ADMINISTRATIVE SERVICES AGREEMENT of SHORT-TERM BOND FUND OF AMERICA, INC.
ADMINISTRATIVE
SERVICES AGREEMENT
of
WHEREAS,
Short-Term
Bond Fund of America, Inc. (the “Fund”), is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the “1940 Act”), as an
open-end diversified investment company that offers Class C shares; Class F
shares; Class R-1 shares, Class R-2 shares, Class R-3 shares, Class R-4 shares
and Class R-5 shares (collectively, the “Class R shares”); and Class 529-A
shares, Class 529-B shares, Class 529-C shares, Class 529-E shares, and Class
529-F shares (collectively, the “Class 529 shares”); and
WHEREAS,
Capital
Research and Management Company (the “Investment Adviser”), is a Delaware
corporation registered under the Investment Advisers Act of 1940, as amended,
and is engaged in the business of providing investment advisory and related
services to the Fund and to other investment companies; and
WHEREAS,
the Fund
wishes to have the Investment Adviser arrange for and coordinate and monitor
the
provision of transfer agent and shareholder services (“transfer agent services”)
and certain other administrative services (other than those provided pursuant
to
any other agreement with the Fund), including but not limited to recordkeeping,
transactional services, tax information returns and reports, fund communication
and shareholder communication (collectively “administrative services”) for the
Fund’s Class C shares, Class F shares, Class R shares and Class 529 shares;
and
WHEREAS,
the
Investment Adviser is willing to perform or to cause to be performed such
transfer agent services and administrative services for the Fund’s Class C
shares, Class F shares, Class R shares and Class 529 shares on the terms and
conditions set forth herein; and
WHEREAS,
the Fund
and the Investment Adviser wish to enter into an Administrative Services
Agreement (“Agreement”) whereby the Investment Adviser would perform or cause to
be performed such transfer agent services and administrative services for the
Fund’s Class C shares, Class F shares, Class R shares and Class 529
shares;
NOW,
THEREFORE, the
parties agree as follows:
1. Services.
During the term
of this Agreement, the Investment Adviser shall perform or cause to be performed
the transfer agent services and administrative services set forth in Exhibit
A
hereto, as such exhibit may be amended from time to time by mutual consent
of
the parties. The Fund and Investment Adviser acknowledge that the Investment
Adviser will contract with third parties, including American Funds Service
Company (“AFS”), to perform such transfer agent services and administrative
services. In selecting third parties to perform transfer agent and
administrative services, the Investment Adviser shall select only those third
parties that the Investment Adviser reasonably believes have adequate facilities
and personnel to diligently perform such services. The Investment Adviser shall
monitor, coordinate and oversee the activities of the third parties with which
it or AFS contracts to ensure shareholders receive high-quality service. In
doing
so the
Investment Adviser shall establish procedures to monitor the activities of
such
third parties. These procedures may, but need not, include monitoring: (i)
telephone queue wait times; (ii) telephone abandon rates; (iii) website and
voice response unit downtimes; (iv) downtime of the third party’s shareholder
account recordkeeping system; (v) the accuracy and timeliness of financial
and
non-financial transactions; (vi) to ensure compliance with the Fund prospectus;
and (vii) with respect to Class 529 shares, compliance with the CollegeAmerica
program description.
2. Fees.
(a)
Transfer
Agent Fees. In
consideration of
transfer agent services performed or caused to be performed by the Investment
Adviser for the Fund’s Class C shares, Class F shares and Class R shares, the
Fund shall pay the Investment Adviser transfer agent fees according to the
fee
schedule contained in the Shareholder Services Agreement, as amended from time
to time, between the Fund and AFS. No Transfer Agent Fees shall be paid in
respect of accounts that are held in other than street name or a networked
environment. No fees shall be paid under this paragraph 2(a) for services
provided by third parties other than AFS. All fund-specific charges from third
parties -- including DST charges, postage, NSCC transaction charges and similar
out-of-pocket expenses -- will be passed through directly to the Fund. Transfer
agent fees shall be paid within 30 days after receipt of an invoice for transfer
agent services performed the preceding month.
(b)
Administrative Services Fees.
In consideration
of administrative services performed or caused to be performed by the Investment
Adviser for the Fund’s Class C shares, Class F shares, Class R shares and Class
529 shares, the Fund shall pay the Investment Adviser an administrative services
fee (“administrative fee”). For the Fund’s Class C shares, Class F shares, Class
R-1 shares, Class R-2 shares, Class R-3 shares, Class R-4 shares and Class
529
shares, the administrative fee shall accrue daily and shall be calculated at
the
annual rate of 0.15% of the average net assets of those shares. For the Fund’s
Class R-5 shares, the administrative fee shall accrue daily and shall be
calculated at the annual rate of 0.10% of the average net assets of the Class
R-5 shares. The administrative fee shall be paid within 30 days after receipt
of
an invoice for administrative services performed in the preceding
month.
