SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT ("Agreement") is made this 26th day of
March, 2009, by and between Xxxx Xxxxx Partners Fund Advisor, LLC, a Delaware
limited liability company (the "Manager"), and Western Asset Management
Company, a California corporation (the "Subadviser").
WHEREAS, the Manager has been retained by Western Asset Municipal
Defined Opportunity Trust Inc. (the "Fund"), a registered management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") to provide investment advisory, management, and administrative
services to the Fund; and
WHEREAS, the Manager wishes to engage the Subadviser to provide certain
investment advisory services to the Fund, and the Subadviser is willing to
furnish such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. In accordance with and subject to the Management Agreement
between the Fund and the Manager (the "Management Agreement"), the Manager
hereby appoints the Subadviser to act as Subadviser with respect to the Fund
for the period and on the terms set forth in this Agreement. The Subadviser
accepts such appointment and agrees to render the services herein set forth,
for the compensation herein provided.
2. The Manager shall cause the Subadviser to be kept fully informed
at all times with regard to the securities owned by the Fund, its funds
available, or to become available, for investment, and generally as to the
condition of the Fund's affairs. Manager shall furnish the Subadviser with
such other documents and information with regard to the Fund's affairs as the
Subadviser may from time to time reasonably request.
3. (a) Subject to the supervision of the Fund's Board of Directors
(the "Board") and the Manager, Subadviser shall regularly provide the Fund
with respect to such portion of the Fund's assets as shall be allocated to
the Subadviser by the Manager from time to time (the "Allocated Assets") with
investment research, advice, management and supervision and shall furnish a
continuous investment program for the Allocated Assets consistent with the
Fund's investment objectives, policies and restrictions, as stated in the
Fund's Prospectus and Statement of Additional Information. The Subadviser
shall, with respect to the Allocated Assets, determine from time to time what
securities and other investments will be purchased (including, as permitted
in accordance with this paragraph, swap agreements, options and futures),
retained, sold or exchanged by the Fund and what portion of the Allocated
Assets will be held in the various securities and other investments in which
the Fund invests, and shall implement those decisions (including the
execution of investment documentation), all subject to the provisions of the
Fund's Articles of Incorporation and By-Laws (collectively, the "Governing
Documents"), the 1940 Act, and the applicable rules and regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC")
and interpretive guidance issued thereunder by the SEC staff and any other
applicable federal and state law, as well as the investment objectives,
policies and restrictions of the Fund referred to above, and any other
specific policies adopted by the Board and disclosed to the Subadviser. The
Subadviser is authorized as the agent of the Fund to give instructions with
respect to the Allocated Assets to the custodian of the Fund as to deliveries
of securities and other investments and payments of cash for the account of
the Fund. Subject to applicable provisions of the 1940 Act, the investment
program to be provided hereunder may entail the investment of all or
substantially all of the assets of the Fund in one or more investment
companies. The Subadviser will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any
broker or dealer, foreign currency dealer, futures commission merchant or
others selected by it. In connection with the selection of such brokers or
dealers and the placing of such orders, subject to applicable law, brokers or
dealers may be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) to the Fund and/or the other accounts
over which the Subadviser or its affiliates exercise investment discretion.
The Subadviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Subadviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer. This determination may be viewed in terms
of either that particular transaction or the overall responsibilities which
the Subadviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Board may adopt policies and
procedures that modify and restrict the Subadviser's authority regarding the
execution of the Fund's portfolio transactions provided herein. The
Subadviser shall exercise voting rights, rights to consent to corporate
action and any other rights pertaining to the Allocated Assets subject to
such direction as the Board may provide, and shall perform such other
functions of investment management and supervision as may be directed by the
Board.
(b) The Fund hereby authorizes any entity or person associated with
the Subadviser which is a member of a national securities exchange to effect
any transaction on the exchange for the account of the Fund which is
permitted by Section 11(a) of the Exchange Act and Rule 11a2-2(T) thereunder,
and the Fund hereby consents to the retention of compensation for such
transactions in accordance with Rule 11a2-2(T)(a)(2)(iv). Notwithstanding
the foregoing, the Subadviser agrees that it will not deal with itself, or
with members of the Board or any principal underwriter of the Fund, as
principals or agents in making purchases or sales of securities or other
property for the account of the Fund, nor will it purchase any securities
from an underwriting or selling group in which the Subadviser or its
affiliates is participating, or arrange for purchases and sales of securities
between the Fund and another account advised by the Subadviser or its
affiliates, except in each case as permitted by the 1940 Act and in
accordance with such policies and procedures as may be adopted by the Fund
from time to time, and will comply with all other provisions of the Governing
Documents and the Fund's Prospectus and Statement of Additional Information
relative to the Subadviser and its directors and officers.
