Exhibit (g)
10/13/04 draft
FORM OF INVESTMENT MANAGEMENT AGREEMENT
GENERATION HEDGE STRATEGIES FUND LLC
AGREEMENT, made as of [], 2004 between GENERATION Hedge Strategies Fund
LLC, a Delaware limited liability company (the "Fund"), and Generation Capital
Management LLC, a New York corporation (the "Adviser").
WHEREAS, the Fund is registered with the Securities and Exchange Commission
(the "SEC") as a closed-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940, as amended;
WHEREAS, the Fund desires to retain the Adviser so that it will render
investment advisory services to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Adviser is willing to render such services and/or engage
others to render such services to the Fund.
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed by the parties as follows:
1. Appointment. The Fund hereby appoints the Adviser to act as investment
adviser and provide investment advisory services to the Fund, subject to the
supervision of the Fund's board of directors (the "Board," "Board of Directors,"
or "Directors"), for the period and on the terms and conditions set forth in
this Agreement. The Adviser accepts such appointment and agrees to render the
services and to assume the obligations set forth in this Agreement commencing on
its effective date for the compensation herein provided.
2. Responsibilities of the Adviser.
(a) The Adviser hereby undertakes and agrees, upon the terms and conditions
herein set forth, subject to the supervision of the Fund's Board of Directors,
either directly or indirectly through one or more Sub advisers (as that term is
defined in paragraph 4 below):
(i) to make investment decisions and provide a program of continuous
investment management for the Fund; prepare, obtain, evaluate, and make
available to the Fund research and statistical data in connection therewith;
obtain and evaluate such information and advice relating to the economy,
securities markets, and securities as it deems necessary or useful to discharge
its duties hereunder; engage in or supervise the selection, acquisition,
retention, and sale of investments, securities, and/or cash; engage in or
supervise the selection, acquisition, retention, and sale of unregistered
investment funds, and/or other investment vehicles (the "Hedge Funds"); select
brokers or dealers to execute transactions; and all of the aforementioned shall
be done in accordance with the Fund's investment objective, policies, and
limitations as stated in the Fund's prospectus and statement of additional
information (the "SAI") included as part of the Fund's registration statement
filed with the SEC on Form N-2 under the Securities Act of 1933, as amended, and
the 1940 Act (the "Registration Statement"), as amended from time to time, and
in accordance with guidelines and directions from the Fund's Board of Directors
and any applicable laws and regulations;
(ii) subject to the direction and control of the Fund's Board of
Directors, to assist the Fund as it may reasonably request in the conduct of the
Fund's business, including oral and written research, analysis, advice,
statistical, and economic data, judgments regarding individual investments,
general economic conditions and trends, and long-range investment policies;
determine or recommend the securities, instruments, repurchase agreements,
options, and other investments (including the Hedge Funds), and techniques that
the Fund will purchase, sell, enter into, use, or provide in an ongoing
evaluation of the Fund's portfolio; continuously manage and supervise the
investment program of the Fund and the composition of its investment portfolio
in a manner consistent with the investment objective, policies, and restrictions
of the Fund, as set forth in its Registration Statement and as may be adopted
from time to time by the Board, and applicable laws and regulations; determine
or recommend the extent to which the Fund's portfolio shall be invested in
securities, Hedge Funds, and other assets, and what portion if any, should be
held uninvested; and undertake to do anything incidental to the foregoing to
facilitate the performance of its obligations hereunder;
(iii) furnish to or place at the disposal of the Fund information,
evaluations, analyses, and opinions formulated or obtained by the Adviser in the
discharge of its duties as the Fund may, from time to time reasonably request,
and maintain or cause to be maintained for the Fund all books, records, reports,
and any other information required under the 1940 Act, to the extent that such
books, records, and reports, and other information are not maintained or
furnished by the custodian, transfer agent, administrator, sub-administrator, or
other agent of the Fund;
(iv) to furnish at the Adviser's expense for the use of the Fund such
office space, telephone, utilities, and facilities as the Fund may require for
its reasonable needs and to furnish at the Adviser's expense;
(v) to render to the Fund management and administrative assistance in
connection with the operation of the Fund that shall include (i) compliance with
all reasonable requests of the Fund for information, including information
required in connection with the Fund's filings with the SEC, other federal and
state regulatory organizations, and self-regulatory organizations, and (ii) such
other services as the Adviser shall from time to time determine to be *necessary
or useful to the administration of the Fund; and
(vi) to pay the reasonable salaries, fees, and expenses of the Fund's
officers and employees (including the Fund's share of payroll taxes) and any
fees and expenses of the Fund's Directors who are directors, officers, or
employees of or otherwise affiliated with the Adviser; provided, however, that
the Fund, and not the Adviser, shall bear travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund who are directors,
officers, or employees of the Adviser to the extent that such expenses relate to
attendance at meetings of the Fund's Board of Directors or any committees
thereof or advisers thereto. The Adviser shall bear all expenses arising out of
its duties hereunder but shall not be responsible for any expenses of the Fund
other than those specifically allocated to the Adviser in this Agreement.
