Exhibit (g)(1)
FORM OF INVESTMENT MANAGEMENT AGREEMENT
DB HEDGE STRATEGIES FUND LLC
AGREEMENT, made as of June 26, 2002 between DB Hedge Strategies Fund
LLC, a Delaware limited liability company (the "Fund"), and DB Investment
Managers, Inc., a Delaware corporation (the "Adviser").
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "SEC") as a closed-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Adviser so that it will render
investment advisory services to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Adviser is willing to render such services and/or engage
others to render such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed by the parties as follows:
1. Appointment. The Fund hereby appoints the Adviser to act as
investment adviser and provide investment advisory services to the Fund, subject
to the supervision of the Fund's board of directors (the "Board," "Board of
Directors," or "Directors"), for the period and on the terms and conditions set
forth in this Agreement. The Adviser accepts such appointment and agrees to
render the services and to assume the obligations set forth in this Agreement
commencing on its effective date for the compensation herein provided.
2. Responsibilities of the Adviser.
(a) The Adviser hereby undertakes and agrees, upon the terms and
conditions herein set forth, subject to the supervision of the Fund's Board of
Directors, either directly or indirectly through one or more Subadvisers (as
that term is defined in paragraph 4 below):
(i) to make investment decisions and provide a program of
continuous investment management for the Fund; prepare, obtain,
evaluate, and make available to the Fund research and statistical data
in connection therewith; obtain and evaluate such information and
advice relating to the economy, securities markets, and securities as
it deems necessary or useful to discharge its duties hereunder; engage
in or supervise the selection, acquisition, retention, and sale of
investments, securities, and/or cash; engage in or supervise the
selection, acquisition, retention, and sale of unregistered investment
funds, and/or other investment vehicles (the "Investment Funds");
select brokers or dealers to execute transactions; and all of the
aforementioned shall be done in accordance with the Fund's investment
objective, policies, and limitations as stated in the Fund's prospectus
and statement of additional information (the "SAI") included as part of
the Fund's registration statement filed with the SEC on Form N-2 under
the Securities Act of 1933, as amended, and the 1940 Act (the
"Registration Statement"), as amended from time to time, and in
accordance with guidelines and directions from the Fund's Board of
Directors and any applicable laws and regulations;
(ii) subject to the direction and control of the Fund's Board
of Directors, to assist the Fund as it may reasonably request in the
conduct of the Fund's business, including oral and written research,
analysis, advice, statistical, and economic data, judgments regarding
individual investments, general economic conditions and trends, and
long-range investment policies; determine or recommend the securities,
instruments, repurchase agreements, options, and other investments
(including the Investment Funds), and techniques that the Fund will
purchase, sell, enter into, use, or provide in an ongoing evaluation of
the Fund's portfolio; continuously manage and supervise the investment
program of the Fund and the composition of its investment portfolio in
a manner consistent with the investment objective, policies, and
restrictions of the Fund, as set forth in its Registration Statement
and as may be adopted from time to time by the Board, and applicable
laws and regulations; determine or
2
recommend the extent to which the Fund's portfolio shall be invested in
securities, Investment Funds, and other assets, and what portion if
any, should be held uninvested; and undertake to do anything incidental
to the foregoing to facilitate the performance of its obligations
hereunder;
(iii) furnish to or place at the disposal of the Fund
information, evaluations, analyses, and opinions formulated or obtained
by the Adviser in the discharge of its duties as the Fund may, from
time to time reasonably request, and maintain or cause to be maintained
for the Fund all books, records, reports, and any other information
required under the 1940 Act, to the extent that such books, records,
and reports, and other information are not maintained or furnished by
the custodian, transfer agent, administrator, sub-administrator, or
other agent of the Fund;
(iv) to furnish at the Adviser's expense for the use of the
Fund such office space, telephone, utilities, and facilities as the
Fund may require for its reasonable needs and to furnish at the
Adviser's expense clerical services related to research, statistical,
and investment work;
(v) to render to the Fund management and administrative
assistance in connection with the operation of the Fund that shall
include (i) compliance with all reasonable requests of the Fund for
information, including information required in connection with the
Fund's filings with the SEC, other federal and state regulatory
organizations, and self-regulatory organizations, and (ii) such other
services as the Adviser shall from time to time determine to be
necessary or useful to the administration of the Fund; and
(vi) to pay the reasonable salaries, fees, and expenses of the
Fund's officers and employees (including the Fund's share of payroll
taxes) and any fees and expenses of the Fund's Directors who are
directors, officers, or employees of or otherwise affiliated with the
Adviser; provided, however, that the Fund, and not the Adviser, shall
bear travel expenses (or an appropriate portion thereof) of Directors
and officers of the Fund who are directors, officers, or employees of
the Adviser to the extent that such expenses relate to attendance at
meetings of the Fund's Board of Directors or any committees thereof or
advisers thereto.
