GENERAL DISTRIBUTOR'S AGREEMENT
AGREEMENT made this ____ day of _________, 2003 between Xxx Xxxx/Short
Hedge Fund LLC (the "Fund"), a Delaware limited liability company having its
principal place of business at Xxx Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; The
Bank of New York (the "Bank"), a New York state chartered bank having its
principal place of business at Xxx Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and
BNY Xxxxxxxx Distributors, Inc. ("Distributor"), having its principal place of
business at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000.
WHEREAS, the Fund is registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, it is intended that the Distributor act as the distributor of
limited liability company interests of the Fund ("Interests");
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR
1.1. The Distributor will act as agent of the Fund for the distribution
of the Interests covered by the registration statement and prospectus of the
Fund then in effect under the Securities Act of 1933, as amended (the
"Securities Act"). As used in this Agreement, the term "registration statement"
shall mean the registration statement and any amendments thereto then in effect,
including Part A (the prospectus), Part B (the statement of additional
information) and Part C of such registration statement, as filed on Form N-2 or
any successor form thereto with the Securities and Exchange Commission the
"Commission"). The term "prospectus" shall mean the current prospectus and
statement of additional information used by the Fund, in accordance with the
rules of the Commission, for delivery to members and prospective members of the
Fund (the "Members") after the effective dates of the above referenced
registration statements together with any amendments and supplements thereto.
1.2. The Distributor agrees to solicit orders for the sale of Interests,
using such efforts as it deems appropriate in its sole discretion. It is
contemplated that the Distributor will retain securities dealers and qualified
financial institutions to act as selling agents in connection with the offering
of Interests (each of the foregoing a "Selling Agent") and will enter into
selling agreements with such Selling Agents. The Distributor shall engage in,
and/or may authorize Selling Agents to engage in, activities which it deems
reasonable, which are primarily intended to result in the sale of Interests.
1.3. The Distributor agrees that it will not make offers or sales of
Interests except in the manner set forth in the prospectus. The Fund has
established procedures that are to be followed in connection with the offer and
sale of Interests and the Distributor agrees not to make offers or sales of any
Interests and agrees to require all Selling Agents not to make any such offers
or sales except in compliance with such procedures. In this regard, the
Distributor agrees that:
(a) no sale of Interests to any one investor will be for less than the
minimum amount as may be specified in the prospectus or as the Fund
shall otherwise advise the Distributor;
(b) no offer or sale of Interests will be made in any state or
jurisdiction, or to any prospective investor located in any state
or jurisdiction, where Interests have not been registered or
qualified for offer and sale under applicable state securities laws
unless Interests are exempt from the registration or qualification
requirements of such laws; and
(c) sales of Interests will be made only to persons who are "qualified
clients," as that term is defined by Rule 205-3 under the
Investment Advisers Act of 1940, as amended, and who meet such
other eligibility requirements as may be imposed by the Fund and
set forth in the prospectus.
1.4. The Fund understands that the Distributor is now and may in the
future be the distributor of ownership interests of other investment entities
(together, "Other Entities"), including Other Entities having investment
objectives similar to those of the Fund or that otherwise compete with the Fund.
The Fund further understands the investors and potential investors in the Fund
may invest in ownership interests of such Other Entities. The Fund agrees that
the Distributor's duties to such Other Entities shall not be deemed in conflict
with its duties to the Fund under this Agreement.
1.5. In its capacity as distributor of the Interests, all activities of
the Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act and the Securities Exchange Act of 1934 (the "1934 Act") and all rules and
regulations promulgated by the Commission thereunder and all rules and
regulations adopted by any relevant securities association registered under the
0000 Xxx.
1.6. The Distributor agrees promptly to issue, or to cause the duly
appointed investor servicing agent of the Fund to issue as the Distributor's
agent, confirmations of all accepted purchase orders and to transmit a copy of
such confirmations to the Fund. The full subscription amounts payable in
connection with each order for the purchase of Interests by an investor shall be
transmitted by the Distributor or by the Selling Agent to the Fund's escrow
agent within the periods specified in the prospectus.
