SUB-ADVISORY AGREEMENT
Sub-Advisory Agreement executed as of July 1, 2000, between LINCOLN
INVESTMENT MANAGEMENT, INC., an Illinois corporation (the "Adviser"), and
XXXXXXX XXXXX ASSET MANAGEMENT, a division of XXXXXXX, SACHS & CO., a New
York limited partnership (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE FUND.
(a)(i) Subject always to the supervision, direction and control of the
Adviser and Directors ("Directors") of Lincoln National Growth and Income
Fund, Inc. (the "Fund"), a Maryland corporation, which is an eligible
investment fund for certain variable annuity and variable life insurance
contracts issued by The Lincoln National Life Insurance Company (the
"Variable Contracts"), the Sub-Adviser, at its expense, will furnish
continuously an investment program for the Fund which shall at all times
comply with all applicable laws and regulations; provided, however, that with
respect to state insurance laws and regulations, Sub-Adviser shall only be
responsible for complying with the requirements of those insurance laws and
regulations that Adviser brings to the attention of Sub-Adviser by Adviser
as provided below. The Sub-Adviser will make investment decisions on behalf
of the Fund and place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-Adviser will comply
with the provisions of the organizational documents and Bylaws of the Fund
and the investment objectives, policies and restrictions of the Fund as set
out in the current prospectus and statement of additional information of the
Fund (as the same may be amended or supplemented from time to time), and will
use its best efforts to safeguard and promote the welfare of the Fund, and
will comply with other policies provided in writing to Sub-Adviser which the
Directors or the Adviser, as the case may be, may from time to time
determine; provided that with respect to policies governing transactions
involving "affiliated persons," as defined by the Investment Company Act of
1940 ("Act") (such as those that may be adopted pursuant to Rules 17a-7,
17e-1, and 10f-3 under the Act), the Fund or the Adviser will identify all
affiliated persons of the Adviser and the Fund, other than affiliated persons
of the Sub-Adviser, to whom the policies apply, taking into account all
exemptive orders and no-action relief applicable to the Fund. The Adviser
agrees to inform the Sub-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 the Sub-Adviser
promptly of any changes in such restrictions. As a particular service to be
rendered by Sub-Adviser, but not by way of limitation, Sub-Adviser shall,
unless otherwise directed in writing by the Adviser or the Directors, vote
proxies relating to the Fund's portfolio securities and exercise such other
rights or
privileges afforded by or relating to the portfolio securities of the Fund,
in a manner consistent with the Fund's investment objectives, policies and
restrictions.
(a)(ii) Consistent with its responsibilities set out in Section 1(a)(i)
above, the Sub-Adviser shall manage the Fund's assets so that the Fund shall
comply with Section 817(h) of the Code and Treasury Regulation Section
1.817-5, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, and life
insurance contracts, and any amendments or other modifications or successor
provisions to such Sections or Regulations. In determining whether it has
managed the Fund's assets in compliance with the foregoing by the last day of
each calendar quarter, or within the 30 day cure period immediately following
the end of the calendar quarter ("Cure Period"), or such other period
required by the Code and the regulations thereunder in the future,
Sub-Adviser shall be entitled to rely on the following information that
Adviser shall supply within the three (3) business days after the end of each
calendar quarter (or other period required by the Code and the regulations
thereunder in the future):
(1) a trial balance from the Fund's books and records as of the calendar
quarter end (or other period required by the Code and the regulations
thereunder in the future);
(2) a detailed holdings report, with the fair market value of each
investment as held on the Fund's books and records as of the calendar quarter
end (or other period required by the Code and the regulations thereunder in
the future); and
(3) a schedule of open futures, forwards, options, and any other
notional principal contracts showing the notional value and fair market value
as held on the Fund's books and records as of the calendar quarter end (or
other period required by the Code and the regulations thereunder in the
future),
it being understood and agreed to by the parties hereto that: (a) the
Sub-Adviser may rely on the foregoing information solely for the purpose of
determining the need to cure, and curing, within the Cure Period any failure
by Sub-Adviser to manage the Fund's assets in compliance with such
diversification requirements; (b) the Sub-Adviser may not rely on the
foregoing information if it knows or should know that the information
provided by the Adviser is or may be materially incorrect for any reason and
Sub-Adviser fails to inform the Adviser immediately of the same in writing
during the Cure Period; and (c) as a condition to relying on the foregoing
information, the Sub-Adviser shall, within fifteen (15) business days after
receipt of such information, notify Adviser in writing sent by facsimile,
either that the Fund is in compliance with such diversification requirements
using the information supplied by Adviser or, if the Fund is not in
compliance with such diversification requirements, that it shall take all
necessary steps, specifying the same, to cure such noncompliance within the
Cure Period.
