Exhibit (d)
THIS
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT (this “Agreement”) is
made as of this 1st day of October, 2007 by and between THE ARBITRAGE
FUNDS, a Delaware business trust (the “Trust”) and WATER ISLAND CAPITAL,
LLC, a Delaware limited liability company (the “Adviser”), with respect to
the following recital of facts.
RECITALS
WHEREAS,
the Trust is registered as an open-end, diversified management investment company under
the Investment Company Act of 1940, as amended (the “1940 Act”) and is
authorized to issue shares in separate series with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS,
the Adviser is registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and is engaged in the business of acting as an investment adviser; and
WHEREAS,
the Trust desires to retain the Adviser to render advice and services to the Fund (as
defined below) pursuant to the terms and provisions of this Agreement, and the Adviser
desires to furnish said advice and services.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto
agree as follows:
| 1. |
Appointment
of Adviser. The Trust hereby appoints the Adviser to act as investment
adviser for The Arbitrage Fund, a series of the Trust (the “Fund”).
Subject to the direction and control of the Trust’s Board of Trustees, the
Adviser shall act as investment adviser for the Fund and shall, in such
capacity, supervise the investment and reinvestment of the cash, securities or
other properties comprising the Fund’s assets. The Adviser shall give the
Fund the benefit of its best judgment, efforts and facilities in rendering its
services as investment adviser. |
| 2. |
Duties
of Investment Adviser. In carrying out its obligation under paragraph 1
hereof, the Adviser shall: |
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(a) |
act
as investment adviser for and supervise and manage the investment and
reinvestment of the Fund’s assets and in connection therewith have
complete discretion in purchasing and selling securities and other assets for
the Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund; |
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(b) |
supervise
continuously the investment program of the Fund and the composition of its
investment portfolio; |
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(c) |
arrange,
subject to the provisions of paragraph 3 hereof, for the purchase and sale of
securities and other assets held in the investment portfolio of the Fund; and |
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(d) |
maintain
books and records with respect to the Fund’s securities transactions and
will render to the Trust’s Board of Trustees such periodic and special
reports as they may request. |
| 3. |
Brokerage.
The Adviser shall place all orders for the purchase and sale of portfolio
securities for the account of the Fund with brokers or dealers selected by the
Adviser, although the Fund will pay the actual brokerage commissions on
portfolio transactions in accordance with paragraph 5 hereof. The Adviser will
take the following into consideration when selecting a broker or dealer: the
best net price available; the reliability, integrity and financial condition of
the broker or dealer; the size of and difficulty in executing the order; the
value of the expected contribution of the broker or dealer to the investment
performance of the Fund on a continuing basis; and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis). |
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To
the extent contemplated by the Trust’s Registration Statement under the 1933 Act, as
amended, and the 1940 Act (the “Registration Statement”) in evaluating the best
overall terms available, and in selecting the broker or dealer to execute a particular
transaction, the Adviser may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided to the Fund and/or other accounts over which the Adviser (or an affiliate of the
Adviser) exercises investment discretion. The Adviser is authorized to pay to a broker or
dealer who provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but only if, the
Adviser determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer, viewed in
terms of that particular transaction or in terms of all of the accounts over which
investment discretion is so exercised. |
| 4. |
Compliance
with Applicable Requirements. In carrying out its obligations
under this Agreement, the Adviser shall at all times conform to: |
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(a) |
all
applicable provisions of the 1940 Act and any rules and regulations adopted
thereunder; |
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(b) |
the
provisions of the Registration Statement; |
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(c) |
the
provisions of the Declaration of Trust of the Trust, as amended; |
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(d) |
the
provisions of the By-Laws of the Trust, as amended; and |
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(e) |
any
other applicable provisions of state and Federal law. |
| 5. |
Expenses.
