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EXHIBIT 10.15(6)
LINCOLN INVESTMENT MANAGEMENT, INC.
INVESTMENT MANAGEMENT AGREEMENT
Client Name: American States Insurance Company
American Economy Insurance Company
American States Preferred Insurance Company
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(the "Account")
Effective Date: May 28, 1996
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The undersigned (the "Client") hereby confirms that it has retained
Lincoln Investment Management, Inc., an Illinois corporation ("LIM"), as
investment adviser for the Account, consisting of those assets identified on
Schedule A attached hereto as well as all other assets which become part of the
Account as a result of transactions therein or additions thereto, and further
that it has, if and to the extent provided herein, retained LIM to provide
certain additional services with respect to the Account, and LIM agrees to
serve on the following terms and conditions:
1. Appointment and Acceptance of LIM. LIM is appointed as investment
adviser for the Account and will provide certain administrative services with
respect to the Account, all as set forth in Section 2 hereof. LIM accepts such
appointment pursuant to the terms and conditions set forth in this Agreement.
2. Powers, Rights and Duties of the Manager.
(a) Investment advisory. LIM shall perform its responsibilities under
this Agreement in accordance with the investment objectives and policies of the
Account described in Section 3 hereof. Subject to such investment objectives
and policies, LIM shall have authority in its sole discretion and without prior
consultation with the Client and as attorney-in-fact with full power and
authority on behalf of the Client:
(i) to make all investment decisions for the Account, it being
understood that LIM shall have complete discretion as to the
nature, amount and timing of all transactions to be effected in the
Account;
(ii) to investigate, analyze, negotiate, purchase, enter into,
monitor, manage, and sell or otherwise dispose of investments of
all types referred to on Schedule B hereto and any additional types
of investments as may be authorized in accordance with Section 3
hereof;
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(iii) to negotiate, draft, legally document, execute,
acknowledge, deliver, and if applicable, file or record, or cause
to be filed or recorded, in any appropriate public office, all
types of contracts, documents, agreements and certificates relating
to investments for the Account, including, without limitation,
brokerage agreements, letters of commitment, guarantees, stock
purchase or subscription agreements, note agreements, participation
agreements, purchase and sale agreements, indemnity agreements,
partnership agreements, limited partnership agreements, joint
venture agreements, option or warrant agreements, swap agreements,
mortgages, correspondent agreements, trust deeds, trusts, financing
statements, assignments, security agreements, pledges,
reorganization agreements, modification agreements, escrow
agreements and instruments of every kind and nature whatsoever, and
to modify, cancel or terminate such contracts, documents,
agreements and certificates;
(iv) after reasonable inquiry or investigation, to make such
representations, warranties, covenants or certifications in the
name of and on behalf of the Client as it believes to be true; to
agree to any terms or conditions to control any investment or
investment transaction; to direct the purchase, sale or exercise of
any options, privileges or rights with respect to any investment;
to initiate, defend or influence the direction of any claim or
litigation arising from or with respect to any investment; to
effect any purchase, sale, exchange, conversion, compromise,
settlement or release with respect to any investment;
(v) to issue directly to brokers, dealers or issuers orders
for the purchase, sale, exchange or other acquisition or
disposition of investments for the Account or any interests therein
as it may deem appropriate;
(vi) to take any action, or render advice respecting the
voting of proxies solicited by or with respect to the issuers of
securities in which assets of the Account may be invested from time
to time; and
(vii) in furtherance of the foregoing, to do anything which
LIM shall deem requisite, appropriate or advisable in connection
therewith.
LIM, in its sole discretion and at its own expense, shall have authority
to engage the services of a subadviser or subadvisers in connection with the
management of the Account. LIM shall continue to be responsible for all
investment advisory services furnished to the Account by such subadviser or
subadvisers.
(b) Additional Services. In connection with the management of the
Account, LIM shall also provide the additional services listed on Schedule C
hereto.