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(b) The Sub-Adviser, at its expense, will furnish all necessary
personnel and facilities required for it to execute its duties under this
Agreement, including, without limitation, personnel and equipment necessary
for the efficient conduct of the investment affairs of the Fund (excluding
determination of net asset value per share, portfolio accounting and
shareholder accounting services).
(c) In the selection of brokers, dealers or futures commission merchants
(which may include Sub-Adviser or its affiliates) and the placing of orders
for the purchase and sale of portfolio investments for the Fund, the
Sub-Adviser shall use its best efforts to obtain for the Fund the most
favorable execution available, except to the extent it may be permitted to
pay higher brokerage commissions for brokerage and research services as
described below. In using its best efforts to obtain for the Fund the most
favorable execution available, the Sub-Adviser shall consider all factors it
deems relevant, including by way of illustration: price; the size of the
transaction; the nature of the market for the security; the amount of the
commission; the timing of the transaction taking into account market prices
and trends; the reputation, experience and financial stability of the broker,
dealer, or futures commission merchant involved; and the quality of service
rendered by the broker, dealer or futures commission merchant in other
transactions. To the extent consistent with applicable law and subject to
such policies as the Directors or the Adviser may determine (which policies
shall be provided to the Sub-Adviser in writing), the Sub-Adviser may pay a
broker, dealer or futures commission merchant that provides brokerage and
research services to the Sub-Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission
another broker, dealer or futures commission merchant would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker, dealer or futures
commission merchant, viewed in terms of either that particular transaction or
the Sub-Adviser's over-all responsibilities with respect to the Fund and to
other clients of the Sub-Adviser as to which the Sub-Adviser exercises
investment discretion.
It is understood that the services provided by such brokers may be
useful to the Sub-Adviser in connection with its services to other clients.
Sub-Adviser may, on occasions when it deems the purchase or sale of a
security to be in the best interest 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 such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
fair and equitable and consistent with its obligations to the Fund and to
such other clients. The Sub-Adviser shall not, however, be required to
aggregate securities orders.
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(d) Sub-Adviser shall not be obligated to pay any expenses of or for the
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1
other than as provided in Section 3.
(e) The Adviser agrees to furnish to the Sub-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 the
Sub-Adviser may reasonably request. The Sub-Adviser agrees to provide to the
Adviser and the Fund such periodic and special reports and other information
regarding its activities under this Agreement as the Adviser or the Fund may
reasonably request. In addition, the Sub-Adviser shall make its officers and
employees available to the Adviser from time to time at such reasonable times
as the parties may agree to review investment policies of the Fund and to
consult with the Adviser or the Fund regarding the investment affairs of the
Fund.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Directors, officers and
employees of the Fund may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Sub-Adviser, and in any person controlled
by or under common control with the Sub-Adviser; and that the Sub-Adviser and
any person controlled by or under common control with the Sub-Adviser may
have an interest in the Fund or the Variable Contracts, or any other
investment vehicle for which the Fund is an eligible investment fund.
3. COMPENSATION TO BE PAID BY THE ADVISER TO THE SUB-ADVISER.
The Adviser will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a monthly fee, computed and paid at the annual rate of
..15 of 1% of the average daily net assets of the Fund for the first three (3)
months of the Agreement, and .1333 of 1% of the average daily net assets of
the Fund thereafter.
Such fee shall be paid by the Adviser, and not by the Fund, and without
regard to any reduction in the fees paid by the Fund to the Adviser under its
investment advisory contract as a result of any statutory or regulatory
limitation on investment company expenses or voluntary fee reduction assumed
by the Adviser. Such fee to the Sub-Adviser shall be payable for each month
within ten (10) business days after the end of such month.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
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4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the investment
advisory contract between the Adviser and the Fund shall have terminated for
any reason; and, except as permitted by law, this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Fund and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Directors who are not parties to the Agreement
or interested persons of the Fund or of the Adviser or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Fund may at any time terminate this Agreement by not more than
sixty days' written notice delivered or mailed by registered mail, postage
prepaid, to the Adviser and the Sub-Adviser; or
(b) Unless either (i) the shareholders of the Fund by the affirmative
vote of a majority of the outstanding shares of the Fund or (ii) a
majority of the Directors who are not parties to the Agreement or
interested persons of the Fund or of the Adviser or of the Sub-Adviser, by
vote cast in person at a meeting called for the purpose of voting on such
approval, specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate at the close
of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the Fund
for their approval and such shareholders fail to approve such continuance
of this Agreement as provided herein, the Sub-Adviser may continue to
serve hereunder in a manner consistent with the Act and the rules and
regulations thereunder; or
(c) The Adviser may at any time terminate this Agreement by not less
than ninety days' written notice delivered or mailed by registered mail,
postage prepaid, to the Sub-Adviser, and the Sub-Adviser may at any time
terminate this Agreement by not less than ninety days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser.