The expenses connected with the Fund shall be allocable between the
Fund and the Adviser as follows: |
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(a) |
The
Adviser shall furnish, at its expense and without cost to the Fund, the
services of a President, Secretary and one or more Vice Presidents of
the Trust, to the extent that such additional officers may be
required by the Trust for the proper conduct of its affairs. |
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(b) |
The
Adviser shall further maintain, at its expense and without cost to the Fund,
a trading function in order to carry out its obligations under
subparagraph (d) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund. |
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(c) |
Nothing
in subparagraph (a) hereof shall be construed to require the Adviser to
bear: |
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(i) |
any
of the costs (including applicable office space, facilities and equipment)
of the services of a principal financial officer of the Trust whose
normal duties consist of maintaining the financial accounts and books
and records of the Fund; including the reviewing of calculations of
daily net asset value and preparing tax returns; or |
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(ii) |
any
of the costs (including applicable office space, facilities and equipment)
of the services of any of the personnel operating under the direction
of such principal financial officer. |
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Notwithstanding
the obligation of the Fund to bear the expense of the functions referred to in clauses (i)
and (ii) of this subparagraph (c), the Adviser may pay the salaries, including any
applicable employment or payroll taxes and other salary costs, of the principal financial
officer and other personnel carrying out such functions and the Fund shall reimburse the
Adviser therefor upon proper accounting. |
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(d) |
All
of the ordinary business expenses incurred in the operations of the Fund and
the offering of its shares shall be borne by the Fund unless specifically
provided otherwise in this paragraph 5. These expenses include but are not
limited to the costs incurred in connection with registration and maintenance
of its registration under the Securities Act of 1933, as amended, the 1940 Act
and state securities laws and regulations; preparation of and printing and
mailing reports, notices and prospectuses to current shareholders; transfer
taxes on the sales of the Fund’s shares and on the sales of portfolio
securities; brokerage commissions; custodial and shareholder transfer charges;
legal, auditing and accounting expenses; interest charges, reimbursement
payments to securities lenders for dividend and interest payments on securities
sold short; taxes; expenses of servicing shareholder accounts; insurance
expenses for fidelity and other coverage; fees and expenses of Trustees who are
not “interested persons” within the meaning of the 1940 Act; expenses
of Trustee and shareholder meetings; and any expenses of distributing the
Fund’s shares which may be payable pursuant to a Plan of Distribution
adopted pursuant to Rule 12b-1 under the 1940 Act. |
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(e) |
The
Adviser may voluntarily absorb certain Fund expenses or waive the Adviser’s
own advisory fee. To the extent the Adviser incurs any costs by assuming
expenses, which are obligations of the Fund as set forth herein, the Fund shall
promptly reimburse the Adviser for such costs and expenses, except to the
extent the Adviser has otherwise agreed to bear such expenses. Subject to
approval by the Trust’s Board of Trustees, to the extent the services for
which the Fund is obligated to pay are performed by the Adviser, the Adviser
shall be entitled to recover from the Fund to the extent of the Adviser’s
actual costs for providing such services. In determining the Adviser’s
actual costs, the Adviser may take into account an allocated portion of the
salaries and overhead of personnel performing such services. |
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(a) |
For
all services rendered by Adviser hereunder, the Fund shall pay to Adviser and
Adviser agrees to accept as full compensation for all services rendered
hereunder, an advisory fee, payable monthly, at an annual rate of 1.25% on the
first $250 million of the Fund’s average daily net assets, 1.20% on the
next $50 million of the Fund’s average daily net assets, 1.15% on the next
$50 million of the Fund’s average daily net assets, 1.10% on the next $75
million of the Fund’s average daily net assets, 1.05% on the next $75
million of the Fund’s average daily net assets and 1.00% on the Fund’s
average daily net assets in excess of $500 million. The portion of the fee
based upon the average daily net assets of the Fund shall be accrued daily at
the rate of 1/365th of the applicable percentage applied to the
daily net assets of the Fund. |
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(b) |
The
investment advisory fee shall be accrued daily by the Fund and paid to the
Adviser on the first business day of the succeeding month. |
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(c) |
The
initial fee under this Agreement shall be payable on the first business day of
the first month following the effective date of this Agreement and shall be
prorated as set forth below. If this Agreement is terminated prior to the end
of any month, the fee to the Adviser shall be prorated for the portion of any
month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the month
during which the Agreement is in effect bears to the number of calendar days in
the month, and shall be payable within ten days after the date of termination. |
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(d) |
The
fee payable to the Adviser under this Agreement will be reduced to the extent
of any receivable owed by the Adviser to the Fund and as required under any
expense limitation applicable to the Fund. |
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(e) |
The
Adviser voluntarily may reduce any portion of the compensation or reimbursement
of expenses due to it pursuant to this Agreement and may agree to make payments
to limit the expenses that are the responsibility of the Fund under this
Agreement. Any such reduction or payment shall be applicable only to such
specific reduction or payment and shall not constitute an agreement to reduce
any future compensation or reimbursement due to the Adviser hereunder or to
continue future payments. Any such reduction will be agreed to prior to accrual
of the related expense or fee and will be estimated daily and reconciled and
paid on a monthly basis. |
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(f) |
The
Adviser may agree not to require payment of any portion of the compensation or
reimbursement of expenses otherwise due to it pursuant to this Agreement. Any
such agreement shall be applicable only with respect to the specific items
covered thereby and shall not constitute an agreement not to require payment of
any future compensation or reimbursement due to the Adviser hereunder. |
| 7. |
Independent
Contractor/Non-Exclusivity. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund or
the Trust in any way or otherwise be deemed an agent of the Fund or the Trust.
