Exhibit (k)(2)
ADMINISTRATION, ACCOUNTING AND INVESTOR SERVICES AGREEMENT
THIS AGREEMENT is made as of January 18, 2002 by and between ▇▇▇▇▇▇▇▇▇▇
PARTNERS ABSOLUTE RETURN FUND L.L.C., a Delaware limited liability company (the
"Fund"), and PFPC INC., a Massachusetts corporation ("PFPC").
W I T N E S S E T H :
WHEREAS, the Fund is registered as a closed-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC to provide certain
administration, accounting and investor services provided for herein, and PFPC
wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Definitions. As Used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's directors to give Oral
Instructions and Written Instructions on behalf of the Fund. An
Authorized Person's scope of authority may be limited by setting
forth such limitation in a written document signed by both
parties hereto.
(d) "Change of Control" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parent(s).
1
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Member" shall have the same meaning given such term in the LLC
Agreement (as hereinafter defined).
(g) "Oral Instructions" mean oral instructions received by PFPC
from an Authorized Person or from a person reasonably believed by
PFPC to be an Authorized Person. PFPC may, in its sole discretion
in each separate instance, consider and rely upon instructions it
receives from an Authorized Person via electronic mail as Oral
Instructions.
(h) "Organizational Documents" means the Fund's charter or articles
of incorporation, Limited Liability Company Agreement ("LLC
Agreement"), bylaws, confidential memorandum and other documents
constituting the Fund.
(i) "SEC" means the Securities and Exchange Commission.
(j) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(k) "Written Instructions" means (i) written instructions signed by
an Authorized Person and received by PFPC or (ii) trade
instructions transmitted (and received by PFPC) by means of an
electronic transaction reporting system, access to which requires
use of a password or other authorized identifier. The
instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to provide administration,
accounting and investor services to the Fund, in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment and
agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's directors, approving the appointment of PFPC or its
affiliates to provide services and approving this Agreement;
(b) a copy of the Fund's most recent effective registration statement
on Form N-2 under the 1940 Act, as filed with the SEC;
2
(c) a copy of all of the Fund's Organizational Documents;
(d) a copy of any distribution agreement with respect to the Fund;
(e) a copy of any additional administration agreement with respect to
the Fund;
(f) a copy of any investor servicing agreement made with respect to
the Fund; and
(g) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations.
PFPC undertakes to comply with the applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be
performed by PFPC hereunder as are specified in writing by the Fund to
PFPC and agreed in writing by PFPC. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions or Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions or
Written Instructions it receives from an Authorized Person (or
from a person reasonably believed by PFPC to be an Authorized
Person) pursuant to this Agreement. PFPC may assume that any Oral
Instruction or Written Instruction received hereunder is not in
any way inconsistent with the provisions of the Organizational
Documents or this Agreement or of any vote, resolution or
proceeding of the Fund's directors or Members, unless and until
PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions
are given by PFPC or its affiliates) so that PFPC receives the
Written Instructions as promptly as practicable and in any event
by the close of business on the day after such Oral
3
Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC or differ from the Oral
Instructions shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral
Instructions or PFPC's ability to rely upon such Oral
Instructions.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice,
including Oral Instructions or Written Instructions, from the
Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take,
PFPC may request advice from counsel of its own choosing (who may
be counsel for the Fund, the Fund's investment adviser or PFPC,
at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions
PFPC receives from the Fund, and the advice PFPC receives from
counsel, PFPC may rely upon and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected and indemnified by
the Fund in any action PFPC takes or does not take in reliance
upon directions, advice or Oral Instructions or Written
Instructions PFPC receives from or on behalf of the Fund or from
counsel and which PFPC believes, in good faith, to be consistent
with those directions, advice and Oral Instructions or Written
Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC (i) to seek such directions or
advice or Oral Instructions or Written Instructions, or (ii) to
act in accordance with such directions or advice or Oral
Instructions or Written Instructions.
4
7. Records; Visits.
(a) The books and records pertaining to the Fund, which are in the
possession or under the control of PFPC, shall be the property of
the Fund. Such books and records shall be prepared and maintained
as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Fund and Authorized Persons shall have
access to such books and records at all times during PFPC's
normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to
the Fund or to an Authorized Person, at the Fund's expense. Any
such books and records may be maintained in the form of
electronic media and stored on any magnetic disk or tape or
similar recording method.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the Fund's books of
account; and
(ii) records of the Fund's securities transactions.