3. Investment Objectives and Policies. The initial investment
objectives and policies of the Account shall be as set forth in Schedule B
hereto. The Client will notify LIM in writing
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of any modifications therein from time to time. LIM is not charged with notice
of any modifications in the Client's investment objectives or policies until
such modifications are received in writing by LIM. In addition, if LIM has
obligated itself or the Client to the purchase or sale of an investment for the
Client prior to the receipt of notice of such modification, LIM shall fulfill
such purchase or sale obligation on behalf of the Client.
4. Client's Responsibilities.
Client acknowledges that it (i) is the owner of all of the assets of the
Account; (ii) is responsible to assure that all investments made for the
Account meet the requirements and limitations of any applicable jurisdiction,
contract or instrument; and (iii) is responsible to assure that any limitations
or restrictions arising from applicable law or regulations which in Client's
judgment apply to Client's aggregate holdings of any particular investment or
type of investment are not exceeded.
The Client is required to notify LIM in writing of changes in the
restrictions, limitations or requirements governing the assets of, and
investments for, the Account and to modify the investment objectives and
policies of the Account as set forth in Schedule B hereto. The Client will
notify LIM in writing as to any investments for the Account that do not meet
the requirements or limitations of any applicable jurisdiction, contract or
instrument. LIM shall arrange to dispose of those assets as agreed upon with
the Client, and such dispositions shall be made in the Client's Account and at
the Client's expense and risk.
The Client acknowledges that it shall be solely responsible for (and LIM
shall have no responsibility for): (i) maintenance of proper accounting records
for the Account; or (ii) with the exception of the SVO filings to be made by
LIM pursuant to Schedule C hereto, all filings required to be made respecting
the Account or assets of the Account with federal or state regulatory
authorities (including, without limitation, verifying and ensuring the accuracy
of all data contained within such filings). Without diminishing or modifying
LIM's obligations under Section 10 hereof, the Client acknowledges that it has
responsibility for the valuation of the assets of the Account for purposes of
the Client's own financial and performance reporting, whether required by law
or regulation or otherwise.
5. Documentation to be Furnished by Client. The Client agrees to furnish
LIM with such authorizations and documentation as LIM may from time to time
require to enable it to carry out its obligations under this Agreement,
including powers of attorney. Without limiting the foregoing, the Client will
direct the Custodian (as defined below) to provide LIM with cash information as
it relates to the Account assets.
6. Custodian. The Client shall be responsible for the appointment and
payment of a custodian (the "Custodian"), acceptable to LIM, who will take
custody of the Account assets and be responsible for the collection of
interest, dividends, distributions and other income (whether in cash or
securities) attributable to the assets in the Account. Although LIM may place
orders directly with brokers for execution of transactions authorized by this
Agreement with respect to
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the Account, all such transactions shall be carried out through the Custodian.
The Client will direct Custodian to accept settlement instructions issued by
LIM for the Account, and LIM shall not be liable to the Client for (i) any
failure of the Custodian to perform its responsibilities to the Account,
including, without limitation, any losses that arise from the failure of the
Custodian to notify LIM of any notices affecting called securities, deadline
expirations, dates and capital reorganization events affecting the securities
in the Account or (ii) any liability or loss with respect to the transmittal or
safekeeping of cash, securities or other assets.
7. Account Modifications. The Client may make additions to the Account
with reasonable advance notice to LIM. The Client may make withdrawals from
the Account subject to industry trade settlement time requirements and any
other market restrictions; provided, however, that LIM may establish additional
restrictions for the withdrawal of certain assets due to the less liquid nature
of such assets.
8. Brokerage.
(a) LIM is hereby authorized on behalf of the Client to place orders
for the Account with brokers and dealers selected exclusively by LIM. LIM will
not be responsible for any act or omission by brokers or dealers selected by
LIM.
(b) In selecting brokers and dealers to execute transactions and in
negotiating commission rates with respect thereto, LIM shall take into account
the financial stability and reputation of brokerage firms and the brokerage and
research services provided by such brokers. The Client may be deemed to be
paying for services (sometimes referred to as "soft dollar" payments) provided
by the broker which are included in the commission rate (as permitted by
Section 28(e) of the Securities Exchange Act of 1934), provided that such
commission rate is reasonable in relation to the value of the brokerage and
research services provided when viewed in terms of either that particular
transaction or LIM's overall responsibilities with respect to the accounts as
to which it exercises investment discretion. The investment advisory fees
described in Section 11 below are based upon the foregoing.
