Exhibit (h)(1)
FORM OF
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ___ day of _______, 2005, by and
between Generation Hedge Strategies Fund LLC, a Delaware limited liability
company (the "Fund"), and UMB Distribution Services, LLC, a Wisconsin limited
liability company (the "Distributor").
WHEREAS, the Fund is a closed-end management investment company
registered under the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act") and is authorized to
issue interest in the fund ("Units") to Eligible Investors as defined in the
Fund's Prospectus dated ______________;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and Distributor desire to enter into an agreement
pursuant to which the Distributor shall be the distributor of the interest of
the Fund (such interest and any additional interest are referred to as the
"Units").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment of the Distributor.
The Fund hereby appoints the Distributor as agent for the distribution
of the Units, on the terms and for the period set forth in this Agreement.
Distributor hereby accepts such appointment as agent for the distribution of the
Units on the terms and for the period set forth in this Agreement.
2. Services and Duties of the Distributor.
2.1 Distributor will act as agent for the distribution of Units in
accordance with the instructions of the Fund's Board of Directors and the
registration statement and prospectuses then in effect with respect to the Fund
under the Securities Act of 1933, as amended (the "1933 Act").
2.2 Distributor may incur expenses for appropriate distribution
activities which it deems reasonable which are primarily intended to result in
the sale of Units, including, but not limited to, advertising, the printing and
mailing of prospectuses to other than current investors, and the printing and
mailing of sales literature. At the direction of the Fund, Distributor may enter
into servicing and/or selling agreements with qualified broker/dealers and other
persons with respect to the offering of Units to the public, and if it so
chooses the Distributor may act as principal. The Distributor shall not be
obligated to incur any specific expenses nor sell any certain number of Units of
the Fund.
2.3 All Units of the Fund offered for sale by the Distributor shall be
offered for sale to the public at a price per Unit (the "offering price")
provided in the Fund's then current prospectus. The Distributor shall have no
liability for the payment of the purchase price of the Units sold pursuant to
this Agreement or with respect to redemptions or repurchases of the Units.
2.4 The Distributor shall act as distributor of the Units in compliance
in all material respects with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
pursuant to the 1940 Act, by the Securities and Exchange Commission (the
"Commission") and the NASD.
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2.5 The Distributor shall not utilize any materials in connection with
the sales or offering of the Units except the Fund's prospectus and statement of
additional information and such other materials as the Fund shall provide or
approve. The Distributor agrees to provide compliance review of all sales
literature and marketing materials prepared for use by or on behalf of the Fund
in advance of the use of such materials. The Fund agrees to incorporate such
changes to such materials as the Distributor shall request. The Distributor will
file the materials as may be required with the NASD, SEC or state securities
commissioners. The Fund represents that it will not use or authorize the use of
any advertising or sales material unless and until such materials have been
approved and authorized for use by the Distributor.
2.5 As compensation for the services performed hereunder and the
expenses incurred by Distributor, the Distributor shall be entitled to the fees
and be reimbursed the expenses as provided in Schedule A hereto.
3. Duties and Representations of The Fund.
3.1 The Fund represents that it is registered as a closed-end
management investment company under the 1940 Act and that it has and will
continue to act in conformity with its Certificate of Incorporation, Limited
Liability Company Operating Agreement, its registration statement as may be
amended from time to time and resolutions and other instructions of its Board of
Directors and has and will continue to comply with all applicable laws, rules
and regulations including without limitation the 1933 Act, the 1934 Act, the
1940 Act, the laws of the states in which units of the Fund is offered and sold,
and the rules and regulations thereunder.
3.2 The Fund shall take or cause to be taken all necessary action to
register and maintain the registration of the Units under the 1933 Act for sale
as herein contemplated and shall pay all costs and expenses in connection with
the registration of Units under the 1933 Act, and be responsible for all
expenses in connection with maintaining facilities for the issue and transfer of
Units and for supplying information, prices and other data to be furnished by
the Fund hereunder.
3.3 The Fund shall execute any and all documents and furnish any and
all information and otherwise take all actions which may be reasonably necessary
in the discretion of the Fund's officers in connection with the qualification of
the Units for sale in such states as Distributor and the Fund may approve, shall
maintain the qualification of a sufficient number or amount of Units thereunder,
and shall pay all costs and expenses in connection with such qualification. The
Fund shall notify the Distributor, or cause it to be notified, of the states in
which the Units may be sold and shall notify the Distributor of any change to
the information.
3.4 The Fund shall, at its expense, keep the Distributor fully informed
with regard to its affairs. In addition, the Fund shall furnish the Distributor
from time to time such information, documents and reports with respect to the
Fund and the Units as the Distributor may reasonably request, and the Fund
warrants that the statements contained in any such information shall be true and
correct and fairly represent what they purport to represent.
3.5 The Fund represents to the Distributor that all registration
statements and prospectuses of the Fund filed or to be filed with the Commission
under the 1933 Act and 1940 Act with respect to the Units have been and will be
prepared in conformity with the requirements of the 1933 Act, the 1940 Act, and
the rules and regulations of the Commission thereunder. As used in this
Agreement the terms "registration statement" and "prospectus" shall mean any
registration statement and prospectus (together with the related statement of
additional information) at any time now or hereafter filed with the Commission
with respect to any of the Units and any amendments and supplements thereto
which at any time shall have been or will be filed with the Commission. The Fund
represents and warrants to the Distributor that any registration statement and
prospectus, when such registration statement becomes effective, will contain all
statements required to be stated therein in conformity with the 1933 Act, the
1940 Act and the rules and regulations of the Commission; that all information
contained in the registration statement and prospectus will be true and correct
in all material respects when such registration statement becomes effective; and
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that neither the registration statement nor any prospectus when such
registration statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Fund agrees to file
from time to time such amendments, supplements, reports and other documents as
may be necessary or required in order to comply with the 1933 Act and the 1940
Act and in order that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary or required in order that
there may be no omission to state a material fact in the registration statement
or prospectus which omission would make the statements therein misleading. The
Fund shall promptly notify the Distributor of any advice given to it by counsel
to the Fund regarding the necessity or advisability of amending or supplementing
the registration statement.
3.6 The Fund shall not file any amendment to the registration statement
or supplement to any prospectus without giving Distributor reasonable notice
thereof in advance and if the Distributor declines to assent to such amendment
(after a reasonable time), the Fund may terminate this Agreement forthwith by
written notice to the Distributor without payment of any penalty. If the Fund
does not propose an amendment or amendments and/or supplement or supplements
promptly after receipt by the Fund of a written request in good faith from the
Distributor to do so, the Distributor may, at its option, immediately terminate
this Agreement. In addition, if, at any time during the term of this Agreement,
the Distributor requests the Fund to make any change in its governing
instruments or in its methods of doing business which are necessary in order to
comply with any requirement of applicable law or regulation, and the Fund fails
to make any such change as requested, the Distributor may terminate this
Agreement forthwith by written notice to the Fund without payment of any
penalty. Nothing contained in this Agreement shall in any way limit the Fund's
right or obligation to file at any time any amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Fund may deem advisable, with advice of its counsel, such right being in all
respects absolute and unconditional.
3.7 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the Fund may
decline to accept any orders for, or make any sales of, any Units until such
time as it deems it advisable to accept such orders and to make such sales and
the Fund shall advise the Distributor promptly of such determination.
3.8 The Fund agrees to advise the Distributor promptly in writing:
(i) any correspondence or other communication by the
Commission or its staff relating to the Fund including requests by the
Commission for amendments to the registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement or
prospectuses then in effect or the initiation of any proceeding for that
purpose;
(iii) the happening of any event which makes untrue any
statement of a material fact made in the registration statement or prospectuses
or which requires the making of a change in such registration statement or
prospectuses in order to make the statements therein not misleading; or
(iv) all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time to
time be filed with the Commission.
4. Indemnification.
4.1 The Fund authorizes the Distributor to use any prospectus or
statement of additional information, in the form furnished to the Distributor
from time to time, in connection with the sale of the Units. The Fund shall
indemnify, defend and hold the Distributor, and each of its present or former
directors, members, officers, employees, representatives and any person who
controls or previously controlled the Distributor within the meaning of Section
15 of the 1933 Act ("Distributor Indemnitees"), free and harmless (a) from and
against any and all losses, claims, demands, liabilities, damages, charges,
payments, costs and expenses (including the costs of investigating or defending
any alleged losses, claims, demands, liabilities, damages, charges, payments,
costs or expenses and any counsel fees incurred in connection therewith) of any
and every nature ("Losses") which Distributor and/or each of the Distributor
Indemnitees may incur under the 1933 Act, the 1934 Act, any other statute
(including Blue Sky laws) or any rule or regulation thereunder, or under common
law or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in the registration statement or
any prospectus, an annual or interim report to investors or sales literature, or
any amendments or supplements thereto, or arising out of or based upon any
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Fund's obligation to indemnify the Distributor and
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any of the foregoing indemnitees shall not be deemed to cover any Losses arising
out of any untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with information
relating to the Distributor and furnished to the Fund or its counsel by
Distributor in writing for the purpose of, and used in, the preparation thereof;
(b) from and against any and all Losses which Distributor and/or each of the
Distributor Indemnitees may incur in connection with this Agreement or the
Distributor's performance hereunder, except to the extent the Losses result from
the Distributor's willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement, (c) from and against any and all
Losses which the Distributor and/or each of the Distributor Indemnitees may
incur resulting from the actions or inactions of any prior service provider to
the Fund, or (d) from and against any and all Losses which the Distributor
and/or each of the Distributor Indemnitees may incur when acting in accordance
with instructions from the Fund or its representatives. Promptly after receipt
by the Distributor of notice of the commencement of an investigation, action,
claim or proceeding, the Distributor shall, if a claim for indemnification in
respect thereof is to made under this section, notify the Fund in writing of the
commencement thereof, although the failure to do so shall not prevent recovery
by the Distributor or any Distributor Indemnitee.
4.2 The Fund shall 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 loss, claim, demand, liability, damage or expense, but if the
Fund elects to assume the defense, such defense shall be conducted by counsel
chosen by the Fund and approved by the Distributor, which approval shall not be
unreasonably withheld. In the event the Fund elects to assume the defense of any
such suit and retain such counsel and notifies the Distributor of such election,
the indemnified defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by them subsequent to the receipt of
the Fund's election. If the Fund does not elect to assume the defense of any
such suit, or in case the Distributor does not, in the exercise of reasonable
judgment, approve of counsel chosen by the Fund, or in case there is a conflict
of interest between the Fund and the Distributor or any of the Distributor
Indemnitees, the Fund will reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and expenses of any counsel
retained by the Distributor and them. The Fund's indemnification agreement
contained in this Paragraph 4 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 and each of the
Distributor Indemnitees, and shall survive the delivery of any Units and the
termination of this Agreement. This agreement of indemnity will inure
exclusively to the Distributor's benefit, to the benefit of each of the
Distributor Indemnitees, and their estates and successors. The Fund agrees
promptly to notify the Distributor of the commencement of any litigation or
proceedings against the Fund or any of its officers or directors in connection
with the issue and sale of any of the Units.
4.3 The Fund acknowledges and agrees that in the event the Distributor,
at the direction of the Fund, is required to indemnify any entity selling Units
or providing investor services to investors or others and such entity shall make
a claim for indemnification against the Distributor, the Distributor shall make
a similar claim for indemnification against the Fund and shall be entitled to
such indemnification.
4.4 Distributor shall indemnify, defend and hold the Fund, and each of
its present or former directors, officers, employees, representatives, and any
person who controls or previously controlled the Fund within the meaning of
Section 15 of the 1933 Act ("Fund Indemnitees"), free and harmless from and
against any and all Losses which the Fund, and each of its present or former
directors, officers, employees, representatives, or any such controlling person,
may incur under the 1933 Act, the 1934 Act, any other statute (including Blue
Sky laws) or any rule or regulation thereunder, or under common law or
otherwise, (a) arising out of or based upon any untrue, or alleged untrue,
statement of a material fact contained in the Fund's registration statement or
any prospectus, as from time to time amended or supplemented, or the omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statement not misleading, but only if such
statement or omission was made in reliance upon, and in conformity with,
information relating to the Distributor and furnished in writing to the Fund or
its counsel by the Distributor for the purpose of, and used in, the preparation
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thereof, and (b) to the extent any Losses arise out of or result from the
Distributor's willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; Distributor's agreement to
indemnify the Fund and any of the Fund Indemnitees shall not be deemed to cover
any Losses to the extent they arise out of or result from the Fund's willful
misfeasance, bad faith or negligence in the performance of its duties, or by
reason of its reckless disregard of its obligations and duties, under this
Agreement. Promptly after receipt by the Fund of notice of the commencement of
an investigation, action, claim or proceeding, the Fund shall, if a claim for
indemnification in respect thereof is to made under this section, notify the
Distributor in writing of the commencement thereof, although the failure to do
so shall not prevent recovery by the Fund or any Fund Indemnitee.
4.5 The Distributor shall 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 loss, claim, demand, liability, damage or expense, but if the
Distributor elects to assume the defense, such defense shall be conducted by
counsel chosen by the Distributor and approved by the Fund, which approval shall
not be unreasonably withheld. In the event the Distributor elects to assume the
defense of any such suit and retain such counsel and notifies the Distributor of
such election, the indemnified defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by them subsequent to
the receipt of the Distributor's election. If the Distributor does not elect to
assume the defense of any such suit, or in case the Fund does not, in the
exercise of reasonable judgment, approve of counsel chosen by the Distributor,
the Distributor will reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and expenses of any counsel
retained by the Fund and them. The Distributor's indemnification agreement
contained in this Paragraph 4 and the Distributor'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 Fund or any of the
Fund Indemnitees, and shall survive the delivery of any Units and the
termination of this Agreement. This agreement of indemnity will inure
exclusively to the Fund's benefit, to the benefit of each of the Fund
Indemnitees and their estates and successors. The Distributor agrees promptly to
notify the Fund of the commencement of any litigation or proceedings against the
Distributor or any of its officers or members in connection with the issue and
sale of any of the Units.
5. Offering of Units.
No Units 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 such Units 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 1933
Act, or if and so long as the current prospectus as required by Section 10 of
the 1933 Act, as amended, is not on file with the Commission; provided, however,
that nothing contained in this paragraph 5 shall in any way restrict or have an
application to or bearing upon the Fund's obligation to repurchase Units from
any investor in accordance with the provisions of the prospectus or Certificate
of Incorporation.
6. Limitation of Liability
6.1 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
performance of its obligations and duties under this Agreement, except a loss
resulting from the Distributor's willful misfeasance, bad faith or gross
negligence in the performance of such duties and obligations, or by reason of
its reckless disregard thereof. Furthermore, notwithstanding anything herein to
the contrary, the Distributor shall not be liable for any action taken or
omitted to be taken in accordance with instructions received by the Distributor
from an officer or representative of the Fund or for any action taken or omitted
to be taken by any prior service provider of the Fund.
6.2 The Distributor assumes no responsibility hereunder, and shall not
be liable, for any default, damage, loss of data, errors, delay or any other
loss whatsoever caused by events beyond its reasonable control. The Distributor
will, however, take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond its control. Notwithstanding
anything in this agreement to the contrary, in no event shall either party, its
affiliates or any of its or their directors, members, officers, employees,
agents or subcontractors, be liable for lost profits or consequential damages.
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7. Term.
7.1 This Agreement shall become effective as of the date hereof. Unless
sooner terminated as provided herein, this Agreement shall continue in effect
until __________, 200_. Thereafter, if not terminated, this Agreement shall
continue automatically in effect for successive annual periods, provided such
continuance is specifically approved at least annually by (i) the Fund's Board
of Directors or (ii) the vote of a majority (as defined in the 1940 Act and Rule
18f-2 thereunder) of the outstanding voting securities of a Fund, and provided
that in either event the continuance is also approved by a majority of the
Fund's Board of Directors who are not "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
7.2 This Agreement may be terminated without penalty with respect to
the Fund (1) through a failure to renew this Agreement at the end of a term, (2)
upon mutual consent of the parties, or (3) on no less than thirty (30) days'
written notice, by the Fund's Board of Directors, by vote of a majority (as
defined with respect to voting securities in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of a Fund, or by the
Distributor (which notice may be waived by the party entitled to such notice).
The terms of this Agreement shall not be waived, altered, modified, amended or
supplemented in any manner whatsoever except by a written instrument signed by
the Distributor and the Fund. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).
7.3 In the event of termination of this Agreement, all reasonable
expenses associated with movement of records and materials and conversion
thereof shall be borne by the Fund.
8. Miscellaneous.
8.1 The services of the Distributor rendered to the Fund are not deemed
to be exclusive. The Distributor may render such services and any other services
to others, including other investment companies. The Fund recognizes that from
time to time members, officers, and employees of the Distributor may serve as
directors, trustees, officers and employees of other entities (including other
investment companies), that such other entities may include the name of the
Distributor as part of their name and that the Distributor or its affiliates may
enter into distribution, administration, fund accounting, transfer agent or
other agreements with such other entities.
8.2 The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records
relative to the Fund's investors, not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
and not to disclose such information except where the Distributor may be exposed
to civil or criminal proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities or court process, when
subject to governmental or regulatory audit or investigation, or when so
requested by the Fund. In case of any requests or demands for inspection of the
records of the Fund, the Distributor will endeavor to notify the Fund promptly
and to secure instructions from a representative of the Fund as to such
inspection. Records and information which have become known to the public
through no wrongful act of the Distributor or any of its employees, agents or
representatives, and information which was already in the possession of the
Distributor prior to the date hereof, shall not be subject to this paragraph.
8.3 This Agreement shall be governed by Wisconsin law, excluding the
laws on conflicts of laws. To the extent that the applicable laws of the State
of Wisconsin, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control, and nothing herein shall
be construed in a manner inconsistent with the 1940 Act or any rule or order of
the Commission thereunder. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the parties.
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8.4 Any notice required or to be permitted to be given by either party
to the other shall be in writing and shall be deemed to have been given when
sent by registered or certified mail, postage prepaid, return receipt requested,
as follows: Notice to the Distributor shall be sent to UMB Distribution
Services, LLC, 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxxx, XX, 00000,
Attention: General Counsel, and notice to the Fund shall be sent to Generation
Hedge Strategies Fund LLC, 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX, 00000,
Attention: President.
8.5 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
8.6 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise effect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
GENERATION HEDGE STRATEGIES FUND LLC
(the "Fund")
By:_____________________________________
UMB DISTRIBUTION SERVICES, LLC
(the "Distributor")
By: ____________________________________
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Schedule A
to the
Distribution Agreement
by and between
Generation Hedge Strategies Fund LLC
and
UMB Distribution Services, LLC
FEES
(to be provided)
