CUSTOMER AGREEMENT
XXXXXXX XXXXX XXXXXX AAA ENERGY FUND X.X. XX
This Customer Agreement made and entered into as of the 31st day of May
2002, by and among XXXXXXX XXXXX XXXXXX AAA ENERGY FUND X.X. XX, a New York
limited partnership (the "Partnership"), and XXXXXXX XXXXX XXXXXX INC., a
Delaware corporation ("SSB"), and solely for purposes of Xxxxxxxxx 0, XX AAA
MASTER FUND LLC, a New York limited liability company.
W I T N E S S E T H :
WHEREAS, the Partnership, formed on March 25, 2002, has been organized to
engage in the speculative trading of commodity interests, including, but not
limited to, futures contracts, options, spot, swap and forward contracts; and
WHEREAS the Partnership intends to pursue this objective initially by
investing substantially all of its assets in SB AAA Master Fund LLC (the "Master
Fund");
WHEREAS, Xxxxx Xxxxxx Futures Management LLC, a Delaware limited liability
company ("SBFM"), is the general partner of the Partnership and is registered as
a commodity pool operator with the Commodity Futures Trading Commission ("CFTC")
and is a member of the National Futures Association ("NFA"); and
WHEREAS, the Partnership and SSB wish to enter into this Customer Agreement
setting forth the terms and conditions upon which SSB will perform brokerage and
other services for the Partnership;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, it is agreed as follows:
1. Appointment of Broker/Dealer and Opening of Account. The Partnership
hereby appoints SSB as its commodity broker/dealer through whom the Partnership
will execute trades in commodity interests including futures contracts, options,
spot, swap and forward contracts. As soon as practicable following the
conclusion of the Initial Offering Period (as defined in the Private Placement
Offering Memorandum and Disclosure Document of the Partnership) of the units of
limited partnership interest in the Partnership (the "Units"), provided at least
10,000 Units are sold, the Partnership shall deposit or cause to be deposited
the partners' capital contributions in a commodity brokerage account with SSB,
and will maintain all of its assets, as they from time to time exist, in such
account except for such amounts as may be necessary or desirable to be
maintained in a bank account or with a broker to facilitate trading in interbank
forward foreign currency transactions and the payment of Partnership expenses,
redemptions or distributions. The Partnership shall execute such other documents
as shall be necessary or appropriate to permit SSB to perform its services
hereunder.
2. Services of SSB. SSB agrees to use its best efforts to effect
transactions for the Partnership's account. SSB agrees to assist the Partnership
or the General Partner in performing various functions. These include: (a)
calculating the Partnership's Net Assets and Net Asset Value (as such terms are
defined in the Partnership's Limited Partnership Agreement) at such times as may
be required, (b) calculating any fees or allocations due the Partnership's
trading advisor (the "Advisor"), (c) preparing and confirming financial
information for annual or interim audits and reports and (d) establishing
procedures for effecting redemptions, cash distributions and the liquidation of
the Partnership upon termination. SSB further agrees to furnish clerical and
bookkeeping support for the administration of the Partnership.
3. Brokerage and Other Fees. (a) With respect to transactions entered on
its behalf (either directly or through the Master Fund), the Partnership will
pay Xxxxxxx Xxxxx Xxxxxx a brokerage commission equal to $18.00 per round turn
futures transaction and $9.00 per side on options transactions. The Partnership
will pay Xxxxxxx Xxxxx Barney the same brokerage commission on a futures
equivalent basis for swap and forward transactions entered on its behalf.
Brokerage commissions are inclusive of applicable floor brokerage. The
Partnership shall also pay all National Futures Association, exchange, clearing,
user and give-up fees, or shall reimburse SSB for all such fees previously paid
by SSB on behalf of the Partnership. SSB's fee may be increased or decreased at
any time at SSB's discretion upon notice to the Partnership.
(b) Reimbursement of Offering and Organizational Expenses. SSB will
initially bear all of the offering and organizational expenses related to the
Initial Offering Period, which are estimated at $75,000. Offering and
organizational expenses will be reimbursed to SSB from the Partnership, plus
interest at the prime rate quoted by JPMorgan Chase Bank, over the first 12
months after trading commences. Offering expenses incurred in the Continuous
Offering will be paid by the Partnership.
