EXHIBIT 99.2
INVESTMENT MANAGEMENT AGREEMENT
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This INVESTMENT MANAGEMENT AGREEMENT is made as of the _______day of
_______________ between ▇▇▇▇▇▇▇ Capital Investments I LLC, a Delaware limited
liability company (the "Investor"), and ▇▇▇▇▇▇▇ Capital Management, LLC (the
"Portfolio Manager").
WHEREAS, the Investor desires to have an account managed by the
Portfolio Manager on a discretionary basis (the "Account");
WHEREAS, the Portfolio Manager is willing to manage this Account for
the Investor, in the manner, upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, the Portfolio Manager has received and reviewed a copy of the
Operational Procedures for the Account attached hereto as Exhibit A;
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt whereof is hereby acknowledged, the parties hereto agree as follows:
1. Appointment of the Portfolio Manager. Effective the ____ day of
__________ and until this Agreement is terminated in accordance with Paragraphs
16 and 17 hereof, the Investor hereby employs the Portfolio Manager to manage,
with discretionary authority, the assets from time to time constituting the
Account, utilizing the Asset Management Guidelines as detailed in Exhibit B, in
the manner, for the period and in accordance with the terms and conditions
hereinafter set forth, subject however, to the Operational Procedures for the
Account, as the same may be amended from time to time by the Portfolio Manager
in accordance with Paragraph 3 hereof. The Investor agrees promptly to furnish,
or to cause the Investor's custodian or agent to furnish, to the Portfolio
Manager all data and information the Portfolio Manager may reasonably request
to: render the investment management services described above; calculate related
incentive fees; and comply with reasonable requests for such information from
Economic Interest Holders (as defined below) in or service providers to the
Portfolio Manager in the course of the Portfolio Manager's business. The
Investor shall be solely responsible for the completeness and accuracy of the
data and information furnished to the Portfolio Manager hereunder.
The Account shall consist of assets of the Investor that are allocated
to the Account by the Investor and any appreciation and depreciation therein,
less any assets of the Account that are withdrawn from the Account upon notice
to the Portfolio Manager in accordance with Paragraph 17 hereof.
2. Acceptance by the Portfolio Manager. The Portfolio Manager hereby
accepts such engagement as the portfolio manager of the Account and agrees to
manage the Account in accordance with the terms and conditions of this
Agreement.
3. Operational Procedures. Operational Procedures to be followed by
the Portfolio Manager in managing the Account are attached hereto as Exhibit A.
The Portfolio Manager reserves the right from time to time to change such
Operational Procedures and will cause the Investor to be notified promptly of
any such changes; provided, that any material changes will not be effective
absent notice to and consent by the Investor. The Investor will be deemed to
have consented to any change received in writing if after five business days of
receipt of notice of such changes the Investor has not objected thereto.
Notwithstanding any other provision of the Agreement, such objection will be
valid if given orally.
4. Portfolio Manager's Authority. Subject to the other terms and
conditions of this Agreement, the Portfolio Manager, for and on behalf of the
Investor in the Account, is authorized without obtaining the consent of or
consulting with the Investor, or any other person:
(a) in a manner consistent with the investment strategy and
investment limitations detailed in the Asset Management Guidelines attached
hereto as Exhibit B, the Portfolio Manager may purchase or otherwise acquire,
sell (including short sales), dispose of, trade, deal in or hold any securities
and financial instruments, including, but not limited to, publicly traded
foreign and domestic equity and debt securities, private placements of both
equity and debt, money market obligations, put and call options, futures and
options on futures, repurchase and reverse repurchase obligations and other
securities and financial instruments (collectively, "Securities").
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(b) to open accounts and place orders with brokers and dealers
(subject to the provisions of Paragraph 5 hereof) to purchase, sell, hold, and
otherwise trade in or deal with, any asset in the Account. The Portfolio Manager
will ensure that all account forms are duly completed before (or if necessary to
complete a trade, contemporaneously with) any new trades are initiated with a
new counterpart; and that brokers, dealers, or other persons upon opening a new
account are duly instructed to send copies of all account correspondence
statements and other documents, to: ___________________________________________.
(c) to act in all matters with respect to the assets in the
Account, including, without limitation, to vote, tender, exchange and convert
Securities and exercise rights related thereto; provided, however, that without
the prior approval of the Investor, the Portfolio Manager may not transfer any
assets in the Account into any account other than an account in the name and for
the benefit of the Investor; and generally to perform any other act necessary to
enable the Portfolio Manager to carry out its obligations under this Agreement.