3
The Adviser shall bear all expenses arising out of its duties hereunder
but shall not be responsible for any expenses of the Fund other than
those specifically allocated to the Adviser in this Agreement.
(b) In particular, but without limiting the generality of the
foregoing, the Adviser shall not be responsible, except to the extent of the
reasonable compensation of the Fund's employees who are directors, officers, or
employees of the Adviser whose services may be involved, for the following
expenses of the Fund: organizational and offering expenses of the Fund; fees
payable to any consultants, including an advisory board (if applicable); fees
paid directly or indirectly to investment advisers of the Investment Funds;
brokerage commissions or all other costs and expenses directly related to
portfolio transactions, acquiring or disposing of any portfolio security, and
positions for the Fund's account such as direct or indirect expenses associated
with the Fund's investments, including investments in the Investment Funds;
legal expenses; auditing and accounting expenses; telephone, telex, facsimile,
postage, and other communications expenses; interest, insurance premiums, taxes,
and governmental fees; dues and expenses incurred by the Fund or with respect to
the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's administrator, sub-administrator,
custodian, transfer agent and registrar, distribution disbursing agent, or any
other agent of the Fund; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers, and other specialists (if any); fees and
expenses related to the repurchase of units of members; other expenses in
connection with the issuance, offering, distribution, sale, or underwriting of
units issued by the Fund, including preparing stock certificates; expenses of
registering or qualifying units of the Fund for sale; expenses relating to
investor and public relations; freight, insurance, and other charges in
connection with any shipment of the Fund's portfolio securities; expenses of
preparing, printing, and distributing prospectuses, SAIs, reports, notices to
members, the SEC, and other regulatory agencies, and providing distributions to
members; costs of stationery; costs of members' and other meetings, including
proxy preparation, printing, and mailing; or litigation expenses.
3. Use of Name. As licensee of the rights to use and sublicense the use
of the names "Deutsche" and "DB," trademarks and any derivatives thereof or logo
associated with those names, the Adviser hereby grants the Fund a non-exclusive
right and sublicense to use (i) the
4
Deutsche and DB names and marks as part of the Fund's name (the "Fund Name"),
and (ii) in connection with the Fund's investment products and services, in each
case only for so long as this Agreement, any other investment management
agreement between the Fund and the Adviser (or any organization which shall have
succeeded to the Adviser's business as investment manager (the "Adviser's
Successor")), or any extension, renewal or amendment hereof or thereof remains
in effect, and only for so long as the Adviser is a licensee of the Deutsche and
DB names and marks, provided, however, that the Adviser agrees to use its best
efforts to maintain its license to use and sublicense the Deutsche and DB names
and marks. The Fund agrees that it shall have no right to sublicense or assign
rights to use the Deutsche and DB names and marks, it shall acquire no interest
in the Deutsche and DB names and marks other than the rights granted herein and
that the Fund shall not challenge the validity of the Deutsche and DB names and
marks or the ownership thereof. The Fund further agrees that all services and
products it offers in connection with the Deutsche and DB names and marks shall
meet commercially reasonable standards of quality, as may be determined by the
Adviser from time to time. At the Adviser's reasonable request, the Fund shall
cooperate with the Adviser and shall execute and deliver any and all documents
necessary to maintain and protect (including, but not limited to any trademark
infringement action) the Adviser and/or enter the Fund as a registered user
thereof. At such time as this Agreement or any other investment management
agreement shall no longer be in effect between the Adviser (or the Adviser's
Successor) and the Fund, or the Adviser no longer is a licensee of the Deutsche
and DB names and marks, the Fund shall (to the extent that, and as soon as, it
lawfully can) cease to use the Fund Name or any other name indicating that it is
advised by, managed by or otherwise connected with the Adviser (or the Adviser's
Successor). In no event shall the Fund use the Deutsche and DB names and marks
or any other name or xxxx confusingly similar thereto (including, but not
limited to, any name or xxxx that includes the name "Deutsche" or "DB") if this
Agreement or any other investment management agreement between the Adviser (or
the Adviser's Successor) and the Fund is terminated.
