CENTRAL ASSET FUND, INC.
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 24th day of March, 1998
between Central Asset Fund, Inc., a Maryland corporation (the "Company"),
and Comerica Bank, a Michigan corporation (the "Administrator"). When used
with reference to a particular series of the Company's preferred shares,
initially capitalized terms not defined herein shall have the respective
meanings ascribed to such terms in the Articles Supplementary of the
Company relating to such series of preferred shares.
WITNESSETH:
WHEREAS, the Company desires to retain the Administrator as its
agent for certain administrative services, and the Administrator is willing
to furnish such administrative services on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, the parties agree as follows:
1. The Company hereby appoints the Administrator as its agent to
provide the services set forth below, subject to the overall supervision
and approval of the Board of Directors of the Company for the period and on
the terms set forth in this Agreement. The Administrator hereby accepts
such appointment and agrees during such period to render the services
herein described and to assume the obligations herein set forth, for the
compensation herein provided.
2. Subject to the supervision, direction and control of the
Board of Directors and officers of the Company, the Administrator shall
provide facilities for meetings of the Board of Directors and shareholders
of the Company and office facilities and personnel to assist the officers
of the Company in the performance of the following services:
(a) Oversee the determination, pursuant to Schedule I
hereto, and publication of, the Company's net asset value in accordance
with the Company's policy as adopted from time to time by the Board of
Directors;
(b) Oversee the maintenance of certain books and records of
the Company as required under Rule 31a-1(b)(1)-(4) of the Investment
Company Act;
(c) Arrange for preparation by the Company's independent
accountants, for review, approval and execution by officers of the Company,
the Company's federal, state and local income tax returns, reporting forms,
and any other required tax returns, as may be determined by the Company and
the Board of Directors;
(d) Arrange for payment of the Company's expenses;
(e) Prepare for review and approval by officers of the
Company financial information for the Company's reports required to be
filed with the Securities and Exchange Commission and its semi-annual and
annual reports, proxy statements and other communications with shareholders
required or otherwise to be sent to Company shareholders, and arrange for
the printing and dissemination of such reports and communications to
shareholders;
(f) Prepare for review by an officer of the Company the
Company's periodic financial reports required to be filed with the
Securities and Exchange Commission (the "SEC") on such forms, or other
filings, as may be determined by the Company and the Board of Directors;
(g) Prepare reports relating to the business and affairs of
the Company as may be mutually agreed upon and not otherwise appropriately
prepared by the Company or by the Company's custodian, counsel or auditors;
(h) Implement the accounting policies of the Company
established by the Company;
(i) Provide such assistance to the Company's custodian and
the Company's counsel and auditors as generally may be reasonably requested
in carrying on the business and operations of the Company;
(j) Respond to, or refer to the Company's officers or
transfer agent, shareholder inquiries relating to the Company;
(k) Provide to Standard & Poor's Ratings Services ("S&P")
such copies of information (including notices and certificates in
connection with Required Asset Coverage as detailed in Schedule II) in the
Administrator's possession as may reasonably be requested by S&P to assist
in the rating of the Company's preferred shares; provided, however, that
such providing of information shall be limited to information in the form
maintained by the Administrator at the time of such request;
(l) Perform required asset coverage tests and calculations
for S&P as detailed in Schedule II; and
(m) Perform the function of notes paying agent for the
Floating Rate Notes due 2023 issued by the Company.
All services are to be furnished through the medium of any
directors, officers or employees of the Administrator as the Administrator
deems appropriate in order to fulfill its obligations hereunder.
Each party shall bear all its own expenses incurred in connection
with this Agreement. Printing and dissemination expenses, such as those
for reports to shareholders and proxy statements, shall be expenses of the
Company, as shall fees of the Company's independent accountants but only in
connection with (i) the preparation of the tax returns and reporting forms
referred to in Section 2(c) hereof, (ii) the preparation of any
accountant's certificates required in connection with calculations of the
required asset coverage of any outstanding preferred stock of the Company
and (iii) the annual audit of the Company's financial statements, it being
understood that the Administrator shall bear all other accounting fees and
expenses.
3. The Company will pay the Administrator a fee as detailed in
Schedule III attached hereto, which may be amended from time to time with
the written consent of the parties hereto.