However, it is understood and agreed that officers or directors of the Adviser
may serve as officers or trustees of the Trust, and that officers and trustees
of the Trust may serve as officers or directors of the Adviser to the extent
permitted by law; and that the officers and directors of the Adviser are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies. |
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The
services of the Adviser to the Fund are not to be deemed to be exclusive, and the Adviser
shall be free to render investment advisory and corporate administrative or other services
to others (including other investment companies) and to engage in other activities. |
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The
Adviser (including its officers, directors, members and employees) shall have no
obligation to purchase or sell for the Fund any security that any such person may purchase
or sell for itself or for any other clients. The Adviser shall have full authority to
allocate any particular transaction in any security among its clients (including the Fund)
in any manner the Adviser shall in good faith, and consistent with its fiduciary
obligations, determine. The Fund acknowledges that transactions in a specific security may
not be accomplished for all client accounts of the Adviser at the same time or at the same
price. |
| 8. |
Term
and Approval. This Agreement shall continue in effect, unless terminated as
hereinafter provided, from year to year, provided that such continuance is
specifically approved at least annually: |
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(a) |
(i)
by the Trustees or (ii) by the vote of a majority of the outstanding voting
securities of the Fund (as defined in Section 2(a)(42) of the 1940 Act), and |
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(b) |
by
the affirmative vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of a party to this Agreement (other than as
Trustees), by votes cast in person at a meeting specifically called for such
purpose. |
| 9. |
Termination.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Trustees or by vote of a majority of the Fund’s
outstanding voting securities, or by the Adviser on sixty days’ written
notice to the other party. The notice provided for herein may be waived by
either party. This Agreement shall automatically terminate in the event of its
assignment, the term “assignment” for this purpose having the meaning
defined in Section 2(a)(4) of the 1940 Act. |
| 10. |
Liability
of Adviser. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser or any of its officers, directors or employees, it shall not be
subject to liability to the Fund or to any shareholder of the Fund for any act
or omission in the course of, or connected with, rendering services hereunder
or for any losses that may, from time to time, be sustained in the purchase,
holding or sale of any security. |
| 11. |
Liability
of Trust. The obligations of the Trust hereunder shall not be binding upon
any of the trustees, shareholders, nominees, officers, agents or employees of
the Trust, personally, but shall bind only the assets and property of the Trust
as provided in the Declaration of Trust of the Trust. |
| 12. |
Notices.
Any notices under this Agreement shall be in writing, addressed and delivered
or mailed postage paid to the other party at such address as such other party
may designate for the receipt of such notice. Until further notice to the other
party, it is agreed that the address of the Trust and that of the Adviser shall
be 00 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. |
| 13. |
Questions
of Interpretation. Any question of interpretation of any term or provision
of this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to the 1940 Act. In addition, where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is changed by
rules, regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation
and order. |
| 14. |
Books
and Records. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Adviser hereby agrees that all records that it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any such records upon the Trust’s request. The Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act. |
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| 15. |
Amendment
of this Agreement. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. Any amendment of this Agreement shall by subject to the
1940 Act. |
| 16. |
Governing
Law. This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein without
reference to choice of law principles thereof and in accordance with the
applicable provisions of the 1940 Act. |
| 17. |
Miscellaneous.
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. 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. This Agreement shall
be binding on, and shall inure to the benefit of this parties hereto and their
respective successors. |
IT
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
respective officers on the day and the year first above written.
| THE ARBITRAGE FUNDS |
WATER ISLAND CAPITAL, LLC |
By: /s/ Xxxx X. Xxxxxx |
By: /s/ Xxxx X. Xxxxxx |
| Name: Xxxx X. Xxxxxx |
Name: Xxxx X. Xxxxxx |
| Title: Trustee |
Title: President |
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