FORM OF
CUSTODY AGREEMENT
by and between
LINCOLN NATIONAL ____ FUND, INC.
and
MELLON BANK, N.A.
Section Table of Contents Page
1. ESTABLISHMENT OF ACCOUNT................................................
2. RELEASE OF PROPERTY.....................................................
3. AUTHORIZED PARTIES......................................................
4. AUTHORIZED INSTRUCTIONS.................................................
5. DIRECTED POWERS OF CUSTODIAN............................................
6. DISCRETIONARY POWERS OF CUSTODIAN.......................................
7. DUTIES OF CUSTODIAN.....................................................
8. DEPOSIT OF CLIENT ASSETS IN SECURITY SYSTEM ............................
9. CONTRACTUAL INCOME AND SETTLEMENT; MARKET PRACTICE
SETTLEMENTS.............................................................
10. TAX LAW.................................................................
11. NON-ACCOUNT ASSETS......................................................
12. REPORTING AND RECORDKEEPING.............................................
13. STANDARD OF CARE........................................................
14. FORCE MAJEURE...........................................................
15. COMPENSATION AND EXPENSES...............................................
16. INDEMNIFICATION.........................................................
17. AMENDMENT OR TERMINATION................................................
18. GOVERNING LAW AND LEGAL PROCEEDINGS.....................................
19. PRIOR AGREEMENTS........................................................
20. REPRESENTATIONS.........................................................
21. NECESSARY PARTIES.......................................................
22. EXECUTION IN COUNTERPARTS...............................................
23. SUCCESSORS AND ASSIGNS..................................................
24. SHAREHOLDER COMMUNICATIONS..............................................
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION.................................
SCHEDULE 2...................................................................
SCHEDULE 6.B.................................................................
SCHEDULE 15..................................................................
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is effective as of ________________,
2001, by and between LINCOLN NATIONAL ____ FUND, INC., a corporation organized
and existing under the laws of Maryland ("Client") and MELLON BANK, N.A., a
national banking association with its principal place of business at Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, XX 00000 ("Custodian")(each, a "Party" and collectively, the
"Parties").
WITNESSETH:
WHEREAS, the Client and the Custodian desire to establish a custody account
to provide for the safekeeping and recordkeeping of certain property of the
Client;
NOW, THEREFORE, the Client and the Custodian, each intending to be legally
bound, agree as follows:
1. Establishment of Account. The Client hereby appoints MELLON BANK, N.A. as
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custodian of its property, which the Client may deposit to the Custodian's care
("Account"). The Custodian hereby accepts such appointment as custodian and
agrees to perform the duties thereof as hereinafter set forth. The term
"property" as used herein shall include, without limitation, securities such as
stocks, shares, and other equity interests of every type, bonds, debentures,
notes, mortgages or other obligations for the payment of money, coin and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing any
other rights or interests therein, and cash in any currency. All property shall
be held in accordance with Section 7 hereof. ["Property" as used herein shall
not include any direct interest in real property, leaseholds or mineral
interests.]
2. Release of Property. The Custodian shall release and deliver property out
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of the Account only pursuant to Authorized Instructions, as defined below, and
only for the purposes listed in Schedule 2 hereto. In making payments to the
Client's service providers pursuant to Authorized Instructions, the Client
acknowledges that the Custodian is acting as a paying agent, and not as the
payer, for tax information reporting and withholding purposes.
3. Authorized Parties. The Client shall furnish the Custodian with a written
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list of the names and signatures of all persons authorized to direct the
Custodian on behalf of the Client under the terms of this Agreement. In
addition, the Client may appoint and remove one or more investment managers
(each, an "Investment Manager") for such portion of the Account as the Client
shall designate to the Custodian in writing. Client shall furnish the Custodian
with a written list of the names and signatures of the person or persons who are
authorized to represent the Investment Manager in dealings with the Custodian.
The Custodian shall be entitled to deal with any person or entity so identified
by the Client (each an "Authorized Party" and collectively, the "Authorized
Parties") until notified otherwise in writing. The Custodian shall be under no
duty to question any Authorized Instruction (defined below) of an Authorized
Party with respect to the portion of the Account over which such Authorized
Party has authority unless
the Custodian is aware of or, in the exercise of reasonable care, should be
aware of facts or circumstances that would cause a person of average
intelligence, acting reasonably, to question such Authorized Instruction or part
thereof, to review any property held in the Account, to make any suggestions
with respect to the investment and reinvestment of the assets in the Account, or
to evaluate or question the performance of any Authorized Party. The Custodian
shall not be responsible or liable for any diminution of value of any securities
or other property held by the Custodian or any sub-custodian employed by it in
accordance with this Agreement, provided such diminution is not the direct or
indirect result of any act or omission of the Custodian or any such sub-
custodian or their respective agents.
4. Authorized Instructions. As used herein, the term "Authorized Instructions"
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means a writing directed to the Custodian and signed by an Authorized Party.
Each such writing shall set forth the specific transaction or type of
transaction involved and state the specific purpose for which action is
requested. Client may deliver Authorized Instructions by facsimile transmission,
electronic transmission subject to the Custodian's practices, which practices
shall be acceptable to Client, or any other method specifically agreed to in
writing by the Client and the Custodian. In addition, the Custodian may, in its
discretion, and subject to the procedures below, accept oral Authorized
Instructions ("Oral Instructions"). If the Custodian adheres to the security
procedures set out below, the Custodian shall be fully protected in acting in
accordance with all Authorized Instructions that it reasonably believes to have
been given by an Authorized Party or in failing to act in the absence thereof.
Notwithstanding anything herein to the contrary, Custodian shall comply
with the following security procedures.
a. Wire Transfer Orders: The Custodian shall accept wire transfer orders
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only if two Authorized Parties have signed the relevant Authorized Instructions.
In addition, Custodian shall, prior to executing a particular wire transfer
order, call back an Authorized Party, other than an Authorized Party who signed
such Authorized Instructions, to confirm such wire transfer orders. Wire
transfer orders to a single destination, which the Client, pursuant to
Authorized Instructions, has authorized Mellon in writing to accept as a
repetitive order, shall not be subject to the preceding call back procedure.
b. Oral Instructions: The Custodian, in its discretion, may accept Oral
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Instructions from any Authorized Party with respect to (i) Corporate Actions (as
defined under Section 7.i. below) and (ii) adjustments or corrections to
Authorized Instructions for purchase and sale transactions previously received
by the Custodian, in either case, for the Account. In the event the Custodian
accepts Oral Instructions from any Authorized Party, the Custodian shall call
back an Authorized Party, other than the Party issuing such Instructions to
confirm such Instructions prior to taking any action in accordance with any such
Oral Instructions.
c. Facsimile or E-Mail Instructions: The Custodian may accept Authorized
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Instructions by facsimile or e-mail instructions sent by an Authorized Person
provided that, prior to taking any action in accordance with such Instructions,
the Custodian shall call back an Authorized Party, other than the Party issuing
such Instructions, to confirm such Instructions.
