FORM OF UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this ____th day of ___________, 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 principal underwriter of units of
beneficial 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
dividends or distributions, or otherwise; or (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. 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.
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 services 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.
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.
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 and
the statement of additional information 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, and (ii) obtain and comply with any
investor certification requirements set forth in the Fund's Registration
Statement and to impose these requirements 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.
2. 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.
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.
SDI shall also receive any distribution services fee payable by the Fund as
provided in any 12b-1 plan or other service plan, as may be adopted by the Fund
and as amended from time to time (a "Plan").
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.
3. The Fund will use its best efforts to keep effectively registered under the
Securities 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.
4. 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.
5. 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.
6. 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 Board member 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 and/or governing instruments. 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 of 1940, as
amended (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.
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, 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.
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.
7. 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 or
a Plan. The Fund will pay (or will enter into arrangements providing that others
will pay) 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"). In addition, SDI will pay all expenses (other than expenses which
one or more Firms may bear pursuant to any agreement with SDI) incident to the
sale and distribution of the units issued or sold hereunder, including, without
limiting the generality of the foregoing, all (a) expenses of printing and
distributing any prospectus and of preparing, printing and distributing or
disseminating any other literature, advertising and selling aids in connection
with the offering of the units for sale (except that such expenses need not
include expenses incurred by the Fund in connection with the preparation,
typesetting, printing and distribution of any registration statement or
prospectus, report or other communication to shareholders in their capacity as
such), and (b) expenses of advertising in connection with such offering.
No transfer taxes, if any, which may be payable in connection with the issue or
delivery or units sold as herein contemplated or of the certificates for such
units shall be borne by the Fund, and SDI will bear all such transfer taxes.
8. 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. 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 a Plan, this Agreement, or in
any other agreement related to a Plan, 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.
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 a Plan, this Agreement or in any other agreement related to a Plan,
cast in person at a meeting called for such purpose.
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.
SDI shall receive such compensation for its distribution services as set forth
in a Plan. 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, as set forth in a Plan.
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 a Plan
or by the terms of any written document provided to the Board of the Fund
announcing a waiver or cap, as if such waiver or cap were fully set forth
herein.
9. 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.
10. 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.
11. 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.
12. All parties hereto are expressly put on notice of the Fund's Limited
Liability Company Operating Agreement, which is on file with the Secretary 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 Directors,
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.
13. This Agreement shall be construed in accordance with applicable federal law
and with the laws of The State of New York.
14. 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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Xxxxxxx X. Xxxxxxxx, III Xxxxxxx X. Xxxxx
Secretary President
Attest: XXXXXXX DISTRIBUTORS, INC.
By:
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Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxx
Assistant Secretary President
