SUB-ADVISORY AGREEMENT
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Sub-Advisory Agreement executed as of December 20, 1993 between LINCOLN
NATIONAL INVESTMENT MANAGEMENT COMPANY, an Illinois corporation (the "Adviser"),
and Xxxxx & Xxxxx, Inc., an Indiana corporation (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) Subject always to the control of the Directors of Lincoln National
Aggressive Growth Fund, Inc. (the "Fund"), a Maryland corporation,
which is an eligible investment fund for Lincoln National Variable
Annuity Account C (the "Separate Account"), the Sub-Adviser, at its
expense, will furnish continuously an investment program for the Fund
which shall at all times meet the diversification requirements of
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"). 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 stated investment objective, policies and
restrictions of the Fund, and will use its best efforts to safeguard
and promote the welfare of the Fund, and to comply with other policies
which the Directors or the Adviser, as the case may be, may from time
to time determine. 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 regarding the
investment affairs of the Fund.
Sub-Adviser understands and agrees that in addition to the Separate
Account, the Fund in the future may also be used as an eligible
investment fund for other variable annuity and/or variable life
insurance separate accounts.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel,
required for it to execute its duties faithfully and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Fund (excluding determination of net asset value per
share and shareholder accounting services). As a particular service to
be rendered by Sub-Adviser, but not by way of limitation, Sub-Adviser
shall vote proxies relating to the Fund's portfolio securities.
(c) In the selection of brokers and dealers 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 price and 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 price and execution available,
the Sub-Adviser, bearing in mind the Fund's best interests at all
times, 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 or dealer
involved; and the quality of service rendered by the broker or dealer
in other transactions. Subject to such policies as the Directors of
the Fund may determine, 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 its having caused the Fund
to pay a broker or dealer 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 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 broker or dealer,
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.
(d) The 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.
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 Annuity, 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 fee, computed and paid at the annual rate of 0.50 of 1%
of the first $150 million of average daily net assets of the Fund, and 0.35 of
1% of any excess over $150 million. Such fee shall be paid by the Adviser, and
not by the Fund, and without regard to any reduction in the
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fees paid by the Fund to the Adviser under its management contract as a result
of any statutory or regulatory limitation on investment company expenses or
voluntary fee reduction assumed by the Adviser. Such fee shall be payable for
each calendar quarter within fifteen (15) business days after the end of that
quarter. Should the parties mutually agree in writing, the Adviser may pay the
Sub-Adviser more frequently than quarterly, without the need to amend this
Agreement.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
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 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 of the Fund
who are not 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 (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the Adviser and the Sub-Adviser; or
(b) If (i) the Directors of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund
and (ii) a majority of the Directors who are not 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, do not 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 Investment Company Act of 1940 and the Rules and Regulations
thereunder; or
(c) The Adviser may at any time terminate this Agreement by not less than
ninety (90) days' written notice delivered or mailed by
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registered mail, postage prepaid, to the Sub-Adviser, and the Sub-
Adviser may at any time terminate this Agreement by not less than
ninety (90) days' written notice delivered or mailed by registered
mail, postage prepaid, to the Adviser.
Action by the Fund under (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 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;
(c) the ownership of more than 51% of the common stock of the Sub-Adviser
issued and outstanding as of the effective date of this Agreement will
be transferred; and
(d) the Chairman of the Board of Directors or the President of the Sub-
Adviser, or any of the Sub-Adviser's portfolio managers for 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 Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner
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consistent with the Investment Company Act of 1940 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.
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, the rendering of services hereunder.
9. EXCEPTIONS TO NON-LIABILITY.
Notwithstanding Section 8 above, Sub-Adviser agrees to indemnify the Fund,
the Adviser, the Separate Account and the Depositor of the Separate Account
(the "Lincoln Entities") for, and hold them harmless against, any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Sub-Adviser) or litigation (including legal and
other expenses) to which the Lincoln Entities, or any of them, may become
subject under any statute, at common law or otherwise, insofar as those losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements arise as a result of any failure by the Sub-Adviser, whether
unintentional or in good faith or otherwise:
(a) 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 21 1989, 54 F.R. 8730), relating to the diversification
requirements for variable annuity, endowment, and life insurance
contracts; and
(b) to supply the Lincoln Entities, or any of them, with accurate
information by which they, or any of them, may properly calculate the
accumulation and/or annuity unit values, or provide other information
to the public, to its clients or prospects, or to any regulatory body,
all as may be mandated by law or required pursuant to the relevant
Prospectuses and Registration Statements for the Fund and for the
Separate Account.