5. Directed Powers of Custodian. The Custodian shall have and exercise the
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following powers and authority in the administration of the Account upon receipt
of Authorized Instructions:
a. Settle purchases and sales and engage in other transactions, including
free receipts and deliveries, subject to the terms of Section 9(c) hereof,
exchanges and other voluntary corporate actions, with respect to securities or
other property received by the Custodian;
[b. Lend the property of the Account in accordance with the terms and
conditions of a separate securities lending agreement approved in writing by the
Client; and]
c. Take any and all actions necessary to settle transactions in futures
and/or options contracts, short-selling programs, foreign exchange or foreign
exchange contracts, swaps and other derivative investments.
6. Discretionary Powers of Custodian. The Custodian shall have and exercise the
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following powers and authority in the administration of the Account:
a. on behalf of the Client from time to time, employ one or more domestic
sub-custodians, but only in accordance with and upon receipt of certified copy
of an approving resolution of the Board of the Client, and provided that the
appointment of any sub-custodian shall not relieve the Custodian of its
responsibilities or liabilities hereunder;
b. on behalf of the Client, appoint a foreign sub-custodian, but only in
accordance with the terms of Schedule 6.b. hereto, and provided that the
appointment of any sub-custodian shall not relieve the Custodian of its
responsibilities or liabilities hereunder;
c. at any time or times appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the Investment Company Act
of 1940, as amended, (the "1940 Act"), to act as a custodian, as its agent to
carry out such of the duties of the Custodian as the Custodian may from time to
time direct, provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder;
d. Commence or defend suits or legal proceedings and represent the
Account in all suits or legal proceedings in any court or before any other body
or tribunal as the Custodian shall deem necessary to protect the Account; and
e. Make, execute and deliver any and all documents, agreements or other
instruments in writing as in good faith necessary or desirable for the
accomplishment of any action requested by an Authorized Instruction.
The powers described in this Section 6 may also be exercised by the
Custodian with Authorized Instructions. Where the Custodian acts on Authorized
Instructions, the Custodian shall be fully protected as described in Section 4.
7. Duties of Custodian. The Custodian shall perform or cause its agents or
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sub-custodians to perform the following duties with respect to the Account:
a. Hold the property in safekeeping facilities of the Custodian or of other
custodian banks, or in a clearing agency that acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
(collectively referred to herein as the "Securities System") in the United
States or elsewhere. Upon the receipt of Authorized Instructions from the
Client, the Custodian shall establish and maintain one or more segregated
accounts for purposes of segregating securities or cash for the purpose or
purposes specified in the applicable Authorized Instruction.
Securities held by the Custodian (other than bearer securities) shall be
registered in the name of the Client or in the name of any nominee of the Client
or in the name of any nominee of the Custodian which nominee shall be assigned
exclusively to the Client, unless the Client has authorized in writing the
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appointment of a nominee to be used in common with other registered investment
companies having the same investment adviser as the Client, or in the nominee
name of any agent appointed pursuant to Section 6.c hereof or in the nominee
name of any sub-custodian appointed pursuant to Section 6.a hereof, in either of
which case, the nominee name shall be one used exclusively for the Client. All
securities accepted by the Custodian on behalf of the Client under the terms of
this Agreement shall be in "street name" or other good delivery form.
The Custodian shall have no responsibility for any property of the Client
held or received by the Client and not delivered to the Custodian or its agents
or sub-custodians.
b. In accordance with Schedule 6.b. hereto, maintain Foreign Assets (as
defined in Schedule 6.b), and cash incidental to transactions in such Assets, in
the custody of certain Eligible Foreign Custodians (as defined in Schedule 6.b.)
and Eligible Securities Depositories (as defined in Schedule 6.b.) acting as
foreign sub-custodians in conformity with the requirements of Rule 17f-5 and
Rule 17f-7 under the 1940 Act;
c. Collect all income payable to and all distributions due to the Account
and sign on the Account's behalf all declarations, affidavits, and ownership and
other certificates in connection with the receipt of income and other payments
with respect to securities held by the Custodian or in connection with transfers
of securities;
d. Subject to the timely receipt of notice from an issuer or Authorized
Party, collect all proceeds from securities, certificates of deposit or other
investments that may mature, be redeemed, be retired, be called or otherwise be
payable;
e. Submit or cause to be submitted to the Client or the Investment Manager,
as designated by the Client, information actually received by the Custodian
regarding ownership rights pertaining to property held in the Account;
f. [Attend to involuntary corporate actions;]
g. Exchange interim receipts or temporary securities for definitive
securities;
h. Render periodic statements for property held hereunder as described in
Section 12 hereof;
i. Give the Client written notice (which may be electronic) of Corporate
Actions (defined below) whenever the Custodian receives or obtains information
from any source (including, without limitation, through publications Custodian
routinely uses in its business) concerning the property held hereunder that
requires discretionary action by the beneficial owners of such property (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, coupon payments, redemptions, exchanges, tender offers, or
legal notices or other material intended to be transmitted to such holders
(collectively, "Corporate Actions"). When a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend, stock split or similar
Corporate Action is received that bears an expiration date, the Custodian shall
promptly seek Authorized Instructions. If Authorized Instructions are not
received in time for the Custodian to take timely action, or actual notice of
such Corporate Action was received too late to seek such Instructions, the
Custodian is authorized, but shall have no express or implied duty or
obligation, to (i) sell such rights entitlement or fractional interest and to
credit the Account with the proceeds or (ii) take any other action it deems, in
good faith, to be appropriate. The Custodian shall be fully protected for acting
in accordance with, or failing to act in the absence of, Authorized Instructions
and for taking such other action as the Custodian is so authorized under the
immediately preceding sentence of this Section 7.i; and
j. The Custodian will send promptly to the Client or the Authorized
Party(ies) all proxies (if issued in the name of the Custodian's nominee or the
nominee of a central depository), without indication of the manner in which such
proxies are to be voted, all notices and communications with respect to
securities in the Account that call for voting or relate to legal proceedings
within a reasonable time after sufficient copies are received by the Custodian
for forwarding to its clients. In addition, the Custodian shall transmit
promptly to the Client, all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of rights in
connection therewith and notices of exercises of call and put options written by
the Client and the maturity of future contracts purchased or sold).