(b) In particular, but without limiting the generality of the foregoing,
the Adviser shall not be responsible, except to the extent of the reasonable
compensation of the Fund's employees who are directors, officers, or employees
of the Adviser whose services may be involved, for the following expenses of the
Fund: organizational and offering expenses of the Fund; fees payable to any
consultants, including an advisory board (if applicable); fees paid directly or
indirectly to investment advisers of the Hedge Funds; brokerage commissions or
all other costs and expenses directly related to portfolio transactions,
acquiring or disposing of any portfolio security, and positions for the Fund's
account such as direct or indirect expenses associated with the Fund's
investments, including investments in the Hedge Funds; legal expenses; auditing
and accounting expenses; telephone, telex, facsimile, postage, and other
communications expenses; interest, insurance premiums, taxes, and governmental
fees; dues and expenses incurred by the Fund or with respect to the Fund in
connection with membership in investment company trade organizations; fees and
expenses of the Fund's administrator, sub-administrator, custodian, transfer
agent and registrar, distribution disbursing agent, or any other agent of the
Fund; payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers, and other specialists (if any); fees and expenses related
to the repurchase of units of members; other expenses in connection with the
issuance, offering, distribution, sale, or underwriting of units issued by the
Fund, including preparing stock certificates; expenses of registering or
qualifying units of the Fund for sale; expenses relating to investor and public
relations; freight, insurance, and other charges in connection with any shipment
of the Fund's portfolio securities; expenses of preparing, printing, and
distributing prospectuses, SAIs, reports, notices to members, the SEC, and other
regulatory agencies, and providing distributions to members; costs of
stationery; costs of members' and other meetings, including proxy preparation,
printing, and mailing; or litigation expenses.
3. Use of Name. The Adviser hereby grants the Fund a non-exclusive right
and sublicense to use (i) the Generation name and marks as part of the Fund's
name (the "Fund Name"), and (ii) in connection with the Fund's investment
products and services, in each case only for so long as this Agreement, any
other investment management agreement between the Fund and the Adviser (or any
organization which shall have succeeded to the Adviser's business as investment
manager (the "Adviser's Successor")), or any extension, renewal or amendment
hereof or thereof remains in effect. The Fund agrees that it shall have no right
to sublicense or assign rights to use the Generation name and marks, it shall
acquire no interest in the Generation name and marks other than the rights
granted herein and that the Fund shall not challenge the validity of the
Generation name and marks or the ownership thereof. The Fund further agrees that
all services and products it offers in connection with the Generation name and
marks shall meet commercially reasonable standards of quality, as may be
determined by the Adviser from time to time. At the Adviser's reasonable
request, the Fund shall cooperate with the Adviser and shall execute and deliver
any and all documents necessary to maintain and protect (including, but not
limited to any trademark infringement action) the Adviser and/or enter the Fund
as a registered user thereof. At such time as this Agreement or any other
investment management agreement shall no longer be in effect between the Adviser
(or the Adviser's Successor) and the Fund, the Fund shall (to the extent that,
and as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with the
Adviser (or the Adviser's Successor). In no event shall the Fund use the
Generation name and marks or any other name or xxxx confusingly similar thereto
(including, but not limited to, any name or xxxx that includes the name
"Generation") if this Agreement or any other investment management agreement
between the Adviser (or the Adviser's Successor) and the Fund is terminated.