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Action by the Fund under Section 5(a) above may be taken either (i) by
vote of a majority of its Directors, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5(a) shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Adviser in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail to
be registered as an investment adviser under the Investment Advisers Act of
1940, as amended from time to time, and under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement; (b) the Sub-Adviser
shall have been served or otherwise have notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund; or (c) any
portfolio manager of the Fund shall have changed.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding shares" means the affirmative vote, at a duly called and held
meeting of shareholders, (a) of the holders of 67% or more of the shares of
the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Act and the
rules and regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange Act of 1934
and the rules and regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
(a) In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Sub-Adviser, or reckless disregard of its obligations and
duties hereunder, the Sub-Adviser shall not be subject to any liability to
the Fund or to any shareholder of the Fund, for any act or omission in the
course of, or connected with, rendering services hereunder.
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(b) Failure by the Sub-Adviser to assure that the investment program for
the Fund meets the diversification requirements of Section 817(h) of the
Code, as required by Section 1(a) of this Agreement, shall constitute gross
negligence per se under sub-paragraph 8(a) above and 9(a) below, except to
the extent that such failure was due either:
(i) to the Sub-Adviser's reasonable reliance, in accordance with Section
1(a)(ii) hereof, on the information that Adviser provides pursuant to that
Section, which information is subsequently determined in an administrative
or judicial forum to be erroneous and to have materially contributed to the
Fund's failure to meet the diversification requirements, or
(ii) to the untimely delivery by the Adviser of the information required by
Section 1(a)(ii) hereof and provided that such untimely delivery materially
contributed to the Fund's failure to meet the diversification requirements.
9. INDEMNIFICATION.
(a) Sub-Adviser agrees to indemnify, defend and hold harmless the Adviser
and the Fund and their respective affiliated persons from and against any and
all claims, demands, actions, losses, damages, liabilities, costs, charges,
counsel fees and expenses of any nature (including amounts paid in settlement
with the written consent of the Sub-Adviser, which consent shall not be
unreasonably withheld) (collectively, "Losses") arising out of the
Sub-Adviser's gross negligence, willful misfeasance, or bad faith or reckless
disregard of its duties and obligations hereunder, except that the Adviser
and the Fund and their respective affiliated persons shall not be entitled to
indemnification from the Sub-Adviser to the extent that the Adviser's gross
negligence, willful misconduct, bad faith or reckless disregard of its duties
and obligations hereunder materially contributed to the Losses.
In addition, Sub-Adviser agrees to indemnify the Adviser and the Fund and
their respective affiliated persons (collectively, "Indemnified Parties")
for, and hold them harmless against all Losses to which the Indemnified
Parties or any of them may become subject under any statute, at common law or
otherwise, insofar as such Losses (or actions in respect thereof) arise as a
result of any failure by the Sub-Adviser, whether unintentional or in good
faith or otherwise, to adequately diversify the investment program of the
Fund pursuant to the requirements of Section 817(h) of the Code, and the
regulations issued thereunder (including, but not by way of limitation, Reg.
Sec. 1.817-5, March 2, 1989, 54 F.R. 8730, 51 F.R. 32633), relating to the
diversification requirements for variable annuity, endowment, and life
insurance contracts, in accordance with Section 1(a)(ii) hereof, provided
that the Sub-Adviser shall have been given prompt written notice concerning
any matter for which indemnification is otherwise afforded hereunder.
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(b) Adviser agrees to indemnify, defend and hold harmless Sub-Adviser and
its affiliated persons from and again any and all Losses arising out of the
Adviser's gross negligence, willful misfeasance, or bad faith or reckless
disregard of its duties and obligations hereunder, except that the
Sub-Adviser and its affiliated persons shall not be entitled to
indemnification from the Adviser to the extent that the Sub-Adviser's gross
negligence, willful misconduct, bad faith or reckless disregard of its duties
and obligations hereunder materially contributed to the Losses.