To enable the Portfolio Manager to exercise fully its discretion and
authority as provided here, the Investor hereby constitutes and appoints the
Portfolio Manager as the Investor's attorney-in-fact with full power and
authority for the Investor and on the Investor's behalf to buy, sell and
otherwise deal in Securities and contracts relating to same for the Account. The
Investor further grants to the Portfolio Manager as the Investor's
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of the foregoing powers as fully as the
Investor might or could do if personally present. This power of attorney is
coupled with an interest and shall terminate only on termination of this
Agreement or on receipt by the Portfolio Manager of written notice of the
dissolution of the Investor. The parties hereto understand and agree that the
Portfolio Manager will not provide accounting or legal advice nor prepare any
accounting or legal documents for the implementation of the Account. Further,
the parties agree that the Portfolio Manager, in the performance of its
obligations and duties under this Agreement, is entitled to rely upon the
accuracy of information furnished by the Investor or on its behalf, without
further investigation.
The Investor shall give prompt notice to the Portfolio Manager if the
Investor deems any investment made for the Account to be in violation of the
Operational Procedures, of directions of the Investor or of
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any other restrictions contained herein. Unless the Investor notifies the
Portfolio Manager of specific additional restrictions not contained in the
Agreement, the investments recommended for, or made on behalf of, the Account
shall be deemed not to be restricted.
5. Selection of Brokers. The Portfolio Manager may outsource the
placement and execution of trades with respect to the purchase and sale of
Securities for the Account and such transaction based service charges shall be
paid from the Account or reimbursed by the Investor.
(a) The Portfolio Manager will allocate transactions for the
Investor to brokers on the basis of best execution. When placing orders with
brokers and dealers, the primary objective shall be to obtain the most favorable
net price and execution, but this requirement shall not be deemed to obligate
the Portfolio Manager to place any order solely on the basis of obtaining the
lowest commission rate if the other standards hereinafter set forth are
satisfied. The Portfolio Manager is authorized to the extent permitted by law
(including, without limitation, Section 28(e) of the Securities Exchange Act of
1934, as amended), to cause the Investor to pay to brokers and dealers who
furnish research and other brokerage services to the Portfolio Manager, an
amount of commission for effecting a portfolio transaction in excess of the
amount of commission that another broker would have charged for effecting such
transaction in recognition of such additional services, but only if the
Portfolio Manager determines in good faith that the excess commission is
reasonable in relation to the value of the brokerage services provided by such
broker or dealer viewed in terms of the Portfolio Manager's overall
responsibilities with respect to the discretionary accounts managed by it. To
the extent the Portfolio Manager earns soft dollars with respect to the Account,
such soft dollars shall inure to the benefit of the Investor.
(b) The Portfolio Manager represents that it will not use any
broker-dealer that is an "affiliated person" (within the meaning of Section
2(a)(3) of the Investment Company Act of 1940, as amended (the "Investment
Company Act")) of the Portfolio Manager to effect transactions for the Account.
The Portfolio Manager will promptly notify the Investor of any change in the
foregoing representations.
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(c) The Investor consents and agrees that the Portfolio Manager
may, but is not required to, aggregate Securities sales and purchase orders of
Securities for the Account with similar orders being made simultaneously for
other accounts managed by the Portfolio Manager or with accounts of affiliates
of the Portfolio Manager, if in the Portfolio Manager's reasonable judgment,
such aggregation is reasonably likely to be fair and equitable to the
discretionary accounts managed by it. In such instances, the purchase or sale of
Securities for the Account will be effected simultaneously with the purchase or
sale of like Securities for the accounts of other clients of the Portfolio
Manager and its affiliates and all participating accounts will share pro rata in
the costs of such transactions. In the event that a particular purchase or sale
order cannot be filled at one time, the Portfolio Manager will fill the order
over time in a manner consistent with seeking best execution. In such event, the
average price of all Securities purchased or sold in such transactions will be
determined, and the Investor may be charged or credited, as the case may be, the
average transaction price and the Account will be deemed to have purchased or
sold its proportionate share of the instruments involved at the average price so
obtained. If all such orders cannot be fully executed under prevailing market
conditions, the Portfolio Manager may allocate the securities traded among the
Investor and such other accounts in a manner which it reasonably considers fair
and equitable, taking into account the size of the order placed for the Investor
and each such other account as well as any other factors which it deems
relevant. In the event that stock exchange regulations prevent the executing
broker/dealer from delivering to the Account a confirmation slip with respect to
its participation in the aggregated transactions and, in such event, the
Portfolio Manager will advise the Investor in writing of any purchase or
disposition of instruments for the Account with respect to any such aggregated
transaction.
