SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of _______, 2000, between Touchstone Advisors, Inc.
(MANAGER), an Ohio corporation, and National Asset Management Corporation, a
Kentucky corporation (SUB-ADVISER).
WHEREAS, Manager, an indirect wholly-owned subsidiary of The Western and
Southern Life Insurance Company, is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement (the MANAGEMENT AGREEMENT), Manager
acts as Investment Manager to Select Ten Plus Fund, LLC (the FUND), which is
registered under the Investment Company Act of 1940, as amended (the 1940 ACT);
WHEREAS, the Fund is authorized to subdivide into portfolios, each such
portfolio representing a separate division (collectively, the DIVISIONS) of
securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the Fund, and the Sub-Adviser is willing to accept such
appointment on the terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Fund's Board of Managers and the Manager, and
in compliance with each Division's investment objectives and policies, the
Sub-Adviser will provide an investment program for the Divisions and determine
the composition of the assets of the Divisions, including determination of the
purchase, retention or sale of the securities, cash, and other investments
contained in the Divisions's holdings.
The Sub-Adviser is hereby authorized to execute and perform such services on
behalf of the Divisions. To the extent, if any, permitted by the investment
policies of the Divisions, the Sub-Adviser shall make determinations as to and
execute and perform futures contracts and options on behalf of the Divisions.
The Sub-Adviser will provide the services under this Agreement in accordance
with each Division's investment objective or objectives, policies, and
restrictions as stated in the Fund's Registration Statement filed with the
Securities and Exchange Commission (SEC). Manager agrees to supply the
Sub-Adviser with a copy of the Registration Statement and each
amendment thereto (the Registration Statement as amended from time to time
hereinafter referred to as the REGISTRATION STATEMENT) and any other documents
that set forth investment policies, procedures or restrictions governing the
Divisions and to notify the Sub-Adviser in writing of any changes in the
investment objectives, policies, procedures and restrictions governing the
Divisions.
The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Divisions so as to ensure compliance by the
Divisions with the diversification requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended (the CODE) and regulations issued
thereunder. In managing the Divisions in accordance with these requirements, the
Sub-Adviser shall be entitled to receive and act upon advice of counsel to the
Fund, counsel to Manager or counsel to the Sub-Adviser, provided the
Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Fund's Board of Managers of which it has notice and the provisions of the
Registration Statement.
(c) On occasions when the Sub-Adviser is required pursuant to the Divisions'
investment objectives to enter into the purchase or sale of a security and such
purchase or sale is also in the best interest of the Sub-Adviser's or the
Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the Divisions,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Fund (such custodian and agent or agents hereinafter referred to as the
AGENT), on a daily basis, such confirmation, trade tickets (which shall state
industry classifications unless the Sub-Adviser has previously furnished a list
of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Divisions as may be
reasonably necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Divisions. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Sub-
Adviser will arrange for the automatic transmission of the
confirmation of such trades to the Fund's Agent, and if requested, Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Fund of the valuation of portfolio securities and other investments of
the Divisions. The Sub-Adviser shall not be obligated to independently verify
the Agent's pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Divisions' securities shall not be
reduced by the Sub-Adviser's duty to monitor such determinations. The
Sub-Adviser will assist the Agent in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Divisions for which the Agent
seeks assistance from or identifies for review by the Sub-Adviser.
(f) The Sub-Adviser will make available to the Fund and Manager, promptly upon
request, all of the Divisions' investment records and ledgers maintained by the
Sub-Adviser as are necessary to assist the Fund and Manager to comply with
requirements of the 1940 Act and the Advisers Act, as well as other applicable
laws. The Sub-Adviser will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Fund's Board of Managers for consideration at meetings of the Board on the
investment program for the Divisions and the issuers and securities represented
in the Divisions' securities holdings, including a schedule of the investments
and other assets held in the Divisions and a statement of all purchases and
sales for the Divisions since the last such statement, and will furnish the
Fund's Board of Managers with periodic and special reports with respect to the
Divisions as the Board of Managers and Manager may reasonably request, including
statistical information with respect to the Divisions' securities. In addition,
the Sub-Adviser will make available at each meeting of the Board of Managers,
either in person or by telephone conference call as instructed by Manager on
behalf of the Board of Managers of the Fund, an appropriate person to discuss
the investment performance of the Divisions.