1.7. [At the request of the Distributor,] [T/t]he [Fund/Distributor]
will take such steps as may be necessary and feasible to qualify Interests for
sale in states, territories or dependencies of the United States, the District
of Columbia, and the Commonwealth of
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Puerto Rico, in accordance with the laws thereof, and to renew or extend any
such qualification; provided, however, that the [Fund/Distributor] shall not be
required to qualify Interests or to maintain the qualification of Interests in
any jurisdiction where it shall deem such qualification disadvantageous to the
Fund.
1.8. Whenever in their judgment such action is warranted by unusual
market, economic or political conditions or by abnormal circumstances of any
kind, the Fund's officers may upon reasonable notice instruct the Distributor to
decline to accept any orders for or make any sales of Interests until such time
as the Fund's officers deem it advisable to accept such orders and to make such
sales.
1.9. The Fund agrees to notify the Distributor in writing, from time to
time, of the amount of registered Interests available to be sold. The Fund
represents and warrants to the Distributor that all such Interests are
registered with the Commission and that a registration statement shall be
effective at the time such Interests are specified by the Fund as available for
sale.
1.10. The Fund will pay all costs and expenses in connection with the
registration of Interests under the Securities Act and all expenses in
connection with the provision of facilities for the issue and transfer of
Interests and for supplying information, prices and other data to be furnished
by the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses. The Fund agrees at its own expense to
execute any and all documents and to furnish any and all information and
otherwise to take all actions that may be reasonably necessary in connection
with the qualification of Interests for sale in such jurisdictions as the
Distributor may designate.
1.11. The Fund shall furnish from time to time, for use in connection
with the sale of Interests, such information with respect to the Fund and
Interests as the Distributor may reasonably request; and the Fund warrants that
the statements contained in any such information will, when made, be true and
correct and fairly show or represent what they purport to show or represent. The
Fund shall also furnish the Distributor upon request with unaudited semi-annual
reports and audited annual reports of the Fund's books and accounts prepared by
the Fund and from time to time such additional information regarding the
financial condition of the Fund as the Distributor may reasonably request.
1.12. The Fund authorizes the Distributor and Selling Agents to use any
prospectus in the form furnished from time to time in connection with the sale
of Interests. The Fund represents and warrants to the Distributor that, with
respect to Interests, all registration statements and prospectuses filed by the
Fund with the Commission under the Securities Act have been carefully prepared
in conformity with the requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and prospectus contain all
statements required to be stated therein in conformity with said Act and the
rules and regulations of said Act and the rules and regulations of said
Commission and all statements of fact contained in any such registration
statement and prospectus are true and correct. Furthermore, neither any
registration statement nor any prospectus contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the
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statements therein not misleading to a purchaser of Interests. The Fund may, but
shall not be obligated to, propose from time to time such amendments to any
registration statement and such supplements to any prospectus as may, in light
of future developments and in the opinion of the Fund's counsel, be necessary or
advisable. If the Fund shall not propose such amendments and/or supplements
within fifteen days after receipt by the Fund of a written request from the
Distributor to do so, the Distributor may, at its option, terminate this
Agreement. In such case, the Distributor will be held harmless from, and
indemnified by the Fund for, any liability or loss resulting from the failure to
implement such amendment or supplement. The Fund shall not file any amendment to
any registration statement or supplement to any prospectus without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
1.13. No Interests shall be offered by either the Distributor or the
Fund under any of the provisions of this Agreement and no orders for the
purchase or sale of Interests hereunder shall be accepted by the Fund if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this Section 1.13 shall in any way restrict
or have an application to or bearing upon the Fund's obligation to repurchase
Interests from a Member in accordance with the provisions of the Fund's
prospectus or limited liability company agreement.