4. Sub advisers. The Adviser may, at its expense and subject to its
supervision, engage one or more persons, including, but not limited to,
subsidiaries and affiliated persons of the Adviser, to render any or all of the
investment advisory services that the Adviser is obligated to render under this
Agreement, including, subject to approval of the Fund's Board of Directors, a
person or persons to render investment advisory services including the provision
of a continuous investment program and the determination of the composition of
the securities and other assets of the Fund (each, a "Sub adviser"). Member
approval of the appointment of a Sub adviser by the Adviser pursuant to this
paragraph is required only to the extent required by applicable law, as may be
modified by any exemptive order or other interpretation received from the SEC.
5. Regulatory Compliance. In performing its duties hereunder, the Adviser
(and any Sub advisers selected by the Adviser) shall comply with the 1940 Act
and all rules and regulations thereunder, all other applicable federal and state
laws and regulations, with any applicable procedures adopted by the Fund's Board
of Directors, and with the provisions of the Fund's Registration Statement.
6. Compensation. As compensation for the services performed and the
facilities and personnel provided by the Adviser pursuant to this Agreement, the
Fund will pay the Adviser quarterly in arrears a fee, calculated on the last
business day of each month during such quarter at the annual rate of 1.50% of
the Fund's month-end net assets. If the Adviser shall serve hereunder for less
than the whole of any quarter, the fee hereunder shall be prorated according to
the proportion that such period bears to the full quarter and shall be payable
within 30 days after the end of the relevant quarter or the date of termination
of this Agreement, as applicable. The value of the net assets of the Fund shall
be determined pursuant to the applicable provisions of the limited liability
company operating agreement (the "Operating Agreement"), valuation procedures,
and Registration Statement of the Fund, each as amended from time to time. If
the determination of the net asset value of the Fund has been suspended for a
period including the end of any quarter when the Adviser's compensation is
payable pursuant to this paragraph, then the Adviser's compensation payable with
respect to such quarter shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such quarter).
If the Fund determines the value of the net assets of its portfolio more than
once in any month, then the last such determination thereof in that month shall
be deemed to be the sole determination thereof in that month for the purposes of
this paragraph.
7. Portfolio Transactions.
(a) In executing transactions for the Fund and selecting brokers or
dealers, the Adviser (either directly or through Sub advisers) shall place
orders pursuant to its investment determinations for the Fund directly with the
issuer, or with any broker or dealer, in accordance with applicable policies
expressed in the Fund's Registration Statement and in accordance with any
applicable legal requirements. Without limiting the foregoing, the Adviser (or a
Sub adviser) shall use its best efforts to obtain for the Fund the most
favorable price and best execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate compliance
with this requirement. Subject to the appropriate policies and procedures
approved by the Fund's Board of Directors, the Adviser (or the Sub adviser) may,
to the extent authorized by Section 28(e) of the Securities Exchange Act of
1934, as amended (the "Securities Exchange Act"), cause the Fund to pay a broker
or dealer that provides brokerage or research services to the Adviser (or the
Sub adviser) an amount of commission for effecting a portfolio transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if the Adviser (or the Sub adviser) determines,
in good faith, that such amount of commission is reasonable in relationship to
the value of such brokerage or research services provided viewed in terms of
that particular transaction or the Adviser's (or the Sub adviser's) overall
responsibilities to the Fund or its other advisory clients. To the extent
authorized by Section 28(e) of the Securities Exchange Act and the Fund's Board
of Directors, the Adviser (or the Sub adviser) shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of such action.
(b) To the extent applicable to the Fund and consistent with these
standards, in accordance with Section 11(a) of the Securities Exchange Act and
Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations, the Adviser (or the Sub adviser) is further authorized to allocate
the orders placed by it on behalf of the Fund to the Adviser (or the Sub
adviser) if it is registered as a broker or dealer with the SEC, to its
affiliate that is registered as a broker or dealer with the SEC, or to such
brokers and dealers that also provide research or statistical research and
material, or other services to the Fund or the Adviser (or the Sub adviser).
