Document:

xncr_Ex10_29

		
			Exhibit 10.29
		

		
			 
		

		
			XENCOR, INC. EMPLOYMENT AGREEMENT
		

		
			 
		

		
			This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into effective as of December 16, 2015 (the “Effective Date”), by and between Paul A. Foster, M.D. (the “Executive”) and XENCOR, INC., a Delaware corporation (the “Company”).  This agreement supersedes prior employment agreements of August 1, 2012 and August 12, 2013 entered into by the Executive and the Company.
		

		
			 
		

		
			RECITALS
		

		
			 
		

		
			A.WHEREAS,  the Company desires to continue to retain Executive’s experience, skills, abilities, background and knowledge with respect to the Company and its business;
		

		
			 
		

		
			B.WHEREAS,  the Company and Executive desire to provide Executive with certain benefits as set forth herein; and
		

		
			 
		

		
			C.WHEREAS,  Executive desires to continue to be in the employ of the Company and is willing to accept such continued employment on the terms and conditions set forth in this Agreement.
		

		
			 
		

		
			AGREEMENT
		

		
			 
		

		
			NOW,  THEREFORE ,  in consideration of the foregoing Recitals and the mutual promises and covenants herein contained, and for other good and valuable consideration the receipt and sufficiency of which is acknowledged, it is agreed between the parties as follows:
		

		
			 
		

		
			1.TERM OF AGREEMENT.  This Agreement shall remain in effect from the Effective
		

		
			Date until the earlier of:
		

		
			 
		

		
			(a)The date when Executive’s employment with the Company terminates for any reason not described in Section 7(a); or
		

		
			 
		

		
			(b)The date when the Company or successor has met all of its obligations under this Agreement following a termination of Executive’s employment with the Company or successor to the Company.
		

		
			 
		

		
			2.EMPLOYMENT BY THE COMPANY.
		

		
			 
		

		
			(a)     Employment of Executive. Executive shall have the title of Senior Vice President and Chief Medical Officer of the Company and shall report to the Company’s President and Chief Executive Officer (the “CEO”). Executive shall serve in such other capacity or capacities as the CEO or the Board of Directors of the Company (the “Board”) may from time to time prescribe. Executive’s employment with the Company is subject to the terms and conditions of this Agreement. During Executive’s employment with the Company, Executive will devote his best efforts and substantially all his business time and attention to the business of
		

		
			 
		

		
			 
		

		
			
		

		
			

		 

		

			 

		

 

the Company (except for paid time off benefits and/or reasonable periods of illness or other incapacity permitted by the Company’s general employment policies and applicable law).
		

		
			 
		

		
			(b)      Executive's Duties.     Executive shall perform such duties as  are customarily associated with the position of Senior Vice President and Chief Medical Officer consistent with the Bylaws of the Company and as required by the CEO or the Board.  It is understood that Executive’s primary office shall be in San Diego, CA, provided that he agrees to spend such time in the Monrovia, CA office as the CEO reasonably believes necessary.
		

		
			 
		

		
			(c)     Employment Policies. The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
		

		
			 
		

		
			(d)     At-will Employment. The Company and Executive acknowledge that either party has the right to terminate Executive’s employment with the Company at any time for any reason whatsoever, with or without cause, subject to the provisions of Section 7 herein. This at-will employment relationship cannot be changed except in a writing signed by both Executive and the CEO.  Any rights of Executive to additional payments or other benefits from the Company upon any such termination of employment shall be governed by Section 7 of this Agreement.
		

		
			 
		

		
			3.COMPENSATION.
		

		
			 
		

		
			(a)     Salary. Executive shall receive for his services to be rendered hereunder Four Hundred dollars ($400,000) annualized base salary (retroactive to January 1, 2015) less standard deductions and withholdings, payable in installments in accordance with the Company’s standard payroll practices, as may be adjusted from time to time by the Board.  Executive’s base salary shall be subject to periodic review and adjustment by the Company from time to time in accordance with this Agreement.
		

		
			 
		

		
			(b)     Standard Company Benefits. Executive shall be entitled to all rights and benefits for which he is eligible under the terms and conditions of the standard Company benefits and compensation practices that may be in effect from time to time and provided by the Company to its employees generally. Executive shall likewise be eligible to participate in any additional benefits programs that may be in effect from time to time and provided by the Company to its executive employees generally.
		

		
			 
		

		
			(c)     Performance Bonus.  Executive shall be eligible to earn an annual performance bonus, with the target amount of such bonus equal to 35% of Executive’s base salary, less standard deductions and withholdings (the “Performance Bonus”), as such Performance Bonus may be adjusted from time to time by the Board. Executive’s Performance Bonus will be based on corporate and individual performance as determined by the Company in its sole discretion. Executive must be employed by the Company on the date the Performance Bonus is paid in order to be eligible to earn any Performance Bonus. Any Performance Bonus
		

		
			
		

		
			

		 

		

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Executive earns will be paid out in cash or stock in accordance with the Company’s standard practice.
		

		
			 
		

		
			(d)     Expense Reimbursement. Executive shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Executive in performing Company services.  Executive agrees to furnish the Company reasonably adequate records and other documentary evidence of such expenses for which Executive seeks reimbursement.  Such expenses shall be accounted for under the policies and procedures established by the Company and consistent with California law.
		

		
			 
		

		
			(e)      Equity Awards.    The Company has previously granted to Executive certain option to purchase common stock of the Company.  Executive will be eligible to participate in and receive equity grants under the Company’s equity incentive plans from time to time in the discretion of the Board (or an authorized committee thereof) and in accordance with the terms and conditions of such plans.
		

		
			 
		

		
			(f)      Vacation; Benefits. Executive shall, in accordance with Company policy and the terms of any applicable plan documents, be eligible for paid time off and benefits under any executive benefit plan or arrangement, such as group health insurance coverage and other fringe benefits, which may be in effect from time to time and made available to the Company’s executives or key management employees.
		

		
			 
		

		
			4.PROPRIETARY INFORMATION OBLIGATIONS.
		

		
			 
		

		
			As a condition of employment, Executive agrees that the Proprietary Information and Inventions Agreement (the "PIIA") dated December 21 shall remain in full force and effect. Executive's obligations under the PIIA shall survive termination of this Agreement and shall remain in full force and effect regardless of whether Executive continues to be employed by the Company.
		

		
			 
		

		
			5.OUTSIDE ACTIVITIES.
		

		
			 
		

		
			(a)      Competing Entities. While employed by the Company, Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which was or should have been known by him to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, he may own, as a passive investor, securities of any publicly owned competitor corporation, so long as his direct holdings in any such corporation shall not in the aggregate constitute more than one percent of the voting stock of such corporation.
		

		
			 
		

		
			(b)      Other Activities. In no event shall executive undertake any business activities that would detract from his ability to devote substantially full-time effort as an employee of the company, consistent with his title and responsibilities. Executive may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the 
		

		
			 
		

		
			
		

		
			

		 

		

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performance of his duties hereunder. At the sole discretion of the Chief Executive Officer or the Board, Executive may serve on the board of directors of other companies not directly competing with the Company if written consent is obtained and Executive’s involvement does not interfere with Executive’s duties and obligations to the Company.
		

		
			 
		

		
			6.CERTAIN DEFINITIONS USED IN THIS AGREEMENT.
		

		
			 
		

		
			(a)     Annual Base Salary. For all purposes of this Agreement, “Annual Base Salary”  means Executive’s annual base salary in effect immediately prior to Executive’s termination, or the rate in effect prior to any material reduction in Executive’s base salary that would give Executive the right to resign for Good Reason, as defined below.
		

		
			 
		

		
			(b)      Cause. For all purposes under this Agreement, “Cause” shall mean Executive’s:
		

		
			 
		

		
			(i)     gross negligence or willful misconduct in the performance of Executive’s duties to the Company as an employee of the Company (other than a failure resulting from Executive’s complete or partial incapacity due to physical or mental illness or impairment);
		

		
			 
		

		
			(ii)      material and willful violation of any federal or state law or regulation applicable to the business of the Company;
		

		
			 
		

		
			(iii)      refusal or failure to act in accordance with any lawful specific direction or order of the Board;
		

		
			 
		

		
			(iv)     commission of any act of fraud with respect to the Company;
		

		
			 
		

		
			(v)     breach of any material provision of Executive’s PIIA, including without limitation, Executive’s theft or other misappropriation of the Company’s proprietary information or trade secrets; or
		

		
			 
		

		
			(vi)     conviction of, or entry of plea of nolo contendere to, a felony or a crime involving moral turpitude. Whether or not the actions or omissions of Executive constitute “Cause” within the meaning of this Section 6 shall be decided by the Board based upon a reasonable good faith investigation and determination.
		

		
			 
		

		
			(c)   Change in Control. For all purposes under this Agreement, “Change in Control” shall mean:
		

		
			 
		

		
			(i)     a sale of all or substantially all of the assets of the Company;
		

		
			 
		

		
			(ii)     a merger or consolidation in which the Company is not the surviving entity and in which the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of the entity surviving such transaction;
		

		
			 
		

		
			
		

		
			

		 

		

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(iii)     a reverse merger in which the Company is the surviving entity but the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of the Company; or
		

		
			 
		

		
			(iv)     an acquisition by any person, entity or group (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or subsidiary of the Company or other entity controlled by the Company) of the beneficial ownership of securities of the Company representing over 50% of the combined voting power entitled to vote in the election of directors.
		

		
			 
		

		
			Notwithstanding the foregoing, any transaction or series of related transactions, the primary purpose of which (i) is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction or (ii) is to raise capital for the Company in a bona fide equity financing shall not be a “Change in Control” for purposes of this Agreement.
		

