DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of May 24, 2000, between The Arbitrage Funds,
a Delaware business trust (hereinafter referred to as the "Trust") and Xxxxxxxx
Capital Markets, Inc. ("RCM" or the "Distributor"), a corporation organized and
existing under the laws of the State of New York.
WHEREAS the Trust is registered under the Investment Act of 1940, as
amended ("1940 Act"), as an open-end management investment company, and has
registered one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
("1933 Act"), and has qualified its shares for sale to the public under various
state securities laws; and
WHEREAS the Trust desires to retain RCM as principal underwriter in
connection with the offering and sale of the Shares of each series listed on
Schedule A (as amended from time to time) to this Agreement; and
WHEREAS, the Distributor is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member of
the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS RCM is willing to act as principal underwriter for the Trust on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows;
1. APPOINTMENT. The Trust hereby appoints RCM as an agent to be the
principal underwriter so as to hold itself out as available to receive and
accept orders for the purchase and redemption of the Shares and redemption of
Shares on behalf of the Trust, subject to the terms and for the period set forth
in this Agreement. RCM hereby accepts such appointment and agrees to act
hereunder. The Trust understands that any solicitation activities conducted on
behalf of the Trust will be conducted primarily, if not exclusively, by
employees of the Trust's sponsor who shall become registered representatives of
RCM.
2. SERVICES AND DUTIES OF RCM.
(a) RCM agrees to sell Shares on a best efforts basis from time to
time during the term of this Agreement as agent for the Trust and upon the terms
described in the Registration Statement. As used in this Agreement, the term
"Registration Statement" shall mean the currently effective registration
statement of the Trust, and any supplements thereto, under the 1933 Act and the
0000 Xxx.
(1) RCM will hold itself available to receive purchase and
redemption orders satisfactory to RCM for Shares and will accept such orders on
behalf of the Trust. Such purchase orders shall be deemed effective at the time
and in the manner set forth in the Registration Statement.
(2) If requested by the Trust, RCM, with the operational assistance
of the Trust's transfer agent, shall make Shares available through the National
Securities Clearing Corporation's Fund/SERV System.
(3) RCM shall provide to investors and potential investors only such
information regarding the Trust as the Trust shall provide or approve. RCM shall
review and file all proposed advertisements and sales literature with
appropriate regulators and consult with the Trust regarding any comments
provided by regulators with respect to such materials.
(4) The offering price of the Shares shall be the price determined
in accordance with, and in the manner set forth in, the most-current Prospectus.
The Trust shall make available to RCM a statement of each computation of net
asset value.
(5) RCM at its sole discretion may repurchase Shares offered for
sale by the shareholders. Repurchase of Shares by RCM shall be at the price
determined in accordance with, and in the manner set forth in, the most-current
Prospectus. At the end of each business day, RCM shall notify, by any
appropriate means, the Trust and its transfer agent of the orders for repurchase
of Shares received by RCM since the last report, the amount to be paid for such
Shares, and the identity of the shareholders offering Shares for repurchase. The
Trust reserves the right to suspend such repurchase right upon written notice to
RCM. RCM further agrees to act as agent for the Trust to receive and transmit
promptly to the Trust's transfer agent shareholder requests for redemption of
Shares.
(6) RCM shall not be obligated to sell any certain number of Shares.
(7) RCM shall prepare reports for the Board regarding its activities
under this Agreement as from time to time shall be reasonably requested by the
Board.
3. DUTIES OF THE TRUST.
(1) The Trust shall keep RCM fully informed of its affairs and shall
provide to RCM from time to time copies of all information, financial
statements, and other papers that RCM may reasonably request for use in
connection with the distribution of Shares, including, without limitation,
certified copies of any financial statements prepared for the Trust by its
independent public accountant and such reasonable number of copies of the most
current Prospectus, Statement of Additional Information ("SAI"), and annual and
interim reports as RCM may request, and the Trust shall fully cooperate in the
efforts of RCM to sell and arrange for the sale of Shares.
(2) The Trust shall maintain a currently effective Registration
Statement on Form N-1A with the Securities and Exchange Commission (the "SEC"),
maintain qualification with applicable states and file such reports and other
documents as may be required under applicable federal and state laws. The Trust
shall notify RCM in writing of the states in which the Shares may be sold and
shall notify RCM in writing of any changes to such information. The Trust shall
bear all expenses related to preparing and typesetting such Prospectuses, SAI
and other materials required by law and such other expenses, including printing
and mailing expenses, related to the Trust's communication with persons who are
shareholders.
(3) The Trust shall not use any advertisements or other sales
materials that have not been (i) submitted to RCM for its review and approval,
and (ii) filed with the appropriate regulators.
