INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
Franklin Advisers, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective Date") by
and among Aid Association for Lutherans, a fraternal benefit society organized and existing under the
laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a corporation organized and
existing under the laws of the State of Minnesota ("Fund"), and Franklin Advisers, Inc., a
corporation organized and existing under the laws of the State of California ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day of
January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the FTI Small Cap Portfolio ("Portfolio"), a
separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment supervisory
management services and is registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as subadviser to furnish certain investment
advisory services to Adviser and the Portfolio and Subadviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the parties
hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment subadviser with respect
to the Portfolio for the period and on the terms set forth in this Agreement, and (B)
Subadviser hereby accepts such appointment and agrees to render the services herein set forth,
for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of shares other
than the Portfolio with respect to which Adviser desires to retain Subadviser to render
investment advisory services hereunder, Adviser shall so notify Subadviser in writing,
indicating the advisory fee to be payable with respect to the additional series of shares. If
Subadviser is willing to render such services on the terms provided for herein, it shall so
notify Adviser in writing, whereupon such series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from time to
time what investments shall be purchased, sold or exchanged and what portion of the
assets of the Portfolio shall be held uninvested. As the Fund's agent and
attorney-in-fact, the Subadviser may (a) buy, sell, exchange, convert and otherwise
trade in any stocks, bonds or other securities including money market instruments,
whether the issuer is organized in the United States or outside the United States and
(b) place orders for the execution of such securities transactions with or through
such brokers, dealers or issuers as Subadviser may select. Subadviser shall perform
these duties subject always to (1) the overall supervision of Adviser and the Board of
Directors of the Fund (the "Board"), (2) the Fund's Articles and By-laws (as defined
below), as amended from time to time, (3) the stated investment objectives, policies
and restrictions of the Portfolio as set forth in the Fund's then current Registration
Statement (as defined below), (4) any additional policies or guidelines established by
Adviser or Board that have been furnished in writing to Subadviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of the
1940 Act and the rules and regulations thereunder, and (6) the provisions of the
Internal Revenue Code of 1986, as amended (the "Code") applicable to "regulated
investment companies" (as defined in Section 851 of the Code), as amended from time to
time. In accordance with Section VII, Subadviser shall arrange for the execution of
all orders for the purchase and sale of securities and other investments for the
Portfolio's account and will exercise full discretion and act for the Fund in the same
manner and with the same force and effect as the Fund might or could do with respect
to such purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases, sales,
or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of the
Portfolio's assets. Subadviser shall affirm security transactions with central
depositories and advise the custodian of the Portfolio ("Custodian") or such
depositories or agents as may be designated by Custodian and Adviser promptly of each
purchase and sale of a portfolio security, specifying the name of the issuer, the
description and amount or number of shares of the security purchased, the market
price, the commission and gross or net price, the trade date and settlement date and
the identity of the effecting broker or dealer. Subadviser shall from time to time
provide Custodian and Adviser with evidence of authority of its personnel who are
authorized to give instructions to Custodian. The Fund shall instruct the Custodian
to provide the Subadviser with such information as the Subadviser may reasonably
request relating to daily cash levels held by the Portfolio.
C. Unless Adviser advises Subadviser in writing that the right to vote proxies has been
expressly reserved to Adviser or the Fund or otherwise delegated to another party,
Subadviser shall exercise voting rights incident to any securities held in the
Portfolio without consultation with Adviser or Fund, provided that Subadviser will
follow any written instructions received from Adviser or Fund with respect to voting
as to particular issues. Subadviser shall further respond to all corporate action
matters incident to the securities held in the Portfolio including, without
limitation, proofs of claim in bankruptcy and class action cases and shelf
registrations. Should Subadviser undertake litigation against an issuer on behalf of
accounts which it manages that are shareholders of such issuer, Fund agrees, that in
the event the Portfolio is also a shareholder of such issuer, to pay its proportionate
share of any applicable legal fees associated with the action or to forfeit any claim
to any assets Subadviser may recover and, in such case, agrees to hold Subadviser
harmless for excluding the Portfolio from such action. In the case of class action
suits involving issuers held by the Portfolio, Subadviser may include information
about the Fund for purposes of participating in any settlements.