8. Deposit of Client Assets in a Securities System. The Custodian may deposit
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and/or maintain securities owned by the Client in a Securities System in
accordance with applicable Federal Reserve Board and Securities and Exchange
Commission ("SEC") rules and regulations, and subject to the following
provisions:
a. The Custodian may keep securities of the Client in a Securities System
provided that such securities are represented in an account ("Custodian
Account") of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as fiduciary, custodian or
otherwise for customers;
b. The records of the Custodian with respect to securities of the Client
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Client;
c. The Custodian shall pay for securities purchased for the Account of the
Client upon (i) receipt of written advice from the Securities System that such
securities have been transferred to the
Custodian Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the Account of the Client.
The Custodian shall transfer securities sold for the Account of the Client upon
(i) receipt of written advice from the Securities System that payment for such
securities has been transferred to the Custodian Account, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and payment
for the Account of the Client. Copies of all advice from the Securities System
of transfers of securities for the Account of the Client shall identify the
Client, be maintained for the Client by the Custodian and be provided to the
Client at its request. Upon request, the Custodian shall furnish the Client
confirmation of each transfer to or from the Account of the Client in the form
of a written advice or notice and shall furnish to the Client copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the Account of the Client. The Custodian shall comply with all requirements
of Rule 17f-4(d) under the 1940 Act;
d. The Custodian shall provide the Client with any report obtained by the
Custodian on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the Securities
System. The Custodian shall send to the Client such reports on their own systems
of internal accounting control as the Client may reasonably request from time to
time; the Custodian shall send to the Client such reports automatically whenever
there is a material change in any such system;
e. Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Client for any loss or damage to the Client
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any of its
or their employees or from failure of the Custodian or any such agent to enforce
effectively such rights as it or the Client may have against the Securities
System or any guarantee or insurance fund; at the election of the Client, it
shall be entitled to be subrogated to the rights of the Custodian or any agent
with respect to any claim against the Securities System or any other person or
fund which the Custodian or agent may have as a consequence of any such loss or
damage if and to the extent that the Client has not been made whole for any such
loss or damage.
9. Contractual Income and Settlement; Market Practice Settlements.
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a. Contractual Income. In accordance with the Custodian's standard
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operating procedure, the Custodian shall credit the Account with income and
maturity proceeds on securities on contractual payment date net of any taxes.
To the extent the Custodian credits income on contractual payment date, the
Custodian may, within five (5) business days of such date, reverse such
accounting entries to the contractual payment date if the Custodian reasonably
believes that such amount will not be received, provided that Custodian consults
with Client or its Investment Manager prior to making any such reversing entry
and provided further that neither Client nor its Investment Manager object to
the making of such entry.
b. Contractual Settlement. In accordance with the Custodian's standard
----------------------
operating procedure, the Custodian will attend to the settlement of securities
transactions on the basis of either contractual settlement date accounting or
actual settlement date accounting as directed by the Client pursuant to
Authorized Instructions, which may be standing instructions of general
application. To the extent the Custodian settles certain securities transactions
on the basis of contractual settlement date accounting, the Custodian may,
within five (5) business days of such date, reverse to the
contractual settlement date any entry relating to such contractual settlement if
the Custodian reasonably believes that such amount will not be received,
provided that Custodian consults with Client or its Investment Manager prior to
making any such reversing entry and provided further that neither Client nor its
Investment Manager object to the making of such entry.
c. Market Practice Settlements. Settlements of transactions may be
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effected in trading and processing practices customary in the jurisdiction or
market where the transaction occurs. The Client acknowledges that this may, in
certain circumstances, other than circumstances involving purchase or sales
settlement transactions, require the delivery of cash or securities (or other
property) without the concurrent receipt of securities (or other property) or
cash. In such circumstances, the Custodian shall have no responsibility for
nonreceipt of payment (or late payment) or nondelivery of securities or other
property (or late delivery) by the counterparty, provided such nonreceipt or
nondelivery was not directly or indirectly caused by any act or omission of
Custodian.
10. Tax Law.
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a. The Custodian shall have no responsibility or liability for any tax
obligations, including responsibility for taxes, withholding, certification and
reporting requirements, claims for exemptions or refund, interest, penalties and
other expenses (collectively, "Tax Obligations") now or hereafter imposed on the
Client or the Account or the Custodian as Client's custodian by any taxing
authorities, domestic or foreign; provided, however, that the Client shall not
be liable to the Custodian and the Custodian shall be liable for penalties or
additions to Tax Obligations as a result of the Custodian's failure to pay or
withhold tax or to report to the Client interest, dividend or other income paid
or credited to the Account as a result of Custodian's negligent acts or
omissions. [The Custodian shall use reasonable efforts to assist the Authorized
Party, to the extent the Authorized Party has provided necessary information,
with respect to any Tax Obligations.]
b. To the extent the Custodian is responsible under any applicable law for
any Tax Obligation, the Client shall inform or cause the Investment Manager to
inform the Custodian of all Tax Obligations, shall direct the Custodian with
respect to the performance of such Tax Obligations and shall provide the
Custodian with the necessary funds and all information required by the Custodian
to meet such Tax Obligations.
11. Non-Account Assets. [The Client may request the Custodian to perform a
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recordkeeping function with respect to property held by others and not otherwise
subject to the terms of this Agreement. To the extent the Custodian shall agree
to perform this service, its sole responsibility shall be to accurately reflect
information on its books which it has received from an Authorized Party.]
12. Reporting and Recordkeeping. The Custodian will supply to the Client from
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time to time, at the Client's request, a statement in respect to any and all
property in the Account held by the Custodian or by any sub-custodian, including
without limitation a tabulation of securities with
certificate numbers and such other information as the Client may reasonably
request. The ownership of the Client's property whether securities, cash and/or
other property, and whether held by the Custodian or a sub-custodian or in a
Securities System, shall be clearly recorded on the Custodian's books as
belonging to the Account and not for the Custodian's own interest. Where
certificates are legended or otherwise not fungible with publicly traded
certificates (and in other cases where the Custodian and the Client may agree),
the Client reserves the right to instruct the Custodian as to the only name in
which such securities shall be registered and the Custodian, to the extent
reasonably practicable, shall comply with such Authorized Instructions;
provided, however if Custodian reasonably determines that compliance with such
Authorized Instructions is not reasonably practicable or otherwise may conflict
with applicable law, rule or regulation, Custodian shall promptly notify Client
and shall comply with reasonable alternatives as to which the Parties may agree
and memoralize in revised Authorized Instructions. The Custodian shall keep
accurate and detailed accounts of all investments, receipts, disbursements and
other transactions for the Account. All accounts, books and records of the
Custodian relating thereto shall be open to inspection and audit at all times
during normal business hours of the Custodian by any person designated by the
Client. All such books records and accounts shall be maintained and preserved in
the form reasonably requested by the Client and in accordance with the 1940 Act
and the rules and regulations thereunder, including, without limitation, Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All books, records and accounts
pertaining to the Client and the Account, that are in the possession of the
Custodian shall be the property of the Client and such materials or (unless the
delivery of original materials is required pursuant to applicable law) legible
copies thereof in a format reasonably acceptable to the Client, shall be
surrendered promptly upon request; provided, however, that the Custodian shall
be entitled to retain a copy or the original of any such books, records and
accounts as may be required or permitted by applicable law and the Custodian's
own policies and procedures.
