CUSTODY AGREEMENT
by and between
LINCOLN NATIONAL [FUND NAME]
and
MELLON BANK, N.A.
TABLE OF CONTENTS
SECTION 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 6
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
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. 28
APPENDIX A 33
AMENDED AND RESTATED CUSTODY AGREEMENT
THIS AMENDED AND RESTATED CUSTODY AGREEMENT ("Agreement") is effective
as of October 1, 2001, by and between LINCOLN NATIONAL [FUND NAME], a
corporation organized and existing under the laws of the State of Maryland
("Client") and MELLON BANK, N.A., a national banking association with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Custodian")(each, a "Party" and collectively, the "Parties").
WITNESSETH:
WHEREAS, the Client and the Custodian previously entered into a Custody
Agreement, effective as of ____________________, in order to establish a custody
account to provide for the safekeeping and recordkeeping of certain property of
the Client;
WHEREAS, the Client and the Custodian desire to amend and restate that
Custody Agreement.
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
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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 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.
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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
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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;
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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.
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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.
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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.
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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
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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.
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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 [FUND NAME] MELLON BANK, N.A.
By: By:
---------------------------- ---------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- ------------------------
Date: Date:
---------------------------- -------------------------
Address for Notice: Address for Notice:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- -------------------------------
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- -------------------------------
Attention: Treasurers Department Attention:
------------------------------- ---------------------
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 [FUND NAME]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Date:
-------------------------------
----------------------------------
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;
17
8) In connection with loan participations; and
9) 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
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 ▇▇▇▇ ▇▇▇) 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 as
identified in a Risk Analysis (as defined in Section 1.3.1.).
"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.
19
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 provide the Client with written reports identifying the Eligible
Foreign Custodians selected by the Foreign Custody Manager to maintain the
assets of the Client. The Foreign Custody Manager will provide the reports
relating to Eligible Foreign Custodians 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
20
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 provide the
Board with a written report each quarter that reflects the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the Foreign
Assets of the Client, the withdrawal of Foreign Assets from an Eligible Foreign
Custodian, and the placement of such Foreign Assets with another Eligible
Foreign Custodian. In addition, the Custodian shall supply the Board with
reasonably current information concerning any Eligible Foreign Custodian added
to the written report provided to the Board each quarter. 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.
21
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 Eligible Securities Depositories in
accordance with section (a)(1)(i)(A) of Rule 17f-7 ("Risk Analysis"), 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. Each Risk Analysis shall
indicate whether the particular Securities Depository has been determined by the
Custodian, in the exercise of its standard of care, to be an Eligible Securities
Depository.
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.
1.3.3 USE OF AGENTS. The Custodian may employ agents, including, but not limited
to Foreign Sub-Custodians, in preparing the Risk Analyses under Section 1.3.1.
With respect to information in Risk Analyses provided by an agent, the Custodian
will exercise reasonable care in the selection of any such agents, and shall be
entitled to rely upon information provided by such agents so selected in the
performance of their duties and responsibilities under Section 1.3.1. unless the
Custodian knows or should have known such information to be incorrect,
incomplete or misleading. Due to the nature and source of information and the
necessity of relying on various information sources (most of which are external
to the Custodian), other than as provided in the preceding sentence or where the
Custodian knows such information to be inaccurate, the Custodian shall have no
liability for direct or indirect use of such information.
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
22
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. The Custodian may maintain Foreign
Assets that are securities ("Foreign Securities") in a Foreign Securities System
in a designated country through a Foreign Sub-Custodian.
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
therefore 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;
23
(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, futures contracts, options on futures
contracts, swaps or other derivative instruments for the Client, 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 Authorized 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 Authorized 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) settling transactions in accordance
with trading and processing practices customary in the jurisdiction or market
where the transaction occurs, including, as appropriate, delivering money to the
seller thereof or to a dealer therefore (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;
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(e) In connection with trading in options, futures contracts, options on futures
contracts, swaps or other derivative instruments for the Client, 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 in
accordance with the terms and conditions of a separate securities lending
agreement approved in writing by the Client; 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.
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, in the name of any
nominee of the Client, in the name of any nominee of the Custodian, in the name
of any nominee of a Foreign Sub-Custodian or in the name of any nominee of a
Securities System. 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 in London,
regardless of currency denomination, shall be payable only at the Custodian's
London Branch.
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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. Where possible, 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.
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SECTION 2.10. LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts
or omissions of a Foreign Sub-Custodian.
APPENDIX A - COUNTRIES
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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.
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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
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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
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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
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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.
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Malaysia
Austria Mauritius
Bangladesh Mexico
Belgium Morocco
Bermuda Namibia
Bolivia The Netherlands
Botswana New Zealand
Brazil Norway
Canada Pakistan
Chile Panama
China/Shanghai Peru
China/Shenzhen The Philippines
Colombia Poland
Costa Portugal
Rica Romania
Croatia Russia
Czech Republic Singapore
Denmark Slovakia
Ecuador Slovenia
Egypt South Africa
Estonia Spain
Finland Sri Lanka
France Sweden
Germany Switzerland
Ghana Taiwan
Greece Thailand
Hong Kong Trinidad & Tobago
Hungary Tunisia
India Turkey
Indonesia United
Ireland Kingdom
Israel United
Italy States
Japan Uruguay
Jordan Venezuela
Kenya Vietnam
Korea, Republic of Zambia
Zimbabwe
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