(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Divisions, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Managers may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Divisions to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer 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 member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Divisions and to the Sub-Adviser's other clients as to which
the Sub-Adviser exercises investment discretion. In accordance with Section
11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager and its
affiliates or any other sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Divisions.
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which the Sub-Adviser maintains for
the Divisions are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's or Manager's request or
upon termination of this Agreement, although the Sub-Adviser may, at the
Sub-Adviser's own expense, make and retain a copy of such records. The
Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act and to preserve the records
required by the Rule 204-2 under the Advisers Act for the period specified in
the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .10% of the first
$100 million of average daily net assets of the Divisions from the management
fee actually received by Manager from the Fund and its affiliated fund offered
by National Integrity Life Insurance Company; and at an annual rate of .05% of
average daily net assets above $100 million of the Divisions from the management
fee actually received by Manager from the Fund and its affiliated fund offered
by National Integrity Life Insurance Company; provided, however, the Sub-Adviser
is guaranteed a minimum sub-advisory fee of $50,000 annually; and provided
further, that the sub-advisory fee shall be reduced proportionately if the
management fee actually paid to Manager by the Divisions shall have been reduced
as a result of applicable state expense limitations or fee waivers agreed to in
writing by the Sub-Adviser. The sub-advisory fee shall be computed, accrue and
be payable in the same manner as the management fee which is payable by the
Separate Account to Manager pursuant to the Management Agreement and as
specified in the Separate Account's Registration Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the Fund
and Manager agree that the Sub-Adviser, any of its affiliated persons, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Sub-Adviser, shall not be liable for, or subject
to any damages, expenses, or losses in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties under this Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however,
that the Sub-Adviser shall not be liable under this paragraph in respect of any
loss, expense, claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by Manager and the Sub-Adviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from Manager's willful misfeasance, bad faith or gross negligence or by reason
of the reckless disregard by Manager of its duties. The foregoing
indemnification shall be in addition to any rights that Manager may have at
common law or otherwise. The Sub-Adviser's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control Manager, be controlled by Manager or be
under common control with Manager and its affiliates, directors, officers,
employees and agents. The Sub-Adviser's agreements in this paragraph shall also
extend to any of Manager's successors or the successors of the aforementioned
affiliates, directors, officers, employees or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Fund's
units, or any wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the breach by the
Sub-Adviser of the provisions of this Agreement; provided, however, that Manager
shall not be liable under this paragraph in respect of any loss, expense, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment, or independent counsel agreed upon by Manager
and the Sub-Adviser shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from the Sub-Adviser's
willful misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing indemnification shall
be in addition to any rights that the Sub-Adviser may have at common law or
otherwise. Manager's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents.
Manager's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act
and the rules and regulations thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute,
deliver and perform the Sub-Adviser's obligations under this Agreement;
(iii) The Sub-Adviser's performance of its obligations under this Agreement
does not conflict with any law, regulation or order to which the
Sub-Adviser is subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Fund
filed with the SEC, and with respect to the disclosure about the
Sub-Adviser and the Divisions or information relating, directly or
indirectly, to the Sub-Adviser or the Divisions which was made in
reliance upon and in conformity with written
information provided by the Sub-Adviser to the Fund specifically for use
therein or, if written information was not provided, which the
Sub-Adviser had the opportunity to review prior to filing with the SEC,
such Registration Statement contains, as of its date, no untrue statement
of any material fact and does not omit any statement of a material fact
which was required to be stated therein or necessary to make the
statements contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at
all times remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement
shall not conflict with any law, regulation or order to which the
Sub-Adviser is then subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act,
the 1940 Act, all applicable rules and regulations under such Acts and
all other applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser
from performing its duties under this Agreement. The Sub-Adviser further
agrees to notify Manager and the Fund promptly with respect to written
material that has been provided to the Fund or Manager by the Sub-Adviser
for inclusion in the Registration Statement or prospectus for the Fund or
any supplement or amendment thereto, or, if written material has not been
provided, with respect to the information in the Registration Statement
or Prospectus, or any amendment or supplement thereto, reviewed by the
Sub-Adviser, in either case of any untrue statement of a material fact or
of any omission of any statement of a material fact which is required to
be stated therein or is necessary to make the statements contained
therein not misleading.