The Custodian shall take all reasonable action as the Client may request to
obtain from year to year favorable opinions from the Client's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Client's Form N-1A and the
Client's Form N-SAR or other periodic reports to the Securities and SEC and with
respect to any other requirements of the SEC. [The Custodian shall be entitled
to reimbursement of its reasonable expenses in connection with assisting the
Client with respect to the preparation of the Client's Forms N-1A and N-SAR and
other periodic reports or requirements of the SEC to the extent that the
Custodian does not provide such service without cost to other clients of the
Custodian generally.]
At the request of the Client, the Custodian shall deliver to the Client a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash and securities,
futures contracts and options on future contracts, including cash and securities
deposited and/or maintained in a Securities System or with a sub-custodian. Such
report shall be of sufficient scope and in sufficient detail as may reasonably
be required by the Client to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, the report shall so state. [The Custodian shall be entitled to
reimbursement of its reasonable expenses in connection with the preparation and
delivery of such report to the extent that any such report is not ordinarily
prepared and delivered without cost to other clients of the Custodian
generally.]
13. Standard of Care. Custodian shall be required to exercise reasonable care,
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prudence, and diligence with respect to its duties under this Agreement unless
otherwise provided.
So long as and to the extent that it is exercising reasonable care,
prudence, and diligence, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this Agreement and shall be held harmless in
acting upon any Authorized Instruction reasonably believed by it to be genuine
and delivered by an Authorized Party.
14. Force Majeure. Notwithstanding anything in this Agreement to the contrary
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contained herein, the Custodian shall not be responsible or liable for any
losses to the Account if such loss results from any event beyond the control of
the Custodian, its agents or sub-custodians, which may include but is not
limited to nationalization, strikes, expropriation, devaluation, seizure, or
similar action by any governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, levies or other charges affecting the
Account's property; or the breakdown, failure or malfunction of any utilities or
telecommunications systems; or any order or regulation of any banking or
securities industry including changes in market rules and market conditions
affecting the execution or settlement of transactions; or acts of war,
terrorism, insurrection or revolution; or acts of God; or any other similar
event which restricts or prohibits the providing of the services contemplated by
this Agreement. In the event that the Custodian is unable to perform its
obligations in whole or in part for any of the reasons described in the
immediately preceding sentence, the Custodian shall notify the Client
immediately. This Section shall survive the termination of this Agreement.
15. Compensation and Expenses. Except as otherwise expressly provided herein,
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each Party shall bear its own expenses in fulfilling its obligations hereunder.
The Custodian shall be entitled to such compensation for its services under this
Agreement as set forth in Schedule 15 hereto, which the Parties may mutually
agree to amend in writing from time to time. All compensation paid to Custodian
shall be paid quarterly in arrears, unless the Parties agree otherwise in
writing. The Custodian shall also be entitled to reimbursement for reasonable
properly vouched, out-of-pocket expenses incurred by it in the discharge of its
duties under this Agreement. The Custodian shall notify the Client of all
compensation and expenses on a monthly basis ("Monthly Notification"). The
Monthly Notifications shall state the nature and amount of such compensation and
expenses and such other information as Client may reasonably request from time
to time.
16. Indemnification. Notwithstanding anything to the contrary elsewhere in
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this Agreement, the Custodian shall indemnify and hold harmless the Client for
all damages and expenses actually incurred (i) as a result of the negligent
action, negligent inaction, or willful misconduct of the Custodian, any agent or
sub-custodian appointed by the Custodian, or any of its or their directors,
officers, agents, nominees, or employees, in the performance of any function
hereunder, or (ii) as a
result of any burglary, robbery, hold-up, theft, or mysterious disappearance,
including loss by damage or destruction.
17. Amendment or Termination. This Agreement may be amended by written
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agreement of the Client and the Custodian. This Agreement also may be terminated
by the Client on sixty (60) days' prior written notice to the Custodian or upon
one hundred and twenty (120) days' prior written notice by the Custodian to the
Client. Any such applicable prior written notice requirement may be modified by
the terminating Party with the consent of the non-terminating Party, which
consent will not be unreasonably withheld.
Upon termination of this Agreement, all property of the Client shall be
delivered by the Custodian to a successor custodian upon receipt by the
Custodian of a written instruction from the Client designating the successor
custodian; and if no successor custodian is designated in such written
instruction, the Custodian shall, upon such termination, deliver all such
property to the Client. Upon termination of the Agreement, the Client shall pay
to the Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its reasonable costs,
expenses, and disbursements in discharging its responsibilities hereunder,
excluding the Custodian's operating overhead.
18. Governing Law and Legal Proceedings. This Agreement shall be construed in
-----------------------------------
and the provisions thereof interpreted under and in accordance with the laws of
the State of Maryland.
19. Prior Agreements. This Agreement supersedes and terminates, as of the date
----------------
hereof, any prior Agreements between the Client and the Custodian relating to
the custody of the Client's assets.
20. Representations. The Client and the Custodian hereby each represent and
---------------
warrant to the other that it has full authority to enter into this Agreement
upon the terms and conditions hereof and that the individual executing this
Agreement on its behalf has the requisite authority to bind the Client or the
Custodian to this Agreement. The Custodian further represents and warrants that
it is qualified as a custodian under Sections 17(f) and 26(a) of the 1940 Act
and warrants that it will remain so qualified, and upon ceasing to be so
qualified, shall promptly notify the Client in writing.
21. Necessary Parties. All of the understandings, agreements, representations
-----------------
and warranties contained herein are solely for the benefit of the Client
(including its shareholders) and the Custodian and there are no other parties
who are intended to be benefited, in any way whatsoever, by this Agreement.
22. Execution in Counterparts. This Agreement may be executed in any number of
-------------------------
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument and may be sufficiently
evidenced by one counterpart.
23. Successors and Assigns. This Agreement shall not be assignable by either
----------------------
Party without the consent of the other Party. Notwithstanding the foregoing, the
Agreement shall bind the successors in interest of the Client and the Custodian.
