ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 23rd day of December, 2002, by and
between Mercantile Alternative Strategies Fund LLC, a Delaware limited liability
company (the "Company"), a registered, non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") consisting of limited liability company interests (the "Interests");
and Mercantile Capital Advisors, Inc., a Maryland corporation (the
"Administrator").
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide administrative and accounting services to
the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. Retention of the Administrator. The Company hereby retains the
Administrator to furnish the Company with accounting, administrative and
recordkeeping services as set forth in this Agreement, and the Administrator
hereby accepts such employment.
ARTICLE 2. Administrative and Accounting Services. The Administrator shall
perform or arrange for and supervise the performance by others of the accounting
and administrative services necessary for the operation of the Company. In
performing its duties under this Agreement, the Administrator will act in all
material respects in accordance with the Company's Limited Liability Company
Agreement (the "LLC Agreement") and Offering Memorandum as they may be amended
(provided copies are delivered to the Administrator). The Administrator (i)
shall not have or be required to have any authority to supervise the investment
or reinvestment of the securities or other properties which comprise the assets
of the Company and (ii) shall not provide any investment advisory services to
the Company, and shall have no liability related to the foregoing. The
Administrator shall provide the Company with all necessary office space,
equipment, supplies, personnel, compensation and facilities (including
facilities for Members' and Board of Directors meetings) for providing such
services. The Administrator may sub-contract with third parties to perform
certain or all of the services to be performed by the Administrator hereunder;
provided, however, that the Administrator shall remain principally responsible
to the Company 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 Company 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
Administrator retained by the Directors of the Company to perform services on
behalf of the Company.
(B) Company Expenses. The Company assumes and shall pay or cause to be
paid all other expenses of the Company 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 and tender offer materials and
notices to existing members, all expenses incurred in connection with issuing
and redeeming Interests, the costs of pricing services, the costs of custodial
services, the cost of initial and ongoing registration of the Interests under
Federal and state securities laws, fees and out-of-pocket expenses of Directors
who are not affiliated persons of the Administrator or any affiliated
corporation of the Administrator, the costs of Directors' meetings, insurance,
interest, brokerage costs, litigation and other extraordinary or nonrecurring
expenses, and all fees and charges of service providers to the Company. The
Company shall reimburse the Administrator for its reasonable out-of-pocket
expenses, including all reasonable charges for 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. The Company shall pay to the
Administrator a monthly fee f 0.05% (approximately 0.70% (60 basis points) on an
annualized basis) of the net assets of the Company until this Agreement is
terminated in accordance with Article 6. Such compensation shall be calculated
and accrued monthly, and paid to the Administrator quarterly, within 30 days of
month-end, otherwise the Administrator shall be entitled to charge and/or
set-off such amounts against any account of the Company. 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. Standard of Care; Limitation of Liability of the Administrator.
The Administrator shall exercise due care and diligence to ensure the accuracy
of all services performed 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. The
Administrator shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for 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 officers,
employees, sub-administrators and other agents of the Administrator as well as
that entity itself.) Under no circumstances shall the Administrator be liable to
the Company 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, the Company 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 the Administrator in carrying out
its duties hereunder. The indemnity and defense provisions set forth herein
shall indefinitely survive the termination of this Agreement.
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, the Company
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 the Administrator's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder. The
indemnity and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
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 a party hereunder (the "Indemnifying Party") is asked to
indemnify or hold the other party harmless (the "Indemnified Party"), the
Indemnified Party shall promptly notify and advise the Indemnifying Party of the
pertinent facts concerning the situation in question, and the Indemnified Party
will use all reasonable care to identify and notify the Indemnifying Party
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.
The Indemnifying Party 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 the Indemnifying Party elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified Party,
whose approval shall not be unreasonably withheld. In the event that the
Indemnifying Party elects to assume the defense of any suit and retain counsel,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it. If the Indemnifying Party does not elect to assume the defense
of a suit, it will reimburse the Indemnified Party for reasonable fees and
expenses of any counsel retained by the Indemnified Party.