1.14. The Fund agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the Commission for amendments to the registration
statement or prospectus or for additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
prospectus or the initiation by service of process on the Fund of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus or
which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to any amendment to
any registration statement or prospectus which may from time to
time be filed with the Commission.
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1.15. The Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Fund all
records and other information relative to the Fund and its prior, present or
potential Members, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except (a)
after prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld when the Distributor has been requested to
divulge such information by duly constituted authorities, (b) where the
Distributor may be exposed to civil or criminal liability for failure to comply,
or (c) when so requested by the Fund.
2. LIMITATION OF LIABILITY; INDEMNIFICATION;
CONTINUATION OF REPRESENTATIONS AND WARRANTIES
2.1. The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Distributor's part in the
performance of its duties, from reckless disregard by the Distributor of its
obligations and duties under this Agreement, or from the Distributor's failure
to comply with laws, rules and regulations applicable to it in connection with
its distribution of the Interests.
2.2. The Fund agrees to indemnify, defend and hold the Distributor, its
several partners and employees, and any person who controls the Distributor
within the meaning of Section 15 of the Securities Act (the Distributor and all
such parties, the "Distributor Parties"), 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) (collectively "Losses") which the
Distributor Parties may incur (a) as the result of acting as distributor of
Interests or arising out of its actions in accordance with this Agreement; or
(b) under the Securities Act or under common law or otherwise, arising out of or
based upon (i) any untrue statement, or alleged untrue statement, of a material
fact contained in any registration statement or any prospectus, (ii) any
omission, or alleged omission, to state a material fact required to be stated in
any registration statement or in any prospectus or necessary to make the
statements in either of such documents not misleading or (iii) any Fund-related
advertisement or sales literature that is not in compliance with applicable
laws, rules or regulations (including, but not limited to the Conduct Rules of
the National Association of Securities Dealers, Inc.). The Fund's agreement to
indemnify the Distributor Parties shall not be deemed to cover any Losses (x)
arising out of any statements or representations as are contained in any
prospectus, advertisement or sales literature and in such financial and other
statements as are furnished in writing to the Fund by the Distributor, or (y)
arising out of or based upon any omission or alleged omission to state a
material fact in such information furnished by the Distributor which is required
to be stated or necessary to make the information not misleading; and further
provided that the Fund's agreement to indemnify the Distributor and the Fund's
representations and warranties hereinbefore set in paragraph 1.10 shall not be
deemed to cover any liability to the Fund or its Members to which the
Distributor would otherwise be subject due to its willful misfeasance, bad faith
or gross negligence in the performance
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of its duties, by reason of the Distributor's reckless disregard of its
obligations and duties under this Agreement, or by the Distributor's failure to
comply with any laws, rules or regulations applicable to it in connection with
its distribution of the Interests.
In the event of a formal legal action, the Fund's agreement to indemnify
the Distributor Parties is conditioned upon the Fund being provided with written
notice of an action brought against the Distributor Parties identifying the
person against whom such action is brought, promptly following receipt of
service of the summons or other first legal process, provided that any failure
to promptly notify the Fund will not relieve the Fund of its duty to indemnify
pursuant to this Section 2.2 unless the Fund is materially prejudiced as a
result, and provided further, that failure to notify the Fund shall not, in any
event, relieve the Fund from any liability the Fund may have to the person
against whom such action is brought, or to any other person, by reason of any
such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than in regard to the Fund's indemnity obligations under this Section
2.2.
The Fund will be entitled to assume the defense of any action as to
which a claim for indemnification may be made under this Section 2.2 if such
defense shall be conducted by counsel of good standing approved by the
Distributor, which approval shall not be unreasonably withheld. In the event the
Fund elects to assume the defense of any such action in accordance with the
foregoing, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them, but in any case
where the Fund does not elect to assume the defense of any such action or in the
event the Distributor reasonably withholds approval of counsel chosen by the
Fund, the Fund will reimburse the Distributor Parties named as defendant or
defendants in such action, for the fees and expenses of any counsel retained by
the Distributor or them.
