CUSTODY AGREEMENT
by and between
LINCOLN NATIONAL VARIABLE ANNUITY FUND A
and
MELLON BANK, N.A.
Section Table of Contents Page
1. ESTABLISHMENT OF ACCOUNT .......................................................................... 1
2. Release of Property ............................................................................... 1
3. AUTHORIZED PARTIES ................................................................................ 1
4. AUTHORIZED INSTRUCTIONS ........................................................................... 2
5. DIRECTED POWERS OF CUSTODIAN ...................................................................... 3
6. DISCRETIONARY POWERS OF CUSTODIAN ................................................................. 3
7. DUTIES OF CUSTODIAN ............................................................................... 4
8. DEPOSIT OF CLIENT ASSETS IN SECURITY SYSTEM ....................................................... 6
9. CONTRACTUAL INCOME AND SETTLEMENT; MARKET PRACTICE SETTLEMENTS .................................... 7
10. TAX LAW ........................................................................................... 7
11. NON-ACCOUNT ASSETS ................................................................................ 8
12. REPORTING AND RECORDKEEPING ....................................................................... 8
13. STANDARD OF CARE .................................................................................. 9
14. FORCE MAJEURE ..................................................................................... 9
15. COMPENSATION AND EXPENSES ......................................................................... 10
i
16. INDEMNIFICATION ................................................................................... 10
17. AMENDMENT OR TERMINATION .......................................................................... 10
18. GOVERNING LAW AND LEGAL PROCEEDINGS ............................................................... 11
19. PRIOR AGREEMENTS .................................................................................. 11
20. REPRESENTATIONS ................................................................................... 11
21. NECESSARY PARTIES ................................................................................. 11
22. EXECUTION IN COUNTERPARTS ......................................................................... 11
23. SUCCESSORS AND ASSIGNS ............................................................................ 11
24. SHAREHOLDER COMMUNICATIONS ........................................................................ 11
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION ........................................................... 14
SCHEDULE 2 ............................................................................................. 15
SCHEDULE 6.B. .......................................................................................... 19
SCHEDULE 15. ........................................................................................... 20
ii
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is effective as of April 11, 2001,
by and between LINCOLN NATIONAL VARIABLE ANNUITY FUND A, 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
------------------------
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. The Custodian shall
have no responsibility for any property of the Client held, owned or received by
the Client and not delivered to the Custodian or any of the Custodian's agents
or sub-custodians appointed hereunder. All property shall be held in accordance
with Section 7 hereof. The term "property" as used herein shall not include any
direct interest in real property, leaseholds or mineral interests, provided,
however, that "property" may include interests that are titled in the name of
the Client or its designee and not in the name of Custodian.
2. Release of Property. The Custodian shall release and deliver property out 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
------------------
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
1
collectively, the "Authorized Parties") until notified otherwise in writing or
orally. Client shall confirm any oral revocation of the authority of any
Authorized Party promptly in writing; however, any such oral revocation shall
take effect immediately. The Custodian shall be under no duty 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 that involves a breach of the standard
of care under this Agreement.
4. Authorized Instructions. As used herein, the term "Authorized Instructions"
-----------------------
means a writing directed to the Custodian and signed by an Authorized Party.
Each such writing shall set forth or evidence the specific transaction or type
of transaction involved. Client or the Investment Manager may deliver Authorized
Instructions by facsimile transmission, electronic transmission subject to the
Custodian's practices, which practices shall be acceptable to Client and agreed
to in writing by the Client or the Investment Manager, or any other method
specifically agreed to in writing by the Client or the Investment Manager 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 or elsewhere
as agreed to in writing by the Client or the Investment Manager, 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 using the means described in such security procedures 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 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 shall accept Oral Instructions
-----------------
from any Authorized Party. 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.
2
5. Directed Powers of Custodian. The Custodian shall have and exercise the
----------------------------
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. Execute or act upon proxies for any stocks, bonds, or other
property held in the Account;
c. 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
d. 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 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 that are affiliates of the Custodian, 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 such 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, except as limited by Schedule 6.b
hereto;
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;
e. When it is reasonable to do so, employ suitable legal counsel, and
Custodian shall be without liability for any action reasonably taken or omitted
pursuant to advice of such counsel; and
3
f. 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 the powers granted to the Custodian in this Agreement.
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.
Without limiting the generality of the foregoing, the Custodian shall not be
liable for any losses arising out of the acts or omissions of any sub-custodian
designated by the Client or the Investment Manager and not by the Custodian.