(c) LIM may combine orders for the Account with those on behalf of
other clients. The purchase price paid or the proceeds received in any
combined order will be allocated equitably among those accounts with assets
included in such combined order.
(d) As evidence of LIM's authority to act as investment adviser for
the Account, Client shall, on or before the execution date of this Agreement,
execute a letter in form substantially similar to Exhibit 1 hereto and Client
authorizes LIM to provide copies of such letter to any broker or dealer it may
select pursuant to subparagraph (a) of this Section 8.
9. Account Information. LIM shall deliver or cause to be delivered in
written form at the times set forth in Schedule D the Account information and
reports set forth in Schedule D.
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10. Valuation. In determining the value of the Account or any of its
assets, any security listed on one or more national securities exchanges shall
be valued at the last quoted sale price on the valuation date on the principal
exchange or market on which the security is traded. Any other security or asset
shall be valued as determined in good faith by LIM to reflect its fair value.
11. Compensation.
(a) The compensation of LIM for its investment advisory services shall
be calculated and paid in accordance with the attached Schedule E on the basis
of asset values determined as provided in this Agreement.
(b) The Client shall pay all expenses related to the Account and
investments of the Account including, without limitation, custodian fees,
brokerage commissions and such other expenses as may be related to the
execution of orders to purchase or sell assets of the Account.
12. Service to Other Clients. It is understood that LIM also provides
investment management services to other clients, and may give advice and take
action with respect to the assets of such clients which may differ from the
advice given, or the timing or nature of action taken, with respect to the
Account. Nothing herein shall restrict LIM, its principals, affiliates or
employees from purchasing or selling any investment for its or their own
accounts. Furthermore, LIM shall have no obligation to purchase or sell for
the Account, or to recommend for purchase or sale for the Account, any
investment which LIM, its principals, affiliates or employees may purchase or
sell for themselves or for any other client.
13. Representations by the Client. The Client represents and warrants
that (i) the retention of LIM pursuant to this Agreement is authorized by any
governing documents relating to Client and the Account; (ii) this Agreement has
been duly authorized by appropriate action and when so executed and delivered
will be binding upon the Client in accordance with its terms; (iii) neither the
execution and delivery of the Agreement by Client nor the performance of its
obligations hereunder conflict with or violate any provision of law, rule or
regulation, or any instrument to which it is a party or to which any of its
property is subject; (iv) the Client has obtained all consents, approvals and
waivers of regulatory authorities which may be required in order for Client to
execute this Agreement and perform its responsibilities hereunder; and (v) the
Client will deliver to LIM such evidence of its authority as LIM may reasonably
require, whether by way of a certified corporate resolution or otherwise.
14. Representations by LIM. LIM represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended.
15. Utilization of Attorneys; Scope of Engagement. Client acknowledges
that from time to time during the term of this Agreement, LIM shall obtain
advice from or otherwise be represented by attorneys, including attorneys who
may be employees of LIM and/or its affiliates ("LIM Counsel"), with respect to
matters arising under or in connection with this Agreement,
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including, without limitation, the matters described in Section 2 hereof.
Client further acknowledges and agrees that: (i) LIM Counsel (whether or not
they are employees of LIM and/or its affiliates) shall at all times only
represent LIM and/or its affiliates; (ii) that LIM shall have no obligation to
engage attorneys to represent Client; and (iii) that Client will retain or
engage counsel to represent it as and when it deems such engagement to be
appropriate. Client acknowledges and agrees that it shall not: (i) be owed any
professional duty or obligation by LIM Counsel; (ii) be deemed to receive any
advice or other legal representation from LIM Counsel; or (iii) be entitled to
rely upon, or actually rely upon, any statements of LIM Counsel.
16. Tax Advice; Scope of Engagement. LIM will not render tax advice in
connection with the performance of its services hereunder. Client acknowledges
that (i) it will not rely on LIM for tax advice, and (ii) it will seek tax
advice, as it deems appropriate, from other qualified experts.
