MANAGEMENT CONTRACT
AGREEMENT made as of the _____ day of ___________, 1999, by and between
CLEARWATER INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), and
CLEARWATER MANAGEMENT CO., INC., a Minnesota corporation (the "Manager").
WITNESSETH:
WHEREAS, the Trust desires to utilize the services of the Manager as
the manager for the Trust on behalf of Clearwater Tax-Exempt Bond Fund (the
"Fund"); and
WHEREAS, the Manager is willing to perform such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, it is agreed as follows:
1. The Manager's Services.
(a) Subject always to the supervision of the Trustees of the Trust and
the investment policies and restrictions applicable to the Fund as set forth in
the registration statement of the Trust filed with the Securities and Exchange
Commission (the "SEC"), the Manager is hereby authorized and directed and hereby
agrees to develop, recommend and implement such investment programs and
strategies for the Funds as may from time to time in the circumstances appear
most appropriate to the achievement of the investment objective of the Fund as
stated in the aforesaid registration statement, to provide research and analysis
relative to the investment program and investments of the Fund, to determine
what securities should be purchased and sold and what portion of the assets of
the Fund should be held in cash or cash equivalents or other assets and to
monitor on a continuing basis the performance of the portfolio securities of the
Fund. In addition, the Manager will place orders for the purchase and sale of
securities and will advise the custodian for the Fund on a prompt basis of each
purchase and sale of a portfolio security for the Fund specifying the name of
the issuer, the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price, trade date,
settlement date and identity of the effecting broker or dealer. From time to
time as the Trustees of the Trust may reasonably request, the Manager will
furnish to the Trust's officers and to each of its Trustees reports on portfolio
transactions and reports on issues of securities held in the Fund, all in such
detail as any such Trustee may reasonably request. The Manager
1
will also inform the Trust's officers and Trustees on a current basis of changes
in investment strategy or tactics. The Manager will make its officers and
employees available to meet with the Trust's officers and Trustees at least
quarterly on due notice to review the investments and investment program of the
Fund in the light of current and prospective economic and market conditions. In
the performance of its duties hereunder, the Manager will comply with the
provisions of the Declaration of Trust and By-laws of the Trust, each as amended
from time to time, and will use its best efforts to safeguard and promote the
welfare of the Trust and to comply with other policies which the Trustees may
from time to time adopt and shall exercise the same care and diligence expected
of the Trustees.
(b) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish the Trust with office space in the offices of the Manager
or in such other place as may be agreed upon from time to time, and all
necessary office facilities, equipment and personnel for managing the affairs
and investments of the Funds, and shall arrange, if desired by the Trust, for
members of the Manager's organization to serve as officers or agents of the
Trust.
(c) The Manager shall pay directly or reimburse the Trust for all
expenses not hereinafter specifically assumed by the Trust or the Fund. The
Trust on behalf of the Fund will pay commissions and other direct charges
relating to the purchase and sale of portfolio securities and other assets,
taxes, interest and extraordinary expenses, including without limitation
litigation expenses.
(d) It shall be the duty of the Manager to furnish to the Trustees of
the Trust such information as may reasonably be necessary in order for the
Trustees to evaluate this Contract or any proposed amendments hereto for the
purposes of casting a vote pursuant to Sections 5 or 7 hereof.
(e) In the performance of its duties hereunder, the Manager is and
shall be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Trust in any way
or otherwise be deemed to be an agent of the Trust.
2. Subadvisers
It is understood that the Manager may employ one or more subinvestment
advisers (each a "Subadviser") to provide investment advisory services to the
Fund by entering into a written agreement with each such Subadviser; provided,
that any such agreement first shall be approved on behalf of the Fund in
accordance with the requirements of the Investment Company Act of 1940, as
amended (the "1940 Act"), as such requirements are modified by rule, regulation,
interpretation or order of the SEC. The authority given to the Manager in
Sections 1 through 7 hereof may be delegated by it under any such agreement;
provided, that any Subadviser shall be subject to the same restrictions and
limitations on investments and brokerage discretion
2
as the Manager. The Trust agrees that the Manager shall not be accountable to
the Trust or the Fund or the Fund's shareholders for any loss or other liability
relating to specific investments directed by any Subadviser, even though the
Manager retains the right to reverse any such investment, because, in the event
a Subadviser is retained, the Trust and the Manager will rely almost exclusively
on the expertise of such Subadviser for the selection and monitoring of specific
investments.
3. Other Agreements, etc.
It is understood that any of the shareholders, trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, any interested person (as defined in
the ▇▇▇▇ ▇▇▇) of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager, and that
the Manager, any such interested person or any such organization may have an
interest in the Trust. It is also understood that the Trust and the Manager may
have advisory, management, service or other contracts with other individuals or
entities, and may have other interests and business; provided, that the Manager
shall not undertake any seriously conflicting duties or loyalties which would
affect its prior fiduciary duty to the Trust.