The Indemnified Party may apply to the Indemnifying Party at any time for
instructions and may consult counsel for the Indemnifying Party or the Company
as applicable, or its own counsel and with the Company's accountants and other
experts, at the Indemnifying Party's expense, with respect to any matter arising
in connection with the Indemnified Party's duties. The Indemnified Party 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.
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Also, the Indemnified Party 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 authorized person or persons. Nor shall the Indemnified Party be
held to have notice of any change of authority of any officers, employee or
agent of the Indemnifying Party until receipt of written notice thereof from the
Indemnifying Party.
Nothing herein shall make the Indemnified Party liable for the performance
or omissions of unaffiliated third parties not under the Indemnified Party's
reasonable control unless the Indemnified Party has delegated its duties
hereunder to such third party such as, by way of example and not limitation,
investment advisers or sub-advisers, postal or delivery services,
telecommunications providers and processing and settlement services.
The Administrator is entitled to rely on the price information provided by
the underlying funds in which the Company invests, and brokers in order to
calculate the Company's net asset value and the Administrator shall not be
liable for any valuation errors resulting from the use of such information,
provided the Administrator complies with the valuation procedures described in
the N-2 and adopted by the Company.
ARTICLE 6. Duration and Termination of this Agreement. This Agreement
shall become effective on the date set forth above and shall remain in effect
for the full duration until December 22, 2005 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 Company, effective upon the liquidation of such
Company. For purposes of this paragraph, the term "liquidation" shall mean a
transaction in which the assets of the Mercantile Alternative Strategies Fund
are sold or otherwise disposed of and proceeds therefrom are distributed in cash
to the members in complete liquidation of the interests of such members.
ARTICLE 7. Activities of the Administrator. The services of the
Administrator rendered to the Company 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. Proprietary and Confidential Information. The Administrator
agrees on behalf of itself and its employees to treat confidentially and as
proprietary information all records and other information relative to the
Administrator and its members 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 the Administrator, which
approval may not be withheld where the Administrator may be exposed to civil or
criminal contempt proceedings or penalties for failure to comply.
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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 Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, 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 Company will 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, the USA Patriot Act and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by the Administrator hereunder including any applicable anti-money
laundering laws and regulations.
ARTICLE 11. Internet Access. Data and information may be made
electronically accessible to the Company through Internet access to one or more
links provided by the Administrator or a Sub-Administrator ("Web Link"). All
rights in Web Link (including text and "look and feel" attributes) are owned by
the Sub-Administrator. Any commercial use of the content or any other aspect of
Web Link requires the written permission of the Sub-Administrator. Use of the
Web Link by the Company will be subject to any terms of use set forth on the web
site. 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. The
Sub-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. Agreement for Sole Benefit of the Administrator and the
Company. This Agreement is for the sole and exclusive benefit of the Company and
the Administrator and will not be deemed to be for the direct or indirect
benefit of the clients or customers of the Company or the Administrator. The
clients or customers of the Company or the Administrator will not be
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deemed to be third party beneficiaries of this Agreement nor to have any other
contractual relationship with the Company by reason of this Agreement and each
party hereto agrees to indemnify and hold harmless the other party from any
claims of its clients or customers against the other party including any
attendant expenses and attorneys' fees, based on this Agreement or the services
provided hereunder.
ARTICLE 15. 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 16. 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 the
Administrator at: Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, XX 00000; and if to the Company,
Attention: Mercantile Alternative Strategies Fund, c/o SEI Mutual Fund Services,
Xxx Xxxxxxx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxxxx, 00000.
ARTICLE 17. 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.
ARTICLE 18. Equipment Failures. In the event of equipment failures beyond
the Administrator's control, the Administrator shall take reasonable steps to
ensure that any Sub-Administrator can minimize service interruptions but shall
have no liability with respect thereto. The Sub-Administrator shall be required
to 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 19. 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 20. 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
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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 21. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware without giving effect to the conflicts of
laws principles thereof, 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 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.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MERCANTILE CAPITAL ADVISORS, INC.
By: /s/Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: President
MERCANTILE ALTERNATIVE STRATEGIES FUND LLC
By: /s/Xxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Treasurer
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