(d) The Investor understands and agrees that the Portfolio
Manager or any Affiliate of the Portfolio Manager may engage in "agency cross
transactions" as defined in Rule 206(3)-2 under the Investment Advisers Act of
1940 (the "Advisers Act"), in which the Portfolio Manager or such Affiliate acts
as a broker for both the Account and for another person on the other side of the
transaction. The Investor understands and agrees that the Portfolio Manager or
such Affiliate may receive commissions from, and have a potentially conflicting
division of loyalties and responsibilities regarding, both parties to such
agency cross transactions.
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6. Compensation of the Portfolio Manager. The Portfolio Manager, as
full compensation for services rendered pursuant to this Agreement, shall be
paid by the Investor the fees specified in Exhibit C hereto.
7. Other Advisory Activities of the Portfolio Manager. It is
understood that the Portfolio Manager and its principals, partners, officers,
employees or affiliates have advisory responsibilities and advisory contracts
with other persons, firms and organizations to which it or they provide advisory
or asset management services, including other customers' discretionary accounts
and investment funds for which it or they serve as asset advisers or asset
managers. This may create conflicts of interest with the Account with respect to
the Portfolio Manager's time devoted to managing the Account and the allocation
of investment opportunities among accounts (including the Account). The
Portfolio Manager will attempt to resolve all such conflicts in a manner that is
generally fair and equitable to all of its clients. The Portfolio Manager shall
be permitted to give advice to the Investor which differs from that made or
recommended with respect to such other accounts and customers even though the
objectives may be the same or similar; provided however, that the Portfolio
Manager acts in good faith and follows a policy of allocating over a period of
time opportunities to the Account on a fair and equitable basis relative to such
other accounts and customers, taking into consideration the policies and
restrictions to which such other accounts and customers and the Account are
subject. The Portfolio Manager shall discharge its duties under this Agreement
with the same degree of skill, care and diligence as it uses in the
administration of such other accounts and the servicing of such other customers,
but shall not be obligated to give the Investor treatment more favorable than or
preferential to that provided to such other accounts and customers. Nothing in
this Agreement shall be deemed to obligate the Portfolio Manager to acquire for
the Account any Security that the Portfolio Manager or its officers or employees
may acquire for its or their own accounts or for the account of any other
client, if in the absolute discretion of the Portfolio Manager, it is not
practical or desirable to acquire a position in such Security for the Account.
8. Representations and Warranties of the Portfolio Manager. The
Portfolio Manager represents and warrants that to its knowledge (a) it has
obtained all applicable registrations, filings, approvals, authorizations,
consents or examinations required in order to serve in its designated capacity
with respect to this Agreement, and
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will maintain the same in effect for so long as this Agreement remains in
effect; and (b) all purchases and sales of assets in the Account shall at all
times conform to and be in accordance with the requirements imposed by
applicable securities laws.
9. Representations and Warranties of the Investor. The Investor
represents and warrants to the Portfolio Manager, as of the date hereof and
continuing each day throughout the term of this Agreement as follows:
(a) The Investor has the requisite legal capacity and authority
to execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly authorized, executed and delivered by the Investor and
is the legal, valid and binding agreement of the Investor, enforceable against
the Investor in accordance with its terms. The Investor's execution of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any provisions of the governing documents of the Investor or any
obligations by which the Investor is bound, whether arising by contract,
operation of law or otherwise. The Investor will deliver to the Portfolio
Manager evidence of the Investor's authority and compliance with its governing
documents on the Portfolio Manager's request. The Investor agrees that the
Portfolio Manager will not be liable for any losses, costs or claims suffered or
arising out of the Investor's failure to provide the Portfolio Manager with any
documents required to be furnished hereunder.
(b) The Investor and its advisors have reviewed the Portfolio
Manager's Form ADV Parts I and II and Schedule F at least forty eight (48) hours
prior to executing this Agreement; are experienced in the engagement of
investment advisers and are aware of the risks associated with such engagements,
including the risk that the Account could suffer substantial diminution in value
or total loss.
(c) The Investor is an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act").
(d) The Investor complies and will continue to comply with all
applicable laws, rules and regulations (foreign or U.S.), including the U.S.
Bank Secrecy Act, USA Patriot Act and other anti-money
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laundering, anti-terrorism and similar laws, rules and regulations and is not
the subject of any formal or informal investigation for violation of any
applicable law, rule or regulation.
(e) The Investor hereby represents that it is a "qualified
client" as defined in Rule 205-3 under the Advisers Act.
(f) The Investor is not, nor is it acting on behalf of, (i) an
"employee benefit plan" within the meaning of Section 3(3) of ERISA, whether or
not such plan is subject to Title I of ERISA, (ii) a "plan" (as defined in
Section 4975(e)(1) of the Code, including without limitation, an individual
retirement account), whether or not such plan is subject to Section 4975 of the
Code, (iii) an entity whose underlying assets include plan assets by reason of a
plan's investment in such entity or (iv) an entity that otherwise constitutes a
"benefit plan investor" within the meaning of the Department of Labor
Regulation, 29 C.F.R. Section 2510.3-101, including but not limited to, as
applicable, an insurance company general account, an insurance company separate
account, a collective investment fund or a governmental plan (whether foreign or
domestic), a plan maintained by a foreign corporation. The Investor will not be
nor will act on behalf of an employee benefit plan or benefit plan investor
without prior approval of the Portfolio Manager.
(g) The Investor understands the risks associated with the
Portfolio Manager's investment of the assets in the Account in accordance with
this Agreement and agrees to assume the economic risks associated therewith.
(h) The Investor is not required to be registered as an
investment company under the Investment Company Act.
(i) The Investor is authorized to make the types of investments
described herein.
(j) The Investor has not dealt with a broker or finder in
connection with this Agreement and agrees to indemnify and hold the Portfolio
Manager and its Affiliates harmless from any claims for brokerage, finder,
placement or other fees in connection with the transactions contemplated in this
Agreement.
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10. Limitation on Liability of the Portfolio Manager.
(a) Neither the Portfolio Manager nor its partners, officers,
individuals entitled to receive a return based on the performance of the
Portfolio Manager (the "Economic Interest Holders"), any member of any advisory
committee or employees shall be liable for any action taken, omitted or suffered
by it to be taken or omitted which, in its reasonable judgment and in good
faith, the Portfolio Manager or its partners, officers, Economic Interest
Holders, any member of any advisory committee or employees believed to be
authorized by or within the discretionary powers conferred upon it by or
pursuant to this Agreement, or which was taken (or omitted) in accordance with
specific instructions of the Investor; provided, however, that, (except when the
Portfolio Manager is acting in accordance with the specific instructions or
directions of the Investor) no provision of this Agreement shall be construed to
protect the Portfolio Manager and its partners, officers, Economic Interest
Holders, any member of any advisory committee and employees from liability or
losses resulting from gross negligence, breach of fiduciary duty, willful
misfeasance, or bad faith in the performance of its obligations and duties under
this Agreement. The Investor will indemnify and hold the Portfolio Manager and
its partners, officers, Economic Interest Holders, any member of any advisory
committee and employees and their legal representatives harmless from and
against all losses, claims, liabilities and expenses of any kind (including
reasonable attorneys' fees and expenses) and amounts paid in satisfaction of
judgments, in compromise or as fines or penalties (a "Loss") resulting from (i)
any inaccuracy of any representation made by the Investor herein (including any
supplement hereto), (ii) the following by the Portfolio Manager of a direction
given by the Investor or (iii) actions or omissions taken by the Portfolio
Manager or its partners, officers, Economic Interest Holders, any member of any
advisory committee and employees pursuant to this Agreement other than with
respect to any Loss resulting from the gross negligence, breach of fiduciary
duty, willful misfeasance or bad faith of the Portfolio Manager provided that
indemnification for any loss falling solely under subsection iii of this
paragraph 10a will be capped at the value of all contributions to the account
without consideration of any withdrawals, gains or losses. The Investor
acknowledges that it understands that no particular rate of return on the assets
in the Account has been promised or indicated by the Portfolio Manager.
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(b) The limitations on liability provided under this Section 10
are not to be construed so as to provide for exculpation of any person described
in this Section for any liability (including liability under U.S. federal
securities laws that, under certain circumstances, impose liability even on
persons that act in good faith) to the extent (but only to the extent) that
exculpation would be in violation of applicable law, but will be construed so as
to effectuate the applicable provisions of this Section 10 to the maximum extent
permitted by applicable law.
