EXHIBIT 99(k)(ii)
ADMINISTRATION AGREEMENT
This AGREEMENT made as of this 5th day of June, 1996, by and between
Kenwood Administrative Management, Limited Partnership, an Ohio limited
partnership (the "Administrator"), and USF&G Pacholder Fund, Inc., a Maryland
corporation (the "Fund").
W I T N E S S T H:
WHEREAS, the Fund is a closed-end diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain the Administrator to provide
administrative services to the Fund, and the Administrator is willing render
such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual convenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby retains the
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Administrator to act as the administrator of the Fund and to furnish the Fund
with the administrative services described in Section 2 below. The
Administrator hereby accepts such employment and agrees to perform the services
described in Section 2.
2. Administrative Services. (a) As administrator, and subject to the
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supervision and control of the Board of Directors of the Fund, the Administrator
will perform (or supervise the performance by others) and will provide
facilities, equipment and personnel to carry out the following administrative
services for operation of the business and affairs of the Fund:
(i) with the assistance of the Fund's legal counsel, prepare, file and
maintain the Fund's governing documents and corporate records, including its
charter, bylaws, and minutes of the meetings of the stockholders, the Board of
Directors and any committees thereof;
(ii) assist the Fund's legal counsel in the preparation and filing with
the Securities and Exchange Commission (the "Commission") and the appropriate
state securities authorities of the registration statements for the Fund and its
shares of capital stock and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements and such other
documents as may be necessary or convenient to enable the Fund to offer its
share from time to time;
(iii) assist with and coordinate the layout and printing of all publicly
disseminated prospectuses and reports;
(iv) provide individuals reasonably acceptable to the Board of Directors
of the Fund for nomination, appointment or election as officers or directors of
the Fund, who will be responsible for the management of certain of the Fund's
affairs as determined by the Board of Directors;
(v) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund in accordance the
requirements of Rules 17g-1 and 17d-1(d)(7) under the 1940 Act, as such bonds
and policies are approved by the Board of Directors of the Fund;
(vi) with the approval of the Fund's counsel and cooperation of its
investment adviser and other relevant parties, prepare and disseminate materials
for meetings of the Board of Directors of the Fund;
(vii) prepare such reports relating to the business and affairs of the
Fund (not otherwise appropriately prepared by the Fund's investment adviser,
legal counsel or auditors) as the Board of Directors of the Fund may from time
to time reasonably request in connection with the performance of its duties;
(viii) provide reviews and quarterly compliance reports to the Board of
Directors regarding all applicable regulatory and operating requirements;
(ix) supervise the declaration of dividends and other distributions to
shareholders of the Fund and prepare and distribute to appropriate parties
notices announcing the declaration of such dividends and other distributions;
(x) compute the Fund's yield, total return, expense ratio and portfolio
turnover rate for dissemination to information services covering the investment
company industry and for other appropriate purposes;
(xi) administer contracts on behalf of the Fund with, among others, the
Fund's investment adviser, custodian and transfer agent;
(xii) calculate contractual Fund expenses and control all disbursements
for the Fund;
(xiii) arrange for and supervise independent auditors as appropriate and
take all reasonable action in the performance of its obligations under this
Agreement to ensure that the necessary information is made available to such
accountants for the expression of their opinion as such may be required by the
Fund from time to time;
(xiv) monitor and advise the Fund on its status as a regulated investment
company under the Internal Revenue Code of 1986, as amended;
(xv) prepare and file the Fund's federal and state tax returns;
(xvi) develop and prepare communications to shareholders, including the
annual report to shareholders, coordinate the mailing of notices, proxy
statements and other materials to
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shareholders, and supervise and facilitate the solicitation of proxies solicited
by the Fund for all shareholder meetings, including the tabulation process for
shareholder meetings:
(xvii) answer correspondence and inquiries from shareholders, securities
broker-dealers and others relating to the Fund;
(xviii) provide internal legal and administrative services as reasonably
requested by the Fund from time to time; and
(xix) advise the Fund and its Board of Directors on matters concerning
the Fund and its affairs.
(b) The Administrator may perform such other services for the Fund as
agreed from time to time, at the request of the Board of Directors. The
services provided by the Administrator to the Fund hereunder shall not include
any duties, functions or services to be performed for the Fund by its investment
adviser, custodian, transfer agent, or accounting and pricing agent pursuant to
their respective agreements with the Fund.
3. Records. The Administrator shall maintain customary records in
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connection with its duties as specified in this Agreement. Any records required
to be maintained and preserved pursuant to Rules 31a-1 and 31a-2 under the 1940
Act which are prepared or maintained by the Administrator on behalf of the Fund
shall be prepared and maintained at the expense of the Administrator, but shall
be the property of the Fund and will be made available or surrendered to the
Fund promptly on request. In case of any request or demand for the inspection
of such records by another party, the Administrator shall notify the Fund and
follow the Fund's instructions as to permitting or refusing such inspection;
provided, however, that the Administrator may exhibit such records to any person
in any case where it is advised by its counsel that it may be held liable for
failure to do so, unless (in cases involving potential exposure only to civil
liability) the Fund has agreed to indemnify the Administrator against such
liability.
4. Expenses. The Administrator shall be responsible for expenses incurred
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in providing office space, equipment and personnel as may be necessary or
convenient to provide administrative services to the Fund, including the
compensation of employees of the Administrator who serve as officers or
directors of the Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund not otherwise allocated herein, including, without
limitation, all fees and charges of its investment adviser and its accounting
and pricing agent; the cost of custodial and transfer-agent services; expenses
for legal and auditing services; the expenses of preparing (including
typesetting), printing and mailing reports, prospectuses and proxy materials to
existing shareholders; all expenses incurred in connection with issuing and
redeeming shares of its capital stock; the cost of registration of the Fund's
shares under federal and state securities laws and of listing such shares on any
securities exchange; fees and out-of-pocket expenses of directors who are not
affiliated persons of the Administrator or the Fund's investment adviser, or any
affiliated person of the Administrator or investment adviser; taxes; insurance
premiums; interest; brokerage costs; trade association dues; and litigation and
other extraordinary or nonrecurring expenses.
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5. Compensation. For the services to be rendered, the facilities
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furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Fund shall pay to the Administrator a fee at the annual rate of
0.1% of the Fund's average weekly net assets. Such fee shall be computed and
accrued weekly and paid monthly as soon as practicable after the end of each
month. The Fund shall also reimburse the Administrator for its reasonable out-
of-pocket expenses.
6. Limitation of Liability. (a) The Administrator shall not be liable
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for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under this Agreement. The duties of the Administrator shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Administrator hereunder.
(b) Any person, even though also an officer, employee or agent of the
Administrator, who may be or become an officer, employee or agent of the Fund,
shall be deemed when rendering services to the Fund or acting on any business of
the Fund (other than services or business in connection with the duties of the
Administrator hereunder) to be rendering such services to or acting solely for
the Fund and not as an officer, director, employee or agent or one under the
control or direction of the Administrator, even though paid by the
Administrator.
(c) The Administrator may apply to the Fund at any time for instructions
and may consult counsel for the Fund or its own counsel and with accountants and
other experts with respect to any matter arising in connection with its duties
and obligations hereunder, and the Administrator shall not be liable or
accountable for any action taken or omitted by it in good faith in accordance
with such instruction or the opinion of such counsel, accountants or other
experts.
7. Indemnification. (a) The Fund agrees to indemnify and hold harmless
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the Administrator and its partners, employees and agents from and against any
and all losses, claims, damages or liabilities to which the Administrator or any
of its partners, employees or agents may become subject, insofar as such losses,
claims, damages or liabilities (or any actions in respect thereof) arise out of
or are based upon the performance by the Administrator of its duties hereunder,
and to reimburse, as incurred, the Administrator and its partners, employees and
agents for any legal or other expenses reasonably incurred in connection with
investigating or defending against any alleged loss, claim, damage or liability;
provided, that the Administrator and any such director, officer, employee or
agent has acted in good faith without negligence.
(b) A party seeking indemnification under this Section 7 in respect of any
claim or other assertion of liability shall give the Fund written notice of such
claim or other assertion of liability
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promptly after the indemnified party receives notice thereof. Failure of an
indemnified party to give such notice promptly shall not be deemed a waiver of
any right to indemnification it may have under this Agreement, except to the
extent any such failure shall have damaged the Fund. In case any action is
brought against any indemnified party, the Fund shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof, with
counsel satisfactory to the indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the Fund
and the indemnified party shall have reasonably concluded that there may be one
or more legal defenses available to it or other indemnified parties which are
different from or additional to those available to the Fund, the Fund shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on their behalf. After notice from
the Fund to an indemnified party of its election so to assume the defense of any
such action and approval by such indemnified party of counsel appointed in
connection therewith, the Fund shall not be liable to the indemnified party
hereunder for any legal or other expense, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in the manner provided for herein or (ii) the Fund has
authorized the employment of counsel for the indemnified party at its expense.
