Exhibit 99(k)(2)
SERVICING AGREEMENT
Agreement made as of September , 2003, between Western Asset/Claymore
U.S. Treasury Inflation Protected Securities Fund, a Massachusetts business
trust (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 shares of
beneficial interest, without par value (the "Common Shares"), and currently
expects to authorize a class of preferred shares, the relative rights, terms and
preferences of which are to be determined in the future by the Board of Trustees
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 hereby 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, subject to
the terms and conditions of this Agreement.
2. SERVICES AND DUTIES OF CLAYMORE. Subject to the supervision of the
Fund's Board of Trustees (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's
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"),
including reports on Forms N-SAR and N-CSR, and in the filing of
such completed forms 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;
(g) Establish and maintain a toll-free number for sales support and
marketing requests on an ongoing basis;
(h) Develop and maintain, as agreed by the Fund, a website for the
Fund which will provide daily and weekly updates, daily net asset
value and price information and monthly distribution
notifications, as well as hyperlinks to the websites of Claymore
and Western Asset Management Company (the "Adviser") for added
information;
(i) Make the Fund and 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;
(j) Assist, as agreed by the Fund, in the provision of materials
regarding the Fund to the investment community and current and
prospective investors;
(k) Assist in the review of materials made available to Shareholders
and prospective investors to assure compliance with applicable
laws, rules and regulations;
(l) Assist, as agreed by the Fund, in the dissemination of the Fund's
net asset value, market price and discount;
(m) Host analyst meetings as appropriate;
(n) Provide persons to serve as officers and trustees of the Fund, as
the Fund may request;
(o) 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;
(p) Assist in the drafting of press releases to the public;
(q) Make such reports and recommendations to the Board as the Board
reasonably requests or deems appropriate;
(r) Oversee, as mutually agreed with the Fund, matters relating to
the conduct and administration of meetings of the Board,
including, without limitation, the preparation and distribution
of all appropriate materials to members of the Board in advance
of any such meetings, the scheduling of such meetings,
communication with respect to such meetings and, if requested,
the hosting of such meetings (including arranging any off-site
meetings); and
(s) 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 Agreement and
Declaration of Trust ("Declaration of Trust"), By-Laws and
registration statements, each as amended from time to time, 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
promptly 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 commenced proceedings or an
investigation that may result in any of these actions, (ii) if
the SEC or any other regulatory authority makes inquiries or
requests information regarding the Fund or the services provided
hereunder and (iii) in the event that there is a change of
control of Claymore, change in its management or in its financial
status or any other change to Claymore 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 its representatives in connection with any such
monitoring efforts.
(e) Claymore represents and warrants that it has in place policies
and procedures reasonably designed to assure the proper
processing of information provided to Claymore by the Fund and to
assure the timely filing of such information with regulators as
required by applicable law.
(f) Claymore represents and warrants that (i) it is a validly
existing entity and has full corporate power and authority to
perform its obligations under this Agreement, (ii) this Agreement
has been duly and validly authorized, executed and delivered on
Claymore's behalf and constitutes Claymore's, legal, valid and
binding obligation, enforceable in accordance with its terms and
(iii) the execution and delivery of this Agreement, the
incurrence of Claymore's obligations herein set forth and the
consummation of the transactions contemplated herein and in the
Fund's registration statement on Form N-2 will not constitute a
breach of, or default under, Claymore's constituent documents or
under any order, rule or regulation applicable to Claymore of any
court or any governmental body or administrative agency having
jurisdiction over Claymore.
3
6. COMPENSATION. As compensation for its services, the Fund will pay
Claymore an annual fee payable monthly in arrears, which will be based
on the Fund's average weekly assets during such month, in an amount
equal to 0.15% of the Fund's average weekly assets. "Average weekly
assets" means the average weekly value of the total assets of the Fund
(including any assets attributable to leverage) minus accrued
liabilities (other than liabilities representing leverage). For
purposes of calculating "average weekly assets," neither the
liquidation preference of any Preferred Shares outstanding nor any
liabilities associated with any instruments or transactions used by
the Adviser to leverage the Fund's portfolio (whether or not such
instruments are "covered" as described in the Fund's prospectus) is
considered a liability. With respect to reverse repurchase or dollar
roll transactions, "average weekly assets" includes any proceeds from
the sale of an asset of the Fund to a counterparty in such a
transaction, in addition to the value of the underlying asset as of
the relevant measuring date.
7. LIMITATION OF LIABILITY OF THE SERVICING AGENT. The Servicing Agent
will not be liable for any reasonable 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 misconduct, bad faith or
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, trustees 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 TRUSTEES AND SHAREHOLDERS OF THE FUND.
A copy of the Agreement and Declaration of Trust of the Fund, as
amended, is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Fund by an officer of the Fund in his or her
capacity as an officer of the Fund and not individually and that the
obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers, or shareholders individually but are
binding only upon the assets and property of the Fund.
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 vote cast in person at a meeting
called for the purpose of voting on such approval of (a) a majority of
the Fund's Board and (b) 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 (the "disinterested Trustees"). Notwithstanding such
initial period, 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 that term is defined in the 1940 Act, or upon any
material breach of the terms of this Agreement by the Fund or
Claymore.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged, amended or terminated orally, but only by
an instrument in writing
4
signed by the party against which enforcement of the change, waiver,
discharge, amendment 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,
promotion and operations 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
reasonably necessary steps to change its name to a name not including
the word "Claymore."
12. CONFIDENTIALITY. 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") or any other confidential 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. Upon termination of this Agreement, all confidential
information shall be promptly returned unless otherwise agreed to by
the parties, although copies may be retained.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect
to the principles of conflicts of law thereof, and the 1940 Act.
14. BOOKS AND RECORDS
(a) In compliance with the requirements of the 1940 Act, Claymore
hereby agrees that any 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. Claymore hereby
agrees to notify and consult with the Fund prior to any such
provision to a regulatory authority.
5
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:
Western Asset/Claymore U.S. Treasury Inflation Protected Securities
Fund
c/o Western Asset Management Company
000 Xxxx Xxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Or if to Claymore, to:
Claymore Securities, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx, Senior Managing Director 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: Western Asset/Claymore U.S. Treasury
Inflation Protected Securities Fund
------------------ ------------------------------------
Attest: Claymore Securities, Inc.
------------------ ------------------------------------
7