4. Subadvisers. The Adviser may, at its expense and subject to its
supervision, engage one or more persons, including, but not limited to,
subsidiaries and affiliated persons of the Adviser, to render any or all of the
investment advisory services that the Adviser is obligated to render under this
Agreement, including, subject to approval of the Fund's Board of Directors, a
person or persons to render investment advisory services including the provision
of a continuous
5
investment program and the determination of the composition of the securities
and other assets of the Fund (each, a "Subadviser"). Member approval of the
appointment of a Subadviser by the Adviser pursuant to this paragraph is
required only to the extent required by applicable law, as may be modified by
any exemptive order or other interpretation received from the SEC.
5. Regulatory Compliance. In performing its duties hereunder, the
Adviser (and any Subadvisers selected by the Adviser) shall comply with the 1940
Act and all rules and regulations thereunder, all other applicable federal and
state laws and regulations, with any applicable procedures adopted by the Fund's
Board of Directors, and with the provisions of the Fund's Registration
Statement.
6. Compensation. As compensation for the services performed and the
facilities and personnel provided by the Adviser pursuant to this Agreement, the
Fund will pay the Adviser quarterly in arrears a fee, calculated on the last
business day of each month during such quarter at the annual rate of 1.95% of
the Fund's month-end net assets. If the Adviser shall serve hereunder for less
than the whole of any quarter, the fee hereunder shall be prorated according to
the proportion that such period bears to the full quarter and shall be payable
within 30 days after the end of the relevant quarter or the date of termination
of this Agreement, as applicable. The value of the net assets of the Fund shall
be determined pursuant to the applicable provisions of the limited liability
company operating agreement (the "Operating Agreement"), valuation procedures,
and Registration Statement of the Fund, each as amended from time to time. If
the determination of the net asset value of the Fund has been suspended for a
period including the end of any quarter when the Adviser's compensation is
payable pursuant to this paragraph, then the Adviser's compensation payable with
respect to such quarter shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such quarter).
If the Fund determines the value of the net assets of its portfolio more than
once in any month, then the last such determination thereof in that month shall
be deemed to be the sole determination thereof in that month for the purposes of
this paragraph.
6
7. Portfolio Transactions.
(a) In executing transactions for the Fund and selecting brokers or
dealers, the Adviser (either directly or through Subadvisers) shall place orders
pursuant to its investment determinations for the Fund directly with the issuer,
or with any broker or dealer, in accordance with applicable policies expressed
in the Fund's Registration Statement and in accordance with any applicable legal
requirements. Without limiting the foregoing, the Adviser (or a Subadviser)
shall use its best efforts to obtain for the Fund the most favorable price and
best execution available, considering all of the circumstances, and shall
maintain records adequate to demonstrate compliance with this requirement.
Subject to the appropriate policies and procedures approved by the Fund's Board
of Directors, the Adviser (or the Subadviser) may, to the extent authorized by
Section 28(e) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), cause the Fund to pay a broker or dealer that
provides brokerage or research services to the Adviser (or the Subadviser) an
amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Adviser (or the Subadviser) determines, in good faith,
that such amount of commission is reasonable in relationship to the value of
such brokerage or research services provided viewed in terms of that particular
transaction or the Adviser's (or the Subadviser's) overall responsibilities to
the Fund or its other advisory clients. To the extent authorized by Section
28(e) of the Securities Exchange Act and the Fund's Board of Directors, the
Adviser (or the Subadviser) shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of such action.
