engagement of Adviser xxxxxxxxx has been duly
authorized by the Trust in accordance with the Investment Company Act of 1940
(the "1940 Act"). Manager agrees to inform Adviser of any and all applicable
state insurance law restrictions on investments that operate to limit or
restrict the investments the Fund may otherwise make, and to inform Adviser
promptly of any changes in such requirements.
Adviser accepts its engagement under this Section 1 and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement;
provided, however, that Adviser will not be required to pay the cost (including
taxes, brokerage commissions and other transaction costs, if any) of securities
and other investments purchased or sold for the Fund.
The Manager shall perform quarterly and annual tax compliance tests to
ensure that the Fund is in compliance with Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code") and Section 817(h) of the Code. In
connection with such compliance tests, the Manager shall prepare and provide
reports to the Adviser within ten (10) business days of a calendar quarter end
relating to the diversification of the Fund under Subchapter M and Section
817(h) of the Code (Manager's "Tax Compliance Reports"). The Adviser shall
review such reports for purposes of determining compliance with such
diversification requirements. If it is determined that the Fund is not in
compliance with the requirements noted above, the Adviser, in consultation with
the Manager, will take prompt action to bring the Fund back into compliance
within the time permitted under the Code (the Adviser's "Tax Remediation
Responsibilities").
The Manager shall provide the Adviser with a copy of the Trust's agreement
with the custodian designated to hold the assets of the Fund (the "Custodian")
and any modifications thereto (the "Custody Agreement"), copies of such
modifications to be provided to the Adviser a reasonable time in advance of the
effectiveness of such modifications. The assets of the Fund shall be maintained
in the custody of the Custodian identified in, and in accordance with the terms
and conditions of, the Custody Agreement (or any sub-custodian properly
appointed as provided in the Custody Agreement). The Adviser shall have no
liability for the acts or omissions of the Custodian unless such act or omission
is required by and taken in reliance upon instruction given to the Custodian by
a representative of the Adviser properly authorized to give such instruction
under the Custody Agreement. Any assets added to the Fund shall be delivered
directly to the Custodian.
The Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the securities
held in the Fund. The Manager shall instruct the Custodian of the Fund and other
parties providing services to the Fund to promptly forward misdirected proxy
materials to the Adviser.
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2.
FUND TRANSACTIONS. In connection with purchases or sales of portfolio securities
for the account of the Fund, neither Adviser nor any of its partners, officers,
employees or affiliates will act as a principal, except as otherwise permitted
by the 1940 Act and the rules thereunder. Adviser or its agents will arrange for
the placing of orders for the purchase and sale of portfolio securities for the
Fund's account with brokers or dealers (including Xxxxxxx, Xxxxx & Co.) selected
by Adviser. In the selection of such brokers or dealers (including Xxxxxxx,
Xxxxx & Co.) and the placing of such orders Adviser is directed at all times to
seek for the Fund the most favorable execution and net price available. It is
also understood that it is desirable for the Fund that Adviser have access to
supplemental investment and market research and security and economic analyses
provided by brokers who may execute brokerage transactions at a higher cost to
the Fund than may result when allocating brokerage to other brokers on the basis
of seeking the most favorable price and efficient execution. Therefore, Adviser
is authorized to consider such services provided to the Fund and other accounts
over which Adviser or any of its affiliates exercises investment discretion and
to place orders for the purchase and sale of securities for the Fund with such
brokers, subject to review by the Board from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to Adviser in connection with its
services to other clients. Adviser may, on occasions when it deems the purchase
or sale of a security to be in the best interests of the Fund as well as its
other clients, aggregate, to the extent permitted by applicable laws and rules,
the securities to be sold or purchased in order to obtain the most favorable
execution and net price. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction will be
made by Adviser in the manner it considers to be the most equitable and
consistent with its obligations to the Fund and to such other clients. Adviser
is not, however, required to aggregate securities orders.
3.
COMPENSATION OF ADVISER. As its compensation hereunder, Manager will pay to
Adviser, within twenty (20) business days after the end of each month, a fee
calculated daily as a percentage of the average daily net assets of the Fund
during that month at the following annual rate: .50% of the first $50 million;
.45% of the next $150 million; .40% of the next $150 million; and .35% in excess
of $350 million.
For the purpose of accruing compensation, the net assets of the Fund will
be determined in the manner provided for in the then-current prospectus of the
Fund.
In the event of termination of this Agreement, all compensation due to
Adviser through the date of termination will be calculated on a pro-rated basis
through the date of termination and paid within fifteen (15) business days of
the date of termination.
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4.
DELIVERY OF INFORMATION AND REPORTS. Manager agrees to furnish to Adviser
current prospectuses, statements of additional information, proxy statements,
reports of shareholders, certified copies of financial statements, charter
documents and such other information with regard to the affairs of the Fund as
Adviser may reasonably request. Adviser agrees to render to Manager such
periodic and special reports regarding its activities under this Agreement as
Manager may reasonably request. Manager represents that it and the Trust have
received Parts I and II of Adviser's Form ADV. The Adviser shall provide the
Manager with a copy of amendments to its Form ADV and a list of the persons whom
the Adviser wishes to have authorized to give written and/or oral instructions
to the Custodian of the assets of the Fund.