3. Effective
Date
and Termination of Agreement.
This Agreement
shall become effective on October 1, 2006, and unless terminated sooner it
shall
continue in effect until October 31, 2007. It may thereafter be continued from
year to year only with the approval of a majority of those Directors of the
Fund
who are not “interested persons” of the Fund (as defined in the 0000 Xxx) and
have no direct or indirect financial interest in the operation of this Agreement
or any agreement related to it (the “Independent Directors”). This Agreement may
be terminated as to the Fund as a whole or any class of shares individually
at
any time by vote of a majority of the Independent Directors. The Investment
Adviser may terminate this agreement upon sixty (60) days’ prior written notice
to the Fund.
4. Amendment.
This Agreement
may not be amended to increase materially the fees payable under this Agreement
unless such amendment is approved by the vote of a majority of the Independent
Directors.
5. Assignment.
This Agreement
shall not be assignable by either party hereto and in the event of assignment
shall automatically terminate forthwith. The term “assignment” shall have the
meaning set forth in the 1940 Act. Notwithstanding the foregoing, the Investment
Adviser is specifically authorized to contract with third parties for the
provision of transfer agent, shareholder services, and administrative services
on behalf of the Fund.
6. Issuance
of
Series of Shares.
If the Fund shall
at any time issue shares in more than one series, this Agreement may be adopted,
amended, continued or renewed with respect to a series as provided herein,
notwithstanding that such adoption, amendment, continuance or renewal has not
been effected with respect to any one or more other series of the
Fund.
7. Choice
of
Law.
This Agreement
shall be construed under and shall be governed by the laws of the State of
California, and the parties hereto agree that proper venue of any action with
respect hereto shall be Los Angeles County, California.
8. Limitation
on
Fees.
Notwithstanding
the foregoing, the portion of the administrative fees payable under this
Agreement retained by the Investment Adviser (after all permissible payments
of
AFS and third party service providers) will be limited to no more than 0.05%
of
average net assets per share class.
IN
WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed in duplicate
original by its officers thereunto duly authorized, as of October 1,
2006.
CAPITAL
RESEARCH
AND SHORT-TERM
BOND
FUND OF
MANAGEMENT
COMPANY AMERICA,
INC.
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By:
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By:
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Xxxxxxx
X.
Xxxxxx
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Xxxxx
X.
Xxxx
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President
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President
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By:
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By:
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Xxxxxxx
X.
Xxxxxx
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Xxxxxxxx
X.
Xxxxxxx,
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Vice
President and Secretary
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Secretary
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EXHIBIT
A
to
the
Administrative
Services Agreement
Transfer
Agent Services
The
Investment
Adviser or any third party with whom it may contract, including American Funds
Service Company (the Investment Adviser and any such third-party are
collectively referred to as “Service Provider”) shall act, as necessary, as
stock transfer agent, dividend disbursing agent and redemption agent for the
Fund’s Class C shares, Class F shares, Class R shares and Class 529 shares, and
shall provide such additional related services as the Fund’s Class C shares,
Class F shares, Class R shares and Class 529 shares may from time to time
require, all of which services are sometimes referred to herein as "shareholder
services."
Administrative
Services
1. Record
Maintenance
The
Service
Provider shall maintain, and require any third parties with which it contracts
to maintain with respect to each Fund shareholder holding the Fund’s Class C
shares, Class F shares, Class R shares and/or Class 529 shares in a Service
Provider account (“Customers”) the following records:
a. Number
of
Shares;
b. Date,
price and
amount of purchases and redemptions (including dividend reinvestments) and
dates
and amounts of dividends paid for at least the current year to
date;
c. Name
and address of
the Customer, including zip codes and social security numbers or taxpayer
identification numbers;
d. Records
of
distributions and dividend payments; and
e. Any
transfers of
shares.
2. Shareholder
Communications
Service
Provider
shall:
a. Provide
to a
shareholder mailing agent for the purpose of delivering certain Fund-related
materials the names and addresses of all Customers. The Fund-related materials
shall consist of updated prospectuses and any supplements and amendments
thereto, annual and other periodic reports, proxy or information statements
and
other appropriate shareholder communications. In the alternative, the Service
Provider may distribute the Fund-related materials to its
Customers.
b. Deliver
current
Fund prospectuses and statements of additional information and annual and other
periodic reports upon Customer request, and, as applicable, with confirmation
statements;
c. Deliver
statements
to Customers on no less frequently than a quarterly basis showing, among other
things, the number of Class C shares, Class F shares, Class R shares and/or
Class 529 shares of the Fund owned by such Customer and the net asset value
of
the Class C shares, Class F shares, Class R shares and/or Class 529 shares
of
the Fund as of a recent date;
d. Produce
and deliver
to Customers confirmation statements reflecting purchases and redemptions of
Class C shares, Class F shares, Class R shares and/or Class 529 shares of the
Fund;
e. Respond
to Customer
inquiries regarding, among other things, share prices, account balances,
dividend amounts and dividend payment dates;
f. With
respect to
Class C and/or Class F shares of the Fund purchased by Customers after the
effective date of this Agreement, provide average cost basis reporting to
Customers to assist them in preparation of their income tax returns; and
g. If
the Service
Provider accepts transactions in the Fund’s Class C shares, Class F shares and
Class R shares from any brokers or banks in an omnibus relationship, require
each such broker or bank to provide such shareholder communications as set
forth
in 2(a) through 2(f) to its own Customers.