Such allocation shall be in such amounts or proportions as the Adviser (or the
Sub adviser) shall determine consistent with the above standards, and, upon
request, the Adviser (or the Sub adviser) will report on said allocation
regularly to the Fund's Board of Directors indicating the broker-dealers to
which such allocations have been made and the basis therefor.
8. Reports. The Adviser (or the Sub adviser) will regularly report to the
Fund's Board of Directors on the investment program of the Fund and the issuers
and securities generally represented in the Fund's portfolio, including reports
received from the Hedge Funds, and will furnish the Fund's Board of Directors
such periodic and special reports as the Directors may reasonably request.
9. Not Exclusive. Nothing herein shall be construed as prohibiting the
Adviser, Sub adviser, or any director, officer, partner, employee, or affiliate
thereof from providing investment management or advisory services to, or
entering into investment management or advisory agreements with, other clients
(including other registered investment companies), including clients which may
from time to time purchase and/or sell securities of issuers in which the Fund
invests, or from utilizing (in providing such services) information furnished to
the Adviser by advisers and consultants to the Fund and others (including Sub
advisers); provided however, that the Adviser will undertake no activities that,
in its judgment, will adversely affect the performance of its obligations under
this Agreement.
10. Conflicts of Interest. Whenever the Fund and one or more other accounts
or investment companies managed or advised by the Adviser or a Sub adviser have
available funds for investment, investments suitable and appropriate for each
shall be allocated in accordance with procedures approved by the Fund's Board of
Directors and believed by the Adviser or the Sub adviser to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in
accordance with procedures approved by the Fund's Board of Directors and
believed by the Adviser or the Sub adviser to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund. In addition, the Fund
acknowledges that any member, director, officer, or persons employed by the
Adviser, its affiliates, or a Sub adviser, who may also be a member, director,
officer, or person employed by the Fund, to assist in the performance of the
Adviser's or the Sub adviser's duties hereunder will not devote their full time
to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Adviser or any affiliate of the Adviser or a Sub
adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
11. Independent Contractor. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Fund's Board of Directors from time to
time, have no authority to act for or represent the Fund in any way or otherwise
be deemed its agent.
12. Liability. The Adviser may rely on information reasonably believed by
it to be accurate and reliable, including but not limited to, any information or
report from the Hedge Funds, and shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder. Neither the Adviser nor its
members, officers, directors, employees, or agents and its affiliates,
successors, or other legal representatives shall be subject to any liability for
any act or omission, error of judgment, mistake of law, or for any loss suffered
by the Fund, in the course of, connected with, or arising out of any services to
be rendered hereunder, except by reason of willful misfeasance, bad faith, or
gross negligence on the part of the Adviser in the performance of its duties or
by reason of reckless disregard on the part of the Adviser of its obligations
and duties under this Agreement. Any person, even though also employed by the
Adviser, who may be or become an employee of the Fund and paid by the Fund shall
be deemed, when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as an employee or agent of
the Adviser.
13. Indemnification.
(a) The Fund will indemnify the Adviser and its affiliates, and each of
their members, directors, officers, and employees and any of their affiliated
persons, executors, heirs, assigns, successors, or other legal representatives
(each an "Indemnified Person") against any and all costs, losses, claims,
damages, or liabilities, joint or several, including, without limitation,
reasonable attorneys' fees and disbursements, resulting in any way from the
performance or non-performance of any Indemnified Person's duties in respect of
the Fund, except those resulting from the willful misfeasance, bad faith or
gross negligence of an Indemnified Person or the Indemnified Person's reckless
disregard of such duties and, in the case of criminal proceedings, unless such
Indemnified Person had reasonable cause to believe its actions unlawful
(collectively, "disabling conduct"). Indemnification shall be made following:
(i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the Indemnified Person was not liable by reason of
disabling conduct; or (ii) a reasonable determination, based upon a review of
the facts and reached by (A) the vote of a majority of the Directors who are not
parties to the proceeding or (B) legal counsel selected by a vote of a majority
of the Board in a written advice, that the Indemnified Person is entitled to
indemnification hereunder. The Fund shall advance to an Indemnified Person
reasonable attorney fees and other costs and expenses incurred in connection
with defense of any action or proceeding arising out of such performance or
non-performance. The Adviser agrees, and each other Indemnified Person will be
required to agree as a condition to any such advance, that if one of the
foregoing parties receives any such advance, the party will reimburse the Fund
for such fees, costs, and expenses to the extent that it shall be determined
that the party was not entitled to indemnification under this paragraph. The
rights of indemnification provided hereunder shall not be exclusive of or affect
any other rights to which any person may be entitled by contract or otherwise
under law.