10. RECORDS; RIGHT TO AUDIT.
The Sub-Adviser agrees to maintain in the form and for the period
required by Rule 31a-2 under the Investment Company Act of 1940, all records
relating to the Fund's investments made by Sub-Adviser that are required to
be maintained by the Fund pursuant to the requirements of Rule 31a-1 under
the Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment
Company Act of 1940 which are prepared or maintained by Sub-Adviser on behalf
of the Fund are the property of the Fund and will be surrendered promptly to
the Fund or the Adviser on request.
The Sub-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 Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Fund.
11. MARKETING MATERIALS.
The Fund shall furnish to the Sub-Adviser, prior to its use, each piece
of advertising, supplemental sales literature or other promotional material
in which the Sub-Adviser or any of its affiliates is named or in which the
Sub-Adviser's logo is included. No such material shall be used except with
the prior written consent of the Sub-Adviser or its delegate (which consent
shall not be unreasonably withheld); provided, however, that the names
"Xxxxxxx Xxxxx," "Xxxxxxx, Xxxxx & Co." and/or "Xxxxxxx Sachs Asset
Management" may be used in any piece of advertising, supplemental sales
literature or other promotional material without such prior written
authorization if no other information about Sub-Adviser is included in the
same piece of advertising, supplemental sales literature or other promotional
material. The Sub-Adviser agrees to respond to any request for approval on a
prompt and timely basis. Failure by the Sub-Adviser to respond within ten
calendar days to the Fund shall relieve the Fund of the obligation to obtain
the prior written permission of the Sub-Adviser.
The Sub-Adviser shall furnish to the Fund, prior to its use, each piece
of advertising, supplemental sales literature or other promotional material
in which the Fund, the Adviser or any of the Adviser's affiliates is named.
No such material shall be used except with the prior written consent of the
Fund or its delegate (which consent shall
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not be unreasonably withheld). The Fund agrees to respond to any request for
approval on a prompt and timely basis. Failure by the Fund to respond within
ten calendar days to the Sub-Adviser shall relieve the Sub-Adviser of the
obligation to obtain the prior written permission of the Fund.
12. CONFIDENTIALITY.
All information and advice furnished by either party to the other in
connection with this Agreement shall be treated as confidential and shall
not, without the prior written consent of the other party, be disclosed to
third parties except as permitted by Section 11 of this Agreement, or as
required by law, regulation or other legal process, or in furtherance of this
Agreement.
13. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of State of Delaware without regard to the principles of conflicts
of law contained therein; provided, however, that nothing herein shall be
construed as being inconsistent with applicable Federal and state securities
laws and any rules, regulations and orders thereunder.
14. NATURE OF RELATIONSHIP.
This Agreement does not and shall not be deemed to constitute a
partnership or joint venture between the parties, and neither party nor any
of its directors, officers, employees or agents shall, by virtue of the
performance of their obligations under this Agreement, be deemed to be an
employee of the other.
15. SEVERABILITY.
If any provision hereof is, or at any time should become, inconsistent
with any present or future law, rule or regulation of any exchange of any
governmental or regulatory body with relevant jurisdiction, such provision
shall be deemed modified to conform to such law, rule or regulation, but in
all other respects this Agreement shall continue and remain in full force and
effect.
16. NON-WAIVER.
A waiver by any party of any of the terms and conditions of this
Agreement in any one instance shall not be deemed or construed to be a waiver
of any such term or condition for the future, nor a waiver of any subsequent
breach thereof, nor shall it be deemed a waiver of performance of any other
obligation hereunder. No waiver of any provision of this Agreement shall be
valid unless agreed to in writing by the party or parties against whom such
waiver is sought to be enforced.
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IN WITNESS WHEREOF, the parties have caused this instrument to be signed
in duplicate on their behalf by their duly authorized representatives, all
as of the day and year first above written.
LINCOLN INVESTMENT
MANAGEMENT, INC.
/s/ Xxxxxx X. Xxxxx
----------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
XXXXXXX XXXXX ASSET
MANAGEMENT, a division of
XXXXXXX, SACHS & CO.
/s/ Xxxxx X. Xxxx
----------------------
Name: Xxxxx X. Xxxx
Title: Managing Director
Accepted and agreed to
as of the day and year
first above written:
LINCOLN NATIONAL GROWTH AND
INCOME FUND, INC.
/s/ Xxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President
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