Exhibit (k)(3)
SERVICING AGREEMENT
Agreement made as of August 26, 2003, between Xxxxxxxx & Xxxxxxxx/Claymore
Total Return Fund Incorporated, a Maryland Corporation (the "Fund") and Claymore
Securities, Inc., a Kansas corporation ("Claymore").
WHEREAS, the Fund intends to operate as a closed-end management investment
company, and is so registered under the Investment Company act of 1940, as
amended (the "1940 Act");
WHEREAS, the Fund has authorized the issuance of its common stock, par
value $.01 per share (the "Common Shares") and a class of preferred shares with
preference rights, the relative rights, terms and preferences of which are to be
determined in the future by the Board of Directors of the Fund (the "Preferred
Shares") (holders of the Common Shares and Preferred Shares are referred to
collectively herein as the "Shareholders");
WHEREAS, the Fund wishes to retain Claymore to provide certain services to
the Fund, under the terms and conditions stated below, and Claymore is willing
to provide such services for the compensation set forth below:
NOW, THEREFORE, In consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. APPOINTMENT. The Fund hereby appoints Claymore as Servicing Agent of
the Fund, and Claymore accepts such appointment and agrees that it
will furnish the services set forth in paragraph 2 below.
2. SERVICES AND DUTIES OF CLAYMORE. Subject to the supervision of the
Fund's Board of Directors (the "Board"), Claymore will:
(a) Reply to requests for information concerning the Fund from
Shareholders or prospective shareholders, brokers or the
public;
(b) Aid in the secondary market support of the Fund through
regular written and oral communications with the Fund's New
York Stock Exchange specialist, the closed end fund analyst
community and various information providers specializing in
the dissemination of closed end fund information;
(c) Assist in the preparation of reports to be sent to the Fund
Shareholders, and assist in the printing and dissemination
of such reports to Shareholders;
(d) Assist in the preparation of all reports required to be
filed with the Securities and Exchange Commission (the
"SEC") on Form N-SAR, or such other form as the SEC may
substitute for Form N-SAR, and file such completed form with
the SEC;
(e) Assist in the dissemination to Shareholders of the Fund's
proxy materials and assist in the filing of such materials
with the Fund's regulators, and oversee the tabulation of
proxies by the Fund's transfer agent;
(f) Assist in analyzing the amounts available for distribution
as dividends and distributions to be paid by the Fund to its
Shareholders and in the preparation of materials relevant to
the Fund's Dividend Reinvestment Plan;
(l) Establish and maintain a dedicated toll-free number for
sales support and marketing requests on an ongoing basis;
(m) Assist in the production of marketing and road-show
materials for the offerings of the Fund's Common Shares and
Preferred Shares;
(n) Develop and maintain a website for the Fund which will
provide quarterly updates and monthly distribution
notifications, as well as hyperlinks to the websites of
Claymore and Xxxxxxxx & Xxxxxxxx Incorporated (the
"Adviser") for added information;
(o) Make the Adviser aware of trading strategies that might be
used for the Fund and communicate to the investment
community any changes made to the Fund's trading strategies;
(p) Assist in the provision of materials regarding the Fund to
the investment community and current and prospective
investors;
(q) Assist in the review of materials made available to
shareholders and prospective investors to assure compliance
with applicable laws, rules and regulations;
(r) Assist in the filing of advertisements and sales materials,
including information on the Fund's website, as necessary,
with the Securities and Exchange Commission ("SEC"), the New
York Stock Exchange, the National Association of Securities
Dealers and any regulatory bodies having jurisdiction over
the Fund and its operations;
(s) Assist in the dissemination of the Fund's net asset value,
market price and discount;
(t) Host analyst meetings as appropriate;
(u) Provide persons to serve as officers and directors of the
Fund, as the Fund may request;
(v) Maintain ongoing contact with brokers in branch offices
whose clients hold Fund shares or whose clients may have an
interest in acquiring Fund shares, including providing,
among other things, progress reports on the Fund, dividend
announcements and performance updates;
(w) Assist in the drafting of press releases to the public;
(x) Make such reports and recommendations to the Board as the
Board reasonably requests or deems appropriate; and
(y) Provide such other services as the parties may mutually
agree from time to time.