4. Payment of Interest. All of the assets of the Partnership which are
deposited in the Partnership's accounts at SSB will be deposited and maintained
in cash or in U.S. government securities, either in its account or the Master
Fund's account. During the term of this Agreement, SSB will, within ten (10)
days following the end of each calendar month, credit the Partnership's
brokerage accounts with a sum representing interest on the Partnership's
allocable share of eighty percent (80%) of the average daily equity maintained
in cash in such accounts and/or the Master Fund's account during each month
(i.e., the sum of the daily cash balances in such accounts divided by the total
number of calendar days in that month) at a 30-day Treasury xxxx rate determined
weekly by SSB based on the average non-competitive yield on 3-month U.S.
Treasury bills maturing in 30 days (or on the closest maturity date thereto)
from the date on which such weekly rate is determined. The equity maintained in
cash in the account on Saturdays, Sundays and holidays shall be the equity
maintained in cash in the account as of the close of business on the immediately
preceding business day. Xxxxxxx Xxxxx Barney may place up to 100% of the Master
Fund's assets into 90-day U.S. Treasury bills, in which case the Master Fund
agrees that it shall cause the Partnership to receive its allocable share of
eighty percent (80%) of the interest earned on Treasury bills purchased for the
Master Fund. Xxxxxxx Xxxxx Xxxxxx will retain twenty percent (20%) of the
interest earned on the Treasury bills.
5. Trading Authorization. The General Partner has entered into an Advisory
Agreement with AAA Capital Management, Inc. (the "Advisor") as the Partnership's
advisor. Pursuant to the Advisory Agreement, the Partnership's Advisor shall
have discretion to order purchases and sales of commodity interests including
futures contracts, options, spot, swap and forward contracts. SBFM as the
Partnership's general partner may allocate or reallocate all or a portion of the
Partnership's assets among trading programs operated by the Partnership's
Advisor or select or appoint additional or replacement trading advisors. SSB is
hereby authorized to execute all orders placed by the Advisor for the account of
the Partnership until notified by SBFM to the contrary, and shall have no
obligation to inquire into the reason for or method of determining such orders,
nor any obligation to monitor such orders in relation to the Partnership's
trading policies. The provisions of this Paragraph 5 shall apply with equal
force and effect to any other commodity trading advisor designated in the future
by SBFM.
6. Terms of the Account. The following terms and conditions shall be
applicable to the Partnership's account:
(a) The word "property" is used herein to mean securities of all kinds,
monies, options, commodities and contracts for the future delivery of, or
otherwise relating to, commodities or securities and all property usually and
customarily dealt in by brokerage firms.
(b) All transactions for the Partnership's account shall be subject to the
regulations of all applicable federal, state and self-regulatory agencies
including, but not limited to, the various commodity exchanges and the
constitutions, rules and customs, as the same may be constituted from time to
time, of the exchange or market (and its clearing house, if any) where executed.
Actual deliveries are intended on all transactions. The Partnership also agrees
not to exceed the speculative position limits for its own account, acting alone
or in concert with others, and promptly to advise SSB if it is required to file
reports of its commodity positions with the Commodity Futures Trading
Commission.
(c) Any and all property belonging to the Partnership, or in which it may
have an interest, held by SSB or carried in the Partnership's account (either
individually or jointly with others) shall be subject to a general lien for the
discharge of the Partnership's obligations to SSB, wherever or however arising
and without regard to whether or not SSB has made advances with respect to such
property, and SSB is hereby authorized to sell and/or purchase any and all
property in the Partnership's account without notice to satisfy such general
lien.
(d) The Partnership agrees to maintain such collateral and/or margin as SSB
may, in its discretion, require from time to time and will pay on demand any
amount owing with respect to its account. Against a "short" position in any
commodity contract, prior to the maturity thereof, the Partnership will give SSB
instructions to cover, or furnish SSB with all necessary delivery documents, and
in default thereof, SSB may, without demand or notice, cover the contracts, or
if an order to buy in such contracts cannot be executed under prevailing
conditions, SSB may procure the actual commodity and make delivery thereof upon
any terms and by any method which may be feasible. It is further agreed that if
the Partnership fails to receive sufficient funds to pay for any commodities and
commodity futures contracts and/or to satisfy any demands for original and/or
variation margin, SSB may, without prior demand and notice, sell any property
held by it in the Partnership's account and any loss resulting therefrom will be
charged to the Partnership's account.