4. The Administrator assumes no responsibility under this
Agreement other than to render the services called for hereunder, and
specifically assumes no responsibilities for investment advice or the
investment or reinvestment of the Company's assets.
5. (a) In the absence of bad faith or negligence on its part,
the Administrator shall not be liable for any action taken, suffered or
omitted or for any error of judgment made by it in the performance of its
duties under this Agreement. In no event shall the Administrator be liable
to the Company or any third party for special, indirect, or consequential
damages, or lost profits or loss of business arising under or in connection
with this Agreement, even if informed of the possibility of such damages
and regardless of the form of action. The Administrator shall not be
liable for any error of judgment made in good faith unless the
Administrator shall have been negligent in ascertaining or failing to
ascertain the pertinent facts.
(b) As used in this Paragraph 5, the term "Administrator"
shall include any affiliates of the Administrator performing services for
the Company contemplated hereby, and directors, officers, agents and
employees of the Administrator and such affiliates.
(c) The Administrator may, with respect to questions of
law, apply for and obtain the advice and opinion of legal counsel
satisfactory to the Administrator, which may include counsel to the Company
(which shall be at the expense of the Company within a reasonable budget
established by the Company after consultation with the Administrator) or
counsel to the Administrator (which shall be at the expense of the
Administrator), and with respect to the application of generally accepted
accounting principles, apply for and obtain the advice and opinion of the
Company's accounting experts, which shall be at the expense of the Company
if in connection with the matters referred to in clauses (i), (ii) or (iii)
of the last paragraph of Section 2 hereof. The Administrator shall be
fully protected with respect to any action taken or omitted by it in good
faith in conformity with such advice or opinion.
(d) The Company shall indemnify and hold harmless the
Administrator from and against any and all costs, expenses, damages,
liabilities and claims, and reasonable attorneys' and accountants' fees
relating thereto, which are sustained or incurred or which may be asserted
against the Administrator, by reason of or as a result of any action taken
or omitted to be taken by the Administrator in good faith hereunder or in
reliance upon (i) any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended or
repealed after such action was taken or omitted, (ii) any offering
materials of the Company, in connection with the sale of securities of the
Company, (iii) any instructions of an officer of the Company, or (iv) any
opinion of legal counsel for the Company, or the Administrator (if a copy
of such opinion is provided to the Company before such action was taken or
omitted), or arising out of transactions or other activities of the Company
which occurred prior to the commencement of this Agreement; provided, that
the Company shall not indemnify the Administrator for costs, expenses,
damages, liabilities or claims arising out of the Administrator's own
negligence, bad faith or willful misconduct. This indemnity shall be a
continuing obligation of the Company, its successors and assigns,
notwithstanding the termination of this Agreement.
(e) Actions taken or omitted in reliance on oral or written
instructions, or upon any information, order, indenture, stock certificate,
power of attorney, assignment, affidavit or other instrument believed by
the Administrator to be genuine or bearing the signature of a person or
persons believed to be authorized to sign, countersign or execute the same,
or upon the opinion of legal counsel for the Company or its own counsel,
shall be conclusively presumed to have been taken or omitted in good faith.
6. At any time the Administrator may apply to an officer of the
Company for written instructions with respect to any matter arising in
connection with the Administrator's duties and obligations under this
Agreement, and the Administrator shall not be liable for any action taken
or omitted to be taken by the Administrator in good faith in accordance
with such instructions. Such application by the Administrator for
instructions from an officer of the Company may, at the option of the
Administrator, set forth in writing any action proposed to be taken or
omitted to be taken by the Administrator with respect to its duties or
obligations under this Agreement and the date on and/or after which such
action shall be taken, and the Administrator shall not be liable for any
action taken or omitted to be taken in accordance with a proposal included
in any such application on or after the date specified therein unless,
prior to taking or omitting to take any such action, the Administrator has
received written instructions in response to such application specifying
the action to be taken or omitted. The Administrator may consult counsel
to the Company at the expense of the Company (within a reasonable budget
established by the Company after consultation with the Administrator), or
its own counsel at its own expense, and shall be fully protected with
respect to anything done or omitted by it in good faith in accordance with
the advice or opinion of such counsel.