4. The Subadviser may delegate to any other one or more companies
that the Subadviser controls, is controlled by, or is under common control
with, or to specified employees of any such companies, certain of the
Subadviser's duties under this Agreement, provided in each case the
Subadviser will supervise the activities of each such entity or employees
thereof, that such delegation will not relieve the Subadviser of any of its
duties or obligations under this Agreement and provided further that any such
arrangements are entered into in accordance with all applicable requirements
of the 1940 Act.
5. The Subadviser agrees that it will keep records relating to its
services hereunder in accordance with all applicable laws, and in compliance
with the requirements of Rule 31a-3 under the 1940 Act, the Subadviser hereby
agrees that any records that 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 the Fund's request. The Subadviser further agrees to arrange for
the preservation of the records required to be maintained by Rule 31a-1 under
the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act.
6. (a) The Subadviser, at its expense, shall supply the Board, the
officers of the Fund, and the Manager with all information and reports
reasonably required by them and reasonably available to the Subadviser
relating to the services provided by the Subadviser hereunder.
(b) The Subadviser shall bear all expenses, and shall furnish all
necessary services, facilities and personnel, in connection with its
responsibilities under this Agreement. Other than as herein specifically
indicated, the Subadviser shall not be responsible for the Fund's expenses,
including, without limitation, advisory fees; distribution fees; interest;
taxes; governmental fees; voluntary assessments and other expenses incurred
in connection with membership in investment company organizations;
organization costs of the Fund; the cost (including brokerage commissions,
transaction fees or charges, if any) in connection with the purchase or sale
of the Fund's securities and other investments and any losses in connection
therewith; fees and expenses of custodians, transfer agents, registrars,
independent pricing vendors or other agents; legal expenses; loan commitment
fees; expenses relating to share certificates; expenses relating to the
issuing and redemption or repurchase of the Fund's shares and servicing
shareholder accounts; expenses of registering and qualifying the Fund's
shares for sale under applicable federal and state law; expenses of
preparing, setting in print, printing and distributing prospectuses and
statements of additional information and any supplements thereto, reports,
proxy statements, notices and dividends to the Fund's shareholders; costs of
stationery; website costs; costs of meetings of the Board or any committee
thereof, meetings of shareholders and other meetings of the Fund; Board fees;
audit fees; travel expenses of officers, members of the Board and employees
of the Fund, if any; and the Fund's pro rata portion of premiums on any
fidelity bond and other insurance covering the Fund and its officers, Board
members and employees; litigation expenses and any non-recurring or
extraordinary expenses as may arise, including, without limitation, those
relating to actions, suits or proceedings to which the Fund is a party and
the legal obligation which the Fund may have to indemnify the Fund's Board
members and officers with respect thereto.
7. No member of the Board, officer or employee of the Fund shall
receive from the Fund any salary or other compensation as such member of the
Board, officer or employee while he is at the same time a director, officer,
or employee of the Subadviser or any affiliated company of the Subadviser,
except as the Board may decide. This paragraph shall not apply to Board
members, executive committee members, consultants and other persons who are
not regular members of the Subadviser's or any affiliated company's staff.
8. As compensation for the services performed by the Subadviser,
including the services of any consultants retained by the Subadviser, the
Manager shall pay the Subadviser out of the management fee it receives with
respect to the Fund, and only to the extent thereof, as promptly as possible
after the last day of each month, a fee, computed daily at an annual rate set
forth on Schedule A annexed hereto. The first payment of the fee shall be
made as promptly as possible at the end of the month succeeding the effective
date of this Agreement, and shall constitute a full payment of the fee due
the Subadviser for all services prior to that date. If this Agreement is
terminated as of any date not the last day of a month, such fee shall be paid
as promptly as possible after such date of termination, shall be based on the
average daily net assets of the Fund or, if less, the portion thereof
comprising the Allocated Assets in that period from the beginning of such
month to such date of termination, and shall be that proportion of such
average daily net assets as the number of business days in such period bears
to the number of business days in such month. The average daily net assets of
the Fund or the portion thereof comprising the Allocated Assets shall in all
cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time
as may be determined by the Board.
