ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 17th day of May, 2005, by and between
The Arbitrage Funds, a Delaware business trust (the "Trust"), and SEI Global
Funds Services, Inc (the "Administrator"), a Delaware corporation.
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series portfolios ("Portfolios"), each of which may
consist of one or more classes of shares of beneficial interest ("Shares"); and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, administrative and accounting services to
such Portfolios of the Trust on the terms and conditions hereinafter set forth
herein;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, Trust and the Administrator hereby agree as follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. Trust hereby retains the
Administrator to furnish the Portfolios with accounting and administrative
services as set forth in this Agreement, and the Administrator hereby accepts
such employment. The Administrator shall be deemed to be an independent
contractor for all purposes herein.
ARTICLE 2. ADMINISTRATIVE AND ACCOUNTING SERVICES. The Administrator
shall perform or supervise the performance by others of the accounting and
administrative services set forth in Schedule A hereto. The Administrator shall
provide the Trust with all necessary office space, equipment, personnel,
compensation and facilities (including facilities for Shareholders' and
Trustees' meetings) for providing such services. The Administrator may
sub-contract with third parties to perform certain of the services to be
performed by the Administrator hereunder; provided, however, that the
Administrator shall remain principally responsible to Trust for the acts and
omissions of such other entities. In meeting its duties hereunder, Administrator
shall have the general authority to do all acts deemed in the Administrator's
good faith belief to be necessary and proper to perform its obligations under
this Agreement.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
1
(B) FUND EXPENSES. The Trust assumes and shall pay or cause to be paid
all other expenses of the Trust not otherwise allocated in this Agreement,
including, without limitation, organizational costs, taxes, expenses for legal
and auditing services, the expenses of preparing (including typesetting),
printing and mailing reports, prospectuses, statements of additional
information, proxy solicitation material and notices to existing shareholders,
all expenses incurred in connection with issuing and redeeming Shares, the costs
of pricing services, the costs of custodial services, the cost of initial and
ongoing registration of the Shares under Federal and state securities laws, fees
and out-of-pocket expenses of Trustees who are not affiliated persons of the
Administrator or any affiliated corporation of the Administrator, the costs of
Trustees' meetings, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of service
providers to the Trust. Trust shall reimburse the Administrator for its
reasonable out-of-pocket expenses, including a reasonable allocation of SAS 70
audit charges, and reasonable copying, postage, telephone, and fax charges
incurred by the Administrator in the performance of its duties.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR. Trust shall pay to the
Administrator compensation at the annual rate specified in Schedule B to this
Agreement until this Agreement is terminated in accordance with Article 6. Such
compensation shall be calculated and accrued daily, and paid to the
Administrator monthly. If this Agreement becomes effective subsequent to the
first day of a month or terminates before the last day of a month, the
Administrator's compensation for that part of the month in which this Agreement
is in effect shall be prorated in a manner consistent with the calculation of
the fees as set forth above. Payment of the Administrator's compensation for the
preceding month shall be made promptly.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. 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. The Administrator shall not be liable for any loss arising out of any
act or omission in carrying out its duties hereunder, 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
hereunder. (As used in this Article 5, the term "Administrator" shall include
Trustees, officers, employees and other agents of the Administrator as well as
that entity itself.) Under no circumstances shall the Administrator be liable to
Trust for consequential, indirect or punitive damages.
So long as the Administrator, or its agents, acts without willful
misfeasance, bad faith or gross negligence in the performance of its duties, and
without reckless disregard of its obligations and duties hereunder, Trust
assumes full responsibility and shall indemnify the Administrator and hold it
harmless from and against any and all actions, suits and claims, whether
groundless or otherwise, and from and against any and all losses, damages,
costs, charges, reasonable counsel fees and disbursements, payments, expenses
and liabilities (including reasonable investigation expenses) arising directly
or indirectly out of any act or omission of Administrator in carrying out its
duties hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
2
The Administrator undertakes to hold harmless and indemnify Trust (including its
delegates, its officers, directors and employees) on its own behalf and on
behalf of its delegates, servants and agents against all actions, proceedings
and claims (including claims of any person purporting to be the beneficial owner
of any part of the assets of Trust) and against all costs, demands, liabilities
and expenses (including legal expenses) which may be brought against, suffered
or incurred by Trust (including its delegates, its officers, directors and
employees) arising from the gross negligence, bad faith, fraud or wilful default
or failure of the Administrator (including its delegates, servants or agents) to
use reasonable skill and care and due diligence in performing its duties and
obligations hereunder.