17. Liability. Unless otherwise provided by law, the Client agrees that
neither LIM nor any LIM director, officer, employee or LIM Counsel shall be
liable for any loss due to an error in judgment or for any act or omission to
act by LIM, LIM Counsel, or any broker, dealer or Custodian, except for losses
resulting from LIM's or such director's, officer's, employee's or LIM Counsel's
gross negligence or willful misconduct. The Client shall indemnify and hold
harmless LIM, its directors, officers, employees and LIM Counsel against any
loss, expense or claim arising in connection with the Account or this Agreement
from any act other than their gross negligence or willful misconduct, except
where such indemnification is prohibited by law.
18. Term. This Agreement shall remain in effect for three years from the
Effective Date (the "Initial Term"). Following the Initial Term, this
Agreement will be automatically renewed for additional one year terms, unless
sooner terminated as herein provided.
19. Dispute Resolution. In the event of a dispute arising out of or
relating to this Agreement, or the breach thereof, the parties shall attempt in
good faith to resolve the dispute in the manner set forth in Schedule F.
Nothing in this Section 19 or in Schedule F shall be construed to
constitute a waiver of any right provided by the Investment Advisers Act of
1940.
20. Termination and Assignment.
(a) This Agreement may be terminated by the Client during the Initial
Term if LIM or any of its directors, officers or employees or LIM Counsel
engage in any act or omission which constitutes gross negligence or willful
misconduct, upon written notice to LIM. This Agreement may be terminated by
either party following the Initial Term at any time upon sixty (60) days' prior
written notice to the other party. Upon any termination of the Agreement by
either party, (i) any transaction for the Account initiated prior to the
receipt of written notice of termination shall be consummated, and (ii) LIM
shall not initiate any transactions for the
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Account subsequent to the receipt of written notice of termination except at
Client's written request.
(b) No assignment (as defined in the Investment Advisers Act of 1940) of
this Agreement by LIM shall be effective without the written consent of the
Client.
(c) The provisions of Section 17 of this Agreement shall survive
notwithstanding any termination of this Agreement.
21. Notices. Unless otherwise specified herein, all notices, reports or
other communications provided for herein shall be in writing and delivered by
first-class mail, registered or certified mail, overnight courier service or
facsimile to LIM or to the Client at the addresses appearing below. All
facsimiles which are sent must be telephonically confirmed. The effective date
of any such notice shall be the date such notice is received. Each party to
this Agreement may by written notice to the other party designate a different
address.
22. Confidentiality. LIM and the Client acknowledge and agree that all
information furnished by LIM to the Client in connection with the Account under
this Agreement shall be treated as confidential and shall not be disclosed to
third parties without the prior written consent of LIM, except as required by
applicable law or as required to perform this Agreement.
If the Client participates in a transaction and as a result of such
participation LIM receives confidential information about parties related to
the transaction, LIM shall retain such confidential information at its site.
If the Client is required by regulatory authorities or otherwise by law to
provide such confidential information, LIM, at the written direction of the
Client, shall provide the confidential information directly to the requesting
entity on the Client's behalf.
23. Inspection and Audit of Records. Upon reasonable notice by the
Client, LIM shall make its records relating to the Account available for
inspection and audit by the Client or its representatives and by any state
insurance regulators at all reasonable times during normal business hours.
24. Disclosure Statement. The Client acknowledges receipt of Part II of
LIM's Form ADV filed with the Securities and Exchange Commission at least
forty-eight (48) hours prior to entering into this Agreement.
25. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana without regard to the
principles of conflicts of law contained therein.
26. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof, and may be amended only
by written document signed by the parties.
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27. Modification in Conformity with Law. If any provision hereof is, or
at any time should become, inconsistent with any present or future law, rule or
regulation of any exchange or any governmental or regulatory body with
jurisdiction, said provision shall be deemed modified
to conform to such law, rule or regulation, but in all other respects this
Agreement shall continue and remain in full force and effect.
American States Insurance Company
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Client's Name
Date: By:
---------------------- ----------------------------------
Name:
Title:
Mailing Address:
- ---------------------------
Telephone No.
- ---------------------------
Fax No.
