EXHIBIT H(b)
SERVICE AGREEMENT
Agreement dated as of September 15, 1997 by and between State
Street Bank and Trust Company, a Massachusetts trust company (the "Bank"), and
13A Commercial Mortgage Securities Fund, Inc. (the "Fund").
WHEREAS, the Fund is registered as a closed-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain the Bank to furnish
certain administrative services to the Fund, and the Bank is willing to furnish
such services, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF BANK
The Fund hereby appoints the Bank to provide certain
administrative services for the period and on the terms set forth in this
Agreement. The Bank accepts such appointment and agrees to render the services
stated herein.
The Fund will initially consist of the portfolio(s) and/or
class(es) of shares (each an "Investment Fund") listed in Schedule A to this
Agreement. In the event that the Fund establishes one or more additional
Investment Funds with respect to which it wishes to retain the Bank hereunder,
the Fund shall notify the Bank in writing. Upon written acceptance by the Bank,
such Investment Fund shall become subject to the provisions of this Agreement to
the same extent as the existing Investment Funds, except to the extent that such
provisions (including those relating to the compensation and expenses payable by
the Fund and its Investment Funds) may be modified with respect to each
additional Investment Fund in writing by the Fund and the Bank at the time of
the addition of the Investment Fund.
2. DELIVERY OF DOCUMENTS
The Fund will promptly deliver to the Bank copies of each of
the following documents and all future amendments and supplements, if any:
a. The Fund's charter document and by-laws;
b. The Fund's currently effective registration statement
under the 1940 Act and the Fund's Prospectus(es) and
Statement(s) of Additional Information relating to
all Investment Funds and all amendments and
supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of
Directors of the Fund authorizing (1) the Fund to
enter into this Agreement and (2) certain individuals
on behalf of the Fund to give instructions to the
Bank pursuant to this Agreement;
d. A copy of the investment advisory agreement between
the Fund and its investment adviser; and
e. Such other certificates, documents or opinions which
the Bank may, in its reasonable discretion, deem
necessary or appropriate in the proper performance of
its duties.
3. REPRESENTATION AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
a. It is a Massachusetts trust company, duly organized,
existing and in good standing under the laws of The
Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on
its business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
d. No legal or administrative proceedings have been
instituted or threatened which would impair the
Bank's ability to perform its duties and obligations
under this Agreement; and
e. Its entrance into this Agreement shall not cause a
material breach or be in material conflict with any
other agreement or obligation of the Bank or any law
or regulation applicable to it.
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4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
a. It is a corporation, duly organized and existing and
in good standing under the laws of Maryland;
b. It has the corporate power and authority under
applicable laws and by its charter and by-laws to
enter into and perform this Agreement;
c. All requisite proceedings have been taken to
authorize it to enter into and perform this
Agreement;
d. It is an investment company properly registered under
the 1940 Act;
e. A registration statement under the 1940 Act has been
filed and will be effective and remain effective
during the term of this Agreement. The Fund also
warrants to the Bank that all necessary filings under
the securities laws of the states in which the Fund
offers or sells its shares will have been made and
will be current during the term of this Agreement;
f. No legal or administrative proceedings have been
instituted or threatened which would impair the
Fund's ability to perform its duties and obligations
under this Agreement;
g. Its entrance into this Agreement shall not cause a
material breach or be in material conflict with any
other agreement or obligation of the Fund or any law
or regulation applicable to it; and
h. As of the close of business on the date of this
Agreement, the Fund is authorized to issue shares of
capital stock, and it will initially offer shares, in
the authorized amounts as set forth in Schedule A to
this Agreement.
5. ADMINISTRATION SERVICES
The Bank shall provide the following services, in each case,
subject to the control, supervision and direction of the Fund and the review and
comment by the Fund's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Fund and the
Bank:
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a. Prepare for review and approval by officers of the
Fund financial information for the Fund's quarterly,
semi-annual and annual reports, proxy statements and
other communications required or otherwise to be sent
to Fund shareholders, and arrange for the printing
and dissemination of such reports and communications
to shareholders;
b. Prepare for review by an officer of and legal counsel
for the Fund the Fund's periodic financial reports
required to be filed with the Securities and Exchange
Commission on Form N-SAR and financial information
required by Form N-2 and such other reports, forms or
filings as may be mutually agreed upon;
c. Assist in the coordination of and oversee the audit
process and prepare audit workpapers;
d. Calculate the total return;
e. Prepare expense budgets and process expense payments;
and
f. Oversee the determination and publication of the
Fund's net asset value in accordance with the Fund's
policy as adopted from time to time by the Board.