3. Transactional
Services
The
Service
Provider shall communicate to its Customers, as to Class C shares, Class F
shares, Class R shares and Class 529 shares of the Fund, purchase, redemption
and exchange orders reflecting the orders it receives from its Customers or
from
any brokers and banks for their Customers. The Service Provider shall also
communicate to beneficial owners holding through it, and to any brokers or
banks
for beneficial owners holding through them, as to shares of Class C shares,
Class F shares, Class R shares and Class 529 shares of the Fund, mergers, splits
and other reorganization activities, and require any broker or bank to
communicate such information to its Customers.
4. Tax
Information
Returns and Reports
The
Service
Provider shall prepare and file, and require to be prepared and filed by any
brokers or banks as to their Customers, with the appropriate governmental
agencies, such information, returns and reports as are required to be so filed
for reporting: (i) dividends and other distributions made; (ii) amounts withheld
on dividends and other distributions and payments under applicable federal
and
state laws, rules and regulations; and (iii) gross proceeds of sales
transactions as required.
5. Fund
Communications
The
Service
Provider shall, upon request by the Fund, on each business day, report the
number of Class C shares, Class F shares, Class R shares and Class 529 shares
on
which the administrative fee is to be paid pursuant to this Agreement. The
Service Provider shall also provide the Fund with a monthly
invoice.
6. Monitoring
of
Service Providers
The
Investment
Adviser shall coordinate and monitor the activities of the Service Providers
with which it contracts to ensure that the shareholders of the Fund’s Class C
shares, Class F shares, Class R shares and Class 529 shares receive high-quality
service. The Investment Adviser shall also ensure that Service Providers deliver
to Customers account statements and all Fund-related materials, including
prospectuses, shareholder reports, and proxies.
SHAREHOLDER
SERVICES AGREEMENT
1. The
parties to this
Agreement, which is effective as of October 1, 2006, are Short-Term Bond
Fund of
America, Inc. (hereinafter called "the Fund") and American Funds Service
Company, a California corporation (hereinafter called "AFS"). AFS is a wholly
owned subsidiary of Capital Research and Management Company (hereinafter
called
"CRMC"). This Agreement will continue in effect until amended or terminated
in
accordance with its terms.
2. The
Fund hereby
employs AFS, and AFS hereby accepts such employment by the Fund, as its transfer
agent. In such capacity AFS will provide the services of stock transfer agent,
dividend disbursing agent, redemption agent, and such additional related
services as the Fund may from time to time require, all of which services
are
sometimes referred to herein as “shareholder services.” In addition, AFS assumes
responsibility for the Fund’s implementation and compliance with the procedures
set forth in the Anti-Money Laundering (“AML”) Program of the Fund and does
hereby agree to provide all records relating to the AML Program to any federal
examiner of the Fund upon request.
3. AFS
has entered
into substantially identical agreements with other investment companies for
which CRMC serves as investment adviser. (For the purposes of this Agreement,
such investment companies, including the Fund, are called "participating
investment companies.")
4. AFS
has entered
into an agreement with DST Systems, Inc. (hereinafter called "DST"), to provide
AFS with electronic data processing services sufficient for the performance
of
the shareholder services referred to in paragraph 2.
5. The
Fund, together
with the other participating companies, will maintain a Review and Advisory
Committee, which Committee will review and may make recommendations to the
boards of the participating investment companies regarding all fees and charges
provided for in this Agreement, as well as review the level and quality of
the
shareholder services rendered to the participating investment companies and
their shareholders. Each participating investment company may select one
director or trustee who is not affiliated with CRMC, or any of its affiliated
companies, or with Washington Management Corporation or any of its affiliated
companies, to serve on the Review and Advisory Committee.
6. AFS
will provide to
the participating investment companies the shareholder services referred
to
herein in return for the following fees:
Annual
account
maintenance fee (paid monthly):
$0.57
per month for
each open account on AFS’ books or in Level 0, 2 or 4
Networking
($6.84
per year).
$0.06
per month for
each open account maintained in Street Name or
Level
1 or 3
Networking ($0.72 per year).
No
annual fee will
be charged for a participant account underlying a 401(k)
or
other defined
contribution plan where the plan maintains a single
account
on AFS’
books and responds to all participant inquiries.
Transaction
fees:
$1.55
per
non-automated transaction
$0.20
per automated
transaction
For
this purpose,
“transactions” shall include all types of transactions included in an “activity
index” as reported to the Review and Advisory Committee at least annually. AFS
will xxxx the Fund monthly, on or shortly after the first of each calendar
month, and the Fund will pay AFS within five business days of such
billing.