24. Shareholder Communications. Rule 14b-2 under the Securities Exchange Act
--------------------------
of 1934 (the "Exchange Act") requires banks that hold securities for the account
of customers to respond to requests by issuers of securities for the names,
addresses and holding of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Client to indicate whether it authorizes the Custodian to provide the Client's
name, address, and share position to requesting companies whose securities the
Client owns. If the Client tells the Custodian "no," the Custodian will not
provide this information to requesting companies. If the Client tells the
Custodian "yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Client as consenting to disclosure of this
information for all securities owned by the Client or any funds or Accounts
established by the Client. For the Client's protection, the Rule prohibits the
requesting company from using the Client's name and address for any purpose
other than corporate communications. Please indicate below whether the Client
consents or objects by checking one of the alternatives below.
YES [_] The Custodian is authorized to release the Client's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Client's name,
address, and share positions.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first set forth above.
Authorized Officer of: Authorized Officer of:
LINCOLN NATIONAL ____FUND, INC. MELLON BANK, N.A.
By:____________________________ By:________________________
Name:__________________________ Name:______________________
Title:_________________________ Title:_____________________
Date:__________________________ Date:______________________
Address for Notice: Address for Notice:
_______________________________ ___________________________
_______________________________ ___________________________
Attention:_____________________ Attention:_________________
Taxable: ________________
or
Tax Exempt: ____________
(Under IRC Section: ______)
Fiscal Year: [December 31]
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
By signing below the Client hereby certifies under penalties of perjury
that the taxpayer identification number provided below is correct and that the
Client is not subject to back-up withholding on reportable payments credited to
the Client's Account by the Custodian. The Client may not be subject to back-up
withholding either because (a) the Client is exempt from back-up withholding
because it is an "exempt recipient," (b) the Client has not been notified by the
Internal Revenue Service that it is subject to back-up withholding for failure
to report all interest or dividends, or (c) the IRS has notified the Client that
it is no longer subject to back-up withholding. (If (a), (b), or (c) do not
apply, please cross out.) Failure to sign below and provide a valid taxpayer
identification number may require that the Custodian apply federal income tax
withholding at the rate of 31% (or the rate as required by law) on all
reportable payments made to the Account established under this Agreement.
The Internal Revenue Service does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
LINCOLN NATIONAL _____ FUND, INC.
By:_____________________________
Name:___________________________
Title:__________________________
________________________________
Taxpayer Identification Number
SCHEDULE 2
----------
RELEASE OF PROPERTY
This Schedule is an integral part of the Agreement to which it is attached.
Capitalized terms shall have the meaning given to them in the Agreement, unless
otherwise noted.
A. Delivery of Securities. The Custodian shall release and deliver
----------------------
securities owned by the Client held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Authorized Instructions from the
Client, which may be continuing instructions when deemed appropriate by the
Parties, and only in the following cases:
1) Upon sale of such securities for the Account of the Client and receipt
of payment therefore;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Client and,
in the case of repurchases that are effected through a Securities
System, subject to the requirements of Section 8 of the Agreement;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 8 of the Agreement;
4) To the depository agent in connection with tender or other similar
offers for securities of the Client;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Client or into the name of any nominee or nominees of the Custodian or
into the nominee name of any agent appointed pursuant to Section 6.c
of the Agreement or into the nominee name of any sub-custodian
appointed pursuant to Section 6.a of the Agreement; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
--------
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Client, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Client, but only against receipt of adequate collateral as agreed upon
--------
from time to time by the Custodian and the Client, which may be in the
form of cash or obligations issued by the United States government,
its agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department of
the Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by the Client prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowing by the
Client on behalf of the Client requiring a pledge of assets by the
Client, but only against receipt of amounts borrowed;
--------
12) For delivery in accordance with the provisions of any agreement by the
Client, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the rules of the
Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Client;
13) For delivery in accordance with the provisions of any agreement by the
Client, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by Client; and
14) For any other proper corporate purpose, but only upon receipt of, in
--------
addition to Authorized Instructions from the Client, a certified copy
of a resolution of the Board, specifying the securities of the Client
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such securities
shall be made.
In delivering any securities pursuant to this Section A of Schedule 2, the
Custodian shall credit to the Account of the Client which held such securities
the cash or other property received thereof, except to the extent that the
Custodian may be instructed otherwise by certified resolution meeting the
requirements of paragraph (14) of this Section A of Schedule 2.
B. Payment of Client Monies. Upon receipt of Authorized Instructions from
------------------------
the Client, which may be continuing instructions when deemed appropriate by the
Parties, the Custodian shall pay out monies of the Account of the Client in the
following cases only:
1) Upon purchase of securities, options, futures contracts or options on
futures contracts for the account of the Client but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose pursuant to Section 6.c of this Agreement,
registered in the manner required for such instruments to be held
pursuant to this Agreement or in proper form for transfer; (b) in the
case of a purchase effected through a Securities Systems, in
accordance with the conditions set forth in Section 8 of this
Agreement; (c) in the case of repurchase agreements entered into
between the Client and the Custodian, or another bank, or a broker-
dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or for securities purchased
through a Securities System, in accordance with the conditions set
forth in Section 8 of this Agreement or (ii) through agreement by the
Custodian or other bank or broker-dealer to repurchase such securities
from the Client or (iii) for transfer to a time deposit account of the
Client in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Authorized Instructions from the Client;
2) In connection with conversion, exchange or surrender of securities
owned by the Client as set forth in Section A of this Schedule 2;
3) For the redemption or repurchase of shares issued by the Client;
4) For the payment of any expense or liability incurred by the Client,
including but not limited to the following payments for the account of
the Client: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Client whether or not
such expenses are to be in whole or part capitalized or treated as
deferred expenses, it being understood and agreed to by the Custodian
that its compensation under the Agreement shall be paid in accordance
with Section 15 of the Agreement;
5) For the payment of any dividends on shares of the Client declared
pursuant to the governing documents of the Client;
6) For payment of the amount of dividends received in respect of
securities sold short by the Client;
7) For any other proper purpose, but only upon receipt of Authorized
Instructions from the Client. In the event there is insufficient cash
available for a particular transaction, the Custodian shall promptly
notify the Client of the amount of the shortfall and the Client, at
its option, shall deposit additional cash or securities in the Account
or shall take steps to have sufficient cash or securities available as
soon as is practicable.
Except as specifically stated otherwise in this Agreement, in any and every case
where payment for purchase of securities for the account of the Client is made
by the Custodian in advance of receipt of the securities purchased (i.e., in
advance of the time specified in Section B(1) of this Schedule 2) in the absence
of specific Authorized Instructions from the Client to so pay in advance, the
Custodian shall be absolutely liable to the Client for such securities to the
same extent as if the securities had been received by the Custodian.
SCHEDULE 6.b.
CUSTODY OF ASSETS OUTSIDE THE UNITED STATES
This Schedule is an integral part of the Agreement to which it is attached.
