Exhibit 10.5
DISTRIBUTION AGREEMENT
between
XXXXXXX XXXXX HEDGE FUND PARTNERS II, LLC
and
XXXXXXX, SACHS & CO.
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT effective as of the 1st day of August,
2003, (the "Agreement"), between XXXXXXX XXXXX HEDGE FUND PARTNERS II, LLC,
a Delaware limited liability company organized under the laws of the State
of Delaware (the "Company"), and XXXXXXX SACHS & CO., a New York Members
(the "Distributor").
RECITALS
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The Company is a limited liability company organized under the
laws of the State of Delaware authorized to conduct business as more fully
described in its Limited Liability Company Agreement.
The Company proposes to offer for sale units in the Company (the
"Units"), on the terms and conditions set forth in its Confidential Private
Placement Memorandum dated April 2004 (such Confidential Private Placement
Memorandum, as amended or supplemented from time to time, is referred to
herein as the "Offering Memorandum");
The Company desires to appoint the Distributor to obtain
purchasers for the Units and to facilitate the offering of the Units in
accordance with the terms and provisions of this Agreement; and
The Distributor is ready and willing to act as distributor for
the Company and to provide the services necessary to effect the offering of
the Units, upon the terms and conditions hereinafter set forth in this
Agreement;
The Company and the Distributor agree as follows:
1. Defined Terms.
-------------
Terms defined in the Offering Memorandum and not otherwise
defined herein shall have the same meanings provided in the Offering
Memorandum.
2. Appointment of Distributor.
--------------------------
The Company hereby appoints the Distributor as distributor
for the Company for the period and upon the terms herein set forth, for the
purpose of obtaining purchasers for the Units in the manner contemplated
herein. The Distributor hereby accepts such appointment and agrees to use
its best efforts during such period to find eligible purchasers for the
Units. The Company reserves the right to appoint, from time to time,
additional distributors.
3. Offer and Sale of Units
-----------------------
(a) Pursuant to the Offering Memorandum, the Company is
offering Units in the Company. Units may be issued at the beginning of any
calendar quarter or at any other such time as the Company may in its sole
discretion permit ("Issue Date") provided the Company receives value in
cleared funds before 4:00 p.m. New York time on the Issue Date. After the
initial closing, Units will be offered for sale at such other times as the
Company, in its sole discretion, may allow. Units will be offered, subject
to the minimum investment per subscriber (the "Subscriber"), as set forth
in the Offering Memorandum. The capital contribution shall be made as
provided in the Subscription Booklet.
(b) Each prospective Subscriber will be required to deliver
a completed Subscription Booklet to the Company at the address specified
therein. No prospective purchaser shall have the right to purchase any
Units until the Subscription Booklet shall have been accepted by the
Company. The Company has the right not to accept any purchase agreement
without stating any reason therefor.
(c) Unless the Company and/or the Units have been registered
for public sale under the laws of a relevant jurisdiction, neither the
Distributor nor the Company, nor any person acting on behalf of either,
including any affiliate or sales or marketing agent, will offer to sell,
offer for sale or sell the Units by means of any (a) form of general
solicitation or general advertising, (b) advertisement, article, notice or
other communication published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(d) Offers of the Units will be made by the Distributor, and
any person acting on its behalf, including any affiliate or sales or
marketing agent, only through the Offering Memorandum and other documents
mutually agreed upon between the Distributor and the Company.
(e) The Distributor, and any person acting on its behalf,
including any affiliate or sales or marketing agent, will comply with all
applicable provisions of law with respect to anything done by it in
relation to the Units; and neither the Distributor nor the Company nor any
person acting on behalf of either, including any affiliate or sales or
marketing agent, will offer for sale or sell the Units by means of any
document or in any manner that does not comply with applicable laws and
regulations.
(f) The Distributor and the Company, and any person acting
on behalf of the Company, shall offer the Units in compliance with the
applicable law in any jurisdiction in which such offering is made.
4. Reliance
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The Company acknowledges that the Distributor, in arranging
for the placement of the Units, will do so in reliance on the
representations, warranties, covenants and agreements of the Company
contained herein. The Distributor acknowledges that the Company, in its
engagement of the Distributor in connection with the placement of the
Units, does so in reliance on the representations, warranties, covenants
and agreements of the Distributor contained herein.