		
			 
		

		
			(d)     Good Reason. For all purposes under this Agreement, “Good Reason” for Executive to terminate Executive’s employment hereunder shall mean the occurrence of any of the following events without Executive’s consent; provided however, that any resignation by Executive due to any of the following conditions shall only be deemed for Good Reason if: (i) Executive gives the Company written notice of the intent to terminate for Good Reason within 60 days following the first occurrence of the condition(s) that Executive believes constitutes Good Reason, which notice shall describe such condition(s); (ii) the Company fails to remedy, if remediable, such condition(s) within 30 days following receipt of the written notice (the “Cure Period”) of such condition(s) from Executive; and (iii) Executive actually resigns his employment within the first 15 days after expiration of the Cure Period:
		

		
			 
		

		
			(i)      a material reduction in Executive’s authority or job responsibilities as an employee of the Company or successor to the Company;
		

		
			 
		

		
			(ii)      a change in Executive’s title without his consent;
		

		
			 
		

		
			(iii)      a material reduction in Executive’s annual base salary other than pursuant to a Company-wide reduction of annual base salaries for employees of the Company generally; or
		

		
			 
		

		
			(iv)      the relocation of the Executive’s offices by a distance of 50 miles or more, which relocation requires an increase in Executive’s one-way driving distance by more than 25miles.
		

		
			 
		

		
			7.TERMINATION BENEFITS.
		

		
			 
		

		
			(a)     Benefits Upon Termination Without Cause or for Good Reason.  In the event Executive’s employment with the Company is terminated by the Company without Cause (and other than as a result of Executive’s death or disability) or Executive terminates his employment for Good Reason, in either case at any time, then subject to Executive’s delivery to 
		

		
			 
		

		
			
		

		
			

		 

		

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			the Company of a Release and Waiver in substantially the form attached hereto as Exhibit A (the “Release and Waiver”) within the applicable time period set forth therein, but in no event later than 45 days following termination of Executive’s employment, and permitting such Release and Waiver to become fully effective in accordance with its terms, the Company shall provide Executive with the following severance benefits hereunder:
		

		
			 
		

		
			(i)     Severance pay in the form of a single lump sum payment equal to the sum of (x) one hundred percent (100%) of Executive’s Annual Base Salary and (y) the Executive’s maximum eligible annual bonus prorated based on the ratio that the number of days from the beginning of the calendar year in which such termination occurs through the date of termination bears to 365. Such payment shall be calculated ignoring any decrease in Executive’s Annual Base Salary that forms the basis for Executive’s termination for Good Reason, if applicable, and shall be made on the first regular payroll date of the Company following the effective date of the Release and Waiver and in no event later than March 15 of the year immediately following the year in which Executive’s termination occurs, provided the Release and Waiver is in effect.
		

		
			 
		

		
			(ii)     Notwithstanding any contrary terms of any stock option grant, option agreement or other equity award agreement between the Company and Executive, Executive shall vest immediately with respect to such number of outstanding unvested stock options, shares of restricted stock and other equity awards covering the Company’s common stock granted to Executive by the Company that are subject to time-based vesting requirements and would have vested in accordance with the applicable vesting schedule as if Executive had been employed for an additional twelve (12) months as of the date of termination.
		

		
			 
		

		
			(iii)     If Executive is eligible for and timely elects continued group health plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA”) following Executive’s termination, the Company will pay the COBRA group health insurance premiums for Executive and Executive’s eligible dependents until the earliest of (A) the close of the twelve (12) month period following the termination of Executive’s employment (the “COBRA Payment Period”), (B) the expiration of Executive’s eligibility for the continuation coverage under COBRA, or (C) the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment.  References to COBRA premiums shall not include any amounts payable by Executive under an Internal Revenue Code Section 125 health care reimbursement plan. Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot pay the COBRA premiums without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then regardless of whether Executive elects continued health coverage under COBRA, in lieu of providing the COBRA premiums, the Company will instead pay to Executive, on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums for that month, subject to applicable tax withholdings (such amount, the “Special Severance Payment”), which payments shall continue until the earlier of expiration of
		

		
			 
		

		
			 
		

		
			
		

		
			

		 

		

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the COBRA Payment Period or the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment.
		

		
			 
		

		
			(b)     Benefits Upon Termination Without Cause or for Good Reason in connection with a Change in Control.     In the event Executive’s employment with the Company is terminated by the Company or successor to the Company without Cause (and other than as a result of Executive’s death or disability) or Executive terminates his employment for Good Reason, in each case during the period beginning one (1) month prior to the execution of a definitive written agreement that if consummated in accordance with its terms would result in a Change in Control and ending on the earlier of (1) the termination of such agreement or (2) twelve (12) months following the consummation of a Change in Control pursuant to such agreement (such period of time, the “ Change in Control Period ”), then subject to Executive’s delivery to the Company or successor to the Company of a Release and Waiver within the applicable time period set forth therein, but in no event later than forty-five (45) days following termination of Executive’s employment, and permitting such Release and Waiver to become fully effective in accordance with its terms, the Company or successor to the Company, if applicable, shall provide Executive with the following severance benefits hereunder:
		

		
			 
		

		
			(i)     Severance pay in the form of a single lump sum payment equal to the sum of (x) one hundred percent (100%) of Executive’s Annual Base Salary and (y) the Executive’s maximum eligible annual bonus prorated based on the ratio that the number of days from the beginning of the calendar year in which such termination occurs through the date of termination bears to 365. Such payment shall be calculated ignoring any decrease in Executive’s Annual Base Salary that forms the basis for Executive’s termination for Good Reason, if applicable, and shall be made on the first regular payroll date of the Company following the effective date of the Release and Waiver and in no event later than March 15 of the year immediately following the year in which Executive’s termination occurs, provided the Release and Waiver is in effect.
		

		
			 
		

		
			(ii)     Notwithstanding any contrary terms of any stock option grant, option agreement or other equity award agreement between the Company and Executive, all outstanding stock options and other equity awards covering the Company common stock held by Executive as of the date of termination that are subject to time-based vesting requirements shall accelerate in full.
		

		
			 
		

		
			(iii)     If Executive is eligible for and timely elects continued group health plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) following Executive’s termination, the Company will pay the COBRA group health insurance premiums for Executive and Executive’s eligible dependents until the earliest of (A) the close of the twelve (12) month period following the termination of Executive’s employment (the “COBRA Payment Period”), (B) the expiration of Executive’s eligibility for the continuation coverage under COBRA, or (C) the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment.  References to COBRA premiums shall not include any amounts payable by Executive under an Internal Revenue Code Section 125 health care reimbursement plan. Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot pay the COBRA premiums without potentially incurring financial costs or penalties under applicable law
		

		
			 
		

		
			 
		

		
			
		

		
			

		 

		

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			(including, without limitation, Section 2716 of the Public Health Service Act), then regardless of whether Executive elects continued health coverage under COBRA, in lieu of providing the COBRA premiums, the Company will instead pay to Executive, on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums for that month, subject to applicable tax withholdings (such amount, the “Special Severance Payment”), which payments shall continue until the earlier of expiration of the COBRA Payment Period or the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment.
		

		
			 
		

		
			(c)     Benefits Upon Other Types of Terminations.  Upon Executive’s termination of employment for Cause, due to Executive’s death or disability, or due to Executive’s resignation from employment other than for Good Reason, the Company shall pa y Executive (or Executive’s heirs, if applicable) Executive’s base salary and accrued and unused vacation benefits and/or paid time off and any other payments required to be made to or on behalf of Executive by law, as of the date of Executive’s termination of employment, less standard deductions and withholdings. Executive shall not be entitled to any other benefit or compensation and the Company shall have no further obligations to Executive (or Executive’s heirs, if applicable) under this Agreement.
		

		
			 
		

		
			(d)     Other Required Payments. Subject to Section 8, nothing contained in this Section 7 or otherwise under this Agreement shall limit Executive’s right to receive a payout of Executive’s accrued but unused vacation and/or paid time off and any other payments required to be made to or on behalf of Executive by law, as of the date of Executive’s termination of employment.
		

		
			 
		

		
			8.LIMITATION ON PAYMENTS.
		

		
			 
		

		
			(a)     If any payment or benefit Executive will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after -tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.
		

		
			
		

		
			

		 

		

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			(b)     Unless Executive and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company within 15 calendar days after the date on which Executive’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company.
		

		
			 
		

		
			(c)     If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 8(a) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 8(a) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 8(a), Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
		

		
			 
		

		
			9.SUCCESSORS.
		

		
			 
		

		
			(a)     Company’s Successors.    The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and form satisfactory to Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Subsection (a) or which becomes bound by this Agreement by operation of law.
		

		
			 
		

		
			(b)     Executive’s Successors.  This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.
		

		
			 
		

		
			10.     APPLICATION OF INTERNAL REVENUE CODE SECTION 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”): shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A -1(h))
		

		
			 
		

		
			
		

		
			

		 

		

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(the “Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A. Each installment of Severance Benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i) and it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that such exemptions are not available and Executive is, on Executive’s Separation From Service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s Separation From Service or (ii) the date of Executive’s death.
		

		
			 
		

		
			Executive shall receive Severance Benefits only if Executive executes and returns within the applicable time period set forth therein, the Release and Waiver, and permits such Release and Waiver to become effective in accordance with its terms, which shall in no event be longer than 60 days following Executive’s Separation From Service (such latest permitted date, the “Release Deadline”). If the Severance Benefits are not covered by one or more exemptions from the application of Section 409A, and the Release and Waiver could become effective in the calendar year following the calendar year in which Executive’s Separation From Service occurs, the Release and Waiver will not be deemed effective any earlier than the Release Deadline. Except to the minimum extent that payments are delayed because Executive is a “specified employee” or until the effectiveness of the Release and Waiver, all amounts will be paid as soon as practicable in accordance with the Company’s normal payroll practices. All amounts payable under the Agreement will be subject to standard payroll taxes and deductions.
		