- ---------------------------
Taxpayer I.D. No.
American Economy Insurance Company
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Client's Name
Date: By:
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Name:
Title:
Mailing Address:
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Telephone No.
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Fax No.
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Taxpayer I.D. No.
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American States Preferred Insurance Company
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Client's Name
Date: By:
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Name:
Title:
Mailing Address:
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Telephone No.
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Fax No.
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Taxpayer I.D. No.
Accepted and Agreed to:
LINCOLN INVESTMENT
MANAGEMENT, INC.
By: Date:
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Name:
Title:
By: Date:
------------------------ ---------------------------------
Name:
Title:
200 East Berry Street
Fort Wayne, IN 46802
Attn: Marketing and Client Services
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Schedule A
Listing of Client's Assets
To be provided.
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Schedule B
STATEMENT OF INVESTMENT POLICY
AMERICAN STATES INSURANCE COMPANY
AMERICAN ECONOMY INSURANCE COMPANY
AMERICAN STATES PREFERRED INSURANCE COMPANY
Investment Objective:
The primary objective is to maximize total return through a combination of
relatively high current income and capital appreciation.
Product Description:
Broad range of commercial and personal lines property casualty policies.
Estimated product duration is short. However, lack of cash disintermediation
risk, strong cash flows and growth pattern, competitive influences, etc.,
require a portfolio duration policy that is not strictly limited to
asset/liability matching considerations.
The principal portfolio management considerations after the primary Investment
Objective are: maintenance of A+ rating from A.M. Best & Co.; competitive
investment income levels; minimizing taxability of investment income; holding
above average levels of quality and liquidity; asset diversification by
investment class; protection against inflation.
Performance Measurement:
Portfolio performance is judged against a blend of benchmarks that reflects
asset composition.
Asset Categories:
Maximum % of Assets
Uncommitted Cash in Money Market Instruments: 20%
Public Bonds 100%
Less Liquid Investments:
Private Placements 15%
Mortgages 15%
TOTAL LESS LIQUID INVESTMENTS 15%
Equity-Related Securities: (&/or) Max. % Surplus
Convertible Bonds & Bonds w/warrants 10%
Convertible Preferreds 5%
Common Stocks 15%
Common Stocks and Perpetual Preferreds 25% 50%
TOTAL EQUITY-RELATED SECURITIES 25%
Real Estate 0%
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AMERICAN STATES INDIANA PROPERTY CASUALTY COMPANIES
Tax-Advantaged Securities:
Preferred Stocks 10%
Tax Exempts 85%
ESOPs 5%
TOTAL TAX-ADVANTAGED SECURITIES 85%
Derivative Securities:
New programs not permitted.
Unhedged Non-Dollar Investments 3%
Quality Restrictions:
Minimum % Assets in Government Securities 3%
Maximum % Assets Baa 20%
Maximum % Assets Below Investment Grade 5%
Required Average Portfolio Quality: A or better
Diversification - Maximum % of Assets:
20 % per Industry (except utilities) 5 % Canadian Governments
- ----- -----
1 % per Non-Government Issuer 5 % Other Foreign (dollar-denominated)
- ----- (except for Clinton Holdings) -----
5 % Supranationals
20 % MBS/ABS/CMBS -----
- -----
Maturity or Duration Profile:
Target Duration Range: 4.0-6.5 years
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Maturity Distribution: Min. % of Assets Max. % of Assets
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Money Market & Bonds <1 yr. 5% 50%
Intermediates 5% 95%
Long (>10 years) 0% 90%
Date Prepared: February 22, 1996
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INVESTMENT GUIDELINES
OF
AMERICAN STATES INSURANCE COMPANY
AMERICAN ECONOMY INSURANCE COMPANY
AMERICAN STATES PREFERRED INSURANCE COMPANY
The following guidelines (the "Guidelines") are to be read in conjunction
with the "Statement of Investment Policy" (individually, the "Policies")
adopted by each of the captioned insurance companies (the "Insurers") and are
intended to assure compliance with the investment limitations set forth in the
Indiana Insurance Code. Lincoln Investment Management, Inc. ("LIM"), which has
been appointed investment manager for each of the Insurers, may not invest the
assets of any Insurer in any investment unless that investment is permitted
under both the Policies and the Guidelines applicable to that insurer.