10. RIGHT TO AUDIT.
The Sub-Adviser shall permit employees or legal representatives of the
Lincoln Entities (including independent auditors), or any of them, at their
discretion, to audit the books and records (including, but not by way of
limitation, electronic data processing E-mail, on-line data and any data in
storage) of Sub-Adviser which relate to transactions which are the subject of
this agreement. Any audit will be conducted during normal business hours of the
Sub-Adviser and on the Sub-Adviser's premises, with reasonable prior notice to
Sub-Adviser. Sub-Adviser agrees to provide to the Lincoln Entities, without
charge, reasonable access to its facilities and personnel
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during the conduct of an audit. Sub-Adviser may charge a reasonable fee for
photocopying and other out-of-pocket costs associated with an audit conducted
under this Paragraph.
11. ALTERNATIVE RESOLUTION OF DISPUTES.
Prior to commencing litigation over any dispute arising out of or
relating to this agreement the parties shall attempt in good faith to
resolve the dispute by the following means:
(a) Negotiation. Any party may give the other party(ies) written notice
of any dispute not resolved in the normal course of business. Within
twenty (20) days after delivery of that notice, executives from those
parties involved in the dispute and who have authority to settle the
controversy shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within 120 days of the disputing party's
notice, or if the parties fail to meet within the twenty (20) days,
any of the disputing parties may initiate a minitrial of the
controversy or claim as provided in Paragraph b. If a negotiator
intends to be accompanied at a meeting by an attorney, the other
negotiator(s) shall be given at least three (3) working days' notice
of such intention and may also be accompanied by an attorney.
(b) Minitrial. If the dispute has not been resolved by negotiation as
provided herein, the disputing parties shall endeavor to settle the
dispute by minitrial under the then current Center For Public
Resources ("CPR") Model Minitrial Procedure, assisted by a neutral
third-party who will be selected by the disputing parties from the CPR
Panels of Neutrals. If the disputing parties encounter difficulty in
agreeing on a neutral, they will seek the assistance of CPR in the
selection process.
(c) Extension of Deadlines. By mutual agreement any or all of the
deadlines set forth in this Section 11 may be extended by mutual
agreement of the disputing parties.
(d) Confidentiality. All negotiations pursuant to this Section 11 are
confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and
applicable State Rules of Evidence.
(e) No Waiver. Nothing in this Section 11 shall be construed to constitute
a waiver of any right provided by the Investment Advisors Act of 1940
to any party to this agreement.
12. FORM ADV.
Adviser hereby acknowledges receipt of a copy of Sub-Adviser's Form ADV
(Part I), dated March 19, 1993, and undertakes to submit that document to the
Fund. For its part, Sub-Adviser undertakes to offer to furnish the fund its
most recent Form ADV at least once anually, and to promptly furnish any
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financial or disciplinary information under the terms of Rule 206(4)-4, a under
the Investment Advisers Act of 1940.
13. CHOICE OF LAW.
This agreement shall be interpreted and construed in accordance with the
law of the State of Indiana.
IN WITNESS WHEREOF, LINCOLN NATIONAL INVESTMENT MANAGEMENT COMPANY and
XXXXX & XXXXX, INC. have each caused this Instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY
By: /s/ Xxx X. Xxxxxx
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Printed Name: Xxx X. Xxxxxx
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Title: President
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XXXXX & XXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Printed Name: Xxxxxx X. Xxxxxxx
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Title: Senior Vice President
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Accepted and agreed to
as of the day and year
first above written:
LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Printed Name: Xxxxx X. Xxxxxxxxx
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Title: Vice President
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V10NONNY/JS/
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