(e) SSB may, whenever in its discretion it considers it necessary for its
protection, sell any or all property held in the Partnership's account, cancel
any open orders for the purchase or sale of any property with or without notice
to the Partnership, and SSB may borrow or buy in any property required to make
delivery against any sales, including a short sale, effected for the
Partnership. Such sale or purchase may be public or private and may be made
without advertising or notice to the Partnership and in such manner as SSB may,
in its discretion, determine, and no demands, calls, tenders or notices which
SSB may make or give in any one or more instances shall invalidate the aforesaid
waiver on the Partnership's part. At any such sale SSB may purchase the property
free of any right of redemption and the Partnership shall be liable for any
deficiency in its account.
(f) SSB and the Partnership agree that the parties shall have the right to
offset any unrealized gains and losses on the Partnership's open positions and
to net any open orders for the purchase or sale of any property of the
Partnership.
(g) The Partnership agrees to pay service fees and/or interest charges upon
its account monthly at the prevailing and/or allowable rates according to the
laws of the State of New York, as determined by SSB at the time of the
acceptance of this Agreement in its New York office and thereafter.
(h) If any provisions herein are or should become inconsistent with any
present or future law, rule or regulation of any sovereign government or a
regulatory body having jurisdiction over the subject matter of this Agreement,
such provision shall be deemed to be rescinded or modified in accordance with
any such law, rule or regulation. In all other respects, this Agreement shall
continue and remain in full force and effect.
7. Indemnification. (a) In any action, suit, or proceeding to which SSB was
or is a party or is threatened to be made a party by reason of the fact that it
is or was the commodity broker for the Partnership (other than an action by or
in the right of the Partnership), the Partnership shall indemnify and hold
harmless SSB, subject to subparagraph (c), against any loss, liability, damage,
cost, expense (including attorneys' fees and accountants' fees), judgments and
amounts paid in settlement actually and reasonably incurred by it in connection
with such action, suit or proceeding if SSB acted in good faith and in a manner
it reasonably believed to be in the best interests of the Partnership, except
that no indemnification shall be made in respect of any claim, issue or matter
which as to SSB constituted negligence, misconduct or breach of its fiduciary
obligations to the Partnership, unless, and only to the extent that, the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, SSB is fairly and reasonably entitled to indemnification for such expenses
which such court shall deem proper; and further provided that no indemnification
shall be available from the Partnership if such indemnification is prohibited by
Section 16 of the Partnership's Limited Partnership Agreement. The termination
of any action, suit or proceeding by judgment, order or settlement shall not, of
itself, create a presumption that SSB did not act in good faith, and in a manner
which it reasonably believed to be in or not opposed to the best interests of
the Partnership.(b) To the extent that SSB has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subparagraph (a) above, or in defense of any claim, issue or matter therein, the
Partnership shall indemnify it against the expenses, including attorneys' fees,
actually and reasonably incurred by it in connection therewith.
(c) Any indemnification under subparagraph (a) above, unless ordered by a
court, shall be made by the Partnership only as authorized in the specific case
and only upon a determination by independent legal counsel in a written opinion
that indemnification is proper in the circumstances because SSB has met the
applicable standard of conduct set forth in subparagraph (a) above.
(d) The term SSB as used in this Paragraph 7 shall include SSB, its
officers, directors, stockholders, employees and affiliates.
8. Termination. This Agreement may be terminated at any time by either
party hereto upon notice to the other, in which event the brokerage accounts
shall be closed and all positions open at such time shall be liquidated or shall
be transferred to another broker as directed by the Partnership.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
XXXXXXX XXXXX XXXXXX AAA ENERGY FUND X.X. XX
By: Xxxxx Xxxxxx Futures Management LLC
(General Partner)
By: /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
SB AAA MASTER FUND LLC
(for purposes of Paragraph 4 only)
By: Xxxxx Xxxxxx Futures Management LLC
(General Partner)
By: /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
XXXXXXX XXXXX BARNEY INC.
(Commodity Broker/Dealer)
By: /s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx
Managing Director