8. Confidentiality.
Each party shall keep confidential any information relating to the
other party's business ("Confidential Information"). Confidential
Information shall include (a) any data or information that is
competitively sensitive material, and not generally known to the
public, including, but not limited to, information about product plans,
marketing strategies, finances, operations, customer relationships,
customer profiles, customer lists, sales estimates, business plans, and
internal performance results relating to the past, present or future
business activities of the Fund or PFPC, their respective subsidiaries
and affiliated companies and the customers, clients and suppliers of
any of them; (b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commercially
valuable and secret in the sense that its confidentiality affords the
Fund or PFPC a competitive advantage over its competitors;
5
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code,
flow charts, databases, inventions, know-how, and trade secrets,
whether or not patentable or copyrightable; and (d) anything
designated as confidential. Notwithstanding the foregoing, information
shall not be subject to such confidentiality obligations if it: (a) is
already known to the receiving party at the time it is obtained; (b)
is or becomes publicly known or available through no wrongful act of
the receiving party; (c) is rightfully received from a third party
who, to the best of the receiving party's knowledge, is not under a
duty of confidentiality; (d) is released by the protected party to a
third party without restriction; (e) is required to be disclosed by
the receiving party pursuant to a requirement of a court order,
subpoena, governmental or regulatory agency or law (provided the
receiving party will provide the other party written notice of such
requirement, to the extent such notice is permitted); (f) is relevant
to the defense of any claim or cause of action asserted against the
receiving party; or (g) has been or is independently developed or
obtained by the receiving party.
9. Liaison with Accountants. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses,
fiscal year summaries, and other audit-related schedules with respect
to the Fund. PFPC shall take all reasonable action in the performance
of its duties under this Agreement to assure that the necessary
information is made available to such accountants for the expression of
their opinion, as required by the Fund.
10. PFPC System. PFPC shall retain title to and ownership of any and all
data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions,
discoveries, patentable or copyrightable matters, concepts, expertise,
patents, copyrights, trade secrets, and other related legal rights
utilized by PFPC in connection with the services provided by PFPC to
the Fund.
6
11. Disaster Recovery. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to
the extent appropriate equipment is available. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund,
take reasonable steps to minimize service interruptions. PFPC shall
have no liability with respect to the loss of data or service
interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties or
obligations under this Agreement.
12. Compensation. As compensation for services set forth herein that are
rendered by PFPC during the term of this Agreement, the Fund will pay
to PFPC a fee or fees as may be agreed to in writing by the Fund and
PFPC.
13. Indemnification. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates, including their respective officers, directors,
agents and employees, from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, attorneys fees
and disbursements and liabilities arising under the Securities Laws
and any state and foreign securities and blue sky laws) arising
directly or indirectly from any action or omission to act which PFPC
takes in connection with the provision of services to the Fund.
Neither PFPC, nor any of its affiliates, shall be indemnified against
any liability (or any expenses incident to such liability) caused by
PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of PFPC's
activities under this Agreement. Any amounts payable by the Fund
hereunder shall be satisfied only against the relevant portfolio's
assets and not against the assets of any other investment portfolio of
the Fund. The provisions of this Section 13 shall survive termination
of this Agreement.
7
14. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be
specifically agreed to by PFPC and the Fund in a written
amendment hereto. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder and to act
in good faith in performing services provided for under this
Agreement. PFPC shall be liable only for any damages arising out
of PFPC's failure to perform its duties under this Agreement to
the extent such damages arise out of PFPC's willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties.
(b) Notwithstanding anything in this Agreement to the contrary,
(i) PFPC shall not be liable for losses, delays, failure, errors,
interruption or loss of data occurring directly or indirectly by
reason of circumstances beyond its reasonable control, including
without limitation acts of God; action or inaction of civil or
military authority; public enemy; war; terrorism; riot; fire;
flood; sabotage; epidemics; labor disputes; civil commotion;
interruption, loss or malfunction of utilities, transportation,
computer or communications capabilities; insurrection; elements
of nature; or non-performance by a third party; and (ii) PFPC
shall not be under any duty or obligation to inquire into and
shall not be liable for the validity or invalidity, authority or
lack thereof, or truthfulness or accuracy or lack thereof, of any
instruction, direction, notice, instrument or other information
which PFPC reasonably believes to be genuine.