Any
revision of the
schedule of charges set forth herein shall require the affirmative vote of
a
majority of the members of the board of directors/trustees of the
Fund.
7. All
fund-specific
charges from third parties -- including DST charges, payments described in
the
next sentence, postage, NSCC transaction charges and similar out-of-pocket
expenses -- will be passed through directly to the Fund or other participating
investment companies, as applicable. AFS, subject to approval of its board
of
directors, is authorized in its discretion to negotiate payments to third
parties for account maintenance and/or transaction processing services provided
such payments do not exceed the anticipated savings to the Fund, either in
fees
payable to AFS hereunder or in other direct Fund expenses, that AFS reasonably
anticipates would be realized by the Fund from using the services of such
third
party rather than maintaining the accounts directly on AFS' books and/or
processing non-automated transactions.
8. It
is understood
that AFS may have income in excess of its expenses and may accumulate capital
and surplus. AFS is not, however, permitted to distribute any net income
or
accumulated surplus to its parent, CRMC, in the form of a dividend without
the
affirmative vote of a majority of the members of the boards of
directors/trustees of the Fund and all participating investment
companies.
9. This
Agreement may
be amended at any time by mutual agreement of the parties, with agreement
of the
Fund to be evidenced by affirmative vote of a majority of the members of
the
board of directors/trustees of the Fund.
10. This
Agreement may
be terminated on 180 days' written notice by either party. In the event of
a
termination of this Agreement, AFS and the Fund will each extend full
cooperation in effecting a conversion to whatever successor shareholder service
provider(s) the Fund may select, it being understood that all records relating
to the Fund and its shareholders are property of the Fund.
11. In
the event of a
termination of this Agreement by the Fund, the Fund will pay to AFS as a
termination fee the Fund's proportionate share of any costs of conversion
of the
Fund's shareholder service from AFS to a successor. In the event of termination
of this Agreement and all corresponding agreements with all the participating
investment companies, all assets of AFS will be sold or otherwise converted
to
cash, with a view to the liquidation of AFS when it ceases to provide
shareholder services for the participating investment companies. To the extent
any such assets are sold by AFS to CRMC and/or any of its affiliates, such
sales
shall be at fair market value at the time of sale as agreed upon by AFS,
the
purchasing company or companies, and the Review and Advisory Committee. After
all assets of AFS have been converted to cash and all liabilities of AFS
have
been paid or discharged, an amount equal to any capital or paid-in surplus
of
AFS that shall have been contributed by CRMC or its affiliates shall be set
aside in cash for distribution to CRMC upon liquidation of AFS. Any other
capital or surplus and any assets of AFS remaining after the foregoing
provisions for liabilities and return of capital or paid-in surplus to CRMC
shall be distributed to the participating investment companies in such
proportions as may be determined by the Review and Advisory
Committee.
12. In
the event of
disagreement between the Fund and AFS, or between the Fund and other
participating investment companies as to any matter arising under this
Agreement, which the parties to the disagreement are unable to resolve, the
question shall be referred to the Review and Advisory Committee for resolution.
If the Review and Advisory Committee is unable to resolve the question to
the
satisfaction of both parties, either party may elect to submit the question
to
arbitration; one arbitrator to be named by each party to the disagreement
and a
third arbitrator to be selected by the two arbitrators named by the original
parties. The decision of a majority of the arbitrators shall be final and
binding on all parties to the arbitration. The expenses of such arbitration
shall be paid by the party electing to submit the question to
arbitration.
13. The
obligations of
the Fund under this Agreement are not binding upon any of the directors,
trustees, officers, employees, agents or shareholders of the Fund individually,
but bind only the Fund itself. AFS agrees to look solely to the assets of
the
Fund for the satisfaction of any liability of the Fund in respect to this
Agreement and will not seek recourse against such directors, trustees, officers,
employees, agents or shareholders, or any of them or their personal assets
for
such satisfaction.
| AMERICAN FUNDS SERVICE COMPANY | SHORT-TERM BOND FUND OF AMERICA, INC. |
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By
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By
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J.
Xxxxx
Xxxx, Chairman
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Xxxx
X.
Xxxxx, Xx., Vice Chairman
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By
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By
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Xxxxxx
X.
Xxxxxxxx, Secretary
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Xxxxxxxx
X.
Xxxxxxx, Secretary
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This
Indemnification Agreement (the “Agreement”) is made as of the date set forth on
the signature page by and between Short-Term Bond Fund of America, Inc.,
a
Maryland corporation (the “Fund”), and the director of the Fund whose name is
set forth on the signature page (the “Board Member”).