4. Manager's Compensation.
(a) The Trust on behalf of Clearwater Tax-Exempt Bond Fund ("Bond
Fund") shall pay to the Manager, as compensation for the Manager's services to
the Bond Fund and as reimbursement to the Manager for the payment of the Bond
Fund's expenses, a fee at the annual rate of 0.60% of the Bond Fund's average
daily net assets. The management fee payable by the Bond Fund hereunder shall be
calculated and accrued daily as a percentage of the Fund's average daily net
assets and shall be payable quarterly after the end of each calendar quarter on
or before the 15th day of January, April, July and October with respect to the
preceding quarter. In the event of termination of this Contract with respect to
the Bond Fund, the fee provided for in this paragraph shall be computed on the
basis of the period ending on the last business day on which this Contract is in
effect subject to a pro rata adjustment based on the number of days elapsed in
the current quarter as a percentage of the total number of days in such quarter.
(b) The method of determining the net assets of the Fund for purposes
of calculating the fee payable to the Manager hereunder shall be the same as the
method of determining net assets for purposes of establishing the offering and
redemption price of shares of the Fund. If this Contract shall be effective for
only a portion of a calendar quarter with respect to the Fund, the applicable
fee shall be prorated for that portion of such calendar quarter during which
this Contract is in effect.
(c) The Manager may from time to time agree not to impose all or a
portion of its fee with respect to the Fund otherwise payable hereunder (in
advance of the time
3
such fee or a portion thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not otherwise required
to be borne or reimbursed by the Manager. Any such fee reduction or undertaking
may be discontinued or modified by the Manager at any time.
5. Assignment and Amendment
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the 1940 Act); provided,
that such termination shall not relieve either party of any liability incurred
hereunder. The terms of this Contract shall not be changed unless such change is
approved in accordance with the requirements of the 1940 Act, as such
requirements are modified by rule, regulation, interpretation or order of the
SEC.
6. Avoidance of Inconsistent Position.
(a) In connection with purchases and sales of portfolio securities for
the account of the Fund, neither the Manager nor any of its Directors, officers
or employees will act as a principal or agent or receive any commission except
as permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of portfolio securities for the Fund's account
with brokers or dealers selected by the Manager. In the selection of such
brokers or dealers and the placing of such orders, the Manager is directed at
all times to seek for the Fund the most favorable execution and net price
available except as described herein. It is understood that it is desirable for
the Fund that the Manager 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, the Manager is authorized to place
orders for the purchase and sale of securities for a Fund with such brokers,
subject to review by the Trust's Trustees 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 the Manager in connection with the
Manager's services (or its affiliates' services) to other clients.
(b) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
4
7. Effective Period and Termination of this Contract.
(a) This Contract shall become effective on the date hereof and shall
remain in full force and effect as to the Fund until two years from the date set
forth above and from year to year thereafter, but only so long as its
continuance is approved in accordance with the requirements of the 1940 Act, as
such requirements are modified by rule, regulation, interpretation or order of
the SEC, subject to the respective rights of the Trust and the Manager to
terminate this contract as provided in paragraphs (b) and (c) hereof.
(b) The Trust may at any time and without penalty terminate this
Contract as to the Fund or as to the Trust as a whole by not more than sixty
(60) days' nor less than thirty (30) days' written notice given to the Manager;
or
(c) The Manager may at any time and without penalty terminate this
Contract as to the Fund or as to the Trust as a whole by not less than one
hundred twenty (120) days' written notice given to the Trust.
8. Complete Agreement
This Contract states the entire agreement of the parties hereto, and is
intended to be the complete and exclusive statement of the terms hereof. It may
not be added to or changed orally, and may not be modified or rescinded except
by a writing signed by the parties hereto and in accordance with Section 5
hereof and the applicable requirements of the 1940 Act as such requirements are
modified by rule, regulation, interpretation or order of the SEC.
9. Nonliability of the Manager
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Manager, or of reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust, to
any shareholder of the Trust, or to any person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder. Nothing herein, however, shall derogate from the Manager's
obligations under applicable federal and state securities laws.
10. Limitation of Liability of the Trustees
Officers and Shareholders. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees of the Trust as Trustees and not individually and that
the obligations of this instrument with respect to a Fund or to the Trust in
general are not binding upon any of the Trustees, officers or shareholders of
the Trust but are binding only upon the assets and property of that Fund or of
the Trust, as the case may be.
5
11. Notices
Any notice, instruction, request or other communications required or
contemplated by this Contract shall be in writing and shall be duly given when
deposited by first-class mail, postage prepaid, or consigned to a nationally
recognized overnight delivery service addressed to (or delivered by hand with
confirmation to) the Trust or the Manager at the applicable address set forth
below:
If to Trust:
Clearwater Investment Trust
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Manager:
Clearwater Management Co., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
12. Disclosure Statement
The Trust acknowledges receipt of the Manager's written disclosure
statement required by Rule 204-3 under the Investment Advisers Act of 1940 not
less than 48 hours prior to entering into this Contract.
13. Governing Law
This Contract and all performance hereunder shall be governed by,
interpreted, construed and enforced in accordance with the laws of the State of
Minnesota.
14. Severability
Any term or provision of this Contract which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Contract or affecting
the validity or enforceability of any of the terms or provisions of this
Contract in any other jurisdiction.
15. Counterparts
This Contract may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
6
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their duly authorized officers and as of the day and year first
written above.
CLEARWATER INVESTMENT TRUST
By:________________________________
Name:
Title:
CLEARWATER MANAGEMENT CO., INC.
By:________________________________
Name:
Title:
7