7. Duties of Custodian. The Custodian shall perform or cause its agents or
-------------------
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, provided, however, that any clearing agency or
book-entry system must be approved by the Board of the Client. 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, in the name of any nominee of the
Client, in the name of any nominee of the Custodian, in the nominee name of any
sub-custodian appointed pursuant to Section 6.a hereof, in the nominee name of
any agent appointed pursuant to Section 6.c hereof, or in the nominee name of a
Securities System. 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.
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.) 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 and other property of the Account,
provided that the Custodian shall not be responsible for the failure to receive
payment of (or late payment of) distributions with respect to securities or
other property held in the Account so long as such failure did not involve a
breach of the Custodian's standard of care under this Agreement;
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;
4
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 the issuer of any security, from any Securities System, or from
any source 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;
j. The Custodian will send promptly to the Client or the Authorized
Party(ies) all proxies and other information concerning the same (if issued in
the name of the Custodian's nominee or the nominee of a Securities System),
without indication of the manner in which such proxies are to be voted, and all
other notices and communications with respect to securities in the Account that
call for voting or relate to legal proceedings; provided, that if written copies
of such proxies are to be distributed, Custodian shall provide them to the
Client within a reasonable time after sufficient copies are received by the
Custodian for forwarding to its clients; and
k. The Custodian shall transmit promptly to the Client, all other
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) received by the Custodian relating to
securities in the Account.
5
8. Deposit of Client Assets in a Securities System. The Custodian may deposit
-----------------------------------------------
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 and shall transfer securities sold for the Account of the Client only
in accordance with procedures established and uniformly applied by the
Securities Systems and only in accordance with the 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; and
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 a 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
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, where possible, 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.
9. Contractual Income and Settlement; Market Practice Settlements.
--------------------------------------------------------------
a. Contractual Income. In accordance with the Custodian's standard
------------------
operating procedure, the Custodian shall credit the Account with income and
maturity proceeds on securities on contractual payment date net of any taxes or
upon actual receipt, as directed by the Client pursuant to Authorized
Instructions, which may be standing instructions of general application. To the
extent the Custodian credits income on contractual payment date, the Custodian
may, as soon as reasonably practicable following the contractual payment date,
reverse such accounting entries to the contractual payment date if the Custodian
reasonably believes that such amount will not be received, provided that the
Custodian consults with Client or its Investment Manager prior to making any
such reversing entry.
6
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, as
soon as reasonably practicable following the contractual payment 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 the Custodian consults with Client or its Investment
Manager prior to making any such reversing entry.
c. Market Practice Settlements. Settlements of transactions may be
---------------------------
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 that involves a breach of Custodian's standard of care under this
Agreement.
10. Tax Law.
-------
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, including, without limitation, assistance
with the preparation of tax reclaims, the filing of tax reclaims on behalf of
the Client, and the submission of information necessary to obtain favorable tax
withholding rates where available.
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.
7
11. Non-Account Assets. The Client may request the Custodian to perform a
------------------
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. Recordkeeping and Reporting. 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 memorialize 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 will supply to the Client from 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
listing of all property, a tabulation of securities with certificate numbers,
and such other information as the Client may reasonably request. Unless the
Client sends to the Custodian a written exception or objection to any statement
within 90 days of the Client's receipt of such statement from Custodian, the
Client shall be deemed to have approved such statement, except for items that
Custodian later discovers and corrects, and except for items that Client
discovers after the 90-day period, which items Client or its Investment Manager
could not reasonably have been expected to discover within such 90-day period.
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 SEC and with
respect
8
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,
----------------
prudence, and diligence with respect to its duties under this Agreement unless
otherwise expressly provided hereunder.
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
-------------
contained herein, the Custodian shall not be responsible or liable for any
failure to perform under this Agreement or for losses to the Account if such
failure or loss results from any event beyond the reasonable 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. 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.
9
15. Compensation and Expenses. Except as otherwise expressly provided herein,
-------------------------
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. 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. The Client shall pay such compensation and
expenses within a reasonable period of time after its receipt and review of such
Monthly Notification, unless the Parties agree otherwise in writing.