WHEREAS,
the Board
Member is a director of the Fund, and the Fund wishes the Board Member
to
continue to serve in that capacity; and
WHEREAS,
the
Articles of Incorporation and By-Laws of the Fund and applicable laws permit
the
Fund to contractually obligate itself to indemnify and hold the Board Member
harmless to the fullest extent permitted by law;
NOW,
THEREFORE, in
consideration of the foregoing recitals and the mutual agreements set forth
herein, the parties hereby agree as set forth below. Certain capitalized
terms
used herein are defined in Section 5.
1.
Indemnification.
The Fund shall
indemnify and hold harmless the Board Member against any liabilities or
Expenses
(collectively, “Liability”) actually and reasonably incurred by the Board Member
in any Proceeding arising out of or in connection with the Board Member’s
service to the Fund, to the fullest extent permitted by the Articles of
Incorporation and By-Laws of the Fund and the laws of the State of Maryland,
the
Securities Act of 1933, and the Investment Company Act of 1940, as now
or
hereafter in force, subject to the provisions of paragraphs (a), (b) and
(c) of
this Section 1. The Fund’s Board of Directors shall take such actions as may be
necessary to carry out the intent of these indemnification provisions and
shall
not amend the Fund’s Articles of Incorporation or By-laws to limit or eliminate
the right to indemnification provided herein with respect to acts or omissions
occurring prior to such amendment or repeal.
(a)
Special
Condition.
With respect to
Liability to the Fund or its shareholders, and subject to applicable state
and
federal law, the Board Member shall be indemnified pursuant to this Section
1
against any Liability unless such Liability arises by reason of the Board
Member’s willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his or her office as defined in
such
Section 17(h) of the Investment Company Act of 1940, as amended (“Disabling
Conduct”).
(b)
Special
Process
Condition.
With respect to
Liability to the Fund or its shareholders, no indemnification shall be
made
unless a determination has been made by reasonable and fair means that
the Board
Member has not engaged in disabling conduct. Such reasonable and fair means
shall be established in conformity with then applicable law and administrative
interpretations. In any determination with respect to disabling conduct,
a
director requesting indemnification who is not an “interested person” of the
Corporation, as defined in Section 2(a)(19) of the Investment Company Act
of
1940, as amended, shall be afforded a rebuttable presumption that such
director
did not engage in such conduct while acting in his or her capacity as a
director.
(c)
State
Law
Restrictions.
In accordance
with the General Corporation Law of the State of Maryland, the Board Member
shall not be indemnified and held harmless pursuant to this Section 1 if
the
substantive and procedural standards for indemnification under such law
have not
been met.
2.
Advancement
of Expenses.
The Fund shall
promptly advance funds to the Board Member to cover any and all Expenses
the
Board Member incurs with respect to any Proceeding arising out of or in
connection with the Board Member’s service to the Fund, to the fullest extent
permitted by the laws of the State of Maryland, the Securities Act of 1933,
and
the Investment Company Act of 1940, as such statutes are now or hereafter
in
force, subject to the provisions of paragraphs (a) and (b) of this Section
2.
(a)
Affirmation
of
Conduct.
A request by the
Board Member for advancement of funds pursuant to this Section 2 shall
be
accompanied by the Board Member’s written affirmation of his or her good faith
belief that he or she met the standard of conduct necessary for indemnification,
and such other statements, documents or undertakings as may be required
under
applicable law.
(b)
Special
Conditions to Advancement.
With respect to
Liability to the Fund or its shareholders, and subject to applicable state
and
federal law, the Board Member shall be entitled to advancements of Expenses
pursuant to this Section 2 against any Liability to the Fund or its shareholders
if (1) the Fund has obtained assurances to the extent required by applicable
law, such as by obtaining insurance or receiving collateral provided by
the
Board Member, to the reasonable satisfaction of the Board, that the advance
will
be repaid if the Board Member is found to have engaged in Disabling Conduct,
or
(2) the Board has a reasonable belief that the Board Member has not engaged
in
disabling conduct and ultimately will be entitled to indemnification. In
forming
such a reasonable belief, the Board of Directors shall act in conformity
with
then applicable law and administrative interpretations, and shall afford
a
director requesting an advance who is not an “interested person” of the
Corporation, as defined in Section 2(a)(19) of the Investment Company Act
of
1940, as amended, a rebuttable presumption that such director did not engage
in
disabling conduct while acting in his or her capacity as a
director.
3.
Procedure
for Determination of Entitlement to Indemnification and
Advancements.
A request by the
Board Member for indemnification or advancement of Expenses shall be made
in
writing, and shall be accompanied by such relevant documentation and information
as is reasonably available to the Board Member. The Secretary of the Fund
shall
promptly advise the Board of such request.
(a)
Methods
of
Determination.
Upon the Board
Member’s request for indemnification or advancement of Expenses, a determination
with respect to the Board Member’s entitlement thereto shall be made by the
Board or Independent Counsel in accordance with applicable law. The Board
Member
shall have the right, in his or her sole discretion, to have Independent
Counsel
make such a determination. The Board Member shall cooperate with the person
or
persons making such determination, including without limitation providing
to
such persons upon reasonable advance request any documentation or information
that is not privileged or otherwise protected from disclosure and is reasonably
available to the Board Member and reasonably necessary to such determination.