		
			 
		

		
			The Severance Benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.
		

		
			 
		

		
			11.MISCELLANEOUS PROVISIONS.
		

		
			 
		

		
			(a)     Notice.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to Executive at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
		

		
			 
		

		
			(b)     Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by
		

		
			
		

		
			

		 

		

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either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.
		

		
			 
		

		
			(c)     Entire Agreement.  This Agreement (including the exhibits hereto) constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof, and supersede any and all prior agreements, representations or understandings (whether oral or written and whether express or implied) made or entered into by either party with respect to the subject matter hereof.
		

		
			 
		

		
			(d)      No Setoff; Withholding Taxes.  There shall be no right of setoff or counterclaim, with respect to any claim, debt or obligation against payments to Executive under this Agreement. All payments made under this Agreement shall be subject to reduction for payment of all federal, state and local employment taxes and any other taxes required to be withheld by law.
		

		
			 
		

		
			(e)      Choice  of  Law.    The  validity,  interpretation,  construction  and performance of this Agreement shall be governed by the laws of the State of California, without regard to principals of conflicts of law.
		

		
			 
		

		
			(f)      Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
		

		
			 
		

		
			(g)      No Assignment. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this Subsection (g) shall be void.
		

		
			 
		

		
			(h)     Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
		

		
			 
		

		
			(i)     At-Will Employment; No Employment Rights.   Executive acknowledges, affirms and agrees that Executive’s employment with the Company is “at will,” and subject to the provisions of this Agreement, may be terminated at any time and for any reason whatsoever by Executive or the Company, with or without Cause and with or without advance notice. This “at-will” employment relationship cannot be changed except in a writing signed by the Company’s CEO.
		

		
			 
		

		
			(j)      Dispute Resolution -- To ensure the rapid and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Executive’s employment with the Company, or the termination of Executive’s employment from the Company, shall be resolv ed, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted
		

		
			
		

		
			

		 

		

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before a single arbitrator by JAMS, Inc (“JAMS”) or its successor, under JAMS’ then applicable rules and procedures for employment disputes (which can be found at http://www.jamsadr.com/rules-clauses/, and which will be provided to Executive on request). The arbitration shall take place in the county (or comparable governmental unit) in which Executive was last employed by the Company, as determined by the arbitrator; provided that if the arbitrator determines there will be an undue hardship to Executive to have the arbitration in such location, the arbitrator will choose an alternative appropriate location. The Executive and the Company each acknowledge that by agreeing to this arbitration procedure, they waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Executive will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator, and not a court, shall also be authorized to determine whether the provisions of this section apply to a dispute, controversy, or claim sought to be resolved in accordance with these arbitration procedures. The Company shall pay all arbitration fees and costs in excess of the administrative fees that Executive would be required to incur if the dispute were filed or decided in a court of law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
		

		
			 
		

		
			IN  WITNESS WHEREOF,  each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the Effective Date.
		

		
			 
		

			
					
						

					
					
						 

					
					
						 

				
	
					
						 

					
					
						EXECUTIVE:

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						    /s/ Paul A. Foster, MD

				
	
					
						 

					
					
						Name: Paul A. Foster, MD

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						COMPANY:

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						XENCOR, INC.

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By 

					
					
						/s/ Bassil Dahiyat

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						Name 

					
					
						Bassil Dahiyat

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						Title 

					
					
						President and CEO

				

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			12

		

 

EXHIBIT A
		

		
			 
		

		
			RELEASE AND WAIVER OF CLAIMS
		

		
			 
		

		
			In consideration of the receipt of benefits set forth in the Employment Agreement dated , 201_ (the “Agreement”) to which this form is attached, I, ______________, hereby _____________ furnish XENCOR, INC.  and any and all affiliated, subsidiary, related, or successor corporations (collectively, the “Company”), with the following release and waiver (“Release and Waiver”). I understand that if I timely sign, date and return this Release and Waiver, and I do not revoke it, I will receive certain benefits pursuant to the terms and conditions of the Agreement. I understand that I am not entitled to such benefits unless I timely sign this Release and Waiver and allow it to become effective.
		

		
			 
		

		
			General Release and Waiver. In exchange for the consideration to be provided to me under the Agreement that I am not otherwise entitled to receive, I hereby generally and completely Release and Waiver, acquit and forever discharge the Company and its parent, subsidiary, and affiliated entities, and investors, along with its and their predecessors and successors and their respective directors, officers, employees, shareholders, partners, agents, attorneys, insurers, affiliates and assigns (collectively, the “Released Parties”), of and from any and all claims, liabilities and obligations, both known and unknown, that arise from or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date that I sign this Release and Waiver (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, other incentive compensation, vacation pay and the redemption thereof, expense reimbursements, fringe benefits, stock, stock options, or any other ownership or equity interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including but not limited to claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including but not limited to claims for discrimination, harassment, retaliation, attorneys’ fees, penalties, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the federal Family and Medical Leave Act (“FMLA”), the California Labor Code (as amended), and the California Fair Employment and Housing Act (as amended).
		

		
			 
		

		
			Excluded Claims. Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the Company’s bylaws, or applicable law; and (2) any rights which are not waivable as a matter of law.  In addition, nothing in this Release and Waiver prevents me from filing, cooperating with, or participating in any investigation or proceeding before the Equal Employment Opportunity Commission, the Department of Labor, the California Department of Fair Employment and Housing, or any other government agency, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge, investigation or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware
		

		
			
		

		
			

		 

		

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of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.
		

		
			 
		

		
			ADEA Waiver.  I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any rights or claims that arise after the date I sign this Release and Waiver; (b) I should consult with an attorney prior to signing this Release and Waiver; (c) I have twenty-one (21) days to consider this Release and Waiver (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Release and Waiver to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release and Waiver.
		

		
			 
		

		
			Section 1542 Waiver. In giving the general release herein, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code, which reads as follows:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to my release of claims, including but not limited to any unknown or unsuspected claims herein.
		

		
			 
		

		
			Other Agreements and Representations. I further agree: (a) not to disparage the Company, its officers, directors, employees, shareholders, and agents, in any manner likely to be harmful to its or their business, business reputations, or personal reputations; (b) not to voluntarily (except in response to legal compulsion) assist any third party in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the Company, its parent or subsidiary entities, investors, affiliates, officers, directors, employees or agents; (c) to cooperate fully with the Company, by voluntarily (without legal compulsion) providing accurate and complete information, in connection with the Company’s actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters, arising from events, acts, or failures to act that occurred during the period of my employment by the Company; and (d) I hereby acknowledge and reaffirm my continuing obligations under the terms of my Proprietary Information and Inventions Agreement. In addition, I hereby represent that I have been paid all wages earned owed and for all hours worked, I have received all the leave and leave benefits and protections for which I am eligible, pursuant to FMLA, the California Family Rights Act, or any applicable law or Company policy, and I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.
		

		
			 
		

		
			I acknowledge my continuing obligations under my employee Proprietary Information and Inventions Agreement with the Company (the “PIIA”) .
		

		
			
		

		
			

		 

		

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This Release and Waiver attached to the Agreement as Exhibit A, along with the PIIA, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein. This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.
		

		
			 
		

			
					
						

					
					
						 

					
					
						 

					
					
						 

				
	
					
						UNDERSTOOD AND AGREED:

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						NAME:

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						Date:

					
					
						 

					
					
						 

					
					
						 

				

		
			 
		

		 

		

			3AMENDED AND RESTATED ALTERNATIVE INVESTMENT

SELLING AGENT AGREEMENT

This Amended and Restated Alternative Investment Selling Agent Agreement (“Agreement”) is dated as of March 3, 2016, by and among each of the limited partnerships listed on Schedule 1 hereto (each, a “Partnership,” and together, the “Partnerships”), Ceres Managed Futures LLC, a Delaware limited liability company (the “General Partner”), and Morgan Stanley Smith Barney LLC, a Delaware limited liability company, currently doing business as Morgan Stanley Wealth Management (“MSSB” or “Placement Agent”).  Partnerships may be added to this Agreement upon the agreement of the General Partner and MSSB, pursuant to the form of joinder attached as Appendix B to this Agreement.  The listing of such partnership on Schedule 1 hereto shall be evidence of such agreement.  This Agreement supersedes all prior agreements between each Partnership, MSSB and the General Partner.

WHEREAS, the offering and sale of units of limited partnership or other interests in the Partnerships (“Interests” or “Units”) in accordance with the terms of each Partnership’s private placement offering memorandum and disclosure document, including any supplements thereto approved by the applicable Partnership (each, a “Memorandum”), each Partnership’s subscription/exchange agreements (the “Subscription Agreements”) and certain other investor materials or supplements approved for use or prepared by each Partnership, including without limitation the summary information contained in certain related marketing materials, all as amended from time to time (collectively, the “Offering Documents”), and each Partnership’s organizational documents (as amended or supplemented from time to time, “Organizational Documents”) (collectively, “Offering Materials”) is exempt from the registration requirements of the Securities Act of 1933, as amended (“Securities Act”), pursuant to Section 4(a)(2) and Rule 506 of Regulation D promulgated thereunder;

WHEREAS, the parties hereto previously entered into an Alternative Investment Selling Agent Agreement, dated as of November 12, 2013, as amended (the “Prior Agreement”) and now wish to amend and restate the Prior Agreement in its entirety;

WHEREAS, the Partnerships desire to retain MSSB as a selling agent and to permit it to serve as an investment advisor to its customers investing in one or more of the Partnerships;

WHEREAS, MSSB (in its capacity as an investment advisor, the “Investment Advisor”; provided, that other than with respect to Sections 1 and 3, references to “Placement Agent” in this Agreement shall be deemed to include the Investment Advisor) is an investment advisor providing investment advisory and discretionary investment management services to its customers and it desires to have the right but not the obligation to promote and market, and to introduce prospective investors to the Partnership(s) subject to the provisions below; and

 

WHEREAS, the Partnership desires to grant such a right to the Investment Advisor.