This Agreement of indemnity will inure exclusively to the benefit of the
Distributor Parties, their respective estates, and their respective successors.
The Fund agrees promptly to notify the Distributor of the commencement of any
litigation of proceedings against the Fund or any of its officers or members of
its Board of Managers (each, a "Manager" and collectively, the "Board") which
relates, directly or indirectly, to the issue and sale of any Interests or which
may otherwise form the basis of an obligation for the Fund to indemnify
hereunder.
2.3. The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Managers, and any person who controls the Fund within the meaning
of Section 15 of the Securities Act (the Fund and all such parties, the "Fund
Parties") free and harmless from and against any and all Losses which the Fund
Parties may incur under the Securities Act or under common law or otherwise, but
only to the extent that such Loss results directly out of any information
furnished in writing by the Distributor to the Fund that (a) constitutes an
untrue, statement of a material fact or (b) contains an omission, or alleged
omission, to state a material fact required to be stated or necessary to make
such information not misleading, which information is used in response to
required items of the registration statement or in the corresponding statements
made in the prospectus.
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The Distributor's agreement to indemnify the Fund Parties is conditioned
upon the Distributor being provided with written notice of an action brought
against the Fund Parties and identifying the person against whom such action is
brought promptly following the indemnified person's receipt of service of the
summons or other legal process, provided that any failure to promptly notify the
Distributor will not relieve the Distributor of its duty to indemnify pursuant
to this Section 2.3 unless the Distributor is materially prejudiced as a result.
The Distributor will be entitled to assume the defense of any such
action if such defense shall be conducted by counsel of good standing approved
by the Fund, which approval shall not be unreasonably withheld. In the event any
such Loss is not based solely on an alleged misstatement or omission on the
Distributor's part, the relevant Fund Parties shall have the right to
participate in the defense, and the Distributor shall have the right of first
control thereof. In the event the Distributor elects to assume the defense of
any action in accordance with the foregoing, the Fund Parties shall bear the
fees and expenses of any additional counsel retained by any of them, but in any
case where the Distributor does not elect to assume the defense of any such
action, the Distributor will reimburse the Fund Parties named as defendant or
defendants in such suit for the reasonable fees and expenses of any counsel
retained by the Fund Parties to the extent related to a Loss covered under this
Section 2.3.
2.4. The indemnification agreements contained in this Section 2 and the
Fund's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Distributor, its partners and employees, or any controlling
person, and shall survive the delivery of any Interests. The Fund's
representations and warranties contained in this Agreement shall continue
throughout the term of this Agreement and be deemed to be of a continuing
nature, and, if relevant, applicable to all registration statements and
prospectuses filed or used hereafter and all Interests distributed hereunder.
2.5. It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon any of the Managers, Members, nominees, officers,
agents or employees of the Fund personally, but shall bind only the Fund and the
property of the Fund. The execution and delivery of this Agreement have been
authorized by the Managers, and this Agreement has been signed and delivered by
an authorized officer of the Fund, acting in such capacity.
3. FEE
As compensation for the Distributor's services under this Agreement, the
Bank shall pay the Distributor a distribution fee of $2,000 per month. The
distribution fee shall be paid on the first business day of each month, or at
such time(s) as the Distributor shall reasonably request.
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4. OFFERING PRICE; SALE AND PAYMENT
4.1. The minimum initial and additional investment amounts in the Fund
shall be those amounts as set forth in the Fund's prospectus unless the Board
approves different amounts and instructs the Distributor in writing to accept
the different minimum initial and/or additional investment amounts.
4.2. To the extent that Interests of the Fund are sold at an offering
price which includes a sales load or subject to a contingent deferred sales
load, such Interests shall be hereinafter referred to collectively as "Load
Interests."
4.3. The public offering price of a Load Interest shall be the net asset
value of such Load Share, plus any applicable sales charge, all as set forth in
the prospectus of the Fund. The net asset value of Interests shall be determined
in accordance with the Limited Liability Company Agreement and the prospectus of
the Fund.