1. In cash or cash equivalents. However, not more than ten percent (10%)
of any Indiana Insurer's admitted assets may be invested in any single money
market mutual fund.
2. In obligations issued, guaranteed, or insured as to principal and
interest by an instrumentality or subdivision of a state, territory, or
possession of the United States, the District of Columbia, Canada, or any
province of Canada, providing such obligations are authorized by law and are
either:
(A) direct and general obligations of the issuing, guaranteeing or
insuring governmental unit;
(B) payable from designated revenues pledged to the payment of the
principal and interest of the obligations; or
(C) improvement bonds or other obligations constituting a first lien,
except for tax liens, against all of the real estate within the
improvement district or on that part of such real estate not discharged
from such lien through payment of the assessment. The area to which
the improvement bonds or other obligations under this clause relate
must be situated within the limits of a town or city and at least fifty
percent (50%) of the properties within that area must be improved with
business buildings or residences.
3. In obligations secured by mortgages or deeds of trust or
unencumbered real estate or perpetual leases thereon, in any state in
the United States, the District of Columbia, Canada, or any province of
Canada, not exceeding eighty percent (80%) of the fair value of the
security determined in a manner satisfactory to the Indiana Department
of Insurance.
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4. In any mutual fund that:
(A) has been registered with the Securities and Exchange Commission for
a period of at lease five (5) years immediately preceding the date of
purchase;
(B) has net assets of at least twenty-five million dollars
($25,000,000) on the date of purchase; and
(C) invests substantially all of its assets in investments permitted
under this subsection;
provided however, that the amount invested in any single such mutual fund shall
not exceed ten percent (10%) of admitted assets of any Indiana Insurer.
5. In obligations payable in United States dollars and issued,
guaranteed, assumed, insured, or accepted by a foreign government or by a
solvent business entity existing under the laws of a foreign government, if the
obligations of the foreign government or business entity meet at least one (1)
of the following criteria:
(A) The obligations carry a rating of at least A3 conferred by Moody's
Investor Services, Inc.
(B) The obligations carry a rating of at least A- conferred by Standard
and Poor's Corporation.
(C) The earnings available for fixed charges of the business entity for
a period of five (5) fiscal years preceding the date of purchase have
averaged at least three (3) times the average fixed charges of the
business entity applicable to the period, and if during either of the
last two (2) years of the period, the earnings available for fixed
charges were at least three (3) times the fixed charges of the business
entity for the year.
Foreign investments authorized by this subdivision shall not exceed twenty
percent (20%) of the admitted assets of any Indiana Insurer. Canada is not a
foreign government for purposes of this subdivision.
6. In the obligations of any solvent business entity existing under the
laws of the United States, any state of the United States, the District of
Columbia, Canada, or any province of Canada, provided that interest on the
obligations is not in default.
7. In the preferred or guaranteed shares of any solvent business entity,
so long as the business entity is not and has not been for the preceding five
(5) years in default in the payment of interest due and payable on its
outstanding debt or in arrears in the payment of dividends on any issue of its
outstanding preferred or guaranteed stock.
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8. In the shares, other than those specified in subdivision (7), of any
solvent business entity existing under the laws of any state of the United
States, the District of Columbia, Canada, or any province of Canada.
9. In loans upon the pledge of any mortgage, stocks, bonds, or other
evidences of indebtedness, if the current value of the mortgage, stock, bond,
or other evidences of indebtedness is at least twenty-five (25%) more than the
amount loaned on it.
10. In securities lending, repurchase and reverse repurchase
transactions with business entities, subject to the following requirements:
(A) The board of directors of the Indiana Insurer for the account
of which such investment is made shall have adopted a written plan
that specifies guidelines and objectives to be followed.
(B) The Indiana Insurer for the account of which such investment
is made shall enter into a written agreement for all transactions
authorized in this subdivision. The written agreement shall
required the termination of each transaction not more than one (1)
year from its inception or upon the earlier demand of the company.