            NOW, THEREFORE, in consideration of the promises and the mutual agreements hereinafter contained and other good and valuable consideration the value of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.            Appointment of MSSB.

a.          MSSB is hereby appointed as a non-exclusive selling agent of the Partnerships during the term of this Agreement for the purpose of finding eligible investors for Interests through offerings that are exempt from registration under the Securities Act, pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder.

b.          In the case of any Partnership formed after the date of this agreement, Units initially shall be offered at $1,000 per Unit or as otherwise determined by the General Partner, and thereafter shall be offered on a continuous basis as of the first day of each month at the final Net Asset Value per Unit (as defined in each Partnership’s Limited Partnership Agreement) as of the last day of the immediately preceding month.  For all other Partnerships, Units are being offered on a continuous basis as of the first day of each month at the final Net Asset Value per Unit (as defined in each Partnership’s Limited Partnership Agreement) as of the last day of the immediately preceding month.  The General Partner in its sole discretion may terminate at any time the continuous offering period of one or more of the Partnerships and may at any time in its sole discretion, terminate, discontinue or resume the continuous offering of any class of Units in any of the Partnerships.

c.          Subject to the right of the General Partner to reject any subscription in whole or in part at any time prior to acceptance, the General Partner shall accept subscriptions for Units properly made and shall cause proper entries to be made in the books and records of the relevant Partnership.  No certificate evidencing Interests shall be issued to any limited partner, although limited partners shall receive confirmations of purchase from the General Partner in its customary form.  Payment for the Interests shall be made as described in the Offering Documents at such time on such date as may be agreed to by the General Partner.  Payment shall be made against issuance of the Interests in the name of the limited partners.

d.          Subject to the performance by the Partnership(s) and the General Partner of their respective obligations hereunder, Placement Agent hereby accepts such appointment and agrees on the terms and conditions set forth herein to find eligible investors for Interests during the term hereof and to use reasonable efforts to assist the Partnership(s) and the General Partner in communicating with investors that have been introduced to the Partnership(s) by the Placement Agent (each a “Placement Agent Client” and collectively “Placement Agent Clients”) with respect to consent solicitations and limited partner votes and other items requiring actions of the limited partners with respect to the Partnership(s), at the reasonable request of the General Partner.  Placement Agent will have no obligation to offer or sell any Interests.

e.          Subject to the performance by the Partnership(s) and the General Partner of their obligations hereunder, the Investment Advisor hereby agrees on the terms and conditions set forth herein to use such efforts, as it deems appropriate in its sole discretion, to refer its customers for investment in the Interests during the term hereof.  The Investment Advisor will have no obligation to offer or sell any Interests.

f.          Placement Agent or Investment Advisor may, without notice to the Partnership or the General Partner, assign or delegate its rights and obligations to its affiliates, or otherwise retain affiliates to act as sub-selling agents, in connection with the solicitation of investors and

 

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otherwise to assist Placement Agent or Investment Advisor in performing its obligations under this Agreement to the extent Placement Agent or Investment Advisor deems appropriate, subject to compliance with applicable laws, rules or regulations; provided however, that each such sub-selling agent shall execute a sub-agent agreement substantially in the form of this Agreement.  MSSB may compensate any such sub-selling agent by paying the sub-selling agent from MSSB’s own funds.

2.            Offering and Sale of Interests.

a.          MSSB shall deliver to each person to whom MSSB makes an offer of an Interest, the Offering Documents, as amended as of such time.

b.          MSSB shall not make any offer of Interests on the basis of any communications or documents relating to any of the Partnerships or the Interests, except the Offering Materials, any other documents supplied or prepared by the General Partner on behalf of the Partnerships and delivered to MSSB by the General Partner for use in making an offer of Interests, or any other materials expressly approved for such use by the General Partner in writing (which shall include electronic mail).  Subject to Section 8, the Partnerships and the General Partner shall provide MSSB copies of any Offering Documents for MSSB’s review and approval a commercially reasonable time prior to providing such Offering Documents to any limited partner, which such approval shall not be unreasonably withheld.

c.          The Partnership(s) and the General Partner agree that the Partnership(s) will rely on Rule 506(b) under Regulation D as a safe harbor from registration under Securities Act. The Placement Agent will not use any form of “general solicitation” or “general advertising” (within the meaning of Rule 502(c) of Regulation D under the Securities Act) in making offers of Interests, including any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by general solicitation or advertising.

d.          Placement Agent will not make any offer of Interests on the basis of any communications or documents relating to the Partnership(s) or the Interests, except the Offering Materials, any other documents supplied or prepared by the Partnership(s) or the General Partner and delivered to Placement Agent by the Partnership(s) or the General Partner for use in making an offer of Interests, or any other materials expressly approved for such use by the Partnership(s) or the General Partner.  Notwithstanding the foregoing, the Partnership(s) or the General Partner consent to the delivery of diligence reports that include, inter alia, information provided to and/or accurately derived from information provided by the General Partner, the Partnership(s) or its affiliates to the Placement Agent and are prepared by MSSB, its affiliates or a third party (“Manager Profiles”) to Placement Agent Clients without the review or approval of such Manager Profiles by the Partnership(s) or the General Partner.  The Partnership(s) or the General Partner shall not provide to any Placement Agent Client any Offering Materials that have not been reviewed and approved by Placement Agent in writing.

e.          MSSB shall, in accordance with requirements of Regulation D under the Securities Act, reasonably believe immediately prior to making any offer or sale of Interests that any prospective investor solicited by MSSB is an “accredited investor,” as that term is defined in

 

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Rule 501(a) of Regulation D under the Securities Act, and meets such other eligibility criteria as are set forth in the Offering Documents.  The Partnerships shall be responsible for the timely filing with the U.S. Securities and Exchange Commission (“SEC”) of any notices required by Rule 503 of Regulation D under the Securities Act.  MSSB shall only solicit prospective investors in any jurisdiction in compliance with the marketing rules and private placement rules of such jurisdiction.

f.          MSSB represents and warrants that it has policies and procedures reasonably designed to comply with applicable anti-money laundering and anti-terrorist financing laws, rules and regulations.  Additionally, MSSB represents and warrants that it has policies and procedures reasonably designed to ensure that it does not offer or sell investments in the Partnerships, directly or indirectly, to any person, government, organization or entity in violation  of any sanctions program administered by the U.S. Office of Foreign Assets Control.

g.          MSSB represents to the Partnerships as of the date hereof that MSSB is subject to the anti-money laundering regime of the United States and maintains anti-money laundering policies and procedures in compliance with applicable anti-money laundering legislation and regulations, as amended from time to time (the “Anti-Money Laundering Regime”). MSSB’s Anti-Money Laundering Regime includes a Customer Identification Program (“CIP”), which requires the performance of CIP due diligence in accordance with applicable Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) requirements and regulatory guidance.  MSSB represents that it shall be responsible for maintaining and performing anti-money laundering procedures in connection with the onboarding of Placement Agent Clients, which procedures shall, at a minimum, (1) identify and verify all potential investors, (2) require maintenance of records in relation to the verification of the identity of all potential investors and (3) provide for ongoing monitoring of all Placement Agent Clients.

h.          MSSB shall be responsible for ensuring that any activities taken in connection with the sale of Interests in any jurisdiction outside of the United States shall be conducted in compliance with the private placement or other applicable offering rules of such jurisdiction; provided, however, that, the Partnerships and the General Partner agree to coordinate with MSSB in respect of determining the number of offers made to prospective investors in any particular jurisdiction and such other relevant information in respect of offerings of Interests made by any party other than MSSB, which would reasonably be deemed to affect MSSB’s compliance with applicable offering rules.  MSSB shall make no offer or sale of any Interest in any foreign jurisdiction, or to any prospective investor located in any foreign jurisdiction, where there is a prohibition on the sale of securities such as the Interests.

i.          The General Partner shall be responsible for any applicable registration or qualification of the Interests under all applicable laws, rules or regulations of the United States and the states therein.  The General Partner on behalf of the Partnerships acknowledges that MSSB intends to offer the Interests in each state within the United States.  The General Partner, at the applicable Partnership’s expense, shall use reasonable efforts to register or qualify the Interests, if required, in each jurisdiction within the United States that the Interests are offered by MSSB or to make any filings required by applicable law in each jurisdiction within the United States in which the Interests are sold by MSSB.  If the Interests may not be offered in any

 

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particular jurisdiction in the United States, the applicable Partnership and the General Partner shall promptly notify MSSB.

j.          As a condition to the General Partner’s acceptance of a subscription by a Placement Agent Client, each Placement Agent Client will be required to agree to maintain an account with MSSB (each, an “MSSB Client Account”).  MSSB agrees to (i) debit from each MSSB Client Account an amount necessary to satisfy each such Placement Agent Client’s obligation to fund any amount to be paid by the Placement Agent Client with respect to its Interest in the Partnership(s), as and when requested by the Partnership(s) or the General Partner, (ii) to pay or transfer such debited amounts to the Partnership(s) or the General Partner (as provided by the General Partner, except that MSSB shall pay or transfer to itself or any of its affiliates an amount required to pay the upfront placement fee, if any); and (iii) credit or distribute to each MSSB Client Account the amount that is distributed to MSSB by the Partnership(s) or the General Partner in respect of such Placement Agent Client’s investment.  The Partnership(s) and the General Partner agree to pay all distribution and withdrawal/redemption amounts to MSSB for further credit to each MSSB Client Account for which MSSB shall provide the appropriate wire instructions.  For the avoidance of doubt, the foregoing provisions shall not limit any right of the Partnership(s) or the General Partner  to seek payment directly from any Placement Agent Client in the event of the failure of such Placement Agent Client to make any contribution or other payment required pursuant to the Partnership(s)’s Offering Materials and the parties hereto agree that MSSB shall not be liable or responsible, as principal, guarantor or otherwise, to make any payments, cover any default or extend any credit, in the event of any such late payment or non-payment by a Placement Agent Client due to the Partnership(s), the General Partner or to any other party to which such payment may become due.

k.          The Partnerships shall provide a reasonable quantity of copies of the Offering Materials and such other documents as MSSB is required to provide to prospective investors under this Agreement.  If any Offering Materials are amended or supplemented, the General Partner shall promptly notify MSSB, and provide copies of such amendments or supplements in accordance with the preceding sentence.

l.          All subscriptions for Interests submitted by or through MSSB shall be subject to the General Partner’s approval, in its sole discretion.  The General Partner and MSSB agree that the General Partner has the ultimate responsibility to determine whether a prospective investor meets all applicable private placement accreditation, minimum investment, and other regulatory requirements necessary to invest in a Partnership, provided, however, it is acknowledged by MSSB that the General Partner shall reasonably rely upon due diligence conducted by MSSB on each prospective investor.