The Bank shall provide the office facilities and the personnel required by it to
perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Bank shall receive from the Fund such compensation for the
services provided pursuant to this Agreement as may be agreed to from time to
time in a written fee schedule approved by the parties and initially set forth
in Schedule B to this Agreement. The fees are accrued and billed monthly and
shall be due and payable upon receipt of the invoice. Upon the termination of
this Agreement before the end of any month, the fee for the part of the month
before such termination shall be prorated according to the proportion which such
part bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
The Fund agrees promptly to reimburse the Bank for any
equipment and supplies specially ordered by or for the Fund through the Bank and
for any other expenses not contemplated by this Agreement that the Bank may
incur on the Fund's behalf at the Fund's request or with the Fund's consent.
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The Fund will bear all expenses that are incurred in its
operation and not specifically assumed by the Bank. Expenses to be borne by the
Fund, include, but are not limited to: organizational expenses; cost of services
of independent accountants and outside legal and tax counsel (including such
counsel's review of the Fund's registration statement, proxy materials, federal
and state tax qualification as a regulated investment company and other reports
and materials prepared by the Bank under this Agreement); cost of any services
contracted for by the Fund directly from parties other than the Bank; cost of
trading operations and brokerage fees, commissions and transfer taxes in
connection with the purchase and sale of securities for the Fund; investment
advisory fees; taxes, insurance premiums and other fees and expenses applicable
to its operation; costs incidental to any meetings of shareholders including,
but not limited to, legal and accounting fees, proxy filing fees and the costs
of preparation, printing and mailing of any proxy materials; costs incidental to
Board meetings, including fees and expenses of Board members; the salary and
expenses of any officer, director or employee of the Fund; costs incidental to
the preparation, printing and distribution of the Fund's registration statements
and any amendments thereto and shareholder reports; cost of typesetting and
printing of prospectuses; cost of preparation and filing of the Fund's tax
returns, Form N-2 and Form N-SAR, and all notices, registrations and amendments
associated with applicable federal and state tax and securities laws; all
applicable registration fees and filing fees required under federal and state
securities laws; fidelity bond and directors' and officers' liability insurance;
and cost of independent pricing services used in computing the Fund's net asset
value.
The Bank is authorized to and may employ or associate with
such person or persons as the Bank may deem desirable to assist it in performing
its duties under this Agreement; provided, however, that the compensation of
such person or persons shall be paid by the Bank and that the Bank shall be as
fully responsible to the Fund for the acts and omissions of any such person or
persons as it is for its own acts and omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Bank may apply to any officer of the Fund for
instructions and, with the prior approval of the Fund, may consult with its own
legal counsel or outside counsel for the Fund or the independent accountants for
the Fund at the expense of the Fund, with respect to any matter arising in
connection with the services to be performed by the Bank under this Agreement.
The Bank shall not be liable, and shall be indemnified by the Fund, for any
action taken or omitted by it in good faith in reliance upon any such
instructions or advice or upon any paper or document believed by it to be
genuine and to have been signed by the proper person or persons. The Bank shall
not be held to have notice of any change of authority of any person until
receipt of written notice thereof from the Fund. Nothing in this paragraph shall
be construed as imposing upon the Bank any obligation to seek such instructions
or advice, or to act in accordance with such advice when received.
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8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Bank shall have no
liability for any error of judgment or mistake of law or for any loss or damage
resulting from the performance or nonperformance of its duties hereunder unless
solely caused by or resulting from the gross negligence or willful misconduct of
the Bank, its officers or employees. The Bank shall not be liable for any
special, indirect, incidental, or consequential damages of any kind whatsoever
(including, without limitation, attorneys' fees) under any provision of this
Agreement or for any such damages arising out of any act or failure to act
hereunder. In any event, the Bank's liability under this Agreement shall be
limited to two times the Bank's total annual fees earned hereunder during the
preceding twelve months or $200,000, whichever is greater, for any liability or
loss suffered by the Fund including, but not limited to, any liability relating
to qualification of the Fund as a regulated investment company or any liability
relating to the Fund's compliance with any federal or state tax or securities
statute, regulation or ruling.
