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elmd104865_ex10-1.htm - Generated by SEC Publisher for SEC Filing

 

Exhibit 10.1

 

UNDERWRITER’S WARRANT AGREEMENT

 

UNDERWRITER’S WARRANT AGREEMENT dated as of September 28, 2010 (this “Agreement”), between Electromed, Inc., a Minnesota corporation (the “Company”), and Feltl and Company, Inc. (hereinafter referred to as the “Underwriter”).

 

RECITALS

 

	
A.

	
The Underwriter agreed, pursuant to the underwriting agreement (the “Underwriting Agreement”) dated August 12, 2010 between the Underwriter and the Company, to act as the Underwriter in connection with the Company’s proposed initial public offering (the “Public Offering”) of 1,700,000 shares of Common Stock (the “Public Shares”) at an initial public offering price of $4.00 per Public Share.

	
 

	
 

	
B.

	
The Company granted the Underwriter an option to purchase up to 255,000 additional shares of common stock, $.01 par value per share  (the “Common Stock”) of the Company on the terms and for the purposes set forth in the Underwriting Agreement (the “Optional Shares”).  

	
 

	
 

	
C.

	
The Underwriter provided notice to the Company on September 23, 2010 that it will purchase 200,000 shares of the Optional Shares. 

	
 

	
 

	
D.

	
The Company proposes to issue to the Underwriter warrants (the “Warrants”) to purchase up to an aggregate of 20,000 (as such number may be adjusted from time to time pursuant to Article 8 of this Warrant Agreement) shares (the “Shares”) of Common Stock.

	
 

	
 

	
E.

	
The Warrants issued pursuant to this Agreement are being issued by the Company to the Underwriter or to its designees who are officers or partners of the Underwriter (collectively, the “Designees”), in consideration for, and as part of the Underwriter’s compensation in connection with the Underwriting Agreement.

 

TERMS AND CONDITIONS

 

NOW, THEREFORE, in consideration of the premises, the payment by the Underwriter to the Company of the aggregate amount of $50.00, the agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.  Grant. The Underwriter is and/or the Designees are hereby granted the right to purchase up to an aggregate of 20,000 fully-paid and non-assessable Shares as reflected in a warrant certificate (the “Warrant Certificate”) at an initial exercise price (subject to adjustment as provided in Article 6 hereof) of  $4.80 per Share at any time from August 13, 2011 until 5:00 P.M., Minneapolis, Minnesota time, on August 13, 2015 (the “Warrant Term”). Except with respect to the rights granted pursuant to Article 7 hereof, the Shares are in all respects identical to the Public Shares being sold to the public pursuant to the terms and provisions of the Underwriting Agreement.

 

2.  Exercise of Warrant.

 

2.1 Cash Exercise. The Warrants initially are exercisable at a price of $4.80 per Share, payable in cash, by wire transfer of immediately available funds to an account specified by the Company, or (if the total exercise price being paid is less than $1,000) by check to the order of the Company, or any combination thereof, subject to adjustment as provided in Article 8 hereof. Upon surrender of the Warrant Certificate(s) with the annexed Cash Exercise Form duly executed, together with payment of the Exercise Price (as hereinafter defined) for the Shares, at the Company’s principal office (currently located at 500 Sixth Avenue NW, New Prague, Minnesota 56071), or at the office of its transfer agent, as applicable, the registered holder of a Warrant Certificate shall be entitled to receive a certificate or certificates for the Shares so purchased. The purchase rights represented by the Warrant Certificate are exercisable at the option of the Holder hereof, in whole or in part. In the case of the purchase of less than all of the Shares purchasable under any Warrant Certificate, the Company shall cancel said Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the balance of the Shares.  As used in this Agreement, the terms “Holder” and “Holders” refer to the registered holder of a Warrant Certificate or the Shares issued upon exercise of the Warrants as the context requires.

 

 

 

 

2.2 Cashless Exercise. At any time during the Warrant Term, the Holder may, at the Holder’s option, exchange, in whole or in part, the Warrants represented by such Holder’s Warrant Certificate which are exercisable for the purchase of Shares into the number of Shares determined in accordance with this Article 2.2 (a “Warrant Exchange”), by surrendering such Warrant Certificate at the principal office of the Company or at the office of its transfer agent, accompanied by a notice stating such Holder’s intent to effect such exchange, the number of Warrants to be so exchanged and the date on which the Holder requests that such Warrant Exchange occur (the “Notice of Exchange”). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company or at the office of its transfer agent, as applicable (the “Exchange Date”). Certificates for the Shares issuable upon such Warrant Exchange and, if applicable, a new Warrant Certificate of like tenor representing the Warrants which were subject to the surrendered Warrant Certificate and not included in the Warrant Exchange, shall be issued as of the Exchange Date and delivered to the Holder within ten (10) business days following the Exchange Date. In connection with any Warrant Exchange, the Holder shall be entitled to subscribe for and acquire (i) the number of Shares (rounded to the next highest integer) which would, but for such Warrant Exchange, then be issuable pursuant to the provisions of Article 2.1 above upon the exercise of the Warrants specified by the Holder in its Notice of Exchange (the “Total Share Number”) less (ii) the number of Shares equal to the quotient obtained by dividing (a) the product of the Total Share Number and the existing Exercise Price per Share (as hereinafter defined) by (b) the Market Price (as hereinafter defined) of a Public Share on the trading day immediately preceding the Exchange Date. “Market Price” at any date shall be deemed to be the closing sale price or, in case no reported sales takes place on such day, the average of the closing sale prices for the last three consecutive trading days on which reported sales have taken place, in either case as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the closing bid price as reported by (i) Bloomberg Financial Markets (or any successor thereto) (“Bloomberg”) through the OTC Bulletin Board or successor trading market or (ii) if not listed on the OTC Bulletin Board (or its successor market), the “pink sheets.” If the Common Stock is not listed or admitted to trading on any national securities exchange, and bid prices are not reported by Bloomberg through the OTC Bulletin Board or successor trading market, or the “pink sheets,” then the Market Price shall be determined in good faith by the  mutual agreement of the Board of Directors of the Company and the Holder, where the Board of Directors of the Company shall prepare and deliver to the Holder its proposed market price and an analysis setting forth the basis for its determination.

 

3.  Issuance of Stock Certificates.

 

Upon the exercise of the Warrants, the issuance of certificates for the Shares purchased shall be made no later than ten (10) business days thereafter without charge to the Holder thereof including, without limitation, any tax which may be payable in respect of the issuance thereof, and such certificates shall (subject to the provisions of Article 4) be issued in the name of the Holder thereof, or, if a sale, transfer, pledge or other disposition of the Warrants or the Shares to be issued upon exercise thereof would be permitted by this Agreement and applicable federal and state securities laws, in such names as may be directed by the Holder; provided, however, that the Company shall not be required to pay any transfer tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other than that of the Holder, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

The certificates representing the Shares shall be executed on behalf of the Company in the manner contemplated by the Company’s articles of incorporation or bylaws. Warrant Certificates shall be dated the date of execution by the Company upon initial issuance, division, exchange, substitution or transfer.

 

Upon exercise, in part or in whole, of the Warrants, certificates representing the Shares purchased shall bear a legend substantially similar to the following:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IS AVAILABLE.

 

 

 

4.  Restriction on Transfer of Warrants.

 

As used herein, “Lock-Up Period” means the period beginning on the date of the final prospectus used in the Public Offering (the “Start Date”) and ending on (and including) the date that is 365 days after the Start Date.  The Underwriter (and the Holder of a Warrant Certificate, by the Holder’s acceptance thereof) covenants and agrees that, as required by FINRA Rule 5110(g), the Warrants and the Shares may not be sold during the Public Offering, or sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the Warrants and the Shares during the Lock-Up Period, except (i) to the Underwriter or the Designees, provided that any portion of the Warrant and the Shares so transferred shall remain subject to the above restriction for the remainder of the restriction period, and (ii) any sale of Shares in accordance with Article 7 in a firm commitment underwritten public offering of Common Stock that closes at least 180 days after the Start Date.

 

5.  Representations and Warranties of Holder.  

The Holder of a Warrant (including the Underwriter) represents and warrants to the Company as follows: 

5.1          Acquisition of Warrant for Personal Account.  The Holder is acquiring this Warrant and the Shares issuable upon exercise of this Warrant (collectively the “Securities”) for investment for its own account and not with a present view to, or for resale in connection with, any public resale or distribution thereof. The  Holder understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”), by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. The Holder further understands that the Securities have not been passed upon or the merits thereof endorsed or approved by any state or federal authorities. 

5.2          Rule 144.  The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The Holder is aware of the provisions of Rule 144 promulgated under the Act. 

5.3          Accredited Investor.  As of the date hereof the Holder is, and upon any exercise of this Warrant the Holder will be, an “accredited investor” within the meaning of Regulation D promulgated under the Act. The Holder is sophisticated in financial matters, and is able to evaluate the risks and benefits of an investment in the Securities for an indefinite period of time. 

5.4          Opportunity To Discuss; Information.  The Holder has been afforded the opportunity to ask questions of, and receive answers from, the officers and/or directors of the Company acting on its behalf concerning the terms and conditions of this transaction and to obtain any additional information, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed itself of the opportunity to the extent the Holder considers appropriate in order to permit it to evaluate the merits and risks of an investment in the Company. 

5.5          Future Registration.  The Holder acknowledges and recognizes that, except as provided in Article 7 hereof, the Company has not agreed to register the resale of the Shares in any Registration Statement to be filed by the Company under the Act. 

 

 

 

6.  Price.

 

6.1 Initial and Adjusted Exercise Price. The initial Exercise Price of each Warrant shall be $4.80 per Share. The adjusted Exercise Price per Share shall be the prices which shall result from time to time from any and all adjustments of the initial Exercise Price per Share in accordance with the provisions of Article 8 hereof.

 

6.2 Exercise Price. The term “Exercise Price” herein shall mean the initial exercise price or the adjusted exercise price, depending upon the context.

 

7.  Registration Rights.

 

7.1 Registration Under the Securities Act of 1933.  As of the date hereof, none of the Warrants or the Shares have been registered for purposes of public resale or distribution under the Act.

 

7.2 Registrable Securities. As used herein, the term “Registrable Security” means each of the Shares and any shares of Common Stock issued upon any stock split or stock dividend in respect of such Shares; provided, however, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been registered under the Act and disposed of pursuant thereto, (ii) registration under the Act is no longer required for the Holder for subsequent public distribution of such security under Rule 144 promulgated under the Act or otherwise, or (iii) it has ceased to be outstanding. The term “Registrable Securities” means any and/or all of the securities falling within the foregoing definition of a “Registrable Security.” In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of “Registrable Security” as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Article 7.