2
3. COMPLIANCE WITH THE FUND'S GOVERNING DOCUMENTS AND APPLICABLE LAW. In
all matters pertaining to the performance of this Agreement, the
Servicing Agent will act in conformity with the Fund's Articles of
Incorporation, By-Laws and registration statements of the Fund and
with the directions of the Board and Fund executive officers and will
conform to and comply with the requirements of the 1940 Act and the
rules and regulations thereunder and all other applicable federal or
state laws and regulations.
4. SERVICE NOT EXCLUSIVE. The Servicing Agent's services hereunder are
not deemed to be exclusive, and the Servicing Agent is free to render
such services to other funds or clients as long as the Servicing
Agent's services under this Agreement are not impaired thereby.
5. REPRESENTATIONS AND WARRANTIES OF CLAYMORE
(a) Claymore represents and warrants that it has obtained all
necessary registrations, licenses and approvals in order to
perform the services provided in this Agreement. Claymore
covenants to maintain all necessary registrations, licenses and
approvals in effect during the term of this Agreement.
(b) Claymore represents that it has adopted a written Code of Ethics
in compliance with Rule 17j-1 under the 1940 Act and will provide
the Fund with any amendments to such Code and any certifications
required by Rule 17j-1.
(c) Claymore agrees that it shall promptly notify the Fund (i) in the
event that the SEC or any other regulatory authority has censured
its activities, functions or operations; suspended or revoked any
registration, license or approval; or has commenced proceedings
or an investigation that may result in any of these actions, and
(ii) in the event that there is a change in Claymore, financial
or otherwise, that adversely affects its ability to perform
services under this Agreement.
(d) The Fund shall be given access to the records of Claymore at
reasonable times solely for the purpose of monitoring compliance
with the terms of this Agreement. Claymore agrees to cooperate
with the Fund and their representatives in connection with any
such monitoring efforts.
6. COMPENSATION. (a) As compensation for its services, the Fund pays the
Servicing Agent a fee computed and paid monthly at the annual rate of
0.025% on the first $200 million of the Fund's average weekly total
managed assets, 0.10% on the next $300 million of the Fund's average
weekly total managed assets and 0.15% on the Fund's average weekly
total managed assets above $500 million. Total managed assets means
the net asset value of the outstanding Common Shares plus the
liquidation preferences of any outstanding Preferred Shares.
(b) Notwithstanding Section 6(a), the maximum amount of the aggregate
of (i) the fee to be paid by the Adviser to Xxxxxxx Xxxxx pursuant to
the Additional Compensation Agreement, dated as of August 29, 2003,
between the Adviser and Xxxxxxx Xxxxx; (ii) the amount paid by the
Fund of $.0083 per share of Common Stock as partial expense
reimbursement to the underwriters pursuant to the Purchase Agreement,
dated as of August 26, 2003, among the Adviser, the Fund, Xxxxxxx
Xxxxx and the other underwriters party thereto (the "Purchase
Agreement"); (iii) the amount of the fee, if any, payable to the
Servicing Agent pursuant to the Underwriter Participation Agreement
between the Fund and the Servicing Agent, (iv) the amount of the fee
to be paid the Servicing Agent pursuant to this Agreement; and (v) the
amount payable by the Fund to underwriters' counsel pursuant to the
Purchase Agreement, shall not exceed 4.5% of the aggregate initial
offering price of the Fund's Common Stock being offered pursuant to
the Fund's Registration Statement.
3
7. LIMITATION OF LIABILITY OF THE SERVICING AGENT. The Servicing Agent
will not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund or its Shareholders in connection with
the performance of its duties under this Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard
by it of its duties under this Agreement ("disabling conduct").
Claymore agrees to indemnify, defend and hold the Fund, the
Adviser, their several officers and directors, and any person who
controls the Fund or the Adviser within the meaning of Section 15 of
the Securities Act of 1933 (collectively, "Fund Indemnified Persons"),
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or
defending such claims, demands or liabilities and any reasonable
counsel fees incurred in connection therewith) which Fund Indemnified
Persons may incur, but only to the extent that such liability or
expense incurred by the Fund Indemnified Persons or resulting from
such claims or demands shall arise out of or be based upon (a) any
disabling conduct with respect to the provision of services under this
Agreement, (b) any violation of law relating to the provision of
services under this Agreement or (c) the breach by Claymore of this
Agreement.