(b) To the extent applicable to the Fund and consistent with these
standards, in accordance with Section 11(a) of the Securities Exchange Act and
Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations, the Adviser (or the Subadviser) is further authorized to allocate
the orders placed by it on behalf of the Fund to the Adviser (or the Subadviser)
if it is registered as a broker or dealer with the SEC, to its affiliate that is
registered as a broker or dealer with the SEC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Fund or the Adviser (or the Subadviser). Such allocation shall
be in such amounts or proportions as the Adviser (or the Subadviser) shall
determine consistent with the above standards, and, upon request, the Adviser
(or the Subadviser) will report on said allocation regularly to the
7
Fund's Board of Directors indicating the broker-dealers to which such
allocations have been made and the basis therefor.
8. Reports. The Adviser (or the Subadviser) will regularly report to
the Fund's Board of Directors on the investment program of the Fund and the
issuers and securities generally represented in the Fund's portfolio, including
reports received from the Investment Funds, and will furnish the Fund's Board of
Directors such periodic and special reports as the Directors may reasonably
request.
9. Not Exclusive. Nothing herein shall be construed as prohibiting the
Adviser, Subadviser, or any director, officer, partner, employee, or affiliate
thereof from providing investment management or advisory services to, or
entering into investment management or advisory agreements with, other clients
(including other registered investment companies), including clients which may
from time to time purchase and/or sell securities of issuers in which the Fund
invests, or from utilizing (in providing such services) information furnished to
the Adviser by advisors and consultants to the Fund and others (including
Subadvisers); provided however, that the Adviser will undertake no activities
that, in its judgment, will adversely affect the performance of its obligations
under this Agreement.
10. Conflicts of Interest. Whenever the Fund and one or more other
accounts or investment companies managed or advised by the Adviser or a
Subadviser have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with procedures approved
by the Fund's Board of Directors and believed by the Adviser or the Subadviser
to be equitable to each entity. Similarly, opportunities to sell securities
shall be allocated in accordance with procedures approved by the Fund's Board of
Directors and believed by the Adviser or the Subadviser to be equitable. The
Fund recognizes that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund. In addition,
the Fund acknowledges that any member, director, officer, or persons employed by
the Adviser, its affiliates, or a Subadviser, who may also be a member,
director, officer, or person employed by the Fund, to assist in the performance
of the Adviser's or the Subadviser's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Adviser or any affiliate of the Adviser or a
Subadviser to
8
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
11. Independent Contractor. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Fund's Board of Directors from time to
time, have no authority to act for or represent the Fund in any way or otherwise
be deemed its agent.
12. Liability. The Adviser may rely on information reasonably believed
by it to be accurate and reliable, including but not limited to, any information
or report from the Investment Funds, and shall give the Fund the benefit of its
best judgment and effort in rendering services hereunder. Neither the Adviser
nor its members, officers, directors, employees, or agents and its affiliates,
successors, or other legal representatives shall be subject to any liability for
any act or omission, error of judgment, mistake of law, or for any loss suffered
by the Fund, in the course of, connected with, or arising out of any services to
be rendered hereunder, except by reason of willful misfeasance, bad faith, or
gross negligence on the part of the Adviser in the performance of its duties or
by reason of reckless disregard on the part of the Adviser of its obligations
and duties under this Agreement. Any person, even though also employed by the
Adviser, who may be or become an employee of the Fund and paid by the Fund shall
be deemed, when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as an employee or agent of
the Adviser.
13. Indemnification.
(a) The Fund will indemnify the Adviser and its affiliates, and each of
their members, directors, officers, and employees and any of their affiliated
persons, executors, heirs, assigns, successors, or other legal representatives
(each an "Indemnified Person") against any and all costs, losses, claims,
damages, or liabilities, joint or several, including, without limitation,
reasonable attorneys' fees and disbursements, resulting in any way from the
performance or non-performance of any Indemnified Person's duties in respect of
the Fund, except those resulting from the willful misfeasance, bad faith or
gross negligence of an Indemnified
9
Person or the Indemnified Person's reckless disregard of such duties and, in the
case of criminal proceedings, unless such Indemnified Person had reasonable
cause to believe its actions unlawful (collectively, "disabling conduct").
