SUB-ADVISORY AGREEMENT
Sub-Advisory Agreement executed as of June 8, 1987 between LINCOLN
NATIONAL INVESTMENT MANAGEMENT COMPANY, an Illinois corporation (the "Adviser"),
and XXXXXX MANAGEMENT COMPANY, INC., a Delaware 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 Xxxxxx Master Fund, Inc. (the "Fund"), a Maryland corporation,
which is an eligible investment fund for Lincoln National Pension Variable
Annuity Account C (the "Variable Annuity"), 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 (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.
(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).
(C) In the selection of brokers, dealers or futures commission
merchants 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, dealer,
or futures commission merchant involved; and the quality of service
rendered by the broker, dealer or futures commission merchant 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, 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 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.
(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.
(a) 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.
(b) The Adviser agrees that if any additional funds are created by
the Variable Annuity for which the Adviser undertakes to act as investment
adviser, it will discuss with the Sub-Adviser obtaining investment
advisory services from the Sub-Adviser for any such additional fund before
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seeking such services from any other investment adviser not affiliated
with the Adviser.
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 the
greater of (a) $40,000, or (b) 0.47% of the first $200 million of average net
assets of the Fund, 0.42% of the next $200 million of average net assets, and
0.40% of any excess over $400 million. 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 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 month
within 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.
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 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
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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 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 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 Rind, (c) the Sub-Adviser shall cease to be a
direct or indirect wholly-owned subsidiary of Xxxxx & XxXxxxxx Companies, Inc.
and (d) the President of the Sub-Adviser or 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
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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 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.
(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.
(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 Article 1(a) of this Agreement, shall constitute
cross negligence per se under sub-paragraph 8(a) just above.
9. Sub-Adviser agrees to indemnify the Adviser, the Variable Annuity and the
Depositor of the Variable Annuity 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 Adviser, the Variable Annuity or the Depositor of
the Variable Annuity may become subject under any statute, at common law or
otherwise, insofar as such 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, 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, Temporary Reg. Sec.
1.817-5T, September 12, 1986, 51 F.R. 32633), relating to the diversification
requirements for variable annuity, endowment, and life insurance contracts,
provided that the Sub-Adviser shall
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have been given prompt written notice concerning any matter for which
indemnification is otherwise afforded hereunder.
IN WITNESS WHEREOF, LINCOLN NATIONAL INVESTMENT MANAGEMENT COMPANY and THE
XXXXXX MANAGEMENT COMPANY, 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/ Xxxxxx X. Xxxxxxx
-------------------------------
Title: President
THE XXXXXX MANAGEMENT COMPANY, INC.
By: /s/ [illegible]
-------------------------------
Title: Senior Managing Director
Accepted and agreed to
as of the day and year
first above written:
LINCOLN NATIONAL XXXXXX MASTER FUND, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Title: President
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