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EXHIBIT 10.15(3)
LINCOLN INVESTMENT MANAGEMENT, INC.
INVESTMENT MANAGEMENT AGREEMENT
Client Name: American States Financial Corporation
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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;
(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
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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 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
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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 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
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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.
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.
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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, 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
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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 Account subsequent to the receipt
of written notice of termination except at Client's written request.
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(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.
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
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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 Financial Corporation
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Client's Name
Date: May 20, 1996 By: Jerome T. Gallogly
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Name: Jerome T. Gallogly
Title: Executive Vice President
Mailing Address:
(317) 262-6785
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Telephone No.
(317) 262-6616
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Fax No.
35-1976549
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Taxpayer I.D. No.
Accepted and Agreed to:
LINCOLN INVESTMENT
MANAGEMENT, INC.
By: Ann L. Warner Date:
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Name:
Title:
By: Date:
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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 FINANCIAL CORPORATION
Investment Objective:
The primary objective is to maximize current income consistent with the
preservation of capital and liquidity. The account pursues its investment
objective by investing primarily in a portfolio of short-term money market
instruments maturing within one year from date of purchase.
Product Description:
American States Financial Corporation is a financial services firm that is
headquartered in Indianapolis, Indiana. Through its subsidiaries, the company
markets property casualty insurance, annuities and various types of life
insurance.
Asset Categories:
Maximum % of Assets
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Uncommitted Cash in Money
Market Instruments: 100%
Public Bonds 100%
Less Liquid Investments:
Private Placements 0%
Mortgages 0%
TOTAL LESS LIQUID INVESTMENTS 0%
Equity-Related Securities: (&/or) Max. %
Surplus
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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%
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%
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AMERICAN STATES FINANCIAL CORPORATION
Quality Restrictions:
Minimum % Assets in Government Securities 0%
Maximum % Assets Baa 20%
Maximum % Assets Below Investment Grade 0%
Minimum Average Portfolio Quality: A or better for bonds
A2/P2 for money market instruments
Diversification - Maximum % of Assets:
20 % per Industry (except utilities) 5 % Canadian Governments
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5 % per Non-Government Issuer 5 % Other Foreign (dollar-denominated)
- ----- (except Clinton Holdings) -----
5 % Supranationals
20 % MBS/ABS/CMBS -----
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Maturity or Duration Profile:
Target Duration Range: 0.0-6.5 years
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Maturity Distribution: Min. % of Assets Max. % of Assets
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Money Market & Bonds <1 yr. 5% 100%
Intermediates 0% 95%
Long (>10 years) 0% 90%
Date Prepared: February 26, 1996
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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)
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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.
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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.
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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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