3.            Fees and Expenses. 

a.          Each Partnership listed in Schedule 2 shall pay MSSB a monthly ongoing selling agent fee equal to the amount described for each Partnership in Schedule 2 (“Ongoing Selling Agent Fee”) relating to each Placement Agent Client who is not a Consulting Client (as defined below)(each a “Non-Consulting Client”).  Net Assets shall have the meaning set forth in the respective Partnership’s Limited Partnership Agreement.  The fee shall be payable monthly beginning with the first month that a Unit is issued.

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b.          Notwithstanding anything to the contrary in Section 3(a) above, Placement Agent, the Partnership(s), and the General Partner agree that Placement Agent shall not be entitled to receive an  Ongoing Selling Agent Fee with respect to Placement Agent Clients that participate in MSSB’s advisory program (each a “Consulting Client”) and such Consulting Clients shall be entitled to invest in the Partnership(s) on the following terms:

(i)          The Partnership(s) and the General Partner acknowledge that each Consulting Client shall be permitted to acquire lower fee, Class Z Units (as defined in the applicable Partnership’s Memorandum).

(ii)          Neither the Partnership(s) nor the General Partner shall pay any compensation to MSSB in respect of any Consulting Client and MSSB shall not charge Ongoing Selling Agent Fee with respect to such Consulting Clients.

(iii)          If a Consulting Client ceases to participate in an MSSB advisory program, such Consulting Client shall become a Non-Consulting Client if it remains a limited partner.  The Units of such Non-Consulting Client will, beginning on the first day of the month following the date that such Consulting Client becomes a Non-Consulting Client, (i) convert to the appropriate class of Units based on the aggregate capital contributions made by such limited partner, adjusted for additional subscriptions, redemptions and exchanges and (ii) become subject to the applicable Ongoing Selling Agent Fee.  While any such limited partner will have the right to redeem its Units, such redemption rights may be limited, requiring such limited partner to bear the Ongoing Selling Agent Fee in respect of any such Units for an extended period of time. MSSB shall notify the General Partner that such Consulting Client has become a Non-Consulting Client and be entitled to an Ongoing Selling Agent Fee for such Non-Consulting Client thereafter pursuant to the terms hereof. Notwithstanding the foregoing, if any such non-Consulting Client is an employee of Placement Agent or an affiliate and remains a limited partner, such employee may retain ownership of such Class Z Units (as defined in the applicable Partnership’s Memorandum) and shall not be subject to the Ongoing Selling Agent Fee.

c.          Placement Agent will designate each prospective investor it introduces to the Partnership(s) as either a Consulting Client or a Non-Consulting Client.  Each Partnership and the General Partner acknowledges that each Consulting Client shall be permitted to acquire Class Z Units (as defined in the applicable Partnership’s Memorandum.

d.          MSSB may, without notice, allocate all or a portion of its fees to its affiliates and may also allocate all or a portion of its fees to non-affiliates upon written notice to the General Partner.  The Partnerships and the General Partner agree that MSSB, including any applicable affiliate of MSSB, reserves the sole right to reduce or waive the Ongoing Selling Agent Fee in whole or in part.  The General Partner agrees to reduce or waive the Ongoing Selling Agent Fee described herein for any limited partner in accordance with written instructions provided by MSSB to the General Partner.  MSSB agrees that neither the Partnerships nor the General Partner shall have any additional responsibility or liability to MSSB or any other party for complying with the written instructions provided by MSSB relating to this Section 3(c) beyond making payments in accordance with such written instructions.

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e.          If MSSB becomes aware that a limited partner is no longer a client of MSSB, it shall promptly inform the General Partner and if the General Partner becomes aware that a limited partner is no longer a client of MSSB, the General Partner shall promptly notify MSSB.  Once a limited partner is no longer a client of MSSB, the Partnership will no longer be obligated to pay the Ongoing Selling Agent Fee attributable to such limited partner.  Notwithstanding the foregoing, a limited partner may be a client of MSSB and another broker-dealer at the same time, and the fact that such limited partner is a client of another broker-dealer may not, by itself, serve as evidence that such limited partner is not a client of MSSB.

f.          The Partnerships and MSSB shall each bear their own expenses in connection with the solicitation of prospective investors, including expenses of preparing, reproducing, mailing and/or delivering offering and sales materials.

4.            Representations, Warranties and Agreements of the Partnerships and the General Partner.  Each Partnership and the General Partner (for purposes of this Section 4 only, each a “Party”) severally, and not jointly, represent and warrant to MSSB and agree with MSSB as follows:

a.          It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or organization, and it has full power and authority under applicable laws, rules or regulations to conduct its business as contemplated by the Offering Materials.

b.          The execution, delivery and performance of this Agreement has been duly authorized by all necessary action of each Party, and upon the execution and delivery hereof, this Agreement shall constitute a valid, binding and enforceable obligation of such Party.

c.          The execution, delivery and performance of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein and in the Offering Materials, including the issuance and sale of the Interests, shall not constitute a breach of or default under any agreement or instrument by which such Party is bound, or to which any of its assets is subject, or any order, rule or regulation applicable to it of any court or any governmental body or administrative agency having jurisdiction over it.

d.          There is not pending or, to the best knowledge of such Party, threatened any action, suit or proceeding before or by any court or other governmental body to which such Party is a party, or to which any of its assets is subject, which might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business or prospects of such Party.  Such Party has not received any notice of an investigation regarding non-compliance by such Party with applicable laws, rules or regulations.

e.          The Offering Materials, as of the date hereof and at any subsequent time during the term of this Agreement, do not and shall not contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading.  If any statement were to become untrue or if an omission of a material fact is discovered, the General Partner shall promptly supplement the Offering Materials to remove such untrue statement or to disclose such material fact.

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f.          At all times during which MSSB client(s) own(s) an Interest, the General Partner shall, as soon as commercially practical, notify and update in writing such MSSB client(s) of any material changes or developments relating to the applicable Partnership or their Interests.

g.          The Interests have been duly authorized for issuance and sale, and, when issued and subscribed for in the amounts and for the consideration described in the Offering Materials, shall be entitled to the rights and subject to the restrictions and conditions contained in the Organizational Documents; no limited partner shall be personally liable for the debts of and claims against the Partnership in which it is invested by the mere reason of being a limited partner; and all necessary action required to be taken for authorization, issue and sale of the Interests has been validly and sufficiently taken.

h.          It is not necessary in connection with the offer, sale and delivery of the Interests in the manner contemplated by this Agreement to register the Interests under the Securities Act or, to the best knowledge of such Party, the laws of any other jurisdiction where it is being offered.  Each Party shall conduct itself, and ensure that its agents conduct themselves, in a manner consistent with the exemption from registration under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder and, without limitation, shall not use, or permit any other person to use, any form of prohibited solicitation or advertising in making offers of Interests.

i.          The General Partner will promptly notify MSSB in the event that a Partnership is no longer able to rely on the private placement exemption under Rule 506(d).

j.          The General Partner is registered as a commodity pool operator under the Commodity Exchange Act with respect to the Partnerships.

k.          Each Partnership and the General Partner each represent that it is aware of the United States and applicable laws and regulations relating to currency reporting and money laundering, including, but not limited to (i) the United States Bank Secrecy Act and implementing regulations; and (ii) the USA PATRIOT Act and implementing regulations. To ensure compliance with those laws, rules and regulations, in addition to periodic monitoring of MSSB’s Anti-Money Laundering Regime, the General Partner for itself and on behalf of the Partnerships, represents that for as long as the General Partner is a subsidiary of Morgan Stanley (x) it will comply with the Morgan Stanley Global Money Laundering Prevention Policy, the Morgan Stanley Global AML Policy and Compliance Program and the Morgan Stanley Investment Management Anti-Money Laundering Policy.

l.          If, at any time, the assets of any Partnership are determined by the General Partner’s legal counsel to constitute "plan assets" within the meaning of the U.S. Department of Labor’s (the “Department”) “plan asset” regulations, Section 2510.3-101, as modified by Section 3(42) of the Employee Retirement Income Security Act of 1974 (the “Plan Asset Regulation”)(“ERISA”), the General Partner represents and warrant that at such time, it shall be, and shall remain through the duration of such Partnership for as long as the assets of such Partnership remain “plan assets”, an "investment manager" and a "fiduciary" (as defined in Sections 3(38) and 3(21) of ERISA, respectively).