Indemnification shall be made following: (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the Indemnified
Person was not liable by reason of disabling conduct; or (ii) a reasonable
determination, based upon a review of the facts and reached by (A) the vote of a
majority of the Directors who are not parties to the proceeding or (B) legal
counsel selected by a vote of a majority of the Board in a written advice, that
the Indemnified Person is entitled to indemnification hereunder. The Fund shall
advance to an Indemnified Person reasonable attorneys' fees and other costs and
expenses incurred in connection with defense of any action or proceeding arising
out of such performance or non-performance. The Adviser agrees, and each other
Indemnified Person will be required to agree as a condition to any such advance,
that if one of the foregoing parties receives any such advance, the party will
reimburse the Fund for such fees, costs, and expenses to the extent that it
shall be determined that the party was not entitled to indemnification under
this paragraph. The rights of indemnification provided hereunder shall not be
exclusive of or affect any other rights to which any person may be entitled by
contract or otherwise under law.
(b) Notwithstanding any of the foregoing, the provisions of this
paragraph shall not be construed so as to relieve the Indemnified Person of, or
provide indemnification with respect to, any liability (including liability
under federal securities laws, which, under certain circumstances, impose
liability even on persons who act in good faith) to the extent (but only to the
extent) that such liability may not be waived, limited, or modified under
applicable law or that such indemnification would be in violation of applicable
law, but shall be construed so as to effectuate the provisions of this paragraph
to the fullest extent permitted by law. The provisions of this paragraph shall
survive the termination or cancellation of this Agreement.
14. Term of Agreement; Termination. This Agreement shall remain in
effect until the date which is two years from the day and date first written
above, and shall continue in effect year to year thereafter, but only so long as
such continuance is specifically approved at least annually by the affirmative
vote of: (i) a majority of the members of the Fund's Board of Directors who are
not parties to this Agreement or interested persons (as defined in the 0000 Xxx)
of any party to this Agreement, or of any entity regularly furnishing investment
advisory services with respect to the
10
Fund pursuant to an agreement with any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval; and (ii) a
majority of the Fund's Board of Directors or the holders of a majority of the
outstanding voting securities of the Fund. This Agreement may nevertheless be
terminated at any time without penalty, on 60 days' written notice, by the
Fund's Board of Directors, by vote of holders of a majority of the outstanding
voting securities of the Fund, or by the Adviser. This Agreement shall
automatically be terminated in the event of its assignment, provided that an
assignment to a corporate successor to all or substantially all of the Adviser's
business or to a wholly-owned subsidiary of such corporate successor which does
not result in a change of actual control or management of the Adviser's business
shall not be deemed to be an assignment for the purposes of this Agreement. Any
notice to the Fund or the Adviser shall be deemed given when received by the
addressee.
15. Assignment. This Agreement may not be transferred, assigned, sold,
or in any manner hypothecated or pledged by either party hereto, except as
permitted under the 1940 Act or rules and regulations adopted thereunder.
16. Amendment. This Agreement may be amended only by the written
agreement of the parties. Any amendment shall be required to be approved by the
Board and by a majority of the independent Directors in accordance with the
provisions of Section 15(c) of the 1940 Act and the rules and regulations
adopted thereunder. If required by the 1940 Act, any material amendment shall
also be required to be approved by such vote of members of the Fund as is
required by the 1940 Act and the rules thereunder.
17. Conflicts of Laws. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws principles thereof, provided, however, that nothing herein shall be
construed as being inconsistent with the 1940 Act. As used herein, the terms
"interested person," "assignment," and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act.
18. Management of Subsidiaries. If the Fund's Board of Directors
determines that it is in the best interests of the Fund and its members to carry
on all or part of the business of the Fund
11
through one or more subsidiaries, the Board of Directors may cause the
substantive terms of this Agreement to apply to the management of any such
subsidiary or subsidiaries.
19. Fund Obligations. This Agreement is made by the Fund and executed
on behalf of the Fund by an officer of the Fund, and the obligations created
hereby are not binding on any of the Directors, officers, members, employees, or
agents, whether past, present, or future of the Fund individually, but bind only
the assets and property of the Fund.
20. Severability. 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 effected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
21. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
22. Supersedes Other Agreements. This Agreement supersedes all prior
investment advisory, management, and/or administration agreements in effect
between the Fund and the Adviser.
12
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
DB HEDGE STRATEGIES FUND LLC
By:
-------------------------------
Name:
Title:
DB INVESTMENT MANAGERS, INC.
By:
-------------------------------
Name:
Title:
13