5.
STATUS OF ADVISER. The services of Adviser to Manager and the Fund are not to be
deemed exclusive, and Adviser is free to render similar services to others so
long as its services to the Fund are not impaired thereby. Adviser will be
deemed to be an independent contractor and will, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
Without limiting the foregoing, Manager represents that it understands that
the Adviser now acts, will continue to act, or may act in the future, as
investment adviser or investment sub-adviser to fiduciary and other managed
accounts, including other investment companies and that Manager has no objection
to Adviser so acting, provided that Adviser duly performs all obligations under
this Agreement. Manager also understands that Adviser may give advice and take
action with respect to any of its other clients or for its own account which may
differ from the timing or nature of action taken by Adviser with respect to the
Fund. Nothing in this Agreement imposes upon Adviser any obligation to purchase
or sell or to recommend for purchase or sale, with respect to the Fund, any
security which Adviser or its partners, officers, employees or affiliates may
purchase or sell for its or their own account(s) or for the account(s) of any
other client.
6.
CERTAIN RECORDS. Adviser agrees to maintain, in the form and for the period
required by Rule 31a-2 under the 1940 Act, all records relating to the Fund's
investments made by Adviser that are required to be maintained by the Fund
pursuant to the requirements of Rule 31 a-1 (b)(5), (6), (7), (9) and (10) under
the 1940 Act. Any records required to be maintained and preserved pursuant to
the provisions of Rule 31 a-1 and Rule 31 a-2 promulgated under the 1940 Act
which are prepared or maintained by Adviser on behalf of the Fund are the
property of the Fund and will be surrendered promptly to the Fund or Manager on
request.
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Adviser agrees that all accounts, books and other records maintained and
preserved by it as required hereby will be subject at any time, and from time to
time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Fund's auditors, the Fund or any
representative of the Fund, the Manager, or any governmental agency or other
instrumentality having regulatory authority over the Fund.
7.
REFERENCE TO ADVISER. The Manager shall not publish or distribute any
information, including but not limited to registration statements, advertising
or promotional material, regarding the provision of investment advisory services
by Adviser pursuant to this Agreement, or use in advertising, publicity or
otherwise the name of Adviser or any of its affiliates, or any trade name,
trademark, trade device, service mark, symbol or any abbreviation, contraction
or simulation thereof of Adviser or its affiliates, without the prior written
consent of Adviser. Any materials utilized by the Manager which contain any
information relating to the Adviser shall be submitted to the Adviser for
approval prior to use, not less than five (5) business days before such approval
is needed by Manager.
Notwithstanding the foregoing, Manager may distribute information regarding
the provision of investment advisory services by Adviser to the Board (the
"Board Materials") without the prior written consent of Adviser. Manager will
provide copies of the Board Materials to Adviser within a reasonable time
following distribution to the Board.
REFERENCE TO MANAGER OR LIFE COMPANY OR TRUST. Any materials utilized by the
Adviser which contain any information relating to the Manager, a life insurance
company investing in the Fund (including any information relating to its
separate accounts or variable annuity or variable life insurance contracts) or
the Trust shall be submitted to the Manager for approval prior to use, not less
than five (5) business days before such approval is needed by the Adviser. No
such materials shall be used if the Adviser or the Manager reasonably objects in
writing to such use within five (5) days after receipt of such material.
8.
LIABILITY OF MANAGER AND ADVISER.
(a) The Manager shall indemnify and hold harmless the Adviser, its officers
and directors and each person, if any, who controls the Adviser within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act")
("Affiliates") against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged loss, liability,
claim, damage or expense and reasonable counsel fees incurred in connection
therewith) ("Liabilities") arising out of any service, other than as provided in
paragraph (b) of this Section 8, to be rendered under this Agreement except by
reason of willful misfeasance, bad faith or gross negligence in the performance
of Adviser's duties.
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(b) With regard to the Adviser's Tax Remediation Responsibilities as set
forth in Section 1, the Manager shall not indemnify and hold harmless Adviser
for Adviser's not taking any corrective action required to be taken based on
consultations with Manager; however, if any Tax Compliance Report is not
properly prepared by Manager which gives rise to the liabilities, Manager shall
indemnify Adviser with respect to such liabilities.
(c) The Adviser shall indemnify and hold harmless the Manager and its
Affiliates and each person, if any, who controls the Manager within the meaning
of Section 15 of the 1933 Act, Allstate Life Insurance Company and its
Affiliates (collectively, the "Life Company") against any Liabilities arising
out of any service to be rendered under this Agreement with respect to the
Adviser's willful misfeasance, bad faith or gross negligence in the performance
of its duties under this Agreement, and further, with regard to the Adviser's
Tax Remediation Responsibilities, shall indemnify Manager, Affiliates, and the
Life Company for any Liabilities resulting from Adviser's not taking any
appropriate corrective action required to be taken based on Adviser's
consultations with Manager. The Adviser and its Affiliates will not be liable to
Manager for any Liabilities relating to the failure of Manager or its Affiliates
to comply with this Agreement and/or any applicable insurance laws and rules
(including the failure of Manager to advise Adviser of any insurance related
restrictions as described in paragraph 1 hereof), or as a result of any error of
judgment or mistake of law, except to the extent specified in Section 36(b) of
the 1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to receipt of compensation for services.
