EXHIBIT 10.15
FORM OF
AMENDED AND RESTATED CUSTOMER AGREEMENT
THIS AMENDED AND RESTATED CUSTOMER AGREEMENT (this
"Agreement"), made as of the ___ day of June, 2000, by and between XXXX XXXXXX
SPECTRUM _________________ L.P., a Delaware limited partnership (the
"Customer"), and XXXX XXXXXX XXXXXXXX INC., a Delaware corporation ("DWR");
W I T N E S S E T H :
WHEREAS, the Customer was organized pursuant to a Certificate
of Limited Partnership filed in the office of the Secretary of State of the
State of Delaware on _________________, and a Limited Partnership Agreement
dated as of ________________, as amended, between Demeter Management
Corporation, a Delaware corporation ("Demeter"), acting as general partner (in
such capacity, the "General Partner"), and the limited partners of the Customer
to trade, buy, sell, spread or otherwise acquire, hold, or dispose of
commodities (including, but not limited, to foreign currencies, mortgage-backed
securities, money market instruments, financial instruments, and any other
securities or items which are, or may become, the subject of futures contract
trading), domestic and foreign commodity futures contracts, commodity forward
contracts, foreign exchange commitments, options on physical commodities and on
futures contracts, spot (cash) commodities and currencies, and any rights
pertaining thereto (hereinafter referred to collectively as "futures interests")
and securities (such as United States Treasury bills) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds and
other securities on a limited basis, and to engage in all activities incident
thereto;
WHEREAS, the Customer (which is a commodity pool) and the
General Partner (which is a registered commodity pool operator) have entered
into management agreements (the "Management Agreements") with certain trading
advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"),
which provide that the Trading Advisors have authority and responsibility,
except in certain limited situations, to direct the investment and reinvestment
of the assets of the Customer in futures interests under the terms set forth in
the Management Agreements;
WHEREAS, the Customer and DWR entered into that certain
Amended and Restated Customer Agreement dated as of December 1, 1997 (the
"Customer Agreement"), whereby DWR agreed to perform futures interests brokerage
and certain other services for the Customer; and
WHEREAS, the Customer and DWR wish to amend and restate the
Customer Agreement to set forth the terms and conditions upon which DWR will
continue to perform certain non-clearing futures interests brokerage and certain
other services for the Customer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not defined herein shall
have the meaning given to them in the Customer's most recent prospectus as filed
with the Securities and Exchange Commission (the "Prospectus") relating to the
offering of units of limited partnership interest of the Customer (the "Units")
and in any amendment or supplement to the Prospectus.
2. Duties of DWR. DWR agrees to act as a non-clearing
commodity broker for the Customer and introduce the Customer's accounts to
Xxxxxx Xxxxxxx & Co. Incorporated ("MS & Co") and Xxxxxx Xxxxxxx & Co.
International Limited ("MSIL") for execution and clearing of futures interests
transactions on behalf of the Customer in accordance with instructions provided
by the Trading Advisors, and the Customer agrees to retain DWR as a non-clearing
commodity broker for the term of this Agreement.
DWR agrees to furnish to the Customer as soon as practicable
all of the information from time to time in its possession which Demeter, as the
general partner of the Customer, is required to furnish to the Limited Partners
pursuant to the Limited Partnership Agreement as from time to time in effect and
as required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus.
3. Obligations and Expenses. Except as otherwise set forth
herein and in the Prospectus, the Customer, and not DWR, shall be responsible
for all taxes, management and incentive fees to the Trading Advisors, brokerage
fees to DWR, and all extraordinary expenses incurred by it. DWR shall pay all of
the organizational, initial and continuing offering, and ordinary administrative
expenses of the Customer (including, but not limited to, legal, accounting, and
auditing fees, printing costs, filing fees, escrow fees, marketing costs and
expenses and other related expenses) and all charges of MS & Co. and MSIL for
executing and clearing the Customer's futures interests trades (as described in
paragraph 5 below), and shall not be reimbursed therefor.
4. Agreement Nonexclusive. DWR shall be free to render
services of the nature to be rendered to the Customer hereunder to other persons
or entities in addition to the Customer, and the parties acknowledge that DWR
may render such services to additional entities similar in nature to the
Customer, including other partnerships organized with Demeter as their general
partner. It is expressly understood and agreed that this Agreement is
nonexclusive and that the Customer has no obligation to execute any or all of
its trades for futures interests through DWR. The parties acknowledge that the
Customer may utilize such other broker or brokers as Demeter may direct from
time to time. The Customer's utilization of an additional commodity broker shall
neither terminate this Agreement nor modify in any regard the respective rights
and obligations of the Customer and DWR hereunder.
5. Compensation of DWR. The Customer will pay brokerage fees
to DWR at a monthly flat-rate. The Customer will pay to DWR a monthly flat-rate
fee of 1/12 of ____% of the Customer's Net Assets (a ____% annual rate) as of
the first day of each month. DWR will receive such brokerage fees irrespective
of the number of trades executed on the Customer's behalf.
DWR will pay or reimburse Customer, from brokerage fees
received by it, all charges of MS & Co. and MSIL for executing and clearing
trades for the Customer, including floor brokerage fees, exchange fees,
clearinghouse fees, NFA fees, "give up" fees, any taxes (other than income
taxes), any third party clearing costs incurred by MS & Co. and MSIL, and costs
associated with taking delivery of futures interests.
From time to time, DWR may increase or decrease brokerage fees
to be charged to the Customer; provided, however, that: (i) notice of such
increase is mailed to each Limited Partner at least five business days prior to
the last date on which a "Request for Redemption" must be received by the
General Partner with respect to the applicable Redemption Date; and (ii) such
notice shall describe the redemption and voting rights of Limited Partners.
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Notwithstanding the foregoing, the Customer's expenses are
subject to the following limits: (a) if the Customer were to pay roundturn
brokerage commissions, the brokerage commissions (excluding transaction fees and
costs) payable by the Customer to DWR shall not exceed 80% of DWR's published
non-member rates for speculative accounts and (b) the aggregate of (i) brokerage
commissions (or fees) payable to DWR, (ii) transaction fees and costs payable by
the Customer, and (iii) net excess interest and compensating balance benefits to
DWR (after crediting the Customer with interest as described in the Prospectus)
shall not exceed 14% annually of the Customer's average month-end Net Assets
during each calendar year.
6. Investment Discretion. The parties recognize that DWR shall
have no authority to direct the futures interests investments to be made for the
Customer's account. However, the parties agree that DWR, and not the Trading
Advisors, shall have the authority and responsibility with regard to the
investment, maintenance, and management of the Customer's assets that are held
in segregated or secured accounts, as provided in Section 7 hereof.
7. Investment of Customer Funds. The Customer shall deposit
its assets in accounts with DWR. The Customer's assets deposited with DWR will
be segregated or secured in accordance with the Commodity Exchange Act and CFTC
regulations. DWR will credit the Customer with interest income at month-end at
the rate earned by DWR on its U.S. Treasury Xxxx investments with customer
segregated funds as if 80% of the Customer's average daily Net Assets for the
month were invested in U.S. Treasury Bills. All of such funds will be available
for margin for the Customer's trading. For the purpose of such interest
payments, Net Assets will not include monies due to the Customer on or with
respect to forward contracts and other futures interests but not actually
received by it from banks, brokers, dealers and other persons. The Customer
understands that it will not receive any other interest income on its assets and
that DWR will receive interest income from MS & Co. and MSIL, as agreed from
time to time by DWR and MS & Co. and MSIL, on the Customer's assets deposited as
margin with MS & Co. and MSIL. The Customer's funds will either be invested
along with other customer segregated and secured funds of DWR or held in
non-interest bearing bank accounts. The Customer's assets held by DWR may be
used solely as margin for the Customer's trading.
Ownership of the right to receive interest on the Customer's
assets pursuant to the preceding paragraph shall be reflected and maintained and
may be transferred only on the books and records of DWR. Any purported transfer
of such ownership shall not be effective or recognized until such transfer shall
have been recorded on the books and records of DWR.
8. Standard of Liability and Indemnity. Subject to Section 2
hereof, DWR and its affiliates (as defined below) shall not be liable to the
Customer, the General Partner or Limited Partners, or any of its or their
respective successors or assigns, for any act, omission, conduct, or activity
undertaken by or on behalf of the Customer pursuant to this Agreement which DWR
determines, in good faith, to be in the best interests of the Customer, unless
such act, omission, conduct, or activity by DWR or its affiliates constituted
misconduct or negligence.
The Customer shall indemnify, defend and hold harmless DWR and
its affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct or activity undertaken by DWR on behalf of the
Customer pursuant to this Agreement, including, without
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limitation, any demands, claims or lawsuits initiated by a Limited Partner (or
assignee thereof), provided that (i) DWR has determined, in good faith, that the
act, omission, conduct, or activity giving rise to the claim for indemnification
was in the best interests of the Customer, and (ii) the act, omission, conduct,
or activity that was the basis for such loss, liability, damage, cost, or
expense was not the result of misconduct or negligence. Notwithstanding anything
to the contrary contained in the foregoing, neither DWR nor any of its
affiliates shall be indemnified by the Customer for any losses, liabilities, or
expenses arising from or out of an alleged violation of federal or state
securities laws unless (a) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee, or (b) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (c) a court of competent jurisdiction approves a settlement of the claims
against the particular indemnitee and finds that indemnification of the
settlement and related costs should be made, provided, with regard to such court
approval, the indemnitee must apprise the court of the position of the SEC, and
the positions of the respective securities administrators of Massachusetts,
Missouri, Tennessee and/or those other states and jurisdictions in which the
plaintiffs claim they were offered or sold Units, with respect to
indemnification for securities laws violations before seeking court approval for
indemnification. Furthermore, in any action or proceeding brought by a Limited
Partner in the right of the Customer to which DWR or any affiliate thereof is a
party defendant, any such person shall be indemnified only to the extent and
subject to the conditions specified in this Section 8. The Customer shall make
advances to DWR or its affiliates hereunder only if: (i) the demand, claim,
lawsuit, or legal action relates to the performance of duties or services by
such persons to the Customer; (ii) such demand, claim, lawsuit, or legal action
is not initiated by a Limited Partner; and (iii) such advances are repaid, with
interest at the legal rate under Delaware law, if the person receiving such
advance is ultimately found not to be entitled to indemnification hereunder.
DWR shall indemnify, defend and hold harmless the Customer and
its successors or assigns from and against any losses, liabilities, damages,
costs, or expenses (including in connection with the defense or settlement of
claims; provided DWR has approved such settlement) incurred as a result of the
activities of DWR or its affiliates, provided, further, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence.
The indemnities provided in this Section 8 by the Customer to
DWR and its affiliates shall be inapplicable in the event of any losses,
liabilities, damages, costs, or expenses arising out of, or based upon, any
material breach of any warranty, covenant, or agreement of DWR contained in this
Agreement to the extent caused by such breach. Likewise, the indemnities
provided in this Section 8 by DWR to the Customer and any of its successors and
assigns shall be inapplicable in the event of any losses, liabilities, damages,
costs, or expenses arising out of, or based upon, any material breach of any
warranty, covenant, or agreement of the Customer contained in this Agreement to
the extent caused by such breach.
As used in this Section 8, the term "affiliate" of DWR shall
mean: (i) any natural person, partnership, corporation, association, or other
legal entity directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of DWR; (ii) any
partnership, corporation, association, or other legal entity 10% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by DWR; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by, or under common control with, DWR; or
(iv) any officer or director of DWR. Notwithstanding the foregoing, "affiliates"
for purposes of this Section 8 shall include only those persons acting on behalf
of DWR within the scope of the authority of DWR, as set forth in this Agreement.
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9. Term. This Agreement shall continue in effect until
terminated by either party giving not less than 60 days' prior written notice of
termination to the other party. Any such termination by either party shall be
without penalty.
10. Complete Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the matters referred to herein,
and no other agreement, verbal or otherwise, shall be binding as between the
parties unless in writing and signed by the party against whom enforcement is
sought.
11. Assignment. This Agreement may not be assigned by either
party without the express written consent of the other party.
12. Amendment. This Agreement may not be amended except by the
written consent of the parties and provided such amendment is consistent with
the Prospectus.
13. Notices. All notices required or desired to be delivered
under this Agreement shall be in writing and shall be effective when delivered
personally on the day delivered, or when given by registered or certified mail,
postage prepaid, return receipt requested, on the day of receipt, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):
if to the Customer:
XXXX XXXXXX SPECTRUM ________________L.P.
c/o Demeter Management Corporation
Xxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
President and Chairman
if to DWR:
XXXX XXXXXX XXXXXXXX INC.
Xxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Senior Vice President
14. Survival. The provisions of this Agreement shall survive
the termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
15. Headings. Headings of Sections herein are for the
convenience of the parties only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
16. Incorporation by Reference. The Futures Customer Agreement
annexed hereto is hereby incorporated by reference herein and made a part hereof
to the same extent as if such document were set forth in full herein. If any
provision of this Agreement is or at any time becomes inconsistent with the
annexed document, the terms of this Agreement shall control.
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IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXX XXXXXX SPECTRUM ____________ L.P.
By: Demeter Management Corporation,
General Partner
By:
----------------------------------------
Xxxxxx X. Xxxxxx
President and Chairman
XXXX XXXXXX XXXXXXXX INC.
By:
----------------------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
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Futures Customer Agreement
In consideration of the acceptance by Xxxx Xxxxxx Xxxxxxxx Inc. ("DWR") of one
or more accounts of the undersigned ("Customer") (if more than one account is
carried by DWR, all are covered by this Agreement and are referred to
collectively as the "Account") and DWR's agreement to act as Customer's broker
for the execution, clearance and/or carrying of transactions for the purchase
and sale of commodity interests, including commodities, commodity futures
contracts and commodity options, Customer agrees as follows:
1. APPLICABLE RULES AND REGULATIONS - The Account and each transaction
therein shall be subject to the terms of this Agreement and to (a) all
applicable laws and the regulations, rules and orders (collectively
"regulations") of all regulatory and self-regulatory organizations
having jurisdiction and (b) the constitution, by-laws, rules,
regulations, orders, resolutions, interpretations and customs and
usages (collectively "rules") of the market and any associated clearing
organization (each an "exchange") on or subject to the rules of which
such transaction is executed and/or cleared. The reference in the
preceding sentence to exchange rules is solely for DWR's protection and
DWR's failure to comply therewith shall not constitute a breach of this
Agreement or relieve Customer of any obligation or responsibility under
this Agreement. DWR shall not be liable to Customer as a result of any
action by DWR, its officers, directors, employees or agents to comply
with any rule or regulation.
2. PAYMENTS TO DWR - Customer agrees to pay to DWR immediately on request
(a) commissions, fees and service charges as are in effect from time to
time together with all applicable regulatory and self-regulatory
organization and exchange fees, charges and taxes; (b) the amount of
any debit balance or any other liability that may result from
transactions executed for the account; and (c) interest on such debit
balance or liability at the prevailing rate charged by DWR at the time
such debit balance or liability arises and service charges on any such
debit balance or liability together with any reasonable costs and
attorney's fees incurred in collecting any such debit balance or
liability. Customer acknowledges that DWR may charge commissions at
other rates to other customers.
3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN - Customer shall at all
times and without prior notice or demand from DWR maintain adequate
margins in the account so as continually to meet the original and
maintenance margin requirements established by DWR for Customer. DWR
may change such requirements from time to time at DWR's discretion.
Such margin requirements may exceed the margin requirements set by any
exchange or other regulatory authority and may vary from DWR's
requirements for other customers. Customer agrees, when so requested,
immediately to wire transfer margin funds and to furnish DWR with names
of bank officers for immediate verification of such transfers. Customer
acknowledges and agrees that DWR may receive and retain as its own any
interest, increment, profit, gain or benefit directly or indirectly,
accruing from any of the funds DWR receives from Customer.
4. DELIVERY; OPTION EXERCISE
(a) Customer acknowledges that the making or accepting of delivery
pursuant to a futures contract may involve a much higher
degree of risk than liquidating a position by offset. DWR has
no control over and makes no warranty with respect to grade,
quality or tolerances of any commodity delivered in
fulfillment of a contract.
(b) Customer agrees to give DWR timely notice and immediately on
request to inform DWR if Customer intends to make or take
delivery under a futures contract or to exercise an option
contract. If so requested, Customer shall provide DWR with
satisfactory assurances that Customer can fulfill Customer's
obligation to make or take delivery under any contract.
Customer shall furnish DWR with property deliverable by it
under any contract in accordance with DWR's instructions.
(c) DWR shall not have any obligation to exercise any long option
contract unless Customer has furnished DWR with timely
exercise instructions and sufficient initial margin with
respect to each underlying futures contract.
5. FOREIGN CURRENCY - If DWR enters into any transaction for Customer
effected in a currency other than U.S. dollars: (a) any profit or loss
caused by changes in the rate of exchange for such currency shall be
for Customer's account and risk and (b) unless another currency is
designated in DWR's confirmation of such transaction, all margin for
such transaction and the profit or loss on the liquidation of such
transaction shall be in U.S. dollars at a rate of exchange determined
by DWR in its discretion on the basis of then prevailing market rates
of exchange for such foreign currency.
6. DWR MAY LIMIT POSITIONS HELD - Customer agrees that DWR, at its
discretion, may limit the number of open positions (net or gross) which
Customer may execute, clear and/or carry with or acquire through it.
Customer agrees (a) not to make any trade which would have the effect
of exceeding such limits, (b) that DWR may require Customer to reduce
open positions carried with DWR and (c) that DWR may refuse to accept
orders to establish new positions. DWR may impose and enforce such
limits, reduction or refusal whether or not they are required by
applicable law, regulations or rules. Customer shall comply with all
position limits established by any regulatory or self-regulatory
organization or any exchange. In addition, Customer agrees to notify
DWR promptly if customer is required to file position reports with any
regulatory or self-regulatory organization or with any exchange.
7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION - Customer acknowledges that:
(a) Any market recommendations and information DWR may communicate
to Customer, although based upon information obtained from
sources believed by DWR to be reliable, may be incomplete and
not subject to verification;
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(b) DWR makes no representation, warranty or guarantee as to, and
shall not be responsible for, the accuracy or completeness of
any information or trading recommendation furnished to
Customer;
(c) recommendations to Customer as to any particular transaction
at any given time may differ among DWR's personnel due to
diversity in analysis of fundamental and technical factors and
may vary from any standard recommendation made by DWR in its
market letters or otherwise; and
(d) DWR has no obligation or responsibility to update any market
recommendations or information it communicates to Customer.
Customer understands that DWR and its officers, directors,
affiliates, stockholders, representatives or associated persons may have
positions in and may intend to buy or sell commodity interests which are the
subject of market recommendations furnished to Customer, and that the market
positions of DWR or any such officer, director, affiliate, stockholder,
representative or associated person may or may not be consistent with the
recommendations furnished to Customer by DWR.
8. LIMITS ON DWR DUTIES; LIABILITY - Customer agrees:
(a) that DWR has no duty to apprise Customer of news or of the
value of any commodity interests or collateral pledged or in
any way to advise Customer with respect to the market;
(b) that the commissions which DWR receives are consideration
solely for the execution, reporting and carrying of Customer's
trades;
(c) that if Customer has authorized any third party or parties to
place orders or effect transactions on behalf of Customer in
any Account, each such party has been selected by Customer
based on its own evaluation and assessment of such party and
that such party is solely the agent of Customer, and if any
such party allocates commodity interests among its customers,
Customer has reviewed each such party's commodity interest
allocation system, has satisfied itself that such allocation
system is fair and will seek recovery solely from such party
to recover any damages sustained by Customer as the result of
any allocation made by such party; and
(d) to waive any and all claims, rights or causes of action which
Customer has or may have against DWR or its officers,
employees and agents (i) arising in whole or in part, directly
or indirectly, out of any act or omission of any person,
whether or not legally deemed an agent of DWR, who refers or
introduces Customer to DWR or places orders for Customer and
(ii) for any punitive damages and to limit any claims arising
out of this Agreement or the Account to Customer's direct
out-of-pocket damages.
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9. EXTRAORDINARY EVENTS - Customer shall have no claim against DWR for any
loss, damage, liability, cost, charge, expense, penalty, fine or tax
caused directly or indirectly by (a) governmental, court, exchange,
regulatory or self-regulatory organization restrictions, regulations,
rules, decisions or orders, (b) suspension or termination of trading,
(c) war or civil or labor disturbance, (d) delay or inaccuracy in the
transmission or reporting of orders due to a breakdown or failure of
computer services, transmission or communication facilities, (e) the
failure or delay by any exchange to enforce its rules or to pay to DWR
any margin due in respect of Customer's Account, (f) the failure or
delay by any bank, trust company, clearing organization or other person
which, pursuant to applicable exchange rules, is holding Customer
funds, securities or other property to pay or deliver the same to DWR
or (g) any other cause or causes beyond DWR's control.
10. INDEMNIFICATION OF DWR - Customer agrees to indemnify, defend and hold
harmless DWR and its officers, employees and agents from and against
any loss, cost, claim, damage (including any consequential cost, loss
or damage), liability or expense (including reasonable attorneys' fees)
and any fine, sanction or penalty made or imposed by any regulatory or
self-regulatory authority or any exchange as the result, directly or
indirectly, of:
(a) Customer's failure or refusal to comply with any provision of
this Agreement or perform any obligation on its part to be
performed pursuant to this Agreement; and
(b) Customer's failure to timely deliver any security, commodity
or other property previously sold by DWR on Customer's behalf.
11 NOTICES; TRANSMITTALS - DWR shall transmit all communications to
Customer at Customer's address, telefax or telephone number set forth
in the accompanying Futures Account Application or to such other
address as Customer may hereafter direct in writing. Customer shall
transmit all communications to DWR (except routine inquiries concerning
the Account) to 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention:
Futures Compliance Officer. All payments and deliveries to DWR shall be
made as instructed by DWR from time to time and shall be deemed
received only when actually received by DWR.
12. CONFIRMATION CONCLUSIVE - Confirmation of trades and any other notices
sent to Customer shall be conclusive and binding on Customer unless
Customer or Customer's agent notifies DWR to the contrary (a) in the
case of an oral report, orally at the time received by Customer or its
agent or (b) in the case of a written report or notice, in writing
prior to opening of trading on the business day next following receipt
of the report. In addition, if Customer has not received a written
confirmation that a commodity interest transaction has been executed
within three business days after Customer has placed an order with DWR
to effect such transaction, and has been informed or believes that such
order has been or should have been executed, then Customer immediately
shall notify DWR thereof. Absent such notice, Customer conclusively
shall be deemed estopped to object and to have waived any such
objection to the failure to execute or cause to be executed such
transaction. Anything in this Section 12 withstanding, neither Customer
nor DWR shall be bound by any transaction or price reported in error.
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13. SECURITY INTEREST - All money and property ("collateral") now or at any
future time held in Customer's Account, or otherwise held by DWR for
Customer, is subject to a security interest in DWR's favor to secure
any indebtedness at any time owing to it by Customer. DWR, in its
discretion, may liquidate any collateral to satisfy any margin or
Account deficiencies or to transfer the collateral to the general
ledger account of DWR.
14. TRANSFER OF FUNDS - At any time and from time to time and without prior
notice to Customer, DWR may transfer from one account to another
account in which Customer has any interest, such excess funds,
equities, securities or other property as in DWR's judgment may be
required for margin, or to reduce any debit balance or to reduce or
satisfy any deficits in such other accounts except that no such
transfer may be made from a segregated account subject to the Commodity
Exchange Act to another account maintained by Customer unless either
Customer has authorized such transfer in writing or DWR is effecting
such transfer to enforce DWR's security interest pursuant to Section
13. DWR promptly shall confirm all transfers of funds made pursuant
hereto to Customer in writing.
15. DWR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS - In addition to all other
rights of DWR set forth in this Agreement:
(a) when directed or required by a regulatory or self-regulatory
organization or exchange having jurisdiction over DWR or the
Account;
(b) whenever, in its discretion, DWR considers it necessary for
its protection because of margin requirements or otherwise;
(c) if Customer or any affiliate of Customer repudiates, violates,
breaches or fails to perform on a timely basis any term,
covenant or condition on its part to be performed under this
Agreement or another agreement with DWR;
(d) if a case in bankruptcy is commenced or if a proceeding under
any insolvency or other law for the protection of creditors or
for the appointment of a receiver, liquidator, trustee,
conservator, custodian or similar officer is filed by or
against Customer or any affiliate of Customer, or if Customer
or any affiliate of Customer makes or proposes to make any
arrangement or composition for the benefit of its creditors,
or if Customer (or any such affiliate) or any or all of its
property is subject to any agreement, order, judgment or
decree providing for Customer's dissolution, winding-up,
liquidation, merger, consolidation, reorganization or for the
appointment of a receiver, liquidator, trustee, conservator,
custodian or similar officer of Customer, such affiliate or
such property;
(e) DWR is informed of Customer's death or mental incapacity; or
(f) if an attachment or similar order is levied against the
Account or any other account maintained by Customer or any
affiliate of Customer with DWR;
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DWR shall have the right to (i) satisfy any obligations due DWR out of
any Customer's property in DWR's custody or control, (ii) liquidate any
or all of Customer's commodity interest positions, (iii) cancel any or
all of Customer's outstanding orders, (iv) treat any or all of
Customer's obligations due DWR as immediately due and payable, (v) sell
any or all of Customer's property in DWR's custody or control in such
manner as DWR determines to be commercially reasonable, and/or (vi)
terminate any or all of DWR's obligations for future performance to
Customer, all without any notice to or demand on Customer. Any sale
hereunder may be made in any commercially reasonable manner. Customer
agrees that a prior demand, call or notice shall not be considered a
waiver of DWR's right to act without demand or notice as herein
provided, that Customer shall at all times be liable for the payment of
any debit balance owing in each account upon demand whether occurring
upon a liquidation as provided under this Section 15 or otherwise under
this Agreement, and that in all cases Customer shall be liable for any
deficiency remaining in each Account in the event of liquidation
thereof in whole or in part together with interest thereon and all
costs relating to liquidation and collection (including reasonable
attorneys' fees).
16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS - Customer
represents and warrants to and agrees with DWR that:
(a) Customer has full power and authority to enter into this
Agreement and to engage in the transactions and perform its
obligations hereunder and contemplated hereby and (i) if a
corporation or a limited liability company, is duly organized
under the laws of the jurisdiction set forth in the
accompanying Futures Account Application, or (ii) if a
partnership, is duly organized pursuant to a written
partnership agreement and the general partner executing this
Agreement is duly authorized to do so under the partnership
agreement;
(b) Neither Customer nor any partner, director, officer, member,
manager or employee of Customer nor any affiliate of Customer
is a partner, director, officer, member, manager or employee
of a futures commission merchant introducing broker, exchange
or self-regulatory organization or an employee or commissioner
of the Commodity Futures Trading Commission (the "CFTC"),
except as previously disclosed in writing to DWR;
(c) The accompanying Futures Account Application and Personal
Financial Statements, if applicable, (including any financial
statements furnished in connection therewith) are true,
correct and complete. Except as disclosed on the accompanying
Futures Account Application or otherwise provided in writing,
(i) Customer is not a commodity pool or is exempt from
registration under the rules of the Commission, and (ii)
Customer is acting solely as principal and no one other than
Customer has any interest in any Account of Customer. Customer
hereby authorizes DWR to contact such banks, financial
institutions and credit agencies as DWR shall deem appropriate
for verification of the information contained herein.
6
(d) Customer has determined that trading in commodity interests is
appropriate for Customer, is prudent in all respects and does
not and will not violate Customer's charter or by-laws (or
other comparable governing document) or any law, rule,
regulation, judgment, decree, order or agreement to which
Customer or its property is subject or bound;
(e) As required by CFTC regulations, Customer shall create, retain
and produce upon request of the applicable contract market,
the CFTC or the United States Department of Justice documents
(such as contracts, confirmations, telex printouts, invoices
and documents of title) with respect to cash transactions
underlying exchanges of futures for cash commodities or
exchange of futures in connection with cash commodity
transactions;
(f) Customer consents to the electronic recording, at DWR's
discretion, of any or all telephone conversations with DWR
(without automatic tone warning device), the use of same as
evidence by either party in any action or proceeding arising
out of the Agreement and in DWR's erasure, at its discretion,
of any recording as part of its regular procedure for handling
of recordings;
(g) Absent a separate written agreement between Customer and DWR
with respect to give-ups, DWR, in its discretion, may, but
shall have no obligation to, accept from other brokers
commodity interest transactions executed by such brokers on an
exchange for Customer and proposed to be "given-up" to DWR for
clearance and/or carrying in the Account;
(h) DWR, for and on behalf of Customer, is authorized and
empowered to place orders for commodity interest transactions
through one or more electronic or automated trading systems
maintained or operated by or under the auspices of an
exchange, that DWR shall not be liable or obligated to
Customer for any loss, damage, liability, cost or expense
(including but not limited to loss of profits, loss of use,
incidental or consequential damages) incurred or sustained by
Customer and arising in whole or in part, directly or
indirectly, from any fault, delay, omission, inaccuracy or
termination of a system or DWR's inability to enter, cancel or
modify an order on behalf of Customer on or through a system.
The provisions of this Section 16(h) shall apply regardless of
whether any customer claim arises in contract, negligence,
tort, strict liability, breach of fiduciary obligations or
otherwise; and
(i) If Customer is subject to the Financial Institution Reform,
Recovery and Enforcement Act of 1989, the certified
resolutions set forth following this Agreement have been
caused to be reflected in the minutes of Customer's Board of
Directors (or other comparable governing body) and this
Agreement is and shall be, continuously from the date hereof,
an official record of Customer.
Customer agrees to promptly notify DWR in writing if any of the
warranties and representations contained in this Section 16 becomes
inaccurate or in any way ceases to be true, complete and correct.
7
17. SUCCESSORS AND ASSIGNS - This Agreement shall inure to the benefit of
DWR, its successors and assigns, and shall be binding upon Customer and
Customer's executors, trustees, administrators, successors and assigns,
provided, however, that this Agreement is not assignable by Customer
without the prior written consent of DWR.
18. MODIFICATION OF AGREEMENT BY DWR; NON-WAIVER PROVISION - This Agreement
may only be altered, modified or amended by mutual written consent of
the parties, except that if DWR notifies Customer of a change in this
Agreement and Customer thereafter effects a commodity interest
transaction in an account, Customer agrees that such action by Customer
will constitute consent by Customer to such change. No employee of DWR
other than DWR's General Counsel or his or her designee, has any
authority to alter, modify, amend or waive in any respect any of the
terms of this Agreement. The rights and remedies conferred upon DWR
shall be cumulative, and its forbearance to take any remedial action
available to it under this Agreement shall not waive its right at any
time or from time to time thereafter to take such action.
19. SEVERABILITY - If any term or provision hereof or the application
thereof to any persons or circumstances shall to any extent be contrary
to any exchange, government or self-regulatory regulation or contrary
to any federal, state or local law or otherwise be invalid or
unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as
to which it is contrary, invalid or unenforceable, shall not be
affected thereby.
20. CAPTIONS - All captions used herein are for convenience only, are not a
part of this Agreement, and are not to be used in construing or
interpreting any aspect of this Agreement.
21. TERMINATION - This Agreement shall continue in force until written
notice of termination is given by Customer or DWR. Termination shall
not relieve either party of any liability or obligation incurred prior
to such notice. Upon giving or receiving notice of termination,
Customer will promptly take all action necessary to transfer all open
positions in each account to another futures commission merchant.
22. ENTIRE AGREEMENT - This Agreement constitutes the entire agreement
between Customer and DWR with respect to the subject matter hereof and
supersedes any prior agreements between the parties with respect to
such subject matter.
23. GOVERNING LAW; CONSENT TO JURISDICTION -
(a) In case of a dispute between Customer and DWR arising out of
or relating to the making or performance of this Agreement or
any transaction pursuant to this Agreement (i) this Agreement
and its enforcement shall be governed by the laws of the State
of New York without regard to principles of conflicts of laws,
and (ii) Customer will bring any legal proceeding against DWR
in, and Customer hereby consents in any legal proceeding by
DWR to the jurisdiction of, any state or federal court located
within the State and City of New York in connection with all
legal proceedings arising directly, indirectly or otherwise in
connection with, out of, related to or from Customer's
Account, transactions contemplated by this Agreement or the
breach thereof. Customer hereby waives all objections
Customer, at any time, may have as to the propriety of the
court in which any such legal proceedings may be commenced.
Customer also agrees that any service of process mailed to
Customer at any address specified to DWR shall be deemed a
proper service of process on the undersigned.
8
(b) Notwithstanding the provisions of Section 23 (a)(ii), Customer
may elect at this time to have all disputes described in this
Section resolved by arbitration. To make such election,
Customer must sign the Arbitration Agreement set forth in
Section 24. Notwithstanding such election, any question
relating to whether Customer or DWR has commenced an
arbitration proceeding in a timely manner, whether a dispute
is within the scope of the Arbitration Agreement or whether a
party (other than Customer or DWR) has consented to
arbitration and all proceedings to compel arbitration shall be
determined by a court as specified in Section 23 (a)(ii).
24. ARBITRATION AGREEMENT (OPTIONAL) - Every dispute between Customer and
DWR arising out of or relating to the making or performance of this
Agreement or any transaction pursuant to this Agreement, shall be
settled by arbitration in accordance with the rules, then in effect, of
the National Futures Association, the contract market upon which the
transaction giving rise to the claim was executed, or the National
Association of Securities Dealers as Customer may elect. If Customer
does not make such election by registered mail addressed to DWR at 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000; Attention: Deputy
General Counsel, within 45 days after demand by DWR that the Customer
make such election, then DWR may make such election. DWR agrees to pay
any incremental fees which may be assessed by a qualified forum for
making available a "mixed panel" of arbitrators, unless the arbitrators
determine that Customer has acted in bad faith in initiating or
conducting the proceedings. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
IN ADDITION TO FOREIGN FORUMS, THREE FORUMS EXIST FOR THE RESOLUTION OF
COMMODITY DISPUTES: CIVIL COURT LITIGATION, REPARATIONS AT THE
COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND ARBITRATION CONDUCTED
BY A SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY
ARBITRATION MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS,
INCLUDING THE ABILITY TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF
DISPUTES WITHOUT INCURRING SUBSTANTIAL COSTS. THE CFTC REQUIRES,
HOWEVER, THAT EACH CUSTOMER INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF
ARBITRATION AND THAT YOUR CONSENT TO THIS ARBITRATION AGREEMENT BE
VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO XXX IN
A COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY
9
CLAIMS OR COUNTERCLAIMS WHICH YOU OR DWR MAY SUBMIT TO ARBITRATION
UNDER THIS AGREEMENT. YOU ARE NOT, HOWEVER, WAIVING YOUR RIGHT TO ELECT
INSTEAD TO PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER
SECTION 14 OF THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE
WHICH MAY BE ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A
DISPUTE ARISES, YOU WILL BE NOTIFIED IF DWR INTENDS TO SUBMIT THE
DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION OF THE COMMODITY
EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A SECTION 14
"REPARATIONS" PROCEEDINGS BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM
THE DATE OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION.
YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT
WITH DWR. See 17 CFR 180.1-180.5. ACCEPTANCE OF THIS ARBITRATION
AGREEMENT REQUIRES A SEPARATE SIGNATURE ON PAGE 8.
25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL) - Without its prior
notice, Customer agrees that when DWR executes sell or buy orders on
Customer's behalf, DWR, its directors, officers, employees, agents,
affiliates, and any floor broker may take the other side of Customer's
transaction through any account of such person subject to its being
executed at prevailing prices in accordance with and subject to the
limitations and conditions, if any, contained in applicable rules and
regulations.
26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL) - Without limiting other
provisions herein, DWR is authorized to transfer from any segregated
account subject to the Commodity Exchange Act carried by DWR for the
Customer to any other account carried by DWR for the Customer such
amount of excess funds as in DWR's judgment may be necessary at any
time to avoid a margin call or to reduce a debit balance in said
account. It is understood that DWR will confirm in writing each such
transfer of funds made pursuant to this authorization within a
reasonable time after such transfer.
27. SUBORDINATION AGREEMENT (Applies only to Accounts with funds held in
foreign countries) - Funds of customers trading on United States
contract markets may be held in accounts denominated in a foreign
currency with depositories located outside the United States or its
territories if the customer is domiciled in a foreign country or if the
funds are held in connection with contracts priced and settled in a
foreign currency. Such accounts are subject to the risk that events
could occur which hinder or prevent the availability of these funds for
distribution to customers. Such accounts also may be subject to foreign
currency exchange rate risks.
10
If authorized below, Customer authorizes the deposit of funds into such
foreign depositories. For customers domiciled in the United States,
this authorization permits the holding of funds in regulated accounts
offshore only if such funds are used to margin, guarantee, or secure
positions in such contracts or accrue as a result of such positions. In
order to avoid the possible dilution of other customer funds, a
customer who has funds held outside the United States agrees by
accepting this subordination agreement that his claims based on such
funds will be subordinated as described below in the unlikely event
both of the following conditions are met: (1) DWR is placed in
receivership or bankruptcy, and (2) there are insufficient funds
available for distribution denominated in the foreign currency as to
which the customer has a claim to satisfy all claims against those
funds.
By initialing the Subordination Agreement below, Customer agrees that
if both of the conditions listed above occur, its claim against DWR's
assets attributable to funds held overseas in a particular foreign
currency may be satisfied out of segregated customer funds held in
accounts denominated in dollars or other foreign currencies only after
each customer whose funds are held in dollars or in such other foreign
currencies receives its pro-rata portion of such funds. It is further
agreed that in no event may a customer whose funds are held overseas
receive more than its pro-rata share of the aggregate pool consisting
of funds held in dollars, funds held in the particular foreign
currency, and non-segregated assets of DWR.
11
OPTIONAL ELECTIONS
The following provisions, which are set forth in this agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
Signature required for each election
ARBITRATION AGREEMENT:
(Agreement Paragraph 24)
-----------------------------------
CONSENT TO TAKE THE OTHER SIDE OF ORDERS:
(Agreement Paragraph 25) X
-----------------------------------
AUTHORIZATION TO TRANSFER FUNDS:
(Agreement Paragraph 26) X
-----------------------------------
ACKNOWLEDGEMENT TO SUBORDINATION AGREEMENT
(Agreement Paragraph 27) X
-----------------------------------
(Required for accounts holding
non-U.S. currency)
--------------------------------------------------------------------------------
HEDGE ELECTION
Customer confirms that all transactions in the Account will represent bona
fide hedging transactions, as defined by the Commodity Futures Trading
Commission, unless DWR is notified otherwise not later than the time an
order is placed for the Account [check box if applicable]: / /
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
DWR's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A. Liquidate all open contracts without first seeking instructions either
from or on behalf of Customer. / /
B. Attempt to obtain instructions with respect to the disposition of all
open contracts. (If neither box is checked, Customer shall be deemed
to elect A) / /
--------------------------------------------------------------------------------
ACKNOWLEDGEMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS
The undersigned each hereby acknowledges its separate receipt from DWR, and its
understanding of each of the following documents prior to the opening of the
account:
* Risk Disclosure Statement for Futures and Options (in the * Project ATM Customer Information Statement
form prescribed by CFTC Regulation 1.55(c))
* LME Risk Warning Notice * Questions & Answers on Flexible Options Trading at the
CBOT
* Xxxx Xxxxxx Order Presumption for After Hours Electronic * CME Average Pricing System Disclosure Statement
Markets
* NYMEX ACCESSSM Risk Disclosure Statement * Special Notice to Foreign Brokers and Foreign Traders
* Globex(R) Customer Information and Risk Disclosure Statement
--------------------------------------------------------------------------------
REQUIRED SIGNATURES
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify DWR in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM ___________________ L.P.
--------------------------------------------------------------------------------
CUSTOMER NAME(S)
By: DEMETER MANAGEMENT CORPORATION
By:
------------------------------------------------- -----------------------------
AUTHORIZED SIGNATURE(S) DATE
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, President
--------------------------------------------------------------------------------
(If applicable, print name and title of signatory)
EXHIBIT 10.16
FORM OF
COMMODITY FUTURES CUSTOMER AGREEMENT
BETWEEN
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum _______________ L.P.
AND
XXXXXX XXXXXXX & CO. INCORPORATED
This Commodity Futures Customer Agreement ("Agreement"), dated as of
June ___, 2000 between Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx"),
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum ________________ L.P. ("Customer"), and
acknowledged and agreed to Xxxx Xxxxxx Xxxxxxxx Inc., the non-clearing commodity
broker for the Customer ("DWR"), shall govern the purchase and sale by Xxxxxx
Xxxxxxx of commodity futures contracts and options thereon (collectively,
"Contracts") for the account and risk of Customer through one or more accounts
carried by Xxxxxx Xxxxxxx on behalf and in the name of Customer (collectively,
the "Account").
1. Applicable Law. The Account and all transactions and agreements in
respect of the Account shall be subject to all applicable Federal, state,
exchange, clearing house and self-regulatory agency rules, regulations and
interpretations and custom and usage of the trade. All such rules, regulations,
interpretations, custom and usage are hereinafter collectively referred to as
"Applicable Law."
2. Customer's Representations and Warranties. Customer represents and
warrants that (a) Customer has full right, power and authority to enter into
this Agreement, and the person executing this Agreement on behalf of Customer is
authorized to do so; (b) this Agreement is binding on Customer and enforceable
against Customer in accordance with its terms; (c) Customer may lawfully
establish and open the Account for the purpose of effecting purchases and sales
of Contracts through Xxxxxx Xxxxxxx; (d) transactions entered into pursuant to
this Agreement will not violate any applicable law (including any Applicable
Law) to which Customer is subject or any agreement to which Customer is subject
or a party; and (e) all information provided by Customer in the Account
Application preceding this Agreement (which Application and the information
contained therein hereby is incorporated into this Agreement) is true and
correct and Customer shall immediately (and in no event later than within one
business day) notify Xxxxxx Xxxxxxx of any change in such information.
3. Payment and Interest Obligations.
(a) Compensation Payments to Xxxxxx Xxxxxxx. Customer shall
pay Xxxxxx Xxxxxxx upon demand (a) all floor brokerage charges, give-up fees,
contract market, clearing house, National Futures Association ("NFA") or
clearing member fees or charges; (b) any tax imposed on such transactions by any
competent taxing authority; (c) the amount of any trading losses in the Account;
(d) any debit balance or deficiency in the Account; and (e) any other amounts
owed by Customer to Xxxxxx Xxxxxxx with respect to the Account or any
transactions therein. DWR shall pay Xxxxxx Xxxxxxx such charges with respect to
the execution and clearing of trades for Customer as DWR and Xxxxxx Xxxxxxx
shall agree from time to time.
(b) Payment of Interest. The Customer's assets deposited with
Xxxxxx Xxxxxxx will be segregated or secured in accordance with the Commodity
Exchange Act and regulations of the Commodity Futures Trading Commission
("CFTC") and will be invested in accord with Xxxxxx Xxxxxxx'x customary practice
for investment of its futures customer funds. All of Customer's funds will be
available for margin for the Customer's trading. Xxxxxx Xxxxxxx shall pay to DWR
at each month-end interest on Customer's funds in its possession as agreed
between Xxxxxx Xxxxxxx and DWR from time to time. The Customer understands that
it will not receive any interest income on its assets held by Xxxxxx Xxxxxxx
other than that paid by DWR pursuant to the Customer's DWR Customer Agreement.
DWR shall pay Xxxxxx Xxxxxxx interest on any debit balances in the Account at
such rates as Xxxxxx Xxxxxxx and DWR shall agree from time to time.
(c) Netting. The parties agree that all payment obligations of
Customer to Xxxxxx Xxxxxxx under this Agreement and all payment obligations of
Xxxxxx Xxxxxxx to Customer under this Agreement will be netted against each
other to result in one net payment amount.
4. Customer's Events Of Default; Xxxxxx Xxxxxxx'x Remedies.
(a) Events of Default. As used herein, each of the following
shall be deemed an "Event of Default": (i) the commencement of a case under any
Federal or state bankruptcy, insolvency or reorganization law, or the filing of
a petition for the appointment of a receiver by or against Customer, an
assignment made by Customer for the benefit of creditors, an admission in
writing by Customer that it is insolvent or is unable to pay its debts when they
mature, or the suspension by the Customer of its usual business or any material
portion thereof; (ii) the issuance of any warrant or order of attachment against
the Account or the levy of a judgment against the Account; (iii) if Customer is
an employee benefit plan, the termination of Customer or the filing by Customer
of a notice of intent to terminate with a governmental agency or body, or the
receipt of a notice of intent to terminate Customer from a governmental agency
or body, or the inability of Customer to pay benefits under the relevant
employment benefit plan when due; (iv) the failure by Customer to deposit or
maintain margins, to pay required premiums, or to make payments required by
Section 3 hereof; (v) the failure by Customer to perform, in any material
respect, its obligations hereunder.
(b) Remedies. Upon the occurrence of an Event of Default or in
the event Xxxxxx Xxxxxxx, in its sole and absolute discretion, considers it
necessary for its protection, Xxxxxx Xxxxxxx shall have the right, in addition
to any other remedy available to Xxxxxx Xxxxxxx at law or in equity, and in
addition to any other action Xxxxxx Xxxxxxx may xxxx appropriate under the
circumstances, to liquidate any or all open Contracts held in or for the
Account, sell any or all of the securities or other property of Customer held by
Xxxxxx Xxxxxxx and to apply the proceeds thereof to any amounts owed by Customer
to Xxxxxx Xxxxxxx, borrow or buy any options, securities, Contracts or other
property for the Account and cancel any unfilled orders for the purchase or sale
of Contracts for the Account, or take such other or further actions Xxxxxx
Xxxxxxx, in its reasonable discretion, deems necessary or appropriate for its
protection, all without demand for margin and without notice or advertisement.
Any such action may be made at the discretion of Xxxxxx Xxxxxxx in any
commercially reasonable manner. In the event Xxxxxx Xxxxxxx'x position would not
be jeopardized thereby, Xxxxxx Xxxxxxx will make reasonable efforts under the
circumstances to notify Customer prior to taking any such action. A prior demand
or margin call of any kind from Xxxxxx Xxxxxxx or prior notice from Xxxxxx
Xxxxxxx shall not be considered a waiver of Xxxxxx Xxxxxxx'x right to take any
action without notice or demand. In the event Xxxxxx Xxxxxxx exercises any
remedies available to it under this Agreement, Customer shall reimburse,
compensate and indemnify Xxxxxx Xxxxxxx for any and all costs, losses,
penalties, fines, taxes and damages that Xxxxxx Xxxxxxx may incur, including
reasonable attorneys' fees incurred in connection with the exercise of its
remedies and the recovery of any such costs, losses, penalties, fines, taxes and
damages.
5. Standard of Liability and Indemnification.
(a) Standard of Liability. Xxxxxx Xxxxxxx and its affiliates
(as defined below) shall not be liable to Customer, the general partner or the
limited partners, or any of its or their respective successors or assigns, for
any act, omission, conduct, or activity undertaken by or on behalf of the
Customer pursuant to this Agreement which Xxxxxx Xxxxxxx determines, in good
faith, to be in the best interest of the Customer, unless such act, omission,
conduct, or activity by Xxxxxx Xxxxxxx or its affiliates constituted misconduct
or negligence. Without limiting the foregoing, Xxxxxx Xxxxxxx shall have no
responsibility or liability to Customer hereunder (i) in connection with the
performance or non-performance by any contract market, clearing house, clearing
2
firm or other third party (including floor brokers not selected by Xxxxxx
Xxxxxxx and banks) to Xxxxxx Xxxxxxx of its obligations in respect of any
Contract or other property of Customer; (ii) as a result of any prediction,
recommendation or advice made or given by a representative of Xxxxxx Xxxxxxx
whether or not made or given at the request of Customer; (iii) as a result of
Xxxxxx Xxxxxxx'x reliance on any instructions, notices and communications that
it believes to be that of an individual authorized to act on behalf of Customer;
(iv) as a result of any delay in the performance or non-performance of any of
Xxxxxx Xxxxxxx'x obligations hereunder directly or indirectly caused by the
occurrence of any contingency beyond the control of Xxxxxx Xxxxxxx including,
but not limited to, the unscheduled closure of an exchange or contract market or
delays in the transmission of orders due to breakdowns or failures of
transmission or communication facilities, execution, and/or trading facilities
or other systems (including, without limitation, GLOBEX, ACCESS, or other
electronic trading systems, facilities or services), it being understood that
Xxxxxx Xxxxxxx shall be excused from performance of its obligations hereunder
for such period of time as is reasonably necessary after such occurrence to
remedy the effects therefrom; (v) as a result of any action taken by Xxxxxx
Xxxxxxx or its floor brokers to comply with Applicable Law; or (vi) for any acts
or omissions of those neither employed nor supervised by Xxxxxx Xxxxxxx. In no
event xxxx Xxxxxx Xxxxxxx be liable to Customer for consequential, incidental or
special damages hereunder.
(b) Indemnification by Customer. Customer shall indemnify,
defend and hold harmless Xxxxxx Xxxxxxx and its affiliates from and against any
loss, liability, damage, cost or expense (including attorneys' and accountants'
fees and expenses incurred in the defense of any demands, claims or lawsuits)
actually and reasonably incurred arising from any act, omission, conduct, or
activity undertaken by Xxxxxx Xxxxxxx on behalf of Customer, including, without
limitation, any demands, claims or lawsuits initiated by a limited partner (or
assignee thereof); provided that (i) Xxxxxx Xxxxxxx has determined, in good
faith, that the act, omission, conduct, or activity giving rise to the claim for
indemnification was in the best interests of the Customer, and (ii) the act,
omission, conduct or activity that was the basis for such loss, liability,
damage, cost or expense was not the result of misconduct or negligence.
Notwithstanding the foregoing, no indemnification of Xxxxxx Xxxxxxx or its
affiliates by Customer shall be permitted for any losses, liabilities or
expenses arising from or out of any alleged violation of federal or state
securities laws unless (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee, or (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (iii) a court of competent jurisdiction approves a settlement of the claims
against the particular indemnitee and finds that indemnification of the
settlement and related costs should be made, provided with regard to such court
approval, the indemnitee must apprise the court of the position of the SEC and
the positions of the respective securities administrators of Massachusetts,
Missouri, Tennessee and/or those other states and jurisdictions in which the
plaintiffs claim that they were offered or sold Units, with respect to
indemnification for securities laws violations before seeking court approval for
indemnification. Furthermore, in any action or proceeding brought by a limited
partner in the right of Customer to which Xxxxxx Xxxxxxx or any affiliate
thereof is a party defendant, any such person shall be indemnified only to the
extent and subject to the conditions specified in the Delaware Revised Uniform
Limited Partnership Act, as amended, and this Section 5. The Customer shall make
advances to Xxxxxx Xxxxxxx or its affiliates hereunder only if: (i) the demand,
claim lawsuit or legal action relates to the performance of duties or services
by such persons to Customer; (ii) such demand, claim lawsuit or legal action is
not initiated by a limited partner; and (iii) such advances are repaid, with
interest at the legal rate under Delaware law, if the person receiving such
advance is ultimately found not to be entitled to indemnification hereunder.
3
(c) Indemnification by Xxxxxx Xxxxxxx. Xxxxxx Xxxxxxx shall
indemnify, defend and hold harmless Customer and its successors or assigns from
and against any losses, liabilities, damages, costs or expenses (including in
connection with the defense or settlement of claims; provided Xxxxxx Xxxxxxx has
approved such settlement) incurred as a direct result of the activities of
Xxxxxx Xxxxxxx or its affiliates, provided, further, that the act, omission,
conduct or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence of Xxxxxx Xxxxxxx or its affiliates.
(d) Limitation on Indemnities. The indemnities provided in
this Section 5 by Customer to Xxxxxx Xxxxxxx and its affiliates shall be
inapplicable in the event of any losses, liabilities, damages, costs or expenses
arising out of, or based upon, any material breach of any agreement of Xxxxxx
Xxxxxxx contained in this Agreement to the extent caused by such event.
Likewise, the indemnities provided in this Section 5 by Xxxxxx Xxxxxxx to
Customer and its successors and assigns shall be inapplicable in the event of
any losses, liabilities, damages, costs or expenses arising out of, or based
upon, any material breach of any representation, warranty or agreement of
Customer contained in this Agreement to the extent caused by such breach.
(e) Definition of "Affiliate." As used in this Section 5, the
term "affiliate" of Xxxxxx Xxxxxxx shall mean: (i) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly owning, controlling, or holding with power to vote 10% or more of the
outstanding voting securities of Xxxxxx Xxxxxxx; (ii) any partnership,
corporation, association, or other legal entity 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held with
power to vote by Xxxxxx Xxxxxxx; (iii) any natural person, partnership,
corporation, association, or other legal entity directly or indirectly
controlling, controlled by, or under common control with, Xxxxxx Xxxxxxx; or
(iv) any officer or director of Xxxxxx Xxxxxxx. Notwithstanding the foregoing,
"affiliates" for purposes of this Section 5 shall include only those persons
acting on behalf of Xxxxxx Xxxxxxx and performing services for Customer within
the scope of the authority of Xxxxxx Xxxxxxx, as set forth in this Agreement.
6. General Agreements. The parties agree that:
(a) Xxxxxx Xxxxxxx'x Responsibility. Xxxxxx Xxxxxxx is not
acting as a fiduciary, foundation manager, commodity pool operator, commodity
trading advisor or investment adviser in respect of any Account opened by
Customer. Xxxxxx Xxxxxxx shall have no responsibility hereunder for compliance
with any law or regulation governing the conduct of fiduciaries, foundation
managers, commodity pool operators, commodity trading advisors or investment
advisers.
Xxxxxx Xxxxxxx agrees to furnish to the Customer as
soon as practicable all of the information from time to time in its possession
which Customer may be required to furnish to its limited partners pursuant to
its limited partnership agreement and as otherwise required by Applicable Law.
Xxxxxx Xxxxxxx shall disclose such information regarding itself and its
affiliates (including, without limitation, financial statements) as may be
required by the Customer for SEC, CFTC and state blue sky disclosure purposes.
Xxxxxx Xxxxxxx agrees to notify the applicable trading advisor for the Customer
(each a "Trading Advisor") immediately upon discovery of any error committed by
Xxxxxx Xxxxxxx or any of its agents with respect to a trade for the Customer's
account which Xxxxxx Xxxxxxx believes was not executed or cleared in accordance
with proper instructions given by the Customer, its Trading Advisors or any
other authorized agent of Customer. Errors made by floor brokers appointed or
selected by Xxxxxx Xxxxxxx shall constitute errors made by Xxxxxx Xxxxxxx.
However, Xxxxxx Xxxxxxx shall not be responsible for errors committed by the
Trading Advisors.
4
Xxxxxx Xxxxxxx agrees to report to DWR its own errors
and the errors of any Trading Advisor for the Account which Xxxxxx Xxxxxxx
becomes aware of, provided that such reporting may be via telephone.
Notwithstanding the foregoing, the failure to comply with such reporting
obligation does not increase Xxxxxx Xxxxxxx'x liability for its own errors
beyond that otherwise expressly set forth in this Agreement, nor does it make
Xxxxxx Xxxxxxx in any way responsible for errors committed by the Trading
Advisors.
Xxxxxx Xxxxxxx acknowledges that the other
partnerships of which Demeter Management Corporation (the general partner of
Customer) is the general partner, do not constitute affiliates of the Customer.
(b) Advice. All advice communicated by Xxxxxx Xxxxxxx with
respect to any Account opened by Customer hereunder is incidental to the conduct
of Xxxxxx Xxxxxxx'x business as a futures commission merchant and such advice
will not serve as the primary basis for any decision made by or on behalf of
Customer in respect of the Account, regardless of whether Customer relies on the
advice of Xxxxxx Xxxxxxx in making any such decision. Customer acknowledges that
Xxxxxx Xxxxxxx and its managing directors, officers, employees and affiliates
may take or hold positions in, or advise other customers concerning, Contracts
that are the subject of advice from Xxxxxx Xxxxxxx to Customer. The positions
and advice of Xxxxxx Xxxxxxx and its managing directors, officers, employees and
affiliates may be inconsistent with or contrary to positions of, and the advice
given by, Xxxxxx Xxxxxxx to Customer.
(c) Recording. Each of Xxxxxx Xxxxxxx, the Customer, DWR and
their respective officers, agents and employees, in their sole and absolute
discretion, may record, on tape or otherwise, any telephone conversation between
or among Xxxxxx Xxxxxxx, the Customer or DWR with respect to the Account and
transactions therein and each of Xxxxxx Xxxxxxx, the Customer and DWR hereby
agrees and consents thereto.
(d) Acceptance of Orders; Position Limits.
(i) Xxxxxx Xxxxxxx shall have the right to limit the
size of open positions (net or gross) of Customer with respect to the
Account at any time and to refuse acceptance of orders to establish new
positions, whether such refusal or limitation is required by, or based
on position limits imposed under, Applicable Law. Xxxxxx Xxxxxxx shall
immediately notify Customer of its rejection of any order. Unless
specified by Customer, Xxxxxx Xxxxxxx may designate the exchange or
other markets (including, without limitation, GLOBEX or ACCESS) on
which it will attempt to execute orders.
(ii) Customer shall file or cause to be filed all
applications or reports required under Applicable Law with the CFTC or
the relevant contract market or clearing house, and shall provide
Xxxxxx Xxxxxxx with a copy of such applications or reports and such
other information as Xxxxxx Xxxxxxx may reasonably request in
connection therewith.
(e) Original and Variation Margin; Premiums; Other Contract
Obligations. Customer shall make, or cause to be made, all applicable original
margin, intra-day margin and premium payments, and perform all other obligations
attendant to transactions or positions in such Contracts, as may be required by
Applicable Law or by Xxxxxx Xxxxxxx. Requests for margin deposits and/or premium
payments may, at Xxxxxx Xxxxxxx'x election, be communicated to Customer orally,
telephonically or in writing. Customer margin deposits and/or premium payments
shall be made by wire transfer to Xxxxxx Xxxxxxx'x Customer Segregated Account
and shall be in U.S. dollars unless Xxxxxx Xxxxxxx and the Customer specifically
agree otherwise. All Contracts for the Account shall be margined at the
applicable exchange or clearing house minimum rates for speculative accounts.
5
(f) Security Interest and Rights Respecting Collateral. Except
to the extent proscribed by Applicable Law not subject to waiver, all Contracts,
cash, securities, and/or any other property of Customer whatsoever
(collectively, the "Collateral") at any time held by Xxxxxx Xxxxxxx or its
affiliates, or carried by others for the Account, hereby are pledged to Xxxxxx
Xxxxxxx and shall be subject to a general lien and security interest in Xxxxxx
Xxxxxxx'x favor to secure any indebtedness or other amounts, obligations and/or
liabilities at any time owing from Customer to Xxxxxx Xxxxxxx (collectively, the
"Customer's Liabilities"). Customer hereby grants Xxxxxx Xxxxxxx the right to
borrow, pledge, repledge, hypothecate, rehypothecate, loan or invest any of the
Collateral held by Xxxxxx Xxxxxxx, including utilizing the Collateral to
purchase United States Government Treasury obligations pursuant to repurchase
agreements or reverse repurchase agreements with any party, in each case without
notice to Customer and without any obligation to pay or to account to Customer
for any interest, income or benefit that may be derived therefrom. The rights of
Xxxxxx Xxxxxxx set forth above shall be qualified by any applicable requirements
for segregation of customers' property under Applicable Law. Xxxxxx Xxxxxxx
commits to Customer that Xxxxxx Xxxxxxx will not issue a Notice of Exclusive
Control under the Control Agreement between Xxxxxx Xxxxxxx and DWR unless Xxxxxx
Xxxxxxx determines there is a default under this Agreement.
(g) Reports and Objections. All confirmations, purchase and
sale notices, correction notices and account statements (collectively,
"Statements") shall be submitted to Customer and shall be conclusive and binding
on Customer unless Customer notifies Xxxxxx Xxxxxxx of any objection thereto
prior to the opening of trading on the contract market on which such transaction
occurred on the business day following the day on which Customer receives such
Statement; provided that, with respect to monthly Statements, Customer may
notify Xxxxxx Xxxxxxx of any objection thereto within five business days after
receipt of such monthly Statement, provided the objection could not have been
raised at the time any prior Statement was received by Customer as provided for
above. Any such notice of objection, if given orally to Xxxxxx Xxxxxxx, shall
immediately (and no later than within one business day) be confirmed in writing
by Customer.
(h) Delivery Procedures; Options Allocation Procedure.
(i) Customer will provide Xxxxxx Xxxxxxx with
instructions either to liquidate Contracts previously established by
Customer, make or take delivery under any such Contracts, or exercise
options entered into by Customer, within such time limits as may be
specified by Xxxxxx Xxxxxxx. Xxxxxx Xxxxxxx shall have no
responsibility to take any action on behalf of Customer or positions in
the Account unless and until Xxxxxx Xxxxxxx receives oral or written
instructions reasonably acceptable to Xxxxxx Xxxxxxx indicating the
action Xxxxxx Xxxxxxx is to take. Funds sufficient to take delivery
pursuant to such Contract or deliverable grade commodities to make
delivery pursuant to such Contract must be delivered to Xxxxxx Xxxxxxx
at such time as Xxxxxx Xxxxxxx may require in connection with any
delivery.
(ii) Short option Contracts may be subject to
exercise at any time. Exercise notices received by Xxxxxx Xxxxxxx from
the applicable contract market with respect to option Contracts sold by
Customer may be allocated to Customer pursuant to a random allocation
procedure, and Customer shall be bound by any such allocation of
exercise notices. In the event of any allocation to Customer, unless
Xxxxxx Xxxxxxx has previously received instructions from Customer,
Xxxxxx Xxxxxxx'x sole responsibility shall be to use its best efforts
to notify Customer of such allocation.
6
(iii) If Customer fails to comply with any of the
foregoing obligations, Xxxxxx Xxxxxxx may, in its sole and absolute
discretion, liquidate any open positions, make or receive delivery of
any commodities or instruments, or exercise or allow the expiration of
any options, in such manner and on such terms as Xxxxxx Xxxxxxx, in its
sole and absolute discretion, deems necessary or appropriate, and
Customer shall indemnify and hold Xxxxxx Xxxxxxx harmless as a result
of any action taken or not taken by Xxxxxx Xxxxxxx in connection
therewith or pursuant to Customer's instructions.
(i) Financial and Other Information. Customer shall provide to
Xxxxxx Xxxxxxx such financial information regarding Customer as Xxxxxx Xxxxxxx
may from time to time reasonably request. Customer shall notify Xxxxxx Xxxxxxx
immediately (and no later than within one business day) if the financial
condition of Customer changes materially and adversely from that shown in the
most recent financial information theretofore provided to Xxxxxx Xxxxxxx. An
investigation may be conducted pertaining to Customer's credit standing and
business.
(j) Currency Exchange Risk. Customer shall bear all risk and
cost in respect of the conversion of currencies incident to transactions
effected on behalf of Customer pursuant hereto.
7. Termination. This Agreement may be terminated at any time by
Customer or Xxxxxx Xxxxxxx upon thirty (30) days by written notice to the other.
In the event of such notice, Customer shall either close out open positions in
the Account or arrange for such open positions to be transferred to another
futures commission merchant. Upon satisfaction by Customer of all of Customer's
Liabilities, Xxxxxx Xxxxxxx shall transfer to another futures commission
merchant all Contracts, if any, then held for the Account, and shall transfer to
Customer or to another futures commission merchant, as Customer may instruct,
all cash, securities and other property held in the Account, whereupon this
Agreement shall terminate. Notwithstanding the foregoing, in the event Xxxxxx
Xxxxxxx is required by a regulatory authority to transfer the account to another
futures commission merchant or in the event that Xxxxxx Xxxxxxx abandons the
Futures Commission Merchant ("FCM") business, then Xxxxxx Xxxxxxx shall have the
right to terminate this Agreement by written notice effective the date contained
therein, provided that Xxxxxx Xxxxxxx cooperates in the transfer of open
positions to another FCM and that the termination of the Agreement is not made
effective earlier than the completion of the transfer.
8. Miscellaneous.
(a) Severability. If any provision of this Agreement is, or at
any time becomes, inconsistent with any present or future law, rule or
regulation of any exchange or other market, sovereign government or regulatory
body thereof, and if any of these authorities have jurisdiction over the subject
matter of this Agreement, the inconsistent provision shall be deemed superseded
or modified to conform with such law, rule or regulation but in all other
respects, this Agreement shall continue and remain in full force and effect.
(b) Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties and their successors. Xxxxxx Xxxxxxx shall
have the right to transfer or assign this Agreement (and thereby the Account) to
any successor entity in its sole and absolute discretion and without obtaining
the consent of Customer.
(c) Entire Agreement. This Agreement contains the entire
agreement between the parties and supersedes any prior agreements between the
parties as to the subject matter hereof. No provision of this Agreement shall in
any respect be waived, altered, modified, or amended unless such waiver,
alteration, modification or amendment is signed by the party against whom such
waiver, alteration, modification or amendment is to be enforced.
7
(d) Currency Denomination. Unless another currency is
designated in the confirmations reporting transactions entered into by Customer,
all margin deposits in connection with such transactions, and a debit or credit
in the Account, shall be stated in United States dollars, and margin
requirements, debits or credits expressed in another currency shall be converted
into United States dollars at a rate of exchange determined by Xxxxxx Xxxxxxx,
in its sole and absolute discretion, on the basis of the then prevailing money
market rates of exchange for such foreign currency.
(e) Instructions, Notices or Communications. Except as
specifically otherwise provided in this Agreement, all instructions, notices or
other communications may be oral or written. All oral instructions, unless
custom and usage of trade dictate otherwise, shall be promptly confirmed in
writing. All written instructions, notices or other communications shall be
addressed as follows:
(i) if to Xxxxxx Xxxxxxx:
Xxxxxx Xxxxxxx & Co. Incorporated
Xxx Xxxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Commodity Operations Manager
(ii) if to Customer, at the address as indicated
on the Commodity Account Application.
(f) Rights and Remedies Cumulative. All rights and remedies
arising under this Agreement as amended and modified from time to time are
cumulative and not exclusive of any rights or remedies which may be available at
law or otherwise.
(g) No Waiver. No failure on the part of Xxxxxx Xxxxxxx to
exercise, and no delay in exercising, any contractual right will operate as a
waiver thereof, nor will any single or partial exercise by Xxxxxx Xxxxxxx of any
right preclude any other or future exercise thereof or the exercise of any other
partial right.
(h) Governing Law. THE INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CHOICE OF LAW.
(i) Consent to Jurisdiction. ANY LITIGATION BETWEEN XXXXXX
XXXXXXX AND CUSTOMER RELATING TO THIS AGREEMENT OR TRANSACTIONS HEREUNDER SHALL
TAKE PLACE IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF
MANHATTAN OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK. CUSTOMER CONSENTS TO THE SERVICE OF PROCESS BY THE MAILING TO CUSTOMER
OF COPIES OF SUCH COURT FILING BY CERTIFIED MAIL TO THE ADDRESS OF CUSTOMER AS
IT APPEARS ON THE BOOKS AND RECORDS OF XXXXXX XXXXXXX, SUCH SERVICE TO BE
EFFECTIVE TEN DAYS AFTER MAILING. CUSTOMER HEREBY WAIVES IRREVOCABLY ANY
IMMUNITY TO WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY ARBITRATION, ACTION AT
LAW, SUIT IN EQUITY OR ANY OTHER PROCEEDING ARISING OUT OF OR BASED ON THIS
AGREEMENT OR ANY TRANSACTION IN CONNECTION HEREWITH.
(j) Waiver of Jury Trial. Customer hereby waives a trial by
jury in any action arising out of or relating to this Agreement or any
transaction in connection therewith.
8
(k) Customer Acknowledgements.
(i) CUSTOMER HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED
AND UNDERSTANDS THE FOLLOWING DISCLOSURE STATEMENT PRESCRIBED BY THE
CFTC AND FURNISHED HEREWITH (please initial):
|_| Risk Disclosure Statement for Futures Options
(Appendix A to CFTC Rule 1.55(c)
transcribed in full on pages 1-3
of Booklet 2 -- Risk Disclosure
Statements)
(ii) If Customer has indicated on the Commodity Futures
Account Application that
orders placed for the Account represent bona fide hedging transactions, please
complete the following. You should note that CFTC Regulation ss.190.06 permits
you to specify whether, in the unlikely event of Xxxxxx Xxxxxxx'x bankruptcy,
you prefer the bankruptcy trustee to liquidate all positions in the Account.
Accordingly, Customer hereby elects as follows: (please initial):
|_| Liquidate |_| Not Liquidate
If neither alternative is initialed, Customer will be deemed to have
elected to have all positions liquidated. This election may be changed at any
time by written notice.
IN WITNESS WHEREOF, Customer has executed this Agreement on the date
indicated below.
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum __________________ L.P.
("Customer")
By: Demeter Management Corporation, General Partner
-----------------------------------------------------------------------
(Signature) (Date)
Xxxxxx X. Xxxxxx, President and Chairman
-----------------------------------------------------------------------
(Name & Title - Please Print)
Xxxxxx Xxxxxxx & Co. Incorporated
-----------------------------------------------------------------------
(Signature) (Date)
W. Xxxxxx Xxxxx, Managing Director
-----------------------------------------------------------------------
(Name & Title - Please Print)
Acknowledged and Agreed (as to Section 3(a) and (b))
Xxxx Xxxxxx Xxxxxxxx Inc.
-----------------------------------------------------------------------
(Signature) (Date)
Xxxxxx X. Xxxxxx, Senior Vice President
-----------------------------------------------------------------------
(Name & Title - Please Print)
9
EXHIBIT 10.17
FORM OF
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement") made as of June __,
2000, by and among XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM ____________________ L.P.
a Delaware limited partnership (the "Customer") and XXXXXX XXXXXXX & CO.
INTERNATIONAL LIMITED ("MSIL");
W I T N E S S E T H:
WHEREAS, Customer and MSIL wish to enter into this Agreement
to set forth the terms and conditions upon which MSIL will perform brokerage
services with respect to Client Contracts, Contracts and Transactions for
Customer through an account carried by MSIL on behalf and in the name of
Customer (the "Account").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Incorporation by Reference. The Non-Private Customer
Agreement annexed hereto is hereby incorporated by reference herein and made a
part hereof to the same extent as if such document were set forth in full
herein. If any provision of this Agreement is or at any time becomes
inconsistent with the annexed document, the terms of this Agreement shall
control.
2. Standard of Liability and Indemnity.
(a) Standard of Liability. MSIL and its affiliates
(as defined below) shall not be liable to Customer, the general partner or the
limited partners, or any of its or their respective successors or assigns, for
any act, omission, conduct, or activity undertaken by or on behalf of the
Customer pursuant to this Agreement which MSIL determines, in good faith, to be
in the best interest of the Customer, unless such act, omission, conduct, or
activity by MSIL or its affiliates constituted misconduct or negligence. Without
limiting the foregoing, MSIL shall have no responsibility or liability to
Customer hereunder (i) in connection with the performance or non-performance by
any Exchange, Clearing House or other third party (including floor brokers not
selected by MSIL) and/or Broker to MSIL of its obligations in respect of any
Contract or Transaction or other property of Customer; (ii) as a result of any
prediction, recommendation or advice made or given by a representative of MSIL
whether or not made or given at the request of Customer; (iii) as a result of
MSIL's reliance on any instructions, notices and communications that it believes
to be that of an individual authorized to act on behalf of Customer; (iv) as a
result of any delay in the performance or non-performance of any of MSIL's
obligations hereunder directly or indirectly caused by the occurrence of any
contingency beyond the control of MSIL including, but not limited to, the
unscheduled closure of an Exchange or Clearing House or delays in the
transmission of orders due to breakdowns or failures of transmission or
communication facilities, execution, and/or trading facilities or other systems,
it being understood that MSIL shall be excused from performance of its
obligations hereunder for such period of time as is reasonably necessary after
such occurrence to remedy the effects therefrom; (v) as a result of any action
taken by MSIL to comply with Market Requirements or Applicable Law; or (vi) for
any acts or omissions of those neither employed nor supervised by MSIL
(excluding floor brokers selected by MSIL). In no event will MSIL be liable to
Customer for consequential, incidental or special damages hereunder.
(b) Indemnification by Customer. Customer shall indemnify,
defend and hold harmless MSIL and its affiliates from and against any loss,
liability, damage, cost or expense (including attorneys' and accountants' fees
and expenses incurred in the defense of any demands, claims or lawsuits)
actually and reasonably incurred arising from any act, omission, conduct, or
activity undertaken by MSIL on behalf of Customer, including, without
limitation, any demands, claims or lawsuits initiated by a limited partner (or
assignee thereof); provided that (i) MSIL has determined, in good faith, that
the act, omission, conduct, or activity giving rise to the claim for
indemnification was in the best interests of the Customer, and (ii) the act,
omission, conduct or activity that was the basis for such loss, liability,
damage, cost or expense was not the result of misconduct or negligence.
Notwithstanding the foregoing, no indemnification of MSIL or its affiliates by
Customer shall be permitted for any losses, liabilities or expenses arising from
or out of any alleged violation of federal or state securities laws unless (i)
there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee, or (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (iii) a court of competent
jurisdiction approves a settlement of the claims against the particular
indemnitee and finds that indemnification of the settlement and related costs
should be made, provided with regard to such court approval, the indemnitee must
apprise the court of the position of the SEC and the positions of the respective
securities administrators of Massachusetts, Missouri, Tennessee and/or those
other states and jurisdictions in which the plaintiffs claim that they were
offered or sold Units, with respect to indemnification for securities laws
violations before seeking court approval for indemnification. Furthermore, in
any action or proceeding brought by a limited partner in the right of Customer
to which MSIL or any affiliate thereof is a party defendant, any such person
shall be indemnified only to the extent and subject to the conditions specified
in the Delaware Revised Uniform Limited Partnership Act, as amended, and this
Section 2. The Customer shall make advances to MSIL or its affiliates hereunder
only if: (i) the demand, claim lawsuit or legal action relates to the
performance of duties or services by such persons to Customer; (ii) such demand,
claim lawsuit or legal action is not initiated by a limited partner; and (iii)
such advances are repaid, with interest at the legal rate under Delaware law, if
the person receiving such advance is ultimately found not to be entitled to
indemnification hereunder.
(c) Indemnification by MSIL. MSIL shall indemnify, defend and
hold harmless Customer and its successors or assigns from and against any
losses, liabilities, damages, costs or expenses (including in connection with
the defense or settlement of claims; provided MSIL has approved such settlement)
incurred as a direct result of the activities of MSIL or its affiliates,
provided, further, that the act, omission, conduct or activity giving rise to
the claim for indemnification was the result of bad faith, misconduct or
negligence of MSIL or its affiliates.
(d) Limitation on Indemnities. The indemnities provided in
this Section 2 by Customer to MSIL and its affiliates shall be inapplicable in
the event of any losses, liabilities, damages, costs or expenses arising out of,
or based upon, any material breach of any agreement of MSIL contained in this
Agreement to the extent caused by such event. Likewise, the indemnities provided
in this Section 2 by MSIL to Customer and its successors and assigns shall be
inapplicable in the event of any losses, liabilities, damages, costs or expenses
arising out of, or based upon, any material breach of any representation,
warranty or agreement of Customer contained in this Agreement to the extent
caused by such breach.
(e) Definition of "Affiliate." As used in this
Section 2, the term "affiliate" of MSIL shall mean: (i) any natural
person, partnership, corporation, association, or other legal entity
directly or indirectly owning, controlling, or holding with power to
vote 10% or more of the outstanding voting securities of MSIL; (ii) any
partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote by MSIL; (iii) any
natural person, partnership, corporation, association, or other legal
entity directly or indirectly controlling, controlled by, or under
common control with, MSIL; or (iv) any officer or director of MSIL.
Notwithstanding the foregoing, "affiliates" for purposes of this
Section 2 shall include only those persons acting on behalf of MSIL and
performing services for Customer within the scope of the authority of
MSIL, as set forth in this Agreement.
3. MSIL Responsibilities. MSIL agrees to notify the applicable
trading advisor for the Customer immediately upon discovery of any error
committed by MSIL or any of its agents with respect to a trade for the Account
which MSIL believes was not executed or cleared in accordance with proper
instructions given by the Customer, its trading advisors or any other authorized
agent of Customer. Errors made by floor brokers appointed or selected by MSIL
shall constitute errors made by MSIL. However, MSIL shall not be responsible for
errors committed by the trading advisors.
MSIL agrees to report to Xxxx Xxxxxx Xxxxxxxx Inc. ("DWR") its
own errors and the errors of any trading advisor for the Account which MSIL
becomes aware of, provided that such reporting may be via telephone.
Notwithstanding the foregoing, the failure to comply with such reporting
obligation does not increase MSIL's liability for its own errors beyond that
otherwise expressly set forth in this Agreement, nor does it make MSIL in any
way responsible for errors committed by the trading advisors.
MSIL acknowledges that the other partnerships of which Demeter
Management Corporation (the general partner of Customer) is the general partner
or trading manager, do not constitute affiliates of the Customer.
4. Minimum Margins. All Contracts for the Account shall be
margined at the applicable Exchange or Clearing House minimum rates for
speculative accounts.
5. Payment of Interest. MSIL shall pay to DWR at each
month-end interest on Customer's funds in its possession as agreed between MSIL
and DWR from time to time. Customer understands that it will not receive any
interest income on its assets held by MSIL other than that paid by DWR pursuant
to the Customer's DWR Customer Agreement. DWR (and not the Customer) shall pay
MSIL interest on any debit balances in the Account at such rates as MSIL and DWR
shall agree from time to time.
6. Recording. Each of MSIL, the Customer, and the Customer's
agents (including DWR), in their sole and absolute discretion, may record, on
tape or otherwise, any telephone conversation between or among MSIL, the
Customer or the Customer's agents with respect to the Account and Transactions
therein and each of MSIL and the Customer hereby agrees and consents thereto.
7. Termination. This Agreement may be terminated at any time
by any party upon thirty (30) days' prior written notice to the other parties
hereto. In the event of such notice, Customer shall either close out open
positions in the Account or arrange for
such open positions to be transferred to another futures broker. Upon
satisfaction by Customer of all of Customer's liabilities to MSIL, MSIL shall
transfer to another futures broker all Contracts, if any, then held for the
Account, and shall transfer to Customer or to another futures broker, as
Customer may instruct, all cash, securities and other property held in the
Account, whereupon this Agreement shall terminate. Notwithstanding the
foregoing, in the event MSIL is required by a regulatory authority to transfer
the Account to another futures broker or in the event that MSIL abandons the
futures brokerage business, then MSIL shall have the right to terminate this
Agreement by written notice effective the date contained therein, provided that
MSIL cooperates in the transfer of open positions to another futures broker and
that the termination of the Agreement is not made effective earlier than the
completion of the transfer.
8. Complete Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters referred to herein, and
no other agreement, verbal or otherwise, shall be binding as among the parties
with respect to such matters unless in writing and signed by the party against
whom enforcement is sought.
9. Assignment. This Agreement may not be assigned by any party
without the express written consent of the other parties.
10. Amendment. This Agreement may not be amended except by the
written consent of the parties and provided such amendment is consistent with
Customer's Limited Partnership Agreement.
11. Notices. All notices required or desired to be delivered
under this Agreement shall be sent to the following addresses:
if to the Partnership:
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM ________________ L.P .
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attention: Xxxxxx X. Xxxxxx
if to MSIL:
as set forth in the Non-Private Customer Agreement.
12. Survival. The provisions of this Agreement shall survive
the termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
13. Headings. Headings of Sections herein are for the
convenience of the parties only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM _______________ L.P.
By: Demeter Management Corporation
General Partner
By:
-------------------------------------
Xxxxxx X. Xxxxxx
President
XXXXXX XXXXXXX & CO. INTERNATIONAL LIMITED
By:
-------------------------------------
Name:
Title:
XXXXXX XXXXXXX & CO. INTERNATIONAL LIMITED
XXXXXX XXXXXXX
SECURITIES LIMITED
Customer Documents
(Market Counterparty / Non-Private Customer)
Exchange-traded Derivatives Only
May 1999
NON-PRIVATE CUSTOMER DOCUMENTS
(EXCHANGE-TRADED DERIVATIVES)
TABLE OF CONTENTS
Please read the contents of Part One before signing the Customer Signatures
pages in Part Three.
Page
PART ONE: NON-PRIVATE CUSTOMER AGREEMENT 1
(Exchange-Traded Derivatives)
Chapter I Introduction 1
II Terms Applicable to Dealings 4
III Margin 6
IV Material Interests 9
V Powers and Exclusions of Liability 10
VI Authorisation 13
VII General 14
PART TWO: MASTER NETTING AGREEMENT 17
PART THREE: SCHEDULES 26
PART FOUR: CUSTOMER SIGNATURE PAGES 32
Non-Private Customer Documents
Customers Domiciled in Luxembourg only
Third Party Trading Authorisation
Certificates of Authority to Deal
Certificate of Trustees
PART ONE
NON-PRIVATE CUSTOMER AGREEMENT
(Exchange-Traded Derivatives)
Made in compliance with the Rules of The Securities and Futures Authority
Limited ("SFA")
THIS AGREEMENT is made as of the date specified on the first customer signature
page below
BETWEEN:
(A) You, as the client named on the customer signature page; and
(B) XXXXXX XXXXXXX & CO. INTERNATIONAL LIMITED ("MSIL") AND/OR XXXXXX
XXXXXXX SECURITIES LIMITED ("MSSL") both of 00 Xxxxx Xxxxxx, Xxxxxx
Xxxxx, Xxxxxx X00 0XX . MSIL is
regulated by SFA, and MSSL is regulated by SFA and a member of the London Stock
Exchange.
IT IS HEREBY AGREED AS FOLLOWS:
We will treat you as a NON-PRIVATE CUSTOMER regarding all investment business
regulated by SFA which we carry on for or with you pursuant to this Agreement
other than for any business referred to below under "Market Counterparties".
All investment business mentioned in Clause 2 below which we carry out with you
or on your behalf as a Non-Private Customer will be carried out under the terms
and conditions set out below (as amended or supplemented from time to time) and
the Customer Documents.
Market Counterparties
The terms of this Agreement and the Customer Documents will also apply to
investment business which we carry out with you or on your behalf if, in respect
of such business, you are a market counterparty.
CHAPTER 1 - INTRODUCTION
1. Interpretation
In the Customer Agreement, the words and phrases below have the
following meanings:-
"acting in due capacity" in relation to you means as beneficial owner
or, where some other person is beneficial owner, as trustee or agent
for and (in either case) with all requisite authorities from that other
person;
"Applicable Law" includes without limitation
(a) Market Requirements, and
(b) the rules, regulations, orders, directives, announcements,
decisions, procedures, terms, other requirements and/or
customs made, given or issued by, or published under the
authority of any Regulatory Body, all as amended, supplemented
or replaced from time to time;
"Approved Custodian" means such bank, financial institution or company
approved by us, or any nominee company or trust corporation which is a
subsidiary thereof;
"Asset" means currencies, Securities (including futures or option
contracts), deposits or physical assets;
"Associated Firm" means any company in the Xxxxxx Xxxxxxx Xxxx Xxxxxx &
Co. group of companies and, as the context requires, any other person
connected with us.
"Broker" means such member of an Exchange and/or Clearing House as is
instructed by us to enter, clear or settle any transaction on an
Exchange;
"Charged Securities" means such Securities as
(a) with our agreement, you (or any person for your account) by
way of security have deposited with or transferred to or may
hereafter deposit with or transfer to us or our agents or
nominees (or with or to our or their order, account, direction
or control), wholly or partly in satisfaction of a demand for
Margin. We shall have sole discretion to determine the type,
amount and quality of the Securities that you may deposit or
transfer as Charged Securities;
(b) are or may at any time hereafter be held (in a clearance
system or otherwise)
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(i) to our order by or for the account of an Approved
Custodian or
(ii) by, or to the order of, for the account of or under
the control or direction of us (or our agents or
nominees) and in either case which have, with our
agreement, by way of security been made subject to
the terms of the charge in Clause 19.2;
"Clearing House" means any clearing house providing settlement or
clearing or similar services for, or as part of, an Exchange;
"Client Contract" means a futures or option contract between us and
you, which is matched by an identical Contract;
"Client Money" means all initial and variation cash Margin, option
premiums and all other sums received from or due to you pursuant to the
Customer Documents which is "Client Money" within the meaning of the
Client Money Regulations;
"Client Money Regulations" means The Financial Services (Client Money)
Regulations 1991, The Financial Services (Client Money) (Supplementary)
Regulations 1991 and the related client money rules in Chapter 4 of the
rules of SFA;
"close out" means the entering into of a Contract equal and opposite to
a Contract previously entered into (and each matching a Client
Contract) to create a level position in relation to the Assets
underlying the Contracts, or in relation to the Contracts themselves,
and fix the amount of profit or loss arising from such Contracts and
the corresponding Client Contracts;
"Contract" means a futures or option contract entered into by us on an
Exchange or with or through a Broker pursuant to Clause 3;
"Customer Documents" means this Agreement, Master Netting Agreement,
any notice (including but not limited to any "Notice of treatment as a
Non-Private Customer" or "Notice of treatment as a Market
Counterparty") and any Further Schedules (including, without
limitation, confirmations, contract notes and statements) and
additional documents relating directly to or indirectly to the services
provided under Clause 2 below and accompanying this Agreement whether
or not expressly incorporated in this Agreement and each as amended
and/or supplemented from time to time;
"Exchange" means any exchange, market or association of dealers in any
part of the world on or through which investments or currencies or
assets underlying, derived from or otherwise related directly or
indirectly to investments or currencies are bought and sold and
includes, without limitation, any automated trading system administered
by an Exchange;
"FSA" means the. Financial Services Authority and any successor
thereto, the central regulatory authority for United Kingdom investment
business;
"FSA1986" means the Financial Services Xxx 0000 of the United Kingdom
and any successor thereto;
"Further Schedule" means any further schedule or notice issued by us to
you after the date of this Agreement;
"a futures or option contract" means a contract, for future delivery
and/or settlement, to (a) buy or sell an Asset and/or (b) pay or
receive a sum of money by reference to an index or formula (including
without limitation the price or value of any Assets);
"LCH" means The London Clearing House Limited;
"LIFFE" means the London International Financial Futures and Options
Exchange and/or, as the context requires, LIFFE Administration and
Management;
"Margin" means the amount of cash (including premiums) as may from time
to time be demanded by us from you to protect us against any loss or
risk of loss on present, future or contemplated Contracts and/or Client
Contracts;
"Margin Account" means a client bank account with such approved bank or
banks as we may from time to time determine, which (in the case of any
such account in which Client Money is held) is a margined transaction
bank account within the meaning of the Client Money Regulations;
"Market Requirements" means
(a) the constitution, by-laws, rules, regulations, orders,
directives, announcements, decisions, procedures, standard
terms and customs made, issued by, or published under the
authority of any Exchange, Clearing House, self-regulating
organisation or market of which we or any relevant Associated
Firm or any Broker is a member, or to whose authority we are
or any of them is subject, directly or indirectly, or where
the relevant transaction is executed and/or cleared, and
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(b) any other requirements of the relevant Exchange, Clearing
House or Broker (including without limitation any and all
agreements and deeds entered into by us or any relevant
Associated Firm or Broker with or in favour of the relevant
Exchange, Clearing House or Broker),
all as amended, supplemented or replaced from time to time;
"Open Contract" means a Contract which has not been closed out and
which has not yet matured;
"Regulatory Body" means any Exchange, Clearing House, governmental,
quasi-governmental or other department, agency or self-regulating
organisation of which we are a member which has direct or indirect
regulatory or enforcement authority or responsibility over us (or to
any relevant Associated Firm or Broker), or any investment business
conducted by us or such relevant Associated Firm or Broker for or with
you;
"Rules" means the FSA Statements of Principle, the rules of SFA, the
Client Money Regulations and the Common Unsolicited Calls Regulations;
"Securities" means securities, investments and financial instruments;
"Taxes" means taxes, duties, imposts and fiscal and regulatory charges
of any nature, wherever and whenever imposed, including without
limitation, value added taxes, stamp and other documentary taxes and
Exchanges and Clearing House and investment industry levies; and
"Transaction" means the entering into of a Contract, closing out or
effecting delivery and/or settlement of a Contract (which terms shall
include exercise or allocation of an option Contract) pursuant to the
Customer Documents.
References herein to "we" or "us" shall mean MSIL and/or MSSL and/or
each or any of our Associated Firms or members of a relevant Exchange
to whom we have delegated pursuant to Clause 3 and /or (in Clauses 9,
21 and 22) any associate of MSIL and/or MSSL, and references to "our"
shall be construed accordingly.
Any words or expressions to which a meaning is given in the Rules,
shall, except where the context indicates otherwise, have the same
meaning in the Customer Documents.
Words importing the singular shall, where the context permits, include
the plural and vice versa. The expression "person" shall include any
firm, partnership, association of persons and body corporate and any
such persons acting jointly and the personal representatives or
successors in title of any such person. Where the customer comprises
two or more persons the liabilities and obligations under the Customer
Documents shall be joint and several. References to "writing" shall
include telex, facsimile transmission or transmission of text by any
other electronic means. References to statutory provisions, rules and
regulations shall include any modification, re-enactment or re-making
thereof.
All headings are for convenience only and shall not affect the
interpretation of the Customer Documents.
2. Services to be provided
2.1 The services which we may provide to you are general investment and
dealing services in financial and commodity options, futures and
contracts for differences traded on an Exchange, together with related
research, advice, clearing and settlement facilities and any other
services agreed between us.
2.2 We shall not undertake discretionary transactions for you unless you
have signed and returned to us a Discretionary Trading Authorisation.
3. Delegation
3.1 We may arrange for any of our Associated Firms or any other member of a
relevant Exchange to carry out the services to you, which we agree to
provide to you pursuant to this Agreement.
3.2 We may designate a Broker to execute, clear and/or settle any
transaction subject to the Rules and to such conditions as we may
impose.
4. Introduction of business
4.1. We may introduce you to any Associated Firm outside the United Kingdom
and you hereby authorise us on any such Associated Firm's behalf to
expressly invite it to call you with a view to entering into investment
transactions from time to time with or for you. If such Associated Firm
agrees to do so:
(a) you shall have a direct relationship solely with such
Associated Firm and, in any dispute between, or claim against,
you and/or any such Associated Firm, you shall have no
recourse to us; and
Page 3
(b) you may place orders with us for the Associated Firm to
execute, subject to its terms. In any of these transactions,
we will act as agent for the Associated Firm, and nothing we
do in connection with such transactions will make us your
agent.
4.2 For any transaction or other investment services provided to you by
such Associated Firms, only the following provisions of this Agreement
will apply as between us and you, as the context may require and each
as amended from time to time;
(a) Clauses 1, 2, 4, 5.2, 8, 9, 21, 22, 26, 29-31and Chapters VI
and VII, Schedule 2 and Schedule 3; and
(b) in the case of the latest Notice of Treatment sent by us to
you as a non-private customer or market counterparty,
paragraphs 1 and 2 of that Notice.
5. Dealings and rules, regulations and restrictions
5.1 All Client Contracts and Transactions shall be subject to applicable
Market Requirements and Applicable Law; provided that:
(a) if there is a conflict between (i) the Customer Documents and
(ii) any such requirements and/or law, the latter will
prevail; and
(b) we are entitled to take or omit to take any action we consider
fit or appropriate to ensure compliance with such laws and
requirements; all actions we take will be binding on you.
5.2 We are authorised by you at any time to do any thing or disclose any
matters concerning you or your dealings (whether or not pursuant to the
Customer Documents) if required by any Applicable Law, or which we are
requested to do or disclose by any Regulatory Body.
CHAPTER II - TERMS APPLICABLE TO DEALINGS
6. Contracts and Client Contracts
6.1 If we carry out a Transaction on your request or pursuant to Clause 24
below:
(a) a corresponding Client Contract shall come into existence on
the purchase or sale of a Contract or, as the case may be
exercise and allocation of an option Contract in respect of
which the underlying Asset is a futures Contract. The Client
Contract will terminate when the Contract is closed out,
settled or delivered; and
(b) you will have the obligations in relation to the Transaction
and the Client Contract that are mentioned in this Agreement
and the Customer Documents.
6.2 For each Client Contract, we will have made or placed an equivalent
Contract on the floor of the relevant market (by open outcry on the
floor of, or on an automated trading system administered by, a futures
and options Exchange or the futures or options market of any other
Exchange) or will have entered into an equivalent Contract with or
through a Broker pursuant to Clause 3 and we shall thus have an
interest in the Transaction.
6.3 Any Contract which we acquire as a result of your instructions will,
unless the position has been closed out, result in you becoming liable
to us in relation to the corresponding Client Contract for actual
delivery of its underlying Asset or payment of the relevant price,
under and subject to Market Requirements.
7. Acceptance and execution of orders
7.1 Every order which we may take is accepted and executed, and every
Client Contract shall be entered into, on the basis that we contract
with you only as a principal and not as agent for you unless otherwise
required by Market Requirements.
7.2 If we have to carry out a Transaction as agent on an Exchange where we
would not deal as principal then, for that Transaction, you agree to be
bound by all Market Requirements of that Exchange and you undertake to
sign and deliver to us any further Customer Documents as we may
require. Unless we otherwise require, Market Requirements of that
Exchange will be incorporated herein.
8. Aggregation of orders
We may aggregate your orders with our own (in-house) orders and/or
orders of our associates, connected customers and/or other customers.
This aggregation may operate on some occasions to your advantage and on
others to your disadvantage.
9. Research and recommendations
9.1 We are under no obligation to provide research reports and
recommendations to you and, where provided, you may not receive them at
the same time as our other customers.
Page 4
9.2 Our employees, officers and directors may receive, know about, act upon
or use such research reports and recommendations before they are
received by our customers. We are under no obligation to take account
of these reports or recommendations when we deal with or for you.
10. Client actions
10.1 You will take any action and give us in relation to the corresponding
Client Contract any information that we ask for in relation to the
delivery, settlement, and, if a purchased Option Contract, the exercise
or allocation, of any Contract which has not been closed out.
10.2 Notwithstanding Clause 10.1 above and regardless of any right of
equity, set-off or counterclaim which you may have or allege against
us, any of our Associated Firms or any person connected with us, you
will promptly take all action necessary (including the supply of
information) to enable us to settle or deliver any Contract which you
have instructed us to open and which has not been closed out at the
time such Contract is to be performed.
11. Closing Out
11.1 Subject in particular to Clauses 3 to 8 and 33.3, Market Requirements
and any further requirements we notify you of, you may at any time
before the date for performance of a Client Contract request us to
close out the matching Contract or, if a purchased option Contract,
exercise that Contract in accordance with its terms. If the closing out
or exercise results in a sum of money being due to us, the relevant
Exchange, Clearing House and/or Broker, we shall notify you of that
amount, which will be payable by you immediately.
11.2 Unless we in our absolute discretion determine otherwise or we accept
instructions from you to do otherwise, equal and opposite Contracts and
Client Contracts (closing out being determined on a "first in, first
out" basis) will automatically fix the amount of profit or loss in
relation thereto.
12. Allocation
If the relevant Clearing House and/or Broker does not allocate long
Open Contracts at maturity directly to a specific account of ours or to
short Client Contracts (or vice versa) we may allocate those Contracts
at random or in a way which seems to us to be most equitable as between
clients. If dealings on our own account are involved at the same time,
allocation will be to all clients first, and we will receive no
allocation until all relevant Client Contracts have been satisfied.
13. Delivery to you
When we receive any amounts and/or Assets (including documents of
title), pursuant to a Transaction, provided that you have fulfilled all
your obligations under this Agreement and subject to Clause 15, 18.3,
22.2 and 24.2, we will deliver such amounts and/or Assets to you in
respect of the corresponding Client Contract, after deduction of any
Charges and Taxes.
14. Option Premiums
In respect of an option Contract matching a Client Contract:-
(a) if you are a buyer, you will pay to us on demand any premium
payable under the rules of the relevant Exchange and/or
Clearing House ("the premium"); and
(b) if you are a seller, when we receive premium from the relevant
Exchange, Clearing House and/or Broker we will pay it into the
Margin Account as Margin for your account. You may be required
to pay further margin in respect of the relevant Contract and
corresponding Client Contract.
15. Alteration of Contracts
If the relevant Exchange, Clearing House or Broker requires any terms
or conditions of any Contract matching a Client Contract (including the
Assets subject to it) to be altered, we may take all actions as may, in
our absolute discretion, be necessary, desirable or expedient to comply
with such requirements or to avoid or mitigate loss resulting from any
alteration. All actions taken by us will be binding on you, and any
alteration will be deemed incorporated into the corresponding Client
Contract. We shall notify you of any alteration (in advance, where
reasonably practicable).
16. Charges
16.1 Our charges will either be a commission or a xxxx-up or xxxx-down on
the fee payable by us to any Exchange, Clearing House and/or Broker for
the relevant Transaction and/or such other amounts as may be agreed
from time to time between you and us. Our charges vary according to the
transaction and customer, so the charges you pay for any particular
transaction may differ from those another customer may pay in a similar
transaction.
16.2 We may share charges with our Associated Firms or other third parties
or receive remuneration from them for transactions carried out with or
for you. Details of any such arrangements will be made available to you
on your written request.
17. Interest
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17.1 We will not pay interest to you on any Client Money or other money,
which we receive from you or hold on your behalf, unless we separately
agree to do so.
17.2 Interest will accrue on the amount that you have not paid us when due
until payment (as well after as before judgement). Such interest will
be calculated at the rate not to exceed 2 per cent per annum above the
base rate or prime rate (or local equivalent thereof) of the bank (or
if there is more than one bank, the one determined by us in our
absolute discretion) at which we maintain our principal securities
settlement or other relevant account in the relevant currency. If such
rate cannot be ascertained for any reason or is insufficient in our
sole judgement to compensate us for our loss or expense, such interest
shall be calculated at the rate per annum conclusively determined by us
to be equal to the loss of interest we suffer or, as applicable, our
cost of funding at prevailing markets rates the amount you owe from
such sources and for such periods as we may decide.
CHAPTER III - MARGIN
18. Margin payment and Client Money
18.1 You will pay to us upon demand such sums as we may in our absolute
discretion require from time to time as Margin in respect of all
present, future or contemplated Contracts and Client Contracts.
18.2 As soon as practicable we will pay or credit all Client Money or other
Margin to a Margin Account at an approved bank (which may be any of our
Associated Firms) that we select. The currency of the Margin you pay to
us shall be the currency of the relevant underlying Contract or, if
agreed by us and you, another currency. Settlement of all transactions
(including Margin payments thereon) will be made in the currency of the
relevant underlying Contract and you bear all risk and cost in respect
of any conversion of currency in a Margin Account. Any such conversion
will be made by us at such reasonable market rate or rates as we will
determine.
18.3 You agree that we will hold your interest under the trust declared
under the Client Money Regulations and all other Client Money, which is
in a Margin Account on trust in the following order of priority:
(a) for ourselves to the extent of all amounts which are or may
become due to us or payable by us on your behalf under or
pursuant to the Customer Documents; and, thereafter
(b) for you to the extent of any surplus which is due to you after
the payment of all amounts due to or payable by us under
paragraph (a) above.
18.4 We may withdraw Client Money and/or any other money held in a Margin
Account to pay to any Broker, Clearing House, Exchange or other parties
all margins, premiums and other sums on futures and options Contracts
demanded or due from us in respect of our clients, and for any other
purposes allowed under the Client Money Regulations.
18.5 Subject to the terms of the Client Money Regulations, any loss incurred
on default by any Exchange, Clearing House or Broker in respect of
Margin paid by us shall be borne by all of our clients at the date of
such loss pari passu, in proportion to their respective entitlement to
monies in the relevant Margin Account at that time.
18.6 Where you agree to effect transactions, or if you give instructions to
us to effect transactions in a jurisdiction outside the United Kingdom,
then we may need to appoint an intermediate broker, settlement agent or
custodian to undertake those transactions. In order to meet the margin
and settlement obligations to the relevant Exchange or Clearing House,
we may need to pass your money and/or assets to an intermediate broker,
settlement agent or custodian in that jurisdiction. In that event you
should note that there may be different settlement and legal and
regulatory requirements in these overseas jurisdictions together with
different practices for the separate identification of your investments
and your money might not be protected as effectively when held by such
an intermediate broker as if it were held in a client bank account in
the United Kingdom. You should note that in the event of a shortfall
arising on the money available to meet the claims of segregated
clients, your claim will be restricted to the money held in our client
bank accounts in respect of transactions carried on through that
intermediate broker and to any money received from the intermediate
broker relating to those transactions.
18.7 The approved bank at which your money is held may be located outside
the United Kingdom. You should note that the legal and regulatory
regime applying to such banks may be different from that of the United
Kingdom and in the event of a default of the approved bank, your money
may be treated differently from the position that would apply if the
money was held by an approved bank in the United Kingdom.
19. Margin Securities
19.1 Amounts you owe to us by way of Margin under Clause 18 may, in our
absolute discretion, be satisfied by way of deposit or transfer of
Charged Securities as security. We may, in our discretion, permit you
to deliver by way of Margin, Charged Securities other than those
accepted by the relevant Exchange or Clearing House as Margin. Our
charges for providing this facility to you will be separately agreed
with you. This Clause 19 will apply to all Securities delivered by way
of Margin. Charged Securities will not (unless we agree otherwise) be
registered in your name.
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19.2 As continuing security for all your liabilities and obligations under
the Customer Documents, you acting in due capacity (and with the intent
that the security so constituted shall be a security in our favour
extending to all beneficial interests in the assets hereby charged and
to any proceeds of sale or other realisation thereof, including any
redemption monies paid or payable in respect thereof) hereby assign,
charge and pledge to us, free of all adverse interests whatsoever by
way of first fixed charge, all Charged Securities. Each Approved
Custodian will hold to our order all Charged Securities held by it for
its account.
19.3 You will forthwith execute on request all transfers, assignments,
mortgages, charges and other documents, give notices and directions and
do any other acts and things as we may specify, to enable us or our
nominee to be registered as the owner of or otherwise obtain legal
title to any Charged Securities, to perfect our rights with respect to
the security referred to in this Clause 19, to secure further your
liabilities and obligations, to facilitate the exercise of our rights
hereunder, or to satisfy any Market Requirements.
19.4 You will not, without our prior written consent, at any time during the
term of this Agreement, grant or agree to grant any option over, sell,
assign or transfer, or agree to attempt to sell, assign or transfer, or
create, agree or attempt to create, or allow to exist any charge, lien,
or other encumbrance on or over any or all of the Charged Securities,
except for the charge set out above.
19.5 We will hold all Charged Securities for the purposes of satisfying any
and all of your obligations and liabilities under the Customer
Documents. We may, without prior notice, free of any interest therein
of yours, any client of yours or any other person for whom you are
trustee or agent:
(a) deposit, charge, pledge or otherwise create security over the
Charged Securities with, to the order of or in favour of any
Exchange, Clearing House or Broker
(i) on such terms as such Exchange or Clearing House may
prescribe, and
(ii) on terms that, subject to the Rules, the Broker may
deal with the Charged Securities in accordance with
Market Requirements and any agreement made with us;
The relevant Exchange, Clearing House or Broker may enforce
and retain such deposit, charge, pledge or other security to
satisfy any obligations of yours or ours to the Exchange,
Clearing House or Broker; and
(b) register, sell, realise, charge or otherwise deal with the
Charged Securities on such terms (including as to the
consideration received therefor) as we may in our absolute
discretion think fit (with prior reference to you where
practicable, but in any case with subsequent notice to you,
and without being responsible for any loss or diminution in
price). Any consideration received will be credited to the
Margin Account.
If Charged Securities are denominated in a different currency from that
in which any relevant cost, damages, loss, liability or expense is
denominated, we may convert any amount realised at such rate as we
determine at the time.
19.6 Where we deposit, pledge or charge Charged Securities under Clause
19.5(a), the part of the proceeds of any sale of those securities which
exceeds your margin requirements to us will be subject, in the event of
our default, to the pooling rules under the Client Money Regulations.
This means that money held in our Client Money bank accounts is pooled
and distributed pari passu to meet the claims of all customers who are
entitled to protection under the Client Money Regulations. If there is
a shortfall in an overseas Client Money bank account, a separate pool
may be formed for all customers whose money was held in that account.
19.7 When we are satisfied that all costs, damages, losses, liabilities and
expenses incurred under the Customer Documents have been satisfied,
discharged or otherwise released, we may re-transfer or, re-deliver any
certificates or documents of title relating to you upon request.
19.8 You agree that if we re-transfer or re-deliver fungible Securities
(whether Charged Securities or otherwise) to you, these need not be the
identical Securities originally deposited, charged, or transferred to
us, and you will accept Securities of the same class and denomination
or other Securities which then represent the same.
19.9 Pending the re-transfer or re-delivery we will credit any income
received in respect of Charged Securities, net of any Taxes payable by
us (whether by withholding or otherwise) on the income, to the Margin
Account. You may direct us as to the exercise of any voting or other
rights attached to or conferred on any Charged Securities.
19.10 Unless the context otherwise requires, references in this Clause 19 to
"we" or "us" includes references to any person holding any of the
Securities or in whose name any of them may be registered.
20. Custodian activities and documents of title
20.1 We may (subject to the Rules) act, or may appoint any of our Associated
Firms which are eligible custodians or any other eligible custodian (as
defined by the SFA) to act, as custodians of your documents of title or
certificates evidencing title to your assets (including Charged
Securities, except where absolute title passes to us).
Page 7
20.2 If we consider it appropriate to register your registrable assets in a
name other than your own, then we may arrange such registration in the
name of a nominee company, which is controlled by:
(a) ourselves;
(b) an Associated Firm;
(c) a recognised or designated investment exchange; or
(d) an eligible custodian (as defined by the Rules) which may be
an Associated Firm.
Such assets will be held by such nominee on trust for you, except that,
in the case of assets held by a custodian which is not an affiliate of
ours, the nominee shall hold its rights against such custodian on trust
for you.
20.3 Where, due to the nature of the law or market practice of an overseas
jurisdiction, it is in your best interests, or it is not feasible to do
otherwise we shall register your assets in the name of an eligible
custodian or ourselves. If your assets are registered in our name you
should note that your assets may not be segregated from the assets of
our firm and in the event of our default you may not be as well
protected.
20.4 Assets will only be held/registered outside the normal SFA requirements
upon your specific written instructions. You should note that the
consequences of doing so are entirely at your own risk.
20.5 Where assets are held on your behalf overseas, you should note that
there may be different settlement, legal and regulatory requirements in
those jurisdictions from those applying in the UK, together with
different practices for the separate identification of your
investments.
20.6 Your assets may be pooled with those of one or more customers. This
means that individual customer entitlements may not be identifiable by
separate certificates, other physical documents of title or equivalent
electronic record and in the event of an unreconcilable shortfall after
the default of a custodian, customers may share in that shortfall
pro-rata.
20.7 We will collect any dividends, interest, or other entitlements, in cash
or in kind, to which you may be entitled and of which we are notified
and will remit to you such dividends or interest as soon as possible
after deduction of any Taxes payable or credit them to such account of
yours as we may consider appropriate.
20.8 In respect of any investments held on your behalf by us or a third
party appointed by us under or pursuant to the Customer Documents, if
we are notified of any voting and/or any other rights or privileges
(including without limitation conversion and subscription rights and
rights or privileges arising in connection with takeovers, other offers
or capital reorganistions) attaching to those investments may be
exercised, we will notify you as soon as reasonably practicable of such
rights and/or privileges.
If you unambiguously inform us in writing within 14 days of such notice
(or such shorter period as may be specified or appropriate) that you
wish us to exercise the rights and/or privileges and we have sufficient
cleared funds, we will do so but only on such terms as you advise in
writing and which are reasonably acceptable to us.
Otherwise we will not exercise any such rights and/or privileges.
Notwithstanding the absence of satisfactory instructions or sufficient
funds, in the event that we are notified that subscription rights
attach to any investments that we or such third party hold on your
behalf we may, in our or its absolute discretion, dispose of such
rights on your behalf in such manner as we think, or it thinks, fit.
20.9 If we are notified by any third party appointed by us under or pursuant
to the Customer Documents, or by any company in which we or such third
party hold investments on your behalf that such company intends to make
calls upon those investments in respect of any monies whatsoever unpaid
on them, we will notify you as soon as practicable of such calls. If
you provide us with the relevant funds in sufficient time for us to do
so, we will satisfy such calls on your behalf and on such terms as you
advise in writing and which are reasonably practicable to us. Otherwise
we shall take no action on your behalf and will have no liability
whatsoever in respect of the consequences of a failure to satisfy the
calls made. However, where the custodian is legally liable to meet such
calls it may do so and you will reimburse us forthwith upon demand.
20.10 Subject to Clauses 19, 20.11 and 24 and the Rules we are not authorised
to:
(a) borrow money on your behalf against the security of your
Securities; or
(b) lend any documents of title or certificates evidencing title
to any third party; or
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(c) otherwise use your documents of title or other documents
evidencing title to investments belonging to you for our own
account or for the account of another of our customers.
In each case, unless we have first entered into a written agreement
with you giving us such authorisation.
20.11(a) Without prejudice to Clause 19.5, you hereby authorise MSIL at any time
or times to borrow, lend or otherwise use for its own purposes any
Charged Securities without giving notice of such borrowing, lending or
other use to you. MSIL may retain for its own account all fees, profits
and other benefits received in connection with any such borrowing, loan
or use. Upon such borrowing, lending or other use, such Charged
Securities will become the absolute property of MSIL (or that of such
transferee) free from the security created hereunder and from any
equity, right, title or interest of yours and you will thereupon have a
right against MSIL for the delivery of Securities of the same issuer,
forming part of the same issue and of an identical type, nominal value,
description and amount as such Charged Securities (provided that where
there has been any corporate action or other events in relation to any
such Charged Securities, we may determine what assets (which may
consist of and include money or other property) are to be treated as
equivalent for this purpose) ("Equivalent Securities").
20.11(b) MSIL may deliver, or procure the delivery of, Equivalent Securities to
you under Clause 20.11(a) by causing such Equivalent Securities to be
transferred, appropriated or designated to your account(s) charged to
it from which such Securities were held prior to such use or, if not
possible to do so, to such other of your accounts charged to MSIL as
MSIL shall determine. Such Securities shall upon such transfer,
appropriation or designation become subject to all the provisions of
the Customer Documents, including, without limitation, those of Clause
19 and this Clause 20.11.
20.11(c) Our obligation to return Equivalent Securities under this paragraph
may, if we so elect, be included in any set-off of obligations of ours
to you against any obligation of yours to us (whether under Clauses 24
or 28 below or otherwise), on the basis that there is for that purpose
due from us to you an amount equal to the Default Market Value of such
Equivalent Securities, and our obligation to return Equivalent
Securities shall, if and to the extent so included, be extinguished
accordingly. For this purpose -
(i) the Default Market Value of such Equivalent Securities means:
(A) if during the Default Valuation Period (as defined
below) we have sold Securities forming part of the same
issue and being of an identical type and description to
those Securities and in substantially the same amount
as those Securities, the net proceeds of sale (after
deducting all reasonable costs, fees and expenses
incurred in connection therewith) and
(B) failing such sale during the Default Valuation Period,
the market value of such Securities at the Default
Valuation Time as determined by us in good faith;
(ii) the Default Valuation Period means:
(A) if the relevant set-off occurs on a day that is a
dealing day in the most appropriate market for
Securities of the relevant description (as determined
by us), a period commencing on the opening of business
on that day and ending at the close of business on the
following dealing day; and
(B) in any other case, the close of business on the second
dealing day in that market after the day on which the
set-off occurs.
(iii) the Default Valuation Time means the end of the Default Valuation
Period.
Where the amount of any Securities sold as mentioned in (i)(A) above is
not identical to that of the Securities to be valued for the purposes
of this definition, the Default Market Value of those Securities shall
be ascertained by dividing the net proceeds of sale by the amount of
the Securities sold so as to obtain a net unit price and multiplying
that net unit price by the amount of the Securities to be valued.
CHAPTER IV - MATERIAL INTERESTS
21.1 The relationship between you and us is as described in the Customer
Documents. Neither that relationship nor the services we provide nor
any other matter will give rise to any fiduciary or equitable duties on
our part which would prevent or hinder us from doing business for or
with you (whether acting as principal or agent), doing business with
associates, connected customers, and other investors and generally
acting as provided in the Customer Documents.
We may give advice or make recommendations to you, enter into
Transactions for or with you or act as your agent or provide any other
service pursuant to Clause 2 notwithstanding that we may have a
relationship, arrangement or interest that is material in relation to
the Transaction, advice or recommendation concerned and/or the Asset
underlying any Contract or Client Contract, including (but not limited
to) the following circumstances where:-
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(a) we have acted, are acting or are seeking to act as a financial
adviser or lending banker to the issuer (or any of its
affiliated companies) of the Assets the subject of a
Transaction or have advised or are advising any person in
connection with a merger, acquisition or take-over by or for
such issuer (or any of its affiliated companies);
(b) we have sponsored or underwritten or otherwise participated
in, or are sponsoring or underwriting or otherwise
participating in the Assets the subject of a Transaction;
(c) we have a holding, dealing, or market-making position or may
otherwise be trading or dealing in the Assets the subject of a
Transaction or in investments (including without limitation
any futures or option Contracts) or assets of any kind
underlying, derived from or otherwise directly or indirectly
related to such investments;
(d) we have received or are receiving payments or other benefits
for giving business to the firm with which your order is
placed;
(e) we have been or are an associate of the issuer (or any of its
affiliated companies) of the Assets the subject of a
Transaction;
(f) we are matching your transaction with that of any other client
(including without limitation us, any Associated Firm,
connected customer or other customer of us) either by acting
on behalf of such person as well as on behalf of you ("agency
cross") or by executing matching transactions at or about the
same time with you and such persons ("back-to- back principal
trade").
21.2 No further disclosure to you is required of any relationship,
arrangement or interest which falls within one of the circumstances
referred to in Clause 21.1 above, and we will be entitled to retain any
profit or benefit arising as if no such relationship, arrangement or
interest existed.
21.3 We will not be obliged to disclose to you any matter, fact or thing,
whether or not such disclosure would or might be a breach of any duty
owed by us to any other person, and we shall not be obliged to disclose
to you any matter, fact or thing which comes to the notice of any of
our employees, officers or directors if the employee, officer or
director who is dealing for or with you is unaware of such matter, fact
or thing.
21.4 We may in our absolute discretion decline to carry out a Transaction
for or with you or to give advice or make a recommendation to you where
we may have an interest in respect thereof which will or may conflict
with your interests.
CHAPTER V - POWERS AND EXCLUSIONS OF LIABILITY
22. Exclusion and restriction of liability
22.1 Nothing in the Customer Documents shall exclude or restrict any
liability which we have under the Rules or the regulatory system
established by the FSA, and which may not be excluded or restricted
thereunder.
22.2 We shall not be liable to you in respect of any relevant Client
Contract, any matching Contract or otherwise if and to the extent that
the relevant Exchange, Clearing House and/or Broker has ceased for any
reason (including netting-off our positions with it) to recognise the
existence of any Contract or fails to perform or close out any Contract
or defaults in respect of margin or collateral. This will not affect
your obligations and liabilities hereunder in respect of Contracts,
which you have instructed us to open, and which have not been closed
out.
22.3 Neither we nor any of our employees, officers or directors will be
liable for any loss resulting from any act or omission made under or in
relation to or in connection with the Customer Documents, except where
such loss results from any bad faith, wilful default, fraud or
negligence of us or any of our employees, officers or directors.
22.4 Neither we nor our employees, officers or directors will be liable for
any consequential or special damages howsoever arising.
22.5 We will not be liable for the solvency, acts or omissions of:-
(i) any nominee, custodian or other third party with whom any
Charged Securities (or other investments) are held pursuant to
Clauses 19 and 20 above; or
(ii) any bank with which we maintain any client bank account; or
(iii) any other third party with whom we deal or transact business
or who is appointed by us in good faith on your behalf,
unless such nominee, custodian, bank or other third party is an
Associated Firm, but we will make available to you, when and to the
extent reasonably so requested, any rights that we may have against
such person.
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22.6 If any claim is made by or against us or any of our employees, officers
or directors against or by any third party in connection with this
Agreement, any Contract acquired or Transaction effected on your
instructions or a corresponding Client Contract or arising out of any
act or omission by us or our employees, officers or directors, you
hereby agree to provide us or our employees, officers or directors with
any assistance which you may be reasonably asked to give.
22.7 Neither we nor any of our directors, officers or employees will have
any responsibility or liability whatsoever for:
(a) any advice or opinion which may be given to you concerning the
Customer Documents; or
(b) any expense, loss or damage suffered by you as a result of (i)
our carrying out your instructions, if we acted in accordance
with such instructions or otherwise acted reasonably, or (ii)
properly carrying out or failing to carry out any actions
which we are permitted but not required to carry out under the
Customer Documents.
23. Indemnity
You will fully indemnify us, our Associated Firms and any of our or
their employees, officers or directors (each an "Indemnified Person")
against all costs, expenses, damages, liabilities and losses which any
such Indemnified Person may suffer or incur directly or indirectly as a
result of, or in connection with, or arising out of the Customer
Documents or any Transaction effected on your instructions or arising
out of any act or omission by such Indemnified Person or by any other
person permitted under the Customer Documents, and against any claims
which may be made against any such Indemnified Person in the
performance of the powers or duties of any such Indemnified Person
(including in any such case any cost of enforcing the same). The
indemnity will not extend to any Indemnified Person if such costs,
expenses, damages, liabilities and losses result primarily from the bad
faith, wilful default, fraud or negligence of such Indemnified Person.
24. Xxxxxx Xxxxxxx'x xxxxxx
24.1 If we have determined, in our absolute discretion, that you have not
performed (or may not be able or willing in the future to perform) any
of your obligations to us under or pursuant to the Customer Documents,
we may (with prior notice only if reasonably practicable) take such
steps as we consider necessary or desirable to comply with, perform,
cancel or satisfy any of our obligations to the relevant Exchange,
Clearing House or Broker in respect of any Contract or Contracts
acquired on your instructions, or otherwise to protect our position,
including closing out and/or performing any or all such Open Contracts.
For such purpose, we may:
(a) buy or sell the Asset underlying any Open Contract in any
manner including to or from ourselves or any Connected
Company;
(b) buy or sell futures or options contracts;
(c) open new long or short positions in order to establish a
spread or straddle;
(d) borrow, buy or sell any currency;
(e) apply any Margin;
(f) cancel, terminate or otherwise liquidate any Transaction
between you and us; and/or
(g) set off any obligation to you against any of your obligations
to us;
in each case so that all amounts spent by us in connection with any
such actions that are in excess of the amount held in the Margin
Account for you shall be paid by you to us on demand.
24.2 On the exercise of our rights under Clause 24.1 above:
(a) we are not obliged to deliver to you in respect of any
corresponding Client Contract the underlying Asset or any
money received or receivable on closing out until all of your
liabilities to us are satisfied or discharged to our
satisfaction, and all amounts you owe us are paid, and:
(i) any such underlying Asset may be registered in our
name or that of our nominee (which may be an
Associated Firm), and we or such nominee may be the
custodian of the documents of title or certificates
evidencing title to such Asset;
(ii) if such amounts are not paid and/or liabilities to us
are not satisfied or discharged to our satisfaction,
we may sell or realise the underlying Asset upon
terms (including the consideration received therefor)
as we in our absolute discretion think fit, without
being responsible for any loss or diminution in
price; any consideration received therefor shall be
credited to the Margin Account; and
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(iii) any income in respect of such Asset paid to us, net
of any Taxes payable by us (whether by withholding or
otherwise) in respect of such income, shall be
credited to the Margin Account; and
(b) all amounts owing to us hereunder will become immediately payable.
24.3 We do not have to close out Contracts or take any other action in
respect of Open Contracts acquired on your instruction. In particular
(subject to Clause 24.1 above), no failure by you to pay Margin when
demanded will require us to close out any relevant Contract to which
such Margin is attributable.
24.4 We may convert any funds realised pursuant to this Clause 24 at such
rate and into such currencies as we may reasonably consider appropriate
at the relevant time.
25 Certificates conclusive
Our certificate that any of our rights under the Customer Documents
have been exercisable, or as to any amount payable or due under the
Customer Documents, will be conclusive and binding on you, absent
manifest error. No purchaser, pledgee or transferee of Charged
Securities will need to enquire whether any such power has become
enforceable, or to establish the proper application of any money paid.
26. Time of the essence
Time shall be of the essence in relation to all matters arising under
or pursuant to the Customer Documents in respect of Transactions or
Client Contracts or otherwise in respect of your dealing in futures or
options.
27. Retention of title
Title to Securities purchased by you (whether upon exercise of an
option Client Contract or otherwise) will pass only when you pay the
amount due for such purchase.
28. Lien and set-off
As further security for all of your obligations hereunder (but subject
to the Rules) we shall have the right to retain (and apply as set out
below) all of your property which we or any of our Associated Firms
hold for any purpose, including, but not limited to, property held in
any other of your accounts with us or any of our Associated Firms,
whether or not we have made any advances in connection with such
property. From time to time we may, without notice, transfer and
re-transfer any money or other property between any such accounts. You
shall execute such documents and take such other action as we shall
reasonably request in order to perfect our rights with respect to any
security referred to in this Clause 28.
29. Force majeure
We shall not be liable to you for the non-performance of any of our
obligations under this Agreement due to any cause beyond our reasonable
control, including without limitation any breakdown or failure of
transmission or communication or computer facilities, postal or other
strikes or similar industrial action, or the failure of any relevant
Exchange, Clearing House or Broker to perform its obligations for any
reason.
30. Taxes
30.1 All amounts which you must pay under the Customer Documents do not
include any applicable Taxes. You must pay any Taxes to us at the same
time as the amounts to which those Taxes relate.
30.2 You are fully responsible for paying all other Taxes due and the making
of all claims in relation thereto whether for exemption from
withholding taxes or otherwise, for filing any and all tax returns, and
for providing any relevant tax authorities with all necessary
information in relation to any investment business we carry on for or
with you or any investments which we hold on your behalf.
30.3 We will use all reasonable endeavours to send you any tax documents
which we receive relating to you or to any monies or investments we
hold under the Customer Documents.
31. Advice
31.1 You rely on your own judgement when you give orders or instructions to
us.
31.2 We do not provide any legal or tax advice. Accordingly, if you consider
it necessary you should consult your own legal or tax advisers.
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CHAPTER VI - AUTHORISATION
32. Due authorisation
32.1 You represent, warrant and undertake to us that:-
(a) in any investment business we carry on for or with you under
this Agreement, you are and will be acting either as principal
or as agent;
(b) you have and will have full power and capacity and have taken
all necessary corporate and other action, and in the case of a
trustee of a particular trust you have and will have full
power and capacity under the relevant trust deeds, to enter
into and perform your obligations under this Agreement
(including without limitation the powers and capacity to grant
us the charge and any other security herein provided for) and
to confer on us the rights and powers contained in or given
pursuant to this Agreement. Without limitation:
(i) your execution, delivery and performance of this
Agreement will not violate or conflict with any
Applicable Law or your constitution or any charge,
trust deed, contract or other instrument to which you
are a party or which is binding upon you or your
assets; and
(ii) the terms and conditions contained in this Agreement
will be your legal, valid and binding obligations;
(c) you are (or some other person for whom you are trustee or
agent and from whom you hold and will at all times hold all
requisite authorities is) and will at all times during the
continuance of this Agreement be the sole beneficial owner of
all Charged Securities. In each case such Charged Securities
are and shall be fully paid and free from all mortgages,
charges, liens and other encumbrances other than those which
may arise in our favour. No other person has or will have any
rights or interests therein and you are lawfully entitled to
create in our favour the security evidenced or intended to be
evidenced hereby;
(d) when further Securities become Charged Securities or otherwise
subject to the charge in Clause 19.2 above you shall be deemed
to have made a further and separate representation and
warranty in the terms of paragraph (c) above;
(e) you and any person designated by you have and shall have, due
authorisation to act in all respects in relation to this
Agreement and each Transaction, Contract and Client Contract
and, in relation thereto, you have obtained, shall obtain and
shall maintain in effect all necessary authorisations,
consents or approvals (including without limitation any
required by any Regulatory Body) and shall comply with the
terms of the same and with all Applicable Law, and shall
provide us with copies or other evidence of such consents or
approvals and such evidence of compliance with such law as we
may reasonably require.
32.2 You agree that, in all investment business which we carry on for or
with you where you are acting as agent, only you will be our customer
and we shall have no responsibility to any principal of yours as our
customer.
32.3 If you are acting as agent for, or on behalf of another in relation to
any Contract and/or Client Contract carried out under this Agreement
then:
(a) you have and will have full power and capacity to enter into
this Agreement and to perform all obligations pursuant hereto
to be performed by your principal under this Agreement;
(b) you are expressly authorised by your principal to instruct us
in relation to such Contract and/or Client Contract in
accordance with the terms and conditions of this Agreement;
and
(c) you will be, and you will procure that your principal will be,
jointly and severally liable, each as if a principal, to us in
respect of all obligations and liabilities to be performed by
you pursuant to and in respect of any such Contract and/or
Client Contract.
32.4 You agree to supply us with such financial information about yourself
(or any immediate, intermediate or ultimate holding company) as we may
reasonably request.
33. Authorised instructions
33.1 You may from time to time notify us in writing of the names of those
persons who are authorised to give instructions on your behalf. Until
we receive notice in writing to the contrary, we shall be entitled to
assume that any of those persons have full and unrestricted power to
give us instructions on your behalf.
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33.2 We are entitled to rely and act without further enquiry on any
instruction, notice, demand, request or information (by whatever means
transmitted and whether or not in writing) which purports or appears to
come and which we reasonably believe in good faith to come from you or
from any person who is or appears to us to be a person designated in
the attached Certificate (if any) or otherwise authorised by you for
the purpose of the Customers Documents or from someone acting on your
behalf, and we shall not be liable for any actions taken or omitted to
be taken in good faith pursuant thereto nor shall we be under any
obligation to confirm instructions before they are executed or the
accuracy or completeness of any such information before it is acted or
otherwise relied upon.
33.3 We are not under any obligation to execute or otherwise enter into any
particular Transaction, or to accept and act in accordance with any
order or instructions, nor shall we be obliged to give any reasons for
declining to do so.
33.4 If we decline to carry out a Transaction we will promptly notify you.
We will have no liability for any expense, loss or damage incurred by
you by reason of any omission so to notify you, otherwise than as a
result of our bad faith, wilful default or negligence; in no event will
we have any liability for any consequential or special damage.
CHAPTER VII - GENERAL
34. Information
34.1 You warrant, represent and undertake that:
(a) you will notify us promptly in writing of any significant
change in your financial position (including changes in
assets, net assets or called-up share capital); and
(b) in entering into this Agreement, we have not made and you are
not relying upon any statements, representations, promises or
undertakings whatsoever that are not contained in this
Agreement;
34.2 You will:
(a) provide us on request all information in your agent's
possession or control of you or your agents as may be required
to be filed or disclosed pursuant to Applicable Law, in each
case regarding us, you, the Customer Documents or any
Contract, Client Contract;
(b) file (within any applicable time periods) such reports,
letters and other communications as may be required from time
to time by any Regulatory Body relating to you or us, you, the
Customer Documents, or any Contract, Client Contract; and
(c) send a copy of all such reports referred to in paragraph (b)
above to us promptly upon such filing, and we may send a copy
of the same to any relevant Exchange, Clearing House member or
Broker.
35. Confirmation and Statements
As soon as practicable after we have carried out a Transaction we shall
confirm details of that Transaction to you. We will provide to you at
agreed intervals a statement of your overall trading (and Margin)
positions with us at the then available current market price.
36. Telephone recording
We may use voice record orders, instructions or conversations we
receive by telephone. Our voice records shall be prima facie evidence
of the order, instructions or conversations recorded, and you agree
that such records shall be admissible as such evidence in any
Proceedings (as defined in Clause 43.2).
37. Notices
37.1 Any instructions or requests you give, or demands or confirmations by
us may be given in writing or, where permitted under the Rules, orally.
Any notice in writing (including without limitation any contract note,
confirmation or demand) may be given by posting or delivering it or by
sending it by telex, facsimile transmission or any other electronic
transmission.
37.2 Any notice or demand given by post will be sent first class, or where
appropriate, by air mail and will, subject to Clauses 37.3 and 37.4
below, be deemed given seven business days after posting and any notice
given by delivery or by telex, facsimile transmission or any other
electronic transmission will be deemed given upon delivery or
transmission (as the case may be), and in proving service of notice it
shall be sufficient to prove, in the case of delivery by post, that the
letter was correctly addressed and was posted first class or, where
appropriate, air mail or, in the case of delivery otherwise than by
post, that it was delivered to the correct address or, in the case of
transmission by facsimile or telex, that it was transmitted to the
correct number and (in the case of telex) received the proper answer
back.
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37.3 Any contract note, confirmation or account statement which we give in
writing shall be deemed correct, conclusive and binding on you if not
objected to in writing within the earlier of five business days of
despatch by us or one business day of your receipt thereof.
37.4 Any statement produced may be delivered by post, or by sending it by
telex, facsimile or other electronic transmission. Where you are
ordinarily resident outside of the UK, we may retain statements
relating to investments and collateral held by a custodian.
37.5 Communications from you under Clause 33.1, 33.2 and 40.1 and any
objection pursuant to Clauses 37.3 and 39.2 shall be deemed received
only if actually delivered.
38. Correct addresses and numbers
Our address for serving notices is shown at the front of this document,
and our facsimile and telex numbers are:
Fax No: 0000 000 0000/0000 000 0000
Telex No: 8812564 MORSTAN
We may change any of these details by written notice to you. Unless you
tell us otherwise we will assume that your correct address and
facsimile and telex numbers are those shown on any communication we
receive which we reasonably believe to come from you.
39. Entire agreement and amendments
39.1 This Agreement, together with all other Customer Documents, represent
the entire terms on which we will undertake for or with your investment
business in Exchange-traded futures and options contracts which is
regulated by SFA. Any alteration to the Customer Documents must be
agreed by us in writing.
39.2 We may amend or supplement our arrangements with you by sending you
Further Schedules or a revised Agreement or by written agreement with
you. Any amendment or supplement will, unless we have received your
written objection, take effect twenty-one days after despatch to you or
on such later date as we may specify, and will apply in respect of any
commitment or transaction entered into by us after that date. Any
amendment or supplement that relates to or results from a change of
Applicable Law may take effect immediately or otherwise as we may
specify.
40. Termination
40.1 Either party can terminate this Agreement without penalty by giving
notice in writing, which will take effect seven days after the notice
is given or after any other period specified in the notice.
40.2 Termination of this Agreement will not affect the rights or liabilities
of either party in respect of Contracts and any corresponding Client
Contracts for which you have already given an instruction which we have
accepted, or in respect of which there is an outstanding liability with
us. Any termination will be without prejudice to our rights to all
Margin and amounts in the Margin Account. The Customer Documents will
apply to these liabilities until all Contracts have been closed out,
settled or delivery effected and all liabilities discharged.
40.3 Termination of this Agreement will not affect any provision of the
Customer Documents which is intended to survive termination.
41. Assignment and Transfer
41.1 The Customer Documents shall be binding upon, and inure to the benefit
of, MSIL and its successors and assigns.
41.2 MSIL may at any time cause all or any part of its rights, benefits
and/or obligations under the Customer Documents to be novated to any
subsidiary or holding company (as defined in section 736 of the
Companies Act 1985) of MSIL or a subsidiary of any such holding company
or any company otherwise affiliated with MSIL (any such company being a
"Connected Company") by delivering to you a written substitution
notice.
Upon delivery of a substitution notice to you:
a) to the extent that in the substitution notice MSIL seeks to
cause its rights and/or its obligations hereunder to be
novated, you and MSIL shall be released from further
obligations to each other hereunder and their respective
rights against each other shall be cancelled;
b) you and the Connected Company shall acquire the same rights
and assume the same obligations between themselves as they
would have acquired or assumed by it as a result of such
novation.
41.3 You may not assign any of your rights under the Customer Documents, any
Contract or Client Contact without our prior written consent. Any
purported assignment of your rights will be invalid.
42. Miscellaneous
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42.1 If any term or part of the Customer Documents is void, voidable or
unenforceable, the rest of the Customer Documents will not be affected.
42.2 Our rights, remedies, powers and privileges in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law.
Our failure to exercise, or delay in exercising, any of our rights,
remedies, powers or privileges will not operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof.
43. Governing Law
43.1 The Customer Documents and all Transactions thereunder shall be
governed by and construed in accordance with English Law.
43.2 Any suit action, claim or proceeding (together in this Clause referred
to as "Proceedings") arising out of or in connection with the Customer
Documents or any Transaction thereunder may be brought in the English
courts. Any objection that you or we may have now or in the future to
the laying of the venue of any Proceedings in any English court, and
any claim that any Proceedings have been brought in an inconvenient
forum, is waived.
43.3 If you are entitled in any jurisdiction to claim immunity for yourself
or for your property or assets from service of process, jurisdiction,
suit, judgement, execution, attachment (whether before judgement, in
aid of execution or otherwise) or legal process in respect of your
obligations under this Agreement, or to the extent that in any
jurisdiction there may be attributed to you or your property or assets
such immunity (whether or not claimed), you waive such immunity to the
fullest extent under the laws of such jurisdiction.
43.4 You irrevocably and generally consent in respect of any legal action or
Proceedings arising out of or in connection with the Customer Documents
or any Transaction to the giving of any relief or the issue of any
process in connection with such action or Proceedings, including,
without limitation, the making, enforcement or execution against any
property, asset, or revenues whatsoever (irrespective of their use or
intended use) of any order or judgement which may be made or given in
such action or Proceedings.
IN WITNESS WHEREOF, this Agreement has been entered into on the date written in
the Customer Signature pages below.
Signed on behalf of
Xxxxxx Xxxxxxx & Co. International Limited
-and-
Xxxxxx Xxxxxxx Securities Limited
By:..........................................
Name: X X Xxxxxxxxx
Title: Company Secretary
Page 16
PART TWO
MASTER NETTING AGREEMENT
THIS MASTER NETTING AGREEMENT is made as of the date specified on the first
customer signature page
BETWEEN
(A) You, as the client named on the customer signature page; and
(B) XXXXXX XXXXXXX & CO. INTERNATIONAL LIMITED ("MSIL") AND/OR XXXXXX
XXXXXXX SECURITIES LIMITED ("MSSL") both of 00 Xxxxx Xxxxxx, Xxxxxx
Xxxxx, Xxxxxx X00 0XX . MSIL is regulated by SFA, and MSSL is regulated
by SFA and a member of the London Stock Exchange.
IT IS HEREBY AGREED AS FOLLOWS:
1. Scope of this Agreement
1.1 Unless otherwise agreed in writing by the Parties in Annex 1 or
otherwise and subject to the next sentence, these terms and the
particular terms agreed by the Parties govern each Transaction entered
into or outstanding between any two Designated Offices of the Parties
on or after the date of execution of these terms. In the case of
Transactions within paragraph (i), (ii), (iii) or (iv) of the
definition of "Transaction", these terms govern only those Transactions
where the exchange mentioned in such definition is a Specified
Exchange.
1.2 These terms, the particular terms of, and applicable to, each and every
Transaction governed by these terms, the Schedules to these terms and
all amendments to any of such items shall together constitute a single
agreement between the Parties. The Parties acknowledge that all
Transactions governed by these terms, which are entered into on or
after the date of execution of these terms, are entered into in
reliance upon the fact that all such items constitute a single
agreement between the Parties.
2. Settlement and Exchange of Clearing Organisation Rules
2.1 Unless a Liquidation Date has occurred or has been effectively set, a
Party shall not be obliged to make any payment or delivery scheduled to
be made by that Party under a Transaction governed by these terms for
so long as an Event of Default or Potential Event of Default with
respect to the other Party has occurred and is continuing.
2.2 Unless otherwise agreed in writing by the Parties, if the Parties enter
into any Transaction governed by these terms to close out any existing
Transaction between the Parties then their obligations under such
Transactions shall automatically and immediately be terminated upon
entering into the second Transaction, except for any settlement payment
due from one Party to the other in respect of such closed-out
Transactions.
2.3 These terms shall not be applicable to any Transaction to the extent
that action which conflicts with or overrides the provisions of this
agreement has been started in relation to that Transaction by a
relevant exchange or clearing organisation under applicable rules or
laws and is continuing.
3. Representations, Warranties and Covenants
3.1 Each Party represents and warrants to the other Party as of the date of
execution of these terms and, in the case of the representation and
warranty in (v) of the Clause 3.1 relating to the entering into of
Transactions, as of the date of entering into each Transaction governed
by these terms that: (i) it has authority to enter into this agreement;
(ii) the person entering into the agreement on its behalf have been
duly authorised to do so: (iii) this agreement and the obligations
created under this agreement are binding upon it and enforceable
against it in accordance with their terms (subject to applicable
principles of equity) and do not and will not violate the terms of any
agreements to which such Party is bound; (iv) no Event of Default or
Potential Event of Default has occurred and is continuing with respect
to it; and (v) it acts as principal and sole beneficial owner (and not
as trustee) in entering into these terms and each and every Transaction
governed by these terms.
3.2 Each Party covenants to the other Party that: (i) it will at all times
obtain and comply with the terms of and do all that is necessary to
maintain in full force and effect all authorisations, approvals,
licences and consents required to enable it lawfully to perform its
obligations under this agreement; and (ii) it will promptly notify the
other Party of the occurrence of any Event of Default or Potential
Event of Default with respect to itself or any credit Support Provider
in relation to it.
Page 17
4 Termination and Liquidation
4.1 If, at any time:
(i) a Party fails to make any payment when due under or to make or
take delivery of any property when due under, or to observe or
perform any other provision of, this agreement (including any
Transaction governed by these terms) and such failure
continues for two business days after notice of
non-performance has been given by the other Party to the
defaulting Party;
(ii) a Party commences a voluntary case or other procedure seeking
or proposing liquidation, reorganisation, an arrangement or
composition, a freeze or moratorium, or other similar relief
with respect to itself or to its debts under any bankruptcy,
insolvency, regulatory, supervisory or similar law (including
any corporate or other law with potential application to an
insolvent Party), or seeking the appointment of a trustee,
receiver, liquidator, conservator, administrator, custodian,
examiner or other similar official (each a "Custodian") of it
or any part of its assets; or takes any corporate action to
authorise any of the foregoing; and, in the case of a
reorganisation, arrangement or composition, the other Party
does not consent to the proposals;
(iii) an involuntary case or other procedure is commenced against a
Party seeking or proposing liquidation, reorganisation, an
arrangement or composition, a freeze or moratorium, or other
similar relief with respect to it or its debts under any
bankruptcy, insolvency, regulatory, supervisory or similar law
(including any corporate or other law with potential
application to an insolvent Party) or seeking the appointment
of a Custodian of it or any part of its assets and such
involuntary case or other procedure either (a) has not been
dismissed within five days of its institution or presentation
or (b) has been dismissed within such period but solely on the
grounds of an insufficiency of assets to cover the costs of
such case or other procedure;
(iv) a Party dies, become of unsound mind, is unable to pay its
debts as they fall due or is bankrupt or insolvent, as defined
under any bankruptcy or insolvency law applicable to such
Party; or indebtedness of a Party is not paid on the due date
therefor or becomes, or becomes capable at any time of being
declared, due and payable under agreements or instruments
evidencing such indebtedness before it would otherwise have
been due and payable, or proceedings are commenced for any
execution, any attachment or garnishment, or any distress
against, or an encumbrancer takes possession of, the whole or
any part of the property, undertaking or assets (tangible and
intangible) of a Party;
(v) a Party or any Credit Support Provider in relation to a Party
(or any Custodian acting on behalf of a Party or any Credit
Support Provider in relation to a Party) disaffirms, disclaims
or repudiates any obligation under this agreement (including
any Transaction governed by these terms) or any Credit Support
Document;
(vi) any representation or warranty made or deemed made by a Party
pursuant to this agreement or pursuant to any Credit Support
Document proves to have been false or misleading in any
material respect as at the time it was made or given;
(vii) (a) any Credit Support Provider in relation to a Party or the
relevant Party itself fails to comply with or perform any
agreement or obligation to be complied with or performed by it
in accordance with the applicable Credit Support Document; (b)
any Credit Support Document relating to a Party expires or
ceases to be in full force and effect prior to the
satisfaction of all obligations of such Party under this
agreement (including any Transaction governed by these terms),
unless the other Party has agreed in writing that this shall
not be an Event of Default; (c) any representation or warranty
made or deemed made by any Credit Support Provider in relation
to a Party pursuant to any Credit Support Document proves to
have been false or misleading in any material respect as at
the time it was made or given or deemed made or given; or (d)
any event referred to in (ii) to (iv) or (viii) of this Clause
4.1 occurs in respect of any Credit Support Provider in
relation to a Party;
(viii) a Party is dissolved, or in respect of a Party whose existence
is dependent upon a formal registration, such registration is
removed or ends, or any procedure is commenced seeking or
proposing a Party's dissolution or the removal or ending of
such a registration of a Party; or
(ix) any event of default (however described) occurs under any
terms of business in place between the Parties or any other
event specified for these purposes in Annex 1 or otherwise
occurs, then the other Party (the "Non-Defaulting Party") may
exercise its rights under Clause 4.2, except that, if so
agreed in writing by the Parties (whether by specifying as
such in Annex 1 hereto or otherwise), in the case of the
occurrence of any Event of Default specified in paragraph (ii)
or (iii) above the provisions of Clause 4.3 shall apply.
4.2 Subject to Clause 4.3, at any time following the occurrence of an Event
of Default, the Non-Defaulting Party may, by notice to the Defaulting
Party, specify a Liquidation Date for the termination and liquidation
of Transactions in accordance with the provisions of Clause 4.4.
Page 18
4.3 If the Parties have so agreed, the date of the occurrence of any Event
of Default specified in paragraph (ii) or (iii) of Clause 4.1 shall
automatically constitute a Liquidation Date, without the need for any
notice by either Party and to the intent that the provisions of Clause
4.4 shall then apply.
4.4 Upon the occurrence of a Liquidation Date:
(i) neither Party shall be obliged to make any further payments or
deliveries under any Transactions governed by these terms
which would, but for this Clause, have fallen due for
performance on or after the Liquidation Date and such
obligations shall be satisfied by settlement (whether by
payment, set-off or otherwise) of the Liquidation Amount;
(ii) the Non-Defaulting Party shall (on, or as soon as reasonably
practicable after, the Liquidation Date) determine
(discounting if appropriate), in respect of each Transaction
governed by these terms, its total cost, loss or, as the case
may be, gain, in each case expressed in the Non-Defaulting
Party's Base Currency (and, if appropriate, including any loss
of bargain, cost of funding or, without duplication, cost,
loss or, as the case may be, gain as a result of the
termination, liquidation, obtaining, performing or
re-establishing of any hedge or related trading position), as
a result of the termination, pursuant to this agreement, of
each payment or delivery which would otherwise have been
required to be made under such Transaction (assuming
satisfaction of each applicable condition precedent and having
due regard to, if appropriate, such market quotations
published on, or official settlement prices set by, a relevant
exchange or clearing organisation as may be available on, or
immediately preceding, the date of calculation); and
(iii) the Non-Defaulting Party shall treat each cost or loss to it,
determined as above, as a positive amount and each gain by it,
so determined, as a negative amount and aggregate all of such
amounts to produce a single, net positive or negative amount,
denominated in the Non-Defaulting Party's Base Currency (the
"Liquidation Amount").
4.5 If the Liquidation Amount determined pursuant to Clause 4.4 is a
positive amount, the Defaulting Party shall pay it to the
Non-Defaulting Party and if it is a negative amount, the Non-Defaulting
Party shall pay it to the Defaulting Party. The Non-Defaulting Party
shall notify the Defaulting Party of the Liquidation Amount, and by
which Party it is payable, immediately after the calculation of such
amount.
4.6 Unless the Parties specify otherwise in Annex 1 or otherwise, where
termination and liquidation occurs in accordance with Clause 4.4, the
Non-Defaulting Party shall also be entitled, at its discretion, to
apply the provisions of Clause 4.4 to any other Transactions entered
into between the Parties which are then outstanding, as if each such
Transaction were a Transaction governed by these terms.
4.7 The amount payable by one Party to the other Party pursuant to the
provisions of Clause 4.5, or any applicable laws or regulations, shall
be paid in the Non-Defaulting Party's Base Currency by the close of
business on the business day following the completion of the
termination and liquidation under Clause 4.4, or any laws or
regulations having a similar effect, (converted as required by
applicable law into any other currency, any costs of such conversion to
be borne by, and (if applicable) deducted from any payment to, the
Defaulting Party). Any such amount which is not paid on the due date
therefor shall bear interest, at the average rate at which overnight
deposits in the currency of such payment are offered by major banks in
the London interbank market as of 11.00 a.m. (London time) (or, if no
such rate is available, at such reasonable rate as the Non-Defaulting
Party may select) plus 1% per annum, for each day for which such amount
remains unpaid.
4.8 For the purpose of any calculation hereunder, the Non-Defaulting Party
may convert amounts denominated in any other currency into the
Non-Defaulting Party's Base Currency at such rate prevailing at the
time of the calculation as it shall reasonably select.
4.9 The Non-Defaulting Party's rights under this Clause 4 shall be in
addition to, and not in limitation or exclusion of, any other rights
which the Non-Defaulting Party may have (whether by agreement,
operation of law or otherwise).
5 Set-Off
Without prejudice to any other right or remedy which it may have,
either Party may, on or after the occurrence of a Liquidation Date and
the determination of the Liquidation Amount, set off any amount owing
by it (whether actual or contingent, present or future and including,
if applicable and with out limitation, the Liquidation Amount and any
amount due and payable on or before the Liquidation Date but remaining
unpaid) to the other Party against any amount owing by such other Party
(whether actual or contingent, present or future and including, if
applicable and without limitation, the Liquidation Amount and any
amount due and payable before the Liquidation Date but remaining
unpaid) to the first Party.
Page 19
6 Currency Indemnity
If a Party (the first Party) receives or recovers any amount in respect
of an obligation of the other Party (the second Party) in a currency
other than that in which such amount was payable, whether pursuant to a
judgement of any court or otherwise, the second Party shall indemnify
and hold harmless the first Party from and against any cost (including
costs of conversion) and loss suffered by the first Party as a result
of receiving such amount in a currency other than the currency in which
it was due.
7. Assignments and Transfers
Neither Party may assign, charge or otherwise transfer or purport to
assign, charge or otherwise transfer its rights or obligations under
this agreement (including the Transactions governed by these terms) or
any interest therein without the prior written consent of the other
Party, and any purported assignment, charge or transfer in violation of
this Clause shall be void.
8. Notices
Unless otherwise agreed, all notices, instructions and other
communications to be given to a Party under this agreement shall be
given to the address, telex (if confirmed by the appropriate
answerback) or facsimile (confirmed if requested) number and to the
individual or department specified in Annex 1, the Customer Signature
page or by notice in writing by such Party. Unless otherwise specified,
any notice, instruction or other communication given in accordance with
this Clause shall be effective upon receipt.
9. Termination, Waiver and Partial Invalidity
9.1 Either of the Parties hereto may terminate this agreement at any time
by seven days' prior notice to the other Party and termination shall be
effective at the end of such seventh day; provided, however, that any
such termination shall not affect any then outstanding Transactions
governed by these terms, and the provisions of this agreement shall
continue to apply until all the obligations of each Party to the other
under this agreement (including the Transactions governed by these
terms) have been fully performed.
9.2 A Party may waive any right, power or privilege under this agreement
only by (and to the extent of) an express statement in writing.
9.3 If, at any time, any provision of these terms is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of these terms nor the legality, validity or
enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.
10. Time of Essence
Time shall be of the essence in this agreement.
11. Payments
Every payment to be made by a Party under these terms shall be made in
same day (or immediately available) and freely transferable funds to
the bank account designated by the other Party for such purpose.
12. Governing Law and Jurisdiction
Unless the Parties specify otherwise in Annex 1 or otherwise:
12.1 These terms shall be governed by, and construed in accordance with, the
laws of England and Wales.
12.2 With respect to any Proceedings, each Party irrevocably (i) agrees that
the courts of England shall have exclusive jurisdiction to determine
any Proceedings and irrevocably submits to the jurisdiction of the
English courts and (ii) waives any objection which it may have at any
time to the bringing of any Proceedings in any such court and agrees
not to claim that such Proceedings have been brought in an inconvenient
forum or that such court does not have jurisdiction over such Party.
Page 20
12.3 Each Party irrevocably waives to the fullest extent permitted by
applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar ground from (i) suit, (ii)
jurisdiction of any courts, (iii) relief by way of injunction, order
for specific performance or for recovery of property, (iv) attachment
of its assets (whether before of after judgement) and (v) execution or
enforcement of any judgement to which it or its revenues or assets
might otherwise be entitled in any Proceedings in the courts of any
jurisdiction and irrevocably agrees to the extent permitted by
applicable law that it will not claim any such immunity in any
Proceedings. Each Party consents generally in respect of any
Proceedings to the giving of any relief or the issue of any process in
connection with such Proceedings, including, without limitation, the
making, enforcement or execution against any property whatsoever of any
order or judgement which may be made or given in such Proceedings.
13 Interpretation
13.1 In these terms:
"Base Currency" means, as to a Party, the currency specified as such in
Annex 1 or agreed as such in relation to it in writing between the
Parties or, failing any such specification or agreement, the lawful
currency of the United Kingdom;
"Credit Support Document" means, as to a Party (the first Party), a
guarantee, hypothecation agreement, margin or security agreement or
document, or any other document containing an obligation of a third
party ("Credit Support Provider"), or of the first Party, in favour of
the other Party supporting any obligations of the first Party under
this agreement;
"Credit Support Provider" has the meaning given to it in the definition
of Credit Support Document;
"Custodian" has the meaning given to it in Clause 4.1;
"Defaulting Party" means the Party in respect of which, or related to a
Credit Support Provider in respect of which, an Event of Default has
occurred;
"Designated Office(s)" means, as to a Party, the office identified with
its name on page 1 of these terms and any other office(s) specified in
Annex 1 or otherwise agreed by the Parties to be its Designated
Office(s) for the purpose of this agreement;
"Liquidation Date" means a day on which, pursuant to the provisions of
Clause 4, the Non-Defaulting Party commences the termination and
liquidation of Transactions or such a termination and liquidation
commences automatically;
"Potential Event of Default" means any event which may become (with the
passage of time, the giving of notice, the making of any determination
hereunder or any combination thereof) an Event of Default;
"Proceedings" means any suit, action, or other proceedings relating to
this agreement;
"Specified Exchanges" means the exchanges specified in Annex 2 and any
other exchanges agreed by the Parties to be Specified Exchanges for the
purpose of Clause 1.1; and "Specified Exchange" means any of them;
"Transaction" means:
(i) a contract made on an exchange or pursuant to the rules of an
exchange;
(ii) a contract subject to the rules of an exchange; or
(iii) a contract which would (but for its term to maturity only) be
a contract made on, or subject to the rules of, an exchange
and which, at the appropriate time, is to be submitted for
clearing as a contract made on, or subject to the rules of, an
exchange,
in any of cases (i), (ii), (iii) being a future, option, contract for
differences, spot or forward contract of any kind in relation to any
commodity, metal, financial instrument (including any security),
currency, interest rate, index or any combination thereof;
(iv) a transaction which is back-to-back with any transaction
within paragraph (i), (ii) or (iii) of this definition; or
(v) any other transaction which the Parties agree shall be a
Transaction.
13.2 In these terms, "Event of Default" means any of the events listed in
Clause 4.1; "Liquidation Amount" has the meaning ascribed to it in
Clause 4.4; and "Non-Defaulting Party" has the meaning ascribed to it
in Clause 4.1.
Page 21
13.3 Any reference in these terms to:
a "business day" shall be construed as a reference to a day (other than
a Saturday or Sunday) on which:
(i) in relation to a date for the payment of any sum denomination
in (a) any currency (other than ecu or euro), banks generally
are open for business in the principal financial centre of the
country of such currency; (b) ecu, the Ecu Clearing and
Settlement System operated by the Ecu Banking Association,
(or, if such clearing system ceases to be operative, any other
clearing or settlement system determined by the Parties) is
open for business; or (c) euros, settlement of payments
denominated in euros is generally possible in London or any
other financial centre in Europe selected by the Parties; and
(ii) in relation to a date for the delivery of any property,
property of such type is capable of being delivered in
satisfaction of obligations incurred in the market in which
the obligation to deliver such first property was incurred;
a "Clause" or "Annex" shall be construed as a reference to,
respectively, a clause or Annex of these terms, unless the context
requires otherwise;
a "currency" shall be construed so as to include any unit of account;
"indebtedness" shall be construed so as to include any obligation
(whether present or future, actual or contingent, as principal or
surety or otherwise) for the payment or repayment of money;
"Parties" shall be construed as a reference to the parties to this
agreement and shall include their successors and permitted assigns; and
"Party" shall be construed as a reference to which of the Parties is
appropriate in the context in which such expression may be used;
a Party to which a Credit Support Provider relates shall be construed
as a reference to the Party whose obligations under this agreement are
supported by that Credit Support Provider; and
these "terms" or this "agreement" shall be construed as including the
Annexes and as a reference to these terms or this agreement as the same
may be amended, varied, novated or supplemented from time to time.
Page 22
ANNEX 1 TO MASTER NETTING AGREEMENT
1. Scope of Agreement
(a) Each of the following shall be a Transaction for the purpose
of paragraph (v) of the definition of "Transaction" in Clause
13.1: Not applicable.
(b) For the purposes of Clause 1.1, these terms shall not apply to
[all] [the following] Transactions outstanding between the
Parties on the date of execution of these terms:
Not applicable.
(c) In the event of a discrepancy between these terms and the
Customer Documents for Exchange-traded Derivatives, these
terms will govern in relation to close out netting of
Transactions but without prejudice to any other rights that
Xxxxxx Xxxxxxx may have under the Customer Documents for
Exchange-traded Derivatives.
2. Designated Offices
Each of the following shall be a Designated Office: The offices
specified in Section 7 "Notices" below or in the Customer Signature
page.
3. Representations, Warrants and Covenants
Clause 3.1 is hereby amended by deleting the words "in the case of the
representation and warranty in (v) of the Clause 3.1 relating to the
entering into of Transactions,".
4. Additional Event(s) of Default
Each of the following shall be an Event of Default for the purpose of
paragraph (ix) of Clause 4.1: Not
Applicable
5. Automatic Termination
Upon the occurrence of any Event of Default specified in paragraph (ii)
or (iii) of Clause 4.1, the provisions of Clause 4.3 shall apply.
6. Termination of Other Transactions
The provisions of Clause 4.6 shall not apply.
7. Notices
Xxxxxx Xxxxxxx
Name : Xxxxxx Xxxxxxx & Co. International Limited
Address : 00 Xxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxx X00 0XX
Telephone Numbers : 00-000-000-0000
Telex number : 8812564
Facsimile number : 00-000-000-0000
Name of individual or department to whom notices are to be sent:
Compliance
8. No Reliance
In connection with these terms and the Customer Documents for
Exchange-Traded Derivatives, each Transaction and any other
documentation relating to these terms, both Parties represent and
acknowledge that (i) it is entering into each Transaction with a full
understanding of all material terms and risks thereof, and it is
capable of assuming those risks; (ii) it has made its investment and
trading decisions (including decisions regarding the suitability of any
transaction) based upon its own judgement and upon any advice from such
advisors as it has deemed necessary, and not in reliance upon any view
expressed by the other Party; (iii) the other Party is not acting as a
fiduciary or an advisor for it, and all decisions have been the results
of arm's length negotiations between the Parties; and (iv) the other
Party has not given to it any assurance or guarantee as to the expected
performance or result of any Transaction.
Page 23
9. Governing Law and Jurisdiction
The following provisions shall not apply in place of the provisions of
Clause 12:
12.1 These terms shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect
to conflict of law provisions.
12.2 With respect to any Proceedings, each Party irrevocably (i)
submits to the non-exclusive jurisdiction of the courts of the
State of New York and the United States District Court located
in the Borough of Manhattan in New York City and (ii) waives
any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court and agrees
not to claim that such Proceedings have been brought in any
inconvenient forum or that such court does not have
jurisdiction over such Party.
12.3 Each party irrevocably waives to the fullest extent permitted
by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended us), all
immunity of the grounds of sovereignty or other similar
grounds from (i) suit, (ii) jurisdiction of any courts, (iii)
relief by way of injunction, order for specific performance or
for recovery of property, (iv) attachment of its assets
(whether before or after judgement) and (v) execution or
enforcement of any judgement to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the
courts of any jurisdiction and irrevocably agrees to the
extent permitted by applicable law that it will not claim any
such immunity in any Proceedings. Each Party consents
generally in respect of any Proceedings to the giving of any
relief or the issue of any process in connection with such
Proceedings, including, without limitation, the making
enforcement or execution against any property whatsoever of
any order or judgement which may be made or given in such
Proceedings.
12.4 Each Party hereby irrevocably waives any and all right to
trial by jury in any Proceedings.
10. Base Currency: US Dollars
11. Selected Financial Centres for Euro Settlements: Not Applicable
12. FDICIA Representations
The following provisions shall not apply to this agreement. Each Party
represents and warrants to the other Party that it is a financial
institution under the provisions of Title IV of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), and the
Parties agree that this agreement shall be a netting contract, as
defined in FDICIA, and each receipt or payment or delivery obligation
hereunder shall be a covered contractual payment entitlement or covered
contractual payment obligations, respectively, as defined in and
subject to FDICIA.
Page 24
ANNEX 2 TO MASTER NETTING AGREEMENT
Specific Exchanges
The following exchanges are Specified Exchanges for the purposes of Clause 1.1;
Any Recognised Exchange, Recognised Investment Exchange, Designated Investment
Exchange or Approved Exchange as defined by the Financial Services Authority or
the Securities and Futures Authority and as amended from time to time.
IN WITNESS WHEREOF, this Agreement has been entered into on the date written in
the Customer Signature pages.
Signed on behalf of
Xxxxxx Xxxxxxx & Co. International Limited
-and-
Xxxxxx Xxxxxxx Securities Limited
By:.......................................
Name: X X Xxxxxxxxx
Title: Company Secretary
Page 25
PART THREE
SCHEDULE 1
SELECTED ASSOCIATED FIRMS OF
XXXXXX XXXXXXX & CO. INTERNATIONAL LIMITED
AND XXXXXX XXXXXXX SECURITIES LIMITED
Xxxxxx Xxxxxxx Group Inc.
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxx Xxxxxxx Market Products Inc.
Xxxxxx Xxxxxxx Capital Services Inc.
Xxxxxx Xxxxxxx Capital Group Inc.
Xxxxxx Xxxxxxx & Co. International Limited Incorporated
Xxxxxx Xxxxxxx Japan Limited
Xxxxxx Xxxxxxx Bank AG*
Xxxxxx Xxxxxxx XX
Xxxxxx Xxxxxxx Asia Limited
Xxxxxx Xxxxxxx & Co. Limited
Xxxxxx Xxxxxxx & Co. International Holdings Limited
Morstan Nominees Limited
Xxxxxx Xxxxxxx Services (UK) Limited
Xxxxxx Xxxxxxx Canada Limited
Xxxxxx Xxxxxxx Asset Management Singapore Limited
Xxxxxx Xxxxxxx Asset Management Limited
Xxxxxx Xxxxxxx Asset Management Inc.
MS Securities Services Inc.
Xxxxxx Xxxxxxx SpA
Xxxxxx Xxxxxxx Capital Group Singapore Pte Limited
Xxxxxx Xxxxxxx Xxxx Kong Securities Limited
Xxxxxx Xxxxxxx Xxxx Kong Nominees Limited
Xxxxxx Xxxxxxx Futures Hong Kong Limited
Xxxxxx Xxxxxxx Futures Singapore Limited
Xxxxxx Xxxxxxx Australia Limited
Xxxxxx Xxxxxxx Global Securities Services Incorporated
Bank Xxxxxx Xxxxxxx XX*
* Approved Banks
Page 26
PART THREE
SCHEDULE 2
ADDITIONAL PROVISIONS FOR LIFFE
The provisions of this Schedule 2 apply where the Contract is a futures or
options contract subject to the Rules of LIFFE.
1. General Provisions
1.1 Xxxxxx Xxxxxxx & Co. International Limited is an individual clearing
member of LIFFE. Xxxxxx Xxxxxxx Securities Limited is a non-clearing
member of LIFFE.
1.2 You accept that in relation to LIFFE:
(a) any allocation pursuant to Clause 12 of this Agreement shall
be made as follows. We shall allocate as between clients,
first, on the basis of a first in first out (FIFO) basis and,
secondly, pro rata in respect of Open Contracts for which
there is a corresponding Client Contract;
(b) any dispute arising from or relating to this Agreement,
insofar as it relates to Contracts or Clients Contracts
subject to the rules of LIFFE, and any dispute arising from or
relating to any such Contract or Client Contract as aforesaid
and made hereunder shall, unless resolved between us, be
referred to the arbitration rules of LIFFE, or to such other
organisation as LIFFE may direct before either of us resorts
to the jurisdiction of the courts (other than to obtain an
injunction or an order for security for a claim). Clause 43 of
this Agreement shall be subject to the agreement contained in
this sub-paragraph; and
(c) subject to the arbitration clause in sub-paragraph (b) above,
disputes arising from this Agreement or from Contracts or
Client Contracts made under or pursuant to this Agreement
shall (for our benefit) be subject to the exclusive
jurisdiction of the English courts to which both parties
hereby irrevocably submit.
(d) in both our interests, LIFFE may from time to time sanction
the making of contracts by us outside the pit or outside its
electronic trading system in order to satisfy your order,
where there has been an error in the execution of your order.
Where a better price (an improvement) can be obtained, we will
seek to secure and offer that improvement to you. However, you
should note that where, in response to your order, we have
bought or sold in accordance with the instruction in your
order to buy or, as the case may be, to sell but have traded
the wrong delivery/expiry month or wrong exercise price of the
relevant contract, then we may in accordance with LIFFE's
Rules offset any loss arising from that trade against any
improvement achieved for you in the course of correctly
satisfying your order, thus offering you only the net
improvements, if any.
2. Exclusion of Liability
2.1 As a member of LIFFE and pursuant to the Rules of LIFFE, we are
required to include a provision dealing with exclusion of liability in
our agreement with you. The following provisions and paragraph 3.1
shall apply without prejudice to the generality of Clauses 22, 23, 27
and 28 of this Agreement with you.
2.2 LIFFE Administration and Management ("the Exchange") is obliged under
the FSA1986 to ensure that business conducted by means of its market
facilities is conducted in an orderly manner and so as to afford proper
protection to investors. We and the Exchange wish to draw to your
attention that, inter alia, business on the market may from time to
time be suspended or restricted, or the market may from time to time be
closed for a temporary period or for such longer period as may be
determined in accordance with LIFFE's rules on the occurrence of one or
more events which require such action to be taken in the interests of,
inter alia, maintaining a fair and orderly market. Any such action may
result in our being unable, and through us you and your clients (if
any) may from time to time be prevented from or hindered in entering
into contracts in accordance with LIFFE's rules as a result of a
failure of some or all market facilities. We and the Exchange wish to
draw the following exclusion of liability to your attention and to the
attention of your clients (if any). Unless otherwise expressly provided
in LIFFE's rules or in any other agreement to which LIFFE is party, we
and LIFFE shall not be liable to you or any client of yours for loss
(including any indirect or consequential loss including, without
limitation, loss of profit), damage, injury or delay, whether direct or
indirect, arising from any of the circumstances or occurrences referred
to above, or from any act or omission of the Exchange, its officers,
employees, agents or representatives, under LIFFE's rules or pursuant
to the Exchange's obligations under statute, or from any breach of
contract by or any negligence howsoever arising of the Exchange, its
officers, employees, agents or representatives.
Page 27
2.3 Paragraphs 2.1 and 2.2 of this Schedule 2 shall be construed as
applying to, and having the same effect in relation to, business which
we transact, or which we would transact, but for one of the events
referred to in this Paragraph occurring, on other futures and options
markets.
3. Linked Contracts
DEFINITIONS
"LCH" means The London Clearing House Limited;
"LIFFE" means LIFFE Administration and Management;
"LIFFE Contract" means an Exchange Contract to which a
Linked Participating Exchange Contract is linked;
"Linked LIFFE Contract" means an Exchange Contract made
available for trading on the market pursuant to a
Link, which is specified as such in a General Notice
published from time to time by the Exchange and is
linked to a Participating Exchange Contract;
"Linked Participant
Exchange Contract" means a Participating
Exchange Contract specified as such in a General
Notice published from time to time by the Exchange
and is linked to an Exchange Contract;
"Participating Exchange" means an exchange which has concluded
one or more agreements in relation to a Link with the
Exchange and/or LCH pursuant to which:(i) contracts
in the terms of one or more Linked LIFFE Contracts
are to be transferred to, for clearing by, such
exchange or its clearing house; or(ii) contracts in
the terms of a Linked Participating Exchange Contract
are to be transferred to, for clearing by, LCH. The
term "Participating Exchange" shall include any
clearing house, which from time to time provides
clearing services to such exchange;
"Participating
Exchange Contract" in respect of a Participating Exchange,
means a class of contract
permitted to be made by Participating Exchange
Members under Participating Exchange rules.
GENERAL PROVISIONS
3.1 Exclusion of Liability
We and LIFFE Administration and Management ("LIFFE") wish to draw to
your attention that LIFFE shall have no liability whatsoever to any
member or client in contract, tort (including, without limitation,
negligence), trust, as fiduciary or under any other cause of action
(except in respect of gross negligence, wilful default or fraud on its
part), in respect of any damage, loss, cost or expense of whatsoever
nature suffered or incurred by any member or client, as the case may
be, as a result of: any suspension, restriction or closure of the
market administered by either a Participating Exchange or LIFFE,
whether for a temporary period or otherwise, or as a result of a
decision taken on the occurrence of a market emergency; any failure by
a Participating Exchange, LIFFE or LCH to supply each other with data
or information in accordance with arrangements from time to time
established between all or any of them; the failure of communications
facilities or technology supplied, operated or used by either a
Participating Exchange, LIFFE or LCH for the purposes of the Link; any
event which is outside its or their control; any act or omission of
either a Participating Exchange (where a Participating Exchange is
acting otherwise than in connection with its clearing function) or
LIFFE in connection with any Participating Exchange Contract, Linked
LIFFE Contract or Linked Participating Exchange Contract or any act or
omission of a Participating Exchange, LIFFE, or LCH (as the case may
be) in connection with the operation of the Link or the arrangements
for the transfer of contracts.
3.2 Governing Law
This agreement and all contracts in the terms of LIFFE Contracts made
under this agreement shall be subject to and construed in accordance
with English Law.
Page 28
3.3 Margin and Client Money/Assets
Following the transfer of a contract in the terms of a Linked LIFFE
Contract and the creation of a contract in the terms of a Participating
Exchange Contract or prior to the transfer of a contract in the terms
of a Linked Participating Exchange Contract and the creation of a
contract in the terms of a LIFFE Contract (as the case may be), margin
requirements will be determined in accordance with the rules of the
Participating Exchange rather than LIFFE Rules. Any money or assets
held in any country other than the UK may be subject to the applicable
law of that country rather than UK client money and other assets rules,
and you should satisfy yourself that this is acceptable to you before
instructing us to transact any such business.
PROVISIONS RELATING TO OUTWARD TRANSFERS OF LINKED LIFFE CONTRACTS
3.4 Rules of LIFFE
All contracts in the terms of a Linked LIFFE Contract made on LIFFE
shall be subject to the Rules of LIFFE as from time to time in force.
3.5 Transfer
We shall endeavour to secure the transfer through the relevant Link of
each contract in the terms of a Linked LIFFE Contract made between us
which is intended for transfer. Upon confirmation by the relevant
Participating Exchange of receipt of trade/position details from LCH,
rights and obligations under such contract, save for outstanding
obligations with respect to fees and margin and those rights and
obligations referred to in the Rules of LIFFE and the Regulations of
LCH, shall be discharged and there shall arise simultaneously a
contract in the terms of a Participating Exchange Contract between us.
The contract in terms of a Participating Exchange Contract shall be
subject to the rules of the relevant Participating Exchange and shall
not be subject to the provisions of this agreement.
3.6 Delayed Transfer
In the event that, on any LIFFE trading day, LCH is unable for whatever
reason to transmit details of all contracts in the terms of a Linked
LIFFE Contract, or the relevant Participating Exchange is unable to
receive or acknowledge receipt of all such details, any such contract
made between us on that day shall remain as an undischarged contract in
the terms of a Linked LIFFE Contract (but without prejudice to any
default provisions agreed between us which may be operated to discharge
such contract), subject to the Rules of LIFFE and the General
Regulations and Default Rules of LCH as from time to time in force,
until such time as transfer can be achieved.
3.7 Impossibility of Transfer
If it is not possible for whatever reason for details of contracts in
the terms of the Linked LIFFE Contract to be transmitted by LCH, or for
the relevant Participating Exchange to receive or acknowledge receipt
of all such details, so that transfer of such contracts cannot occur on
any particular day, and any circumstances preventing such transfer
continues so that the Link is suspended or terminated, any such
contract made between us during any such period shall remain as an
undischarged contract in the terms of a Linked LIFFE Contract, subject
to the Rules of LIFFE and the Regulations of LCH as from time to time
in force, and shall be performed in accordance with its terms or may be
closed out or otherwise discharged, in accordance with the Rules and
any agreement reached between us.
PROVISIONS RELATING TO INWARD TRANSFERS OF LINKED PARTICIPATING EXCHANGE
CONTRACTS
3.8 Transfer
In respect of each contract in the terms of a Linked Participating
Exchange Contract made between us which is intended for transfer
through the relevant Link, rights and obligations under such contract,
save for outstanding obligations with respect to fees or margin and any
other rights or obligations referred to in the Rules of the
Participating Exchange, shall be discharged upon confirmation by LCH of
receipt of trade/position details from the Participating Exchange and
there shall arise simultaneously a contract in the terms of a LIFFE
Contract between us. The LIFFE Contract shall be subject to the Rules
of LIFFE and the General Regulations and Default Rules of LCH.
3.9 Delayed Transfer
In the event that, on any Participating Exchange trading day, the
relevant Participating Exchange is unable for whatever reason to
transmit details of all contracts in the terms of a Linked
Participating Exchange Contract, or LCH is unable to receive or
acknowledge receipt of all such details, any such contract made between
us on that Participating Exchange on that day shall remain an
undischarged contract in the terms of a Linked Participating Exchange
Contract (but without prejudice to any default provisions agreed
between us which might be operated to discharge such contract), subject
to the rules of the Participating Exchange as from time to time in
force, until such time as transfer can be achieved.
Page 29
3.10 Impossibility of Transfer
If it is not possible for whatever reason for details of contracts in
the terms of a Linked Participating Exchange Contract to be transmitted
by the relevant Participating Exchange, or for LCH to receive or
acknowledge receipt of all such details, so that transfer of such
contracts cannot occur on any particular day, and any circumstance
preventing such transfer continues so that the Link is suspended or
terminated, any such contract made between us on that Participating
Exchange during that period shall remain as an undischarged contract in
the terms of a Linked Participating Exchange Contract, subject to the
rules of the Participating Exchange as from time to time in force and
shall be performed in accordance with its terms or may be closed out or
otherwise discharged in accordance with the Rules and any agreement
reached between us.
Page 30
PART THREE
SCHEDULE 3
ELECTRONIC TRADING AND ORDER ROUTING SYSTEMS
FIA DISCLOSURE STATEMENT
Electronic trading and order routing systems differ from traditional
open outcry pit trading and manual order routing methods. Transactions
using an electronic system are subject to the rules and regulations of
the exchange(s) offering the system and/or listing the contract. Before
you engage in transactions using an electronic system, you should
carefully review the rules and regulations of the exchange(s) offering
the system and/or listing contracts you intend to trade.
DIFFERENCES AMONG ELECTRONIC TRADING SYSTEMS
Trading or routing orders through electronic systems varies widely
among the different electronic systems. You should consult the rules
and regulations of the exchange offering the electronic system and/or
listing the contract traded or order routed to understand, among other
things, in the case of trading systems, the system's order matching
procedure, opening and closing procedures and prices, error trade
policies, and trading limitations or requirements; and in the case of
all systems, qualifications for access and grounds for termination and
limitations on the types of orders that may be entered into the system.
Each of these matters may present different risk factors with respect
to trading on or using a particular system. Each system may also
present risks related to system access, varying response times, and
security. In the case of internet-based systems, there may be
additional types of risks related to system access, varying response
times and security, as well as risks related to service providers and
the receipt and monitoring of electronic mail.
RISKS ASSOCIATED WITH SYSTEM FAILURE
Trading through an electronic trading or order routing system exposes
you to risks associated with system or component failure. In the event
of system or component failure, it is possible that, for a certain time
period, you may not be able to enter new orders, execute existing
orders, or modify or cancel orders that were previously entered. System
or component failure may also result in loss of orders or order
priority.
SIMULTANEOUS OPEN OUTCRY PIT AND ELECTRONIC TRADING
Some contracts offered on an electronic trading system may be traded
electronically and through open outcry during the same trading hours.
You should review the rules and regulations of the exchange offering
the system and/or listing the contract to determine how orders that do
not designate a particular process will be executed.
LIMITATION OF LIABILITY
Exchanges offering an electronic trading or order routing system and/or
listing the contract may have adopted rules to limit their liability,
the liability of FCMs, and software and communication system vendors
and the amount of damages you may collect for system failure and
delays. These limitations of liability provisions vary among the
exchanges. You should consult the rules and regulations of the relevant
exchange(s) in order to understand these liability limitations.
Page 31
PART FOUR
NON-PRIVATE CUSTOMER DOCUMENTS
(Exchange-traded Derivatives)
CUSTOMER SIGNATURES
To: Xxxxxx Xxxxxxx & Co. International Limited
Xxxxxx Xxxxxxx Securities Limited
The undersigned agrees to the terms of the Non-Private Customer Documents
(Exchange-traded Derivatives) including without limitation, the indemnities,
exclusions and restrictions of duties and liabilities in your favour therein and
any additional enclosures, all of which we have read and understood.
Date: .................. .....................
Signed: .................. .....................
Name(s): .................. .....................
[Print]
Authorised Signatory(ies)
for and on behalf of .................. .....................
[Print Name of Client (Non-Private Customer)]
All notices or other documents pursuant to this booklet shall be served at the
following address:
Address:
For the attention of:
Telex and Answerback:
Fax:
Corporate Registered Office:
(if different from above)
Designated Offices for the purposes of Master Netting Agreement:
(if different from above)
CUSTOMERS DOMICILED IN LUXEMBOURG ONLY
I/We confirm that I/we specifically and expressly consent to Clause 9, 21, 22,
23, 32, 33, 34, 39, 40 and 42 of the above Agreement for the purposes of Article
1135-1 of the Civil Code and Article 1 of the Protocol annexed to the Convention
on Jurisdiction and the Enforcement of Judgements in Civil and Commercial
Matters signed in Brussels on 27th September 1968.
Signed:
Page 32
THIRD PARTY TRADING AUTHORISATION
THIS DOCUMENT SHOULD BE COMPLETED ONLY BY CUSTOMERS WHO HAVE SIGNED THE CUSTOMER
SIGNATURE PAGES BUT WHO WISH TO DELEGATE AUTHORITY TO AN INVESTMENT ADVISOR,
INVESTMENT MANAGER OR OTHER THIRD PARTY.
To: Xxxxxx Xxxxxxx & Co. International Limited
Xxxxxx Xxxxxxx Securities Limited
Dear Sirs
I/We refer to the Non-Private Customer Documents (Exchange-traded Derivatives)
set out on the preceding pages of this booklet which is supplemented hereby.
Terms used herein have the same meanings as ascribed to them in the Agreement
and any Customer Documents referred to therein.
I/We hereby authorise the individual or organisation named as agent (in the
"Agent's Details" section below) and hereinafter referred to as the "Agent" as
my/our agent to purchase, sell and trade generally in, exercise, and otherwise
enter into and carry out transactions and give other instructions relating to
financial and commodity futures, options and contracts for differences (and any
related transactions including without limitation, foreign exchange transactions
to facilitate any of the foregoing), on margin or otherwise, for my/our account
and risk and in my/our name or number on your books, including trades which will
or may result in me/us having short position in any such investment. I/We
authorise you to accept and act on:
(a) any and all orders and instructions received in connection with such
transactions; and
(b) any other instructions of the Agent in any respect concerning my/our
account(s) with you (including, without limitation, delivering or
otherwise transferring as the Agent may order or direct, and whether or
not any such delivery or other transfer is to be made against payment,
or any such payment is to be made against delivery or other transfer).
In all matters or things mentioned above or otherwise concerning or incidental
to any of my/our accounts(s) with you, the Agent is authorised to act for me/us
and on my/our behalf in the same manner and with the same effect as I/we
myself/ourselves might or could do. The Agent may from time to time appoint (in
writing, effective upon receipt thereof by you) individuals to sign documents
and give instructions pursuant to this authorisation.
I/We acknowledge that any Transaction entered into by the Agent pursuant to the
above authority will be governed by the Customer Documents and that I/we shall
have all the rights and obligations in respect thereof as are contained in the
Customer Documents and, without prejudice to the generality of the foregoing,
I/we shall indemnify you and hold you harmless from, and pay you promptly on
demand, any and all losses, costs, expenses, damages and liabilities whatsoever
(including consequential and special damage) arising directly or indirectly from
any such Transaction or debt balances due thereon.
This authorisation and indemnity is in addition to, and in no way limits or
restricts, any rights which you may have under the Customer Documents and any
other agreement or agreements entered between us.
I/We acknowledge that neither you nor any of your associates nor any of your or
their directors, officers or employees will be liable for any loss howsoever
suffered by me/us pursuant to this authorisation unless loss arises from your
negligence, bad faith, wilful default, or fraud. I/We have carefully examined
the provisions of the documents by which I/we have given trading authority or
control over my/our account(s) to the Agent and understand fully the obligations
which I/we have assumed by executing that document. I/We understand that neither
you nor any of your associates are in any way responsible for any loss to me/us
occasioned by the actions of the Agent, and you do not, by implication or
otherwise, endorse the operating methods of the Agent. We further understand
that to the extent that we now or hereafter give to the Agent authority to
exercise any of my/our account(s) I/we do so at our my/own risk.
This authorisation may be terminated by me/us at any time with effect from
actual receipt by you of written notice of termination. Termination of this
authorisation shall not affect any liability resulting from transactions
initiated prior to such termination. This authorisation and indemnity shall
inure to your benefit and that of your successors and assigns.
Yours faithfully
Signed: .
AGENT'S DETAILS (please print)
Name of Agent:
Address of Agent:
Telephone:
Telex and Answerback:
Page 33
CERTIFICATES OF AUTHORITY TO DEAL
FOR USE BY COMPANIES AND PARTNERSHIPS
Certificate of Company Secretary/Authorised Partner*
Extracts from the Minutes of the Meeting of the Board of
Directors/Partners/Management Committee* of ......................
(the "Company/Partnership") held at .........................
on ..................... 19....
IT WAS RESOLVED THAT:
(1) the Company/Partnership* is by its Memorandum and Articles of
Association/Partnership Agreement/constitutional documents* empowered
to trade in financial and commodity futures, options and contracts for
differences ("investments") and to enter into and perform the
Non-Private Customer Documents between the Company and Xxxxxx Xxxxxxx &
Co. International Limited and Xxxxxx Xxxxxxx Securities Limited
concerning investment and dealing and related services (including such
transactions in such investments);
(2)+ trading or dealing in financial and commodity futures, options and
contracts for differences and/or other investments pursuant to the
Non-Private Customer Documents would be carrying on the ordinary
business of the Partnership;
(2/3*) any one/two* of the undermentioned designated persons be hereby
authorised, on behalf of the Company/Partnership*
(a) to accept and sign the Non-Private Customer Documents;
(b) to sign all documents in connection with, and give all
instructions relating to, trading in investments and otherwise
howsoever under and pursuant to the Non-Private Customer
Documents; and
(c) to delegate authority to one or more persons to sign any
documents, give any instructions and do anything else
permitted to be signed given or done by such designated
person.
DESIGNATED PERSONS
Name Position Signature
I certify that the above is a true extract from the Minutes of a duly convened
and held meeting of the Board of Directors/Partners/Management Committee* of the
Company/Partnership*
Signed:
Name:
Title: Secretary/Director/Authorised Partner*
Date:
*Delete as appropriate
+ Partnerships
Note: Companies incorporated outside the UK, British Dependent Territories
and Commonwealth may, instead of extract minutes comprising a
director's resolution, provide a certificate signed by a duly
authorised officer of the Company (and showing the officer's name and
title) and comprising both paragraphs (1) and (2) as applicable to
companies but preceded by the words "This is to certify that".
Page 34
Corporate general partners of a limited partnership should provide a
certificate as a company but including appropriate additional
references to the partnership (including paragraph 2 for partnerships).
CERTIFICATE OF TRUSTEES
(FOR USE BY TRUSTEES)
Extracts from the Minutes of a Meeting of the trustees of
(the "Trust") held at ..........................................
on.......................19....
IT WAS RESOLVED THAT all the Trustees accept and authorise the signature on
behalf of each of them of the Non-Private Customer Documents between the
Trustees and Xxxxxx Xxxxxxx & Co. International Limited and Xxxxxx Xxxxxxx
Securities Limited concerning transactions in financial and commodity futures,
options and contracts for difference and that, in connection therewith:
(1) The Trustees, after taking legal advice, were satisfied that they were
empowered by the Trust Deed(s) constituting the Trust to enter into and
perform the Non-Private Customer Documents and all liabilities and
obligations attaching to the "Private Customer" (as defined)
thereunder;
(2) The exercise of all rights and privileges of the "Non-Private Customer"
(as so defined) under the Non-Private Customer Documents would be
carried out only in accordance with the said powers contained in the
Trust Deed(s) constituting the Trust and in particular after obtaining
all proper and requisite investment advice;
(3) The Trustees were satisfied that they were empowered by the said Trust
Deed(s) to delegate the requisite powers and pursuant to that power any
one/two* of the undermentioned persons be hereby authorised, on behalf
of the Trustees:
(a) to sign the Non-Private Customer Documents and all documents
in connection with, and give all instructions relating to, the
Non-Private Customer Documents; and
(b) to delegate authority to one or more persons to sign any
documents, give any instructions and do anything else
permitted to be signed, given or done by such designated
person;
DESIGNATED PERSONS
Name Position Signature
(4) The Trustees would give to Xxxxxx Xxxxxxx & Co. International Limited
and Xxxxxx Xxxxxxx Securities Limited written notice in the terms if
sub-paragraph (3) above each time there was an alteration in the
persons authorised as referred to in such sub-paragraph.
I certify that the above is a true extract from the Minutes of a duly convened
and held meeting of all the Trustees of the Trust.
Signed: ................. .................
Name: ................. .................
Title: Chairman of the Trustees/Authorised Trustee*
................. .................
Date: ................. .................
* Delete as appropriate
Page 35
EXHIBIT 10.18
FORM OF
FOREIGN EXCHANGE AND OPTIONS
MASTER AGREEMENT
(FEOMA)
MASTER AGREEMENT dated as of June ____, 2000 by and between Xxxxxx
Xxxxxxx & Co. Incorporated, a Delaware corporation, and Xxxxxx Xxxxxxx Xxxx
Xxxxxx Spectrum _______________ L.P., Delaware Limited Liability Company.
SECTION 1. DEFINITIONS
Unless otherwise required by the context, the following terms shall
have the following meanings in the Agreement:
"Agreement" has the meaning given to it in Section 2.2.
"American Style Option" means an Option which may be exercised on any
Business Day up to and including the Expiration Time.
"Base Currency", as to a Party, means the Currency agreed to as such in
relation to it in Part VII of the Schedule.
"Business Day" means for purposes of: (i) Section 3.2, a day which is a
Local Banking Day for the applicable Designated Office of the Buyer; (ii)
Section 5.1 and the definition of American Style Option, a day which is a Local
Banking Day for the applicable Designated Office of the Seller; (iii) clauses
(i), (viii) and (xii) of the definition of Event of Default, a day which is a
Local Banking Day for the Non-Defaulting Party; (iv) solely in relation to
delivery of a Currency, a day which is a Local Banking Day in relation to that
Currency; and (v) any other provision of the Agreement, a day which is a Local
Banking Day for the applicable Designated Offices of both Parties; provided,
however, that neither Saturday nor Sunday shall be considered a Business Day for
any purpose.
"Buyer" means the owner of an Option.
"Call" means an Option entitling, but not obligating (except upon
exercise), the Buyer to purchase from the Seller at the Strike Price a specified
quantity of the Call Currency.
"Call Currency" means the Currency agreed to as such at the time an
Option is entered into, as evidenced in a Confirmation.
"Close-Out Amount" has the meaning given to it in Section 8.1.
"Close-Out Date" means a day on which, pursuant to the provisions of
Section 8.1, the Non-Defaulting Party closes out Currency Obligations and/or
Options or such close-out occurs automatically.
"Closing Gain", as to the Non-Defaulting Party, means the difference
described as such in relation to a particular Value Date under the provisions of
Section 8.1.
"Closing Loss", as to the Non-Defaulting Party, means the difference
described as such in relation to a particular Value Date under the provisions of
Section 8.1.
"Confirmation" means a writing (including telex, facsimile or other
electronic means from which it is possible to produce a hard copy) evidencing an
FX Transaction or an Option, and specifying:
(A) in the case of an FX Transaction, the following information:
(i) the Parties thereto and the Designated Offices through which
they are respectively acting,
(ii) the amounts of the Currencies being bought or sold and by
which Party,
(iii) the Value Date, and
(iv) any other term generally included in such a writing in
accordance with the practice of the relevant foreign
exchange market; and
(B) in the case of an Option, the following information:
(i) the Parties thereto and the Designated Offices through which
they are respectively acting,
(ii) whether the Option is a Call or a Put,
(iii) the Call Currency and the Put Currency that are the subject
of the Option and their respective quantities,
(iv) which Party is the Seller and which is the Buyer,
(v) the Strike Price,
(vi) the Premium and the Premium Payment Date,
(vii) the Expiration Date,
(viii) the Expiration Time,
(ix) whether the Option is an American Style Option or a European Style Option,
and (x) such other matters, if any, as the Parties may agree.
"Credit Support" has the meaning given to it in Section 8.2.
"Credit Support Document", as to a Party (the "first Party"), means a
guaranty, hypothecation agreement, margin or security agreement or document, or
any other document containing an obligation of a third party ("Credit Support
Provider") or of the first Party in favor of the other Party supporting any
obligations of the first Party under the Agreement.
"Credit Support Provider" has the meaning given to it in the definition
of Credit Support Document.
"Currency" means money denominated in the lawful currency of any
country or the Ecu.
"Currency Obligation" means any obligation of a Party to deliver a
Currency pursuant to an FX Transaction, the application of Section 6.3(a) or
(b), or an exercised Option (except, for the purposes of Section 8.1 only, one
that is to be settled at its In-the-Money Amount under Section 5.5).
"Currency Pair" means the two Currencies which potentially may be
exchanged in connection with an FX Transaction or upon the exercise of an
Option, one of which shall be the Put Currency and the other the Call Currency.
"Custodian" has the meaning given to it in the definition of Insolvency
Proceeding.
2
"Defaulting Party" has the meaning given to it in the definition of
Event of Default.
"Designated Office(s)", as to a Party, means the office or offices
specified in Part II of the Schedule.
"Effective Date" means the date of this Master Agreement.
"European Style Option" means an Option for which Notice of Exercise
may be given only on the Option's Expiration Date up to and including the
Expiration Time, unless otherwise agreed.
"Event of Default" means the occurrence of any of the following with
respect to a Party (the "Defaulting Party", the other Party being the
"Non-Defaulting Party"):
(i) the Defaulting Party shall (A) default in any payment when due
under the Agreement (including, but not limited to, a Premium payment) to the
Non-Defaulting Party with respect to any Currency Obligation or Option and such
failure shall continue for two (2) Business Days after the Non-Defaulting Party
has given the Defaulting Party written notice of non-payment, or (B) fail to
perform or comply with any other obligation assumed by it under the Agreement
and such failure is continuing thirty (30) days after the Non-Defaulting Party
has given the Defaulting Party written notice thereof;
(ii) the Defaulting Party shall commence a voluntary Insolvency
Proceeding or shall take any corporate action to authorize any such Insolvency
Proceeding;
(iii) a governmental authority or self-regulatory organization having
jurisdiction over either the Defaulting Party or its assets in the country of
its organization or principal office (A) shall commence an Insolvency Proceeding
with respect to the Defaulting Party or its assets or (B) shall take any action
under any bankruptcy, insolvency or other similar law or any banking, insurance
or similar law or regulation governing the operation of the Defaulting Party
which may prevent the Defaulting Party from performing its obligations under the
Agreement as and when due;
(iv) an involuntary Insolvency Proceeding shall be commenced with
respect to the Defaulting Party or its assets by a person other than a
governmental authority or self-regulatory organization having jurisdiction over
either the Defaulting Party or its assets in the country of its organization or
principal office and such Insolvency Proceeding (A) results in the appointment
of a Custodian or a judgment of insolvency or bankruptcy or the entry of an
order for winding-up, liquidation, reorganization or other similar relief, or
(B) is not dismissed within five (5) days of its institution or presentation;
(v) the Defaulting Party is bankrupt or insolvent, as defined under any
bankruptcy or insolvency law applicable to it;
(vi) the Defaulting Party fails, or shall otherwise be unable, to pay
its debts as they become due;
(vii) the Defaulting Party or any Custodian acting on behalf of the
Defaulting Party shall disaffirm, disclaim or repudiate any Currency Obligation
or Option;
(viii) any representation or warranty made or given or deemed made or
given by the Defaulting Party pursuant to the Agreement or any Credit Support
Document shall prove to have been false or misleading in any material respect as
at the time it was made or given or deemed made or given and one (1) Business
Day has elapsed after the Non-Defaulting Party has given the Defaulting Party
written notice thereof;
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(ix) the Defaulting Party consolidates or amalgamates with or merges
into or transfers all or substantially all its assets to another entity and (A)
the creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of the Defaulting Party prior to such action, or (B)
at the time of such consolidation, amalgamation, merger or transfer the
resulting, surviving or transferee entity fails to assume all the obligations of
the Defaulting Party under the Agreement by operation of law or pursuant to an
agreement satisfactory to the Non-Defaulting Party;
(x) by reason of any default, or event of default or other similar
condition or event, any Specified Indebtedness (being Specified Indebtedness of
an amount which, when expressed in the Currency of the Threshold Amount, is in
aggregate equal to or in excess of the Threshold Amount) of the Defaulting Party
or any Credit Support Provider in relation to it: (A) is not paid on the due
date therefor and remains unpaid after any applicable grace period has elapsed,
or (B) becomes, or becomes capable at any time of being declared, due and
payable under agreements or instruments evidencing such Specified Indebtedness
before it would otherwise have been due and payable;
(xi) the Defaulting Party is in breach of or default under any
Specified Transaction and any applicable grace period has elapsed, and there
occurs any liquidation or early termination of, or acceleration of obligations
under, that Specified Transaction or the Defaulting Party (or any Custodian on
its behalf) disaffirms, disclaims or repudiates the whole or any part of a
Specified Transaction;
(xii) (A) any Credit Support Provider of the Defaulting Party or the
Defaulting Party itself fails to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with the
applicable Credit Support Document and such failure is continuing after any
applicable grace period has elapsed; (B) any Credit Support Document relating to
the Defaulting Party expires or ceases to be in full force and effect prior to
the satisfaction of all obligations of the Defaulting Party under the Agreement,
unless otherwise agreed in writing by the Non-Defaulting Party; (C) the
Defaulting Party or any Credit Support Provider of the Defaulting Party (or, in
either case, any Custodian acting on its behalf) disaffirms, disclaims or
repudiates, in whole or in part, or challenges the validity of, any Credit
Support Document; (D) any representation or warranty made or given or deemed
made or given by any Credit Support Provider of the Defaulting Party pursuant to
any Credit Support Document shall prove to have been false or misleading in any
material respect as at the time it was made or given or deemed made or given and
one (1) Business Day has elapsed after the Non-Defaulting Party has given the
Defaulting Party written notice thereof; or (E) any event set out in (ii) to
(vii) or (ix) to (xi) above occurs in respect of any Credit Support Provider of
the Defaulting Party; or
(xiii) any other condition or event specified in Part IX of the
Schedule or in Section 11.14 if made applicable to the Agreement in Part XI of
the Schedule.
"Exercise Date", in respect of any Option, means the day on which a
Notice of Exercise received by the applicable Designated Office of the Seller
becomes effective pursuant to Section 5.1.
"Expiration Date", in respect of any Option, means the date agreed to
as such at the time the Option is entered into, as evidenced in a Confirmation.
4
"Expiration Time", in respect of any Option, means the latest time on
the Expiration Date on which the Seller must accept a Notice of Exercise as
agreed to at the time the Option is entered into, as evidenced in a
Confirmation.
"FX Transaction" means any transaction between the Parties for the
purchase by one Party of an agreed amount in one Currency against the sale by it
to the other of an agreed amount in another Currency, both such amounts either
being deliverable on the same Value Date or, if the Parties have so agreed in
Part VI of the Schedule, being cash-settled in a single Currency, which is or
shall become subject to the Agreement and in respect of which transaction the
Parties have agreed (whether orally, electronically or in writing): the
Currencies involved, the amounts of such Currencies to be purchased and sold,
which Party will purchase which Currency and the Value Date.
"In-the-Money Amount" means (i) in the case of a Call, the excess of
the Spot Price over the Strike Price, multiplied by the aggregate amount of the
Call Currency to be purchased under the Call, where both prices are quoted in
terms of the amount of the Put Currency to be paid for one unit of the Call
Currency; and (ii) in the case of a Put, the excess of the Strike Price over the
Spot Price, multiplied by the aggregate amount of the Put Currency to be sold
under the Put, where both prices are quoted in terms of the amount of the Call
Currency to be paid for one unit of the Put Currency.
"Insolvency Proceeding" means a case or proceeding seeking a judgment
of or arrangement for insolvency, bankruptcy, composition, rehabilitation,
reorganization, administration, winding-up, liquidation or other similar relief
with respect to the Defaulting Party or its debts or assets, or seeking the
appointment of a trustee, receiver, liquidator, conservator, administrator,
custodian or other similar official (each, a "Custodian") of the Defaulting
Party or any substantial part of its assets, under any bankruptcy, insolvency or
other similar law or any banking, insurance or similar law governing the
operation of the Defaulting Party.
"LIBOR", with respect to any Currency and date, means the average rate
at which deposits in the Currency for the relevant amount and time period are
offered by major banks in the London interbank market as of 11:00 a.m. (London
time) on such date, or, if major banks do not offer deposits in such Currency in
the London interbank market on such date, the average rate at which deposits in
the Currency for the relevant amount and time period are offered by major banks
in the relevant foreign exchange market at such time on such date as may be
determined by the Party making the determination.
"Local Banking Day" means (i) for any Currency, a day on which
commercial banks effect deliveries of that Currency in accordance with the
market practice of the relevant foreign exchange market, and (ii) for any Party,
a day in the location of the applicable Designated Office of such Party on which
commercial banks in that location are not authorized or required by law to
close.
"Master Agreement" means the terms and conditions set forth in this
Master Agreement, including the Schedule.
"Matched Pair Novation Netting Office(s)", in respect of a Party, means
the Designated Office(s) specified in Part V of the Schedule.
"Non-Defaulting Party" has the meaning given to it in the definition of
Event of Default.
5
"Notice of Exercise" means telex, telephonic or other electronic
notification (excluding facsimile transmission) providing assurance of receipt,
given by the Buyer prior to or at the Expiration Time, of the exercise of an
Option, which notification shall be irrevocable.
"Novation Netting Office(s)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"Option" means a currency option which is or shall become subject to
the Agreement.
"Parties" means the parties to the Agreement, including their
successors and permitted assigns (but without prejudice to the application of
clause (ix) of the definition of Event of Default); and the term "Party" shall
mean whichever of the Parties is appropriate in the context in which such
expression may be used.
"Premium", in respect of any Option, means the purchase price of the
Option as agreed upon by the Parties, and payable by the Buyer to the Seller
thereof.
"Premium Payment Date", in respect of any Option, means the date on
which the Premium is due and payable, as agreed to at the time the Option is
entered into, as evidenced in a Confirmation.
"Proceedings" means any suit, action or other proceedings relating to
the Agreement, any FX Transaction or any Option.
"Put" means an Option entitling, but not obligating (except upon
exercise), the Buyer to sell to the Seller at the Strike Price a specified
quantity of the Put Currency.
"Put Currency" means the Currency agreed to as such at the time an
Option is entered into, as evidenced in a Confirmation.
"Schedule" means the Schedule attached to and part of this Master
Agreement, as it may be amended from time to time by agreement of the Parties.
"Seller" means the Party granting an Option.
"Settlement Date" means, in respect of: (i) an American Style Option,
the Spot Date of the Currency Pair on the Exercise Date of such Option, and (ii)
a European Style Option, the Spot Date of the Currency Pair on the Expiration
Date of such Option; and, where market practice in the relevant foreign exchange
market in relation to the two Currencies involved provides for delivery of one
Currency on one date which is a Local Banking Day in relation to that Currency
but not to the other Currency and for delivery of the other Currency on the next
Local Banking Day in relation to that other Currency, "Settlement Date" means
such two (2) Local Banking Days.
"Settlement Netting Office(s)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) in respect
of borrowed money, other than in respect of deposits received.
6
"Specified Transaction" means any transaction (including an agreement
with respect thereto) between one Party to the Agreement (or any Credit Support
Provider of such Party) and the other Party to the Agreement (or any Credit
Support Provider of such Party) which is a rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
linked swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of these transactions) or any combination of any of the
foregoing.
"Spot Date" means the spot delivery day for the relevant Currency Pair
as generally used by the relevant foreign exchange market.
"Spot Price" means the rate of exchange at the time at which such price
is to be determined for foreign exchange transactions in the relevant Currency
Pair for value on the Spot Date, as determined in good faith: (i) by the Seller,
for purposes of Section 5, and (ii) by the Non-Defaulting Party, for purposes of
Section 8.
"Strike Price", in respect of any Option, means the price at which the
Currency Pair may be exchanged, as agreed to at the time the Option is entered
into, as evidenced in a Confirmation.
"Threshold Amount" means the amount specified as such for each Party in
Part VIII of the Schedule.
"Value Date" means, with respect to any FX Transaction, the Business
Day (or where market practice in the relevant foreign exchange market in
relation to the two Currencies involved provides for delivery of one Currency on
one date which is a Local Banking Day in relation to that Currency but not to
the other Currency and for delivery of the other Currency on the next Local
Banking Day in relation to that other Currency ("Split Settlement") the two (2)
Local Banking Days in accordance with that market practice) agreed by the
Parties for delivery of the Currencies to be purchased and sold pursuant to such
FX Transaction, and, with respect to any Currency Obligation, the Business Day
(or, in the case of Split Settlement, Local Banking Day) upon which the
obligation to deliver Currency pursuant to such Currency Obligation is to be
performed.
SECTION 2. FX TRANSACTIONS AND OPTIONS
2.1 Scope of the Agreement. The Parties (through their respective
Designated Offices) may enter into (i) FX Transactions, for such quantities of
such Currencies, as may be agreed subject to the terms of the Agreement, and
(ii) Options, for such Premiums, with such Expiration Dates, at such Strike
Prices and for the purchase or sale of such quantities of such Currencies, as
may be agreed subject to the terms of the Agreement; provided that neither Party
shall be required to enter into any FX Transaction or Option with the other
Party (other than in connection with an exercised Option). Unless otherwise
agreed in writing by the Parties, each FX Transaction and Option entered into
between Designated Offices of the Parties on or after the Effective Date shall
be governed by the Agreement. Each FX Transaction and Option between any two
Designated Offices of the Parties outstanding on the Effective Date which is
identified in Part I of the Schedule shall also be governed by the Agreement.
2.2 Single Agreement. This Master Agreement, the terms agreed between
the Parties with respect to each FX Transaction and Option (and, to the extent
recorded in a Confirmation, each such Confirmation), and all amendments to any
of such items shall together form the agreement between the Parties (the
"Agreement") and shall together constitute a single agreement between the
Parties. The Parties acknowledge that all FX Transactions and Options are
entered into in reliance upon such fact, it being understood that the Parties
would not otherwise enter into any FX Transaction or Option.
7
2.3 Confirmations. FX Transactions and Options shall be promptly
confirmed by the Parties by Confirmations exchanged by mail, telex, facsimile or
other electronic means from which it is possible to produce a hard copy. The
failure by a Party to issue a Confirmation shall not prejudice or invalidate the
terms of any FX Transaction or Option.
2.4 Inconsistencies. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of the Agreement, the
Schedule will prevail. In the event of any inconsistency between the terms of a
Confirmation and the other provisions of the Agreement, (i) in the case of an FX
Transaction, the other provisions of the Agreement shall prevail, and the
Confirmation shall not modify the other terms of the Agreement and (ii) in the
case of an Option, the terms of the Confirmation shall prevail, and the other
terms of the Agreement shall be deemed modified with respect to such Option,
except for the manner of confirmation under Section 2.3 and, if applicable,
discharge of Options under Section 4.
SECTION 3. OPTION PREMIUM
3.1 Payment of Premium. Unless otherwise agreed in writing by the
Parties, the Buyer shall be obligated to pay the Premium related to an Option no
later than its Premium Payment Date.
3.2 Late Payment or Non-Payment of Premium. If any Premium is not
received on or before the Premium Payment Date, the Seller may elect: (i) to
accept a late payment of such Premium; (ii) to give written notice of such
non-payment and, if such payment shall not be received within two (2) Business
Days of such notice, treat the related Option as void; or (iii) to give written
notice of such non-payment and, if such payment shall not be received within two
(2) Business Days of such notice, treat such non-payment as an Event of Default
under clause (i) of the definition of Event of Default. If the Seller elects to
act under either clause (i) or (ii) of the preceding sentence, the Buyer shall
pay all out-of-pocket costs and actual damages incurred in connection with such
unpaid or late Premium or void Option, including, without limitation, interest
on such Premium from and including the Premium Payment Date to but excluding the
late payment date in the same Currency as such Premium at overnight LIBOR and
any other losses, costs or expenses incurred by the Seller in connection with
such terminated Option, for the loss of its bargain, its cost of funding, or the
loss incurred as a result of terminating, liquidating, obtaining or
re-establishing a delta hedge or related trading position with respect to such
Option.
SECTION 4. DISCHARGE AND TERMINATION OF OPTIONS; NETTING OF OPTION
PREMIUMS
4.1 Discharge and Termination. If agreed in Part V of the Schedule, any
Call or any Put written by a Party will automatically be discharged and
terminated, in whole or in part, as applicable, against a Call or a Put,
respectively, written by the other Party, such discharge and termination to
occur automatically upon the payment in full of the last Premium payable in
respect of such Options; provided that such discharge and termination may only
occur in respect of Options:
8
(i) each being with respect to the same Put Currency and the same
Call Currency;
(ii) each having the same Expiration Date and Expiration Time;
(iii) each being of the same style, i.e. either both being American
Style Options or both being European Style Options;
(iv) each having the same Strike Price;
(v) each being transacted by the same pair of Designated Offices
of Buyer and Seller; and
(vi) neither of which shall have been exercised by delivery of a
Notice of Exercise;
and, upon the occurrence of such discharge and termination, neither Party shall
have any further obligation to the other Party in respect of the relevant
Options or, as the case may be, parts thereof so discharged and terminated. Such
discharge and termination shall be effective notwithstanding that either Party
may fail to record such discharge and termination in its books. In the case of a
partial discharge and termination (i.e., where the relevant Options are for
different amounts of the Currency Pair), the remaining portion of the Option
which is partially discharged and terminated shall continue to be an Option for
all purposes of the Agreement, including this Section 4.1.
4.2 Netting of Option Premiums. If agreed in Part V of the Schedule and
if, on any date, Premiums would otherwise be payable under the Agreement in the
same Currency between the same respective Designated Offices of the Parties,
then, on such date, each Party's obligation to make payment of any such Premium
will be automatically satisfied and discharged and, if the aggregate Premium(s)
that would otherwise have been payable by such Designated Office of one Party
exceeds the aggregate Premium(s) that would otherwise have been payable by such
Designated Office of the other Party, replaced by an obligation upon the Party
by whom the larger aggregate Premium(s) would have been payable to pay the other
Party the excess of the larger aggregate Premium(s) over the smaller aggregate
Premium(s) and, if the aggregate Premiums are equal, no payment shall be made.
SECTION 5. EXERCISE AND SETTLEMENT OF OPTIONS
5.1 Exercise of Options. The Buyer may exercise an Option by delivery
to the Seller of a Notice of Exercise. Subject to Section 5.3, if a Notice of
Exercise with respect to an Option has not been received by the Seller prior to
or at the Expiration Time, the Option shall expire and become void and of no
effect. Any Notice of Exercise shall (unless otherwise agreed):
(i) in respect of an American Style Option, (A) if received at or prior
to 3:00 p.m. on a Business Day, be effective upon receipt thereof by the Seller,
and (B) if received after 3:00 p.m. on a Business Day, be effective only as of
the opening of business of the Seller on the first Business Day subsequent to
its receipt; and
(ii) in respect of a European Style Option, if received on or, if the
parties have so agreed, before the Expiration Date, prior to or at the
Expiration Time, be effective upon receipt thereof by the Seller.
5.2 No Partial Exercise. Unless otherwise agreed by the Parties, an
Option may be exercised only in whole.
9
5.3 Automatic Exercise. Unless otherwise agreed in Part VI of the
Schedule or unless the Seller is otherwise instructed by the Buyer, if an Option
has an In-the-Money Amount at its Expiration Time that equals or exceeds the
product of (x) 1% of the Strike Price (or such other percentage or amount as may
have been agreed by the Parties) and (y) the amount of the Call Currency or Put
Currency, as appropriate, then the Option shall be deemed automatically
exercised. In such case, the Seller may elect to settle such Option either in
accordance with Section 5.4 or by payment to the Buyer on the Settlement Date
for such Option of the In-the-Money Amount, as determined at the Expiration Time
or as soon thereafter as practicable. In the latter case, the sole obligations
of the Parties with respect to settlement of such Option shall be to deliver or
receive the In-the-Money Amount of such Option on the Settlement Date. The
Seller shall notify the Buyer of its election of the method of settlement of an
automatically exercised Option as soon as practicable after the Expiration Time.
5.4 Settlement of Exercised Options. An exercised Option shall settle
on its Settlement Date. Subject to Section 5.3 and 5.5, on the Settlement Date,
the Buyer shall pay the Put Currency to the Seller for value on the Settlement
Date and the Seller shall pay the Call Currency to the Buyer for value on the
Settlement Date. An exercised Option shall be treated as an FX Transaction and a
Currency Obligation (except, for the purposes of Section 8.1 only, if it is to
be settled at its In-the-Money Amount), and for this purpose the relevant
Settlement Date shall be treated as the Value Date of the FX Transaction.
5.5 Settlement at In-the-Money Amount. An Option shall be settled at
its In-the-Money Amount if so agreed by the Parties at the time such Option is
entered into. In such case, the In-the-Money Amount shall be determined based
upon the Spot Price at the time of exercise or as soon thereafter as
practicable. The sole obligations of the Parties with respect to settlement of
such Option shall be to deliver or receive the In-the-Money Amount of such
Option on the Settlement Date.
SECTION 6. SETTLEMENT AND NETTING OF FX TRANSACTIONS
6.1 Settlement of FX Transactions. Subject to Sections 6.2 and 6.3,
each Party shall deliver to the other Party the amount of the Currency to be
delivered by it under each Currency Obligation on the Value Date for such
Currency Obligation.
6.2 Settlement Netting. If, on any date, more than one delivery of a
particular Currency under Currency Obligations is to be made between a pair of
Settlement Netting Offices, then each Party shall aggregate the amounts of such
Currency deliverable by it and only the difference between these aggregate
amounts shall be delivered by the Party owing the larger aggregate amount to the
other Party, and, if the aggregate amounts are equal, no delivery of the
Currency shall be made.
6.3 Novation Netting. (a) By Currency. If the Parties enter into an FX
Transaction through a pair of Novation Netting Offices giving rise to a Currency
Obligation for the same Value Date and in the same Currency as a then existing
Currency Obligation between the same pair of Novation Netting Offices, then
immediately upon entering into such FX Transaction, each such Currency
Obligation shall automatically and without further action be individually
canceled and simultaneously replaced by a new Currency Obligation for such Value
Date determined as follows: the amounts of such Currency that would otherwise
have been deliverable by each Party on such Value Date shall be aggregated and
the Party with the larger aggregate amount shall have a new Currency Obligation
to deliver to the other Party the amount of such Currency by which its aggregate
amount exceeds the other Party's aggregate amount, provided that if the
aggregate amounts are equal, no new Currency Obligation shall arise. This
Section 6.3 shall not affect any other Currency Obligation of a Party to deliver
any different Currency on the same Value Date.
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(b) By Matched Pair. If the Parties enter into an FX Transaction
between a pair of Matched Pair Novation Netting Offices then the provisions of
Section 6.3(a) shall apply only in respect of Currency Obligations arising by
virtue of FX Transactions entered into between such pair of Matched Pair
Novation Netting Offices and involving the same pair of Currencies and the same
Value Date.
6.4 General (a) Inapplicability of Sections 6.2 and 6.3. The provisions
of Sections 6.2 and 6.3 shall not apply if a Close-Out Date has occurred or a
voluntary or involuntary Insolvency Proceeding or action of the kind described
in clause (ii), (iii) or (iv) of the definition of Event of Default has occurred
without being dismissed in relation to either Party.
(b) Failure to Record. The provisions of Section 6.3 shall apply
notwithstanding that either Party may fail to record the new Currency Obligation
in its books.
(c) Cut-off Date and Time. The provisions of Section 6.3 are subject to
any cut-off date and cut-off time agreed between the applicable Novation Netting
Offices and Matched Pair Novation Netting Offices of the Parties.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties. Each Party represents and warrants
to the other Party as of the Effective Date and as of the date of each FX
Transaction and each Option that: (i) it has authority to enter into the
Agreement (including such FX Transaction or Option, as the case may be); (ii)
the persons entering into the Agreement (including such FX Transaction or
Option, as the case may be) on its behalf have been duly authorized to do so;
(iii) the Agreement (including such FX Transaction or Option, as the case may
be) is binding upon it and enforceable against it in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and applicable principles of
equity) and does not and will not violate the terms of any agreements to which
such Party is bound; (iv) no Event of Default, or event which, with notice or
lapse of time or both, would constitute an Event of Default, has occurred and is
continuing with respect to it; (v) it acts as principal in entering into each FX
Transaction and Option and exercising each and every Option; and (vi) if the
Parties have so specified in Part XV of the Schedule, it makes the
representations and warranties set forth in such Part XV.
7.2 Covenants. Each Party covenants to the other Party that: (i) it
will at all times obtain and comply with the terms of and do all that is
necessary to maintain in full force and effect all authorizations, approvals,
licenses and consents required to enable it lawfully to perform its obligations
under the Agreement; (ii) it will promptly notify the other Party of the
occurrence of any Event of Default with respect to itself or any Credit Support
Provider in relation to it; and (iii) if the Parties have set forth additional
covenants in Part XVI of the Schedule, it makes the covenants set forth in such
Part XVI.
SECTION 8. CLOSE-OUT AND LIQUIDATION
8.1 Manner of Close-Out and Liquidation. (a) Close-Out. If an Event of
Default has occurred and is continuing, then the Non-Defaulting Party shall have
the right to close out all, but not less than all, outstanding Currency
Obligations (including any Currency Obligation which has not been performed and
in respect of which the Value Date is on or precedes the Close-Out Date) and
Options, except to the extent that in the good faith opinion of the
Non-Defaulting Party certain of such Currency Obligations or Options may not be
closed out under applicable law. Such close-out shall be effective upon receipt
by the Defaulting Party of notice that the Non-Defaulting Party is terminating
11
such Currency Obligations and Options. Notwithstanding the foregoing, unless
otherwise agreed by the Parties in Part X of the Schedule, in the case of an
Event of Default in clause (ii), (iii) or (iv) of the definition thereof with
respect to a Party and, if agreed by the Parties in Part IX of the Schedule, in
the case of any other Event of Default specified and so agreed in Part IX with
respect to a Party, close-out shall be automatic as to all outstanding Currency
Obligations and Options, as of the time immediately preceding the institution of
the relevant Insolvency Proceeding or action. The Non-Defaulting Party shall
have the right to liquidate such closed-out Currency Obligations and Options as
provided below.
(b) Liquidation of Currency Obligations. Liquidation of Currency
Obligations terminated by close-out shall be effected as follows:
(i) Calculating Closing Gain or Loss. The Non-Defaulting Party shall
calculate in good faith, with respect to each such terminated Currency
Obligation, except to the extent that in the good faith opinion of the
Non-Defaulting Party certain of such Currency Obligations may not be liquidated
as provided herein under applicable law, as of the Close-Out Date or as soon
thereafter as reasonably practicable, the Closing Gain, or, as appropriate, the
Closing Loss, as follows:
(A) for each Currency Obligation calculate a "Close-Out Amount" as
follows:
(1) in the case of a Currency Obligation whose Value Date is the same
as or is later than the Close-Out Date, the amount of such Currency Obligation;
or
(2) in the case of a Currency Obligation whose Value Date precedes the
Close-Out Date, the amount of such Currency Obligation increased, to the extent
permitted by applicable law, by adding interest thereto from and including the
Value Date to but excluding the Close-Out Date at overnight LIBOR; and
(3) for each such amount in a Currency other than the Non-Defaulting
Party's Base Currency, convert such amount into the Non-Defaulting Party's Base
Currency at the rate of exchange at which, at the time of the calculation, the
Non-Defaulting Party can buy such Base Currency with or against the Currency of
the relevant Currency Obligation for delivery (x) if the Value Date of such
Currency Obligation is on or after the Spot Date as of such time of calculation
for the Base Currency, on the Value Date of that Currency Obligation or (y) if
such Value Date precedes such Spot Date, for delivery on such Spot Date (or, in
either case, if such rate of exchange is not available, conversion shall be
accomplished by the Non-Defaulting Party using any commercially reasonable
method); and
(B) determine in relation to each Value Date: (1) the sum of
all Close-Out Amounts relating to Currency Obligations under which the
Non-Defaulting Party would otherwise have been entitled to receive the relevant
amount on that Value Date; and (2) the sum of all Close-Out Amounts relating to
Currency Obligations under which the Non-Defaulting Party would otherwise have
been obliged to deliver the relevant amount to the Defaulting Party on that
Value Date; and
(C) if the sum determined under (B)(1) is greater than the sum
determined under (B)(2), the difference shall be the Closing Gain for such Value
Date; if the sum determined under (B)(1) is less than the sum determined under
(B)(2), the difference shall be the Closing Loss for such Value Date.
12
(ii) Determining Present Value. To the extent permitted by applicable
law, the Non-Defaulting Party shall adjust the Closing Gain or Closing Loss for
each Value Date falling after the Close-Out Date to present value by discounting
the Closing Gain or Closing Loss from and including the Value Date to but
excluding the Close-Out Date, at LIBOR with respect to the Non-Defaulting
Party's Base Currency as at the Close-Out Date or at such other rate as may be
prescribed by applicable law.
(iii) Netting. The Non-Defaulting Party shall aggregate the following
amounts so that all such amounts are netted into a single liquidated amount
payable to or by the Non-Defaulting Party: (x) the sum of the Closing Gains for
all Value Dates (discounted to present value, where appropriate, in accordance
with the provisions of Section 8.1(b)(ii)) (which for the purposes of the
aggregation shall be a positive figure); and (y) the sum of the Closing Losses
for all Value Dates (discounted to present value, where appropriate, in
accordance with the provisions of Section 8.1(b)(ii)) (which for the purposes of
the aggregation shall be a negative figure).
(c) Liquidation of Options. To liquidate unexercised Options and
exercised Options to be settled at their In-the-Money Amounts that have been
terminated by close-out, the Non-Defaulting Party shall:
(i) Calculating Settlement Amount. Calculate in good faith with respect
to each such terminated Option, except to the extent that in the good faith
opinion of the Non-Defaulting Party certain of such Options may not be
liquidated as provided herein under applicable law, as of the Close-Out Date or
as soon as reasonably practicable thereafter a settlement amount for each Party
equal to the aggregate of:
(A) with respect to each Option purchased by such Party, and
which the other Party has not elected to treat as void pursuant to Section
3.2(ii) for lack of payment of the Premium, the current market premium for such
Option;
(B) with respect to each Option sold by such Party and which
such Party has not elected to treat as void pursuant to Section 3.2(ii) for lack
of payment of the Premium, any unpaid Premium, provided that, if the Close-Out
Date occurs before the Premium Payment Date, such amount shall be discounted
from and including the Premium Payment Date to but excluding the Close-Out Date
at a rate equal to LIBOR on the Close-Out Date and, if the Close-Out Date occurs
after the Premium Payment Date, to the extent permitted by applicable law, the
settlement amount shall include interest on any unpaid Premium from and
including the Premium Payment Date to but excluding the Close-Out Date in the
same Currency as such Premium at overnight LIBOR;
(C) with respect to any exercised Option to be settled at its
In-the-Money Amount (whether or not the Close-Out Date occurs before the
Settlement Date for such Option), any unpaid amount due to such Party in
settlement of such Option and, if the Close-Out Date occurs after the Settlement
Date for such Option, to the extent permitted by applicable law, interest
thereon from and including the applicable Settlement Date to but excluding the
Close-Out Date at overnight LIBOR; and
(D) without duplication, the amount that the Non-Defaulting
Party reasonably determines in good faith, as of the Close-Out Date or as of the
earliest date thereafter that is reasonably practicable, to be its additional
losses, costs and expenses in connection with such terminated Option, for the
loss of its bargain, its cost of funding, or the loss incurred as a result of
terminating, liquidating, obtaining or re-establishing a delta hedge or related
trading position with respect to such Option;
13
(ii) Converting to Base Currency. Convert any settlement amount
calculated in accordance with clause (i) above in a Currency other than the
Non-Defaulting Party's Base Currency into such Base Currency at the Spot Price
at which, at the time of the calculation, the Non-Defaulting Party could enter
into a contract in the foreign exchange market to buy the Non-Defaulting Party's
Base Currency in exchange for such Currency (or, if such Spot Price is not
available, conversion shall be accomplished by the Non-Defaulting Party using
any commercially reasonable method); and
(iii) Netting. Net such settlement amounts with respect to each Party
so that all such amounts are netted to a single liquidated amount payable by one
Party to the other Party.
(d) Final Netting. The Non-Defaulting Party shall net (or, if both are
payable by one Party, add) the liquidated amounts payable under Sections 8.1(b)
and 8.1(c) with respect to each Party so that such amounts are netted (or added)
to a single liquidated amount payable by one Party to the other Party as a
settlement payment.
8.2 Set-Off Against Credit Support. Where close-out and liquidation
occurs in accordance with Section 8.1, the Non-Defaulting Party shall also be
entitled (i) to set off the net payment calculated in accordance with Section
8.1(d) which the Non-Defaulting Party owes to the Defaulting Party, if any,
against any credit support or other collateral ("Credit Support") held by the
Defaulting Party pursuant to a Credit Support Document or otherwise (including
the liquidated value of any non-cash Credit Support) in respect of the
Non-Defaulting Party's obligations under the Agreement or (ii) to set off the
net payment calculated in accordance with Section 8.1(d) which the Defaulting
Party owes to the Non-Defaulting Party, if any, against any Credit Support held
by the Non-Defaulting Party (including the liquidated value of any non-cash
Credit Support) in respect of the Defaulting Party's obligations under the
Agreement; provided that, for purposes of either such set-off, any Credit
Support denominated in a Currency other than the Non-Defaulting Party's Base
Currency shall be converted into such Base Currency at the rate specified in
Section 8.1(c)(ii).
8.3 Other Foreign Exchange Transactions and Currency Options. Where
close-out and liquidation occurs in accordance with Section 8.1, the
Non-Defaulting Party shall also be entitled to close-out and liquidate, to the
extent permitted by applicable law, any other foreign exchange transaction or
currency option entered into between the Parties which is then outstanding in
accordance with the provisions of Section 8.1, with each obligation of a Party
to deliver a Currency under such a foreign exchange transaction being treated as
if it were a Currency Obligation (including exercised options, provided that
cash-settled options shall be treated analogously to Options to be settled at
their In-the-Money Amount) and each unexercised option being treated as if it
were an Option under the Agreement.
8.4 Payment and Late Interest. The net amount payable by one Party to
the other Party pursuant to the provisions of Sections 8.1 and 8.3 above shall
be paid by the close of business on the Business Day following the receipt by
the Defaulting Party of notice of the Non-Defaulting Party's settlement
calculation, with interest at overnight LIBOR from and including the Close-Out
Date to but excluding such Business Day (and converted as required by applicable
law into any other Currency, any costs of conversion to be borne by, and
deducted from any payment to, the Defaulting Party). To the extent permitted by
applicable law, any amounts owed but not paid when due under this Section 8
shall bear interest at overnight LIBOR (or, if conversion is required by
applicable law into some other Currency, either overnight LIBOR with respect to
such other Currency or such other rate as may be prescribed by such applicable
law) for each day for which such amount remains unpaid. Any addition of interest
or discounting required under this Section 8 shall be calculated on the basis of
a year of such number of days as is customary for transactions involving the
relevant Currency in the relevant foreign exchange market.
14
8.5 Suspension of Obligations. Without prejudice to the foregoing, so
long as a Party shall be in default in payment or performance to the other Party
under the Agreement and the other Party has not exercised its rights under this
Section 8, or, if "Adequate Assurances" is specified as applying to the
Agreement in Part XI of the Schedule, during the pendency of a reasonable
request to a Party for adequate assurances of its ability to perform its
obligations under the Agreement, the other Party may, at its election and
without penalty, suspend its obligation to perform under the Agreement.
8.6 Expenses. The Defaulting Party shall reimburse the Non-Defaulting
Party in respect of all out-of-pocket expenses incurred by the Non-Defaulting
Party (including fees and disbursements of counsel, including attorneys who may
be employees of the Non-Defaulting Party) in connection with any reasonable
collection or other enforcement proceedings related to the payments required
under the Agreement.
8.7 Reasonable Pre-Estimate. The Parties agree that the amounts
recoverable under this Section 8 are a reasonable pre-estimate of loss and not a
penalty. Such amounts are payable for the loss of bargain and the loss of
protection against future risks and, except as otherwise provided in the
Agreement, neither Party will be entitled to recover any additional damages as a
consequence of such losses.
8.8 No Limitation of Other Rights; Set-Off. The Non-Defaulting Party's
rights under this Section 8 shall be in addition to, and not in limitation or
exclusion of, any other rights which the Non-Defaulting Party may have (whether
by agreement, operation of law or otherwise), and, to the extent not prohibited
by law, the Non-Defaulting Party shall have a general right of set-off with
respect to all amounts owed by each Party to the other Party, whether due and
payable or not due and payable (provided that any amount not due and payable at
the time of such set-off shall, if appropriate, be discounted to present value
in a commercially reasonable manner by the Non-Defaulting Party). The
Non-Defaulting Party's rights under this Section 8.8 are subject to Section 8.7.
SECTION 9. FORCE MAJEURE, ACT OF STATE, ILLEGALITY AND IMPOSSIBILITY
9.1 Force Majeure, Act of State, Illegality and Impossibility. If
either Party is prevented from or hindered or delayed by reason of force majeure
or act of state in the delivery or receipt of any Currency in respect of a
Currency Obligation or Option or if it becomes or, in the good faith judgment of
one of the Parties, may become unlawful or impossible for either Party to make
or receive any payment in respect of a Currency Obligation or Option, then the
Party for whom such performance has been prevented, hindered or delayed or has
become illegal or impossible shall promptly give notice thereof to the other
Party and either Party may, by notice to the other Party, require the close-out
and liquidation of each affected Currency Obligation and Option in accordance
with the provisions of Section 8.1 and, for such purposes, the Party unaffected
by such force majeure, act of state, illegality or impossibility (or, if both
Parties are so affected, whichever Party gave the relevant notice) shall perform
the calculation required under Section 8.1 as if it were the Non-Defaulting
Party. Nothing in this Section 9.1 shall be taken as indicating that the Party
treated as the Defaulting Party for the purpose of calculations required by
Section 8.1 has committed any breach or default.
15
9.2 Transfer to Avoid Force Majeure, Act of State, Illegality or
Impossibility. If Section 9.1 becomes applicable, unless prohibited by law, the
Party which has been prevented, hindered or delayed from performing shall, as a
condition to its right to designate a close-out and liquidation of any affected
Currency Obligation or Option, use all reasonable efforts (which will not
require such Party to incur a loss, excluding immaterial, incidental expenses)
to transfer as soon as practicable, and in any event before the earlier to occur
of the expiration date of the affected Options or twenty (20) days after it
gives notice under Section 9.1, all its rights and obligations under the
Agreement in respect of the affected Currency Obligations and Options to another
of its Designated Offices so that such force majeure, act of state, illegality
or impossibility ceases to exist. Any such transfer will be subject to the prior
written consent of the other Party, which consent will not be withheld if such
other Party's policies in effect at such time would permit it to enter into
transactions with the transferee Designated Office on the terms proposed, unless
such transfer would cause the other Party to incur a material tax or other cost.
SECTION 10. PARTIES TO RELY ON THEIR OWN EXPERTISE
Each Party will be deemed to represent to the other Party on the date
on which it enters into an FX Transaction or Option that (absent a written
agreement between the Parties that expressly imposes affirmative obligations to
the contrary for that FX Transaction or Option): (i)(A) it is acting for its own
account, and it has made its own independent decisions to enter into that FX
Transaction or Option and as to whether that FX Transaction or Option is
appropriate or proper for it based upon its own judgment and upon advice from
such advisors as it has deemed necessary; (B) it is not relying on any
communication (written or oral) of the other Party as investment advice or as a
recommendation to enter into that FX Transaction or Option, it being understood
that information and explanations related to the terms and conditions of an FX
Transaction or Option shall not be considered investment advice or a
recommendation to enter into that FX Transaction or Option; and (C) it has not
received from the other Party any assurance or guarantee as to the expected
results of that FX Transaction or Option; (ii) it is capable of evaluating and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of that FX
Transaction or Option; and (iii) the other Party is not acting as a fiduciary or
an advisor for it in respect of that FX Transaction or Option.
SECTION 11. MISCELLANEOUS
11.1 Currency Indemnity. The receipt or recovery by either Party (the
"first Party") of any amount in respect of an obligation of the other Party (the
"second Party") in a Currency other than that in which such amount was due,
whether pursuant to a judgment of any court or pursuant to Section 8 or 9, shall
discharge such obligation only to the extent that, on the first day on which the
first Party is open for business immediately following such receipt or recovery,
the first Party shall be able, in accordance with normal banking practice, to
purchase the Currency in which such amount was due with the Currency received or
recovered. If the amount so purchasable shall be less than the original amount
of the Currency in which such amount was due, the second Party shall, as a
separate obligation and notwithstanding any judgment of any court, indemnify the
first Party against any loss sustained by it. The second Party shall in any
event indemnify the first Party against any costs incurred by it in making any
such purchase of Currency.
16
11.2 Assignment. Neither Party may assign, transfer or charge or
purport to assign, transfer or charge its rights or obligations under the
Agreement to a third party without the prior written consent of the other Party
and any purported assignment, transfer or charge in violation of this Section
11.2 shall be void.
11.3 Telephonic Recording. The Parties agree that each may
electronically record all telephonic conversations between them and that any
such recordings may be submitted in evidence to any court or in any Proceedings
for the purpose of establishing any matters pertinent to the Agreement.
11.4 Notices. Unless otherwise agreed, all notices, instructions and
other communications to be given to a Party under the Agreement shall be given
to the address, telex (if confirmed by the appropriate answerback), facsimile
(confirmed if requested) or telephone number and to the individual or department
specified by such Party in Part III of the Schedule. Unless otherwise specified,
any notice, instruction or other communication given in accordance with this
Section 11.4 shall be effective upon receipt.
11.5 Termination. Each of the Parties may terminate the Agreement at
any time by seven (7) days' prior written notice to the other Party delivered as
prescribed in Section 11.4, and termination shall be effective at the end of
such seventh day; provided, however, that any such termination shall not affect
any outstanding Currency Obligations or Options, and the provisions of the
Agreement shall continue to apply until all the obligations of each Party to the
other under the Agreement have been fully performed.
11.6 Severability. In the event any one or more of the provisions
contained in the Agreement should be held invalid, illegal or unenforceable in
any respect under the law of any jurisdiction, the validity, legality and
enforceability of the remaining provisions contained in the Agreement under the
law of such jurisdiction, and the validity, legality and enforceability of such
and any other provisions under the law of any other jurisdiction shall not in
any way be affected or impaired thereby. The Parties shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
11.7 No Waiver. No indulgence or concession granted by a Party and no
omission or delay on the part of a Party in exercising any right, power or
privilege under the Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
11.8 Master Agreement. Where one of the Parties to the Agreement is
domiciled in the United States, the Parties intend that the Agreement shall be a
master agreement, as referred to in 11 U.S.C. Section 101(53B)(C) and 12 U.S.C.
Section 1821(e)(8)(D)(vii).
11.9 Time of Essence, Etc. Time shall be of the essence in the
Agreement. Unless otherwise agreed, the times referred to in the Agreement with
respect to Options shall in each case refer to the local time of the relevant
Designated Office of the Seller of the relevant Option.
11.10 Headings. Headings in the Agreement are for ease of reference
only.
17
11.11 Payments Generally. All payments to be made under the Agreement
shall be made in same day (or immediately available) and freely transferable
funds and, unless otherwise specified, shall be delivered to such office of such
bank, and in favor of such account as shall be specified by the Party entitled
to receive such payment in Part IV of the Schedule or in a notice given in
accordance with Section 11.4.
11.12 Amendments. No amendment, modification or waiver of the Agreement
will be effective unless in writing executed by each of the Parties; provided
that the Parties may agree in a Confirmation that complies with Section 2.3 to
amend the Agreement solely with respect to the Option that is the subject of the
Confirmation.
11.13 Credit Support. A Credit Support Document between the Parties may
apply to obligations governed by the Agreement. If the Parties have executed a
Credit Support Document, such Credit Support Document shall be subject to the
terms of the Agreement and is hereby incorporated by reference in the Agreement.
In the event of any conflict between a Credit Support Document and the
Agreement, the Agreement shall prevail, except for any provision in such Credit
Support Document in respect of governing law.
11.14 Adequate Assurances. If the Parties have so agreed in Part XI of
the Schedule, the failure by a Party to give adequate assurances of its ability
to perform any of its obligations under the Agreement within two (2) Business
Days of a written request to do so when the other Party has reasonable grounds
for insecurity shall be an Event of Default under the Agreement.
11.15 Correction of Confirmations. Unless either Party objects to the
terms contained in any Confirmation sent by the other Party or sends a corrected
Confirmation within three (3) Business Days of receipt of such Confirmation, or
such shorter time as may be appropriate given the Value Date of an FX
Transaction, the terms of such Confirmation shall be deemed correct and accepted
absent manifest error. If the Party receiving a Confirmation sends a corrected
Confirmation within such three (3) Business Days, or shorter period, as
appropriate, then the Party receiving such corrected Confirmation shall have
three (3) Business Days, or shorter period, as appropriate, after receipt
thereof to object to the terms contained in such corrected Confirmation.
SECTION 12. LAW AND JURISDICTION
12.1 Governing Law. The Agreement shall be governed by, and construed
in accordance with, the laws of the jurisdiction set forth in Part XII of the
Schedule without giving effect to conflict of laws principles.
12.2 Consent to Jurisdiction. (a) With respect to any Proceedings, each
Party irrevocably (i) submits to the non-exclusive jurisdiction of the courts of
the jurisdiction set forth in Part XIII of the Schedule and (ii) waives any
objection which it may have at any time to the laying of venue of any
Proceedings brought in any such court, waives any claim that such Proceedings
have been brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does not have
jurisdiction over such Party. Nothing in the Agreement precludes either Party
from bringing Proceedings in any other jurisdiction nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
18
(b) Each Party irrevocably appoints the agent for service of process
(if any) specified with respect to it in Part XIV of the Schedule. If for any
reason any Party's process agent is unable to act as such, such Party will
promptly notify the other Party and within thirty (30) days will appoint a
substitute process agent acceptable to the other Party.
12.3 Waiver of Jury Trial. Each Party irrevocably waives any and all
right to trial by jury in any Proceedings.
12.4 Waiver of Immunities. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all immunity on
the grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for specific
performance or for recovery of property, (iv) attachment of its assets (whether
before or after judgment) and (v) execution or enforcement of any judgment to
which it or its revenues or assets might otherwise be entitled in any
Proceedings in the courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any such immunity in
any Proceedings.
XXXXXX XXXXXXX & CO. INCORPORATED
By:
------------------------------
Name:
Title:
XXXXXX XXXXXXX XXXX XXXXXX
SPECTRUM __________________ L.P.
By: Demeter Management Corporation
------------------------------
Name:
Title:
19
Schedule-1
SCHEDULE
Schedule to the International Foreign Exchange and
Options Master Agreement dated as of June
___, 2000 (the "Agreement")
between Xxxxxx Xxxxxxx & Co. Incorporated ("Party A")
and
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum ________________ L.P.
("Party B").
Part I. Scope of the Agreement
The Agreement shall apply to all FX Transactions outstanding between
any two Designated Offices of the Parties on the Effective Date.
The Agreement shall apply to all Currency Options outstanding between
any two Designated Offices of the Parties on the Effective Date.
Part II. Designated Offices
Each of the following shall be a Designated Office:
Party A: New York
Party A is not a multibranch party.
Party B: New York
Party B is not a multibranch party.
Each Party (the "first Party") that enters into an FX Transaction or
Option through an agency, branch, or office other than its head or home office
represents to the other Party (the "second Party") that, notwithstanding the
place of booking office or jurisdiction of incorporation or organization of the
first Party, the obligations of the first Party are the same as if it had
entered into the FX Transaction or Option through its head or home office. This
representation will be deemed to be repeated by the first Party on each date on
which it enters into an FX Transaction or Option.
Part III. Notices
If sent to Party A:
Address: Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Telex Number: 6801048 (Answerback: FXMS)
Facsimile Number: (000) 000-0000
SWIFT Number: XXXXXX00
Name of Individual or Department to whom Notices are to be sent:
Foreign Exchange Trading Department
Schedule-1
If sent to Party B:
Address: Party B c/o
Morgan Xxxxxxx Xxxx Xxxxxx & Co.
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone Number: 000-000-0000
Telex Number:
Facsimile Number: 000-000-0000
SWIFT Number:
Name of Individual or Department to whom Notices are to be sent:
Managed Futures
Part IV. Payment Instructions
[X] Name of Bank and Office, Account Number and Reference with
respect to relevant Currencies:
In the case of Party A, U.S. dollar payments shall be made to the
following account:
Bank of New York, New York
ABA#: 000000000
For: Xxxxxx Xxxxxxx & Co., New York
Acct. #: 8900010932
Ref: Chips UID 23-65-84
In the case of Party B, U.S. dollar payments shall be made to the
following account:
Citibank N.A.
ABA#: 021-000089
For: Xxxx Xxxxxx Xxxxxxxx Inc.
Acct.#: 40611164
For Further Credit to Managed Futures Fund Margin Transfer 000-000000-0
[X] With respect to each Party, as may be set forth in such Standard
Settlement Instructions as may be specified by such Party in a notice given in
accordance with Section 11.4.
Part V. Netting
A. Discharge of Options
Section 4.1 shall apply to Options other than Barrier Options.
B. Netting of Premiums
Section 4.2 shall apply to Premium payments for Options other than
Barrier Options.
C. Settlement Netting Offices
Each of the following shall be a Settlement Netting Office:
Schedule-2
Party A: Same as Part II.
Party B: Same as Part II
Party A and Party B agree that, notwithstanding Section 6.2 of the
Agreement, obligations to make payments pursuant to FX Transactions shall only
be netted, satisfied and discharged against obligations to make payments arising
out of the same or other FX Transactions between a pair of Settlement Netting
Offices and obligations to make payments pursuant to Options (including
exercised Options) shall only be netted, satisfied and discharged against
obligations to make payments arising out of the same or other Options (including
exercised Options) between a pair of Settlement Netting Offices.
D. Novation Netting Offices
Each of the following shall be a Novation Netting Office:
Party A: Same as Part II
Party B: Same as Part II
E. Matched Pair Novation Netting Offices
Each of the following shall be a Matched Pair Novation Netting
Office:
Not applicable.
Part VI. Automatic Exercise of Options; Cash Settlement of FX Transactions
A. Automatic Exercise of Options
Automatic Exercise of certain In-the-money Options pursuant to
Section 5.3 shall apply to Party A as Buyer.
Automatic Exercise of certain In-the-money Options pursuant to
Section 5.3 shall apply to Party B as Buyer.
B. Cash Settlement of FX Transactions
Schedule-3
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include
foreign exchange transactions for the purchase and sale of one Currency against
another but which shall be settled by the delivery of only one Currency based on
the difference between exchange rates as agreed by the Parties as evidenced in a
Confirmation. Section 6.1 is modified so that only one Currency shall be
delivered for any such FX Transaction in accordance with the formula agreed by
the Parties. Section 8.1(b)(i)(A) is modified so that the Close-Out Amount for
any such FX Transaction for which the cash settlement amount has been fixed on
or before the Close-Out Date pursuant to the terms of such FX Transaction shall
be equal to the Currency Obligation arising therefrom (increased by adding
interest in the manner provided in clause (A)(2) if the Value Date precedes the
Close-Out Date) and for any such FX Transaction for which the cash settlement
amount has not yet been fixed on the Close-Out Date pursuant to the terms of
such FX Transaction, the Close-Out Amount shall be as reasonably determined by
Party A in accordance with market practice.
Part VII. Base Currency
Party A's Base Currency is U.S. Dollars.
Party B's Base Currency is U.S. Dollars.
Part VIII. Threshold Amount
For purposes of clause (x) of the definition of Event of Default:
Party A's Threshold Amount is U.S.D. $10,000,000.
Party B's Threshold Amount is U.S.D. $10,000,000.
Part IX. Additional Events of Default
Clause (x) of the definition of Event of Default shall be modified
by deleting the words ", or becomes capable at any time of being declared,"
after the words "and remains unpaid after any applicable grace period has
elapsed, or (B) becomes".
The following provisions which are checked shall constitute Events
of Default:
[X] (a) occurrence of garnishment or provisional garnishment
against a claim against the Defaulting Party acquired by the Non-Defaulting
Party. The automatic termination provision of Section 8.1 shall not apply to
either Party that is a Defaulting Party in respect of this Event of Default.
[X] (b) suspension of payment by the Defaulting Party or any
Credit Support Provider in accordance with the Bankruptcy Law or the Corporate
Reorganization Law in Japan. The automatic termination provision of Section 8.1
shall not apply to either Party that is a Defaulting Party in respect of this
Event of Default.
[X] (c) disqualification of the Defaulting Party or any Credit
Support Provider by any relevant xxxx clearing house located in Japan. The
automatic termination provision of Section 8.1 shall not apply to either Party
that is a Defaulting Party in respect of this Event of Default.
Schedule-4
Part X. Automatic Termination
The Automatic Termination provision of Section 8.1 shall not apply
to Party A as Defaulting Party in respect of clause (ii), (iii) or (iv) of the
definition of Event of Default.
The Automatic Termination provision of Section 8.1 shall not apply
to Party B as Defaulting Party in respect of clause (ii), (iii) or (iv) of the
definition of Event of Default.
Part XI. Adequate Assurances
Adequate Assurances under Section 11.14 shall not apply to the
Agreement.
Part XII. Governing Law
In accordance with Section 12.1 of the Agreement, the Agreement
shall be governed by the laws of:
[X] the State of New York.
[ ] England and Wales.
[ ] Japan.
Part XIII. Consent to Jurisdiction
In accordance with Section 12.2 of the Agreement, each Party
irrevocably submits to the non-exclusive jurisdiction of:
[X] the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City.
[ ] the courts of England.
[ ] the Tokyo District Court.
Part XIV. Agent for Service of Process
Party A appoints the following as its agent for service of process
in any Proceedings in the State of New York: Not applicable.
Party B appoints the following as its agent for service of process
in any Proceedings in the State of New York: Not applicable.
Part XV. Certain Regulatory Representations
A. The following FDICIA representation shall apply:
1. Party A represents and warrants that it qualifies as a
"financial institution" within the meaning of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") by virtue of being a:
[X] broker or dealer within the meaning of FDICIA;
Schedule-5
[ ] depository institution within the meaning of FDICIA;
[X] futures commission merchant within the meaning of FDICIA;
[ ] "financial institution" within the meaning of Regulation
EE (see below).
2. Party B hereby represents and warrants that it qualifies as a
"financial institution" by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of FDICIA;
[ ] "financial institution" within the meaning of Regulation
EE (see below).
3. A Party representing that it is a "financial institution"
as that term is defined in 12 C.F.R. Section 231.3 of Regulation EE issued by
the Board of Governors of the Federal Reserve System ("Regulation EE")
represents that:
(a) it is willing to enter into "financial contracts" as a
counterparty "on both sides of one or more financial markets" as those terms are
used in Section 231.3 of Regulation EE; and
(b) during the 15-month period immediately preceding the date
it makes or is deemed to make this representation, it has had on at least one
(1) day during such period, with counterparties that are not its affiliates (as
defined in Section 231.2(b) of Regulation EE) either:
(i) one or more financial contracts of a total gross
notional principal amount of $1 billion outstanding; or
(ii) total xxxxx xxxx-to-market positions (aggregated
across counterparties) of $100 million; and
(c) agrees that it will notify the other Party if it no longer
meets the requirements for status as a financial institution under Regulation
EE.
4. If both Parties are financial institutions in accordance with
the above, the Parties agree that the Agreement shall be a netting contract, as
defined in 12 U.S.C. Section 4402(14), and each receipt or payment or delivery
obligation under the Agreement shall be a covered contractual payment
entitlement or covered contractual payment obligation, respectively, as defined
in FDICIA.
B. The following ERISA representation shall apply:
Each Party represents and warrants that it is not (i) a plan
subject to the fiduciary responsibility part of the Employee Retirement Income
Security Act of 1974, as amended, or subject to Section 4975 of the Internal
Revenue Code of 1986, as amended; (ii) a person acting on behalf of any such
plan; or (iii) a person the assets of whom constitute assets of any such plan.
C. The following CFTC trade option representation shall not apply:
Schedule-6
Each Party represents and warrants that it is a commercial user of
or a merchant handling the Currencies subject to each Option and was offered or
entered into each Option solely for purposes related to its business as such.
D. The following CFTC eligible swap participant representation shall apply:
Each Party represents and warrants that it is an "eligible swap
participant" under, and as defined in, 17 C.F.R. Section 35.1.
Part XVI. Representations and Warranties
In addition to the representations and warranties set forth in
Section 7.1 and Part XV of this Schedule, each Party hereby represents and
warrants to the other Party on the date hereof and on the date of each FX
Transaction or Option, as the case may be, that: (a) it is a sophisticated
investor able to evaluate and assume the risks associated with transactions in
currencies as contemplated by the Agreement; (b) it is not relying upon any
representations (whether written or oral) of the other Party other than the
representations expressly set forth in the Agreement, this Schedule, any Credit
Support Document or in any Confirmation; (c) its execution and delivery of the
Agreement, and its performance of its obligations hereunder, do not and will not
conflict with any law or regulation of the jurisdiction of its organization or
other law or regulation applicable to it, and do not and will not violate,
constitute a default under, or result in the creation or imposition of any lien
or encumbrance on any of its property or assets under any agreement or
instrument to which it is a party or by which its assets are bound; (d) no
consent, authorization or approval (including exchange control approval) or
other action by, and no notice to or filing with, any person or entity,
including any governmental authority or regulatory body, other than any already
obtained, made or filed and remaining in full force and effect, and the
conditions of which have been duly complied with, is required in connection with
the performance of its obligations under the Agreement; and (e) there are no
actions, proceedings or claims pending or, to the best of its knowledge,
threatened, the adverse determination of which might have a materially adverse
effect on its ability to perform its obligations under, or affect the validity
or enforceability of, the Agreement.
Part XVII. Agreement Superseding
A new Section 11.16 shall be added to the Agreement which shall
read as follows: "The Agreement shall supersede any other agreement between the
Parties with respect to the subject matter hereof."
Part XVIII. Barrier Options
In connection with any Barrier Options between the Parties, Party
B acknowledges that:
a) As part of its business, Party A regularly trades in the
foreign exchange spot, forward, futures and options markets for its own account
and for the accounts of other customers. Such trading may affect spot prices in
the Currency Pair.
b) Party A generally xxxxxx its Barrier Option positions by buying
or selling a quantity of the relevant currency, and may adjust (increase or
decrease) its hedge as market conditions change during the life of the Options
and it believes that it is more or less likely that a Barrier will be breached.
Such hedging and de-hedging activity may affect spot prices and may thus affect
the probability of a Barrier being breached.
Schedule-7
Part XIX. 1998 FX and Currency Option Definitions.
The 1998 FX and Currency Option Definitions as published by
ISDA, EMTA and the Foreign Exchange Committee (the "Definitions") shall be
applicable to each FX Transaction and Option under the Agreement, including any
FX Transaction or Option outstanding on the date hereof, subject to the
following:
A. Definitions:
1. The term "Agreement" in Section 2.2 of the Agreement shall
include the Agreement as modified and supplemented by this
Part.
2. The term "FX Transaction" and "Currency Option Transaction" in
the Definitions or in a Confirmation shall in all cases by
considered references to an "FX Transaction" and "Option"
under the Agreement.
3. All terms in this Part shall have the meanings given them
above or in the Definitions, unless not defined above or in
the Definitions, in which case the term shall have the meaning
given in the Agreement.
B. Scope.
1. Notwithstanding the absence of any reference to the
Definitions in a Confirmation, this Part and the Definitions
shall be applicable to any FX Transaction or Currency Option
Transaction covered by the Agreement; provided that the
Parties may agree otherwise for any Transaction as evidenced
by a Confirmation that complies with Section 2.3 of the
Agreement.
2. In the event of any inconsistency between the Definitions and
a Confirmation, the terms of the Confirmation shall govern for
the purpose of the relevant Transaction. In the event of any
inconsistency between the Definitions and the Agreement, the
Definitions shall prevail.
C. Confirmations.
Notwithstanding Sections 2.4 and 11.12 of the Agreement, in the event
of any inconsistency between the terms of a Confirmation for an FX Transaction
or Currency Option Transaction and the Agreement, the terms of the Confirmation
shall prevail.
D. Disruption Events.
With respect to any Disruption Event that is applicable to an FX
Transaction or Currency Option Transaction pursuant to the Definitions or as
otherwise agreed by the Parties as evidenced by a Confirmation, Section 9 of the
Agreement shall not be applicable in respect of such FX Transaction or Currency
Option Transaction, and the Parties shall be subject to the Disruption Fallbacks
(including but not limited to No Fault Termination) specified as applicable
pursuant to the Definitions or such Confirmation.
Schedule-8
E. Miscellaneous.
The provisions of Part VI.B of this Schedule relating to cash
settlement of FX Transactions shall apply to Non-Deliverable FX Transactions.
Part XX. Margin and Security
(a) Party B shall at all times maintain with Xxxx Xxxxxx Xxxxxxxx
Inc. (the "Custodian") for and on behalf of Party A cash and securities
acceptable to Party A (together, the "Margin") in order to secure the
obligations of Party B under all open FX Transactions and Options entered into
under the Agreement. The amount of Margin which Party B shall maintain with
Party A shall be determined by Party A in its reasonable judgment (which
determination shall be conclusive in the absence of manifest error), on a risk
adjusted basis, taking into account historical volatility, imputed volatility
and/or such other factors as Party A reasonably deems relevant to this
determination (the "Aggregate Margin Requirement"). On or prior to the date of
the Agreement, Party B shall have established a special pledge account with the
Custodian (the "Account") for the purpose of holding custody of the Margin for
and on behalf of Party A in accordance with the provisions of the Custodian
Account Addendum, dated the date hereof, and the Agreement. Party B's failure to
deposit Margin or to establish the Account as required herein shall be an Event
of Default for all purposes under the Agreement (it being understood that there
shall be no grace period with respect to obligations of Party B pursuant to this
Part XX).
(b) Whenever such Aggregate Margin Requirement shall exceed the
market value of Margin on deposit with the Custodian in the Account as
determined by Party A at such time in its reasonable judgment and which
determination shall be conclusive in the absence of manifest error (the "Margin
Balance", and the difference between such Aggregate Margin Requirement and the
Margin Balance being the "Shortfall"), then Party B shall deposit immediately
upon Party A's request, additional Margin in an amount at least equal to such
Shortfall.
(c) In furtherance of the foregoing, as security for the prompt
and complete payment when due and the performance by Party B of all of its
obligations to Party A under the Agreement, Party B hereby grants to Party A a
continuing first priority security interest in and to all of Party B's right,
title and interest in and to the Margin, the Account, all financial assets,
investment property and other property and assets which are deposited from time
to time in, or credited from time to time to, the Account, all security
entitlements in respect thereof, all income and profits thereon, all interest,
dividends and other payments and distributions with respect thereto, and all
proceeds of any of the foregoing (the "Margin Collateral"). As additional
security for the prompt and complete payment when due and the performance by
Party B of all of its obligations to Party A under the Agreement, Party B hereby
grants to Party A and its affiliates a first priority security interest in and
to any property of Party B at any time held by or for the benefit of Party A or
any affiliate of Party A for any purpose, including, without limitation, any
property of Party B held in any account with Party A, any affiliate of Party A
or with the Custodian, any financial assets, investment property and other
property and assets which are deposited from time to time in, or credited from
time to time to, any such account, all security entitlements in respect thereof,
all income and profits thereon, all interest, dividends and other payments and
distributions with respect thereto, and all proceeds of any of the foregoing
(the "Collateral"), to secure all obligations of Party B to Party A. If
Schedule-9
Collateral was delivered in connection with a particular agreement between Party
B and Party A or any of its affiliates, then such Collateral shall secure first
the obligations of Party B with respect to such agreement and second all other
obligations of Party B to Party A or any of its affiliates (in such order as
Party A shall determine in its sole discretion). Party A, its affiliates and the
Custodian and Party B hereby each acknowledge and agree that (a) each of Party A
and its affiliates which holds Collateral holds such Collateral for itself and
also as agent and bailee for all other of Party A and its affiliates which are
secured parties hereunder or under any agreement between Party B and Party A or
any of its affiliates and (b) the Custodian which holds Collateral for and on
behalf of Party A holds such Collateral as agent and bailee for Party A and its
affiliates which are secured parties hereunder and under any agreement between
Party B and Party A or any of its affiliates. If an Event of Default hereunder
shall occur, then each of Party A and its affiliates shall be entitled to retain
or sell all Collateral as security for Party B's obligations, even if otherwise
required pursuant to the terms of an agreement or otherwise to deliver any
Collateral to Party B or Party B's order. The parties agree that Party A and its
affiliates shall have the rights and remedies of a secured creditor under the
New York Uniform Commercial Code (the "UCC") and under any other applicable law
or agreement to exercise any right with respect to the Margin Collateral and the
Collateral subject to the security interest granted under the Agreement.
Notwithstanding Section 9-207 of the UCC, each of Party A or any of its
affiliates shall have free and unrestricted use of any Margin Collateral and/or
Collateral which it holds hereunder or with the Custodian, including, without
limitation, the right, from time to time and without notice to Party B, to sell,
pledge, repledge, hypothecate, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Margin Collateral
and/or Collateral separately or in common with other securities, commodities or
other property, for the sum due to any of Party A or any of its affiliates or
for a greater sum on terms which may otherwise impair the right of Party B to
redeem such Margin Collateral and/or Collateral, and free from any other right
of claim of any nature whatsoever of Party B, and without retaining possession
and control for delivery a like amount of similar securities, commodities, or
other property.
(d) Party B represents and warrants that it owns the Margin
Collateral and the Collateral to be pledged and assigned to each of Party A and
its affiliates hereunder and under any other agreement between Party B and Party
A or any of its affiliates, free and clear of any liens, equities, claims
(including, without limitation, participation interests) and transfer
restrictions. Party B covenants and agrees that it will not sell, assign,
transfer, exchange or otherwise dispose of, or grant any option with respect to,
any of the Margin Collateral or the Collateral, nor will it create, incur or
permit to exist any lien on or with respect to any of the Margin Collateral or
the Collateral, any interest therein, or any proceeds thereof, except for the
security interests created under this Agreement or otherwise under any agreement
between Party B and Party A or any of its affiliates. Any purported sale,
assignment, transfer, exchange, disposition, grant or lien of the Margin
Collateral or the Collateral by Party B that is not permitted under the
foregoing sentence shall be null and void and shall constitute an Event of
Default hereunder and under any agreement between Party B and Party A or any of
its affiliates immediately prior to the taking of any such action, if Party A so
deems (it being understood that there shall be no grace period with respect to
obligations of Party B pursuant to this Part XX).
(e) Party B shall, at its sole expense and as Party A in its sole
discretion may deem necessary or advisable from time to time, undertake all such
action as is necessary, (i) to create, preserve, protect and perfect the
security interests granted under the Agreement, (ii) to enable Party A to
exercise and enforce its rights with respect to such security interests, and
(iii) execute and deliver all documents and instruments in such manner and form
as Party A may require, including without limitation UCC financing statements
and continuation statements. Party B hereby appoints Party A as its true and
lawful attorney-in-fact, including without limitation, to sign and file such
documents and instruments on Party B's behalf and without Party B's signature;
such appointment, being coupled with an interest, shall be irrevocable. Without
limitation on the foregoing, Party B agrees to take such action as Party A in
its sole discretion may deem necessary or advisable in the event of any change
in applicable law, including, without limitation, Article 8 of the UCC and the
Regulations of the Department of the Treasury governing transfers of interests
in U.S. marketable treasury securities in book-entry form.
Schedule-10
(f) The parties hereto agree that each of the Account and any
account in which any Collateral is held or to which any Collateral is credited
(a "Collateral Account") is a "securities account" within the meaning of Article
8 of the UCC and that all property and assets (including, without limitation,
cash) held in or credited to (i) the Account or (ii) any Collateral Account
shall be treated as a "financial asset" for purposes of Article 8 of the UCC.
XXXXXX XXXXXXX & CO. INCORPORATED
By
-------------------------------
Name:
Title:
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM ________________ L.P.
By: Demeter Management Corporation
Name:
Title:
Schedule-11
Addendum-1
CUSTODIAN ACCOUNT ADDENDUM
This Addendum supplements, forms part of, and is subject in all
respects to, the Foreign Exchange and Options Master Agreement (FEOMA) including
the Schedule thereto (the "Schedule") dated as of June ___, 2000 by and between
Xxxxxx Xxxxxxx & Co. Incorporated and Demeter Management Corporation on behalf
of ____________________________________ (collectively, the "Agreement"), and is
a part of the Schedule with respect to each party; provided, however, as used
herein, "Pledgor" means Party B and "Secured Party" means Party A (as defined in
the Agreement). Other capitalized terms used herein, unless otherwise defined,
have the meanings specified in the Agreement. With respect to the rights or
obligations of the Secured Party or the Pledgor, in the event of any
inconsistencies between this Addendum and the Agreement, the Agreement will
prevail.
Having appointed Xxxx Xxxxxx Xxxxxxxx Inc. (the "Custodian") to hold
Margin for and on behalf of the Secured Party, the Secured Party, the Pledgor
and the Custodian (solely to the extent of the duties it has agreed to undertake
and perform hereunder) agree as follows:
1. In all respects, the rights of the Secured Party under the Schedule
with respect to Margin shall not be affected by the appointment of a Custodian
hereunder. The provisions of this Addendum in no way diminish or otherwise
affect the rights of the Secured Party under the Agreement.
2. The Secured Party, by written notice to the Custodian, may exercise
all powers, and exercise any and all rights and remedies permitted under the
Schedule as though the Secured Party was taking such action directly, and the
Custodian will comply with, and be entitled to rely on, all such instructions
(including, without limitation, entitlement orders) as if such instructions were
provided by the parties jointly.
3. As used herein, the following terms have the following meaning:
"Advice from the Secured Party" or "Advice" means a written notice sent
to the Pledgor and/or the Custodian or transmitted by a facsimile sending device
by any of those individuals designated by the Secured Party, except that for any
of the following purposes it shall mean notice by telephone to a person
designated by the Pledgor in writing as authorized to receive such advice or, in
the event that no such person is available, to any officer of the Pledgor and
confirmed promptly in writing thereafter: (i) for initial or additional Margin;
(ii) that the Secured Party has issued a Notice of Exercise with respect to an
Option ; or (iii) that the Pledgor has failed to give notice of intent to make
payment of amounts or deliveries as required under Paragraph 5 of this Addendum.
With respect to any covering purchase transaction, the Advice from the Secured
Party shall mean a Confirmation in use by the Secured Party and sent or
transmitted to the Pledgor and/or the Custodian. When used herein the term
"Advise" means the act of sending an Advice from the Secured Party.
4. The Custodian shall open an account on its books entitled "Special
Custody Account for Xxxxxx Xxxxxxx & Co. Incorporated as Pledgee of Xxxxxx
Xxxxxxx Xxxx Xxxxxx Strategic Alternatives, L.L.C (referred to herein as the
"Special Custody Account").
The parties hereto agree that all property and assets held in
or credited to the Special Custody Account will be treated as financial assets
under Article 8 of the Uniform Commercial Code as in effect in the State of New
York (the "UCC"). The parties hereto further agree that the securities
intermediary's jurisdiction, within the meaning of Section 8-110(e) of the UCC,
in respect of the Special Custody Account and the Margin is the State of New
York and agree that none of them has or will enter into any agreement to the
contrary.
Addendum-1
Anything in this Addendum notwithstanding, the Custodian
hereby agrees to comply with entitlement orders and other instructions of the
Secured Party with respect to the Special Custody Account and any Margin without
further consent of the Pledgor. The Pledgor hereby consents to such agreement.
The Custodian represents and warrants that it has not, and
agrees that it will not, agree to comply with entitlement orders concerning the
Special Custody Account or any Margin that are originated by any person other
than the Secured Party.
The Pledgor agrees to inform the Custodian in writing that
cash and securities specified by the Pledgor as qualifying as Margin and equal
in value to the Aggregate Margin Requirement are to be identified on the
Custodian's books and records as pledged to the Secured Party. The Custodian
will hold the Margin in, and credit the Margin to, the Special Custody Account,
separate and apart from any other property of the Pledgor that may be held by
the Custodian, subject to the interest therein of the Secured Party as the
Pledgee thereof in accordance with the terms of the Agreement. The Custodian
continuously represents that Margin will not be subject to any other lien,
charge, security interest or other right or claim of the Custodian or any person
claiming through the Custodian. The Custodian will confirm in writing to the
Secured Party and the Pledgor all pledges, releases, substitutions or
distributions of Margin permitted under the Agreement, and will inform the
Secured Party upon request of the kind and amount of Margin pledged to the
Secured Party.
5. In the event that (i) the Secured Party advises the Pledgor in an
Advice from the Secured Party that the Secured Party has exercised an Option
sold by the Pledgor and the Pledgor does not promptly notify the Secured Party
by telephone of the Pledgor's intention to comply with the Notice of Exercise by
making payment or delivery, as the case may be, as required under the terms of
such Option plus payment of applicable commissions or other charges; or (ii) the
Pledgor, having received such Notice of Exercise, fails to make such payment or
delivery, or cause such payment or delivery to be made, then the Secured Party
will immediately notify the Pledgor in an Advice from the Secured Party of such
failure to give telephone notice or failure to make payment or delivery, as
applicable, and may, after transmittal of an Advice from the Secured Party of
its intention to do so and only if the Pledgor does not promptly make payment or
delivery to the Secured Party, direct the Custodian to take any action necessary
to fully satisfy Pledgor's obligations to the Secured Party, including any of
the Secured Party's rights and remedies under Part XX of the Schedule.
6. With respect to any losses or liabilities, the Custodian shall be
protected in acting pursuant to any instructions from the Pledgor or Advices
from the Secured Party believed by the Custodian in good faith to be genuine and
authorized. The Pledgor agrees to indemnify the Custodian for, and hold it
harmless against, any loss, liability or expense incurred by the Custodian,
without negligence or bad faith on the part of the Custodian, arising out of
this Addendum.
7. The Secured Party shall not be liable for any losses, costs,
damages, liabilities or expenses suffered or incurred by the Pledgor as a result
of any actions taken under this Addendum, or any other action taken or not taken
by the Secured Party hereunder for the Pledgor's account at the Pledgor's
direction or otherwise, except to the extent that such loss, cost, damage,
liability or expense is the result of the Secured Party's own recklessness,
willful misconduct or bad faith.
Addendum-2
8. The Pledgor continuously represents and warrants to the Secured
Party that securities included at any time in the Margin shall be in good
deliverable form (or Custodian shall have the unrestricted power to put such
securities into good deliverable form) in accordance with the requirements of
such exchanges as may be the primary market or markets for such securities. Each
of the Pledgor, the Secured Party and the Custodian continuously represents and
warrants that:
a) it has duly executed and delivered this Addendum, and has all requisite
power, authority and approvals to enter into and perform its
obligations hereunder; and
b) this Addendum is its valid and legally binding obligation, enforceable
against it in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and to
general equitable principles.
The Secured Party and the Pledgor hereby acknowledge that the Custodian
holds securities and cash as custodian for its customers through sub-custodians,
depositaries and deposit-taking banks which maintain omnibus accounts on behalf
of customers of the Custodian. Securities held in the Special Custody Account
may be held at the Depository Trust Company or other book-entry depository
systems in the account of the Custodian, save that Margin denominated in
currencies other than US Dollars may be held by a sub-custodian for the
Custodian other than in book-entry form. U.S. Treasury securities shall be held
in a Treasury/Reserve Automated Debt Entry System ("TRADES") Participant's
securities account of the Custodian or of the Custodian's sub-custodian for the
account of the Custodian at the Federal Reserve Bank.
9. A monthly statement will be provided by the Custodian to the Secured
Party and the Pledgor listing all Margin held in the Special Custody Account.
The Custodian will also advise the Secured Party upon request, at any time, of
the kind and amount of Margin pledged to the Secured Party. It is agreed that,
notwithstanding any language to the contrary in Custodian's form of
confirmation, the Custodian holds the Margin as agent of the Secured Party as
pledgee hereunder, not as escrow agent. The Custodian makes no representations
as to the existence, perfection or enforceability of any security interest,
charge, lien or other rights of the Pledgor in or to the Margin.
10. The Pledgor shall pay the Custodian as compensation for its
services pursuant to this Addendum such compensation as may from time to time be
agreed upon in writing between the Pledgor and the Custodian.
11. No amendment to this Addendum shall be effective unless in writing
and signed by an authorized officer of each of the Secured Party, the Pledgor,
and the Custodian.
12. This Addendum may be executed in one or more counterparts, all of
which together shall constitute but one and the same instrument.
13. Any of the parties hereto may terminate the custodial relationship
by notice, given at least 10 business days prior to the date of such intended
termination, in writing to the other parties hereto; provided, however, that
should the Custodian or the Pledgor seek to terminate, then the Pledgor must
designate a replacement Custodian, which the Secured Party has, in the exercise
of its sole discretion, approved. Custodian agrees to remain as the Custodian
until such time as a replacement Custodian has been approved and such
replacement Custodian has agreed to the terms of its service hereunder and under
the Agreement.
Addendum-3
Written communications hereunder shall be sent in the manner specified in the
Agreement addressed:
(a) If to Custodian, to:
Xxxx Xxxxxx Xxxxxxxx Inc.
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx - Managed Futures Department
Phone: 000-000-0000
Fax: 000-000-0000
(b) If to the Pledgor, to:
Demeter Management Corporation
Xxxxxx Xxxxxxx Xxxx Xxxxxx & Co.
2 World Trade Center
62nd Floor
New York, New York 10048
Attention: Managed Futures Department
Phone: 000-000-0000
Fax: 000-000-0000
(c) If to the Secured Party, to:
Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Foreign Exchange Trading Desk
Phone: (000) 000-0000
Fax: (000) 000-0000
14. This Addendum will be governed by the laws of the State of New York
applicable to transactions entered into and to be performed wholly within the
State of New York.
DEMETER MANAGEMENT CORPORATION
on behalf of ______________________
By:
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Name:
--------------------
Title:
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XXXXXX XXXXXXX & CO. INCORPORATED
By:
--------------------
Name:
--------------------
Title:
--------------------
Addendum-4
XXXX XXXXXX XXXXXXXX INC.
(for purposes of this Addendum)
By:
--------------------
Name:
--------------------
Title:
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Addendum-5
EXHIBIT 10.19
FORM OF
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the day of , 2000 among XXXXXX
XXXXXXX XXXX XXXXXX SPECTRUM STRATEGIC L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and ECLIPSE CAPITAL MANAGEMENT, INC., a Delaware corporation
(the "Trading Advisor").
WITNESSETH:
WHEREAS, the Partnership has been organized pursuant to the
Limited Partnership Agreement dated as of May 27, 1994 (the "Limited Partnership
Agreement"), to trade, buy, sell, spread, or otherwise acquire, hold, or dispose
of commodities (including, but not limited to, foreign currencies,
mortgage-backed securities, money market instruments, financial instruments, and
any other securities or items which are now or may hereafter be the subject of
futures contract trading), domestic and foreign commodity futures contracts,
commodity forward contracts, foreign exchange commitments, options on physical
commodities and on futures contracts, spot (cash) commodities and currencies,
and any rights pertaining thereto (hereinafter referred to collectively as
"futures interests") and securities (such as United States Treasury bills)
approved by the Commodity Futures Trading Commission (the "CFTC") for investment
of customer funds;
WHEREAS, the Partnership became a member partnership of the
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum Series (the "Fund Group") by entering into
an agreement pursuant to which units of limited partnership interest ("Units")
of such member partnerships are sold to investors in a common offering under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-1 as it may be amended from time to time (the
"Registration Statement") and a final Prospectus, constituting a part thereof as
it may be amended and supplemented from time to time (the "Prospectus"), and
thereafter, pursuant to which such Units can be exchanged by a limited partner
of a member partnership of the Fund Group for six months for Units of other
member partnerships of the Fund Group at 100% of the respective Net Asset Value
(as defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the Trading Advisor has extensive experience trading
in futures interests and is willing to provide certain services and undertake
certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to act as
a trading advisor for the Partnership and to make investment decisions with
respect to futures interests for its allocated share of the Partnership's Net
Assets (as defined in Section 6(c) hereof) and the Trading Advisor desires so to
act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Advisor will
conduct a portion of the Partnership's futures interests trading;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing Offering
of Units.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership, the General Partner, and Xxxx
Xxxxxx Xxxxxxxx Inc., the selling agent for the Partnership ("DWR") by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the
Trading Advisor becomes aware of any materially untrue or misleading statement
or omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2
2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a Trading
Advisor for the Partnership and, as such, shall have sole authority and
responsibility for directing the investment and reinvestment of its allocable
share of the Net Assets of the Partnership on the terms and conditions and in
accordance with the prohibitions and trading policies set forth in this
Agreement, or the Prospectus or as otherwise provided in writing to the Trading
Advisor; provided, however, that the General Partner may override the
instructions of the Trading Advisor to the extent necessary (i) to comply with
the trading policies of the Partnership and with applicable speculative position
limits, (ii) to fund any distributions, redemptions, or reapportionments among
other trading advisors to the Partnership, (iii) to pay the Partnership's
expenses, (iv) to the extent the General Partner believes doing so is necessary
for the protection of the Partnership, (v) to terminate the futures interests
trading of the Partnership, or (vi) to comply with any applicable law or
regulation. The General Partner agrees not to override any such instructions for
the reasons specified in clauses (ii) or (iii) of the preceding sentence unless
the Trading Advisor fails to comply with a request of the General Partner to
make the necessary amount of funds available to the Partnership within five
calendar days of such request. The Trading Advisor shall not be liable for the
consequences of any decision by the General Partner to override instructions of
the Trading Advisor, except to the extent that the Trading Advisor is in breach
of this Agreement. In performing services to the Partnership the Trading Advisor
may not materially alter the trading program(s) used by the Trading Advisor in
investing and reinvesting its allocable share of the Partnership's Net Assets in
futures interests as described in the Prospectus without the prior written
consent of the General Partner, it being understood that changes in the futures
interests traded shall not be deemed an alteration in the Trading Advisor's
trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading
futures interests for the account of the Partnership in accordance with
the prohibitions and trading policies of the Partnership described in
the Prospectus and as otherwise provided in writing to the Trading
Advisor and the trading programs, systems, methods, and strategies of
the Trading Advisor described in the Prospectus, with such changes and
additions to such trading programs, systems, methods or strategies as
the Trading Advisor, from time to time, incorporates into its trading
programs for accounts the size of the Partnership.
(ii) Subject to reasonable assurances of
confidentiality by the General Partner and the Partnership, provide the
General Partner, within 30 days of a request therefor by the General
Partner, with information comparing the performance of the
Partnership's account and the performance of all other client accounts
directed by the Trading Advisor using the trading programs used by the
Trading Advisor for the Partnership over a specified period of time. In
providing such information, the Trading Advisor may take such steps as
are necessary to assure the confidentiality of the Trading Advisor's
clients' identities. The Trading Advisor shall, upon the General
Partner's request, consult with the General Partner concerning any
discrepancies between the performance of such other accounts and the
Partnership's account. The Trading Advisor shall promptly inform the
General Partner of any material discrepancies of which the Trading
Advisor is aware. The General Partner acknowledges that different
trading programs, strategies or implementation methods may be utilized
for different accounts, accounts with different trading policies,
accounts experiencing differing inflows or outflows of equity, accounts
that commence trading at different times, accounts which have different
portfolios or different fiscal years and that such differences may
cause divergent trading results.
3
(iii) Upon request of the General Partner and subject
to reasonable assurances of confidentiality by the General Partner and
the Partnership, provide the General Partner with all material
information concerning the Trading Advisor other than proprietary
information (including, without limitation, information relating to
changes in control, personnel, trading approach, or financial
condition). The General Partner acknowledges that all trading
instructions made by the Trading Advisor will be held in confidence by
the General Partner, except to the extent necessary to conduct the
business of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading
Advisor's open positions maintained by the Trading Advisor exceed the
Trading Advisor's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Advisor shall be for the
account of the Partnership. The Trading Advisor makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the
contrary, the Trading Advisor shall assume financial responsibility for any
errors committed or caused by it in transmitting orders for the purchase or sale
of futures interests for the Partnership's account, including payment to DWR of
the floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred by DWR on such trades but only for the
amount of DWR's out-of-pocket costs in respect thereof. The Trading Advisor's
errors shall include, but not be limited to, inputting improper trading signals
or communicating incorrect orders for execution. However, the Trading Advisor
shall not be responsible for errors committed or caused by DWR or by floor
brokers or other FCM's. The Trading Advisor shall have an affirmative obligation
promptly to notify the General Partner of its own errors, and the Trading
Advisor shall use its best efforts to identify and promptly notify the General
Partner of any order or trade which the Trading Advisor reasonably believes was
not executed in accordance with its instructions.
(e) Prior to the commencement of trading, the General Partner
on behalf of the Partnership shall deliver to the Trading Advisor a trading
authorization appointing the Trading Advisor the Partnership's attorney-in-fact
for such purpose.
4
3. Designation of Additional Trading Advisors and
Reallocation of Net Assets.
(a) If the General Partner at any time deems it to be in the
best interests of the Partnership, the General Partner may designate an
additional trading advisor or advisors for the Partnership and may apportion to
such additional trading advisor(s) the management of such amounts of Net Assets
as the General Partner shall determine in its absolute discretion. The
designation of an additional trading advisor or advisors and the apportionment
of Net Assets to any such trading advisor(s) pursuant to this Section 3 shall
neither terminate this Agreement nor modify in any regard the respective rights
and obligations of the Partnership, the General Partner and the Trading Advisor
hereunder. In the event that an additional trading advisor or advisors is so
designated, the Trading Advisor shall thereafter receive management and
incentive fees based, respectively, on that portion of the Net Assets managed by
the Trading Advisor and the Trading Profits attributable to the trading by the
Trading Advisor.
(b) The General Partner may at any time and from time to time
upon two business days' prior notice reallocate Net Assets allocated to the
Trading Advisor to any other trading advisor or advisors of the Partnership or
allocate additional Net Assets upon two business days' prior notice to the
Trading Advisor from such other trading advisor or advisors; provided that any
such addition to or withdrawal from Net Assets allocated to the Trading Advisor
of the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, DWR shall act as non-clearing commodity broker and Xxxxxx
Xxxxxxx & Co. Incorporated ("MS & Co."), an affiliate of the general partner,
shall act as the clearing commodity broker for the Partnership, with the
exception of trades on the London Metal Exchange which will be cleared by Xxxxxx
Xxxxxxx & Co. International Limited ("MSIL"), also an affiliate of the general
partner. In addition, MS & Co. will act as the counterparty on all of the
foreign currency forward trades for the Partnership. The General Partner shall
provide the Trading Advisor with copies of brokerage statements. Notwithstanding
that MS & Co. and MSIL shall act as the clearing commodity brokers for the
Partnership, the Trading Advisor may execute trades through floor brokers other
than those employed by MS & Co. and MSIL so long as arrangements are made for
such floor brokers to "give-up" or transfer the positions to MS & Co. or MSIL
and provided that the rates charged by such floor brokers have been approved in
writing by DWR. The Trading Advisor will not be responsible for paying give-up
fees.
5
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's
account, equal to 1/12 of 3% (a 3% annual rate) of the "Net Assets" of
the Partnership allocated to the Trading Advisor (as defined in Section
6(c)) as of the opening of business on the first day of each calendar
month.
(ii) A monthly incentive fee equal to 15% of the
"Trading Profits" (as defined in Section 6(d)) as of the end of each
calendar month, payable on a non-netted basis vis-a-vis other trading
advisors(s) of the Partnership.
(b) If this Agreement is terminated on a date other than the
last day of a month, the incentive fee described above shall be determined as if
such date were the end of a month. If this Agreement is terminated on a date
other than the end of a month, the management fee described above shall be
prorated based on the ratio of the number of trading days in the month through
the date of termination to the total number of trading days in the month. If,
during any month after the Partnership commences trading operations (including
the month in which the Partnership commences such operations), the Partnership
does not conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall have the same
meaning ascribed thereto in Section 7(d)(1) of the Limited Partnership
Agreement.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last
calendar month in which an incentive fee was earned by the Trading Advisor or,
if no incentive fee has been earned previously by the Trading Advisor, from the
date that the Partnership commenced trading to the end of the month as of which
such incentive fee calculation is being made. No incentive fee will be paid on
interest income earned by the Partnership.
6
(e) If any payment of incentive fees is made to the Trading
Advisor on account of Trading Profits earned by the Partnership on Net Assets
allocated to the Trading Advisor and the Partnership thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period with
respect to such amounts so allocated, the Trading Advisor shall be entitled to
retain such amounts of incentive fees previously paid to the Trading Advisor in
respect of such Trading Profits. However, no subsequent incentive fees shall be
payable to the Trading Advisor until the Partnership has again earned Trading
Profits on the Trading Advisor's allocated Net Assets; provided, however, that
if the Trading Advisor's allocated Net Assets are reduced or increased because
of redemptions, additions or reallocations that occur at the end of, or
subsequent to, an incentive period in which the Partnership experiences a
futures interests trading loss with respect to Net Assets allocated to the
Trading Advisor, the trading loss for that incentive period which must be
recovered before the Trading Advisor's allocated Net Assets will be deemed to
experience Trading Profits will be equal to the amount determined by (x)
dividing the Trading Advisor's allocated Net Assets after such increase or
decrease by the Trading Advisor's allocated Net Assets immediately before such
increase or decrease and (y) multiplying that fraction by the amount of the
unrecovered futures interests trading loss experienced in that month prior to
such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month with respect to the
Trading Advisor's allocated Net Assets without the payment of an intervening
incentive fee and Net Assets are increased or reduced in more than one such
month because of redemptions, additions or reallocations, then the trading loss
for each such month shall be adjusted in accordance with the formula described
above and such increased or reduced amount of futures interests trading loss
shall be carried forward and used to offset subsequent futures interest trading
profits. The portion of redemptions to be allocated to the Net Assets of the
Partnership managed by each of the trading advisors to the Partnership shall be
in the sole discretion of the General Partner.
(f) The Partnership will remit the management and incentive
fees to the Trading Advisor as soon as practicable, but in no event later than
30 days, in the case of the management fee, or 45 days in the case of the
incentive fee of the month-end as of which they are due, together with an
itemized statement showing the calculations.
7. Term.
This Agreement shall continue in effect until July , 2003 (the
"Initial Termination Date"). If this Agreement is not terminated on the Initial
Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least thirty days prior to the expiration
of the Initial Termination Date or any subsequent one-year period, as the case
may be, the Trading Advisor may terminate this Agreement at the end of the
current period by providing written notice to the Partnership indicating that
the Trading Advisor desires to terminate this Agreement at the end of such
7
period. This Agreement shall also terminate if the Partnership terminates. The
Partnership shall have the right to terminate this Agreement at its discretion
(a) at any month end upon five calendar days' prior written notice to the
Trading Advisor or (b) at any time upon written notice to the Trading Advisor
upon the occurrence of any of the following events: (i) if any person described
as a "principal" of the Trading Advisor in the Prospectus ceases for any reason
to be an active executive officer of the Trading Advisor; (ii) if the Trading
Advisor becomes bankrupt or insolvent; (iii) if the Trading Advisor is unable to
use its trading programs, systems or methods as in effect on the date hereof and
as refined and modified in the future for the benefit of the Partnership; (iv)
if the registration, as a commodity trading advisor, of the Trading Advisor with
the CFTC or its membership in the NFA is revoked, suspended, terminated, or not
renewed, or limited or qualified in any respect; (v) except as provided in
Section 12 hereof, if the Trading Advisor merges or consolidates with, or sells
or otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $1,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within five business days of a written request by the Trading
Advisor to do so, and, if such consent is given, does not make arrangements to
facilitate such trading within 90 days of such notice; or (vi) the assets
allocated to the Trading Advisor fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management
Activities. The Trading Advisor shall indemnify, defend and hold harmless the
Partnership and the General Partner, their controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Trading Advisor shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading of the Trading Advisor, or
any of its controlling persons or affiliates or their respective directors,
officers, partners, shareholders, or employees; provided that such liability
arises from an act or omission of the Trading Advisor, or any of its controlling
persons or affiliates or their respective directors, officers, partners,
shareholders, or employees which is found by a court of competent jurisdiction
upon entry of a final judgment (or, if no final judgment is entered, by an
opinion rendered by counsel who is approved by the Partnership and the Trading
Advisor, such approval not to be unreasonably withheld) to be a breach of this
Agreement or a representation, warranty or covenant herein, the result of bad
faith, misconduct or negligence, or conduct not done in good faith in the
reasonable belief that it was in, or not opposed to, the best interests of the
Partnership.
(c) Partnership Indemnity in Respect of Management Activities.
The Partnership shall indemnify, defend, and hold harmless the Trading Advisor,
its controlling persons, their affiliates and their respective directors,
officers, shareholders, employees, and controlling persons, from and against any
and all losses, claims, damages, liabilities (joint and several), costs, and
expenses (including any reasonable investigatory, legal, and other expenses
incurred in connection with, and any amounts paid in, any settlement; provided
that the Partnership shall have approved such settlement) resulting from a
demand, claim, lawsuit, action, or proceeding (other than those incurred as a
result of claims brought by or in the right of an indemnified party) relating to
the futures interests trading activities of the Partnership undertaken by the
Trading Advisor; provided that a court of competent jurisdiction upon entry of a
final judgment finds (or, if no final judgment is entered, an opinion is
rendered to the Partnership by independent counsel reasonably acceptable to both
parties) to the effect that the action or inaction of such indemnified party
that was the subject of the demand, claim, lawsuit, action, or proceeding did
not constitute negligence, misconduct, or a breach of this Agreement or a
representation, warranty or covenant of the Trading Advisor herein and was done
in good faith and in a manner such indemnified party reasonably believed to be
in, or not opposed to, the best interests of the Partnership.
9
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, MS & Co., MSIL,
the Partnership, the General Partner, any additional seller, and their
affiliates and each of their officers, directors, principals, shareholders,
controlling persons from and against any loss, claim, damage, liability, cost,
and expense, joint and several, to which any indemnified person may become
subject under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") the Commodity Exchange Act, as amended, and rules
promulgated thereunder (the "CEAct"), the securities or Blue Sky law of any
jurisdiction, or otherwise (including any reasonable investigatory, legal, and
other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Trading Advisor shall have approved such
settlement, and in connection with any administrative proceedings), in respect
of the offer or sale of Units, insofar as such loss, claim, damage, liability,
cost, or expense (or action in respect thereof) arises out of, or is based upon:
(i) a breach by the Trading Advisor of any representation, warranty, or
agreement in this Agreement or any certificate delivered pursuant to this
Agreement or the failure by the Trading Advisor to perform any covenant made by
the Trading Advisor herein; (ii) a breach of the disclosure requirements under
the CEAct or NFA Rules that relate to the Trading Advisor and the Trading
Advisor Principals; (iii) a misleading or untrue statement or alleged misleading
or untrue statement of a material fact made in the Registration Statement, the
Prospectus, or any related selling material or an omission or alleged omission
to state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus and any
selling material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined below) (including the
historical performance capsules) or was made in reliance upon, and in conformity
with, written information or instructions furnished by the Trading Advisor
(provided, however, that with respect to any related selling material only such
related selling material as shall have been approved in writing by the Trading
Advisor).
(e) Partnership Indemnity in Respect of Sale of Units. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not relate
to the Trading Advisor or its Trading Advisor Principals (including the
historical performance capsules) or was not made in reliance upon, and in
conformity with, information or instructions furnished by the Trading Advisor
(provided, however, that with respect to any related selling material, only such
related selling material as shall have been approved in writing by the Trading
Advisor), or does not result from a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by the Trading Advisor to
materially perform any covenant made in this Agreement.
10
(f) The foregoing agreements of indemnity shall be in addition
to, and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice
of the commencement of any action, claim, or proceeding to which any of the
indemnities may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available
hereunder, an indemnified person reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees
and expenses of more than one counsel for all indemnified persons in connection
with any one action, claim, or proceeding or in connection with separate but
similar or related actions, claims, or proceedings in the same jurisdiction
arising out of the same general allegations. The indemnifying party will not be
liable for any settlement of any action, claim, or proceeding effected without
the indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
11
9. Right to Advise Others and Uniformity of Acts and
Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the
number or nature of its clients, except that: (i) so long as the Trading Advisor
acts as a trading advisor for the Partnership, neither the Trading Advisor nor
any of its principals or affiliates shall hold knowingly any position or control
any other account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
12
10. Representations, Warranties, and Covenants of the
Trading Advisor.
(a) Representations of the Trading Advisor. The Trading
Advisor with respect to itself and each of its principals represents and
warrants to and agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using
the trading programs on behalf of the Partnership that are described in
the Prospectus (as modified from time to time) or any other trading
programs agreed to by the General Partner.
(ii) The Trading Advisor shall follow, at all times,
the trading policies of the Partnership (as described in the
Prospectus) and as amended in writing and furnished to the Trading
Advisor from time to time, provided, that the General Partner has
notified the Trading Advisor of these trading policies.
(iii) The Trading Advisor shall trade: (A) the
Partnership's Net Assets pursuant to the same trading programs
described in the Prospectus unless the General Partner agrees otherwise
and (B) only in futures and option contracts traded on U.S. contract
markets, foreign currency forward contracts traded with MS & Co. and
MSIL, and such other futures interests which are approved in writing by
the General Partner.
(iv) The Trading Advisor is duly organized, validly
existing and in good standing as a corporation under the laws of the
state of its incorporation and is qualified to do business as a foreign
corporation and in good standing in each other jurisdiction in which
the nature or conduct of its business requires such qualification and
the failure to so qualify would materially adversely affect the Trading
Advisor's ability to perform its duties under this Agreement. The
Trading Advisor has full corporate power and authority to perform its
obligations under this Agreement, and as described in the Registration
Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in
the Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each
Trading Advisor Principal, including the Trading Advisor's trading
programs, approaches, systems and performance, in the Registration
Statement and the Prospectus, and in the supplemental selling material
which has been approved in writing by the Trading Advisor, are accurate
and complete in all material respects. With respect to the material
relating to the Trading Advisor and each Trading Advisor Principal,
including the Trading Advisor's and the Trading Advisor Principals'
trading programs, approaches, systems, and performance information, as
applicable, (i) the Registration Statement and Prospectus contain all
statements and information required to be included therein under the
CEAct, (ii) the Registration Statement as of its effective date will
not contain any misleading or untrue statement of a material fact or
omit to state a material fact which is required to be stated therein or
necessary to make the statements therein not misleading and (iii) the
Prospectus at its date of issue and as of each closing will not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
13
(vi) This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Trading Advisor and
is a valid and binding agreement of the Trading Advisor enforceable in
accordance with its terms.
(vii) Each of the Trading Advisor and each
"principal" of the Trading Advisor, as defined in Rule 3.1 under the
CEAct, has all federal and state governmental, regulatory and exchange
licenses, registrations and approvals and has effected all filings with
federal and state governmental and regulatory agencies required to
conduct its or his business and to act as described in the Registration
Statement and Prospectus or required to perform its or his obligations
under this Agreement. The Trading Advisor is registered as a commodity
trading advisor under the CEAct and is a member of the NFA in such
capacity.
(viii) The execution and delivery of this Agreement,
the incurrence of the obligations set forth herein, the consummation of
the transactions contemplated herein and in the Prospectus and the
payment of the fees hereunder will not violate, or constitute a breach
of, or default under, the certificate of incorporation or bylaws of the
Trading Advisor or any agreement or instrument by which it is bound or
of any order, rule, law or regulation binding on it of any court or any
governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over it.
(ix) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as may otherwise be stated in or contemplated by the
Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise,
business or prospects of the Trading Advisor or any Trading Advisor
Principal.
(x) Except as set forth in the Registration Statement
or Prospectus there has not been in the five years preceding the date
of the Prospectus and there is not pending, or to the best of the
Trading Advisor's knowledge threatened, any action, suit or proceeding
before or by any court or other governmental body to which the Trading
Advisor or any Trading Advisor Principal is or was a party, or to which
any of the assets of the Trading Advisor is or was subject and which
resulted in or might reasonably be expected to result in any material
adverse change in the condition, financial or otherwise, business or
prospects of the Trading Advisor or which is required under the
Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any
notice of an investigation by the NFA or the CFTC regarding
noncompliance by the Trading Advisor or any of the Trading Advisor
Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading
Advisor Principal has received, or is entitled to receive, directly or
indirectly, any commission, finder's fee, similar fee, or rebate from
any person in connection with the organization or operation of the
Partnership, other than as described in the Prospectus.
14
(xii) The actual performance of each discretionary
account of a client directed by the Trading Advisor and the Trading
Advisor Principals since at least the later of (i) the date of
commencement of trading for each such account or (ii) a date five years
prior to the effective date of the Registration Statement, is disclosed
in the Prospectus (other than such discretionary accounts the
performance of which are exempt from the CEAct disclosure
requirements); all of the information regarding the actual performance
of the accounts of the Trading Advisor and the Trading Advisor
Principals set forth in the Prospectus is complete and accurate in all
material respects and is in accordance with and in compliance with the
disclosure requirements under the CEAct and the Securities Act,
including the Division of Trading and Markets "notional equity"
advisories and interpretations and the rules and regulations of the
NFA.
(b) Covenants of the Trading Advisor. The Trading Advisor
covenants and agrees that:
(i) The Trading Advisor shall use its best efforts to
maintain all registrations and memberships necessary for the Trading
Advisor to continue to act as described herein and to at all times
comply in all material respects with all applicable laws, rules, and
regulations, to the extent that the failure to so comply would have a
materially adverse effect on the Trading Advisor's ability to act as
described herein.
(ii) The Trading Advisor shall inform the General
Partner immediately as soon as the Trading Advisor or any of its
principals becomes the subject of any investigation, claim or
proceeding of any regulatory authority having jurisdiction over such
person or becomes a named party to any litigation materially affecting
the business of the Trading Advisor. The Trading Advisor shall also
inform the General Partner immediately if the Trading Advisor or any of
its officers becomes aware of any breach of this Agreement by the
Trading Advisor.
(iii) The Trading Advisor agrees reasonably to
cooperate by providing information regarding itself and its performance
in the preparation of any amendments or supplements to the Registration
Statement and the Prospectus.
(iv) The Trading Advisor agrees to participate, to
the extent that the General Partner may reasonably request, in "road
shows" and other promotional activities relating to the marketing of
the Units, provided that such participation shall not in the reasonable
judgment of the Trading Advisor require the registration of the Trading
Advisor or any of its principals or agents as a broker-dealer or
salesman or interfere materially with the trading activities of the
Trading Advisor. The Trading Advisor shall pay the costs of its
reasonably requested participation in such road shows.
11. Representations, Warranties, and Covenants of the
General Partner and the Partnership.
(a) Representations of the Partnership and the General
Partner. The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:
15
(i) The Partnership has provided to the Trading
Advisor, and filed with the SEC, the Registration Statement and has
filed copies thereof with: (i) the CFTC under the CEAct; (ii) the NASD
pursuant to its Conduct Rules; and (iii) the NFA in accordance with NFA
Compliance Rule 2-13. The Partnership will not file any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus unless the Trading Advisor has received reasonable prior
notice of and a copy of such amendments or supplements and has not
reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for
the subscription for and sale of the Units; all action required to be
taken by the General Partner and the Partnership as a condition to the
sale of the Units to qualified subscribers therefor has been, or prior
to each Closing (as defined in the Prospectus) will have been taken;
and, upon payment of the consideration therefor specified in each
accepted Subscription and Exchange Agreement and Power of Attorney, in
such form as attached to the Prospectus, the Units will constitute
valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly
organized pursuant to the Certificate of Limited Partnership, the
Limited Partnership Agreement and the Delaware Revised Uniform Limited
Partnership Act ("DRULPA") and is validly existing under the laws of
the State of Delaware with full power and authority to engage in the
trading of futures interests and to engage in its other contemplated
activities as described in the Prospectus; the Partnership has received
a certificate of authority to do business in the State of New York as
provided by Article 8-A of the New York Revised Limited Partnership Act
and is qualified to do business in each jurisdiction in which the
nature or conduct of its business requires such qualification and where
failure to be so qualified could materially adversely affect the
Partnership's ability to perform its obligations hereunder.
(iv) The General Partner is duly organized and
validly existing and in good standing as a corporation under the laws
of the State of Delaware and in good standing and qualified to do
business as a foreign corporation under the laws of the State of New
York and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature or conduct
of its business requires such qualification and where the failure to be
so qualified could materially adversely affect the General Partner's
ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to
conduct their business and to perform their respective obligations
under this Agreement.
(vi) The Registration Statement and Prospectus
contain all statements and information required to be included therein
by the CEAct. When the Registration Statement becomes effective under
the Securities Act and at all times subsequent thereto up to and
including each Closing, the Registration Statement and Prospectus will
comply in all material respects with the requirements of the Securities
Act, the rules and regulations promulgated thereunder (the "SEC
Regulations"), the rules of the NFA and the CEAct. The Registration
Statement as of its effective date will not contain any misleading or
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
16
therein not misleading. The Prospectus as of its date of issue and at
each Closing will not contain any misleading or untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
The supplemental selling material will comply with the CEAct and the
regulations and rules of the NFA and NASD. The representation, and
warranties in this clause (vi) shall not, however, apply to any
statement or omission in the Registration Statement, Prospectus or
supplemental selling material relating to the Trading Advisor, or its
Trading Advisor Principals or its trading programs or made in reliance
upon and in conformity with information furnished by the Trading
Advisor.
(vii) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition,
financial or otherwise, business or prospects of the General Partner or
the Partnership, whether or not arising in the ordinary course of
business.
(viii) This Agreement has been duly and validly
authorized, executed and delivered by the General Partner on behalf of
the Partnership and constitutes a valid, binding and enforceable
agreement of the Partnership in accordance with its terms.
(ix) The execution and delivery of this Agreement,
the incurrence of the obligations set forth herein and the consummation
of the transactions contemplated herein and in the Registration
Statement and Prospectus will not violate, or constitute a breach of,
or default under, the General Partner's certificate of incorporation,
bylaws, the Certificate of Limited Partnership, or the Limited
Partnership Agreement or any agreement or instrument by which either
the General Partner or the Partnership, as the case may be, is bound or
any order, rule, law or regulation applicable to the General Partner or
the Partnership of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction
over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement
or Prospectus, there has not been in the five years preceding the date
of the Prospectus and there is not pending or, to the best of the
General Partner's knowledge, threatened, any action, suit or proceeding
at law or in equity before or by any court or by any federal, state,
municipal or other governmental body or any administrative,
self-regulatory or commodity exchange organization to which the General
Partner or the Partnership is or was a party, or to which any of the
assets of the General Partner or the Partnership is or was subject and
which resulted in or might reasonably be expected to result in any
materially adverse change in the condition, financial or otherwise, of
the General Partner or the Partnership or which is required under the
Securities Act or the CEAct to be disclosed in the Prospectus; and
neither the General Partner nor any of the principals of the General
Partner, as "principals" is defined under Rule 4.10 under the CEAct
("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by
the General Partner or the General Partner Principals or the
Partnership with the CEAct or the Securities Act which is required
under the Securities Act or the CEAct to be disclosed in the
Prospectus.
17
(xi) The General Partner and each principal of the
General Partner, as defined in Rule 3.1 under the CEAct, have all
federal and state governmental, regulatory and exchange approvals,
registrations, and licenses, and have effected all filings with federal
and state governmental agencies and regulatory agencies required to
conduct their business and to act as described in the Registration
Statement and Prospectus or required to perform their obligations under
this Agreement (including, without limitation, registration as a
commodity pool operator under the CEAct and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The
General Partner's principals identified in the Registration Statement
are all of the General Partner Principals.
(b) Covenants of the General Partner and the Partnership. The
General Partner covenants and agrees that:
(i) The General Partner shall use its best efforts to
maintain all registrations and memberships necessary for the General
Partner to continue to act as described herein and in the Prospectus
and to all times comply in all material respects with all applicable
laws, rules, and regulations, to the extent that the failure to so
comply would have a materially adverse effect on the General Partner's
ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading
Advisor immediately as soon as the General Partner or any of its
principals becomes the subject of any investigation, claim, or
proceeding of any regulatory authority having jurisdiction over such
person or becomes a named party to any litigation materially affecting
the business of the General Partner. The General Partner shall also
inform the Trading Advisor immediately if the General Partner or any of
its officers become aware of any breach of this Agreement by the
General Partner.
(iii) The Partnership will furnish to the Trading
Advisor copies of the Registration Statement, the Prospectus, and all
amendments and supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
18
13. Complete Agreement.
This Agreement constitutes the entire agreement between the
parties with respect to the matters referred to herein, and no other agreement,
verbal or otherwise, shall be binding as between the parties unless in writing
and signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without
the express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written
consent of the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Partnership's first
Monthly Closing (as defined in the Prospectus), following the effective date of
the Registration Statement and at the request of the General Partner at any
Monthly Closing, provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading
Advisor in this Agreement are true, accurate, and complete on and as of
the date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its
obligations and satisfied all of the conditions on its part to be
performed or satisfied under this Agreement, at or prior to the date of
such closing.
19
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a limited liability
company duly organized and validly existing under the laws of Ireland
and is qualified to do business and in good standing in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to be duly qualified would
materially adversely affect the Trading Advisor's ability to perform
its obligations under this Agreement. The Trading Advisor has full
power and authority to conduct its business as described in the
Registration Statement and Prospectus and to perform its obligations
under this Agreement.
(ii) The Trading Advisor (including the Trading
Advisor Principals) has all governmental, regulatory, self-regulatory
and commodity exchange and clearing association licenses,
registrations, and memberships required by law, and the Trading Advisor
(including the Trading Advisor Principals) has made all filings
necessary to perform its obligations under this Agreement and to
conduct its business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings and
registrations, the absence of which would not have a material adverse
effect on its ability to act as described in the Registration Statement
and Prospectus or to perform its obligations under this Agreement, and,
to the best of such counsel's knowledge, after due investigations, none
of such licenses, memberships or registrations have been rescinded,
revoked or suspended.
(iii) This Agreement has been duly authorized,
executed and delivered by or on behalf of the Trading Advisor and
constitutes a valid and binding agreement of the Trading Advisor
enforceable in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in
effect affecting the enforceability generally of rights of creditors
and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification, exculpation, and
contribution provisions contained in this Agreement may be limited by
applicable law or public policy and the enforcement of specific terms
or remedies may be unavailable.
(iv) Based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, except as
disclosed in the Prospectus, there are no material actions, suits or
proceedings at law or in equity either threatened or pending in any
court or before or by any governmental or administrative body nor have
there been any such actions, suits or proceedings at any time within
the five years preceding the date of the Prospectus against the Trading
Advisor or any Trading Advisor Principal which are required to be
disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of
the transactions contemplated herein and in the Prospectus will not be
in contravention of any of the provisions of the Memorandum or Articles
of Association of the Trading Advisor and, based upon due inquiry of
certain officers of the Trading Advisor, to the best of such counsel's
knowledge, will not constitute a breach of, or default under, or a
violation of any instrument or agreement known to such counsel by which
the Trading Advisor is bound and will not violate any order, law, rule
or regulation applicable to the Trading Advisor of any court or any
governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over the Trading Advisor.
20
(vi) Based upon reliance of certain SEC "no-action"
letters, as of the closing, the performance by the Trading Advisor of
the transactions contemplated by this Agreement and as described in the
Prospectus will not require the Trading Advisor to be registered as an
"investment adviser" as that term is defined in the Investment Advisers
Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention
that would lead them to believe that, (A) the Registration Statement at
the time it became effective, insofar as the Trading Advisor and the
Trading Advisor Principals are concerned, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (B) the Prospectus at the time it was issued
or at the closing contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein relating to the Trading Advisor or the Trading
Advisor Principals, in light of the circumstances under which they were
made, not misleading; provided, however, that such counsel need express
no opinion or belief as to the performance data and notes or
descriptions thereto set forth in the Registration Statement and
Prospectus, except that such counsel shall opine, without rendering any
opinion as to the accuracy of the information in such tables, that the
actual performance tables of the Trading Advisor set forth in the
Prospectus comply as to form in all material respects with applicable
CFTC rules and all CFTC and NFA interpretations thereof, except as
disclosed in the Prospectus or as otherwise permitted by the CFTC
staff.
In giving the foregoing opinion, counsel may rely on
information obtained from public officials, officers of the Trading Advisor, and
other resources believed by it to be responsible and may assume that signatures
on all documents examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a report
dated the date of the closing which shall present, for the period from the date
after the last day covered by the historical performance records in the
Prospectus to the latest practicable day before closing, figures which shall be
a continuation of such historical performance records and which shall certify
that such figures are, to the best of such Trading Advisor's knowledge, accurate
in all material respects.
(2) The General Partner shall, at the Partnership's first
Monthly Closing following the effective date of the Registration Statement,
provide the following:
(a) To the Trading Advisor a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
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(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true,
accurate, and complete on and as of the date of the closing as if made
on the date of the closing.
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued by the SEC and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the General Partner, are contemplated or threatened
under the Securities Act. No order preventing or suspending the use of
the Prospectus has been issued by the SEC, NASD, CFTC, or NFA and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the General Partner, are contemplated or threatened
under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions
on their part to be performed or satisfied under this Agreement at or
prior to the date of the closing.
(b) Cadwalader, Xxxxxxxxxx & Xxxx, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto, in
form and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly
formed pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the
laws of the State of Delaware with full partnership power and authority
to conduct the business in which it proposes to engage as described in
the Registration Statement and Prospectus and to perform its
obligations under this Agreement; the Partnership has received a
Certificate of Authority as contemplated under the New York Revised
Limited Partnership Act and is qualified to do business in New York and
need not affect any other filings or qualifications under the laws of
any other jurisdictions to conduct its business as described in the
Registration Statement and Prospectus.
(ii) The General Partner is duly organized and
validly existing and in good standing as a corporation under the laws
of the State of Delaware and is qualified to do business and is in good
standing as a foreign corporation in the State of New York and in each
other jurisdiction in which the nature or conduct of its business
requires such qualification and the failure to so qualify might
reasonably be expected to result in material adverse consequences to
the Partnership or the General Partner's ability to perform its
obligations as described in the Registration Statement and Prospectus.
The General Partner has full corporate power and authority to conduct
its business as described in the Registration Statement and Prospectus
and to perform its obligations under this Agreement.
(iii) The General Partner, each of its principals as
defined in Rule 3.1 under the CEAct, and the Partnership have all
federal and state governmental and regulatory licenses, registrations
and memberships required by law and have made all filings necessary in
order for the General Partner and the Partnership to perform their
obligations under this Agreement to conduct their business as described
in the Registration Statement and Prospectus, except for such licenses,
memberships, filings, and registrations, the absence of which would not
have a material adverse effect on the ability of the Partnership or the
General Partner to act as described in the Registration Statement and
Prospectus, or to perform their obligations under this Agreement, and,
to the best of such counsel's knowledge, after due investigation, none
of such licenses and memberships or registrations have been rescinded,
revoked or suspended.
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(iv) This Agreement has been duly authorized,
executed and delivered by or on behalf of the General Partner and the
Partnership, and constitutes a valid and binding agreement of the
General Partner and the Partnership, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability
generally of rights of creditors and by general principals of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in
such agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and
the offer and sale of the Units by the Partnership and the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of the General Partner's certificate of incorporation or
bylaws, the Certificate of Limited Partnership, or the Limited
Partnership Agreement and, to the best of such counsel's knowledge
based upon due inquiry of certain officers of the General Partner, will
not constitute a breach of, or default under, or a violation of any
agreement or instrument known to such counsel by which the General
Partner or the Partnership is bound and will not violate any order
known to such counsel or any law, rule or regulation applicable to the
General Partner or the Partnership of any court, governmental body,
administrative agency, panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(vi) To such counsel's knowledge, based upon due
inquiry of certain officers of the General Partner, except as disclosed
in the Prospectus, there are no actions, suits or proceedings at law or
in equity pending or threatened before or by any court, governmental
body, administrative agency, panel or self-regulatory organization, nor
have there been any such actions, suits or proceedings within the five
years preceding the date of the Prospectus against the General Partner
or the Partnership, which are required to be disclosed in the
Registration Statement or Prospectus.
(vii) The Registration Statement is effective under
the Securities Act and, to the best of such counsel's knowledge, no
proceedings for a stop order are pending or threatened under Section
8(d) of the Securities Act or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus
was issued and as of the closing, the Prospectus, complied as to form
in all material respects with the requirements of the Securities Act,
the Securities Regulations, the CEAct and the regulations of the NFA
and NASD. Nothing has come to such counsel's attention that would lead
them to believe that the Registration Statement at the time it became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus at
the time it was issued or at the closing contained an untrue statement
of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they where made, not misleading; provided, however, that Cadwalader,
Xxxxxxxxxx & Xxxx need express no opinion or belief (a) as to
information in the Registration Statement or the Prospectus regarding
any Trading Advisor or its principals, or (b) as to the financial
statements, notes thereto and other financial or statistical data set
forth in the Registration Statement and Prospectus, or (c) as to the
performance data and notes or descriptions thereto set forth in the
Registration Statement and Prospectus.
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(ix) Based upon reliance on certain SEC "no-action"
letters, as of the closing, the Partnership need not register as an
"investment company" under the Investment Company Act of 1940, as
amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the
filing of, or publish any description of the Trading Advisor, or of its
respective principals or trading approaches that is materially inconsistent with
those in the Registration Statement and Prospectus, without so informing the
General Partner and furnishing to it copies of all such filings within a
reasonable period prior to the date of filing or publication.
19. Disclosure Document.
During the term of this Agreement, the Trading Advisor shall
furnish to the General Partner promptly copies of all disclosure documents filed
with the CFTC or NFA by the Trading Advisor. The General Partner acknowledges
receipt of the Trading Advisor's disclosure document dated April 1, 2000.
20. Notices.
All notices required to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
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if to the Partnership:
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum Strategic L.P.
c/o Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the General Partner:
Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the Trading Advisor:
Eclipse Capital Management, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. If any action or proceeding
shall be brought by a party to this Agreement or to enforce any right or remedy
under this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
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23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading Advisor agrees not to seek any
prejudgment equitable or ancillary relief. The Trading Advisor agrees that its
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM STRATEGIC L.P.
by Demeter Management Corporation,
General Partner
By
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DEMETER MANAGEMENT CORPORATION
By
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ECLIPSE CAPITAL MANAGEMENT, INC.
By
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