INVESTMENT ADVISORY AGREEMENT
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INVESTMENT ADVISORY AGREEMENT, dated as of September 1, 1999,
between Third Avenue Variable Series Trust (the "Trust"), a Delaware business
trust, on behalf of its series, Third Avenue Value Portfolio (the "Fund") and
EQSF Advisers, Inc. (the "Adviser"), a New York corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. IN GENERAL
The Adviser agrees, all as more fully set forth herein, to act
as investment adviser to the Fund with respect to the investment of the assets
of the Fund and to supervise and arrange the purchase and sale of assets held in
the investment portfolio of the Trust. The Adviser may delegate any or all of
its responsibilities to one or more sub-advisers or administrators, subject to
the approval of the Board of Trustees of the Trust. Such delegation shall not
relieve the Adviser of its duties and responsibilities hereunder.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO
INVESTMENTS OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this paragraph
and subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund; and (ii)
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of the Fund. Nothing contained herein shall be construed to
restrict the Fund's right to hire its own employees or to contract separately
with EQSF Advisers, Inc. or others to provide administrative services to the
Fund, including but not limited to, the calculation of the net asset value of
the Fund's shares.
(b) In the performance of its duties under this Agreement,
the Adviser shall at all times use all reasonable efforts to conform to, and act
in accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Declaration of Trust and By-Laws of the Fund, as
such documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the Fund as set forth in the Fund's
Prospectus (including its Statement of Additional Information) and (v) any
policies and determinations of the Board of Trustees of the Trust.
(c) The Adviser will seek to provide qualified personnel
to fulfill its duties hereunder and will bear all costs and expenses (including
any overhead and personnel costs) incurred in connection with its duties
hereunder and shall bear the costs of any salaries or trustees fees of any
officers or trustees of the Trust who are affiliated persons (as defined in the
Act) of the Adviser. Subject to the foregoing, the Fund shall be responsible for
the payment of all the Fund's other expenses, including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions; (iv) taxes; (v) interest charges on
borrowings; (vi) the cost of liability insurance or fidelity bond coverage for
the Fund officers and employees, and trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing and accounting fees and
expenses; (viii) charges of the Fund's administrator, custodian, transfer agent
and other service providers, (ix) the Fund's pro rata portion of dues, fees and
charges of any trade association of which the Fund is a member; (x) the expenses
of printing, preparing and mailing proxies, stock certificates and reports,
including the Fund's prospectus and statement of additional information, and
notices to shareholders; (xi) filing fees for the registration or qualification
of the Fund and its shares under federal or state securities laws; (xii) the
fees and expenses involved in registering and maintaining registration of the
Fund's shares with the Securities and Exchange Commission; (xiii) the expenses
of holding shareholder meetings; (xiv) the compensation, including fees, of any
of the Trust's trustees, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions and all other distribution
expenses payable by the Fund; (xvii) expenses of redemption of shares and
(xviii) litigation and other extraordinary or non-recurring expenses and other
expenses properly payable by the Fund.
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(d) The Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, directors, employees, agents or controlling persons shall
be liable for any act or omission or for any loss sustained by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from 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 under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Fund may have
which may not be waived under applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or
any director, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its directors, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio
transactions for the Fund, it is agreed that the Adviser shall employ securities
brokers and dealers which, in its judgment, will be able to satisfy the policy
of the Fund to seek the best execution of its portfolio transactions at
reasonable expenses. For purposes of this agreement, "best execution" shall mean
prompt, efficient and reliable execution at the most favorable price obtainable.
Under such conditions as may be specified by the Trust's Board of Trustees in
the interest of its shareholders and to ensure compliance with applicable law
and regulations, the Adviser may (a) place orders for the purchase or sale of
the Fund's portfolio securities with its affiliates, X.X. Xxxxxxx, Inc. and X.X.
Xxxxxxx Senior Debt Corp.; (b) pay commissions to brokers other than its
affiliates which are higher than might be charged by another qualified broker to
obtain brokerage and/or research services considered by the Adviser to be useful
or desirable in the performance of its duties hereunder and for the investment
management of other advisory accounts over which it or its affiliates exercise
investment discretion; and (c) consider sales by brokers (other than its
affiliates distributor) of shares of the Fund and any other mutual fund for
which it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for the Fund's portfolio transactions.