Any Expenses incurred by the Board Member in so cooperating shall be borne
by
the Fund, irrespective of the determination as to the Board Member’s entitlement
to indemnification or advancement of Expenses.
(b)
Independent
Counsel.
If the
determination of entitlement to indemnification or advancement of Expenses
is to
be made by Independent Counsel, the Board of Directors shall select the
Independent Counsel, and the Secretary of the Fund shall give written notice
to
the Board Member advising the Board Member of the identity of the Independent
Counsel selected. The Board Member may, within five days after receipt
of such
written notice, deliver to the Secretary of the Fund a written objection
to such
selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirement of independence
set forth in Section 4, and shall set forth with particularity the factual
basis
of such assertion. Upon such objection, the Board of Directors, acting
in
conformity with applicable law, shall select another Independent Counsel.
If
within fourteen
days after submission by the Board Member of a written request for
indemnification or advancement of Expenses no such Independent Counsel
shall
have been selected without objection, then either the Board or the Board
Member
may petition the Superior Court of the State of California or any other
court of
competent jurisdiction for resolution of any objection that shall have
been made
to the selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other
person as
the court shall designate, and the person with respect to whom an objection
is
favorably resolved or the person so appointed shall act as Independent
Counsel.
The
Fund shall pay
all reasonable fees and Expenses charged or incurred by Independent Counsel
in
connection with his or her determinations pursuant to this Agreement, and
shall
pay all reasonable fees and Expenses incident to the procedures described
in
this paragraph, regardless of the manner in which such Independent Counsel
was
selected or appointed.
(c)
Failure
to Make
Timely Determination.
If the person or
persons empowered or selected to determine whether the Board Member is
entitled
to indemnification or advancement of Expenses shall not have made such
determination within thirty days after receipt by the Secretary of the
Fund of
the request therefor, the requisite determination of entitlement to
indemnification or advancement of Expenses shall be deemed to have been
made,
and the Board Member shall be entitled to such indemnification or advancement,
absent (i) an intentional misstatement by the Board Member of a material
fact,
or an intentional omission of a material fact necessary to make the Board
Member’s statement not materially misleading, in connection with the request for
indemnification or advancement of Expenses, or (ii) a prohibition of such
indemnification or advancements under applicable law; provided, however,
that
such period may be extended for a reasonable period of time, not to exceed
an
additional thirty days, if the person or persons making the determination
in
good faith require such additional time to obtain or evaluate documentation
or
information relating thereto.
(d)
Payment
Upon
Determination of Entitlement.
If a determination
is made pursuant to Section 1 or Section 2 (or is deemed to be made pursuant
to
paragraph (c) of this Section 3) that the Board Member is entitled to
indemnification or advancement of Expenses, payment of any indemnification
amounts or advancements owing to the Board Member shall be made within
ten days
after such determination (and, in the case of advancements of further Expenses,
within ten days after submission of supporting information). If such payment
is
not made when due, the Board Member shall be entitled to an adjudication
in a
court of competent jurisdiction, of the Board Member’s entitlement to such
indemnification or advancements. The Board Member shall commence such proceeding
seeking an adjudication within one year following the date on which he
or she
first has the right to commence such proceeding pursuant to this paragraph
(d).
In any such proceeding, the Fund shall be bound by the determination that
the
Board Member is entitled to indemnification or advancements, absent (i)
an
intentional misstatement by the Board Member of a material fact, or an
intentional omission of a material fact necessary to make his or her statement
not materially misleading, in connection with the request for indemnification
or
advancements, or (ii) a prohibition of such indemnification or advancements
under applicable law.
(e)
Appeal
of
Adverse Determination.
If a determination
is made that the Board Member is not entitled to indemnification or
advancements, the Board Member shall be entitled to an adjudication of
such
matter in any court of competent jurisdiction. Alternatively, the Board
Member,
at his or her option, may seek an award in arbitration to be conducted
by a
single arbitrator pursuant to the rules of the American Arbitration Association.
The Board Member shall commence such proceeding or arbitration within one
year
following the date on which the adverse determination is made. Any such
judicial
proceeding or arbitration shall be conducted in all respect as a de novo
trial
or arbitration on the merits, and the Board Member shall not be prejudiced
by
reason of such adverse determination.
(f)
Expenses
of
Appeal.
If the Board
Member seeks a judicial adjudication of or an award in arbitration to enforce
his or her rights under, or to recover damages for breach of, the
indemnification or Expense advancement provisions of this Agreement, the
Board
Member shall be entitled to recover from the Fund, and shall be indemnified
by
the Fund against, any and all Expenses actually and reasonably incurred
by the
Board Member in such judicial adjudication or arbitration, but only if
the Board
Member prevails therein. If it shall be determined in such judicial adjudication
or arbitration that the Board Member is entitled to receive part but not
all of
the indemnification or advancement of Expenses sought, the Expenses incurred
by
the Board Member in connection with such judicial adjudication or arbitration
shall be prorated as the court or arbitrator determines to be
appropriate.