 

7.3 Piggyback Registration. If, within seven (7) years following the effective date of the Public Offering, the Company proposes to prepare and file one or more post-effective amendments to the registration statement filed in connection with the Public Offering or any new registration statement or post-effective amendments thereto covering equity or debt securities of the Company, or any such securities of the Company held by its shareholders (in any such case, other than in connection with a merger, acquisition or pursuant to Form S-8 or successor form)(for purposes of this Article 7, collectively, the “Registration Statement”), it will give written notice of its intention to do so (“Notice”), at least thirty (30) days prior to the filing of each such Registration Statement, to all Holders of the Registrable Securities. Upon the written request of such a Holder (a “Requesting Holder”), made within twenty (20) days after receipt by the Holder of the Notice, that the Company include any of the Requesting Holder’s Registrable Securities in the proposed Registration Statement, the Company shall, as to each such Requesting Holder, use commercially reasonable efforts to effect the registration under the Act of the Registrable Securities which it has been so requested to register (“Piggyback Registration”), at the Company’s sole cost and expense and at no cost or expense to the Requesting Holders (except as provided in Article 7.5(b) hereof).

 

Notwithstanding the provisions of this Article 7.3, the Company shall have the right at any time after it shall have given written notice pursuant to this Article 7.3 (irrespective of whether any written request for inclusion of Registrable Securities shall have already been made) to elect not to file any such proposed Registration Statement, or to withdraw the same after the filing but prior to the effective date thereof, without incurring any liability to any Holder of Registrable Securities.

 

7.4 Demand Registration.

 

(a) At any time beginning at such time as the Company is eligible to use a registration statement on Form S-3 under the Act (or applicable successor form) for secondary offerings of securities and ending five (5) years after the effective date of the Public Offering, any “Majority Holder” (as such term is defined in Article 7.4(c) below) of the Registrable Securities shall have the right, exercisable by written notice to the Company (the “Demand Registration Request”), to have the Company prepare and file with the Securities and Exchange Commission (the “Commission”) on one occasion, at the sole expense of the Company (except as provided in Article 7.5(b) hereof), a Registration Statement on Form S-3 (or applicable successor form) and such other documents, including a prospectus, as may be necessary (in the opinion of both counsel for the Company and counsel for such Majority Holder) in order to comply with the provisions of the Act, so as to permit a public offering and sale of the Registrable Securities by the Holders thereof. This right is in addition to the piggyback registration rights provided for under Article 7.3 hereof, provided that the Company shall not be required to effect a Demand Registration pursuant to this Article 7.4 within 180 days of the effective date of a Registration Statement filed by the Company to which the rights provided by Article 7.3 would apply if the Holders were properly notified pursuant to Article 7.3 hereof.  The Company shall use commercially reasonable efforts to cause the Registration Statement to become effective under the Act so as to permit a public offering and sale of the Registrable Securities by the Holders thereof. Once effective, the Company will use commercially reasonable efforts to maintain the effectiveness of the Registration Statement until the earlier of (i) the date that all of the Registrable Securities have been sold or (ii) the date the Holders thereof receive an opinion of counsel to the Company that all of the Registrable Securities may be freely traded without registration under the Act under Rule 144 promulgated under the Act or otherwise.

 

 

(b) The Company covenants and agrees to give written notice of any Demand Registration Request to all Holders of the Registrable Securities within ten (10) business days from the date of the Company’s receipt of any such Demand Registration Request. After receiving notice from the Company as provided in this Article 7.4(b), Holders of Registrable Securities may request the Company to include their Registrable Securities in the Registration Statement to be filed pursuant to Article 7.4(a) hereof by notifying the Company of their decision to have such securities included within fifteen (15) business days of their receipt of the Company’s notice.

 

(c) The term “Majority Holder” as used in Article 7.4 hereof shall mean any Holder or any combination of Holders of Registrable Securities that hold an aggregate number of shares of Common Stock (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants) as would constitute a majority of the aggregate number of Shares that are Registrable Securities (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants).

 

7.5 Covenants of the Company With Respect to Registration. The Company covenants and agrees as follows:

 

(a) In connection with any registration under Article 7.4 hereof, the Company shall file the Registration Statement as expeditiously as possible, but in any event no later than thirty (30) days following receipt of any demand therefore, shall use commercially reasonable efforts to have any such Registration Statement declared effective at the earliest possible time, and shall furnish each Holder of Registrable Securities such number of prospectuses as shall reasonably be requested.

 

(b) The Company shall pay all costs, fees and expenses (other than underwriting fees, discounts and nonaccountable expense allowance applicable to the Registrable Securities and fees and expenses of counsel retained by the Holders of Registrable Securities) in connection with all Registration Statements filed pursuant to Articles 7.3 and 7.4(a) hereof including, without limitation, the Company’s legal and accounting fees, printing expenses, and blue sky fees and expenses and any fees due to the FINRA related to such registration or sale of any of the Registrable Securities.

 

(c) The Company will take all necessary action which may be required in qualifying or registering the Registrable Securities included in the Registration Statement for offering and sale under the securities or blue sky laws of such states as are requested by the Holders of such securities and for obtaining the clearance of FINRA member firms to participate in the distribution of such Registrable Securities; provided, however, that the Company shall not be required in connection therewith to qualify to do business or file a general consent to service of process in any jurisdiction if the Board of Directors of the Company determines in good faith that the same would be materially detrimental to the Company.

 

(d) The Company shall indemnify any Holder of the Registrable Securities to be sold pursuant to any Registration Statement and any underwriter or person deemed to be an underwriter under the Act and each person, if any, who controls such Holder or underwriter or person deemed to be an underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such Registration Statement to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriter as set forth in Section 6 of the Underwriting Agreement and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

 

 

 

(e) Any Holder of Registrable Securities to be sold pursuant to a Registration Statement, and such Holder’s successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holder, or such Holder’s successors or assigns, for specific inclusion in such Registration Statement to the same extent and with the same effect as the provisions pursuant to which the Underwriter has agreed to indemnify the Company as set forth in Section 6 of the Underwriting Agreement and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

 

(f) Nothing contained in this Agreement shall be construed as requiring any Holder to exercise the Warrants held by such Holder prior to the initial filing of any Registration statement or the effectiveness thereof.

 

(g) If the Company shall fail to comply with the provisions of this Article 7, the Company shall, in addition to any other equitable or other relief available to the Holders of Registrable Securities, be liable for any or all incidental, special and consequential damages sustained by the Holders of Registrable Securities requesting registration of their Registrable Securities.

 

(h) In connection with any offering involving an underwriting of shares of the Company’s Common Stock pursuant to Article 7.3, the Company shall not be required to include any of the Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters. If the total number of securities to be included in such offering, including the Registrable Securities requested by Holders to be included therein, exceeds the amount of securities that the underwriters determine in their reasonable discretion is compatible with the success of the offering (the “Maximum Number of Securities”), then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company determine in their sole discretion will not jeopardize the success of the offering. In the event that the underwriters determine that the Maximum Number of Securities is less than the number of securities to be offered by the Company plus all of the other Registrable Securities requested to be registered by Holders or other security holders with similar registration rights, then the securities that are included in such offering shall be allocated in the following manner: (i) to the Company and, if there is a balance remaining, (ii) to the Holders, provided that if the balance remaining is not sufficient to include in the offering all of the Registrable Securities requested to be registered by the Holders, the number of Registrable Securities to be included for any holder shall be determined pro rata based on the proportionate number of Registrable Securities then held (regardless of whether or not such any such Holder has requested that all such Registrable Securities be included), and, if there is a balance remaining, (iii) to any other shareholders holding similar registration rights as selling security holders.

 

(i) The Company shall promptly deliver copies of all correspondence between the Commission and the Company, its counsel or its auditors with respect to the Registration Statement to each Holder of Registrable Securities included for registration in such Registration Statement pursuant to Article 7.3 hereof or Article 7.4 hereof and to the managing underwriter, if any, of the offering in connection with which such Holder’s Registrable Securities are being registered and shall permit each Holder of Registrable Securities and such underwriter to do such reasonable investigation, upon reasonable advance notice, with respect to information contained in or omitted from the Registration Statement as it deems reasonably necessary to comply with applicable securities laws or rules of the FINRA. Such investigation shall include access to books, records and properties, and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as any such Holder of Registrable Securities or underwriter shall reasonably request; provided, that the Company may require each such Holder or underwriter to enter into reasonable confidentiality and non-disclosure agreements with respect to the information contained in or derived from such investigations.

 

 

 

8.  Adjustments of Exercise Price and Number of Securities. The following adjustments apply to the Exercise Price of the Warrants with respect to the Shares and the number of Shares purchasable upon exercise of the Warrants.

 

8.1 Computation of Adjusted Price. In case the Company at any time after the date hereof pays a dividend in shares of Common Stock or makes a distribution in shares of Common Stock, then upon such dividend or distribution, the Exercise Price in effect immediately prior to such dividend or distribution shall forthwith be reduced to a price determined by dividing (a) an amount equal to the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution multiplied by the Exercise Price in effect immediately prior to such dividend or distribution, by (b) the total number of shares of Common Stock outstanding immediately after such issuance or sale.

 

8.2 Subdivision and Combination. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of subdivision or proportionately increased in the case of combination.

 

8.3 Adjustment in Number of Securities. Upon each adjustment of the Exercise Price pursuant to the provisions of this Article 8, the number of Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest full number by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.

 

8.4 Reclassification, Consolidation, Merger, etc. Subject to Article 12, in case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of all or substantially all of the assets of the Company, the Holders shall thereafter have the right to convert this Warrant into the kind and amount of shares of stock and other securities and property which the Holder would have owned or have been entitled to receive immediately after such reclassification, change, consolidation, merger, sale or conveyance had this Warrant been converted immediately prior to the effective date of such reclassification, change, consolidation, merger, sale or conveyance, and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Article 8 with respect to the rights and interests thereafter of the Holder of this Warrant, to the end that the provisions set forth in this Article 8 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock and other securities and property thereafter deliverable on the exercise of this Warrant. The provisions of this Article 8.4 shall similarly apply to successive such reclassifications, changes, consolidations, mergers, sales or conveyances. In the event of any conflict between Article 8.4 and Article 12, the latter shall control.

 

8.5  Determination of Outstanding Common Shares. For purposes of this Agreement, the number of shares of Common Stock at any one time outstanding shall include: (i) the aggregate number of shares of common stock issued and outstanding, and (ii) the aggregate number of shares of common stock issuable upon the exercise of any outstanding options, rights, and warrants, and upon the conversion or exchange of any outstanding convertible or exchangeable securities.