8. LIMITATION OF LIABILITY OF THE DIRECTORS AND SHAREHOLDERS OF THE FUND.
Pursuant to the provisions of the Fund's Articles of Incorporation,
this Agreement is entered into by the Board not individually, but as
Directors and the obligations of the Fund hereunder is not binding
upon any such Directors or Shareholders of the Fund, but binds only
the Fund itself.
9. DURATION AND TERMINATION. This Agreement shall continue for an initial
period of two years and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically
approved at least annually by (a) a vote of a majority of the Fund's
Board and (b) a vote of a majority of the Fund's Board members who are
not interested persons (as defined in the 0000 Xxx) of any party to
this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable (a)
by the Fund, without penalty, on thirty (30) days' written notice, by
a vote of a majority of the Fund's Board, or (b) on sixty (60) days'
written notice by Claymore. This Agreement shall automatically
terminate in the event of its assignment as the term is defined in the
1940 Act.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver or discharge or termination is sought.
11. LICENSE.
Claymore hereby grants to the Fund the nonexclusive right and
license to use the xxxx "Claymore" (the "Licensed Xxxx") in the Fund's
name and in connection with the formation, issuance, marketing, and/or
promotion of, or disclosure related to, the Fund. Claymore agrees that
it shall receive no compensation for any such use by the Fund.
Claymore hereby warrants and represents that it has filed applications
and/or owns rights in the Licensed Xxxx sufficient to grant this
license. No right, title or interest in the Licensed Xxxx, except the
right to use the Licensed Xxxx as provided in this Agreement, is or
will be transferred to the Fund by this Agreement. Should this
Agreement be terminated, the Fund agrees that it will take necessary
steps to change its name to a name not including the word "Claymore."
12. CONFIDENTIALITY.
4
Claymore agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Fund all records
and other information relative to the Fund, the Adviser and all prior,
current or potential shareholders of the Fund and not to use such
records and information for any purpose other than the performance of
its duties hereunder. Claymore also agrees that, without the prior
written consent of the Fund, it will not disclose personal information
of any Shareholders of the Fund ("Personal Shareholder Information"),
including to its affiliates, unless it is required by law to disclose
the information to the recipient of such information. Claymore further
agrees, represents and warrants that (a) only those employees of
Claymore who need to do so in carrying out their job responsibilities
may access Personal Shareholder Information; (b) it maintains
physical, electronic and procedural safeguards that comply with
federal standards to protect confidentiality; and (c) it may use
Personal Shareholder Information only for the purposes set forth in
this Agreement.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Maryland and the 1940 Act, without giving
effect to the principles of conflicts of law thereof. To the extent
that the applicable laws of the State of Maryland conflict with the
applicable provisions of the 1940 Act, the latter shall control.
14. BOOKS AND RECORDS
(a) In compliance with the requirements of the 1940 Act, Claymore
hereby agrees that all records which it maintains for the Fund
are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon request. Claymore
further agrees to preserve for the periods prescribed under the
1940 Act the records required to be maintained under the 0000
Xxx.
(b) Claymore hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in
connection with services that Claymore renders pursuant to this
Agreement which may be requested in order to ascertain whether
the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
15. MISCELLANEOUS. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
16. NOTICES.
All notices required or permitted to be sent under this Agreement
shall be sent, if to the Fund, to:
Xxxxxxxx & Xxxxxxxx/Claymore Total Return Fund Incorporated
c/o Flaherty & Xxxxxxxx Incorporated
000 Xxxx Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Chief Executive Officer
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
5
Or if to Claymore, to:
Claymore Securities, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx, COO and General Counsel
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
6
IN WITNESS WHEREOF, the parties hereto have caused the instrument to be
executed by their officers designated below as of the day and year first
above written.
Attest: Xxxxxxxx & Xxxxxxxx/Claymore Total Return
Fund Incorporated
/s/ Xxxx Xxxxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
------------------- ----------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
Attest: Claymore Securities, Inc.
/s/ Xxxx Xxxxxxxxxx /s/ Xxxxxxxx Xxxxxxx
------------------- ----------------------
Name: Xxxxxxxx Xxxxxxx
Title: Chief Operating Officer and General Counsel
7