D. Subadviser shall consult with Adviser to develop strategic marketing plans for the
Fund on or before November 30 in each year for the following calendar year with
respect to the Portfolio and the variable contract for which it provides an underlying
investment choice. Subadviser shall coordinate all marketing support efforts with
Adviser, including, without limitation, the promotion of products, training of
Adviser's field force, seminars promoting the Portfolio and preparation of
presentations for clients (collectively referred to as the activities of
"Wholesalers"). Wholesalers' participation in on-site presentations, sales desk
training, conferences, and portfolio manager conference calls shall first be approved
by Adviser. Subadviser shall not include Adviser's field force in any sales contest
and other incentive promotions sponsored by Subadviser without Adviser's prior written
approval. Subadviser shall also, from time-to-time, provide such additional marketing
support such as Adviser may reasonably request, including, without limitation,
assistance in product roll-outs, on-going product training and sales support, and
development of sales strategies.
E. Upon request of Custodian and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the Portfolio for
which market quotations are not readily available.
F. In the performance of its duties hereunder, Subadviser is and shall be an independent
contractor and except as expressly provided for herein or otherwise expressly provided
or authorized shall have no authority to act for or represent the Portfolio or the
Fund in any way or otherwise be deemed to be an agent of the Portfolio, the Fund or of
Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall receive
an investment management fee as set forth in Schedule 1, attached hereto and incorporated
herein by reference. The management fee shall be payable monthly in arrears to Subadviser on
or before the 10th day of the next succeeding calendar month. If this Agreement becomes
effective or terminates before the end of any month, the investment management fee for the
period from the effective date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the proration
which such period bears to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Subadviser will bear all expenses incurred by it
in the performance of its duties hereunder, other than those expenses specifically assumed by
the Fund hereunder. The Fund shall bear its own expenses, including all brokers' and
underwriting commissions chargeable to the Fund in connection with the securities transactions
to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the following
documents and will furnish to Subadviser at its principal office all future amendments and
supplements to such documents, if any, as soon as practicable after such documents become
available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to time
("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended from
time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of Adviser and
Subadviser and approving the form of the Advisory Agreement and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities Act of
1933, as amended (the "1933 Act") on Form N-1A, as filed with the Securities
and Exchange Commission ("SEC") relating to the Portfolio and its shares and
all amendments thereto ("Registration Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form N-8A as
filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus"); and
(7) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or information
that Subadviser may reasonably request to enable it to perform its duties pursuant to
this Agreement.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting brokers or
dealers, if any, it shall use its best efforts to seek best execution on behalf of the
Portfolio. In assessing the best execution for any transaction, Subadviser shall
consider all factors it deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating best execution and in
selecting the broker or dealer, if any, to execute a particular transaction,
Subadviser may also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended ("1934
Act")) provided to Subadviser with respect to the Portfolio and/or other accounts over
which Subadviser exercises investment discretion. Subadviser may, in its discretion,
agree to pay a broker or dealer that furnishes such brokerage or research services a
higher commission than that which might have been charged by another broker-dealer for
effecting the same transactions, if Subadviser determines in good faith that such
commission is reasonable in relation to the brokerage and research services provided
by the broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of Subadviser with respect to the accounts as to which it
exercises investment discretion (as such term is defined under Section 3(a)(35) of the
1934 Act). Subadviser shall, upon request from Adviser, provide such periodic and
special reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they relate.
B. In no instance will portfolio securities be purchased from or sold to Subadviser, or
any affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolio at the same time it is selling such
securities for another client account and may sell securities for the Portfolio at the
time it is buying such securities for another client account. In such cases, subject
to applicable legal and regulatory requirements, and in compliance with such
procedures of the Fund as may be in effect from time to time, Subadviser may
effectuate cross transactions between the Portfolio and such other account if it deems
this to be advantageous.