The Bank shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption, nor
shall any such failure or delay give the Fund the right to terminate this
Agreement.
The Fund shall indemnify and hold the Bank harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Bank resulting from any claim, demand, action or suit
in connection with the Bank's acceptance of this Agreement, any action or
omission by it in the performance of its duties hereunder, or as a result of
acting upon any instructions reasonably believed by it to have been duly
authorized by the Fund, provided that this indemnification shall not apply to
actions or omissions of the Bank, its officers or employees in cases of its or
their own gross negligence or willful misconduct.
The Fund will be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above. In the
event the Fund elects to assume the defense of any such suit and retain counsel,
the Bank or any of its affiliated persons, named as defendant or defendants in
the suit, may retain additional counsel but shall bear the fees and expenses of
such counsel unless (i) the Fund shall have specifically authorized the
retaining of such counsel or (ii) the Bank shall have determined in good faith
that the retention of such counsel is required as a result of a conflict of
interest.
The indemnification contained herein shall survive the
termination of this Agreement.
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9. CONFIDENTIALITY
The Bank agrees that, except as otherwise required by law or
in connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
written consent of the Fund.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Fund assumes full responsibility for complying with all
securities, tax, commodities and other laws, rules and regulations applicable to
it.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
13A COMMERCIAL MORTGAGE SECURITIES FUND, INC.
By: /s/ Xxxxxx Xxxxxx
_____________________________
Name: Xxxxxx Xxxxxx
_____________________________
Title: Secretary
_____________________________
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxxxx X. Xxxxxxx
_____________________________
Name: Xxxxxxxx X. Xxxxxxx
_____________________________
Title: Senior Vice President
_____________________________
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SERVICE AGREEMENT
13A Commercial Mortgage Securities Fund, Inc.
SCHEDULE A
Listing of Investment Funds and Authorized Shares
Investment Fund Authorized Shares
--------------- -----------------
13A Commercial Mortgage Securities Fund, Inc.
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STATE STREET BANK AND TRUST COMPANY
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Schedule B
FUND ADMINISTRATION FEE SCHEDULE
FOR
13A COMMERCIAL MORTGAGE SECURITIES FUND, INC.
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I. FUND ADMINISTRATION SERVICES
The following fee schedule is for the 13A Commercial Mortgage
Securities Fund, Inc. The proposed level of service includes: Financial
Reporting, N-SAR preparation and filing, expense budgeting and fund
accounting oversight.
Fees for Fund Administration Services
Annual Fee
Average Assets Expressed in Basis Points: 1/100 of 1%
-------------- --------------------------------------
First $150 Million / Fund 5.00
Next $150 Million / Fund 3.00
Thereafter 1.00
Minimum / Fund $60,000
Fund Fees:
Total net assets of the Fund will be used to calculate the fee by
multiplying the net assets of the Fund by the basis point fees in the
above schedule. The greater of the basis point fee or the minimum will
be accrued to the Fund.
II. LEVERAGE FEE:
An additional fee of $2,500 per year will be charged to 13A Commercial
Mortgage Securities Fund, Inc. for additional financial statement
preparation required to the extent that the fund utilizes leveraging.
III. OUT OF POCKET EXPENSES INCLUDE, BUT MAY NOT BE LIMITED TO:
Legal fees, audit fees and other professional fees
Postage
Supplies related to Fund records
Travel and lodging for Board and Operations meetings
IV. SPECIAL ARRANGEMENTS
Fees for activities of a non-recurring nature such as reorganizations,
and/or preparation of special reports, and consulting will be subject
to negotiation. Fees for a change in fund structure (i.e., Core and
Feeder) are subject to negotiation.
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V. TERM OF THE CONTRACT
The parties agree that this fee schedule shall remain in effect until
December 31, 1998 and from year to year thereafter until it is revised
as a result of negotiations initiated by either party.
13A Commercial Mortgage Securities Fund, Inc. Street Bank and Trust Company
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx
_________________ _______________________
Title: Secretary Title: Senior Vice President
_________ _____________________
Date: 11/24/97 Date: 11/20/97
________ ________
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