4. COMPENSATION OF THE ADVISER
(a) The Fund agrees to pay to the Adviser out of the
Fund's assets and the Adviser agrees to accept as full compensation for all
services rendered
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by or through the Adviser a fee computed daily and payable monthly in arrears an
amount equal to 1/12 of .90% of the Fund's daily average net assets for such
month. For any period less than a month during which this Agreement is in
effect, the fee shall be prorated according to the proportion which such period
bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the
Fund shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the net asset value of the Fund's
shares.
5. Indemnity.
(a) The Fund hereby agrees to indemnify the Adviser and
each of the Adviser's directors, officers, employees, and agents (including any
individual who serves at the Adviser's request as director, officer, partner,
trustee or the like of another corporation) and controlling persons (each such
person being an "indemnitee) against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which he
may be or may have been involved as a party or otherwise or with which he may be
or may have been threatened, while acting in any capacity set forth above in
this paragraph or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been adjudicated not
to have acted in good faith in the reasonable belief that his action was in the
best interest of the Fund and furthermore, in the case of any criminal
proceeding, so long as he had no reasonable cause to believe that the conduct
was unlawful, provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Fund or its shareholders or any expense
of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence or (iv) reckless disregard of the duties involved in the
conduct of his position (the conduct referred to in such clauses (i) through (v)
being sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interests of the Fund and that
such indemnitee appears to have acted in good faith in the reasonable belief
that his action was in the best interest of the Fund and did not involve
disabling conduct by such indemnitee and (3) with respect to any action, suit or
other proceed-
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ing voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall
be mandatory only if the prosecution of such action, suit or other proceeding by
such indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing the Fund shall not be obligated to provide any
such indemnification (i) to the extent such provision would waive any right
which the Fund cannot lawfully waive or (ii) with respect to any obligation,
liability or expense of any other series of shares of the Trust.
(b) The Fund shall make advance payments in connection
with the expenses of defending any action with respect to which indemnification
might be sought hereunder if the Fund receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Fund
unless it is subsequently determined that he is entitled to such indemnification
and if the trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Fund shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of trustees of the Trust who
are neither "interested persons" of the Trust (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if
a majority vote of such quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
6. DURATION AND TERMINATION
This Agreement shall become effective upon the date hereof and
shall continue in effect for a period of two years and thereafter from year to
year, but only
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so long as such continuation is specifically approved at least annually in
accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Fund sixty days written notice (which notice may
be waived by the Fund) and may be terminated by the Fund at any time without
penalty upon giving the Adviser sixty days notice (which notice may be waived by
the Adviser), provided that such termination by the Fund shall be directed or
approved by the vote of a majority of the Trustees of the Trust in office at the
time or by the vote of the holders of a "majority of the voting securities" (as
defined in the Act) of the Fund at the time outstanding and entitled to vote.
This Agreement shall terminate automatically in the event of its assignment (as
"assignment" is defined in the Act and the rules thereunder.)
It is understood and hereby agreed that the words "Third
Avenue" is the property of the Adviser for copyright and other purposes. The
Fund further agrees that the words "Third Avenue" may freely be used by the
Adviser for other investment companies, entities or products. The Fund further
agrees that, in the event that the Adviser shall cease to act as investment
adviser to the Fund, the Fund shall promptly take all necessary and appropriate
action to change its name to names which do not include the words "Third
Avenue"; provided, however, that the Fund may continue to use the words "Third
Avenue" if the Adviser consents in writing to such use.
7. NOTICES
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
8. GOVERNING LAW
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
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IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized officers, all as of
the day and the year first above written.
THIRD AVENUE VARIABLE SERIES TRUST
on behalf of its series THIRD AVENUE VALUE
PORTFOLIO
By
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Name:
Title:
EQSF ADVISERS, INC.
By
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Name: Xxxxxx X. Xxxxxxx
Title:
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