 

8.6 Dividends and Other Distributions with Respect to Outstanding Securities. In the event that the Company shall at any time prior to the exercise of all Warrants make any distribution of its assets to holders of its Common Stock as a liquidating or a partial liquidating dividend, then the Holder of Warrants who exercises its Warrants after the record date for the determination of those Holders of Common Stock entitled to such distribution of assets as a liquidating or partial liquidating dividend shall be entitled to receive for the exercise price per Warrant, in addition to each share of Common Stock, the amount of such distribution (or, at the option of the Company, a sum equal to the value of any such assets at the time of such distribution as determined by the Board of Directors of the Company in good faith) which would have been payable to such Holder had he been the Holder of record of the Common Stock receivable upon exercise of his Warrant on the record date for the determination of those entitled to such distribution. At the time of any such dividend or distribution, the Company shall make appropriate reserves to ensure the timely performance of the provisions of this Article 8.6.

 

 

 

8.7 Subscription Rights for Shares of Common Stock or Other Securities. In the case that the Company or an affiliate of the Company shall at any time after the date hereof and prior to the exercise of all the Warrants issue any rights, warrants or options to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the shareholders of the Company, the Holders of unexercised Warrants on the record date of such issuance of rights, warrants or options shall be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive such rights, warrants or options that such Holders would have been entitled to receive had they been, on the record date set by the Company or such affiliate in connection with such issuance of rights, warrants or options, the holders of record of the number of whole shares of Common Stock then issuable upon exercise of their outstanding Warrants.

 

9.  Exchange and Replacement of Warrant Certificates.

 

Each Warrant Certificate is exchangeable without expense, upon the surrender thereof by the registered Holder at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of securities in such denominations as shall be designated by the Holder thereof at the time of such surrender.

 

Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate and, in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and upon surrender and cancellation of the Warrant Certificate, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor in lieu thereof.

 

10.  Elimination of Fractional Interests.

 

The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Warrants, nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Shares.

 

11.  Reservation and Listing of Securities.

 

The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrants and payment of the Exercise Price therefore, all Shares issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any shareholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrants to be listed on any securities exchange or trading market on which the Common Stock may be listed and/or quoted.

 

12.  Sale of the Company.

(a)   As used herein, a “Sale of the Company” means (i) any sale (however effected, including without limitation by sale of stock, merger, share exchange or otherwise, including without limitation in a single transaction or series of related transactions) of all or substantially all of the outstanding voting stock of the Company, or (ii) any sale, lease or disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole; provided, that in neither case, shall a Sale of the Company include a transaction set forth above where the holders of the Company’s voting stock immediately prior to the transaction hold more than 50% of the outstanding voting stock of the Company or its successor following such transaction.

(b)   The Company shall give each Holder at least twenty (20) days prior notice of any Sale of the Company.

(c)   Notwithstanding anything to the contrary herein, this Warrant will expire at the closing for a Sale of the Company.

(d)   Upon receipt of the notice contemplated by Article 12(b) hereof, any Holder may:

(i)  elect (by giving written notice received by the Company no later than five days before the closing of such Sale of the Company and surrendering the Warrants) to receive, upon the closing of the Sale of the Company, (1) the same amount and kind of securities, cash or property as the Holder would have been entitled to receive upon the closing of the Sale of the Company if the Holder had been, immediately prior to the Sale of the Company, the holder of the number of Shares of Common Stock then issuable upon exercise in full of this Warrant less (2) an amount of such securities, cash or property equal to the aggregate exercise price of the Warrants surrendered.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Sale of the Company, then the Holder shall be given the same choice as to such alternate consideration it receives pursuant to an election under this Article 12(d);

 

 

(ii)  let the Holders’ Warrants expire in accordance with their terms (subject to Article 12(c)); or

(iii)  exercise the Holder’s Warrants in accordance with their terms prior to the expiration thereof (subject to the Article 12(c)).

(e)   Neither this Article 12, nor any notice or election contemplated by this Article 12, shall create any obligation on the Company’s part to consummate any Sale of the Company. If, after any notice or election contemplated by this Article 12 is given, the Company determines not to consummate the Sale of the Company, then the Company shall notify the Holders of such determination, whereupon any preceding notices or elections under this Article 12 regarding such Sale of the Company shall be null and void and of no effect.

 

13.  Notices to Warrant Holders.

 

Nothing contained in this Agreement shall be construed as conferring upon the Holder or Holders the right to vote or to consent or to receive notice as a shareholder in respect of any meetings of shareholders for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur:

 

(a) the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or

 

(b) the Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefore; or

 

(c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger); or

 

(d) reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or a sale or conveyance to another corporation of the property of the Company as an entirety is proposed; or

 

(e) The Company or an affiliate of the Company shall propose to issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the shareholders of the Company; then, in any one or more of said events, the Company shall give written notice to the Holder or Holders of such event at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, options or warrants, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend or distribution, or the issuance of any convertible or exchangeable securities or subscription rights, options or warrants, or any proposed dissolution, liquidation, winding up or sale.

 

 

 

14.  Notices.

 

All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made (1) one business day after being sent by overnight courier, (2) three business days after having been sent by first-class U.S. mail (certified or regular), (3) at the time sent, if sent by email or facsimile between 8:00 a.m. and 5:00 p.m. on  a business day, or one business day after being sent, if sent by email or facsimile at any other time, and (4) upon delivery, if hand-delivered by any other means.

 

(a) If to a registered Holder of the Warrants, to the address (or email or facsimile number, as applicable) of such Holder as shown on the signature page hereto or the books of the Company; or

 

(b) If to the Company, to:

 

Electromed, Inc.

Attn: Chief Executive Officer

500 Sixth Avenue NW

New Prague, MN 56011

 

or to such other address as the Company may designate by notice to the Holders given pursuant to this Article.

 

15.  Supplements and Amendments.

 

The Company and the Underwriter may from time to time supplement or amend this Agreement without the approval of any Holders of the Warrants and/or Shares issued upon exercise of the Warrants in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Underwriter may deem mutually necessary or desirable and which the Company and the Underwriter mutually deem not to adversely affect the interests of the Holders of Warrant Certificates.

 

16.  Successors.

 

All the covenants and provisions of this Agreement by or for the benefit of the Company and the Holders inure to the benefit of their respective successors and permitted assigns hereunder.

 

17.  Governing Law.

 

This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Minnesota and for all purposes shall be construed in accordance with the laws of said State, other than its conflicts of laws provisions.

 

18.  Benefits of this Agreement.

 

Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Underwriter and any other registered Holder or Holders of the Warrant Certificates or Shares any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and the Underwriter and any other Holder or Holders of the Warrant Certificates or Shares.

 

19.  Counterparts.

 

This Agreement may be executed in any number of counterparts, and may be delivered to each of the parties by facsimile or e-mail.  Facsimile or photocopy signatures shall be deemed as legally enforceable as the original.  Each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.

 

[Signature page follows.]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed as of the day and year first above written.

 

	
 

	
ELECTROMED, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Robert D. Hansen

	
 

	
 

	
Robert D. Hansen

Chief Executive Officer

	
 

	
 

	
 

 

 

Agreed and Accepted as of the day and year first above written:

 

	
FELTL AND COMPANY, INC.

	
 

	
 

	
 

	
 

	
By: 

	
/s/ : Joseph P. Sullivan

	
 

	
Name: Joseph P. Sullivan

Title: Director, Corp. Finance

 

 

Feltl and Company, Inc.

2100 LaSalle Plaza

800 LaSalle Ave.

Minneapolis MN 55402

Main: 612.492.8800

 

 

with a copy to (that shall not constitute notice):

 

Faegre & Benson LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402-3901

Attention: W. Morgan Burns

Fax: (612) 766-1600

 

 

 

 

 

FORM OF WARRANT CERTIFICATE

 

NEITHER THE WARRANTS NOR THE SHARES UNDERLYING THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS.  NEITHER THE WARRANTS NOR THE SHARES UNDERLYING THE WARRANTS MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE WARRANTS OR THE SHARES UNDERLYING THE WARRANTS, AS APPLICABLE, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IS AVAILABLE.

 

THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.

 

EXERCISABLE ON OR BEFORE 5:00 P.M., MINNEAPOLIS TIME, AUGUST 13, 2015

 

	
No. W-1001

	
20,000 Warrants

 

 

This Warrant Certificate certifies that Feltl and Company, Inc. or its registered assigns, is the registered holder of  20,000 Warrants to purchase, at any time from August 13, 2011 until 5:00 P.M. Minneapolis, Minnesota time on August 13, 2015 (“Expiration Date”), up to 20,000 fully-paid and non-assessable shares (the “Shares”) of the common stock, $.01 par value per share (the “Common Stock”), of Electromed, Inc., a Minnesota corporation (the “Company”), at an initial exercise price, subject to adjustment in certain events (the “Exercise Price”), of  $4.80 per Share, upon surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the Underwriter’s Warrant Agreement dated as of September 28, 2010, between the Company and Feltl and Company, Inc. (the “Warrant Agreement”). Payment of the Exercise Price may be made in cash, wire transfer, or by check payable to the order of the Company, by surrender of a portion of the Warrants represented by the Warrant Certificate, or any combination thereof, in each case subject to the terms of the Warrant Agreement.

 

No Warrant may be exercised after 5:00 P.M., Minneapolis, Minnesota time, on the Expiration Date, at which time all Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void.

 

The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words “holders” or “holder” means the registered holders or registered holder) of the Warrants.

 

The Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and the type and/or number of the Company’s securities issuable thereupon may, subject to certain conditions, be adjusted.  In such event, the Company will, at the request of the holder, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the number and/or type of securities issuable upon the exercise of the Warrants; provided, however, that the failure of the Company to issue such new Warrant Certificates shall not in any way change, alter, or otherwise impair the rights of the holder as set forth in the Warrant Agreement.

 

Upon due presentment for registration of transfer of this Warrant Certificate at an office or agency of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection therewith.

 

 

 

Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such number of unexercised Warrants.

 

The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary.

 

All terms used in this Warrant Certificate which are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement.

 

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed.