(4) The Trust represents and warrants that its Registration
Statement and any advertisements and sales literature (excluding statements
relating to RCM and the services it provides that are based upon written
information furnished by RCM expressly for inclusion therein) of the Trust shall
not contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that all statements or information furnished to RCM,
pursuant to Section 3(i) hereof, shall be true and correct in all material
respects.
4. OTHER BROKER-DEALERS. RCM in its discretion may enter into
agreements to sell Shares to such registered and qualified retail dealers, as
reasonably requested by the Trust. In making agreements with such dealers, RCM
shall act only as principal and not as agent for the Trust. The form of any such
dealer agreement shall be mutually agreed upon and approved by the Trust and
RCM.
5. WITHDRAWAL OF OFFERING. The Trust reserves the right at any time to
withdraw all offerings of any or all Shares by written notice to RCM at its
principal office. No Shares shall be offered by either RCM or the Trust under
any provisions of this Agreement and no orders for the purchase or Sale of
Shares hereunder shall be accepted by the Trust if and so long as effectiveness
of the Registration Statement then in effect or any necessary amendments thereto
shall be suspended under any of the provisions of the 1933 Act, or if and so
long as a current prospectus as required by Section 5(b)(2) of the 1933 Act is
not on file with the SEC.
6. SERVICES NOT EXCLUSIVE. The services furnished by RCM hereunder
are not to be deemed exclusive and RCM shall be free to furnish similar services
to others so long as its services under this Agreement are not impaired thereby.
7. EXPENSES OF THE TRUST. The Trust shall bear all costs and expenses
of registering the Shares with the SEC and state and other regulatory bodies,
and shall assume expenses related to communications with shareholders of the
Trust including, but not limited to, (i) fees and disbursements of its counsel
and independent public accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAIs; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAIs, and proxy materials
to shareholders; (iv) such other expenses related to the communications with
persons who are shareholders of the Trust; and (v) the qualifications of Shares
for sale under the securities laws of such jurisdictions as shall be selected by
the Trust pursuant to Paragraph 3(ii) hereof, and the costs and expenses payable
to each such jurisdiction for continuing qualification therein. In addition, the
Trust shall bear all costs of preparing, printing, mailing and filing any
advertisements and sales literature subject to the terms of the any Rule 12b-1
Plan.
8. EXPENSES OF THE DISTRIBUTOR. The Distributor shall bear the expenses
of registration or qualification of the Distributor as a dealer or broker under
federal or state laws and the expenses of continuing such registration or
qualification. The Distributor does not assume responsibility for any expenses
not expressly assumed hereunder.
9. COMPENSATION. As compensation for the services performed and the
expenses assumed by RCM under this Agreement including, but not limited to, any
commissions paid to third parties for sales of Shares, the Trust shall pay RCM,
as promptly as possible after receipt of a quarterly invoice, a fee for services
as set forth in Schedule B to this Agreement. Such fees shall be paid to
Distributor by the Trust pursuant to its Rule 12b-1 plan or, if Rule 12b-1
payments are not sufficient to pay such fees and expenses, or if the Rule 12b-1
plan is discontinued, or if the Fund's sponsor, the Adviser, otherwise
determines that Rule 12b-1 fees shall not, in whole or in part, be used to pay
Distributor, the Adviser shall be responsible for the payment of the amount of
such fees not covered by Rule 12b-1 payments.
10.SHARE CERTIFICATES. The Trust shall not issue certificates
representing Shares unless requested to do so by a shareholder. If such request
is transmitted through RCM, the Trust will cause certificates evidencing the
Shares owned to be issued in such names and denominations as RCM shall from time
to time direct.
11. STATUS OF RCM. RCM is an independent contractor and shall be
agent of the Trust only with respect to the sale and redemption of Shares.
12. INDEMNIFICATION.
(a) The Trust agrees to indemnify, defend, and hold RCM, its
officers and directors, and any person who controls RCM within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands, or liabilities and any counsel fees incurred
in connection therewith) that RCM, its officers, directors, or any such
controlling person may incur under the 1933 Act, or under common law or
otherwise, arising out of or based upon any (i) alleged untrue statement of a
material fact contained in the Registration Statement, Prospectus, SAI or sales
literature, (ii) alleged omission to state a material fact required to be stated
in the Registration Statement, Prospectus, or SAI or necessary to make the
statements therein not misleading, or (iii) failure by the Trust to comply with
the terms of the Agreement; provided, that in no event shall anything contained
herein be so construed as to protect RCM against any liability to the Trust or
its shareholders to which RCM would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Agreement.
(b) The Trust shall not be liable to RCM under this Agreement
with respect to any claim made against RCM or any person indemnified unless RCM
or other such person shall have notified the Trust in writing of the claim
within a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon RCM or
such other person (or after RCM or the person shall have received notice of
service on any designated agent). However, failure to notify the Trust of any
claim shall not relieve the Trust from any liability that it may have to RCM or
any other person against whom such action is brought otherwise than on account
of this Agreement.
