Exhibit 5
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 Fidelity Management Trust Company, a Massachusetts 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
Equity-Income 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 accordance with the provisions of the organizational documents and
By-laws of the Fund and the stated investment objective, policies and
restrictions of the Fund as set forth in the Fund's prospectus.
Adviser will provide the Sub-Adviser with copies of the organizational
documents of the Fund and with the Fund's prospectus, and any
amendments to those items as may occur from time to time. Sub-Adviser
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 may from time to time determine and communicate in writing to
the Sub-Adviser. 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 of 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
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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: .75 of
l% of the average daily net assets of the Fund. 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 ten (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 less 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
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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 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 meet the definition of a "bank" 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 a bank 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.
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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 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.
Sub-Adviser, its directors, officers or employees shall not be liable to
the Lincoln Entities defined in Section 9 for any loss suffered solely as a
consequence of any action or inaction of any custodian of the Fund in failing to
observe the instructions of the Sub-adviser.
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) and 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:
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(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 2, 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 he mandated by law or required pursuant to the relevant
Prospectuses and Registration Statements for the Fund and for the
Separate Account and any other separate accounts it may serve.
10. USE OF SUB-ADVISER'S NAME.
Adviser will not use Sub-Adviser's name (nor that of any affiliate) in its
marketing or sales literature, without prior review and approval by Sub-Adviser,
which approval will not be unreasonably withheld or delayed.
11. RIGHT OF AUDIT.
The Sub-Adviser shall permit employees or legal representatives of the
Lincoln Entities (including independent auditors), or any of them, at the
Lincoln Entities' reasonable discretion, to audit the books and records
(including, but not by way of limitation, electronic data files, and E-mail,
whether on-line or 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. Sub-
Adviser agrees to provide to the Lincoln Entities, without charge, reasonable
access to its facilities and personnel 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 Section.
12. 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
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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 that
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 third party, they will seek the assistance of
CPR in the selection process.
(c) Extension of Deadlines. Any or all of the deadlines set forth in this
Section 12 may be extended by mutual agreement of the disputing
parties.
(d) Confidentiality. All negotiations pursuant to this Section 12 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 12 shall be construed to
constitute a waiver of any right provided by the Investment Advisors
Act of 1940 to any party to this agreement.
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
FIDELITY MANAGEMENT TRUST COMPANY 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/ ▇▇▇ ▇. ▇▇▇▇▇▇
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Printed Name: ▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President
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FIDELITY MANAGEMENT TRUST COMPANY
By: /s/ ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, ▇▇.
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Printed Name: ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, ▇▇.
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Title: Sr. Vice President
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Accepted and agreed to
as of the day and year
first above written:
LINCOLN NATIONAL EQUITY-INCOME FUND, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: Vice President
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