(b) Notwithstanding any of the foregoing, the provisions of this paragraph
shall not be construed so as to relieve the Indemnified Person of, or provide
indemnification with respect to, any liability (including liability under
federal securities laws, which, under certain circumstances, impose liability
even on persons who act in good faith) to the extent (but only to the extent)
that such liability may not be waived, limited, or modified under applicable law
or that such indemnification would be in violation of applicable law, but shall
be construed so as to effectuate the provisions of this paragraph to the fullest
extent permitted by law. The provisions of this paragraph shall survive the
termination or cancellation of this Agreement.
14. Term of Agreement; Termination. This Agreement shall remain in effect
until the date which is two years from the day and date first written above, and
shall continue in effect year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the affirmative vote
of: (i) a majority of the members of the Fund's Board of Directors who are not
parties to this Agreement or interested persons (as defined in the 0000 Xxx) of
any party to this Agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an agreement with any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval; and (ii) a majority of the Fund's Board of Directors or
the holders of a majority of the outstanding voting securities of the Fund. This
Agreement may nevertheless be terminated at any time without penalty, on 60
days' written notice, by the Fund's Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the Adviser.
This Agreement shall automatically be terminated in the event of its assignment,
provided that an assignment to a corporate successor to all or substantially all
of the Adviser's business or to a wholly-owned subsidiary of such corporate
successor which does not result in a change of actual control or management of
the Adviser's business shall not be deemed to be an assignment for the purposes
of this Agreement. Any notice to the Fund or the Adviser shall be deemed given
when received by the addressee.
15. Assignment. This Agreement may not be transferred, assigned, sold, or
in any manner hypothecated or pledged by either party hereto, except as
permitted under the 1940 Act or rules and regulations adopted thereunder.
16. Amendment. This Agreement may be amended only by the written agreement
of the parties. Any amendment shall be required to be approved by the Board and
by a majority of the independent Directors in accordance with the provisions of
Section 15(c) of the 1940 Act and the rules and regulations adopted thereunder.
If required by the 1940 Act, any material amendment shall also be required to be
approved by such vote of members of the Fund as is required by the 1940 Act and
the rules thereunder.
17. Conflicts of Laws. This Agreement shall be construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws principles thereof, provided, however, that nothing herein shall be
construed as being inconsistent with the 1940 Act. As used herein, the terms
"interested person," "assignment," and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act.
18. Management of Subsidiaries. If the Fund's Board of Directors determines
that it is in the best interests of the Fund and its members to carry on all or
part of the business of the Fund through one or more subsidiaries, the Board of
Directors may cause the substantive terms of this Agreement to apply to the
management of any such subsidiary or subsidiaries.
19. Fund Obligations. This Agreement is made by the Fund and executed on
behalf of the Fund by an officer of the Fund, and the obligations created hereby
are not binding on any of the Directors, officers, members, employees, or
agents, whether past, present, or future of the Fund individually, but bind only
the assets and property of the Fund.
20. Severability. 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 effected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
21. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
22. Supersedes Other Agreements. This Agreement supersedes all prior
investment advisory, management, and/or administration agreements in effect
between the Fund and the Adviser.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
GENERATION HEDGE STRATEGIES FUND LLC
By:
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Name:
Title:
Generation Capital Management LLC
By:
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Name:
Title:
