Exhibit (h)(1)
FORM OF UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 26th day of June, 2002, between DB Hedge Strategies
Fund LLC, a Delaware limited liability company (the "Fund"), and XXXXXXX
DISTRIBUTORS, INC., a Delaware corporation ("SDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints SDI to act as general distributor of units
of limited liability interest (hereinafter called "units") of the Fund in
jurisdictions wherein units of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may: (a) issue or
sell units directly to holders of units of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of distributions, or otherwise; (b) issue units in connection
with the merger or consolidation of any other investment company with the Fund
or the Fund's acquisition, by purchase or otherwise, of all or substantially all
of the assets of any other investment company or all or substantially all of the
outstanding shares of any such company; and (c) issue units in connection with
the reinvestment of distributions made by the Fund, if any. SDI shall appoint
various financial service firms ("Firms") to provide distribution services to
investors. The Firms shall provide such office space and equipment, telephone
facilities, personnel, literature distribution, advertising and promotion as is
necessary or beneficial for providing information and distribution services to
existing and potential clients of the Firms. SDI may also provide some of the
above services for the Fund.
2. SDI accepts such appointment as principal underwriter and agrees to
render such services and to assume the obligations herein set forth for the
compensation herein provided. SDI shall for all purposes herein provided be
deemed to be an independent contractor and, unless expressly provided herein or
otherwise authorized, shall have no authority to act for or represent the Fund
in any way. SDI, by separate agreement with the Fund, may also serve the Fund in
other capacities. The services of SDI to the Fund under this Agreement are not
to be deemed exclusive, and SDI shall be free to render similar or other
services to others so long as its services hereunder are not impaired thereby.
SDI represents that it is a registered securities dealer and a member in good
standing of the National Association of Securities Dealers, Inc.
3. In carrying out its duties and responsibilities hereunder, SDI may,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution services contemplated hereunder
directly to or for the benefit of existing and potential shareholders who may be
clients of such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by SDI and not the Fund.
4. SDI shall use its best efforts with reasonable promptness to sell
such part of the authorized units of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Fund's currently effective registration statement,
including the prospectus
1
and the statement of additional information ("SAI") and any supplements or
amendments thereto ("Registration Statement") and the Fund's organizational
documents; provided, however, that SDI may, in its discretion, refuse to accept
orders for units from any particular applicant. Without limiting the foregoing,
SDI agrees to: (i) sell units only to an investor who is an "Eligible Investor"
as that term is defined in the Registration Statement; (ii) obtain and comply
with any investor certification requirements set forth in the Fund's
Registration Statement; and (iii) impose the requirements set forth in (i) and
(ii) of this paragraph as a condition of the sales activity of any Firm or other
person with whom SDI enters into a selling group arrangement with respect to the
units.
5. SDI shall sell units of the Fund to or through qualified Firms in
such manner, not inconsistent with the provisions hereof and the Fund's
Registration Statement, as SDI may determine from time to time, provided that no
Firm or other person shall be appointed or authorized to act as agent of the
Fund without prior consent of the Fund. In addition to sales made by it as agent
of the Fund, SDI may, in its discretion, also sell units of the Fund as
principal to persons with whom it does not have selling group agreements.
6. Units of any class of any series of the Fund offered for sale or
sold by SDI shall be so offered or sold at a price per share determined in
accordance with the Registration Statement. The price the Fund shall receive for
all units purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such units, except with respect
to units sold during the initial offering period, as defined in the Registration
Statement, which shall be offered and sold at the price set forth therein. Any
excess of the sales price over the net asset value of the units of the Fund sold
by SDI as agent shall be retained by SDI as a commission for its services
hereunder. SDI may compensate Firms for sales of units at the commission levels
provided in the Registration Statement from time to time. SDI may pay other
commissions, fees or concessions to Firms, and may pay them to others in its
discretion, in such amounts as SDI shall determine from time to time consistent
with applicable regulations. SDI shall be entitled to receive and retain any
applicable early withdrawal charge as described in the Registration Statement.
7. SDI will require each Firm to conform to the provisions hereof and
the Registration Statement with respect to the public offering price or net
asset value, as applicable, of the Fund's units, and neither SDI nor any such
Firms shall withhold the placing of purchase orders so as to make a profit
thereby.
8. The Fund will use its best efforts to keep effectively registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), for sale as herein contemplated such units as SDI shall reasonably
request and as the Securities and Exchange Commission shall permit to be so
registered. Notwithstanding any other provision hereof, the Fund may terminate,
suspend, or withdraw the offering of units whenever, in its sole discretion, it
deems such action to be desirable.
9. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its units for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as SDI may reasonably
request (it being understood that the Fund shall not be required without
its consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to SDI from time to time such information
with respect to the Fund and its units as SDI may reasonably request for use in
connection with the sale of units of the Fund.
10. SDI shall issue and deliver or shall arrange for various Firms to
issue and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this Agreement as may be required under any applicable law. At or
prior to the time of issuance of units, SDI will pay or cause to be paid to the
Fund the amount due the Fund for the sale of such units. Units shall be
registered on the transfer books of the Fund in such names and denominations as
SDI may specify.
11. SDI shall order units of the Fund from the Fund only to the extent
that it shall have received purchase orders therefor. SDI will not make, or
authorize Firms or others to make (a) any short sales of units of the Fund; or
(b) any sales of such units to any member of the Fund's board of directors
("Board") or officer of the Fund or to any officer or Board member of SDI or of
any corporation or association furnishing investment advisory, managerial or
supervisory services to the Fund, or to any corporation or association, unless
such sales are made in accordance with the Registration Statement relating to
the sale of such units. SDI, on behalf of and for the account of the Fund, may
repurchase the units of the Fund at such prices and upon such terms and
conditions as shall be specified in the Fund's Registration Statement. In
selling or repurchasing units of the Fund for the account of the Fund, SDI will
in all respects conform to the requirements of all state and federal laws and
the Conduct Rules of the National Association of Securities Dealers, Inc.,
relating to such sale or repurchase, as the case may be. SDI will observe and be
bound by all the provisions of the Fund's organizational documents (and of any
fundamental policies adopted by the Fund pursuant to the Investment Company
Act), which at the time in any way require, limit, restrict, prohibit or
otherwise regulate any action on the part of SDI hereunder.
12. SDI agrees to indemnify and hold harmless the Fund and each of its
Board members and officers and each person, if any, who controls the Fund within
the meaning of Section 15 of the Securities Act, against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which the Fund or such Board members, officers, or controlling persons may
become subject under such Act, under any other statute, at common law or
otherwise, arising out of the acquisition of any units by any person which (i)
may be based upon any wrongful act by SDI or any of SDI's employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading if such
statement or omission was made in reliance upon information furnished to the
Fund by SDI, or (iii) may be incurred or arise by reason of SDI's acting as the
Fund's agent instead of purchasing and reselling units as principal in
distributing the units to the public, provided, however, that in no case (i) is
SDI's indemnity in favor of a Board member or officer or any other person deemed
to protect such Board member or officer or other person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is SDI to be liable under the indemnity agreement contained in
this paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or such person, as the case may be, shall have
notified SDI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claims shall have
been served upon the Fund or upon such person (or after the Fund or such person
shall have received notice of such service on any designated agent), but failure
to notify SDI of any such claim shall not relieve SDI from any liability which
SDI may have to the Fund or any person against whom such action is brought
otherwise than on account of SDI's indemnity agreement contained in this
paragraph. SDI shall be entitled to participate, at SDI's own expense, in the
defense, or, if SDI so elects, to assume the defense of any suit brought to
enforce any such liability, but if SDI elects to assume the defense, such
defense shall be conducted by counsel chosen by SDI and satisfactory to the
Fund, to its officers and Board members, or to any controlling person or persons
who is/are defendant or defendants in the suit. In the event that SDI elects to
assume the defense of any such suit and retain such counsel, the Fund, such
officers and Board members or controlling person or persons, defendant or
defendants in the suit shall bear the fees and expenses of any additional
counsel retained by them, but, in case SDI does not elect to assume the defense
of any such suit, SDI will reimburse the Fund, such officers and Board members
or controlling person or persons, defendant or defendants in such suit for the
reasonable fees and expenses of any counsel retained by them. SDI agrees to
notify the Fund promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any units. The Fund shall
not, without the prior written consent of SDI, effect any settlement of any
pending or threatened action, suit or proceeding in respect of which the Fund is
or could have been a party and indemnity has or could have been sought hereunder
by the Fund, unless such settlement includes an unconditional release of SDI
from all liability on claims that are the subject matter of such action, suit or
proceeding.
13. The Fund agrees to indemnify and hold harmless SDI and each of
SDI's directors and officers and each person, if any, who controls SDI within
the meaning of Section 15 of the Securities Act, against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which SDI or such directors, officers or controlling persons may become
subject under such Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any units by any person which (i) may be based
upon any wrongful act by the Fund or any of its employees or representatives, or
(ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement or
omission was not made in reliance upon information furnished to SDI by the Fund;
provided, however, that in no case (i) is the Fund's indemnity in favor of a
director or officer or any other person deemed to protect such director or
officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement or (ii) is the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claims made against SDI or any such director, officer or controlling
person unless SDI or such director, officer or controlling person, as the case
may be, shall have notified the Fund in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon SDI or upon such director, officer or
controlling person (or after SDI or such director, officer or controlling person
shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to SDI, its
directors, officers, or controlling person or persons, defendant or defendants
in the suit. In the event that the Fund elects to assume the defense of any such
suit and retain such counsel, SDI, its directors, officers or controlling person
or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse SDI or such
directors, officers or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Fund agrees to notify SDI promptly of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of any units. SDI shall not, without the prior written
consent of the Fund, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which either SDI is or could have been a party
and indemnity has or could have been sought hereunder by SDI, unless such
settlement includes an unconditional release of the Fund from all liability on
claims that are the subject matter of such action, suit or proceeding.
14. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by SDI under
this Agreement. The Fund will pay (or will enter into arrangements providing
that others will pay): (i) all fees and expenses in connection with the
registration of the Fund and its units under the United States securities laws
and the registration and qualification of units for sale in the various
jurisdictions in which the Fund shall determine it advisable to qualify such
units for sale (including registering the Fund as a broker or dealer or any
officer of the Fund or other person as agent or salesman of the Fund in any such
jurisdictions) ("Blue Sky expenses"); and (ii) the cost of preparing and
printing of sufficient copies of the Fund's prospectus, SAI, and any other sales
material (and any supplements or amendments thereto).
15. This Agreement shall become effective on the date first written
above and shall continue for a period two years after such date; and shall
continue from year to year thereafter only so long as such continuance is
approved in the manner required by the Investment Company Act.
16. This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by SDI on sixty (60) days' written notice to the other party. The
indemnity provisions contained herein shall remain operative and in full force
and effect regardless of any termination of this Agreement. The Fund may effect
termination with respect to any class of any series of the Fund by a vote of (i)
a majority of the Board members who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of this
Agreement or (ii) a majority of the outstanding voting securities of such series
or class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon SDI's failure to fulfill
any of its obligations hereunder.
17. All material amendments to this Agreement must be approved by a
vote of a majority of the Board, and of the Board members who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of this Agreement, cast in person at a meeting called for such
purpose.
18. The terms "assignment," "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
19. SDI shall receive such compensation for its distribution services
as set forth in this Agreement. Termination of this Agreement shall not affect
the right of SDI to receive payments on any unpaid balance of the compensation
earned prior to such termination.
20. Notwithstanding anything in this Agreement to the contrary, SDI
shall be contractually bound hereunder by the terms of any publicly announced
waiver of or cap on the compensation received for its distribution services
under this Agreement or by the terms of any written document provided to the
Board announcing a waiver or cap, as if such waiver or cap were fully set forth
herein.
21. SDI will not use or distribute, or authorize the use, distribution
or dissemination by Firms or others in connection with the sale of Fund units
any statements other than those contained in the Registration Statement, except
such supplemental literature or advertising as shall be lawful under federal and
state securities laws and regulations. SDI will furnish the Fund with copies of
all such material.
22. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
23. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
24. All parties hereto are expressly put on notice of the Fund's
Limited Liability Company Operating Agreement, and all amendments thereto, all
of which are on file with the Secretary of State of the State of Delaware. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Board members, officers, or
unitholders of the Fund individually but are binding upon only the assets and
property of the Fund. With respect to any claim by SDI for recovery of any
liability of the Fund arising hereunder allocated to a particular series or
class, whether in accordance with the express terms hereof or otherwise, SDI
shall have recourse solely against the assets of that series or class to satisfy
such claim and shall have no recourse against the assets of any other series or
class for such purpose.
25. This Agreement shall be construed in accordance with applicable
federal law and with the laws of the State of New York.
26. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and SDI have caused this Agreement to be
executed as of the day and year first above written.
DB HEDGE STRATEGIES FUND LLC
Attest:
By:
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Xxxxx X. Xxxxxxxxx Xxxxxxx X. Xxxx
Secretary President
Attest: XXXXXXX DISTRIBUTORS, INC.
By:
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Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxx
Assistant Secretary President