The indemnification rights hereunder shall include the right to
reasonable advances of defense expenses in the event of any pending or
threatened litigation with respect to which indemnification hereunder may
ultimately be merited. If in any case the Trust may be asked to indemnify or
hold the Administrator harmless, the Administrator shall promptly advise the
Trust of the pertinent facts concerning the situation in question, and the
Administrator will use all reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification, but failure to do so shall
not affect the rights hereunder.
Trust shall be entitled to participate at its own expense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity provision. If Trust elects to assume the defense of any such
claim, the defense shall be conducted by counsel chosen by Trust and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that Trust elects to assume the defense of any suit and
retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If Trust does not elect to assume the defense
of a suit, it will reimburse the Administrator for the fees and expenses of any
counsel retained by the Administrator.
The Administrator may apply to Trust at any time for instructions and
may consult counsel for Trust or its own counsel and with accountants and other
experts with respect to any matter arising in connection with the
Administrator's duties, 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 with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of Trust
until receipt of written notice thereof from Trust.
Nothing herein shall make Administrator liable for the performance or
omissions of unaffiliated third parties not under Administrator's reasonable
control such as, by way of example and not limitation, transfer agents,
custodians, investment advisers or sub-advisers, postal or delivery services,
telecommunications providers and processing and settlement services.
3
ARTICLE 6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective on the date set forth in Schedule B hereto and shall
remain in effect for the full duration of the Initial Term and each Renewal
Term, each as set forth in Schedule B, unless terminated in accordance with the
provisions of this Article 6. This Agreement may be terminated only: (a) by
either party at the end of the Initial Term or the end of any Renewal Term on 90
days' prior written notice; (b) by either party hereto on such date as is
specified in written notice given by the terminating party, in the event of a
material breach of this Agreement by the other party, provided the terminating
party has notified the other party of such material breach at least 45 days
prior to the specified date of termination and the breaching party has not
remedied such breach by the specified date; or (c) as to any Portfolio or the
Trust, effective upon the liquidation of such Portfolio or the Trust, as the
case may be. For purposes of this paragraph, the term "liquidation" shall mean a
transaction in which the assets of the Trust or a Portfolio are sold or
otherwise disposed of and proceeds therefrom are distributed in cash to the
shareholders in complete liquidation of the interests of such shareholders in
the entity.
ARTICLE 7. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests.
ARTICLE 8. CONFIDENTIALITY. The Administrator agrees on behalf of
itself and its employees to treat confidentially all records and other
information relative to the Trust and its shareholders received by the
Administrator in connection with this Agreement, including any non-public
personal information as defined in Regulation S-P, and that it shall not use or
disclose any such information except for the purpose of carrying out the terms
of this Agreement; provided, however, that Administrator may disclose such
information as required by law or after prior notification to and approval in
writing by Trust, which approval may not be withheld where the Administrator may
be exposed to civil or criminal contempt proceedings or penalties for failure to
comply.
ARTICLE 9. CERTAIN RECORDS. The Administrator shall maintain customary
records in 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 Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify Trust and follow Trust's
instructions as to permitting or refusing such inspection; provided 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) Trust has agreed
to indemnify the Administrator against such liability.
ARTICLE 10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The
Administrator undertakes to comply in all material respects with applicable
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
the 1940 Act, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by the
Administrator hereunder.
4
ARTICLE 11. INTERNET ACCESS. Data and information may be made
electronically accessible to the Trust and its adviser and/or sub-adviser
through Internet access to one or more links provided by the Administrator ("Web
Link"). All rights in Web Link (including text and "look and feel" attributes)
are owned by Administrator. Any commercial use of the content or any other
aspect of Web Link requires the written permission of Administrator. Use of the
Web Link by Trust or its agents will be subject to any terms of use set forth on
the web site. A Web Link and the information (including text, graphics and
functionality) in the Web Link is presented "As Is" and "As Available" without
express or implied warranties including, but not limited to, implied warranties
of non-infringement, merchantability and fitness for a particular purpose.
Administrator neither warrants that the Web Link will be uninterrupted or error
free, nor guarantees the accessibility, reliability, performance, timeliness,
sequence, or completeness of information provided on the Web Link.
ARTICLE 12. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement between the parties hereto and supersedes any prior
agreement, draft or proposal with respect to the subject matter hereof. This
Agreement or any part hereof may be changed or waived only by an instrument in
writing signed by the party against which enforcement of such change or waiver
is sought.