7. This Agreement shall become effective immediately and shall
continue in effect unless terminated as herein provided. This Agreement
may be terminated by either party hereto (without penalty) at any time upon
not less than 30 days' prior written notice to the other party hereto.
8. The services of the Administrator to the Company hereunder
are not exclusive and nothing in this Agreement shall limit or restrict the
right of the Administrator to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association. The Administrator shall be deemed to be an independent
contractor, unless otherwise expressly provided or authorized by this
Agreement.
9. During the term of this Agreement, the Company agrees to
furnish the Administrator at the principal office of the Administrator
prior to use thereof drafts and final copies of all placement memoranda,
prospectuses, proxy statements, reports to shareholders, sales literature,
or other material prepared for distribution to shareholders of the Company
or the public that refer in any way to the Administrator. If the
Administrator reasonably objects to such references within five business
days (or such other time as may be mutually agreed) after receipt thereof,
the Company will modify such references in a manner reasonably satisfactory
to the Administrator. In the event of termination of this Agreement, the
Company will continue to furnish to the Administrator copies of any of the
above-mentioned materials that refer in any way to the Administrator. The
Company shall timely furnish or otherwise make available to the
Administrator such other information relating to the business affairs of
the Company, its directors, officers, and service providers, as the
Administrator at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
10. This Agreement may be amended only by mutual written
consent.
11. Any notice of other communication required to be given in
writing pursuant to this Agreement shall be deemed duly given if delivered
or mailed by registered mail, postage prepaid, (l) to the Administrator at
Comerica Bank, 000 X. Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxxxx XX; (2) to the Company at c/o Merrill Lynch, Pierce,
Xxxxxx & Xxxxx Incorporated, World Financial Center, New York, New York
10281-1323, Attention: Auction Desk.
12. This Agreement sets forth the agreement and understanding of
the parties hereto solely with respect to the matters covered hereby and
the relationship between the Company and Comerica Bank as Administrator.
Nothing in this Agreement shall govern, restrict or limit in any respect
any other business dealings between the parties hereto unless otherwise
expressly provided herein.
13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the Investment
Company Act of 1940 (the "Investment Company Act"). In the case of any
conflict, the Investment Company Act shall control.
14. This Agreement may be executed by the parties hereto in
counterparts, and if executed in more than one counterpart, the separate
instruments shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CENTRAL ASSET FUND, INC.
By: /s/ Xxxxx X. Xxxxx
______________________________
Name: Xxxxx X. Xxxxx
Title: Assistant Secretary
COMERICA BANK, as Administrator
By: /s/ Xxxxx X. XxXxxxxx
______________________________
Name: Xxxxx X. XxXxxxxx
Title: First Vice President
Schedule I
The net asset value of a share of the Common Stock as at the time
of a particular determination shall be calculated by subtracting the
Company's liabilities (including accrued expenses and dividends payable)
and the liquidation value of any preferred stock outstanding from the
Company's total assets (the value of the securities the Company holds plus
cash or other assets, including interest and dividends accrued but not yet
received) and dividing the result by the total number of shares of Common
Stock-outstanding. The value of the securities the Company holds shall be
based on the closing prices quoted by Xxxxxx Data Corporation or any other
pricing service approved by Standard & Poor's Ratings Services. Expenses
are to be accrued as directed by the Board of Directors of the Company.
Schedule II
Certificate of S&P Required Asset Coverage.