Capitalized terms shall have the meaning given to them in the Agreement, unless
otherwise noted. References herein to "Schedule" are to this Schedule 6.b.
SECTION 1.1. DEFINITIONS. As used throughout this Schedule, the capitalized
terms set forth below shall have the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 0000 Xxx) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.
"ELIGIBLE SECURITIES DEPOSITORY" has the meaning set forth in section (b)(1) of
Rule 17f-7.
"FOREIGN ASSETS" means any of the Clients' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Client's
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(3) of Rule
17f-5.
"FOREIGN SECURITIES SYSTEM" means an Eligible Securities Depository listed on
Appendix B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
"RULE 17f-5" means Rule 17f-5 under the 1940 Act as the same may be amended from
time to time, or that has otherwise been made exempt pursuant to an SEC
exemptive order.
"RULE 17f-7" means Rule 17f-7 under the 1940 Act as the same may be amended from
time to time, or that has otherwise been made exempt pursuant to an SEC
exemptive order.
SECTION 1.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
1.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Client, by
resolution adopted by the Board, hereby delegates to the Custodian, subject to
Section (b) of Rule 17f-5, the responsibilities set forth in this Section 1.2
with respect to Foreign Assets of the Client held outside the United States, and
the Custodian hereby accepts such delegation as Foreign Custody Manager with
respect to the Client.
1.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for
performing the delegated responsibilities defined below only with respect to the
countries and custody arrangements for each such country listed on Appendix A to
this Agreement, which list of countries may be amended from time to time by the
Client with the agreement of the Foreign Custody Manager. The Foreign Custody
Manager shall list on Appendix A the Eligible Foreign Custodians selected by the
Foreign Custody Manager to maintain the assets of the Client, which list of
Eligible Foreign Custodians may be amended from time to time in the sole
discretion of the Foreign Custody Manager. The Foreign Custody Manager will
provide amended versions of Appendix A in accordance with Section 1.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Authorized Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Appendix A, and the fulfillment by the Client of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board the Client's responsibility as Foreign Custody
Manager with respect to that country and to have accepted such delegation.
Execution of this Agreement by the Client shall be deemed to be an Authorized
Instruction to open an account, or to place or maintain Foreign Assets, in each
country listed on Appendix A. Following the receipt of Authorized Instructions
directing the Foreign Custody Manager to close a Client account with the
Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Client to the
Custodian as Foreign Custody Manager for that country shall be deemed to have
been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager with respect to Client with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Client. Sixty (60) days (or such longer period to which the Parties agree in
writing) after receipt of any such notice by the Client, the Custodian shall
have no further responsibility in its capacity as Foreign Custody Manager to the
Client with respect to the country as to which the Custodian withdraws its
acceptance of delegation pursuant to this paragraph.
1.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this
Section 1.2, the Foreign Custody Manager may place and maintain the Foreign
Assets in
the care of the Eligible Foreign Custodian selected by the Foreign Custody
Manager in each country listed on Appendix A, as amended from time to time. In
performing its delegated responsibilities as Foreign Custody Manager to place or
maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody
Manager shall determine that the Foreign Assets will be subject to reasonable
care, based on the standards applicable to custodians in the country in which
the Foreign Assets will be held by that Eligible Foreign Custodian, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation, the factors specified in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager
shall determine that the contract governing the foreign custody arrangements
with each Eligible Foreign Custodian selected by the Foreign Custody Manager
will satisfy the requirements of Rule 17f-5(c)(2).
(c) MONITORING. In each case in which the Foreign Custody Manager maintains
Foreign Assets with an Eligible Foreign Custodian selected by the Foreign
Custody Manager, the Foreign Custody Manager shall establish a system to monitor
(i) the appropriateness of maintaining the Foreign Assets with such Eligible
Foreign Custodian and (ii) the contract governing the custody arrangements
established by the Foreign Custody Manager with the Eligible Foreign Custodian.
In the event the Foreign Custody Manager determines that the custody
arrangements with an Eligible Foreign Custodian it has selected are no longer
appropriate, the Foreign Custody Manager shall notify the Board in accordance
with Section 1.2.5 hereunder.
1.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this
Section 1.2, the Board shall be deemed to have considered and determined to
accept such Country Risk as is incurred by placing and maintaining the Foreign
Assets in each country for which the Custodian is serving as Foreign Custody
Manager of the Client.
1.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the
withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign Custodian by
providing to the Board an amended Appendix A at the end of the calendar quarter
in which an amendment to such Appendix has occurred. The Foreign Custody Manager
shall make written reports notifying the Board of any other material change in
the foreign custody arrangements of the Client described in this Section 1.2
after the occurrence of the material change.
1.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER. In performing the
responsibilities delegated to it, the Foreign Custody Manager agrees to exercise
reasonable care, prudence and diligence such as a person having responsibility
for the safekeeping of assets of management investment companies registered
under the 1940 Act would exercise.
1.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager
represents to the Client that it is a U.S. Bank as defined in section (a)(7) of
Rule 17f-5. The Client represents to the Custodian that the Board has determined
that it is reasonable for the
Board to rely on the Custodian to perform the responsibilities delegated to it
pursuant to this Schedule.
1.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY
MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of
the Client shall be effective as of the effective date of the Agreement and
shall remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination will
become effective sixty (60) days after receipt by the non-terminating party of
such notice. The provisions of Section 1.2.2 hereof shall govern the delegation
to and termination of the Custodian as Foreign Custody Manager of the Client
with respect to designated countries.
SECTION 1.3 ELIGIBLE SECURITIES DEPOSITORIES.
1.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Client (or
its duly-authorized Investment Manager) with an analysis of the custody risks
associated with maintaining assets with the Eligible Securities Depositories set
forth on Appendix B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-
7, and (b) monitor such risks on a continuing basis, and promptly notify the
Client (or its duly-authorized Investment Manager) of any material change in
such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
1.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable care,
prudence and diligence in performing the duties set forth in Section 1.3.1
hereof.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY TO BE HELD OUTSIDE
THE UNITED STATES
SECTION 2.1. HOLDING FOREIGN ASSETS. The Custodian shall identify on its books
as belonging to the Client the Foreign Assets held by each Foreign Sub-Custodian
or Foreign Securities System. The Custodian may hold Foreign Assets for all of
its customers, including the Client, with any Foreign Sub-Custodian in an
account that is identified as belonging to the Custodian for the benefit of its
customers, provided, however, that (i) the records of the Custodian with respect
to Foreign Assets of the Client which are maintained in such account shall
identify those Assets as belonging to the Client and (ii) to the extent
permitted and customary in the market in which the account is maintained, the
Custodian shall require that Foreign Assets so held by the Foreign Sub-Custodian
be held separately from any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.