(g)
Validity
of
Agreement.
In any judicial
proceeding or arbitration commenced pursuant to this Section 3, the Fund
shall
be precluded from asserting that the procedures and presumptions set forth
in
this Agreement are not valid, binding and enforceable against the Fund,
and
shall stipulate in any such court or before any such arbitrator that the
Fund is
bound by all the provisions of this Agreement.
4.
General
Provisions.
(a)
Non-Exclusive
Rights.
The provisions
for indemnification of, and advancement of Expenses to, the Board Member
set
forth in this Agreement shall not be deemed exclusive of any other rights
to
which the Board Member may otherwise be entitled. The Fund shall not be
liable
under this Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that the Board Member has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
(b)
Continuation
of
Provisions.
This Agreement
shall be binding upon all successors of the Fund, including without limitation
any transferee of all or substantially all assets of the Fund and any successor
by merger, consolidation, or operation of law, and shall inure to the benefit
of
the Board Member’s spouse, heirs, assigns, devisees, executors, administrators
and legal representatives. The provisions of this Agreement shall continue
until
the later of (1) ten years after the Board Member has ceased to provide
any
service to the Fund, and (2) the final termination of all Proceedings in
respect
of which the Board Member has asserted, is entitled to assert, or has been
granted rights of indemnification or advancement of Expenses hereunder
and of
any proceeding commenced by the Board Member pursuant to Section 3 relating
thereto. Unless required by applicable law, no amendment of the Articles
of
Incorporation or By-Laws of the Fund shall limit or eliminate the right
of the
Board Member to indemnification and advancement of Expenses set forth in
this
Agreement with respect to acts or omissions occurring prior to such amendment
or
repeal. In the event the Fund or any successor shall discontinue its operations
within the term of this Agreement, adequate provision shall be made to
honor the
Fund’s obligations under this Agreement.
(c)
Selection
of
Counsel.
Counsel selected
by the Board shall be entitled to assume the defense of any Proceeding
for which
the Board Member seeks indemnification or advancement of Expenses under
this
Agreement. However, counsel selected by the Board Member shall conduct
the
defense of the Board Member to the extent reasonably determined by such
counsel
to be necessary to protect the interests of the Board Member, and the Fund
shall
indemnify the Board Member therefore to the extent otherwise permitted
under
this Agreement, if (1) the Board Member reasonably determines that there
may be
a conflict in the Proceeding between the positions of the Board Member
and the
positions of the Fund or the other parties to the Proceeding that are
indemnified by the Fund and not represented by separate counsel, or the
Board
Member otherwise reasonably concludes that representation of both the Board
Member, the Fund and such other parties by the same counsel would not be
appropriate, or (2) the Proceeding involves the Board Member but neither
the
Fund nor any such other party and the Board Member reasonably withholds
consent
to being represented by counsel selected by the Fund. If the Board has
not
selected counsel to assume the defense of any such Proceeding for the Board
Member within thirty days after receiving written notice thereof from the
Board
Member, the Fund shall be deemed to have waived any right it might otherwise
have to assume such defense.
(d)
D&O
Insurance.
For a period of
at least six years after the Board Member has ceased to provide services
to the
Fund, the Fund shall purchase and maintain in effect, through “tail” or other
appropriate coverage, one or more policies of insurance on behalf of the
Board
Member to the maximum extent of the coverage provided to the active members
of
the Board of Directors of the Fund.
(e)
Subrogation.
In the event of
any payment by the Fund pursuant to this Agreement, the Fund shall be subrogated
to the extent of such payment to all of the rights of recovery of the Board
Member, who shall, upon reasonable written request by the Fund and at the
Fund’s
expense, execute all such documents and take all such reasonable actions
as are
necessary to enable the Fund to enforce such rights. Nothing in this Agreement
shall be deemed to diminish or otherwise restrict the right of the Fund
or the
Board Member to proceed or collect against any insurers and to give such
insurers any rights against the Fund under or with respect to this Agreement,
including without limitation any right to be subrogated to the Board Member’s
rights hereunder, unless otherwise expressly agreed to by the Fund in writing,
and the obligation of such insurers to the Fund and the Board Member shall
not
be deemed to be reduced or impaired in any respect by virtue of the provisions
of this Agreement.
(f)
Notice
of
Proceedings.
The Board Member
shall promptly notify the Secretary of the Fund in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information
or
other document relating to any Proceeding which may be subject to
indemnification or advancement of expense pursuant to this Agreement, but
no
delay in providing such notice shall in any way limit or affect the Board
Member’s rights or the Fund’s obligations under this Agreement.
(g)
Notices.