D. On occasions when Subadviser deems the purchase or sale of a security to be in the
best interest of the Fund as well as other clients of Subadviser, Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be purchased or sold to attempt to obtain a
more favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Subadviser in the manner Subadviser
considers to be the most equitable and consistent with its fiduciary obligations to
the Fund and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by Subadviser pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions on behalf of the Portfolio. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, Subadviser hereby agrees (A) to preserve for
the periods prescribed by Rule 31a-3 under the 1940 Act any records that it maintains for the
Fund that are required to be maintained by Rule 31a-1 under the 1940 Act and (B) to provide
the Fund with access to or copies of any records that it maintains for the Fund upon
reasonable request by the Fund.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate, such
information, reports, evaluations, analyses and opinions as are required by law or
that the Board or Adviser, as appropriate, may reasonably require, including, without
limitation: compliance reporting and certification with respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Price Overrides/Fair Valuation Determinations
B. Subadviser shall make available in person to the Board and to Adviser personnel of
Subadviser as the Board or Adviser may reasonably request to review the investments
and the investment program of the Portfolio and the services provided by Subadviser
hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or restrict (i)
the freedom of Subadviser, or any affiliated person thereof, to render investment management
and corporate administrative services to other investment companies, to act as investment
manager or investment counselor to other persons, firms, or corporations, or to engage in any
other business activities, or (ii) the right of any director, officer, or employee of
Subadviser, who may also be a director, officer, or employee of the Fund, to engage in any
other business or to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar nature. Nothing in
this Agreement shall impose upon Subadviser any obligation to purchase or sell or to recommend
for purchase or sale, with respect to the Portfolio, any securities which the Subadviser, or
its officers, directors, employees or affiliates may purchase or sell for its or their own
account(s) or for the account of any other client. Subadviser may give advice and take action
with respect to any of its other accounts or for its own account which my differ from the
timing or nature of action taken by the Subadviser with respect to the Portfolio.
XI. Subadviser's Use of the Services of Others. Subadviser may, at its cost, employ, retain, or
otherwise avail itself of the services or facilities of other persons or organizations for the
purpose of providing Subadviser or the Fund or Portfolio, as appropriate, with such
statistical and other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities, or such other information,
advice, or assistance as Subadviser may deem necessary, appropriate, or convenient for the
discharge of its obligations hereunder or otherwise helpful to the Fund or the Portfolio, as
appropriate, or in the discharge of Subadviser's overall responsibilities with respect to the
other accounts that it serves as investment manager or counselor.
XII. Use of Xxxxxxxx Xxxxx. The Subadviser hereby gives the Fund, for the term of this Agreement,
a royalty free, nonexclusive, nontransferable right to use the name "Franklin" or "FTI"
(hereinafter referred to as the "Marks") in the United States as part of the name of the
Portfolio, provided such name is approved by Subadviser in writing. Such right does not
include the right to allow third parties to use the Marks except as specifically provided in
this Agreement. Neither the Fund nor the Adviser shall retain any right to use of the Marks
after the termination of this Agreement. Upon termination of this Agreement, the Fund will
immediately terminate all use of the Marks and destroy any remaining unused sales
documentation, promotional, marketing, advertising or other written printed or electronic
material or performance information that contains the Marks. The Fund agrees to use its best
efforts to ensure that the nature and quality of the services rendered in connection with the
Marks shall conform to the terms of this Agreement and any amendments thereto.
All sales documentation, promotional, marketing, advertising and other written, printed or
electronic material or performance information or data which includes the Marks which is
prepared, controlled and/or issued by or on behalf of the Fund and/or the Adviser and/or their
agents or affiliates shall require the written approval of Subadviser prior to distribution.
XIII. Liability of Subadviser; Indemnification. Neither Subadviser nor any of its officers,
directors, or employees, nor any person performing executive, administrative, trading, or
other functions for the Fund, the Portfolio (at the direction or request of Subadviser) or
Subadviser in connection with Subadviser's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement (collectively, "Related Persons"), shall be
liable for (i) any error of judgment or mistake of law or for any loss suffered by the Fund or
Portfolio or (ii) any error of fact or mistake of law contained in any report or data provided
by Subadviser, except for any error, mistake or loss resulting from willful misfeasance, bad
faith, or gross negligence in the performance by Subadviser or such Related Person of
Subadviser's duties on behalf of the Fund or Portfolio or from reckless disregard by
Subadviser or any such Related Person of the duties of Subadviser pursuant to this Agreement
(each of which is referred to as a "Culpable Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Subadviser from any responsibility or liability Subadviser may have under state or federal
statutes or from responsibility or liability for errors in connection with the execution of
trade orders.