SECTION 2.2. FOREIGN SECURITIES SYSTEMS. Foreign Assets that are securities
("Foreign Securities") shall be maintained in a Foreign Securities System in a
designated country through arrangements implemented by the Custodian or a
Foreign Sub-Custodian, as applicable, in such country.
SECTION 2.3. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
2.3.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian
shall release and deliver Foreign Assets of the Client held by the Custodian or
such Foreign Sub-Custodian, or in a Foreign Securities System, only upon receipt
of Authorized Instructions, which may be continuing instructions when deemed
appropriate by the Parties, and only in the following cases:
(a) Upon the sale of Foreign Assets for the Client in accordance with
commercially reasonable market practice in the country where such Assets are
held or traded, including, without limitation: (i) delivery against expectation
of receiving later payment; or (ii) in the case of a sale effected through a
Foreign Securities System, in accordance with the rules governing the operation
of the Foreign Securities System;
(b) In connection with any repurchase agreement related to Foreign Securities;
(c) To the depository agent in connection with tender or other similar offers
for Foreign Securities of the Client;
(d) To the issuer thereof or its agent when such Foreign Securities are called,
redeemed, retired or otherwise become payable;
(e) To the issuer thereof, or its agent, for transfer into the name of the
Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee
of the Custodian or such Foreign Sub-Custodian) or for exchange for a different
number of bonds, certificates or other evidence representing the same aggregate
face amount or number of units;
(f) To brokers, clearing banks or other clearing agents for examination or trade
execution in accordance with market custom; provided that in any such case, the
Foreign Sub-Custodian shall have no responsibility or liability for any loss
arising from the delivery of such Foreign Securities prior to receiving payment
therefor except as may arise from the Foreign Sub-Custodian's own negligence or
willful misconduct;
(g) For exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the issuer
of such securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
(h) In the case of warrants, rights or similar Foreign Securities, the surrender
thereof in the exercise of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities for definitive securities;
(i) For delivery as security in connection with any borrowing by the Client
requiring a pledge of assets by the Client;
(j) In connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(k) Upon the sale or other delivery of such Foreign Securities (including,
without limitation, to a Sub-Custodian) as a free trade, provided that
applicable Authorized Instructions shall set forth (i) the Foreign Securities to
be delivered and (ii) the person or persons to whom delivery shall be made;
(l) In connection with the lending of Foreign Securities; and
(m) For any other purpose, but only upon receipt of Proper Instructions
specifying (i) the Foreign Assets to be delivered and (ii) the person or persons
to whom delivery of such securities shall be made.
2.3.2. PAYMENT OF CLIENT MONIES. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out, or direct the respective Foreign Sub-Custodian or the respective
Foreign Securities System to pay out, monies of the Client in the following
cases only:
(a) Upon the purchase of Foreign Securities for the Client, unless otherwise
directed by Authorized Instructions, by (i) delivering money to the seller
thereof or to a dealer therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such Foreign Assets; or (ii) in the
case of a purchase effected through a Foreign Securities System, in accordance
with the rules governing the operation of such Foreign Securities System;
(b) In connection with the conversion, exchange or surrender of Foreign
Securities of the Client;
(c) For the payment of any expense or liability of the Client, including but not
limited to the following payments: interest, taxes, investment advisory fees,
transfer agency fees, fees under the Agreement, legal fees, accounting fees, and
other operating expenses;
(d) For the purchase or sale of foreign exchange or foreign exchange contracts
for the Client, including transactions executed with or through the Custodian or
its Foreign Sub-Custodians;
(e) In connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(f) Upon the purchase of Foreign Securities as a free trade, provided that
applicable Authorized Instructions shall set forth (i) the amount of such
payment and (ii) the person or persons to whom payment shall be made;
(g) For payment of part or all of the dividends received in respect of
securities sold short;
[(h) In connection with the borrowing or lending of Foreign Securities; and]
(i) For any other purpose, but only upon receipt of Authorized Instructions
specifying (i) the amount of such payment and (ii) the person or persons to whom
such payment is to be made.
2.3.3. MARKET CONDITIONS. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for Foreign Assets received for the account
of the Client and delivery of Foreign Assets maintained for the account of the
Client may be effected in accordance with the customary established securities
trading or processing practices and procedures in the country or market in which
the transaction occurs, including, without limitation, delivering Foreign Assets
to the purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) with the expectation of receiving later payment for such Foreign
Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian described on Appendix C hereto at the time or times set forth on
such Appendix. The Custodian may revise Appendix C from time to time, provided
that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
SECTION 2.4. REGISTRATION OF FOREIGN SECURITIES. The Foreign Securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the Client or in the name of the
Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Client agrees to hold any such nominee
harmless from any liability as a holder of record of such Foreign Securities.
The Custodian or a Foreign Sub-Custodian shall not be obligated to accept
securities on behalf of the Client under the terms of the Agreement unless the
form of such securities and the manner in which they are delivered are in
accordance with reasonable market practice.
SECTION 2.5 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Client cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts shall be opened and maintained
outside the United States on behalf of the Client with a Foreign Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the terms of the Agreement to hold cash received by or from or for the
account of the Client. Cash maintained on the books of the Custodian (including
its branches, subsidiaries and affiliates), regardless of currency denomination,
is maintained in bank accounts established under, and subject to the laws of the
Commonwealth of Pennsylvania.
SECTION 2.6. COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Client shall be entitled and shall
credit such income, as collected, to the Client. In the event that extraordinary
measures are required to collect such income, the Client and the Custodian shall
consult as to such measures and as to the compensation and expenses of the
Custodian relating to such measures.
SECTION 2.7. SHAREHOLDER RIGHTS. With respect to the Foreign Securities held
pursuant to this Section 2, the Custodian shall use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and
practical constraints that may exist in the country where such securities are
issued. The Client acknowledges that local conditions, including lack of
regulation, onerous procedural obligations, lack of notice and other factors may
have the effect of severely limiting the ability of the Client to exercise
shareholder rights.
SECTION 2.8. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall
transmit promptly to the Client written information with respect to materials
received by the Custodian via the Foreign Sub-Custodians from issuers of the
Foreign Securities being held for the account of the Client (including, without
limitation, pendency of calls and maturities of Foreign Securities and
expirations of rights in connection therewith). With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Client written
information with respect to materials so received by the Custodian from issuers
of the Foreign Securities whose tender or exchange is sought or from the party
(or its agents) making the tender or exchange offer. The Custodian shall not be
liable for any untimely exercise of any tender, exchange or other right or power
in connection with Foreign Securities or other property of the Client at any
time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian
is in actual possession of such Foreign Securities or property and (ii) the
Custodian receives Authorized Instructions with regard to the exercise of any
such right or power, and both (i) and (ii) occur at least three (3) business
days prior to the date on which the Custodian is to take action to exercise such
right or power.