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m.          The General Partner has sole discretion and ultimate responsibility over the investment model/portfolio of the Partnership.  Accordingly, any decision to invest in a vehicle managed by the Placement Agent or any of its affiliates, or by an entity in which Placement Agent or any of its affiliates owns a material interest, is the General Partner’s alone, and shall be based solely on appropriate independent research and diligence.

n.          Each Party acknowledges that in performing the services contemplated hereby, MSSB shall be entitled to rely upon and assume, without independent verification, the accuracy and completeness of all information that is available from public sources and all information that has been provided to it by, or on behalf of, the Partnerships or the General Partner, and that MSSB has no obligation to verify the accuracy or completeness of any such information and shall have no liability to the Partnerships, the General Partner or any third party for any information contained in the Offering Materials.

o.          The representations and warranties set forth in this Agreement are continuing during the term of this Agreement and each Party agrees to notify MSSB promptly in writing if at any time during the term of this Agreement, any such representation or warranty becomes materially inaccurate or untrue and of the facts related thereto.

p.          Each Party acknowledges that MSSB enters into this Agreement in reliance on the representations, warranties and agreements of the Partnerships and the General Partner contained herein.

5.            Representations, Warranties and Agreements of MSSB.  MSSB represents and warrants to and agrees with, the Partnerships and the General Partner as follows:

a.          MSSB is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and MSSB has full power and authority under applicable laws, rules or regulations to engage in the activities contemplated under this Agreement.

b.          The execution, delivery and performance of this Agreement has been duly authorized by all necessary action of MSSB, and upon the execution and delivery hereof, this Agreement shall constitute a valid, binding and enforceable obligation of MSSB.

c.          The execution, delivery and performance of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein shall not constitute a breach of or default under any agreement or instrument by which MSSB is bound, or to which any of its assets is subject, or any order, rule or regulation applicable to it or of any court or any governmental body or administrative agency having jurisdiction over it.

d.          MSSB (or any designee to which it delegates its right and obligations hereunder pursuant to Section 1(f)) has and shall maintain all licenses and registrations necessary under applicable federal and state laws, rules and regulations, including the rules and regulation of any self-regulatory organization with competent jurisdiction, to provide the services required to be provided by MSSB (or such designee) hereunder. To the reasonable knowledge of MSSB, MSSB has not solicited and shall not solicit any offer to buy or offer to sell Interests in any manner that would be inconsistent with applicable laws and regulations, or in any manner that would be inconsistent with the solicitation and advertising limitations of Regulation D under the Securities Act or any state securities laws.  MSSB shall conduct itself and take reasonable measures to ensure that its respective agents conduct themselves, in a manner consistent with (i) the exemption from registration under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder, including, without limitation the requirements of Regulation D under the Securities Act, and (ii) any applicable state law exemptions from registration.

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e.          MSSB shall furnish to each prospective investor it solicits the most current copy of the applicable Partnership’s Memorandum provided to it by the General Partner prior to that person’s admission as a limited partner.

f.          MSSB shall furnish to the Partnerships a description of all material pending and prior litigation and regulatory actions involving MSSB and its subsidiaries, required to be disclosed in the Memorandums during the term of this Agreement.

g.          MSSB has and maintains policies, procedures, and internal controls that are reasonably designed to ensure that no Covered Person identified in Appendix A subject to disqualification is permitted to participate in any of a Partnership’s offerings pursuant to Rule 506 of Regulation D under the Securities Act (“Rule 506”).  MSSB represents that it has exercised reasonable care, in accordance with section (e) of Rule 506 in making a factual inquiry into whether any Covered Person is the subject of any of the acts enumerated in Rule 506(d)(1)(i) through (viii) or that would cause a Partnership to be unable to rely upon Rule 506 (each a “Disqualifying Event”).  MSSB agrees that each Partnership may disclose any Disqualifying Event involving a Covered Person that occurred prior to September 23, 2013, in accordance with the method of disclosure under Rule 506(e).

h.          The representations and warranties set forth in this Agreement are continuing during the term of this Agreement and MSSB agrees to notify each of the Partnerships and the General Partner promptly in writing if at any time during the term of this Agreement, any such representation or warranty becomes materially inaccurate or untrue and of the facts related thereto.

i.          MSSB acknowledges that each of the Partnerships and the General Partner enter into this Agreement in reliance on the representations, warranties and agreements of MSSB contained herein.

6.            Covenants of the Parties.

a.          MSSB will promptly notify the Partnerships and the General Partner if it becomes aware of any Covered Person who is or becomes the subject of a Disqualifying Event.

b.          MSSB shall, to the extent practicable and reasonable, make available personnel to the General Partner to respond to reasonable queries about its processes directly related to identifying Covered Persons and Disqualifying Events under Rule 506(d) and confirm that the representations made in Section 5(g) are accurate and complete.

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7.            Indemnification.

a.          Except as otherwise provided herein, the General Partner and each Partnership shall jointly and severally indemnify, hold harmless, and defend MSSB, each person who controls MSSB within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, and their respective officers, directors, partners, members, shareholders, employees and agents from and against any losses, claims, damages or liabilities (or actions in respect thereof) (“Covered Claims”) arising out of or relating to (i) the offer or sale of the Interests or the management or affairs of the applicable Partnership; (ii) any untrue statement or alleged untrue statement of material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in any Offering Materials or in any advertising or promotional material approved, published or provided to MSSB by or on behalf of the applicable Partnership or the General Partner or accurately derived from information approved, published or provided to MSSB by or on behalf of the applicable Partnership (iii) any violation of any law, rule or regulation relating to the registration or qualification of Interests or the applicable Partnership, (iv) any breach by the applicable Partnership or the General Partner of any representation, warranty or agreement contained in this Agreement, (v) any violation of any law, rule or regulation relating to the operation of the applicable Partnership or (vi) any willful misconduct or gross negligence by the applicable Partnership or the General Partner or their respective affiliates in the performance of, or failure to perform, its obligations under this Agreement, except to the extent that any such Covered Claim is caused by breach of this Agreement by MSSB or its affiliates, directors, members, employees, agents and affiliates or the willful misconduct or gross negligence of any of the foregoing in the performance of, or failure to perform, their obligations under this Agreement.  Notwithstanding anything to the contrary contained herein, in no event shall any Partnership be jointly liable on the indemnity set forth in this Section 7(a) with any other Partnership.

b.            MSSB shall indemnify, hold harmless, and defend each of the Partnerships and the General Partner, each person who controls any of the foregoing within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, and their officers, directors, partners, members, shareholders, employees, and agents from and against any Covered Claims arising out of or relating to (i) any breach by MSSB of any representation, warranty or agreement contained in this Agreement, (ii) failure of MSSB to comply with marketing rules or private placement rules in any jurisdiction, (iii) any untrue statement, or alleged untrue statement of a material fact, made by MSSB in connection with MSSB’s placement of the Interests that is not in reliance on or in conformity with the Offering Materials, or (iv) willful misconduct or gross negligence by MSSB in the performance of, or failure to perform, its obligations under this Agreement, except in each case to the extent that any Covered Claim is caused by breach of this Agreement by any of the Partnerships or the General Partner or their officers, directors, partners, members, shareholders, employees, agents and affiliates or the willful misconduct or gross negligence of any of the foregoing in the performance of, or failure to perform, their obligations under this Agreement.

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c.           Promptly after receipt of notice of any claim or complaint or the commencement of any action or proceeding with respect to which an indemnified party is entitled to seek indemnification hereunder, the indemnified party shall notify the indemnifying party in writing of such claim or complaint or the commencement of such action or proceeding.  The indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects within a reasonable time after receipt of such notice, to assume the defense of any suit so brought, which defense shall be conducted by counsel chosen by it and satisfactory to the indemnified party or parties.  In the event that the indemnifying party elects to assume the defense of any such suit and retain such counsel, the indemnified party or parties shall bear the fees and expenses of any additional counsel thereafter retained by it or them.

d.          If the foregoing indemnification is for any reason unavailable to an indemnified party (other than by reason of the terms thereof), the indemnifying party shall contribute to the Covered Claims that are paid or payable by the indemnified party in such proportion as is appropriate to reflect the relative economic interests of the indemnifying party, on the one hand, and the indemnified party, on the other hand, in the transactions contemplated by this Agreement (whether or not consummated) and any other relevant equitable considerations.  For purposes of this paragraph, the relative interests of the applicable Partnership and the General Partner, on the one hand, and MSSB, on the other hand, in the transactions contemplated by this Agreement, shall be deemed to be in the same proportion as (i) the total proceeds received or contemplated to be received by the applicable Partnership and the General Partner in the transactions contemplated by this Agreement (whether or not any such transaction is consummated) bears to (ii) the fees paid or to be paid to MSSB under the Agreement; provided however, that to the extent permitted by applicable law, in no event shall the applicable Partnership and the General Partner contribute less than the amount necessary to ensure that all indemnified parties, in the aggregate, are not liable in excess of the amount of fees actually received by MSSB pursuant to this Agreement.

e.          The foregoing indemnity shall be in addition to any liabilities that the parties may otherwise have incurred hereunder.