ARTICLE 13. ASSIGNMENT. This Agreement shall not be assignable by
either party without the prior written consent of the other party.
ARTICLE 14. WAIVER. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by written
instrument executed by such party. No failure of either party hereto to exercise
any power or right granted hereunder, or to insist upon strict compliance with
any obligation hereunder, and no custom or practice of the parties with regard
to the terms of performance hereof, will constitute a waiver of the rights of
such party to demand full and exact compliance with the terms of this Agreement.
ARTICLE 15. NOTICE. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, federal express (or substantially similar delivery service),
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to
Trust, at 000 Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, XX 00000; and if to the
Administrator at Xxx Xxxxxxx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxxxx, 00000.
ARTICLE 16. FORCE MAJEURE. No breach of any obligation of a party to
this Agreement will constitute an event of default or breach to the extent it
arises out of a cause, existing or future, that is beyond the control and
without negligence of the party otherwise chargeable with breach or default,
including without limitation: work action or strike; lockout or other labor
dispute; flood; war; riot; theft; earthquake or natural disaster. Either party
desiring to rely upon any of the foregoing as an excuse for default or breach
will, when the cause arises, give to the other party prompt notice of the facts
which constitute such cause; and, when the cause ceases to exist, give prompt
notice thereof to the other party.
5
ARTICLE 17. EQUIPMENT FAILURES. In the event of equipment failures
beyond the Administrator's control, the Administrator shall take reasonable and
prompt steps to minimize service interruptions but shall have no liability with
respect thereto. The Administrator shall develop and maintain a plan for
recovery from equipment failures which may include contractual arrangements with
appropriate parties making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
ARTICLE 18. DEFINITIONS OF CERTAIN TERMS. The term "affiliated person,"
when used in this Agreement, shall have the meaning specified in the 1940 Act
and the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
ARTICLE 19. HEADINGS. All Article headings contained in this Agreement
are for convenience of reference only, do not form a part of this Agreement and
will not affect in any way the meaning or interpretation of this Agreement.
Words used herein, regardless of the number and gender specifically used, will
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine, or neuter, as the contract requires.
ARTICLE 20. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Delaware and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Delaware, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 21. LIMITATION OF LIABILITY. Notice is hereby given that this
Agreement is executed on behalf of the Trustees of the Trust as trustees and not
individually, and that all obligations of this Agreement are not binding upon
any of the trustees, officers, agents or shareholders of any of the Portfolios
or the Trust individually, but binding only upon the assets and property of the
Portfolios or the Trust. No Portfolio shall be liable for any claims against any
other Portfolio.
ARTICLE 22. MULTIPLE ORIGINALS. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 23. BINDING AGREEMENT. This Agreement, and the rights and
obligations of the parties hereunder, shall be binding on, and inure to the
benefit of, the parties and their respective successors and assigns.
ARTICLE 24. SEVERABILITY. If any part, term or provision of this
Agreement is held to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
The Arbitrage Funds
By: /S/ XXXXXXX XXXXXXXXX
---------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Compliance Officer
SEI INVESTMENTS GLOBAL FUNDS SERVICES
By: /S/ XXXXX XXXXX
---------------------
Name: Xxxxx Xxxxx
Title: Executive Vice President
7
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF MAY 17, 2005
BETWEEN
THE ARBITRAGE FUNDS
AND
SEI INVESTMENTS GLOBAL FUNDS SERVICES
Administrator shall provide the following services to the Trust:
(a) Maintain the Trust's accounting books and records;
(b) Obtain portfolio security valuations from appropriate sources
consistent with the Trust's pricing and valuation policies, and
calculate net asset value of each portfolio and class;
(c) Compute yields, total return, expense ratios, portfolio turnover rate
and average dollar-weighted portfolio maturity, as appropriate;
(d) Track and validate income and expense accruals, analyze and modify
expense accrual changes periodically, and process expense disbursements
to vendors and service providers;
(e) Perform cash processing such as recording paid-in capital activity,
perform necessary reconciliations with the transfer agent and the
custodian, and provide cash availability data to the adviser, if
requested;
(f) Calculate required ordinary income and capital gains distributions,
coordinate estimated cash payments, and perform necessary
reconciliations with the transfer agent;