Subadviser shall indemnify Adviser and its Related Persons and hold them harmless from and
against any and all actions, suits or claims whether groundless or meritorious and from and
against any and all losses, damages, costs, charges, reasonable counsel fees, payments,
expenses and liabilities (collectively, "Damages") arising directly or indirectly out of or in
connection with the performance of services by Subadviser or its Related Persons hereunder to
the extent such Damages result from willful misfeasance, bad faith, gross negligence or the
reckless disregard of Subadviser's obligations and duties under this Agreement.
Adviser shall indemnify Subadviser and its Related Persons and hold them harmless from and
against any Damages arising directly or indirectly out of or in connection with the
performance of services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any Culpable Act of Adviser or
any of its Related Persons.
XIV. Representations of Subadviser. Subadviser represents, warrants, and agrees as follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect; (ii) is
not prohibited by the 1940 Act or the Advisers Act from performing the services
contemplated by this Agreement; (iii) has met, and will continue to meet for so long
as this Agreement remains in effect, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will immediately notify Adviser of
the occurrence of any event that would disqualify Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act
or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code") complying with
the requirements of Rule 17j-1 under the 1940 Act, as may be amended from time to
time, and, has provided the Adviser and the Fund with a copy of the Subadviser Code,
together with evidence of its adoption. The Subadviser certifies that it has adopted
procedures reasonably necessary to prevent access persons as defined in Rule 17j-1
("Access Persons") from violating the Subadviser Code. On a periodic basis, Subadviser
will either; (i) certify to Adviser that Subadviser and its Access Persons have
complied with Subadviser Code with respect to the Portfolio, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to the
Portfolio. In addition, Subadviser will furnish at least annually to Adviser and the
Board a written report that (a) describes any issues arising under the Subadviser Code
since the last report to the Board, including, but not limited to, information about
material violations of the Subadviser Code with respect to the Portfolio and sanctions
imposed in response to the material violations and (b) certifies that the Subadviser
has adopted procedures reasonably necessary to prevent Access Persons from violating
the Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as most
recently filed with the SEC and, if not so filed, its most recent Part II of Form ADV,
and will, promptly after filing any amendment to its Form ADV with the SEC, and, if
not so filed, any amendment to Part II of its Form ADV, furnish a copy of such
amendment to Adviser.
XV. Compliance with Applicable Regulations. In performing its duties hereunder, Subadviser shall
establish compliance procedures (copies of which shall be provided to Adviser, and shall be
subject to review and approval by Adviser) reasonably calculated to ensure compliance at all
times with all applicable provisions of the 1940 Act and the Advisers Act, and any rules and
regulations adopted thereunder; Subchapter M of the Code; the provisions of the Registration
Statement; the provisions of the Articles and the By-Laws of the Fund, as the same may be
amended from time to time; and any other applicable provisions of state, federal or foreign
law.
XVI. Term of Agreement. This Agreement shall become effective with respect to the FTI Small Cap
Portfolio on the Effective Date and, with respect to any additional Portfolio, on the date of
receipt by the Adviser of notice from the Subadviser in accordance with Section II hereof that
the Subscriber is willing to serve as Subadviser with respect to such Portfolio. Unless
sooner terminated as provided herein, this Agreement shall continue in effect for two years
from the Effective Date with respect to the FTI Small Cap Portfolio and, with respect to each
additional Portfolio, for two years from the date on which this Agreement becomes effective
with respect to such Portfolio. Thereafter, this Agreement shall continue in effect from year
to year, with respect to the Portfolio, subject to the termination provisions and all other
terms and conditions hereof, so long as (a) such continuation shall be specifically approved
at least annually (i) by either the Board, or by vote of a majority of the outstanding voting
securities of the Portfolio; (ii) in either event, by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the Directors of the Fund
who are not interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval; and (b) Subadviser shall not have notified
the Fund, in writing, at least 60 days prior to such approval that it does not desire such
continuation. Subadviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal, or amendment hereof.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote of a majority
of the outstanding voting securities of the Portfolio on at least 60 days' prior written
notice to Subadviser. This Agreement may also be terminated by Adviser: (i) on at least 60
days' prior written notice to Subadviser, without the payment of any penalty; (ii) upon
material breach by Subadviser of any of the representations and warranties set forth in
Section XIV of this Agreement, if such breach shall not have been cured within a 20-day period
after notice of such breach; or (iii) if Subadviser becomes unable to discharge its duties and
obligations under this Agreement. Subadviser may terminate this Agreement at any time,
without the payment of any penalty, on at least 60 days' prior notice to Adviser. This
Agreement shall terminate automatically in the event of its assignment, as such term is
defined in the 1940 Act, or upon termination of the Advisory Agreement. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of any Portfolio shall be effective to
continue, amend or terminate this Agreement with respect to any such Portfolio notwithstanding
(i) that such action has not been approved by the holders of a majority of the outstanding
voting securities of any other Portfolio affected thereby, and/or (ii) that such action has
not been approved by the vote of a majority of the outstanding voting securities of the Fund,
unless such action shall be required by any applicable law or otherwise.
XVIII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. This Agreement (including any
exhibits hereto) may be amended at any time by written mutual consent of the parties, subject
to the requirements of the 1940 Act and rules and regulations promulgated and orders granted
thereunder.
XIX. Notification. Subadviser will notify Adviser promptly of any change in the personnel of
Subadviser with responsibility for making investment decisions in relation to the Portfolio or
who have been authorized to give instructions to Custodian.
XX. Override Provisions. Notwithstanding any other provision of this Agreement:
A. Prior to this Agreement being approved by a vote of a majority of the Portfolio's outstanding
voting securities in accordance with the 1940 Act: (i) in no event shall compensation paid
to the Subadviser hereunder exceed the amount permitted by Rule 15a-4 under the 1940 Act;
(ii) the portion of the compensation payable by the Fund to the Adviser under the terms of
the Advisory Agreement with respect to such Portfolio that is equal in amount to the
compensation payable to the Subadviser hereunder (the "Subadviser Escrow Amount") shall be
held in an interest-bearing escrow account with the Fund's custodian or a bank (the
"Escrow Account"); and (iii) this Agreement may be terminated at any time without the
payment of any penalty, by vote of the Board or by a vote of a majority of the outstanding
voting securities of the Portfolio on 10 days' prior written notice to the Subadviser.
The Subadviser Escrow Amount, including interest earned thereon, shall be paid promptly
after approval of this Agreement by the vote of a majority of the Portfolio's outstanding
voting securities in accordance with the 1940 Act, provided that such approval is obtained
no later than 150 days after the date of this Agreement.
B. If this Agreement is not approved by a vote of a majority of the Portfolio's outstanding
voting securities within the time period stated above, (i) this Agreement shall
immediately terminate; and (ii) the Subadviser shall receive from the Escrow Account the
lesser of: (a) the sum of the amount of any costs incurred by the Subadviser in performing
its duties under this Agreement prior to such termination plus any interest earned on that
amount, and (b) the sum of the Subadviser Escrow Amount plus any interest earned on that
amount.
XXI. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws of the
State of California without giving effect to the conflicts of laws principles thereof
and the 1940 Act. To the extent that the applicable laws of the State of California
conflict with the applicable provisions of the 1940 Act, the latter shall control.
B. Insurance. Subadviser agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the nature
and scope of Subadviser's business activities.
C. Captions. The captions contained in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
D. Entire Agreement. This Agreement represents the entire agreement and understanding of
the parties hereto and shall supersede any prior agreements between the parties
relating to the subject matter hereof, and all such prior agreements shall be deemed
terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Articles or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to relieve
or deprive the Board of its responsibility for and control of the conduct of the
affairs of the Portfolio.
F. Definitions. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940 Act and
to interpretations thereof, if any, by the United States courts or, in the absence of
any controlling decision of any such court, by rules, regulations, or orders of the
SEC validly issued pursuant to the 1940 Act. As used in this Agreement, the terms
"majority of the outstanding voting securities," "affiliated person," "interested
person," "assignment," broker," "investment adviser," "net assets," "sale," "sell,"
and "security" shall have the same meaning as such terms have in the 1940 Act, subject
to such exemption as may be granted by the SEC by any rule, regulation, or order.
Where the effect of a requirement of the federal securities laws reflected in any
provision of this Agreement is made less restrictive by a rule, regulation, or order
of the SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly
authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
FRANKLIN ADVISERS, INC.
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
Schedule I
Dated as of January 1, 2002
Subadvisory Fees
FTI Small Cap Portfolio
Average Net Daily Assets Annual Rate
$0 - 200 million 0.60%
$200 - 500 million 0.52%
Above $500 million 0.50%