9. The Subadviser assumes no responsibility under this Agreement
other than to render the services called for hereunder, in good faith, and
shall not be liable for any error of judgment or mistake of law, or for any
loss arising out of any investment or for any act or omission in the
execution of securities transactions for the Fund, provided that nothing in
this Agreement shall protect the Subadviser against any liability to the
Manager or the Fund to which the Subadviser would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder. As used in this Section 9, the term
"Subadviser" shall include any affiliates of the Subadviser performing
services for the Fund contemplated hereby and the partners, shareholders,
directors, officers and employees of the Subadviser and such affiliates.
10. Nothing in this Agreement shall limit or restrict the right of
any director, officer, or employee of the Subadviser who may also be a Board
member, officer, or employee of the Fund, to engage in any other business or
to devote his time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature,
nor to limit or restrict the right of the Subadviser to engage in any other
business or to render services of any kind, including investment advisory and
management services, to any other fund, firm, individual or association. If
the purchase or sale of securities consistent with the investment policies of
the Fund or one or more other accounts of the Subadviser is considered at or
about the same time, transactions in such securities will be allocated among
the accounts in a manner deemed equitable by the Subadviser. Such
transactions may be combined, in accordance with applicable laws and
regulations, and consistent with the Subadviser's policies and procedures as
presented to the Board from time to time.
11. For the purposes of this Agreement, the Fund's "net assets" shall
be determined as provided in the Fund's Prospectus and Statement of
Additional Information and the terms "assignment," "interested person," and
"majority of the outstanding voting securities" shall have the meanings given
to them by Section 2(a) of the 1940 Act, subject to such exemptions as may be
granted by the SEC by any rule, regulation or order.
12. This Agreement will become effective with respect to the Fund on
the date set forth opposite the Fund's name on Schedule A annexed hereto,
provided that it shall have been approved by the Fund's Board and, if so
required by the 1940 Act, by the shareholders of the Fund in accordance with
the requirements of the 1940 Act and, unless sooner terminated as provided
herein, will continue in effect through March 24, 2011. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the Fund,
so long as such continuance is specifically approved at least annually (i) by
the Board or (ii) by a vote of a majority of the outstanding voting
securities of the Fund, provided that in either event the continuance is also
approved by a majority of the Board members who are not interested persons of
any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval.
13. This Agreement is terminable with respect to the Fund without
penalty by the Board or by vote of a majority of the outstanding voting
securities of the Fund, in each case on not more than 60 days' nor less than
30 days' written notice to the Subadviser, or by the Subadviser upon not less
than 90 days' written notice to the Fund and the Manager, and will be
terminated upon the mutual written consent of the Manager and the Subadviser.
This Agreement shall terminate automatically in the event of its assignment
by the Subadviser and shall not be assignable by the Manager without the
consent of the Subadviser.
14. The Subadviser agrees that for any claim by it against the Fund
in connection with this Agreement or the services rendered under this
Agreement, it shall look only to assets of the Fund for satisfaction and that
it shall have no claim against the assets of any other portfolios of the
Fund.
15. 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, discharge or
termination is sought, and no material amendment of the Agreement shall be
effective until approved, if so required by the 1940 Act, by vote of the
holders of a majority of the Fund's outstanding voting securities.
16. This Agreement, and any supplemental terms contained on Annex I
hereto, if applicable, embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof. Should any part of this
Agreement be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding on and shall inure to the benefit of the
parties hereto and their respective successors.
17. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
[signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
XXXX XXXXX PARTNERS FUND ADVISOR, LLC
By:_______________________________
Name:
Title:
WESTERN ASSET MANAGEMENT COMPANY
By:_______________________________
Name:
Title:
The foregoing is acknowledged:
The undersigned officer of the Fund has executed this Agreement not
individually but in his/her capacity as an officer of the Fund. The Fund does
not hereby undertake, on behalf of the Fund or otherwise, any obligation to
the Subadviser.
WESTERN ASSET MUNICIPAL TERM TRUST INC.
By:_______________________________
Name:
Title:
ANNEX I
Not applicable.
SCHEDULE A
Western Asset Municipal Defined Opportunity Trust Inc.
Date:
March 26, 2009
Fee:
The sub-advisory fee will be 70% of the management fee paid to Xxxx Xxxxx
Partners Fund Advisor, LLC, net of expense waivers and reimbursements.