5. Representations and Warranties of the Company
---------------------------------------------
The Company represents, warrants and agrees to and with the
Distributor, for its benefit that:
(a) the Company will, when Units have been issued, be a duly
organized and validly existing Limited Liability Company under the laws of
the State of Delaware and have the requisite power and authority to conduct
the Company's business as contemplated by the Offering Memorandum;
(b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary action of the Company,
and upon execution and delivery hereof, this Agreement will be a valid,
binding and enforceable obligation of the Company;
(c) the Units, when issued and paid for in the amounts and
for the consideration described in the Offering Memorandum, will be
entitled to the rights and subject to the restrictions and conditions
contained in the Limited Liability Company Agreement; no holder of Units (a
"Member") will be personally liable for the debts of and claims against the
Company by the mere reason of being such a Member; and all necessary action
required to be taken for the authorization, issue and sale of the Units has
been validly and sufficiently taken;
(d) the Company is not required to be registered as an
investment company under the United States Investment Company Act of 1940,
as amended; and
(e) it is not necessary in connection with the offer, sale
and delivery of the Units to investors in the manner contemplated by this
Agreement to register the Units under the Securities Act.
6. Representations, Warranties and Covenants of the Distributor
------------------------------------------------------------
The Distributor represents, warrants and agrees with the
Company, for its benefit that:
(a) the execution, delivery and performance of this
Agreement by the Distributor has been duly authorized by all necessary
action, and upon execution and delivery hereof, this Agreement will be a
valid, binding and enforceable obligation of the Distributor;
(b) the Distributor will offer the Units for sale and will
solicit offers to buy the Units only in compliance with the procedures
described in the Offering Memorandum and this Agreement and in accordance
with applicable law;
(c) as of the date hereof, no permit, consent, approval or
authorization of, or declaration to, or filing with, any governmental or
regulatory authority is required in connection with the (i) execution,
delivery and performance of this Agreement and (ii) consummation of any of
the transactions contemplated herein and in the Offering Memorandum;
(d) without the prior consent of the Company, no steps will
be taken to qualify the Units for sale in any jurisdiction;
(e) neither the Distributor, nor any affiliate of the
Distributor, shall offer the Units in any jurisdiction, except in
compliance with the applicable law in any such jurisdiction in which such
offering is made;
(f) the Distributor will notify the Company promptly of any
occurrence of which it becomes aware which is material in the context of
the offering and sale of the Units, including any event which shall lead
the Distributor to reasonably believe that the Offering Memorandum will be
misleading, or which affects any of the representations, warranties,
agreements and indemnities by the Distributor contained in this Agreement
(or which would have affected any of the same if this Agreement had been
entered into immediately thereafter), and will take such steps as may be
reasonably requested by the Company to remedy and/or publicize the same;
and
(g) (a) the Distributor has used commercially reasonable due
diligence with respect to accepting as clients any investors who have
purchased through it and with respect to introducing investors to the
Company, and to the best of the Distributor's knowledge, such clients are
of good business reputation and such clients' funds used to purchase Units
were not derived from, nor the product of, any criminal activity; and
(b) the Distributor is, and agrees that it will be at
all times with respect to this Agreement, appropriately licensed in the
country of its domicile, or otherwise exempt from such requirements, to the
extent required by applicable law, in each jurisdiction in which the
Distributor will perform the duties set forth in this Agreement.
7. Covenants of the Company
------------------------
The Company covenants with the Distributor that:
(a) the Company will require any other person appointed as
distributor to offer the Units for sale, or solicit offers to buy the
Units, only in accordance with the procedures described in the Offering
Memorandum and in this Agreement;
(b) the Company will, so long as any of the Units remain
outstanding, furnish directly to the Distributor copies of each
communication sent to the Members, including any annual or interim report
of the Company, as soon as such communications or reports are delivered or
made available to the Members;
(c) without the prior consent of the Distributor, no steps
will be taken to qualify the Units for sale in any jurisdiction;
(d) neither the Company, nor any affiliate of the Company,
shall offer the Units in any jurisdiction, except in compliance with the
applicable law in any such jurisdiction in which such offering is made; and
(e) the Company will notify the Distributor promptly of any
occurrence of which it becomes aware which is material in the context of
the offering and sale of the Units, including any event which shall lead
the Company to reasonably believe that the Offering Memorandum will be
misleading, or which affects any of the representations, warranties,
agreements and indemnities by the Company contained in this Agreement (or
which would have affected any of the same if this Agreement had been
entered into immediately thereafter) and will take such steps as may be
reasonably requested by the Distributor to remedy and/or publicize the same
and to indemnify the Distributor out of the assets of the Company in
respect of any such steps taken by it.