(g) Provide standardized performance reporting data to the Trust and its
adviser;
(h) Provide performance, financial and expense information for registration
statements and proxies;
(i) Communicate net asset value, yield, total return or other financial
data to appropriate third party reporting agencies, and assist in
resolution of errors reported by such third party agencies;
(j) Prepare Trust's financial statements for review by fund management and
independent auditors, manage annual and semi-annual report preparation
process, prepare Forms N-Q, N-SAR, N-PX and 24f-2, provide fund
performance data for annual report, coordinate printing and delivery of
annual and semi-annual reports to shareholders, and file Form N-SAR,
Form 24f-2 and annual/semi-annual reports via XXXXX;
8
(k) Monitor each Portfolio's compliance with the requirements of Subchapter
M of the Internal Revenue Code with respect to status as a regulated
investment company;
(l) Prepare and file federal and state tax returns for the Trust, and
provide data for year-end 1099's and supplemental tax letters;
(m) Provide such fund accounting and financial reports in connection with
quarterly meetings of the Board of Trustees as are required or as the
Board may reasonably request;
(n) Manage the proxy process, including evaluating proxy distribution
channels, coordinating with outside service provider to distribute
proxies, track shareholder responses and tabulate voting results, and
managing the proxy solicitation vendor if necessary;
(o) Provide individuals to serve as officers of the Trust, as requested;
(p) Coordinate with Trust's counsel on drafting, review and filing of
registration statements and proxies, and coordinate printing and
delivery of prospectuses and proxies;
(q) Coordinate the Trust's Board of Trustees' schedule, agenda and
production of Board meeting materials, and attend Board meetings (if
requested);
(r) Provide consultation to the Trust and its adviser on regulatory matters
relating to the operation of the Trust, and update the Trust and its
adviser on significant regulatory and legislative developments which
may affect the Trust;
(s) Develop or assist legal counsel to the Trust in the development of
policies and procedures relating to the operation of the Trust;
(t) Act as liaison to legal counsel to the Trust and, where applicable, to
legal counsel to the Trust's independent Trustees;
(u) Coordinate with Trust counsel in the preparation, review and execution
of contracts between the Trust and third parties, such as the Trust's
investment adviser, transfer agent, and custodian, and record-keepers
or shareholder service providers;
(v) Assist the Trust in handling and responding to routine regulatory
examinations with respect to records retained or services provided by
the Administrator, and coordinate with Trust's legal counsel in
responding to any non-routine regulatory matters with respect to such
matters;
(w) Provide consulting with respect to the ongoing design, development and
operation of the Trust, including new portfolios or share classes
and/or load structures and financing, as well as changes to investment
objectives and polices for existing portfolios;
9
(x) Coordinate as necessary the registration or qualification of shares of
the Trust with appropriate state securities authorities.
[END OF SCHEDULE A]
10
SCHEDULE B
TO THE ADMINISTRATION AGREEMENT
DATED AS OF MAY 17, 2005
BETWEEN
THE ARBITRAGE FUNDS
AND
SEI INVESTMENTS GLOBAL FUNDS SERVICES
Portfolios: This Agreement shall apply with respect to all Portfolios of
the Trust, either now existing or in the future created. The
following is a listing of the current portfolios of the Trust
(collectively, the "Portfolios"):
The Arbitrage Fund, Class I and Class R
Fees: Pursuant to Article 4, Trust shall pay the Administrator the
following fees, at the annual rate set forth below calculated
based upon the aggregate average daily net assets of the
Trust:
10 basis points on the first $500 million in net assets
8 basis points on net assets over $500 million
This fee schedule is subject to a minimum annual fee of
$150,000 USD for one Portfolios and 2 classes in existence as
of the effective date of this Agreement. The minimum fee shall
be increased $100,000 for each Portfolio created after the
effective date of this Agreement. In addition, the minimum fee
shall be increased $15,000 for each new class added to a
Portfolio of the Trust after the effective date of this
Agreement, as well as for each class in excess of 2 for new
Portfolios added after the effective date of this Agreement.
Term: This Agreement shall become effective on August 31, 2005 and
shall remain in effect through August 31, 2008_ ("Initial
Term") and, thereafter, for successive terms of 3 year(s) each
(each a "Renewal Term"), unless and until this Agreement is
terminated in accordance with the provisions of Article 6
hereof.
Misc.: Trust acknowledges and agrees that Administrator reserves the
right to impose a five percent (5%) per annum surcharge on a
Portfolio basis against the Portfolios in the event the Funds
have not implemented by the first anniversary of this
Agreement an automated trade ticket process with Administrator
to facilitate the orderly and timely processing of Portfolio
transactions, valuations and reconciliations.
[END OF SCHEDULE B]
11