9.
DURATION AND TERMINATION. This Agreement shall become effective as of October 1,
1999, and shall continue in effect for a period more than two years from the
date of execution only so long as such continuance is specifically approved by
the Trustees at the times and in the manner required by Section15(a) and (c) of
the 1940 Act and the rules thereunder.
Pursuant to an Order of the Commission, the Manager may engage an adviser
without first obtaining approval of the investment advisory agreement by a
majority of the outstanding voting securities of the Fund. This Agreement shall
become effective upon its approval by the Board. The Adviser shall be without
the protection accorded by shareholder approval of an investment adviser's
receipt of compensation under Section 36(b) of the Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Manager or Trustees on sixty (60) days' written notice to the
Adviser, or by the Adviser on sixty (60) days' written notice to the Manager and
the Trust.
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This Agreement will automatically terminate in the event of its assignment.
This Agreement will automatically terminate in the event that the Investment
Management Agreement by and between the Trust and the Manager on behalf of the
Fund, referred to in Section 1, is terminated.
Notices and other writings delivered or mailed postage prepaid to Manager
and the Trust at 0000 Xxxxxxx Xxxx, Xxxxx X0X, Xxxxxxxxxx, Xxxxxxxx, 00000
Attention: Xxxxxxx X. Xxxxxxx, or to Adviser at One New York Plaza, New York,
New York 10004, Attention: Xxxxxxx X. Xxxx (42nd Floor), or to such other
address as Manager or Adviser may hereafter specify by written notice to the
most recent address specified by the other party, will be deemed to have been
properly delivered or given hereunder to the respective addressee.
As used in this Section 9, the terms "assignment," "interested persons" and
a "vote of a majority of the outstanding voting securities" will have the
respective meanings set forth in the 1940 Act and the rules thereunder.
10.
CONFIDENTIALITY. All information and advice by Adviser for the Fund will be
treated as confidential by Manager and will not be disclosed to third parties
without Adviser's prior written consent except as required by law.
11.
COMPUTER. Adviser and its affiliates, on the one hand, and Manager and its
affiliates on the other hand, represent and warrant to each other that they will
use reasonable commercial efforts to (a) review all of their respective hardware
and/or software comprising computer systems which will be used in connection
with this Agreement (individually, the "Computer System" and collectively, the
"Computer Systems") to determine if such Computer Systems are Year 2000
Compliant (as defined below), (b) render such Computer Systems Year 2000
Compliant prior to any part of such Computer Systems suffering a material
malfunction due to its not being made Year 2000 Compliant on a timely basis, and
(c) jointly test any interfaces between Adviser and its affiliates' Computer
System and Manager and its affiliates' Computer System so as to determine that
they are capable of interfacing without material malfunctions. In the event that
any portion of such Computer System materially malfunctions due to the failure
to be made Year 2000 Compliant on a timely basis, the party responsible for
operating and/or maintaining such Computer System shall use good faith efforts
to correct the malfunction and render the relevant portion of the Computer
System Year 2000 Compliant in order to mitigate the damages from such
malfunction and to avoid any further material malfunction. Adviser and its
affiliates and manager and its affiliates represent and warrant to each other
that they have devoted sufficient resources in terms of funding personnel and
project time to satisfy their respective obligations under this warranty.
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For the purpose of this Section 11, "Year 2000 Compliant" shall mean that
the referenced Computer System will correctly differentiate between years, in
different centuries, that end in the same two digits, and will accurately
process date/time data (including, but not limited to, calculating, comparing
and sequencing) from, into, and between the centuries including leap year
calculations, provided that any hardware or software not being operated and/or
maintained as part of the referenced Computer System, is itself Year 2000
Compliant.
12.
SEVERABILITY. If any provision of this Agreement is held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
AMENDMENTS. This Agreement may not be amended, altered or modified in any way
except by an addendum in writing duly executed by the proper officials of the
parties hereto.
SURVIVAL. Sections 7, 8 and 10 will survive the termination of this Agreement.
GOVERNING LAW. This Agreement will be construed in accordance with the laws of
the State of Illinois and the applicable provisions of the 1940 Act and the
rules thereunder. To the extent that the applicable laws of the State of
Illinois or any provisions herein conflict with the applicable provisions of the
1940 Act, the latter will control.
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement this 30th day of September, 1999,
to be effective October 1, 1999.
LSA ASSET MANAGEMENT LLC XXXXXXX, XXXXX & CO.
By: /s/Xxxx Xxxxxx By: /s/Xxxxx X. Xxxx
------------- ----------------
Name: Xxxx Xxxxxx Name: Xxxxx X. Xxxx
Title: President Title: Managing Director
XXXXXXX XXXXX ASSET MANAGEMENT
separate operating division of
XXXXXXX, XXXXX & CO.
By: _______________________________
Name: _____________________________
Title: ______________________________
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