8. Payment of Fees and Expenses
----------------------------
To the extent it has recourse to assets available in the Company,
the Company will pay all expenses of the offering of Units, including,
without limitation (i) the fees, disbursements and expenses of counsel to
the Company; (ii) expenses of preparing, reproducing, mailing and/or
delivering offering and sales materials, including annual reports, to
purchasers; (iii) the fees, disbursements and expenses of counsel to the
Distributor; (iv) the reasonable out-of-pocket expenses incurred by the
Distributor in marketing the Units and any additional amounts it may incur
or may have incurred in connection with the marketing of the Units; and (v)
such other fees and expenses which the Distributor and the Company mutually
agree are payable by the Company.
9. Conditions of Distributor's and Company's Obligations
-----------------------------------------------------
The obligations of the Distributor and the Company to effect the
transactions contemplated under this Agreement are subject to the
fulfillment of the following conditions, any one or more of which may be
waived by mutual agreement of the Distributor and the Company:
(a) the Distributor and the Company shall each have
performed and complied in all material respects with the covenants
contained in this Agreement required to be performed and complied with by
it prior to each date on which the Units are offered and each of the
representations and warranties of the Company and the Distributor set forth
in this Agreement shall be true and correct in all material respects as of
such date;
(b) the Distributor and the Company shall have received
satisfactory opinions of such U.S. and other local counsel as counsel to
the Distributor and the Company shall deem appropriate;
(c) this Agreement shall have been duly executed and
delivered and be in full force and effect;
(d) the Distributor and the Company shall have been
furnished with such additional information, opinions, certificates and
documents as each of them may reasonably request; and
(e) all actions taken by the Distributor and the Company in
connection with the sale of the Units as contemplated herein and in the
Offering Memorandum shall be reasonably satisfactory in form and substance
to the Distributor, the Company and their respective counsel.
If any of the conditions specified in this Section 9 shall not
have been fulfilled or waived when and as required by this Agreement to be
fulfilled or waived, the Distributor or the Company, as applicable, shall
inform the defaulting party in writing of each condition which has not been
fulfilled or waived and shall permit the defaulting party a reasonable time
under the circumstances to fulfill such conditions, after which time this
Agreement and all of the Distributor's or Company's obligations hereunder,
as applicable, may be canceled by the Distributor or the Company by
notifying the defaulting party of such cancellation in writing or by telex
or telecopy at any time at or prior to the date on which the Company
initially closes the offering of the Units (the "Initial Closing Date") or
any subsequent offering date, as applicable, and the sale of the Units to
be made at such Initial Closing Date or subsequent offering date shall not
take place. Any such cancellation or termination shall be without liability
of any party to any other party except that obligations that may arise in
accordance with Sections 8, 10 and 11 shall continue after termination of
this Agreement.
10. Indemnification and Contribution
--------------------------------
(a) The Company will indemnify and hold harmless the
Distributor, its affiliates and any person acting on its behalf, but only
to the extent it has recourse to assets available in the Company, against
any losses, claims, damages or liabilities (or actions in respect thereof),
joint or several (the "Covered Claims"), to which the Distributor may
become subject, insofar as such Covered Claims arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement therein, in light of
the circumstances under which they are made, not misleading. The Company
will reimburse the Distributor, solely to the extent it has recourse to
assets available in the Company, for any legal or other expenses reasonably
incurred by the Distributor in connection with investigating or defending
any such Covered Claims; provided, however, that the Company shall not be
liable to so indemnify or reimburse the Distributor out of the assets of
the Company in any such case to the extent that any such Covered Claims
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Offering Memorandum
in reliance upon and in conformity with written information furnished to
the Company by the Distributor expressly for use therein. The Company
acknowledges and agrees that as of the date hereof the Distributor has not
provided any information in connection with the Offering Memorandum.
(b) The Distributor will indemnify and hold harmless the
Company against any Covered Claims to which the Company may become subject
insofar as such Covered Claims arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Offering Memorandum, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Offering
Memorandum, in reliance upon and in conformity with the written information
furnished to the Company by the Distributor referred to in subsection (a)
above; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such Covered Claims.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above or notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
to so notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action is brought against any indemnified
party and such indemnified party notifies the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party). After notice from the indemnifying party to such indemnified party
of the indemnifying party's election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 10
is unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect to any Covered Claims referred
to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such Covered
Claims in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Distributor from the offering of
the Units. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company and
the Distributor in connection with the statements or omissions which
resulted in such Covered Claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Distributor shall be deemed to be in the same proportion as the total net
proceeds from the Offering (before deducting expenses) received by the
Company relative to the value of total compensation, if any, received by
the Distributor in selling the Units under this Agreement. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributor agree that it would
not be just and equitable if contribution pursuant to this subsection (d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the Covered Claims referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such Covered Claims.