SECTION 2.9. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to
which the Custodian employs a Foreign Sub-Custodian shall require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties, and
to indemnify, and hold harmless the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Sub-Custodian's performance of such obligations. At the Client's
election, the Client shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Client have not been made whole for any such loss,
damage, cost, expense, liability or claim.
SECTION 2.10. TAX LAW. The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Client, or the Custodian as
custodian of the Client, by the tax law of the United States or of any state or
political subdivision thereof. It shall be the responsibility of the Client to
notify the Custodian of the obligations imposed on the Client or the Custodian
as custodian of the Client by the tax law of countries other than those
mentioned in the above sentence, including responsibility for withholding and
other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with regard to
such tax law shall be to use reasonable efforts to assist the Client with
respect to any claim for exemption or refund under the tax law of countries for
which the Client has provided such information.
SECTION 2.11. LIABILITY OF CUSTODIAN. The Custodian shall be liable for the
acts or omissions of a Foreign Sub-Custodian to the same extent as set forth
with respect to sub-custodians generally in this Agreement and, regardless of
whether assets are maintained in the custody of a Foreign Sub-Custodian or a
Foreign Securities System, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism, or any other loss where the Sub-Custodian has otherwise acted with
reasonable care.
APPENDIX A - Countries
APPENDIX B - Eligible Securities Depository
APPENDIX C - Eligible Foreign Custodian
SCHEDULE 15
CUSTODY FEE SCHEDULE
This Schedule is an integral part of the Agreement to which it is attached.
Capitalized terms shall have the meaning given to them in the Agreement, unless
otherwise noted. References herein to "Schedule" are to this Schedule 15.
For fulfilling its obligations under the Agreement, Custodian shall receive
compensation according to the following schedule, which shall remain fixed for a
period of three (3) years from the date the Agreement was first executed:
Domestic Asset Fee (per annum):
1/4 basis points (.000025) on Fund [net] asset value
Account Administration Fee (per annum):
$1,000
Transaction Fees:
$ 3 per book entry buy/sell
$ 20 per physical buy/sell
$ 3 per incoming wire
$ 5 per outgoing wire
$ 3 per paydown
$ 15 per option and future transaction
$ 30 per non-Custodian foreign exchange
$250 per broker relationship (one time, assumes utilization of Custodian
agreement)
No custody charge for internal bank transfers
Transactions include purchases, sales, free receipts/free deliveries, per
activity
Asset based fees are annualized.
Global Custody Charges
Assets held in specific countries will incur additional annualized asset-based
charges, plus transaction charges associated with each region.
Developed
---------
Tier I
Canada Japan 3.0 basis points on the market value
Euroclear New Zealand $25 per buy/sell transaction
Sweden Switzerland
Italy United Kingdom
Tier II
Australia Luxembourg 4.5 basis points on the market value
Belgium Mexico $25 per buy/sell transaction
CEDEL Norway
Germany South Africa
Ireland France
Netherlands Spain
Tier III
Argentina Portugal 7.0 basis points on the market value
Austria Singapore $25 per buy/sell transaction
Brazil South Korea
Denmark Sri Lanka
Hong Kong Thailand
Malaysia Turkey
Finland
Intermediate
------------
Tier IV
Czech Republic Israel 12.0 basis points on the market value
Greece Peru $50 per buy/sell transaction
Hungary Tiawan
Indonesia Zimbabwe
Tier V
Bangladesh Pakistan 20.0 basis points on the market
value
Bermuda Philippines $60 per buy/sell transaction
Botswana Poland
Ghana Slovak Republic
Kenya Uruguay
Mauritius
Emerging
--------
Tier VI
Bolivia India 40 basis points on the market value
Chile Jordan $85 per buy/sell transaction
China - Shanghai Morocco
China - Shenzhen Namibia
Colombia Panama
Cyprus Russia
Ecuador Slovak Republic
Egypt Venezuela
Estonia Zambia
Ancillary Fees/Services
Out-of-Pocket Expenses
Custodian will pass through to the client any reasonable, properly vouched
out-of-pocket expenses including, but not limited to, postage, courier
expense, registration fees, stamp duties, Fed sale charges, telex charges,
custom reporting or custom programming and interface development,
internal/external tax, legal or consulting costs and proxy voting expenses.
On-Line Access
Custodian will provide on-line access to the Client via the Custodian's
Client Reporting software. The client will be responsible for all
communication charges or frame relay costs related to on-line usage.
[Securities Lending
Securities lending services (if applicable) will be provided under separate
contractual arrangements between the Client and Custodian. If third party
securities lending services are utilized by the Client, additional
administrative fees may apply.]
Note
Custodian offers other services not covered under the above schedule.
These services are covered under separate fee schedules. Additional
services include: Investment Management, Non-Collectivized Real Estate and
Mortgage Custody, Securities Lending, Performance Measurement and
Analytics, Back Office and Private Label Services.
Daily Credits/Charges
The Account may earn interest on balances, including disbursement balances
and balances arising from purchase and sale transactions. For each month during
which the Custodian holds property for the Client, there shall be an adjustment
to the custody fees, calculated as follows. For each day of the month in which
the closing cash balance of the Account is more than zero, such cash balance
amount will earn interest calculated by taking the amount of the idle balance
multiplied by the Overnight Fed Funds (defined below) minus .50% divided by 365
days. The amount of interest credit shall be known as the "Daily Credits."
Alternatively, for each day of the month in which the closing balance of the
Account is less than zero (an "overdraft"), the overdraft amount will be subject
to a charge calculated by taking the amount of the overdraft multiplied by the
Overnight Federal Funds Rate (defined below) plus .50% divided by 365 days. The
amount of interest charge shall be known as "Daily Charges." The net of the
Daily Credits and Daily Charges for a particular month will be credited or
debited,
as the case may be, to the Monthly Notification for the applicable period.
Monthly credit balances will roll forward to offset future Custodian fees and
expenses. Credit balances may not be transferred. They are used exclusively to
offset Custodian fees and expenses and shall not be applied against investment
or other related expenses. A Daily Charge shall not apply to the extent that an
overdraft is solely due to Custodian error upon termination of the Agreement,
any unused Daily Credits shall be disbursed to the Client.
The term "Overnight Federal Funds Rate" shall mean, for any month, the
average of daily "Federal Funds Rates" for such month. In turn, the daily
Federal Funds Rates shall mean, for any day, the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers on such day, as published by the
Federal Reserve Bank of New York on the business day next succeeding such day.