(C) For as long as the transaction remains outstanding, the
Indiana Insurer for the account of which the investment is made, or
its agent or custodian, shall maintain, as to acceptable collateral
received in a transaction under this section, either physically or
through book entry systems of the Federal Reserve, Depository Trust
Company, Participants Trust Company, or other securities
depositories approved by the Indiana Commissioner of Insurance:
(i) possession of the acceptable collateral;
(ii) a perfected security interest in the acceptable
collateral; or
(iii) in the case of a jurisdiction outside the United
States, title to, or rights of a secured creditor to, the
acceptable collateral.
(D) For the purposes of calculations made to determine compliance
with this subsection, no effect may be given to the company's future
obligation to resell securities in the case of a repurchase
transaction, or to repurchase securities in the case of a reverse
repurchase transaction.
(E) In a securities lending transaction, the company shall receive
and maintain acceptable collateral having a market value as of the
transaction date at least equal to one hundred two percent (102%) of
the market value of the securities loaned by the company in the
transaction as of that date.
(F) In a reverse repurchase transaction, the company shall received
acceptable collaterial
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having a market value as of the transaction date at least equal to
ninety-five percent (95%) of the market value of the
securities transferred by the company in the transaction as of that
date.
(G) In a repurchase transaction, the company shall receive as
acceptable collateral transferred securities having a market value
equal to at least one hundred two percent (102%) of the purchase price
paid by the company for the securities.
11. In mortgage backed securities, included collateralized mortgage
obligation, mortgage pass through securities, mortgage backed bonds, and real
estate mortgage investment conduits, adequately secured by a pool of mortgages,
which mortgages are fully guaranteed or insured by the government of the United
States or any agency of the United States, including the Federal National
Mortgage Association of the Federal Home Loan Mortgage Corporation.
12. In mortgage backed securities, including collateralized mortgage
obligations, and investment conduits, adequately secured by a pool of
mortgages, if the obligations carry a rating of at least:
(A) A3 conferred by Moody's Investor Services, Inc.; or
(B) A- conferred by Standard and Poor's Corporation. Not more
than five percent (5%) of admitted assets may be invested in any one
(1) obligation or pool of obligations described in this subdivision.
The aggregate amount of all investments under this subdivision
shall not exceed ten percent (10%) of admitted assets.
13. In any other investment. The total of all investments under this
subdivision for any Indiana Insurer, except for investments in subsidiary
companies, may not exceed an aggregate amount of ten percent (10%) of the
Indiana Insurer's admitted assets.
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Schedule C
List of Additional Services
Accounting services to include the following:
- - Process cash and trade activity within Prism
- - Monthly projections of prepayment speeds on MBS/ABS (within 10 days of
month end)
- - Quarterly GAAP reserve recommendation for permanent declines in market
value on fixed income securities and equity securities
- - Complete and file applications for registration of securities with
Securities Valuation Office of the NAIC ("SVO") (as required by SVO filing
deadlines)
- - Quarterly Schedule D, Part 3, Part 4 and Part 1B information*
- - Monthly Interest Maintenance Reserve (IMR) amortization report*
- - Quarterly Asset Valuation Reserve (AVR) report*
- - Monthly Schedule Ds, all parts*
* The data contained in these reports is not reviewed by LIM, and the
Client is responsible for the accuracy of the final reports.
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Schedule D
Account Information
Monthly:
within 10 business days:
asset inventory listing
within 20 business days:
portfolio performance report
Quarterly:
within 25 business days:
management reports
summary of derivatives activity
performance summaries
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Schedule E
Fees for Investment Advisory Services
Based upon the objectives and policies of the Account as set forth in
Schedule B and the additional services set forth in Schedule C, the annualized
fee shall be thirteen (13) basis points.* Fees are calculated each quarter by
applying the above rate to the aggregate value of assets held in the Account as
of the last business day of each calendar quarter. The value of assets in the
Account is to be determined in accordance with Section 10 of the Agreement.
LIM's minimum total quarterly fee is $12,500. The Client will be charged
additional amounts for the management of its equity securities based upon the
fees charged LIM by the applicable subadvisers.