8.            Confidentiality.

a.          Each Partnership and the General Partner hereby acknowledge that they have received or will receive written and/or oral information from Placement Agent that the Placement Agent considers confidential and/or proprietary (such information being referred to in this Section 8 as “MS Confidential Information”).  For the purposes of this Agreement, MS Confidential Information means any information relating to or disclosed by Placement Agent to one or more Partnerships or the General Partner that is confidential or proprietary to Placement Agent, including but not limited to information about Placement Agent Clients.  All such MS Confidential Information has been or will be furnished to the Partnerships or the General Partner subject to the provisions of this Section 8.  The Partnerships and the General Partner agree that they will use, and that they will ensure that all of their employees, officers, directors, representatives and agents and other entities providing services with respect to the Partnerships or the General Partner use, the MS Confidential Information solely in connection with the subscription for Interests by each

 

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Placement Agent Client, the booking of such Interests, communicating with such Placement Agent Clients, the administration of the Partnerships and the performance of their respective roles with respect to the Partnership and the Interests, and for no other purpose whatsoever.  Furthermore, except as otherwise provided herein, the General Partner agrees that it will not disclose or make available, and will ensure that none of its employees, officers, directors, representatives or agents or other entities providing services with respect to a Partnership discloses or makes available, any MS Confidential Information to any person or entity that does not have a need to know such MS Confidential Information in connection with the foregoing.

b.          Notwithstanding the foregoing, Placement Agent acknowledges and agrees that the General Partner, the Partnerships, the Partnership’s administrator and their respective officers or directors may disclose MS Confidential Information or portions thereof (i) to each other; (ii) at the request of or as required by a government, regulatory or tax agency (including any self-regulatory agency) or in connection with an examination of the General Partner, the Partnerships or an affiliate thereof by regulatory examiners; (iii) to its internal or external attorneys or auditors; and (iv) as required by law, regulation or court order (whether by oral question, interrogatory, subpoena, civil or regulatory investigative demand, examination or similar process).  In any of the circumstances mentioned in clauses (ii) or (iv), the General Partner and the Partnerships shall (to the extent permitted by law) give Placement Agent reasonable prior notice of any such disclosure and shall, in any event, advise Placement Agent (to the extent not prohibited by law or regulation) of any such disclosure promptly after it is made.

c.          Placement Agent hereby acknowledges that it has received or will receive written and/or oral information from one or more of the Partnerships and/or the General Partner that the Partnership(s) and/or the General Partner consider confidential and/or proprietary (such information being referred to in this Section 8 as “Partnership Confidential Information”).  For purposes of this Agreement, Partnership Confidential Information means any information relating to or disclosed by the Partnership(s) or the General Partner to Placement Agent that is confidential or proprietary to the General Partner of a Partnership including, but not limited to, information about the Partnership(’s)(s’) or the General Partner’s actual or potential portfolio holdings and investments, investment and/or risk management techniques and the amount of assets under management by the General Partner.  All such Partnership Confidential Information that has been furnished prior to the execution of this Agreement or will be furnished to the Placement Agent is subject to the provisions of this Section 8. Placement Agent agrees that it will use any Partnership Confidential Information solely in connection with its obligations, duties and undertakings pursuant to this Agreement or for the benefit of Placement Agent Clients and for no other purpose whatsoever. Furthermore, except as otherwise provided herein, the Placement Agent agrees that it will not disclose or make available, and will ensure that none of its employees, officers, directors, representatives or agents discloses or makes available, any Partnership Confidential Information to any person or entity that does not have a need to know such Partnership Confidential Information in connection with the foregoing.

d.          Notwithstanding the foregoing, the Partnerships and the General Partner acknowledge and agree that Placement Agent and its affiliates may disclose Partnership

 

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Confidential Information or portions thereof (i) to each other; (ii) at the request of or as required by a government, regulatory or tax agency (including any self-regulatory agency) or in connection with an examination of Placement Agent or affiliate by regulatory examiners; (iii) to its internal or external attorneys or auditors; or (iv) as required by law, regulation or court order (whether by oral question, interrogatory, subpoena, civil or regulatory investigative demand, examination or similar process).  In any of the circumstances mentioned in clauses (ii) or (iv), Placement Agent or the applicable affiliate shall (to the extent permitted by law) give the Partnerships and the General Partner reasonable prior notice of any such disclosure and shall, in any event, advise the Partnerships and the General Partner (to the extent permitted by law) of any such disclosure promptly after it is made.

e.          For purposes of this Agreement, the term MS Confidential Information shall not include information that (i) is or becomes generally available to the public other than as a result of a disclosure in connection with the performance of this Agreement;  or (ii) becomes available to the General Partner or a Partnership on a non-confidential basis from a source other than the Placement Agent any of its representatives; provided, that such source is not bound, to the General Partner’s reasonable knowledge, by a confidentiality agreement with or other legally enforceable obligation of secrecy to or for the benefit of the Placement Agent, or any of its representatives. Notwithstanding the foregoing, this Section 8(e) shall not apply to any MS Confidential Information that is comprised of the personal information of any Placement Agent Client.

f.          For purposes of this Agreement, the term Partnership Confidential Information shall not include information that (i) is or becomes generally available to the public other than as a result of a disclosure in connection with the performance of this Agreement; or (ii) becomes available to the Placement Agent on a non-confidential basis from a source other than the General Partner  or any of its respective representatives; provided, that such source is not bound, to the Placement Agent’s  reasonable knowledge, by a confidentiality agreement with or other legally enforceable obligation of secrecy to or for the benefit of the General Partner, a Partnership, or any of their respective representatives.

g.         In the event of a breach or threatened breach by any party of the provisions of this Section 8 of this Agreement, the parties agree that a remedy at law to the aggrieved party may be inadequate and that the aggrieved party shall be entitled to seek an injunction or another appropriate remedy in equity restraining the breaching party from disclosing or using either the MS Confidential Information or Partnership Confidential Information, as the case may be, in whole or in part. Nothing herein shall be construed as limiting or prohibiting the aggrieved party from pursuing any other remedies in addition to injunctive relief available hereunder for such breach or threatened breach, including the recovery of damages and reasonable attorney fees.

h.         Upon written request or on the expiration or termination of this Agreement, each party shall use commercially reasonable efforts to return to the other parties or destroy MS Confidential Information or Partnership Confidential Information (as appropriate) in its possession or control, provided that each party may retain archival copies of any document

 

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or information that such party is obligated to maintain pursuant to recordkeeping requirements to which it is subject under applicable laws, rules, regulations or internal policies, but for only so long as such records are required to be maintained.

9.            Data Privacy

a.            The Partnerships and the General Partner acknowledge that, as a result of this Agreement, they may receive PII about Placement Agent Clients and Placement Agent employees.  For the purposes of this Agreement, “PII” includes “Nonpublic Personal Information” as that term is defined in Title V of the Gramm-Leach-Bliley Act of 1999 or any successor federal statute, and the rules and regulations thereunder, all as may be amended or supplemented from time to time (“GLBA”) and personally identifiable information and other data protected under any other applicable laws, rule or regulation of any jurisdiction relating to disclosure or use of personal information (“Privacy Laws”), including, without limitation, the name and account number of – and any other personally identifiable information.  The General Partner agrees that it shall not knowingly do or omit to do anything which would cause the Placement Agent or any of its affiliates to be in breach of any Privacy Laws.  The General Partner shall, and shall cause its representatives to, (i) keep PII confidential, use and disclose PII only as necessary for the purchase of Interests in the Partnership for which the PII was disclosed to the General Partner and in accordance with this Agreement, GLBA and Privacy Laws, (ii) implement and maintain an appropriate written information security program, the terms of which shall meet or exceed the requirements for financial institutions under 17 CFR 248.30, if applicable to (A) ensure the security and confidentiality of PII, (B) protect against any threats or hazards to the security or integrity of PII, and (C) prevent unauthorized access to, use of or disclosure of PII.  The Placement Agent reserves the right to review the General Partner’s policies and procedures used to maintain the security and confidentiality of PII and the General Partner shall, and cause its Representatives to, comply with all reasonable requests or directions from the Placement Agent to enable the Placement Agent to verify and/or procure that the General Partner is in full compliance with its obligations under this Agreement in relation to PII.

b.         The General Partner shall promptly notify the Placement Agent (i) of any disclosure or use of any PII by the General Partner or any of their Representatives in breach of this Agreement and (ii) of any disclosure of any PII to the General Partner or their Representatives where the purpose of such disclosure is not known to the General Partner or their Representatives.  In the event that the General Partner learns or has reason to believe that there (i) has been a breach of its security standards, or (ii) is a weakness in the General Partner’s security practices or systems, in each instance irrespective of cause, to the extent such breach or weakness could reasonably be expected to (y) allow unauthorized access to PII or the Partnership’s facilities associated with such PII or (z) adversely impact the facilities the Partnership(s) will promptly give notice of such event to the Placement Agent.

c.          Furthermore, the General Partner acknowledges that upon unauthorized access to or acquisition of PII within the General Partner’s custody or control (a “Security Event”), the law may require that the General Partner notify the individuals whose information was accessed or disclosed that a Security Event has occurred.  The General

 

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Partner must notify the Placement Agent immediately if the General Partner learns or has reason to believe a Security Event has occurred. Except to the extent prohibited by mandatory applicable law, the General Partner agrees that it will not notify any Placement Agent Client or Placement Agent employee until the General Partner first consult with the Placement Agent and the Placement Agent has had an opportunity to review the notification the General Partner proposes to issue to the affected individuals and given its express consent to the same.

10.            Client Communications.  Each Partnership and the General Partner severally agree to provide to MSSB copies of any communications to limited partners with respect to the operation and performance of the applicable Partnership.  Communications that are provided on a regular basis such as monthly account statements, shall be distributed to MSSB when such communications are distributed to MSSB clients.  The General Partner shall use its commercially reasonable efforts to distribute to MSSB all communications that require any action by limited partners such as limited partner consent or vote prior to the distribution of such communication to limited partners.  Each Partnership and the General Partner agree that MSSB may use such communications in connection with reports issued by MSSB to the applicable limited partners to which such communications were directed.  Each Partnership and the General Partner severally agree to respond as soon as practicable to inquiries of MSSB investors as communicated by MSSB and shall endeavor to copy MSSB on all such communications.

11.            Injunctive Relief.  Each party agrees that certain breaches of this Agreement with respect to confidentiality (Section 8), data privacy (Section 9) may cause potentially irreparable harm, and that monetary damages would not be sufficient to compensate the non-breaching party for such harm.  In the event of a breach of these provisions by a party, the non-breaching parties may seek temporary and permanent injunctive relief (without the necessity of proving actual damages or the posting of a bond) as well as other equitable relief, and will be entitled to commence an action for any such relief in any court pursuant to Section 14.