SECTION 11. EXCLUSIVITY OF USE OF NAMES.
The Sub-Adviser acknowledges and agrees that the name PINNACLE and SELECT TEN
PLUS, and abbreviations or logos associated with those names, are the valuable
property of Manager and its affiliates; that the Fund, Manager and its
affiliates have the sole right to use such names, abbreviations and logos; and
that the Sub-Adviser shall use the names PINNACLE and SELECT TEN PLUS, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder. Manager acknowledges that "National Asset
Management Corporation" (the SUB-ADVISER'S NAME) is distinctive in connection
with investment advisory and related services provided by the Sub-Adviser, the
Sub-Adviser's name is a property right of the Sub-Adviser, and the Sub-Adviser's
name in connection with the Divisions is understood to be used by the Fund with
the Sub-Adviser's consent. The Sub-Adviser hereby grants to the Fund a
non-exclusive license to use the Sub-Adviser's name in the name of the Divisions
upon the conditions hereinafter set forth; provided that the Fund may use such
name only so long as the Sub-Adviser shall be retained as the investment
sub-adviser of the Divisions pursuant to the terms of this Agreement. Any such
use by the Fund shall in no way prevent the Sub-Adviser or any of its successors
or assigns from using or permitting the use of the Sub-Adviser's name along with
any other word or words, for, by or in connection with any other entity or
business, other than the Fund or its business, whether or not the same directly
competes or conflicts with the Fund or its business in any manner. Manager
acknowledges that the Fund shall use the Sub-Adviser's name in connection with
the Divisions for the period set forth herein in a manner not inconsistent with
the interests of the Sub-Adviser and that the Fund's rights in the Sub-Adviser's
name are limited to its use as a component of the Divisions's name and in
connection with accurately describing the activities of the Divisions. In the
event that the Sub-Adviser shall cease to be the investment sub-adviser of the
Divisions, then the Fund at their own expense, upon the Sub-Adviser's written
request:
(i) shall cease to use the Sub-Adviser's name, or any combination thereof for
any other commercial purpose (other than the right to refer to the
Divisions' former Sub-Adviser's name in the Fund's Registration
Statement, proxy materials and other Fund documents to the extent
required under the 1940 Act);
(ii) shall use its best efforts to cause the Fund's officers and Board of
Managers to take any all actions which may be necessary or desirable to
effect the foregoing and to reconvey to the Sub-Adviser all rights which
the Fund may have to such name. Manager agrees to take any all actions as
may be necessary or desirable to effect the foregoing. The Sub-Adviser
hereby agrees and consents to the use of the Sub-Adviser's name upon the
foregoing terms and conditions.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Divisions until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two years
and thereafter for successive one year periods, provided that continuation of
this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Managers
of the Fund, including a majority of the Managers who are not interested persons
of the Sub-Adviser, Manager or the Fund, cast in person at a meeting called for
the purpose of voting on such approval.
SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Fund, or by the Fund,
upon sixty (60) days written notice to the Sub-Adviser and Manager, acting
pursuant to a resolution adopted by a majority of the members of the Board of
Managers who are not interested persons or by a vote of the holders of the
lesser of (1) 67% of the Divisions' voting shares present if 8 the holders of
more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Divisions. This Agreement
shall automatically terminate in the event of its assignment or the termination
of the Management Agreement pertaining to the Divisions. Termination of this
Agreement shall not affect rights of the parties which have accrued prior
thereto. The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the
termination of this Agreement, except that if Manager or the Fund terminates the
Agreement, the first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control. This Agreement shall be governed by
the laws of the State of Kentucky, without reference to principles of conflicts
of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as of the day and year first written above.
TOUCHSTONE ADVISORS, INC.
By:_________________________________
Attest:_______________________________
NATIONAL ASSET MANAGEMENT CORPORATION
By:__________________________________
Attest:________________________________