(c) The Trust shall be entitled to participate at its ownn expense
in the defense or, if it so elects, to assume the defense of any suit brought t
enforce any claims subject to this Agreement. If the Trust elects to assume the
defense of any such claim, the defense shall be conducted by counsel chosen by
the Trust and satisfactory to indemnified defendants in the suit whose approval
shall not be unreasonably withheld. In the event that the Trust elects to assume
the defense of any suit and retain counsel, the indemnified defendants shall
bear the fees and expenses of any additional counsel retained by them. If the
Trust does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants. The Trust agrees to promptly notify RCM
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of its
Shares.
(d) RCM agrees to indemnify, defend, and hold the Trust, its
officers and trustees, and any person who controls the Trust within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending against such claims, demands, or liabilities and any counsel fees
incurred in connection therewith) that the Trust, its trustees or officers, or
any such controlling person may incur under the 1933 Act, or under common law or
otherwise, resulting from RCM's willful misfeasance, bad faith or gross
negligence in the performance of its obligations and duties under this
Agreement, or arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by RCM to the Trust
for use in the Registration Statement, Prospectus or SAI of or based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement, Prospectus or SAI or
necessary to make such information not misleading.
(e) RCM shall be entitled to participate, at its own expense, in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if RCM elects to assume the defense, the defense shall be
conducted by counsel chosen by RCM and satisfactory to the indemnified
defendants whose approval shall not be unreasonably withheld. In the event that
RCM elects to assume the defense of any suit and retain counsel, the defendants
in the suit shall bear the fees and expenses of any additional counsel retained
by them. If RCM does not elect to assume the defense of any suit, it will
reimburse the indemnified defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
13. DURATION AND TERMINATION.
(a) This Agreement shall become effective on the date first written
above or such later date as indicated in Schedule A and, unless sooner
terminated as provided herein, will continue in effect for two years from the
above written date. Thereafter, if not terminated this Agreement shall continue
in effect for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Trust's Board who are neither interested persons (as defined in the 0000 Xxx) of
the Trust ("Independent trustees") or RCM, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of the Trust.
(b) Notwithstanding the foregoing, this Agreement may be terminated
in its entirety at any time, without the payment of any penalty, by vote of the
Board, by vote of a majority of the Independent trustees, or by vote of a
majority of the outstanding voting securities of the Trust on sixty days'
written notice to RCM or by RCM at any time, without the payment of any penalty,
on sixty days' written notice to the Trust. This Agreement will automatically
terminate in the event of its assignment.
14. 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. This Agreement may be amended with the
approval of the Board or of a majority of the outstanding voting securities of
the Trust; provided, that in either case, such amendment also shall be approved
by a majority of the Independent trustees.
15. LIMITATION OF LIABILITY. The Board and shareholders of the Trust
shall not be personally liable for obligations of the Trust in connection with
any matter arising from or in connection with this Agreement. This Agreement is
not binding upon any trustees, officer or shareholder of the Trust individually,
and no such person shall be individually liable with respect to any action or
inaction resulting from this Agreement.
16. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
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 upon and inure to the benefit
of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
18. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated as of the day and year first above
written.
ATTEST: THE ARBITRAGE FUNDS
___________________________ By:___________________________
Title:________________________
ATTEST: XXXXXXXX CAPITAL MARKETS, INC.
___________________________ By:___________________________
Title:________________________
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BETWEEN
THE ARBITRAGE FUNDS
AND
XXXXXXXX CAPITAL MARKETS, INC.
Pursuant to Section 1 of the Distribution Agreement between Arbitrage
Funds (the "Trust"), and Xxxxxxxx Capital Markets, Inc. ("RCM"), the Trust
hereby appoints RCM as its agent to be the principal underwriter of the Trust
with respect to its following series:
Arbitrage Fund
Dated___________________,2000
SCHEDULE B
DISTRIBUTION SERVICES FEE SCHEDULE
|X| Greater of the annual minimum of $15,000 for the initial fund or
1 basis point on assets of the funds.
|X| Licensing of Investment Advisor's Staff @ an annual fee of $900 per
person.
|X| Advertising Compliance Review and NASD Filing @ $150 per job for
the first ten pages of an ad piece and $20 per additional page.
NASD filing fees will apply for Fund/Serv activities on a pass thru
basis, if applicable.
SERVICES INCLUDE:
|X| Providing access to Fund/Serv as an NSCC member
|X| Filing marketing material with the NASD
|X| Providing principal review of marketing materials
|X| Executing broker dealer selling agreements
|X| Underwriting mutual fund shares
