Exhibit (K)(2)
FORM OF SUB-ADMINISTRATION AGREEMENT
Agreement dated as of May 23, 2000 among Hyperion Capital Management, Inc.
(the "Company"), a Delaware corporation on behalf of the Hyperion 2005
Investment Grade Opportunity Term Trust, Inc., Hyperion 2002 Term Trust, Inc.,
Hyperion Total Return Fund, Inc., Lend Lease Hyperion High Yield CMBS Fund, Inc.
and Lend Lease Hyperion Mortgage Opportunity Fund, Inc. (the "Funds") and State
Street Bank and Trust Company, a Massachusetts trust company (the "Bank").
WHEREAS, each Fund, except Lend Lease Hyperion Mortgage Opportunity Fund,
Inc., is registered as closed-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, Lend Lease Hyperion Mortgage Opportunity Fund, Inc. is registered
as an open-end, management investment company under the 1940 Act;
WHEREAS, the Company has been appointed as administrator to the Funds;
WHEREAS, the Company and the Funds desire to retain the Bank to furnish
certain administrative services to the Funds, 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 Company and the Funds hereby appoint the Bank to act as
sub-administrator with respect to the Funds for purposes of providing 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 Funds 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 Funds establishes one or more additional Investment Funds
with respect to which the Company and the Funds wish to retain the Bank to act
as administrator hereunder, the Company and the Funds 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 Funds and its
Investment Funds) may be modified with respect to each additional Investment
Fund in writing by the Company, the Funds and the Bank at the time of the
addition of the Investment Fund.
2. DELIVERY OF DOCUMENTS
Each Fund will promptly deliver to the Bank copies of each of the following
documents and all future amendments and supplements, if any:
a. It's Articles of Incorporation and by-laws;
b. The Fund's currently effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), if applicable,
and 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. A copy of the investment advisory agreement between the Fund and its
investment adviser, including any sub-advisory agreement between the
Fund and its investment sub-adviser, if any; and
d. 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. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
a. It is a Massachusetts trust company, duly organized and existing 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.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
Each Fund represents and warrants to the Bank that:
a. It is a corporation, duly organized, existing and in good standing
under the laws of the State of Maryland;
b. It has the corporate power and authority under applicable laws and by
its Articles of Incorporation 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 1933 Act, where applicable, and 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 as of the effective date of this Agreement, all necessary filings
under the securities laws of the states in which the Fund offers or
sells its shares have been made;
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 will 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 beneficial interest, and it will
initially offer shares, in the authorized amounts as set forth in
Schedule A to this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Bank that:
a. It is a corporation, duly organized, existing and in good standing
under the laws of Delaware;
b. It has the power and authority under Delaware law and by its charter
and by-laws to enter into and perform this Agreement;
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 Company'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
Company or any law or regulation applicable to it.
6. ADMINISTRATION SERVICES
The Bank shall provide the following services, in each case, subject to the
control, supervision and direction of the Fund and the Company and the review
and comment by the Fund's and the Company's auditors and legal counsel and in
accordance with procedures which may be established from time to time between
the Fund, the Company and the Bank:
a. Oversee the determination and publication of each Fund's net asset
value in accordance with the Fund's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Fund's custodian of certain books and
records of each Fund as required under Rule 31a-1(b) of the 1940 Act;
c. Review calculation, submit for approval by officers of each Fund and
arrange for payment of the Fund's expenses;
d. Prepare for review and approval by officers of each Fund financial
information for the Fund's 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;
e. 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 ("SEC") 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;
f. Prepare reports relating to the business and affairs of each Fund as
may be mutually agreed upon (including but not limited to performance
and aged receivables) and not otherwise prepared by the Fund's
investment adviser, custodian, legal counsel or independent
accountants;
g. Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may reasonably
request;
h. Make such reports and recommendations to the Board concerning the
performance and fees of the Fund's custodian and transfer and dividend
disbursing agent ("Transfer Agent") as the Board may reasonably
request or deems appropriate;
i. Oversee and review calculations of fees paid to the Fund's investment
adviser, custodian and Transfer Agent;
j. Consult with each Fund's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the accounting
policies of the Fund;
k. Respond to, or refer to each Fund's officers or Transfer Agent,
shareholder inquiries relating to the Fund;
l. Provide periodic testing of portfolios to assist the Fund's investment
adviser in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the 1940 Act and Fund
prospectus limitations as may be mutually agreed upon;
m. Review and provide assistance on shareholder communications;
n. Maintain general calendar for each Fund;
o. Maintain copies of the Fund's charter and by-laws and copies of
minutes of meetings of the Board of Directors of the Fund and meeting
of shareholders of each Fund;
p. File annual and semi-annual shareholder reports with the appropriate
regulatory agencies; review text of "President's letters" to
shareholders and "Management's Discussion of Fund Performance" (which
shall also be subject to review by the Fund's legal counsel);
q. Provide limited legal services as described in the Fee Schedule to
this Agreement;
r. Develop or assist in developing guidelines and procedures to improve
overall compliance by the Fund and its various agents; and
s. Prepare and file with the SEC Rule 24f-2 notices.
The Bank shall provide the office facilities and the personnel required by it to
perform the services contemplated herein.
7. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Bank shall receive from the Company such compensation for the Bank's
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 the Fee Schedule to this Agreement. The fees are accrued daily and billed
monthly and shall be due and payable upon receipt of the invoice. Each Fund
shall pay to the Bank any and all compensation and reimbursement of expense that
are not paid to the Bank by the Company. 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 bars
to the full monthly period and shall be payable upon the date of termination of
this Agreement. In addition, the Company shall reimburse the Bank for its
out-of-pocket costs incurred in connection with `this Agreement.