LIM will bill the Client for its quarterly fee and the fees of any
subadvisers, and such fees will be due immediately upon receipt of each
invoice. Notwithstanding the foregoing, for any calendar quarter during which
this Agreement is not in effect for the full calendar quarter, the fees for
investment advisory services shall be prorated for the period during which the
Agreement is in effect.
For each portfolio created subsequent to the Effective Date, there is a
one time initialization fee of $10,000 per portfolio.
If at any time while this Agreement shall be in effect the Client desires
services or account information from the Manager other than those specifically
delineated in this Agreement and all Schedules hereto, and the Manager agrees
to provide such services or account information, a fee for such services or
account information shall be determined through good faith negotiations. In
addition, LIM reserves the right to increase its fees if the Client modifies
the objectives and policies of the Account as set forth in Schedule B or
requests additional services to be set forth in Schedule C. LIM also reserves
the right to charge the Client such additional amounts as determined from time
to time by LIM if any of the following occur: (i) LIM is required to spend
additional time to process the Client's transactions due to the Client's choice
of Custodian; or (ii) if the Client desires to have on-line access to LIM's
computer systems and executes a separate agreement with LIM relating to such
access. Any increase in fees or additional amounts described in this paragraph
shall be effective upon written notice to the Client by LIM.
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* After the Initial Term, fees may be amended by LIM upon 90 days' prior
written notice to the Client.
20
Schedule F
Alternative Dispute Resolution
NEGOTIATION BETWEEN EXECUTIVES. The parties shall attempt in good faith
to resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy.
Any party may give the other party written notice of any dispute not resolved
in the normal course of business. Within 20 days after delivery of said
notice, executives of both parties 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 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of the
controversy or claims as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney, the
other negotiator shall be given at least three working days' notice of such
intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
MEDIATION. If the dispute has not been resolved by negotiation as
provided herein, the parties shall endeavor to settle the dispute by mediation
under the then current Center for Public Resources ("CPR") Model Procedures for
Mediation of Business Disputes. The neutral third party will be selected from
the CPR Panel of Neutrals. If the parties encounter difficulty in agreeing on
a neutral, they will seek the assistance of CPR in the selection process.
ARBITRATION UNDER THE CPR RULES. Any dispute arising out of or relating
to this Agreement or the breach, termination or validity thereof, which has not
been resolved by Mediation as provided above within 60 days of the initiation
of such procedure (unless the parties mutually agree to extend such timeframe),
shall be finally settled by arbitration conducted expeditiously in accordance
with the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes by three independent and impartial arbitrators, of whom each
party shall appoint one, provided, however, that if one party has requested the
other to participate in a non-binding procedure and the other has failed to
participate, the requesting party may initiate arbitration before expiration of
the above period. Any arbitrator not appointed by a party shall be selected
from the CPR Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The arbitrators are not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any arbitration
damages in excess of compensatory damages.
21
Exhibit 1
ATTACHMENT TO INVESTMENT MANAGEMENT AGREEMENT
Lincoln Investment Management, Inc.
200 E. Berry Street
Fort Wayne, Indiana 46802
Re:
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(Name of Account)
Ladies and Gentlemen:
This letter confirms the appointment of Lincoln Investment Management,
Inc. ("Manager") as investment adviser with authority as attorney-in-fact on
behalf of the Account
(a) to purchase any and all securities and other property and investments for
the Account at any time or from time to time; (b) to sell any and all
securities and other property and investments held in the Account at any time
or from time to time; (c) to place orders for the execution of such
transactions with or through such brokers and dealers as the Manager may
select; and (d) to execute any and all documents which may be deemed necessary
or desirable to effectuate such transactions.
It is further understood that the Manager may deliver to any broker or
dealer executing transactions on behalf of the Account a copy of this document
as evidence of the authority of the Manager to act for and on behalf of the
Account. In the event this authority is terminated, any party to whom a copy
of this document has been delivered as evidence of the Manager's authority will
be held harmless from any loss or liability incurred as a result of any action
taken in reliance thereon after such termination but before notice of such
termination has been received by such party.
Very truly yours,
Date:
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(Client)
By:
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Its:
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