(c) The Investor agrees that, as the Investor has agreed to a
custodian or other manner of safekeeping for the assets in the Account, the
Portfolio Manager shall have no liability to the Investor or any other person
for any loss or other harm to any property in the Account, whether held in the
custody of a custodian or any other person, including any harm to any property
in the Account held in the custody of a custodian resulting from the insolvency
of the custodian or any acts of the agents or employees of the custodian and
whether or not the full amount of such loss is covered by the Securities
Investor Protection Corporation ("SIPC") or any other insurance which may be
carried by the custodian. The Investor understands that SIPC provides only
limited protection for the loss of property held by a broker-dealer.
11. Confidentiality. The Portfolio Manager shall treat as confidential
the identities of the persons associated with the Account and shall not disclose
the same to outside parties except (a) with the prior written consent of such
persons, (b) as may be necessary to comply with applicable governmental laws,
rules and regulations, (c) as required or requested by regulators or (d) to
effectively perform its obligations and duties under this Agreement. The
Portfolio Manager agrees to provide the Investor with notice and an opportunity
to object to requests by regulators unless not permitted to do so by such
regulators.
The Investor shall treat all non-public information about the
Portfolio Manager's trading strategies furnished hereunder as confidential and
shall not disclose such non-public information to third parties except (x) with
the prior written consent of the Portfolio Manager, (y) as may be necessary to
comply with applicable governmental laws, rules and regulations, or (z) as
required or requested by regulators; provided, however, that the Investor may
provide information regarding investment positions held by the Investor and the
performance of the
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Investor and the Account to the respective agents and advisers of such members
in the ordinary course of the Investor's business.
12. Record-Keeping. The Portfolio Manager shall maintain and preserve
on behalf of the Investor copies of the records as specified in the Operational
Procedures and such additional records as the Investor and the Portfolio Manager
agree to in writing. The Investor may from time to time, issue specific
instructions to the Portfolio Manager as to the manner in which such copies of
records shall be maintained by amending the Operational Procedures. The
Portfolio Manager agrees that such copies of records are the property of the
Investor, agrees to preserve such copies of records for a period of not less
than three years from the end of the fiscal year of the Investor in which the
transactions reflected therein occurred, and promptly to surrender such copies
of records to the Investor or its designee when so requested by the Investor;
provided however, that the Portfolio Manager shall be permitted to retain copies
of such records to the extent necessary to comply with applicable law and for
purposes of using the track record generated by the management of the Account or
to the extent they are incorporated in the Portfolio Manager's records.
13. Reports. The Portfolio Manager shall provide the Investor with the
periodic reports and information regarding the Portfolio Manager's activities
hereunder as specified in the Operational Procedures and such other periodic
reports and information as the Investor and the Portfolio Manager agree in
writing, which reports may be prepared by the Portfolio Manager without the
assistance of outside accountants. The Portfolio Manager shall also provide the
Investor with reports (such as monthly letters) which are distributed to all
other clients of the Portfolio Manager.
14. Independent Contractor. The Portfolio Manager shall for all
purposes of this Agreement be deemed to be an independent contractor of the
Investor and, except as otherwise expressly provided herein, shall have no
authority to act for or represent the Investor or to otherwise be deemed an
agent of the Investor.
15. Authority. Each of the parties to this Agreement hereby represents
that to its knowledge it is duly authorized and empowered to execute, deliver,
and perform this Agreement and that such action does not
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conflict with or violate any provision of law, rule or regulation, contract,
deed or trust or other instrument to which it is a party or to which it or any
of its property is subject and that this Agreement to its knowledge constitutes
a valid and binding obligation enforceable in accordance with its terms. The
Portfolio Manager shall, from time to time when so requested by the Investor,
furnish certificates of its officers or partners evidencing the authority of the
officers, partners, employees or agents of the Portfolio Manager to act on its
behalf.
16. Term. This Agreement shall be effective as of the latter of the
date first above written for an initial term of two years from said effective
date and shall be renewed automatically for successive one year terms
thereafter, unless terminated as provided herein.
17. Withdrawal; Termination; Assignment.
(a) Withdrawal. The Investor may not withdraw all or any portion
of the Account prior to the termination of the Agreement.
(b) Termination and Assignment.