4.4. Prior to the time of delivery of any Load Interests by the Fund to,
or on the order of, the Distributor, the Distributor shall pay or cause to be
paid to the Fund or to its order an amount equal to the applicable net asset
value of such Interests. The Distributor may retain so much of any sales charge
or underwriting discount as is not allowed by the Distributor as a concession to
dealers.
4.5. The Fund reserves the right to issue, transfer or sell Load
Interests at their net asset value (a) in connection with the merger or
consolidation of the Fund with any other investment company or the acquisition
by the Fund of all or substantially off of the assets or of the outstanding
Interests of any other investment company (b) in connection with a pro rata
distribution directly to the holders of Interests in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Interests on a pro rata basis; (d) in connection with the issuance of
Load Interests pursuant to any exchange and reinvestment privileges described in
the prospectus of the Fund; and (e) otherwise in accordance with the prospectus
of the Fund.
5. TERM, DURATION AND TERMINATION
This Agreement shall become effective as of the date first written above
(the "Effective Date") and, unless sooner terminated as provided herein, shall
continue for a two-year period following the Effective Date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive one-year
terms, provided that such continuance is specifically approved at least annually
by the vote of a "majority of the outstanding voting securities of the Fund," as
defined by the 1940 Act and the rules thereunder, or by the Board; and provided
that in either event such continuance is also approved by a majority of the
Managers who are not parties to this Agreement or "interested persons," as
defined by the 1940 Act, of any such party (the "Independent Managers"), by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Fund may at any time, without payment of any penalty, terminate this
Agreement upon sixty days' prior written notice to the Distributor, either by
majority vote of the Board or by the vote of a "majority of the outstanding
voting securities of the
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Fund," as defined by the 1940 Act and the rules thereunder. The Distributor may
at any time, without payment of penalty, terminate this Agreement upon sixty
days' prior written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment (to the extent required by the 1940 Act
and the rules thereunder) unless such automatic termination shall be prevented
by an exemptive order of the Commission.
6. PRIVACY
Notwithstanding any provision herein to the contrary, each party hereto
agrees that any Nonpublic Personal Information, as defined under Rule 3(t) of
Regulation S-P ("Regulation S-P"), promulgated under the Xxxxx-Xxxxx-Xxxxxx Act
(the "Privacy Act"), disclosed by a party hereunder is for the specific purpose
of permitting the other party to perform the services set forth in this
Agreement. Each party agrees that, with respect to such information, it will
comply with Regulation S-P and the Privacy Act and that it will not disclose any
Nonpublic Personal Information received in connection with this Agreement to any
other party, except to the extent as necessary to carry out the services set
forth in this Agreement or as otherwise permitted by Regulation S-P or the
Privacy Act. The Fund represents to the Distributor that it has adopted a
statement of its privacy policies and practices as required by Regulation S-P
and agrees to provide the Distributor with a copy of that statement annually.
The Distributor shall have in place and maintain physical, electronic and
procedural safeguards reasonably designed to protect the security,
confidentiality and integrity of, and to prevent unauthorized access to or use
of records and information relating to consumers of the Fund.
7. NOTICES
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: if to the Fund, to it at Xxx Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 Attention: ________________; and if to the Distributor, to it at
0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000, Attn: President, or at such other
address as either party may from time to time specify in writing to the other
party pursuant to this Section.
8. GOVERNING LAW
8.1. 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 an enforcement of the change, waiver, discharge or termination is
sought.
8.2. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York and the provisions of the 1940 Act. To
the extent the law of the State of New York, or any of the provisions herein,
conflict with the provisions of the 1940 Act, the latter shall control.
8.3. 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
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thereby. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors.
8.4. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
XXX XXXX/SHORT HEDGE FUND LLC
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
--------------------------------
Name:
Title:
BNY XXXXXXXX DISTRIBUTORS, INC.
By:
--------------------------------
Name:
Title:
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