(e) The obligations of the Company under this Section 10
shall be in addition to any liability which the Company may otherwise have
and shall extend, upon the same terms and conditions, to each person, if
any, who controls the Distributor within the meaning of the Securities Act
to affiliates of the Distributor and to any person acting on behalf of any
such persons; and the obligations of the Distributor under this Section 10
shall be in addition to any liability which the Distributor may otherwise
have and shall extend, upon the same terms and conditions, to the general
partner of the Company.
11. Survival of Representations, Warranties and Agreements
------------------------------------------------------
All representations, warranties, covenants and agreements in this
Agreement and any documents delivered by or on behalf of the Company in
connection with this Agreement shall survive the offer and sale by the
Distributor of any Units. The provisions of Sections 8, 10 and 11 shall
survive the termination or cancellation of this Agreement.
12. Term
----
This Agreement shall become effective on the date hereof and
shall remain in full force until one year from the date hereof and shall be
automatically renewed each year thereafter for an additional one-year term
unless (i) either party gives written notice of nonrenewal to the other at
least 60 days prior to the end of the current term or (ii) the Agreement is
sooner terminated as hereinafter provided.
13. Termination
-----------
(a) The Distributor shall have the right to terminate this
Agreement forthwith by promptly notifying the Company by telephone, telex
or telecopy and providing written confirmation (sent by courier or
registered air mail), at any time prior to the Closing Date or any Offering
Date, as applicable, if:
(i) there shall have been, since the date as of which
information is given in the Offering Memorandum, any material adverse
change (not promptly corrected to the satisfaction of the Distributor after
notice thereof to the Company from the Distributor) in the affairs or
business prospects of the Company;
(ii) there shall have occurred any change in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls, the effect of which is in the judgment
of the Distributor such as to make it impracticable or inadvisable to
proceed with the offering and delivery of Units on the terms and in the
manner contemplated in this Agreement or the Offering Memorandum; or
(iii) trading on the New York Stock Exchange generally
shall have been suspended or materially limited, or a banking moratorium or
exchange controls shall have been declared by United States or New York
State authorities.
(b) If the Distributor shall fail in any material respect to
comply with its obligations hereunder and such failure is not cured within
30 days of notice from the Company, given in accordance with Section 14 of
this Agreement, the Company shall have the right to terminate this
Agreement.
(c) If this Agreement is terminated in accordance with
clause (i) of Section 12 or if the Distributor terminates this Agreement as
provided in paragraph (a) of this Section 13, such termination shall be
without liability of any party to any other except that obligations that
may arise in accordance with Sections 8, 10 and 11 shall continue after
such termination of this Agreement.
14. Notices
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Except as otherwise provided herein, all communications
hereunder shall be in writing and shall be delivered, telexed or telecopied
and confirmed in writing, sent by registered air mail, to the requisite
party, at its address as follows:
If to the Distributor:
---------------------
Xxxxxxx, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel, Asset Management Division
Telefax: 000-000-0000
If to the Company:
-----------------
Xxxxxxx Sachs Hedge Fund Partners II, LLC
000 Xx. Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Legal Department
Telefax: 000-000-0000
with a copy to:
--------------
Xxxxxxx, Sachs & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel, Asset Management Division
Telefax: 000-000-0000
or to such other address as to which the party receiving the notice shall
have notified the other party in writing.
15. Parties
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This Agreement shall inure to the benefit of and be binding
upon the Distributor and the Company, and their respective successors and
permitted assigns. Nothing in this Agreement is intended to confer upon any
other person except the parties hereto any rights or remedies hereunder.
Neither the Distributor nor the Company shall be entitled to assign its
respective rights, units or obligations hereunder without the written
consent of the other party hereto; provided, however, that none of the
foregoing shall restrict the ability of the Distributor, in its sole
discretion, to appoint affiliates or designees to fulfill any or all of
their obligations under this Agreement.
16. Governing Law; Jurisdiction
---------------------------
This Agreement shall be governed by and construed in
accordance with the laws of New York. The courts located in New York shall
have non-exclusive jurisdiction to settle any disputes which may arise out
of or in connection with this Agreement and, accordingly, any suit, action
or proceeding arising out of or in connection with this Agreement may be
brought in such courts.
17. Counterparts
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This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Distributor have caused
their duty authorized representatives to execute this Agreement as of the
date first written above.
XXXXXXX XXXXX HEDGE FUND PARTNERS II, LLC
By: /s/ Xxxx X. Xxxxx
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: Director
XXXXXXX, SACHS & CO.
By: /s/ Xxxxx X. Xxxx
----------------------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Director