(i) The Investor may terminate this Agreement, for any
reason, upon not less than sixty (60) days' written notice to the Portfolio
Manager; provided, however, that in the event of a material breach of this
Agreement by the Portfolio Manager, the Investor may terminate this
Agreement immediately upon written notice to the Portfolio Manager;
provided, further, that if ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ is not actively involved
in the management of the Account for any reason for fifteen (15)
consecutive days, other than absence due to annual leave under ordinary
employment conditions, the Portfolio Manager shall promptly notify the
Investor, and the Investor may terminate this Agreement by delivering
notice of such termination to the Portfolio Manager within ten (10) days of
delivery of notice. A termination notice may not be rescinded upon its
receipt by the Portfolio Manager.
(ii) The Portfolio Manager may terminate this Agreement, for
any reason, upon not less than thirty (30) days' written notice to the
Investor.
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(iii) This Agreement may not be assigned (as such term is
defined under the Advisers Act) without the consent of the Investor. To the
fullest extent permitted by applicable law, in the event the Investor fails
to object to a notice of a proposed assignment within thirty (30) calendar
days after notice of such assignment is effectively given to the Investor
under this Agreement, the Investor shall be deemed to have consented to
such assignment.
(iv) This Agreement will automatically terminate upon the
liquidation of the Account.
(v) Any termination of this Agreement shall be without the
payment of any penalty, except that any person required to pay compensation
under any provision of this Agreement for services rendered prior to the
effective date of such termination shall remain liable therefore to the
party to whom such compensation is due and owing, notwithstanding such
termination. Nothing herein shall relieve any party of any liability for
any breach of this Agreement.
(vi) Upon termination of this Agreement, the Portfolio
Manager shall have the right, in his sole discretion, to either (A)
liquidate the Account in an orderly manner and distribute all proceeds to
the Investor in the form of cash so as to minimize the economic impact of
such liquidation on the Account and any other accounts advised by the
Portfolio Manager, or (B) deliver a payment to the Investor in the form of
cash equal to the U.S. dollar value of the interest of the Investor in the
Account as of the date of termination; provided, however, that such
liquidation pursuant to clause (A) of this subsection or cash payment
pursuant to clause (B) of this subsection shall occur within 30 days of
termination.
18. Expenses.
(a) The Investor shall pay or reimburse the Portfolio Manager and
its respective affiliates for its allocable share of (A) all investment related
costs, including research and trading expenses, including, but not limited to,
hardware, software, products, services and professionals' fees useful in the
investment process,
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brokerage commissions, margin interest, expenses related to short sales,
custodial fees, clearing and settlement charges, travel expenses incurred in
connection with investment due diligence, monitoring or the assertion of rights
or pursuit of remedies (including, without limitation, pursuant to bankruptcy or
other legal proceedings, or participation in informal committees of creditors or
other security holders of an issuer), and external data services; and (B) all
fees to protect or preserve any investment held by the Investor, as determined
in good faith by the Portfolio Manager, and all fees and other expenses incurred
in connection with the investigation, prosecution or defense of any claims by or
against the Investor. The Portfolio Manager, in its sole discretion, may from
time to time pay for any of the foregoing expenses or waive its right to
reimbursement for any such expenses, and may also terminate any such voluntary
payment or waiver of reimbursement. These expenses shall be submitted for
payment to the Investor and payment shall be due within 15 days of submission.
(b) The Portfolio Manager will pay its own general operating and
overhead type expenses which are part of its day-to-day management of the
Account.
19. Trade Errors. The Portfolio Manager's decision to grant
limited trading authority, to use reliable brokers and to review trades promptly
is intended to prevent trade errors from occurring. However, on those occasions
when such an error does occur, the Portfolio Manager will reasonably determine
how to correct the error. If the error results in losses, such losses will not
be reimbursed. The Portfolio Manager will not use brokerage for one fund or
account to fix errors in another fund or account. The Portfolio Manager will
maintain records of such errors including information about the trade and how
the error was corrected which will be made available to the Investor on request.
20. Notices. Any notice, direction, instruction, acknowledgment or
other communication required or contemplated by this Agreement shall be in
writing and addressed as indicated in Exhibit D; provided, however, that the
Portfolio Manager shall be required to send the communication identified in
Exhibit A hereto to the parties and in the manner specified therein. Any party
may designate a different address by giving notice in accordance
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with this Paragraph 20 to the other parties. All notices given hereunder shall
be deemed to have been given upon receipt.
21. Governing Law. Notwithstanding the place where this Agreement may
be executed by any of the parties to this Agreement, the parties expressly agree
that all terms and provisions of this Agreement shall be construed in accordance
with, and governed by the laws of the State of New York, United States without
reference or giving effect to the conflict of laws provisions thereof.