16. Indemnification. Notwithstanding anything to the contrary elsewhere in this
---------------
Agreement, and in addition to any other rights or remedies that the Parties may
have at law or otherwise:
(a) the Custodian shall indemnify and hold harmless the Client against all
damages and expenses actually incurred, including reasonable counsel fees and
expenses, (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 any other failure to
comply with the standard of care required by this Agreement, or (ii) as a result
of any burglary, robbery, hold-up, theft, or mysterious disappearance, including
loss by damage or destruction; and
(b) the Client shall indemnify and hold harmless the Custodian against all
damages and expenses actually incurred, including reasonable counsel fees and
expenses, arising out of the performance of the Custodian's obligations under
this Agreement, except damages or expenses that result from the negligent act,
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 any other failure to comply with the standard of care required by
this Agreement. The Parties agree that the obligations of the Client under this
Agreement shall not be binding upon any of the Directors, shareholders,
nominees, officers, employees or agents, whether past, present or future, of the
Client, individually, but are binding only upon the assets and property of the
Client.
In no event shall either Party be liable to the other under this Agreement
for special, indirect, or consequential damages of any kind whatsoever. This
Section 16 shall survive any termination of this Agreement.
17. Amendment or Termination. This Agreement may be amended by written 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.
10
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 Pennsylvania.
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
11
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.
[The remainder of this page intentionally left blank.]
12
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 VARIABLE MELLON BANK, N.A.
ANNUITY FUND A
By: /s/ Xxxxxxxx X. Xxxxxxx By: /s/ Xxxxxxxxxxx Xxxxx
------------------------------------- -------------------------------
Name: Xxxxxxxx X. Xxxxxxx Name: Xxxxxxxxxxx Xxxxx
----------------------------------- -----------------------------
Title: Assistant Treasurer Title: First Vice President
---------------------------------- ----------------------------
Date: April 9, 2001 Date: April 10, 2001
----------------------------------- -----------------------------
Address for Notice: Address for Notice:
0000 Xxxxx Xxxxxxx Xxxxxx 000 Xxxxxxxx Xxx.
---------------------------------------- ----------------------------------
Xxxx Xxxxx, Xxxxxxx 00000 Xxxxxxx, XX 00000
---------------------------------------- ----------------------------------
Attention: Treasurers Department Attention: Mutual Funds Dept.
----------------------------- -----------------------
13
Taxable: X
------------------
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 VARIABLE ANNUITY FUND A
By: /s/ Xxxx X. Xxxxx
--------------------------------------------------
Name: Xxxx X. Xxxxx
------------------------------------------------
Title: Assistant Vice President
-----------------------------------------------
Date: April 9, 2001
------------------------------------------------
00-0000000
-----------------------------------------------------
Taxpayer Identification Number
14
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 or other market practice; 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;
15
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 in accordance with market
--------
practice or Authorized Instructions;
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
16
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 or an Executive
Committee of the Board, specifying the securities of the
Client to be delivered 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 for the Account of the Client, but
---
only (a) against the delivery of such securities to the
----
Custodian 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,
(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) Upon purchase of options, futures contracts, options on
futures contracts, swaps or other derivative instruments for
the Account of the Client, but only in accordance with
--------
applicable market practices;
3) In connection with conversion, exchange or surrender of
securities owned by the Client as set forth in Section A of
this Schedule 2;
4) For the redemption or repurchase of the Client's shares;
5) For the payment of any Client expense or liability;
6) For the payment of any Client dividends;
7) For payment of the amount of dividends received in respect of
securities sold short by the Client; and
17
8) For any other proper purpose, but only upon receipt of, in
--------
addition to Authorized Instructions from the Client, a
certified copy of a resolution of the Board or an Executive
Committee of the Board, specifying the amount of such payment
and naming the person or persons to whom such payment is to be
made. 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.
18
SCHEDULE 6.b.
CUSTODY OF ASSETS OUTSIDE THE UNITED STATES
Not Applicable.
19
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, provided that the nature of the property in the Account and the
services required by the Client under the Agreement with respect to the Account
remain materially the same:
Domestic Asset Fee (per annum):
1/4 basis points (.000025) on Account average monthly net asset value as
determined by Client or its accounting service provider.
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.
20
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
21
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
22
Ancillary Fees/Services
-----------------------
Out-of-Pocket Expenses
----------------------
Custodian will pass through to the Client any reasonable, properly
vouched out-of-pocket expenses incurred by the Custodian in the discharge of its
duties under this Agreement, which expenses are limited to postage, courier
expense, registration fees, stamp duties, Federal sale charges, telex charges,
custom reporting, consulting costs, proxy voting expenses and other expenses as
the Parties may mutually agree.
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 Federal Funds Rate (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
23
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. Unused Daily Credits will
expire at calendar year end. 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.
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.
24