For each series of the Company's preferred shares which is rated
by S&P the Administrator shall determine, as of each Business Day and each
Cure Date, the aggregate Adjusted Value of all S&P Eligible Assets on that
day and whether such aggregate Adjusted Value on such date equals or
exceeds the S&P Required Asset Coverage on such date. The calculations of
the Adjusted Value of all S&P Eligible Assets and S&P Required Asset
Coverage, and whether the aggregate Adjusted Value of S&P Eligible Assets
equals or exceeds the S&P Required Asset Coverage shall be set forth in a
certificate (a "Certificate of S&P Required Asset Coverage"), dated as of
each such Business Day and Cure Date and signed by an Authorized Custodian
Officer. The Administrator shall deliver (by facsimile or otherwise) a
Certificate of S&P Required Asset Coverage to the Company by 11:00 a.m. New
York time on the Business Day to which such certificate relates. With
respect to the Certificate of S&P Required Asset Coverage relating to (1)
each Business Day which is the first Business Day in the months of January,
April, July and October of each year, and (2) another day during each
calendar quarter, which day shall be selected at random by the independent
accountants signing the Accountant's Certificate referred to below, the
Administrator shall deliver to the Company, within three Business Days of
each such date, an Accountant's Certificate certifying as to (i) the
mathematical accuracy of the calculations reflected in the related
Certificate of S&P Required Asset Coverage, including the calculation of
the Adjusted Value of the S&P Eligible Assets referred to therein and
confirming that the S&P Eligible Assets referred to therein conform to the
definition of S&P Eligible Assets set forth in the Articles Supplementary,
(ii) that the methodology used by the Administrator in determining whether
the Adjusted Value of S&P Eligible Assets equals or exceeds the S&P
Required Asset Coverage is in accordance with the applicable requirements
of the Articles Supplementary, and (iii) that the written or published
price quotations used in such determination conform to such written or
published quotations and that the S&P Eligible Assets listed in such
Certificate of S&P Required Asset Coverage constitute S&P Eligible Assets
as defined in the Articles Supplementary.
Notices to S&P.
For each series of the Company's preferred shares which is rated
by S&P the Administrator shall:
(a) deliver to S&P, as soon as practicable (but in no event
later than the close of business on the second Business Day next succeeding
the following dates) the Certificate of S&P Required Asset Coverage with
respect to each of the following dates: (i) the Date of Original Issue,
(ii) each date as of which the Adjusted Value of all S&P Eligible Assets is
less than the S&P Required Asset Coverage, (iii) each Cure Date, (iv) each
date as of which the Adjusted Value of all S&P Eligible Assets is less than
or equal to 105% of the S&P Required Asset Coverage, (v) each Business Day
which is the first Business Day in the months of January, April, July and
October, and (vi) the date on which any Common Stock is redeemed by the
Company.
(b) deliver to S&P, promptly after same become available,
the following: (i) a copy of each Accountant's Certificate which differs
from the Administrator's calculations of S&P Required Asset Coverage; (ii)
a copy of each Accountant's Certificate relating to the Certificates of S&P
Required Asset Coverage with respect to (1) the Date of Original Issue for
each Series of preferred shares; (2) each Cure Date; (3)(A) each business
day which is the first business day in the months of January, April, July
and October and (B) another day during each calendar quarter, which day
shall be selected at random by the independent accountant's signing the
Accountant's Certificate; (iii) a copy of each amendment to the Articles
Supplementary; (iv) notice of the failure to distribute the full Dividend
Amount payable on any Dividend Distribution Date; (v) notice of the
inability of the Pricing Service to price, or the unavailability of price
quotes with respect to, any issue of common stock included in the S&P
Eligible Assets; and (vi) a copy of each written notice from the Broker-
Dealer changing any previously scheduled Dividend Distribution Date.
Notices to Company and Broker-dealer.
The Administrator will direct the independent auditors to
distribute such certifications as follows: In addition to providing the
required asset coverage certifications to S&P.
Company: Xxxxxx X. Xxxxxxxx XX, Treasurer
c/o Comerica Bank
X.X. Xxx 00000
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Broker/dealer: Xxxxxx Xxxxxxxx, Managing Director
c/o Merrill Xxxxx & Co.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Xxxxxx Xxxxxxx, Director
c/o Merrill Xxxxx & Co.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax (000) 000-0000
The Administrator will promptly notify the Company and the
Broker-dealer as enumerated above in case of any failure to meet the
required asset coverage.
Schedule III
The Company will pay the Administrator an annual fee for its
services under this Agreement and the Custodian Contract, dated March __,
1998, in an amount calculated by multiplying (i) the Total of the Fund's
Net Asset Value (i.e., total assets less total liabilities with liquidation
preference of preferred stock not being treated as a liability) at the end
of the relevant fiscal year of the Fund, by (ii) the percentage indicated
on the matrix below with respect to the relevant fiscal year of the Fund.
Period
------
Fund Fiscal Year of Initial Funding 0.25%
1st Full Fund Fiscal Year 0.25%
2nd Full Fund Fiscal Year 0.15%
3rd and Subsequent Fund Fiscal Years 0.06%