22. Arbitration. Any dispute, claim or controversy arising out of or
relating to this Agreement or the Account, or the breach, termination,
enforcement, interpretation or validity of this Agreement, including the
determination of the scope or applicability of this Agreement to arbitrate,
shall be resolved exclusively by arbitration to be conducted only in the county
and state of New York at the time of such dispute. The arbitration shall be
administered by JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures, applying the laws of the State of New York without reference or
giving effect to the principles of conflicts of laws. The parties agree that
there shall be one arbitrator, and that arbitrator shall be a retired judge who
is experienced in dispute resolution regarding the securities industry. The
parties agree that the arbitration award: (1) shall be final and binding; (2)
shall not include any factual findings, conclusions of law, or any written
statements of the reasons for the award; and (3) shall not include any award of
punitive or consequential damages. Judgment on any award may be entered in any
court of competent jurisdiction in the county and state of New York.
23. Sole Agreement. This Agreement (including the Exhibits attached
hereto) constitutes the only agreement between the parties with respect to the
management of the Account and correctly sets forth the rights, duties, and
obligations of each party to the other as of the date hereof. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
24. Waiver or Modifications. No waiver or modification of this
Agreement shall be effective unless reduced to a written document signed by both
parties. No failure to exercise and no delay in exercising on the part of any
party hereto, of any right, remedy, power or privilege hereunder shall operate
as a waiver thereof.
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25. Assignment and Delegation. This Agreement may not be assigned by
either party absent the prior written consent of the other party. This Agreement
binds and inures to the benefit of its parties, their successors and assigns.
26. Severability. If, for any reason, any provision of this Agreement
is held invalid, such invalidity shall not affect any other provision of this
Agreement not so held invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held so invalid, and the rest of such
provision, together with all other provisions of this Agreement, shall to the
full extent consistent with law continue in full force and effect.
27. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
28. Paragraph Headings. The paragraph headings in this Agreement are
for convenience of reference only and shall not be deemed to interpret or modify
the provisions hereof.
29. Survival. The provisions of Paragraphs 6, 10, 11, 12, 18, 21, 22
and 29 hereof shall survive the termination of this Agreement.
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day first above written.
▇▇▇▇▇▇▇ Capital Investments I LLC
By:
-------------------------------------------------
Name:
Title:
The Investor is ___/ is not ___ eligible to
participate in "new issue" securities in
accordance with Rule 2790 of the Conduct Rules of
the U.S. National Association of Securities
Dealers, Inc.
▇▇▇▇▇▇▇ Capital Management, LLC
By:
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
17
EXHIBIT A
OPERATIONAL PROCEDURES
----------------------
1. Registration. All securities, balances and other assets will be registered
in the name of, or held in street name for the account of ▇▇▇▇▇▇▇ Capital
Investment 1_____, managed account of ▇▇▇▇▇▇▇ Capital Management, LLC, in
accordance with the instructions provided by the Investor.
2. Custodian. The Custodian shall be ▇▇▇▇▇▇▇ Sachs or a successor entity as
agreed by the Investor and the Portfolio Manager. The Custodian shall provide
direct access to the portfolio records of the Account to the Investor and to the
Portfolio Manager.
3. Confirmations. As soon as practicable after the Portfolio Manager effects a
purchase or sale of securities or concludes any transaction which in any way
affects the assets or liabilities of the Account, either directly or indirectly,
the Portfolio Manager, will:
(a) advise _____________________________by e-mail transmission at
__________________ and/or by fax at ______________________________ of
details of each transaction, specifically:
(i) a description of the security or investment;
(ii) quantity bought or sold;
(iii) the settlement date and trade date;
(iv) price or rate at which the deal is effected in US dollars or
local currency (if applicable);
(v) commission and stamp duty or other charges incurred;
(vi) the total cost or net receipt from the transaction;
(vii) the broker through which the trade was executed;
and
(b) Instruct the custodian, broker or agent to confirm all details directly
to _________________ by mail, fax or email.
4. Quarterly Reports. The Portfolio Manager shall provide the Investor and the
Investor's custodian with quarterly reports on the holdings and balances in the
Account and performance information relating to the Account within 15 days of
the end of each quarter during the term of this Agreement.
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EXHIBIT B
Asset Management Guidelines
---------------------------
The Account's objective will be limited to investing in options and other
derivatives referenced to Borders Group, Inc., a U.S.-based specialty retail
company listed on the New York Stock Exchange. In connection with this
objective, the Portfolio Manager may, in its sole discretion, utilize both
exchange-traded and over-the-counter derivatives, including, but not limited to,
options and swap agreements.