 

Dated:  September 28, 2010

 

 

	
 

	
ELECTROMED, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Robert D. Hansen

	
 

	
 

	
Robert D. Hansen

Chief Executive Officer

	
 

	
 

	
 

 

 

 

fb.us.5782234.02

 

 

 

 

 

 

CASH EXERCISE FORM

 

            The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase __________ Shares of Common Stock and herewith tenders in payment for such securities, in cash, by wire transfer of immediately available funds to an account specified by Electromed, Inc., a Minnesota corporation (the “Company”), or (if the total exercise price being paid is less than $1,000) by check to the order of the Company, or any combination thereof, in the amount of $__________, all in accordance with the terms of the Warrant Certificate.  The undersigned requests that a certificate for such securities be registered in the name of the undersigned, or, if permitted by the Underwriter’s Warrant Agreement dated as of September 28, 2010 between the Company and Feltl and Company, Inc., the name of:  

 

 

	
      

	
,

	
whose address is

	
 

	
      

	
 

	
 

	
 

	
      

	
 

	
 

	
 

	
      

	
,

	
The undersigned requests that such Certificate be delivered to:

	
 

	
    

	
,

	
whose address is

	
 

	
   

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
.

	
Dated:

	
 

	
 

	
 

	
Signature:

	
 

	
 

	
 

	
SSN or Tax ID No:

	
 

	
 

	
 

 

 

 

 

 

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder desires to transfer the Warrant Certificate and such transfer is permitted pursuant to the terms of the Underwriter’s Warrant Agreement dated September 28, 2010 between the Company and Feltl and Company, Inc.)

 

FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns and transfers unto:

 

	
      

	
,

	
whose address is

	
 

	
      

	
 

	
 

	
 

	
      

	
 

	
 

	
 

	
      

	
,

	
and whose tax ID

No. or SSN is:

	
 

	
      

	
,

 

this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _________________, Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution.

 

 

 

 

CASHLESS EXERCISE FORM

 

(To be executed upon exercise of Warrant pursuant to Article 2.2 of the Underwriter’s Warrant Agreement dated September 28, 2010 between the Company and Feltl and Company, Inc. (the “Warrant Agreement”)

 

To:  ELECTROMED, INC.

 

The undersigned hereby irrevocably elects a cashless exercise of the right to purchase represented by the attached Warrant Certificate for, and to purchase thereunder, _____________________ Shares, as provided for in Article 2.2 of the Warrant Agreement.

 

Please issue a certificate or certificates for such Shares in the name of the undersigned, or, if permitted by the Warrant Agreement, the name of:

 

	
      

	
,

	
whose address is

	
 

	
      

	
 

	
 

	
 

	
      

	
 

	
 

	
 

	
      

	
,

	
and whose tax ID

No. or SSN is:

	
 

	
      

	
,

	
The undersigned requests that such Certificate be delivered to:

	
 

	
      

	
,

	
whose address is

	
 

	
      

	
 

	
 

	
 

	
      

	
 

	
 

	
 

	
      

	
.

	
Dated:

	
 

	
 

	
 

	
Signature:

	
 

	
 

	
 

 

 

NOTE: The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form, if any.

 

And if said number of shares shall not be all the shares purchasable under the attached Warrant Certificate, a new Warrant Certificate is to be issued in the name of the undersigned for the remaining balance of the shares purchasable thereunder.efc10-657_ex1002.htm

Exhibit 10.02

 

ML FUTURESACCESSsm ADVISORY AGREEMENT

 

among

 

MAN AHL FUTURESACCESSSM LLC

 

 

MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC

 

and

 

MAN-AHL (USA) LTD.

 

 

Dated as of June 30, 2010

 

  

  

  

 

Table of Contents

	Section	 	Page
	 	 	 
	
1.

	
Undertakings of the Trading Advisor in Connection with Offering.

	
2

	
2.

	
Duties of the Trading Advisor.

	
4

	
3.

	
Trading Advisor Independent

	
7

	
4.

	
Commodity Broker; Floor Brokers

	
7

	
5.

	
Management Fee

	
8

	
6.

	
Incentive Fee.

	
8

	
7.

	
Term and Termination.

	
9

	
8.

	
Right to Advise Others; Uniformity of Acts and Practices

	
11

	
9.

	
Additional Undertakings by the Trading Advisor

	
11

	
10.

	
Representations and Warranties.

	
11

	
11.

	
Entire Agreement

	
15

	
12.

	
Exculpation; Indemnification

	
15

	
13.

	
Assignment

	
17

	
14.

	
Amendment

	
17

	
15.

	
Severability

	
17

	
16.

	
Notices

	
17

	
17.

	
Governing Law

	
18

	
18.

	
Consent to Jurisdiction

	
18

	
19.

	
Remedies

	
18

	
20.

	
Survival

	
18

	
21.

	
Counterparts

	
18

	
22.

	
No Waiver.

	
19

	
23.

	
Rules of Interpretation

	
19

	
24.

	
Binding Effect; Benefit

	
20

	
25.

	
Confidentiality.

	
20

	
26.

	
Advisers Act Compliance

	
21

_______________

	
Appendix A — Commodity Trading Authority

	
A-1

  

  

  

 

ML FUTURESACCESSsm ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT (the “Agreement”), made as of this 30th day of June 2010, among MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC, a Delaware limited liability company (the “Manager”), MAN AHL FUTURESACCESSSM LLC, a Delaware limited liability company (the “Fund”), and MAN-AHL (USA) LTD. (the “Trading Advisor”).

 

W I T N E S S E T H:

 

WHEREAS, the Fund is one of the “family” of privately-offered managed futures funds sponsored by the Manager as part of the “ML FuturesAccessSM Program,” which provides for investors to invest in, and exchange their investments among, different funds in the ML FuturesAccessSM Program, as well as among the various “hedge funds” in the ML HedgeAccess® Program (the ML FuturesAccessSM Program and the ML HedgeAccess® Program being collectively referred to as the “Program”);

 

WHEREAS, the Manager operates “funds of funds” (ML Systematic Momentum FuturesAccess LLC and ML Trend-Following Futures Fund L.P., each a “Fund of Funds”) — which allocate and reallocate their capital among funds that are established within the ML FuturesAccessSM Program;

 

WHEREAS, the Fund has been formed in order to trade, buy, sell or otherwise acquire, hold or dispose of forward contracts, futures contracts for commodities, financial instruments and currencies, rights pertaining thereto and options thereon or on physical commodities and engage in all activities incident thereto (the foregoing forms of investment being collectively referred to herein as “commodity interests”) under the sole direction of the Trading Advisor;

 

WHEREAS, the Manager and the Trading Advisor initially intend for the Fund to be offered for investment by direct investors or ML Trend-Following Futures Fund L.P., although, in the Manager’s discretion, ML Systematic Momentum FuturesAccess LLC may be allowed to invest in the Fund pursuant to the terms of this Agreement;

 

WHEREAS, the Fund intends, subject to the terms and conditions set forth herein, to offer units of limited liability company interest (“Units”) for sale to U.S. investors in an offering exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”), as described in the Fund’s Confidential Program Disclosure Document, as updated or supplemented from time to time (the “Memorandum”), which has been filed with the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”) pursuant to the Commodity Exchange Act, as amended (the “CEA”), the commodity pool operator and commodity trading advisor regulations promulgated under the CEA by the CFTC (the “Commodity Regulations”), and the NFA rules promulgated under the CEA (the “NFA Rules”);

 

WHEREAS, the Manager acts as manager of the Fund;

 

  

  

  

 

WHEREAS, the Trading Advisor is engaged in the business of, among other things, making trading decisions on behalf of investors in the purchase and sale of certain commodity interests;

 

WHEREAS, the Manager has sponsored the Fund in order that the Trading Advisor, upon the terms and conditions set forth herein, act as the trading advisor for the Fund, making commodity interests investment decisions for the Fund on a discretionary basis; and

 

WHEREAS, the Trading Advisor is willing to manage the Fund’s commodity interests trading.

 

NOW, THEREFORE, the parties hereto do hereby agree as follows, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in entering into this Agreement the parties intend to be legally bound:

 

1.           Undertakings of the Trading Advisor in Connection with Offering.

 

(a)           Trading Advisor to Provide Current Information.  The Trading Advisor agrees to provide to the Manager information requested by the Manager regarding the Trading Advisor, its “principals,” “trading principals,” and “trading program” (each of the foregoing as defined in Section 4.10 of the Commodity Regulations) and “affiliates” (as defined in Rule 405 promulgated under the 1933 Act) for purposes of inclusion in the section of the Memorandum relating to the Trading Advisor (the “Trading Advisor Extract”) and applicable Securities and Exchange Commission (“SEC”) filings as it relates to the Fund.  The Trading Advisor shall also provide to the Manager such information as pre-arranged in a template for inclusion in the Fund’s monthly reports.  At all times, the Manager must obtain the prior approval of the Trading Advisor to use any materials mentioning the Trading Advisor and the Trading Program (defined below), provided that if the Trading Advisor does not provide an affirmative approval or disapproval within seven business days of the date in which the material in question is provided to the Trading Advisor, the Manager shall have the right to use such information without receiving the prior approval of the Trading Advisor, and, provided further, that notwithstanding the foregoing the Manager may make non-material changes to such information to conform the format of such information to the format of the Memorandum and/or to comply with Commodity Regulations without prior approval of the Trading Advisor.

 

(b)           Solicitation Material; “Roadshow” Participation.  None of the Trading Advisor, its affiliates, nor their respective principals, directors, officers, employees, representatives or controlling persons (collectively, the “Trading Advisor Parties”) shall use, publish, circulate or distribute the Memorandum or any related solicitation material nor shall any Trading Advisor Party engage in any marketing, sales or promotional activities in connection with the offering of Interests, except as may be requested by the Manager or as may be required by the Commodity Regulations and the NFA Rules.  It is hereby agreed by the Manager that affiliates of the Trading Advisor may independently market the Fund within the Merrill Lynch system provided that all marketing materials to be used by the Trading Advisor Parties shall be approved in advance by the Manager which approval shall not be unreasonably withheld.

 

  

2

  

(c)           The Trading Advisor will, to the extent reasonably requested by the Manager, provide appropriate Trading Advisor personnel, selected by the Trading Advisor, to participate in “road shows,” seminars, presentations and other marketing activities relating to the Fund as reasonably requested by the Manager, such participation to be at the expense of the Trading Advisor.

 

(d)             Performance Information.  At all times while any of the Interests continue to be offered, the Trading Advisor, at its own expense, shall promptly provide the Fund and the Manager with complete and accurate performance information (in form and substance consistent with Sections 4.25 and 4.35 of the Commodity Regulations and with the NFA Rules) reflecting the actual performance of the accounts directed by the Trading Advisor up to the latest practicable date (consistent with Sections 4.25 and 4.35 of the Commodity Regulations), together with any reports or letters relating to such performance data received from accountants and in the possession of the Trading Advisor.  The Manager is responsible for providing the performance information for the Fund.