After notice from the Fund to an indemnified party, the Fund shall not be liable
for the costs and expenses of any settlement of such action effected by such
indemnified party without the consent of the Fund, unless the Fund waived its
rights hereunder in which case the indemnified party may effect such a
settlement without such consent.
(c) The Fund agrees to notify the Administrator promptly of the
commencement of any litigation or proceeding against the Fund or any of its
officers or directors related to the services provided by the Administrator
under this Agreement.
8. Activities of Administrator. (a) The services furnished by the
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Administrator to the Fund hereunder are not to be deemed exclusive, and the
Administrator and its affiliates shall be free to render services to others and
engage in other activities; provided, however, that any such other services and
activities do not, during the term of this Agreement, interfere, in a material
manner, with the Administrator's ability to meet all of its obligations to the
Fund hereunder.
(b) Subject to and in accordance with the charter and bylaws of the Fund,
the 1940 Act and the rules thereunder, it is understood that directors,
officers, agents and shareholders of the Fund are or may be interested in the
Administrator or its affiliated persons as directors, officers, agents or
shareholders or otherwise; that directors, officers, agents and shareholders of
the Administrator or its affiliated persons are or may be interested in the Fund
as directors, officers, agents, shareholders or otherwise; that the
Administrator or its affiliated persons may be interested in the Fund as a
shareholder or otherwise; and that the effect of any such interests shall be
governed by the charter and bylaws of the Fund and the 1940 Act and the rules
thereunder.
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9. Effective Date; Term. This Agreement shall become effective as of the
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date hereof. Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect for an initial period of two years and thereafter may
be continued for successive periods of one year, but only so long as each such
continuance is specifically approved at least annually (i) by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund, and (ii) by the vote of a majority of the directors of
the Fund, who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.
10. Termination. Notwithstanding any provision of this Agreement, it may
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be terminated at any time, without payment of any penalty, by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Administrator, or by
the Administrator on 60 days' written notice to the Fund. This Agreement shall
terminate automatically in the event of its assignment. The indemnity and
defense provisions set forth in Section 7 shall indefinitely survive the
termination of this Agreement.
11. Amendment. This Agreement may be amended at any time by agreement of
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the parties, provided that the amendment shall be approved both by the vote of a
majority of the directors of the Fund, who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
that purpose, and where required by the 1940 Act by a majority of the
outstanding voting securities of the Fund.
12. Notices. Any notices required to be given hereunder shall be in
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writing and shall be deemed effective, if mailed, five business days after being
deposited in the mails with proper postage affixed thereto or, if delivered by
hand or courier service or in the form of a facsimile transmission, when
received, in each case addressed or directed as follows:
If to the Fund:
USF&G Pacholder Fund, Inc.
Towers of Kenwood
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., President
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Administrator:
Kenwood Administrative Management,
Limited Partnership
Towers of Kenwood
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change its address and/or facsimile number for the purpose
of all notices or communications required or permitted to be given pursuant to
this Agreement by notice to the other party.
13. Certain Terms. The terms "affiliated person", "assignment",
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"interested person" and "vote of a majority of the outstanding voting
securities", when used in this Agreement, shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to any
applicable orders of exemption issued by the Commission.
14. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Ohio without giving effect to the
choice of law provisions thereof and, to the extent applicable, the federal law
of the United States. To the extent applicable Ohio law or any of the
provisions of this Agreement conflict with applicable provisions of the 1940 Act
or other applicable federal laws and regulations, the latter shall control.
15. Miscellaneous. If any provision of this Agreement shall be held or
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made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be affected thereby. The title of this Agreement and the headings to
the sections herein are for convenience of the parties only, and are not
intended to be part of or affect the meaning or interpretation of this
Agreement. This Agreement constitutes the entire agreement of the parties
hereto with respect to the matters referred to herein, and no other agreement,
verbal or otherwise, shall be binding as between the parties. No failure or
delay on the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver granted hereunder must be in writing and shall be valid only in the
specific instance in which given. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one original instrument.
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IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
USF&G PACHOLDER FUND, INC.
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., President
KENWOOD ADMINISTRATIVE MANAGEMENT, LIMITED
PARTNERSHIP
By: Kenwood Administrative Management, Inc.,
its general partner
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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