(c) Notwithstanding anything in this Agreement (whether contained
anywhere in Sections 15-17 or otherwise) to the contrary, Fund
hereby acknowledges and agrees that (i) PFPC, in the course of
providing tax-related services or
8
calculating and reporting portfolio performance hereunder, may
rely upon PFPC's interpretation of tax positions or its
interpretation of relevant circumstances (as determined by PFPC)
in providing such tax services and in determining methods of
calculating portfolio performance to be used, and that (ii) PFPC
shall not be liable to for losses or damages of any kind
associated with such reliance except to the extent such loss or
damage is substantially due to PFPC's gross negligence or willful
misconduct.
(d) Notwithstanding anything in this Agreement to the contrary,
without limiting anything in the immediately preceding sentence,
Fund hereby acknowledges and agrees that PFPC shall not be liable
for any losses or damages of any kind associated with any tax
filings with which PFPC has assisted in any way except to the
extent such loss or damage is substantially due to PFPC's gross
negligence or willful misconduct; provided, however, that PFPC
shall not be found to have been grossly negligent for losses or
damages associated with areas of responsibility that the
judiciary, regulators (or other governmental officials) or
members of the hedge fund industry determine would otherwise
apply to PFPC (or similar service providers) and which, as of the
date hereof, have yet to be identified by such parties as areas
for which PFPC (or any similar service provider) is (or would be)
responsible.
(e) Notwithstanding anything in this Agreement to the contrary, (i)
neither PFPC nor its affiliates shall be liable for any
consequential, special or indirect losses or damages, whether or
not the likelihood of such losses or damages was known by PFPC or
its affiliates and (ii) PFPC's cumulative liability to the Fund
for all losses, claims, suits, controversies, breaches or damages
for any cause whatsoever (including but not limited to those
arising out of or related to this Agreement) and regardless of
the form of action or legal theory shall not exceed the lesser of
$250,000 or the fees received by PFPC for services provided
9
hereunder during the 12 months immediately prior to the date of
such loss or damage.
(f) No party may assert a cause of action against PFPC or any of its
affiliates that allegedly occurred more than 12 months
immediately prior to the filing of the suit (or, if applicable,
commencement of arbitration proceedings) and a formal demand
letter from counsel to the Fund or one of its affiliates alleging
such cause of action.
(g) Each party shall have a duty to mitigate damages for which the
other party may become responsible.
(h) The provisions of this Section 14 shall survive termination of
this Agreement.
15. Description of Accounting Services on a Continuous Basis.
PFPC will perform the following accounting services with respect to
each portfolio:
(i) Journalize investment, capital and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from
the investment adviser for the portfolio (the "Adviser")
and, with respect only to those portfolios that invest
principally in U.S. domestic securities, transmit trades to
such portfolio's custodian(s) for proper settlement;
(iii) Maintain individual ledgers for each investment fund in
which the Fund is invested and use valuations provided by
the underlying funds in which the Fund is invested as
reported by the Adviser;
(iv) Maintain historical tax lots for each security;
(v) Record and reconcile corporate action activity and all other
capital changes;
(vi) Reconcile cash and investment balances of the Fund with the
Fund's custodian(s), and provide the Adviser with the
beginning cash balance available for investment purposes.
(vii) Calculate contractual expenses, including management fees
and incentive allocation, as applicable, in accordance with
the Fund's confidential memorandum;
(viii) Post to and prepare the Statement of Assets and Liabilities
and the
10
Statement of Operations in U.S. dollar terms;
(ix) Monitor the expense accruals and notify and officer of the
Fund of any proposed adjustments;
(x) Control all disbursements and authorize such disbursements
from the Fund's account with the custodian(s) upon Written
Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) If requested by the Adviser, obtain daily security market
quotes and currency exchange rates from independent pricing
services approved by the Adviser, or if such quotes are
unavailable, then obtain such prices from the Adviser, and
in either case calculate the market value of the Fund's
investments in accordance with the applicable valuation
policies or guidelines provided by the Fund to PFPC and
acceptable to PFPC;
(xiv) Transmit or mail a copy of the monthly portfolio valuation
to the Adviser as required;
(xv) Arrange for the computation of the net asset value in
accordance with the provisions of the Fund's LLC Agreement
and confidential memorandum;
(xvi) As appropriate, compute total return, expense ratios,
portfolio turnover rate; and
(xvii) Prepare a monthly financial statement, which will include
the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
16. Description of Administration Services on a Continuous Basis. PFPC
will perform the following administration services if required with
respect to each portfolio:
(i) Prepare monthly security transaction listings;
(ii) Supply various normal and customary Fund statistical data as
requested on an ongoing basis;
(iii) Prepare for execution and file the Fund's Federal Form 1065
and state tax returns;
11
(iv) Coordinate with the Adviser contractual relationships and
communications between the Fund and its contractual service
providers;
(v) Prepare and file the Fund's Annual and Semi-Annual Reports
with the SEC on Form N-SAR via ▇▇▇▇▇;
(vi) Coordinate with the Adviser printing of the Fund's annual
and semi-annual shareholder reports; and
(vii) Perform such additional administrative duties relating to
the administration of the Fund as may subsequently be agreed
upon in writing between the Fund and PFPC.