The Company agrees promptly to reimburse the Bank for any equipment and
supplies specially ordered by or for a Fund, or the Company, through the Bank
and for any other expenses not contemplated by this Agreement that the Bank may
incur on a Fund's or the Company's behalf, at the Fund's or the Company's
request or with the Fund's or the Company's consent.
Each Fund will bear all expenses that are incurred in its operation and not
specifically assumed by the Bank. Expenses to be borne by each 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
preparation and review of the Fund's registration statement, proxy materials as
well as federal and state tax qualification as a regulated investment company
and other reports and materials that may be 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, filing, (edgarization),
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/trustee or employee of the Fund; costs incidental to the
preparation, filing (edgarization), 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 and Form N-SAR (other than pursuant to Section 6f. of
this Agreement), 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 each 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.
8. INSTRUCTIONS AND ADVICE
At any time, the Bank may apply to the Treasurer or Compliance Officer for
instructions and 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; provided, however, that legal fees
and expenses of the Bank for consultation with its own legal counsel shall not
be an expense of the Fund unless such payment is approved by the Fund. 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.
9. 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 its total annual
compensation earned and fees paid hereunder during the preceding twelve months
fox 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.
The Company and 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
a-.ting upon any instructions reasonably believed by it to have been duly
authorized by the Company and 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 indemnification contained herein shall survive the termination of this
Agreement.
10. 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 record. 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.
11. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Each Fund assumes full responsibility for complying with all securities,
tax, commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Bank agrees that all records which it maintains for the Fund shall at all times
remain the property of the Fund, shall be readily accessible during normal
business hours, and shall be promptly surrendered upon the termination of the
Agreement or otherwise on written request. The Bank further agrees that all
records which it maintains for the Fund pursuant to Rule 31a-1 under the 1940
Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940
Act unless any such records are earlier surrendered as provided above. Records
shall be surrendered in usable machine-readable form.
12. SERVICES NOT EXCLUSIVE
The services of the Bank to the Fund are not to be deemed exclusive, and
the Bank shall be free to render similar services to others. The tank shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Fund from time to time, have no authority
to act or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
13. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its execution and
shall remain in full force and effect from the effective date for an initial
term of one year from the effective date and shall automatically continue in
full force and effect after such initial term unless either party terminates
this Agreement by written notice to the other party at least sixty (60) days
prior to the expiration of the initial term. Either party may terminate this
Agreement at any time after the initial term upon at least sixty (60) days'
prior written notice to the other party. Termination of this Agreement with
respect to any given Investment Fund shall in no way affect the continued
validity of this Agreement with respect to any other Investment Fund. Upon
termination of this Agreement, the Company shall pay to the Bank such
compensation and any reimbursable expenses as may be due under the terms hereof
as of the date of such termination, including reasonable out-of-pocket expenses
associated with such termination. Each Fund shall pay to the Bank any and all
compensation and reimbursement of expense that are not paid to the Bank by the
Company. This Agreement may be modified or amended from time to time by mutual
written agreement of the parties hereto.
14. NOTICES
Any notice or other communication authorized or required by this Agreement
to be given to either party shall be in writing and deemed to have been given
when delivered in person or by confirmed facsimile, or posted by certified mail,
return receipt requested, to the following address (or such other address as a
party may specify by written notice to the other): If to the Company: Hyperion
Capital Management, Inc., One Liberty Plaza, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, if to the Funds: c/o Hyperion Capital Management, Inc., One
Liberty Plaza, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,▇ if to the
Bank: State Street Bank and Trust Company, ▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attn: Fund Administration Legal Department, fax:
(▇▇▇)▇▇▇-▇▇▇▇.
15. NON-ASSIGNABILITY
This Agreement shall not be assigned by any party hereto without the prior
consent in writing of the other two parties, except that the Bank may assign
this Agreement to a successor of all or a substantial portion of its business,
or to a party controlling, controlled by or under common control with the Bank.
16. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of each
Fund, the Company and the Bank and their respective successors and permitted
assigns.
17. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto
with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
18. WAIVER
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver nor shall it deprive
such party of the right thereafter to insist upon strict adherence to that term
or any term of this Agreement. Any waiver must be in writing signed by the
waiving party.
19. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance
of the Agreement shall remain in effect, and if any provision is inapplicable to
any person or circumstance it shall nevertheless remain applicable to all other
persons and circumstances.
20. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
21. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
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.
HYPERION CAPITAL MANAGEMENT, INC.
By:
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Name:
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Title:
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HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC.
HYPERION 2002 TERM TRUST, INC.
HYPERION TOTAL RETURN FUND, INC.
LEND LEASE HYPERION HIGH YIELD CMBS FUND, INC.
LEND LEASE HYPERION MORTGAGE OPPORTUNITY FUND, INC.
By:
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Name:
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Title:
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STATE STREET BANK AND TRUST COMPANY
By:
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Name:
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Title:
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SUB-ADMINISTRATION AGREEMENT
HYPERION FUNDS
SCHEDULE A
Listing of Investment Funds and Authorized Shares
Investment Fund Authorized Shares
Hyperion 2005 Investment Grade Opportunity Term Trust, Inc.
Hyperion 2002 Term Trust, Inc.
Hyperion Total Return Fund, Inc.
Lend Lease Hyperion High Yield CMBS Fund, Inc.
Lend Lease Hyperion Mortgage Opportunity Fund, Inc.