All notices,
requests, demands and other communications to a party pursuant to this
Agreement
shall be in writing, addressed to such party at the address specified on
the
signature page of this Agreement (or such other address as may have been
furnished by such party by notice in accordance with this paragraph), and
shall
be deemed to have been duly given when delivered personally (with a written
receipt by the addressee) or two days after being sent (1) by certified
or
registered mail, postage prepaid, return receipt requested, or (2) by nationally
recognized overnight courier service.
(h)
Severability.
If any provision
of this Agreement shall be held to be invalid, illegal, or unenforceable,
in
whole or in part, for any reason whatsoever, (1) the validity, legality
and
enforceability of the remaining provisions of this Agreement (including,
without
limitation, each portion of any Section of this Agreement containing any
provision that is not itself invalid, illegal or unenforceable) shall not
in any
way be affected or impaired thereby, and (2) to the fullest extent possible,
the
remaining provisions of this Agreement shall be construed so as to give
effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
(i)
Modification
and
Waiver.
This Agreement
supersedes any existing or prior agreement between the Fund and the Board
Member
pertaining to the subject matter of indemnification, advancement of Expenses
and
insurance. No supplement, modification or amendment of this Agreement shall
be
binding unless executed in writing by both parties or their respective
successors or legal representatives. Any waiver by either party of any
breach by
the other party of any provision contained in this Agreement to be performed
by
the other party must be in writing and signed by the waiving party or such
party’s successor or legal representative, and no such waiver shall be deemed
a
waiver of similar or other provisions at the same or any prior or subsequent
time.
(j)
Headings.
The headings of
the Sections of this Agreement are for convenience only and shall not be
deemed
to control or affect the meaning or construction of any provision of this
Agreement.
(k)
Counterparts.
This Agreement may
be executed in one or more counterparts, each of which shall be an original,
and
all of which when taken together shall constitute one document.
(l)
Applicable
Law.
This Agreement
shall be governed by and construed and enforce in accordance with the laws
of
the state of organization of the Fund without reference to principles of
conflict of laws.
5.
Definitions.
For purposes of
this Agreement, the following terms shall have the following
meanings:
(a)
“Board”
means
the board of directors of the Fund, excluding those members of the board
of
directors who are not eligible under applicable federal or state law to
participate in making a particular determination pursuant to Section 3
of this
Agreement; provided, however, that if no two members of the Board of directors
are eligible to participate, Board shall mean Independent Counsel.
(b)
“Disabling
Conduct” shall be as defined in Section 1.
(c)
“Expenses”
shall include without limitation all judgments, penalties, fines, amounts
paid
or to be paid in settlement, ERISA excise taxes, liabilities, losses, interest,
expenses of investigation, attorneys’ fees, retainers, court costs, transcript
costs, fees of experts and witnesses, expenses of preparing for and attending
depositions and other proceedings, travel expenses, duplicating costs,
printing
and binding costs, telephone charges, postage, delivery service fees, and
all
other costs, disbursements or expenses of the type customarily incurred
in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or acting as a witness in a Proceeding.
(d)
“Final
termination of a Proceeding” shall mean a final adjudication by court order or
judgment of the court or other body before which a matter is pending, from
which
no further right of appeal or review exists.
(e)
“Independent
Counsel” shall mean a law firm, or a member of a law firm, that is experienced
in matters of investment company law and neither at the time of designation
is,
nor in the five years immediately preceding such designation was, retained
to
represent (A) the Fund or the Board Member in any matter material to either,
or
(B) any other party to the Proceeding giving rise to a claim for
indemnification or advancements hereunder. Notwithstanding the foregoing,
however, the term “Independent Counsel” shall not include any person who, under
the applicable standards of professional conduct then prevailing, would
have a
conflict of interest in representing either the Fund or the Board Member
in an
action to determine the Board Member’s rights pursuant to this Agreement,
regardless of when the Board Member’s act or failure to act
occurred.
(f)
“Independent
Board Member” shall mean a director of the Fund who is neither an “interested
person” of the Fund as defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended, nor a party to the Proceeding with respect to which
indemnification or advances are sought.
(g)
“Liability
shall be as defined in Section 1.
(h)
“Proceeding”
shall include without limitation any threatened, pending or completed claim,
demand, threat, discovery request, request for testimony or information,
action,
suit, arbitration, alternative dispute mechanism, investigation, hearing,
or
other proceeding, including any appeal from any of the foregoing, whether
civil,
criminal, administrative or investigative, and shall also include any proceeding
brought by the Board Member against the Fund.
(i)
The Board
Member’s “service to the Fund” shall include without limitation the Board
Member’s service as a director, officer, employee, agent or representative of
the Fund, and his or her service at the request of the Fund as a director,
officer, employee, agent or representative of another corporation, partnership,
joint venture, trust, employee benefit plan or other
enterprise.
IN
WITNESS WHEREOF,
the undersigned have executed this Agreement as of the date set forth
below.
Dated:
a
Maryland
Corporation
By:
Name:
Title:
Address
for
notices:
Name:
Address
for
notices: