EXHIBIT (k)(5)
FORM OF EXPENSE LIMITATION AGREEMENT
GENERATION HEDGE STRATEGIES FUND LLC
This EXPENSE LIMITATION AGREEMENT, is made as of _______, 2004 by and
between GENERATION CAPITAL MANAGEMENT LLC (the "Adviser") and GENERATION Hedge
Strategies Fund LLC (the "Fund").
WHEREAS, the Fund is a Delaware limited liability company, and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a closed-end management investment company; and
WHEREAS, the Fund and the Adviser have entered into an investment
management agreement dated _______, 2004, as amended (the "Investment Management
Agreement"), pursuant to which the Adviser provides investment management
services to the Fund for compensation based on the value of the Fund's month-end
net assets; and
WHEREAS, the Fund and the Adviser have entered into an administration
agreement dated _______, 2004, as amended (the "Administration Agreement"),
pursuant to which the Adviser, in its capacity as administrator, provides
administrative services to the Fund for compensation based on the value of the
Fund's month-end net assets; and
WHEREAS, the Fund and the Adviser have determined that it is appropriate
and in the best interests of the Fund and its members to maintain the expenses
of the Fund at a level below the level to which the Fund may normally be
subject;
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. The Adviser, in its capacity as investment
adviser and/or administrator of the Fund, agrees to waive its fees and/or
reimburse expenses to the extent necessary so that the total annual operating
expenses for the Fund do not exceed the Operating Expense Limit (as defined in
Section 1.2 below). For purposes of this Agreement, total annual operating
expenses for the Fund generally consist of costs not specifically borne by the
Adviser (in its capacity as investment adviser and/or administrator to the
Fund), or the Fund's principal underwriter, including, but not limited to,
investment advisory fees, administrative fees, fees for necessary professional
services, any amortization of organizational expenses, costs associated with
regulatory compliance, maintaining legal existence, and investor relations
("Fund Operating Expenses"), but excluding: interest; taxes; transaction costs
(such as brokerage commissions); extraordinary expenses, including, but not
limited to, litigation and indemnification costs, expenses of a reorganization,
restructuring or merger of the Fund or acquisition of all or substantially all
of the assets of another fund, expenses of holding, and soliciting proxies for a
meeting of members of the Fund (except to the extent relating to routine items),
expenses of converting to a new custodian, transfer agent or other service
provider; other expenses not incurred in the ordinary course of the Fund's
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business; and/or expenses of any counsel or other persons or services retained
by the Fund's directors who are not "interested persons," as that term is
defined in the 1940 Act, of the Adviser. To the extent the Fund Operating
Expenses exceed the Operating Expense Limit (as defined in Section 1.2 below),
such excess amount (the "Excess Amount") shall be the liability of the Adviser.
1.2. Operating Expense Limit. The maximum Operating Expense Limit in any
fiscal year or period with respect to the Fund shall be the amount specified in
Schedule A based on a percentage of the Fund's month-end net assets.
1.3. Duration of Operating Expense Limit. The Operating Expense Limit with
respect to the Fund shall remain in effect until ___________, 2005. The Adviser
may extend, but may not during the term of this Agreement shorten, the duration
of the Operating Expense Limit without the consent of the Fund. Such an
extension must continue at the same Operating Expense Limit amount specified on
Schedule A, unless otherwise agreed by the parties hereto.
1.4. Method of Computation. To determine the Adviser's obligation with
respect to the Excess Amount, each month the Fund Operating Expenses for the
Fund shall be annualized. If the annualized Fund Operating Expenses for any
month of the Fund exceeds the Operating Expense Limit of the Fund, the Adviser
shall remit to the Fund an amount equal to such Excess Amount.
1.5. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the fees waived or reduced and
other payments remitted by the Adviser to the Fund with respect to the previous
fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If on the last business day of any month during which
the Investment Management Agreement is in effect, the estimated annualized Fund
Operating Expenses of the Fund for that month is less than the Operating Expense
Limit, the Adviser shall be entitled to reimbursement by the Fund of the fees
waived or reduced and other payments remitted by the Adviser to the Fund
pursuant to Section 1 hereof (the "Reimbursement Amount") during any of the
previous thirty-six (36) months, to the extent that the annualized Fund
Operating Expenses plus the amount so reimbursed equals, for such month, the
Operating Expense Limit provided in Schedule A, provided that such amount paid
to the Adviser will in no event exceed the total Reimbursement Amount and will
not include any amounts previously reimbursed.
2.2. Year-End Adjustment. If necessary, on or before the last business day
of the first month of each fiscal year, an adjustment payment shall be made by
the appropriate party in order that the actual Fund Operating Expenses of the
Fund for the prior fiscal year (including any reimbursement payments hereunder
with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall have an initial period as set forth in Section 1.3
above, and shall apply for each fiscal year thereafter so long as it is in
effect. Thereafter, this Agreement shall automatically renew for one-year terms
unless the Adviser provides written notice to the Fund of the termination of
this Agreement, which notice shall be received by the Fund at least thirty (30)
days' prior to the end of the then-current term. In addition, this Agreement
shall terminate upon termination of the Investment Management Agreement, or it
may be terminated by the Fund, without payment of any penalty, upon thirty (30)
days' prior written notice to the other party at its principal place of
business.
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4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to the Fund's limited liability company
operating agreement, or any applicable statutory or regulatory requirement to
which it is subject or by which it is bound, or to relieve or deprive the Fund's
Board of Directors of its responsibility for and control of the conduct of the
affairs of the Fund.
4.3. Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment management fee,
the computations of net asset value, and the allocation of expenses, having a
counterpart in or otherwise derived from the terms and provisions of the 1940
Act or the Investment Management Agreement, shall have the same meaning as and
be resolved by reference to the 1940 Act or such Investment Management
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the day and year first
above written.
GENERATION HEDGE STRATEGIES FUND LLC
By: _________________________________
Name:
Title:
GENERATION CAPITAL MANAGEMENT LLC
By: _________________________________
Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMIT
Maximum
Operating
Expense Limit
(as a percentage of
Name of Fund month-end net assets)
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Generation Hedge Strategies Fund LLC 2.20%
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