 

(e)           Access to Books and Records.  Upon reasonable notice to the Trading Advisor, the Manager and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) shall have the right to have access to the Trading Advisor’s offices during normal business hours in order to inspect and copy such books and records as may enable the Manager or Merrill Lynch to verify the accuracy and completeness of the information provided by the Trading Advisor pursuant to this Agreement or compliance with the terms hereof, in each case, subject to such restrictions as the Trading Advisor may reasonably deem necessary or advisable so as to preserve the confidentiality of proprietary information with respect to the Trading Advisor’s clients and investors other than those who access the Trading Advisor through the Fund.  The Manager’s and/or Merrill Lynch’s rights under this Section 1(e) shall not include any right to access, inspect or copy any proprietary information related to the Trading Advisor’s trading strategies and the implementation thereof, including software, algorithms, process manuals or instructions or other intellectual property, other than performance information as provided herein.

 

(f)           General Assistance.

 

(i)           The Trading Advisor acknowledges that Merrill Lynch will be expending substantial resources in preparing the Fund for marketing as well as in marketing the Interests.  The Trading Advisor agrees to cooperate with Merrill Lynch in doing so to the extent reasonably practicable.

 

(ii)           In consideration of Merrill Lynch’s reliance on the Trading Advisor’s availability and ability to be the trading advisor to the Fund, the Trading Advisor agrees promptly to notify the Manager in the event that the Trading Advisor has any reason to believe that the Trading Advisor may not be able or willing to do so to the full extent set forth herein.

 

(iii)           The Trading Advisor agrees, subject to Section 8, not to accept other client capital or accounts if doing so could reasonably be expected to materially impair the Trading Advisor’s ability to trade the Fund as contemplated 

 

  

3

  

 

by the Memorandum, assuming that the Fund has a minimum capitalization of $1 billion; provided, however, that the provisions of this Section 1(f)(iii) shall not apply to, and shall no manner restrict, the Trading Advisor’s management of any accounts it currently manages.

 

(iv)           The Trading Advisor acknowledges that the Manager is registered as an investment adviser with the SEC and will promptly provide information as reasonably requested by the Manager in connection with the Manager’s compliance with the Investment Advisers Act of 1940, as amended (the “Advisers Act”), in connection with the Fund.

 

(g)         Additional Offerings.  In the Manager’s discretion, ML Systematic Momentum FuturesAccess LLC may be allowed to invest in the Fund pursuant to the terms of this Agreement without further amendment of this Agreement.

 

2.           Duties of the Trading Advisor.

 

(a)         Trading for the Fund.  The Trading Advisor shall act solely as a trading advisor for the Fund.  The Trading Advisor, the Manager and the Fund agree that in trading the Fund, the Trading Advisor shall implement the U.S. AHL Diversified Program, subject to any differences resulting from restrictions placed on the Fund’s trading portfolio due to the Manager’s disapproving or delaying its approval of an instrument pursuant to the process referenced in Section 2(b) below (the “Trading Program”), as provided by the Trading Advisor for incorporation into the Memorandum and trading the instruments set forth in the Approved Instruments List (as defined below).  The Trading Advisor shall have sole and exclusive authority and responsibility for directing the Fund’s trading, subject to the Manager’s fiduciary obligation to intervene to overrule or unwind trades if the Manager deems that doing so is necessary or reasonably advisable for the protection of the Fund.  The Fund or the Manager may also override the trading instructions of the Trading Advisor to the extent necessary:  (i) to fund any distributions or redemptions of Interests to be made by the Fund; (ii) to pay the Fund’s expenses; and/or (iii) to comply with speculative position limits imposed by the CFTC or a particular market on which instruments traded by the Trading Advisor for the Fund are listed or traded; provided that the Fund and the Manager shall permit the Trading Advisor three days in which to liquidate positions for the purposes set forth in clauses (i)-(iii) prior to exercising its override authority.  The Manager agrees that any exercise of its override authority under this Section 2(a) will be effected solely by the Manager or a Manager affiliate (or, at the Manager’s request, the Trading Advisor).  The Trading Advisor will have no liability for the results of any of the Manager’s interventions under Section 2(a)(i)-(ii) above effected by the Manager or Manager affiliate nor under 2(a)(iii) if the Manager’s intervention is proven to be an error and the Trading Advisor was in fact in compliance with speculative position limits imposed by the CFTC or a particular market on which instruments traded by the Trading Advisor for the Fund are listed or traded.

 

            The Trading Advisor shall give the Fund at least 30 days’ prior written notice of any proposed material change in the Trading Program or the manner in which trading decisions are to be made or implemented and shall not make any such proposed material change affecting the Fund without the Manager’s consent.  The addition and/or deletion of commodity interests

 

  

4

  

 

from the Fund’s portfolio managed by the Trading Advisor shall not be deemed a change in the Trading Advisor’s trading approach and prior written notice to the Fund or the Manager shall not be required therefor, except as set forth in Section 2(b) below.

(b)          List of Commodity Interests Traded by the Trading Advisor.

 

(i)           The Trading Advisor shall agree in writing with the Manager or the Fund to the list of commodity interests that the Trading Advisor currently intends to trade on the Fund’s behalf or may in the future trade on the Fund’s behalf other than regulated futures contracts and options on regulated futures contracts traded on a qualified board of trade or exchange (the “Approved Instruments List”).  The addition of commodity interests (other than spot and forward contracts on foreign currencies) to the Approved Instruments List shall require the prior written consent of the Fund or the Manager, which the Manager and Fund shall use reasonable efforts to provide within seven business days following the Trading Advisor’s having provided the Manager and the Fund with prior written notice of its intention to trade additional commodity interests, such consent constituting an amendment to the Approved Instruments List.  The addition of spot and forward contracts on foreign currencies to the Approved Instruments List shall require prior written notice to, but not consent of, the Fund or the Manager, such notice constituting an amendment to the Approved Instruments List.

 

(ii)           The Trading Advisor acknowledges and agrees that U.S. investors are prohibited under CFTC regulations from trading in certain instruments — for example, certain “contracts for differences,” and certain non-U.S. stock index futures and related options.  The Trading Advisor agrees not to trade any such instruments for the Fund.

 

(c)           Capacity; Speculative Position Limits.

 

(i)           To the extent that the Trading Advisor’s trading is subject to speculative position limits or other comparable capacity limitations, the Trading Advisor agrees that it will reserve for the Fund sufficient trading capacity that the Fund’s trading would be unrestricted by such limits were the Fund’s capital to total $1 billion, subject to the restrictions otherwise described in this Section 2(c)(i).  If the Fund’s Net Asset Value is less than $700 million as of the third anniversary of the effective date of this Agreement, the Trading Advisor shall reserve, for an additional two-year period, an amount in trading capacity equal to 120% of the Fund’s Net Asset Value as of such third anniversary. If the Fund’s Net Asset Value is equal to or greater than $700 million as of the third anniversary of the effective date of this Agreement, the Trading Advisor shall reserve a total of $1 billion in trading capacity for the Fund for an additional two-year period.  The Trading Advisor also agrees to consult with the Manager in the event that, notwithstanding the undertaking in the preceding sentence, the Manager believes that speculative position limits or comparable capacity restrictions may affect the Trading Advisor’s strategy on behalf of the Fund.

 

  

5

  

 

(ii)           If the Trading Advisor (either alone or aggregated with the positions of any other person, if such aggregation shall be required by the CEA, the CFTC or any other regulatory authority having jurisdiction) shall exceed applicable limits in any commodity interest traded for the Fund, the Trading Advisor shall immediately take such action as the Trading Advisor may deem fair and equitable to comply with such limits, and shall immediately deliver to the Fund a written explanation of the action taken to comply with such limits.  If such limits are exceeded by the Fund, the Manager may require the Trading Advisor to liquidate positions as required.

 

(d)           No Authority to Invest Assets Held in Securities and Cash.  The Fund and the Manager, and not the Trading Advisor, shall have the sole and exclusive authority and responsibility with regard to the investment, maintenance and management of the Fund’s assets other than in respect of the Trading Advisor’s trading of the Fund’s assets in commodity interests.

 

(e)           Trading Authorization.  Prior to the Fund’s commencing operations, the Fund shall deliver to the Trading Advisor a trading authorization in the form of Appendix A hereto appointing the Trading Advisor as an agent of the Fund and attorney-in-fact for such purpose.

 

(f)           Delivery of Reports.  Should the Trading Advisor, during the term of this Agreement, deliver to investors in the U.S. AHL Diversified Program client alerts, monthly reports, notices or special reports which contain material information relating to the Trading Program, the Trading Advisor shall promptly deliver such documents or reports to the Manager; provided, however, that the Trading Advisor shall not be required to deliver to the Manager reports customized for a specific investor and that, for the avoidance of doubt, the use of all such information shall be subject to the Trading Advisor’s prior approval as set forth in Section 1(a).

 

(g)           Trade Reconciliations.  The Trading Advisor acknowledges its obligation to review its commodity interest positions on a daily basis and to notify the Fund and the Manager promptly of any errors committed by the Trading Advisor or any trade which the Trading Advisor believes was not executed in accordance with its instructions and which cannot be promptly resolved.

 

(h)           Trade Information.  The Trading Advisor shall use reasonable efforts to provide trade information to the Fund’s administrator by electronic file by 4:30 p.m. Eastern Time on the date of any trade made on behalf of the Fund.  Such reports may be provided directly by the Trading Advisor or by The Bank of New York Mellon, the Trading Advisor’s primary administrator.

 

(i)           Letter Agreement.  As of the date hereof, the Manager, Merrill Lynch and the Trading Advisor, inter alia, are entering into a Letter Agreement (the “Letter Agreement”) setting forth the legally binding agreements with respect to certain matters relating to the organization and marketing of the Fund.  This Agreement, which deals primarily with the Trading Advisor’s management of the Fund’s trading, is to be read and interpreted in 

 

  

6

  

 

conjunction with the Letter Agreement, and vice versa.  In the event of any conflict between this Agreement and the Letter Agreement, this Agreement shall control.

 

(j)           No Guarantee of Profits.  The Fund and the Manager both specifically acknowledge that in agreeing to manage the Fund, the Trading Advisor is in no respects making any guarantee of profits or of protections against loss, but it is undertaking to use reasonable efforts to trade profitably on behalf of the Fund.

 

(k)           Investment Activities; Trade or Business.  The Trading Advisor agrees to use reasonable efforts to conduct the investment activities of the Fund in a manner such that those activities will not cause the Fund to be treated as engaged in a trade or business for purposes of Subchapter N of the Internal Revenue Code of 1986, as amended.

 

3.           Trading Advisor Independent.  For all purposes of this Agreement, the Trading Advisor shall be deemed to be an independent contractor and shall have no authority to act for or represent the Fund in any way and shall not otherwise be deemed to be an agent of the Fund.  Nothing contained herein shall create or constitute the Trading Advisor and any other trading advisor for the Fund, the Fund or the Manager as a member of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, nor shall 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.  The parties acknowledge that the Trading Advisor has not been an organizer or promoter of the Fund.

 

4.           Commodity Broker; Floor Brokers.

 

(a)           (i) Clearing of All Trades.  The Trading Advisor shall clear orders for all commodity interest transactions for the Fund through such commodity broker or brokers as the Fund shall designate from time to time in its sole discretion (the Fund currently so designating Merrill Lynch).  The Trading Advisor shall not trade on a “give up” basis through floor brokers, give-up brokers, prime brokers, dealers or other executing entities or facilities (collectively, “executing brokers”) unless the Manager has entered into an industry standard give-up agreement with such brokers.  The Fund will not hold the Trading Advisor liable for any error or breach of contract by any such executing broker, barring negligence, misconduct or bad faith on the part of the Trading Advisor.  Irrespective of whether floor executing brokers unaffiliated with Merrill Lynch receive the Manager’s consent to execute trades on behalf of the Fund, all such trades will be “given-up” to be carried by Merrill Lynch.  The Trading Advisor shall receive electronic copies of all daily and monthly brokerage statements for the Fund directly from Merrill Lynch. The Fund agrees to assume all liabilities associated with orders entered into using an automated routing system and agrees, subject to the standard of liability set forth in Section 12 of this Agreement, that the Trading Advisor shall have no liability for such transactions.

 

(ii)           The Fund will be subject to round turn commission rates as determined from time to time by Merrill Lynch and consistent with disclosures made to investors.

 

  

7

  

 

(b)           Forward Trading.

 

(i)           If necessary for the Trading Advisor to trade pursuant to the Trading Program, the Fund shall provide adequate dealing lines of credit for the Trading Advisor to place orders for spot and forward currency contracts on behalf of the Fund.

 

(ii)           Any “F/X prime brokerage” arrangements which the Trading Advisor may wish to establish for the Fund shall be subject to the approval of the Manager which approval shall not be unreasonably withheld.  The parties agree that all over-the-counter foreign exchange transactions entered into pursuant to this Agreement are being entered into by the Trading Advisor as the Fund’s agent for the account, benefit and risk of the Fund, notwithstanding that such over-the counter-foreign exchange transactions are first being entered into by the Trading Advisor, being treated as principal by third-party counterparties (i.e., counterparties that are not affiliated with Merrill Lynch). The Fund agrees to assume all liabilities associated with the over-the-counter foreign exchange transactions and the Fund and the Manager agree, subject to the standard of liability set forth in Section 12 of this Agreement, that the Trading Advisor shall have no liability for such over-the-counter foreign exchange transactions.

 

(c)           The Trading Advisor acknowledges that the Fund shall be subject to the brokerage commissions and administrative fees and costs specified in the Memorandum.

 

5.           Management Fee.  As of the last business day of each calendar month, the Fund shall pay the Trading Advisor a management fee equal to 1/12 of 2.00% (a 2.00% annual rate) of the aggregate gross asset value (for the avoidance of doubt, prior to reduction for any accrued Incentive Fees or accrued Sponsor’s Fees or for the Management Fee being calculated) of the Fund (the “Management Fee”).  Such Management Fee shall be pro rated in the case of partial calendar months, but shall not be subject to rebate once paid.

 

6.           Incentive Fee.

 

(a)           The Fund will pay to the Trading Advisor, as of each December 31 (“Incentive Fee Calculation Date”), an incentive fee equal to 20% of the New Trading Profit allocated to the Class D, Class DT and Class DS Interests of the Fund and 25% of the New Trading Profit allocated to the Class A, C and I Interests of the Fund as of such Incentive Fee Calculation Date.  For the avoidance of doubt, New Trading Profit is calculated for the entire Fund and then allocated among the Classes of Interests pro rata in proportion to their respective net asset values (prior to the reduction for any Incentive Fees, Management Fees or Sponsor’s Fees being calculated as of such Incentive Fee Calculation Date).

 

(b)           “New Trading Profit” equals any increase in the Net Asset Value of the Fund (as defined in the Memorandum, subject to Section 6(e)) as of the current Incentive Fee Calculation Date over the High Water Mark attributable to the Fund.

 

  

8

  

 

(c)           (i)           The High Water Mark of the Fund shall be equal to the highest Net Asset Value of the Fund after reduction for the Incentive Fee then paid, as of any preceding Incentive Fee Calculation Date.  The High Water Mark shall be increased dollar-for-dollar by new subscriptions and decreased proportionately when capital withdrawals from the Fund’s account (“Capital Withdrawals”) are made by the Fund (other than to pay expenses).  The proportionate High Water Mark reduction made as a result of Capital Withdrawals shall be calculated by multiplying the High Water Mark in effect immediately prior to such Capital Withdrawal by the fraction the numerator of which is the Net Asset Value of the Fund immediately following such Capital Withdrawal and the denominator of which is the Net Asset Value of the Fund immediately before such Capital Withdrawal, in each case prior to reduction for any accrued Incentive Fee.

 

(ii)           If an Incentive Fee is paid as of an Incentive Fee Calculation Date, the High Water Mark is reset to the Net Asset Value of the Fund immediately following such payment and following the payment of the Sponsor’s Fees and Management Fees.

 

(iii)           For the avoidance of doubt, the High Water Mark shall be determined on the basis of the Fund not on the basis of any individual investors or group of investors.

 

(d)           When there is an accrued Incentive Fee at the time any Capital Withdrawal is made, the Incentive Fee attributable to such Capital Withdrawal will be paid.  Such Incentive Fee shall be determined by multiplying the Incentive Fee that would have been paid had the date of the Capital Withdrawal been an Incentive Fee Calculation Date by the fraction the numerator of which is the amount of the Capital Withdrawal and the denominator of which is the Net Asset Value of the Fund immediately prior to the Capital Withdrawal, in each case prior to reduction for the accrued Incentive Fee.  Such Incentive Fee will be paid from and reduce the amount of the Capital Withdrawal.

 

(e)           Net Asset Value for purposes of calculating the Incentive Fee shall not include any interest income earned by the Fund and shall not be reduced by the Sponsor’s Fees (as defined in the Memorandum), although such interest income shall increase, and such Sponsor’s Fees shall decrease, Net Asset Value for purposes of determining the value of the Interests.  For the avoidance of doubt, no Incentive Fee shall be payable on any interest income earned by the Fund.

 

(f)           Termination of this Agreement shall be treated as an Incentive Fee Calculation Date.

 

7.           Term and Termination.

 

(a)           Term and Renewal.  This Agreement shall continue in effect until the calendar year end following the five-year anniversary of the effective date of this Agreement. Thereafter, this Agreement shall be automatically renewed for successive one-year periods, on the same terms, unless terminated by either the Trading Advisor or the Fund upon notice to the other party no later than 90 days before the expiration of the then-current term.  For the avoidance of doubt, the Trading Advisor recognizes that the resources which the Manager has 

 

  

9

  

 

and will commit to the sponsorship and marketing of the Fund are only economically justifiable for Merrill Lynch if Merrill Lynch can rely on a long-term commitment from the Trading Advisor to manage the Fund, and the Trading Advisor hereby commits to do so (subject to the terms and conditions set forth herein.)

 

(b)           Termination.  Notwithstanding Section 7(a) hereof:

 

(i)           In its discretion, the Manager may terminate this Agreement at any time.

 

(ii)           If after 90 days of the effective date of this Agreement the Fund does not have a capitalization of at least $50 million, the Trading Advisor may terminate this Agreement upon 30 days’ prior written notice at any time.  If after eighteen months of the effective date of this Agreement the Fund does not have a capitalization of at least $100 million, the Trading Advisor may terminate this Agreement upon 30 days’ prior written notice at any time.

 

(iii)           The Trading Advisor may terminate this Agreement upon 30 days’ prior written notice if the Fund does not have a capitalization of at least $700 million as of the third anniversary of the effective date of this Agreement, provided that such termination must be effective no later than three months following the third anniversary of the effective date of this Agreement.

 

(iv)           The Trading Advisor may terminate this Agreement upon 30 days’ prior written notice, if, in the opinion of a reputable law firm reasonably acceptable to the Manager, there occurs a change in law or regulation of general application that would result in material legal, regulatory, tax or financial harm to the global AHL business of which the Trading Advisor is part due to the Trading Advisor’s continued engagement by the Fund.

 

(v)           The Fund and/or the Manager, on the one hand, or the Trading Advisor, on the other, may terminate this Agreement as a result of a material breach hereof by the other party, after due notice and an opportunity to cure.

 

Upon termination of this Agreement, the Trading Advisor shall continue to trade the Fund’s account, for liquidation only, and shall close all open commodity interest positions in an orderly manner as expeditiously as is commercially practicable; provided, however, that if the Trading Advisor is unable or unwilling to liquidate the Fund’s Account, the Manager and the Trading Advisor shall negotiate in good faith to agree upon a mutually acceptable liquidation agent. If the Trading Advisor liquidates the Fund’s account, in whole or in part, the parties agree that the terms of the liquidation of the Fund shall be in accordance with this Agreement.  In the event of the termination of this Agreement, the Manager shall promptly dissolve the Fund or change the Fund’s name so that “Man” and “AHL” shall not appear in the name of the Fund or in any Fund documentation.

 

  

10

  

 

8.           Right to Advise Others; Uniformity of Acts and Practices.

 

(a)           During the term of this Agreement, the Trading Advisor Parties shall, subject to the capacity undertaking set forth herein and the exclusivity undertaking of the Letter Agreement, be free to advise other investors as to the purchase and sale of commodity interests, to manage and trade other investors’ commodity interests accounts and to trade for and on behalf of their own proprietary commodity interests accounts.  However, under no circumstances shall any Trading Advisor Party favor any commodity interests account directed by any of them (regardless of the date on which they began or shall begin to direct such account) over the Fund’s account, giving due consideration to the Trading Program.

 

(b)           At the request of the Fund, the Trading Advisor shall promptly deliver to the Fund a written explanation which, accurately explains the differences, if any, in the performance between the Fund’s account and such other commodity interest accounts traded utilizing the Trading Program (subject to the need to preserve the confidentiality of proprietary information concerning the Trading Advisor’s trading systems, methods, models, strategies and formulas and the identity of the Trading Advisor’s clients).

 

9.           Additional Undertakings by the Trading Advisor.  No Trading Advisor Party or its respective successors or assigns shall:  (i) knowingly use or distribute for any purpose the names and/or any other information about any of the investors in the Fund; (ii) knowingly solicit any investor in the Fund for investment in the Trading Advisors other investment products in the United States having a similar strategy to the Trading Program (unless such investor is already a client of the Trading Advisor or its affiliates); (iii) knowingly accept as a client, other than through Merrill Lynch, any person who has been an investor in any FuturesAccess Fund at any time during the six calendar months prior to such acceptance; or (iv) use any of the information included in the Merrill Lynch channel, or any other information that the Trading Advisor receives from the Manager, to market the Trading Advisor’s products.

 

10.           Representations and Warranties.

 

(a)           The Trading Advisor hereby represents and warrants to the other parties as follows:

 

(i)           The Trading Advisor is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization 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 affect the Trading Advisor’s ability to perform its obligations under this Agreement and it has the requisite power and authority to own property, perform its obligations and conduct its business in the manner described in the Trading Advisor Extract, or other materials relating to the Trading Advisor Parties approved by the Trading Advisor and provided to the Fund or Manager.

 

(ii)          The Trading Advisor has the corporate, partnership or limited liability company (as the case may be) power and authority under applicable law to perform its obligations hereunder.

 

  

11

  

(iii)         This Agreement has been duly and validly authorized, executed and delivered on behalf of the Trading Advisor and constitutes a legal, valid, binding agreement of the Trading Advisor enforceable in accordance with its terms.

 

(iv)         The Trading Advisor is, and will continue to be, operated in compliance in all material respects with all applicable laws, rules and regulations, and has effected all filings and registrations with federal and state governmental and regulatory agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder (including, without limitation, registration of the Trading Advisor as a commodity trading advisor under the CEA, and membership of the Trading Advisor as a commodity trading advisor in the NFA), and the performance of such obligation will not violate or result in a breach of any provision of the Trading Advisor’s certificate of incorporation, by-laws or any agreement, instrument, order, law or regulation binding on the Trading Advisor.  The principals of the Trading Advisor are duly listed as such on its commodity trading advisor Form 7-R registration.

 

(v)          Management by the Trading Advisor of an account for the Fund in accordance with the terms hereof will not require any registration of the Trading Advisor under, or cause the Trading Advisor to violate any of the provisions of the Advisers Act (assuming that the Fund is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended).

 

(vi)         The Trading Advisor’s implementation of its Trading Program will not knowingly infringe any other person’s copyrights, trademark or other property rights.

 

(vii)        The execution and delivery of this Agreement, the incurrence of the obligations herein set forth and the consummation of the transactions contemplated herein will not constitute a breach of, or default under, any instrument by which the Trading Advisor is bound or any order, rule or regulation applicable to the Trading Advisor of any court or any governmental body or administrative agency having jurisdiction over the Trading Advisor.

 

(viii)       Other than as may have been disclosed in writing to the Manager by the Trading Advisor, 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 is a party, or to which any of the assets of the Trading Advisor is subject, which might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business or prospects of the Trading.  The Trading Advisor has not received any notice of an investigation or warning letter from the NFA or the CFTC regarding non-compliance by the Trading Advisor with the CEA or the regulations thereunder.

 

  

12

  

(b)           The Manager hereby represents and warrants to the other parties as follows:

 

(i)           The Manager is duly organized and validly existing and in good standing under the laws of its jurisdiction of formation and in good standing under the laws of 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 Manager’s ability to perform its obligations hereunder.

 

(ii)          The Manager has the corporate power and authority under applicable law to perform its obligations hereunder.

 

(iii)         This Agreement has been duly and validly authorized, executed and delivered by the Manager and constitutes a legal, valid and binding agreement of the Manager enforceable in accordance with its terms.

 

(iv)         The execution and delivery of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein will not constitute a breach of, or default under, any instrument by which the Manager is bound or any order, rule or regulation applicable to the Manager of any court or any governmental body or administrative agency having jurisdiction over the Manager.

 

(v)          There is not pending, or, to the best of the Manager’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Manager is a party, or to which any of the assets of the Manager is subject, which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Manager or is required to be disclosed pursuant to the Commodity Regulations.  The Manager has not received any notice of an investigation or warning letter from the NFA or the CFTC regarding non-compliance by the Manager with the CEA or the regulations thereunder.

 

(vi)         The Manager has all federal and state governmental, regulatory and commodity exchange approvals and licenses, and has effected all filings and registrations with federal and state governmental agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder (including, without limitation, registration as a commodity pool operator under the CEA and membership in the NFA as a commodity pool operator), and the performance of such obligations will not contravene or result in a breach of any provision of its certificate of incorporation, by-laws or any agreement, order, law or regulation binding upon it.  The principals of the Manager are duly registered as such on the Manager’s commodity pool operator Form 7-R registration.

 

  

13

  

(vii)        The Manager acknowledges receipt, on behalf of both itself and the Fund, of all disclosure documents required to be delivered by the Trading Advisor Parties pursuant to applicable Commodity Regulations or the NFA Rules.

 

(c)           The Fund represents and warrants as of the date of its formation to the other parties as follows:

 

(i)           The Fund is duly organized and validly existing and in good standing under the laws of the jurisdiction of its formation and 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 Fund’s ability to perform its obligations hereunder.

 

(ii)           The Fund has the limited liability company power and authority under applicable law to perform its obligations hereunder.

 

(iii)          This Agreement has been duly and validly authorized, executed and delivered by the Fund and constitutes a legal, valid and binding agreement of the Fund enforceable in accordance with its terms.

 

(iv)         The execution and delivery of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein will not constitute a breach of, or default under, any instrument by which the Fund is bound or any order, rule or regulation applicable to the Fund of any court or any governmental body or administrative agency having jurisdiction over the Fund.

 

(v)          There is not pending, or, to the best of the Fund’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Fund is a party, or to which any of the assets of the Fund is subject, which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Fund or is required to be disclosed pursuant to applicable CFTC regulations.  The Fund has not received any notice of an investigation or warning letter from the NFA or the CFTC regarding non-compliance by the Fund with the CEA or the regulations thereunder.

 

(vi)         The Fund has all federal and state governmental, regulatory and commodity exchange approvals and licenses, and has effected all filings and registrations with federal and state governmental agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder and the performance of such obligations will not contravene or result in a breach of any provision of its certificate of formation, organization agreement or any agreement, order, law or regulation binding upon it.

 

  

14

  

(d)           The foregoing representations and warranties shall be continuing during the entire term of this Agreement and, if at any time, any event shall occur which would make any of the foregoing representations and warranties of any party no longer true and accurate, such party shall promptly notify the other parties.

 

General

 

11.           Entire Agreement.  This Agreement and the Letter Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as between the parties unless it shall be in writing and signed by the party against whom enforcement is sought.

 

12.           Exculpation; Indemnification.  No Trading Advisor Party shall be liable to the Manager, the Fund or their respective officers, directors, employees, representatives or controlling persons or any of their successors or assigns, except by reason of acts or omissions constituting a material breach of this Agreement or due to their negligence or willful misconduct.  Notwithstanding any provision of this Agreement, subject to applicable law, the duties and obligations of the Trading Advisor hereunder shall be due solely to the Fund and neither the Trading Advisor nor any of its Affiliates shall have any responsibility or liability whatsoever to any investor in the Fund or any Fund of Funds in connection with this Agreement and nothing in this Agreement, none of the services to be provided pursuant to this Agreement, nor any other matter, shall oblige the Trading Advisor to accept any responsibility or liability to the investors in the Fund or any Fund of Funds.

 

The Fund and the Manager shall each severally indemnify, defend and hold harmless the Trading Advisor Parties from and against any and all losses, claims, damages, liabilities, costs and expenses (including any reasonable investigatory, legal and other expenses incurred in connection with, and any amounts paid in, any settlement; provided that, as applicable, the Fund or the Manager shall have approved such settlement, collectively, “Trading Advisor Losses”), resulting from a demand, claim, lawsuit, action or proceeding relating to any of the Fund’s or the Manager’s actions or capacities, respectively, relating to the business or activities of the Fund pursuant to this Agreement; provided that neither the Fund nor the Manager shall be liable for such indemnification with respect to any Trading Advisor Losses incurred or assessed against any Trading Advisor Party to the extent such Trading Advisor Losses arise out of or result from such Trading Advisor Party’s negligence, willful misconduct or a material breach of this Agreement or of any fiduciary obligation to the Fund or from conduct of such Trading Advisor Party that was not done in good faith or in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Fund.  The termination of any demand, claim, lawsuit, action or proceeding by settlement shall not, in itself, create a presumption that the conduct in question was not undertaken in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Fund.

 

The Trading Advisor shall indemnify, defend and hold harmless the Fund, the Manager, their respective affiliates and their respective directors, officers, employees, representatives and controlling persons (“Merrill Lynch Parties”) 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 

 

  

15

  

 

paid in, any settlement; provided that the Trading Advisor shall have approved such settlement, collectively, “Merrill Lynch Losses”), resulting from a demand, claim, lawsuit, action or proceeding relating to any of the actions or capacities of any Trading Advisor Party relating to the business or activities of the Fund pursuant to this Agreement; provided that the Trading Advisor shall not be liable for such indemnification with respect to any such Merrill Lynch Losses incurred or assessed against any Merrill Lynch Party to the extent such Merrill Lynch Losses arise out of or result from such Merrill Lynch Party’s negligence, willful misconduct or a material breach of this Agreement or of any fiduciary obligation to the Fund or from conduct of such Merrill Lynch Party that was not done in good faith or in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Fund.  The termination of any demand, claim, lawsuit, action or proceeding by settlement shall not, in itself, create a presumption that the conduct in question was not undertaken in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Fund.

 

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 party.

 

Any indemnification required by this Section 12, unless ordered or expressly permitted by a court, shall be made by the indemnifying party only upon a determination by independent legal counsel mutually agreeable to the parties hereto in a written opinion that the conduct which is the subject of the claim, demand, lawsuit, action or proceeding with respect to which indemnification is sought meets the applicable standard set forth in this Section 12.

 

In the event that a person entitled to indemnification under this Section 12 is made a party to an action, suit or proceeding alleging both matters for which indemnification may be due hereunder and matters for which indemnification may not be due hereunder, such person shall be indemnified only in respect of the former matters.