The Investor understands that derivative instruments are highly volatile,
involve certain special risks and expose the Account to a high risk of loss. The
low initial margin deposits normally required to establish a position in such
instruments permit a high degree of leverage. As a result, depending on the type
of instrument, a relatively small movement in the price of a contract may result
in a profit or a loss that is high in proportion to the amount of funds actually
placed as initial margin and may result in unquantifiable further losses
exceeding any margin deposited. There is no limit on the amount of implied
leverage the Account may incur. In addition, daily limits on price fluctuations
and speculative position limits on exchanges may prevent prompt liquidation of
positions resulting in potentially greater losses. Transactions in
over-the-counter contracts may involve additional risk as there is no exchange
market on which to close out an open position. The Account is also subject to
the risk of the inability or refusal of its counterparties to perform with
respect to such contracts. It may be impossible to liquidate an existing
position, to assess the value of a position or to assess the exposure to risk.
Contractual asymmetries and inefficiencies can also increase risk, such as break
clauses, whereby a counterparty can terminate a transaction on the basis of a
certain reduction in net asset value, incorrect collateral calls or delays in
collateral recovery.
A call option, upon payment of a premium, gives the purchaser of the option the
right to buy, and the seller the obligation to sell, the underlying instrument
at the exercise price. If a call option purchased by the Account were permitted
to expire without being sold or exercised, the Account would lose the entire
premium it paid for the option. Swaps and certain options and other custom
instruments are subject to the risk of non-performance by the counterparty,
including risks relating to the financial soundness and creditworthiness of the
counterparty.
The performance of the derivatives in which the Account will invest will be
based solely on the appreciation of the common stock of Borders Group, Inc. If
the common stock of Borders Group, Inc. fails to appreciate (or fails to
appreciate above any relevant "strike price"), or if the gains on the
derivatives in which the Account invests are not realized at a time when such
common stock has appreciated, the Account will not realize any profit and may
suffer substantial or total loss. To the extent the Account holds call options
or similar derivatives that have no value if the underlying common stock fails
to appreciate, the Account will suffer a total loss on such investments.
Affiliates of the Portfolio Manager serve as the investment adviser for the
▇▇▇▇▇▇▇ Capital Opportunity Fund, LP, the ▇▇▇▇▇▇▇ Capital Opportunity Fund II,
LP, two domestic private investment partnerships, and the ▇▇▇▇▇▇▇ Capital
Offshore Opportunity Fund, Ltd, a Cayman Islands exempted company as well as
other separately managed accounts and the ▇▇▇▇▇▇▇ Capital Select Fund, LP also a
domestic private investment partnership (collectively, the "▇▇▇▇▇▇▇ Funds").
There is no limitation on the ability of the ▇▇▇▇▇▇▇ Funds or any other client
of the Portfolio Manager or its affiliates to invest in the same securities and
instruments as the Account, take long positions in the stock of Borders Group,
Inc., or take opposite positions from positions held by the Account (for
example, sell Borders Group, Inc. short while the Account holds call options
long).
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EXHIBIT C
Fees
----
Incentive Fee
-------------
Upon liquidation of the Account, the Portfolio Manager shall be entitled to
an incentive fee as follows:
(a) 10% of the amount of net realized income, if any, of the Account
as reflected in the books of the Account as of the liquidation of
the Account (excluding, for the avoidance of doubt, the payment
of the incentive fee to the Portfolio Manager); and
(b) The incentive fee shall be payable by the Investor upon the
Portfolio Manager's written request, accompanied by a statement
setting forth the computation of the fee, within fifteen (15)
days after the liquidation of the Account.
In the event that the Investor disputes the calculation of the incentive
fee it shall notify the Portfolio Manager in writing and attach its
calculation of the incentive fee within such fifteen (15) day timeframe.
The parties shall then negotiate in good faith regarding the resolution of
the discrepancies between the two fee calculations and if they fail to
agree within fifteen (15) days from such notice to the Portfolio Manager,
they shall submit the dispute to arbitration.
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Exhibit D
Notices
-------
Notices to the Investor shall be addressed to:
______________________________
______________________________
______________________________
______________________________
Notices to the Custodian shall be addressed to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇.▇▇▇
Notices to the Portfolio Manager shall be addressed to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Capital Management, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
21