17. Description of Investor Services on a Continuous Basis. PFPC will
perform the following functions:
(i) Maintain the register of Members and enter on such register
all issues, transfers and repurchases of interests in the
Fund;
(ii) Arrange for the calculation of the issue and repurchase
prices of interests in the Fund in accordance with the
Fund's LLC Agreement;
(iii) Allocate income, expenses, gains and losses to individual
Members' capital accounts in accordance with the Fund's LLC
Agreement;
(iv) Calculate the Incentive Allocation in accordance with the
Fund's LLC Agreement and reallocate corresponding amounts
from the applicable Members' accounts to the Adviser's
account;
(v) Prepare and mail annually to each Member a Form K-1 in
accordance with applicable tax regulations;
(vi) Facilitate the mailing of offering materials to prospective
investors in accordance with instructions from an Authorized
Person;
(vii) Prepare and mail quarterly to each Member a capital account
statement;
(viii) Administer and execute the tender process; and
(ix) Perform such additional investor services as may
subsequently be agreed upon in writing between the Fund and
PFPC.
18. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PFPC on sixty (60) days' prior written
notice to the other party. In the event the Fund gives notice of
termination, all expenses associated with movement (or
12
duplication) of records and materials and conversion thereof to a
successor service provider (or each successive service provider, if
there are more than one), and all trailing expenses incurred by PFPC,
will be borne by the Fund.
19. Change of Control. Notwithstanding any other provision of this
Agreement, in the event of an agreement to enter into a transaction
that would result in a Change of Control of the Adviser or sponsor, the
Fund's ability to terminate the Agreement pursuant to Section 18 will
be suspended from the time of such agreement until two years after the
Change of Control; provided, however, this provision shall expire on
the third anniversary of the effective date of this Agreement.
20. Notices. Notices shall be addressed (a) if to PFPC, at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President; (b) if to
the Fund, at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: General Counsel or (c) if to neither of the foregoing, at
such other address as shall have been given by like notice to the
sender of any such notice or other communication by the other party.
If notice is sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have been
given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is
delivered.
21. Amendments. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
22. Assignment. PFPC may assign its rights hereunder to any majority-owned
direct or indirect subsidiary of PFPC or of The PNC Financial Services
Group, Inc., provided that PFPC gives the Fund 70 days prior written
notice of such assignment.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13
24. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
25. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter
hereof, provided that the parties may embody in one or more
separate documents their agreement, if any, with respect to
delegated duties.
(b) No Changes that Materially Affect Obligations. Notwithstanding
anything in this Agreement to the contrary, the Fund agrees not
to make any modifications to its registration statement or adopt
any policies which would affect materially the obligations or
responsibilities of PFPC hereunder without the prior written
approval of PFPC, which approval shall not be unreasonably
withheld or delayed.
(c) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect.
(d) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law without regard to
principles of conflict of law.
(e) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
(f) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(g) No Representations or Warranties. Except as expressly provided in
this
14
Agreement, PFPC hereby disclaims all representations and
warranties, express or implied, made to the Fund or any other
person, including, without limitation, any warranties regarding
quality, suitability, merchantability, fitness for a particular
purpose or otherwise (irrespective of any course of dealing,
custom or usage of trade), of any services or any goods provided
incidental to services provided under this Agreement. PFPC
disclaims any warranty of title or non-infringement except as
otherwise set forth in this Agreement.
(h) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution
hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title: Executive Vice President
--------------------------------
▇▇▇▇▇▇▇▇▇▇ PARTNERS ABSOLUTE
RETURN FUND L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Assistant Secretary
--------------------------------
Business Approval By:
------------------
Date:
----------------------------------
Legal Approval By:
---------------------
Date:
----------------------------------
15