 

Promptly after receipt by any of the indemnified parties under this Agreement of notice of any demand, claim, lawsuit, action or proceeding, the indemnified party shall notify the indemnifying party in writing of the commencement thereof if a claim in respect thereof is to be made under this Agreement.  Except to the extent that the indemnifying party is not materially prejudiced thereby, the omission so to notify shall relieve the indemnifying party from any obligation or liability which it may have to any such indemnified party under this Section.  In the event that such demand, claim, lawsuit, action or proceeding is brought against a person indemnified under this Agreement, and the indemnified party is notified of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that the indemnifying party may wish, to assume the defense thereof, with counsel selected by the indemnifying party and approved by the indemnified person (provided that approval may not be unreasonably withheld), and after notice from the indemnifying party to such indemnified person of the indemnifying party’s election so as to assume the defense thereof, the indemnifying party shall not be liable to such person under this Section for any legal or other expenses subsequently incurred by such person in connection with the defense thereof, unless the indemnifying party approves the employment of separate counsel by such person (it being understood, however, that the indemnifying party shall not be liable for legal or other expenses of more than one separate firm of attorneys for all such persons indemnified hereunder, which firm shall be designated in writing by the Trading Advisor or the Manager, as the case may be).

 

  

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13.           Assignment.  This Agreement shall not be assigned by any of the parties hereto without the prior express written consent of the other parties hereto.

 

14.           Amendment.  This Agreement shall not be amended except by a writing signed by the parties hereto.

 

15.           Severability.  If any provision of this Agreement, or the application of any provision to any person or circumstance, shall be held to be inconsistent with any present or future law, ruling, rule or regulation of any court or governmental or regulatory authority having jurisdiction over the subject matter hereof, such provision shall be deemed to be rescinded or modified in accordance with such law, ruling, rule or regulation, and the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it shall be held inconsistent, shall not be affected thereby.

 

16.           Notices.  Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered by courier service, facsimile, e-mail, any form of electronic file transfer, mail, postage prepaid mail or other similar means and shall be effective upon actual receipt by the party to which such notice shall be directed, 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 Fund:

 

MAN AHL FUTURES ACCESS LLC

c/o Merrill Lynch Alternative Investments LLC

4 World Financial Center

250 Vesey Street, 10th Floor

New York, NY 10080

Attn:  Craig Deardorff

if to the Manager:

 

MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC

4 World Financial Center

250 Vesey Street, 10th Floor

New York, NY 10080

Attn:  Craig Deardorff

 

  

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if to the Trading Advisor:

 

                                MAN-AHL (USA) LTD.

                                Sugar Quay

Lower Thames Street

London EC3R 6DU, England

Attn: Legal Department

With a copy to:

MAN INVESTMENTS

One Rockefeller Plaza

16th Floor

New York, NY 10020

Attn: Legal Department

17.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law.

 

18.           Consent to Jurisdiction.  The parties hereto agree that any action or proceeding arising directly, indirectly or otherwise in connection with, out of, related to or from this Agreement, any breach hereof or any transaction covered hereby, shall be resolved, whether by arbitration or otherwise, within the County of New York, City of New York, and State of New York.  Accordingly, the parties consent and submit to the jurisdiction of the federal and state courts and any applicable arbitral body located within the County of  New York, City of New York, and State of New York.  The parties further agree that any such action or proceeding brought by  either party 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 federal or state courts, or if appropriate before any applicable arbitral body, located within the County of New York, City of New York and State of  New York.

 

19.           Remedies.  In any action or proceeding arising out of any of the provisions of this Agreement, the Trading Advisor, the Manager and the Fund agree that they shall not seek any prejudgment equitable or provisional relief.  Such parties also agree that their sole remedy in any such action or proceeding shall be to seek actual monetary damages for any breach of this  Agreement; provided, however, that the Fund agrees that the Trading Advisor and the Manager may seek declaratory judgment with respect to the indemnification provisions of this Agreement.

 

20.           Survival.  The provisions of this Agreement shall survive the termination hereof with respect to any matter arising while this Agreement shall be in effect.

 

21.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall, however, together constitute one and the same document.  Facsimile signature pages shall have the same binding force and effect as original copies.

 

  

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22.           No Waiver.

 

(a)           No failure or delay on the part of the Manager in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  Failure on the part of the Fund or the Manager to complain of any act of the other or to declare the other in default under this Agreement, irrespective of how long such failure continues, shall not constitute a waiver by the Fund or the Manager of its rights with respect to such default until the applicable statute-of-limitations period has run.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(b)           Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given.

 

23.           Rules of Interpretation.  In this Agreement, unless inconsistent with the context or the contrary intention appears, a reference to:

 

(a)           “May” shall be construed as permissive;

 

(b)           A “notice” means written notice unless otherwise stated;

 

(c)           “Shall” shall be construed as imperative;

 

(d)           The singular includes the plural and vice versa;

 

(e)           The masculine includes the feminine and neuter;

 

(f)           Writing includes typewriting, printing, lithography, photography and other modes of representing or reproducing words in a legible and non-transitory form;

 

(g)           Any reference to a law, agreement or a document shall be deemed also to refer to any amendment, supplement or replacement thereof;

 

(h)           Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless such reference specifies business days;

 

(i)           The term “and/or” is used herein to mean both “and” as well as “or.”  The use of “and/or” in certain contexts in no respects qualifies or modifies the use of the terms “and” or “or” in others.  “Or” shall not be interpreted to be exclusive, and “and” shall not be interpreted to require the conjunctive — in each case, unless the context otherwise requires;

 

(j)           The terms “include” and “including” are to be construed as non-exclusive (so that, by way of example and for the avoidance of doubt, “including” shall mean “including without limitation”);

 

  

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(k)           Whenever it is provided or contemplated herein that the Manager is to determine or decide any matter, the Manager (on its own behalf as well as on behalf of the Fund) shall do so in its sole and absolute discretion, unless otherwise expressly provided herein;

 

(l)           In addition to the authority granted to the Manager pursuant to this Agreement, the Manager may, but shall have no obligation to, take any action that the Manager deems necessary or advisable to ensure that the Fund is not in violation of law or in breach of any contractual provisions;

 

(m)           The table of contents to and the headings in this Agreement are for convenience of reference only and are to be ignored in construing this Agreement;

 

(n)           No provision of this Agreement shall be construed in favor of or against any person by reason of the extent to which any such person, its affiliates, or their respective employees or counsel participated in the drafting thereof; and

 

(o)           In the event of any inconsistency between the provisions of this Agreement and of the Fund’s constituent documents, the parties shall determine on a commercially reasonable basis which provisions shall control.

 

24.           Binding Effect; Benefit.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, all persons indemnified hereunder and their respective estates, permitted successors, transferees, custodians, executors, administrators, legal representatives, heirs and permitted assigns.

 

25.           Confidentiality.

 

(a)           The parties hereto each acknowledge that the business and assets of the Merrill Lynch Parties and of the Trading Advisor Parties are confidential and involve a wide range of proprietary information, including trade secrets and financial or commercial information.

 

(b)           All information with respect to the Fund’s activities (including investment and trading) and assets shall be presumed confidential and proprietary unless the Manager and the Trading Advisor agree otherwise in writing.  Each party covenants that it has and it shall at all times keep confidential and not, directly or indirectly (i) disclose, divulge, furnish or make accessible to anyone, or (ii) use in any manner that would be adverse to the interests of any other party, any confidential or proprietary information to which the former party has been or shall become privy relating to the business or assets of any of such other parties except with the prior written approval of such other party or except for information that is otherwise publicly available, other than information made publicly available by breach of this contract, or required to be disclosed by law, regulation or request by a regulatory authority (including a self-regulatory organization) with jurisdiction.  Each party may, however, share such information with such party’s service providers, accountants and attorneys (“Permitted Confidants”); provided, that the parties’ Permitted Confidants undertake in writing (if regulated professional ethical obligations do not apply) to hold such information strictly confidential to the same extent set forth herein, and not in any manner or respect to use any of such information for their personal gain.  For the avoidance of doubt, such Permitted Confidants shall include third parties 

 

  

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contracted by the Manager (“Risk Assessors”) which will receive the Fund’s trade information in order to provide risk management and portfolio analysis for the Manager or one of its affiliates.  However, in no case shall any Risk Assessor be provided information identifying the trade information with the Fund, i.e. the trade information shall be provided “blind.”

 

In furtherance of the foregoing, the Manager and the Fund acknowledge that the Trading Advisor’s Trading Program, trading strategies and trades constitute proprietary data and intellectual property belonging to the Trading Advisor and agree that any confidential information regarding any of the foregoing acquired by the Manager or the Fund or any of their affiliates is to be used solely to monitor the Trading Advisor’s performance on behalf of the Fund.  Neither the Fund, the Manager nor any of their affiliates will use such information, or any other information provided by the Trading Advisor, to attempt to reverse engineer the Trading Advisor’s Trading Program or to trade for themselves or their customers.  Nothing herein shall require the Trading Advisor to disclose any proprietary details of its Trading Program, trading strategies or approach.

 

26.           Advisers Act Compliance.  Any provisions of this Agreement which are construed to violate the Advisers Act shall be deemed null and void ab initio.  For the avoidance of doubt, no provision of this Agreement shall be deemed to constitute a waiver of any person’s rights or claims under any federal or state securities laws.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned on the day and year first written above.

 

MAN AHL FUTURESACCESSSM LLC

 

By:  Merrill Lynch Alternative Investments LLC,

           Manager

 

By:   /s/ Deann Morgan                                                  

Name: Deann Morgan

Title:   Director

 

MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC

 

By:  /s/ Deann Morgan                                                  

Name: Deann Morgan

Title:   Director

 

Man-AHL (USA) Ltd.

 

By:  /s/ Tim Wong                                                           

Name: Tim Wong

Title:   Director

 

  

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APPENDIX A

 

COMMODITY TRADING AUTHORITY

 

Man-AHL (USA) Ltd.

Sugar Quay

Lower Thames Street

London EC3R 6DU, England

Attn: Legal Department

Dear Advisor:

 

MAN AHL FUTURESACCESSSM LLC (the “Fund”) does hereby make, constitute and appoint you as its attorney-in-fact to buy and sell commodity futures and forward contracts (including foreign futures and options contracts) in accordance with the ML FuturesAccessSM Advisory Agreement among us and certain others.

 

 

 

	 	  

Very truly yours,

 

MAN AHL FUTURESACCESSSM LLC

By:  Merrill Lynch Alternative Investments LLC,

Manager

 

By:________________________________

 Name:

 Title:

 

 

  

Dated as of June 30, 2010

 

 

 

 

 

 

A-1

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