12.            Term and Termination.

a.          This Agreement shall remain in full force and effect until terminated by a party on thirty days’ prior written notice to the other parties.

b.          This Agreement may be terminated immediately on written notice to the other parties hereto on the dissolution, insolvency or bankruptcy of any party or upon a material breach of any condition, warranty, representation or other term of this Agreement by the other party.  Notwithstanding the foregoing, if this Agreement relates to more than one Partnership, the termination of the Agreement with respect to any one Partnership shall not result in the termination of the Agreement with respect to the other parties thereto.  Notwithstanding Section 12(b), upon becoming aware of a Disqualifying Event occurring on or after September 23, 2013 with respect to MSSB or any of its Covered Persons, a Partnership may, in its sole discretion, terminate this Agreement which shall be effective immediately or on such future date as indicated by such Partnership in a notice to MSSB relating to such termination.

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c.          On termination of this Agreement, the General Partner shall continue to pay MSSB the compensation set forth in Section 3 for so long as each limited partner introduced to the Partnerships by MSSB remains a limited partner and MSSB (and its applicable employees) maintains all necessary licenses and regulations required to receive such compensation.  For purposes of the foregoing, MSSB shall be entitled to the compensation set forth in Section 3 with respect to any person introduced by MSSB to the General Partner prior to termination whose subscription is accepted by the applicable Partnership within sixty days following such termination.

13.            Notices.  Any notice required or desired to be delivered under this Agreement shall be effective on actual receipt and shall be in writing and (i) delivered personally; (ii) sent by first class mail or overnight delivery, postage prepaid; (iii) transmitted by electronic mail (with confirmation of delivery and receipt); or (iv) transmitted by fax (with confirmation by first class mail, postage prepaid) to the parties at the following address or such other address as the parties from time to time specify in writing:

	 	
If to the Partnership or the General Partner:

 

[Name of Partnership]

c/o Ceres Managed Futures LLC

522 5th Avenue,

New York, NY  10036

Fax: 212-507-2065

Email: Patrick.Egan@morganstanley.com

Attention: Patrick Egan, President

 

With a copy to:

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Email:  RMolesworth@willkie.com

Attention: Rita Molesworth

 

	
If to MSSB:

 

Morgan Stanley Smith Barney LLC

522 5th Avenue, 13th Floor

New York, NY  10036

Fax: 212 905-2750

Email: Jeremy.Beal@morganstanley.com

Attention:  Jeremy Beal, Managing Director

 

 

 

14.            Status of Parties.  In selling the Interests, MSSB shall be an independent contractor (rather than employee, agent or representative) of any Partnership or the General Partner, and MSSB shall not have the right, power or authority to enter into any contract or to create any obligation on behalf of any Partnership or the General Partner or otherwise bind any Partnership or the General Partner in any way.  Nothing in this Agreement shall create a partnership, joint venture, agency, association, syndicate, unincorporated business or any other similar relationship between the parties.  Nothing in this Agreement shall be construed to imply that MSSB is a partner, shareholder, manager, managing member or member of any Partnership or the General Partner.

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15.            Miscellaneous.

a.            Headings.  Headings to sections and subsections in this Agreement are for the convenience of the parties only and are not intended to be a part of or affect the meaning or interpretation hereof.

b.            Entire Agreement.  This Agreement embodies the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all other agreements and understandings, including the Prior Agreement, whether written or oral, between the parties relating to the subject matter hereof entered into prior to this Agreement.

c.          Amendments.  This Agreement shall not be amended except by a writing signed by all parties hereto.  Notwithstanding the previous sentence, Partnerships may be added to this Agreement upon the agreement of the General Partner and MSSB.  The listing of such Partnership on Schedule 1 hereto shall be evidence of such agreement.

d.          Waiver.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto either before or after the effective date of this Agreement or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

e.          Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.  The provisions of Sections 3, 7 (including with respect to breaches of Section 4 or 5), 8, 9, 11(c), and this Section 14 shall survive termination of this Agreement.  If any provision of this Agreement is or should become inconsistent with any present or future law, rule, or regulation of any governmental or regulatory authority having jurisdiction over the subject matter of this Agreement, such provision shall be deemed rescinded or modified in accordance with any such law, rule or regulation.  In all other respects, this Agreement shall continue and remain in full force and effect.

f.          Successors and Assigns.  This Agreement shall inure to the benefit of and be binding on the parties hereto and such parties’ respective successors and permitted assigns.

g.          Assignment.  No party may assign this Agreement without the prior written consent of the other parties, except as otherwise provided herein.  Any purported assignment in violation of this Section 14 shall be void.

h.          Jurisdiction and Consent.  THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, ONLY IF THAT COURT LACKS SUBJECT MATTER JURISDICTION, TO THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, COMMERCIAL DIVISION OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND, WHETHER IN DISTRICT COURT OR SUPREME COURT OF THE STATE OF NEW YORK, WAIVE TRIAL BY JURY.  EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY

 

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OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  EACH OF THE PARTIES AGREES THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND BINDING UPON THE PARTIES AND MAY BE ENFORCED IN ANY OTHER COURTS TO WHOSE JURISDICTION A PARTY IS OR MAY BE SUBJECT, BY SUIT UPON SUCH JUDGMENT.  EACH PARTNERSHIP AND THE GENERAL PARTNER EACH HEREBY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BY MEANS OF PERSONAL DELIVERY OR COURIER SERVICE, ADDRESSED TO ITS ADDRESS PROVIDED ABOVE AND TO THE ATTENTION OF ANY SECRETARY, ASSISTANT SECRETARY OR ANY OTHER OFFICER, DIRECTOR, MANAGING AGENT OR GENERAL AGENT OF SUCH PARTY, AND SUCH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE UNDER NEW YORK LAW OR UNDER ANY LAW OF ANY STATE OF THE UNITED STATES OR OF ANY OTHER JURISDICTION OR OTHERWISE TO SERVICE OF PROCESS IN SUCH MANNER.

i.          Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  Facsimiles (including facsimiles of the signature pages of this Agreement) shall have the same legal effect hereunder as originals.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be executed as of the day and year first above written.

	
THE PARTNERSHIPS LISTED ON SCHEDULE 1 HERETO

 

By: Ceres Managed Futures LLC

 

Name: /s/ Patrick T. Egan               

           Patrick T. Egan

Title:  President

	
Morgan Stanley Smith Barney LLC

 

Name: /s/ Michael Korn                 

             Michael Korn

Title:  Executive Director

	 	
Ceres Managed Futures LLC

 

Name:  /s/ Patrick T. Egan            

             Patrick T. Egan

Title:  President

 

 

 

	 	 

20

Schedule 1

 

	
PARTNERSHIP

	
STATE AND DATE OF ORGANIZATION

	
EFFECTIVE DATE

	
Potomac Futures Fund L.P.

	
New York; March 14, 1997

	
October 1, 2013

Schedule 2

	
PARTNERSHIP

	
ONGOING SELLING AGENT FEE

	
Potomac Futures Fund L.P.

	
2.00% per year of the adjusted net assets of Class A Units (computed monthly by multiplying the adjusted net assets of the Class A Units by 2.00% and dividing the result thereof by 12). 1 Class Z units will not be subject to an ongoing selling agent fee.

1                    Adjusted net assets are month-end Net Assets increased by the current month’s management fee, ongoing selling agent fee, incentive fee accrual and other expenses and any redemptions or distributions as of the end of such month. 

 

 

 

 

Appendix A

Covered Persons:

		(i)	MSSB and its executive officers and directors and officers participating in the offering of any of the Partnerships;

		(ii)	Morgan Stanley Financial Advisors soliciting investors for the Partnerships on September 23, 2013 and thereafter who receive compensation with respect to such solicitation; and

		(iii)	MSSB’s managing member, Morgan Stanley Smith Barney Holdings LLC (the “Managing Member”) and the Managing Member’s executive officers and directors and officers participating in the offering of any of the Partnerships.

APPENDIX B: FORM OF JOINDER

TO THE AMENDED AND RESTATEDALTERNATIVE INVESTMENT SELLING AGENT AGREEMENT

This joinder (the “Joinder”) is to the Amended and Restated Alternative Investment Selling Agent Agreement, dated as of March 3, 2016, by and among Morgan Stanley Smith Barney LLC (“MSSB”), Ceres Managed Futures LLC (the “General Partner”) and each of the Partnerships listed on Schedules 1 and 2 thereto (the “Schedules”), as amended from time to time (the “Agreement”).  The undersigned (“Authorized Agent”) is acting on behalf of each Partnership (each, a “Joining Partnership”) set forth on the schedule of Joining Partnerships (“Schedule of Joining Partnerships”) attached hereto pursuant to authority and a power of attorney devolved upon Authorized Agent by each such Joining Partnership, for the purpose of joining each such Joining Partnership to the Agreement.  Pursuant to the terms of the Agreement, Partnerships may be added to the Agreement upon the agreement of the General Partner and MSSB.  The Schedules shall be amended by adding thereto the Joining Partnerships.  Unless otherwise indicated herein, capitalized terms used in this Joinder shall have the meanings set forth in the Agreement.

The execution of this Joinder by Authorized Agent on behalf of each Joining Partnership shall be deemed to be an agreement by MSSB and each Joining Partnership to be bound by all of the terms and conditions set forth in the Agreement, effective with respect to each Joining Partnership as of the date listed under the heading “Date of Joinder to the Agreement” on the schedule attached hereto.  By the execution of this Joinder by Authorized Agent, each Joining Partnership also agrees and represents that all of such Joining Partnership’s information in the Schedule of Joining Partnerships hereto provided by Authorized Agent on behalf of such Joining Partnership in connection with this Joinder (which Schedule of Joining Partnerships is hereby incorporated into the Agreement) is true and correct and such Joining Partnership, by Authorized Agent, shall promptly notify MSSB of any material change in such information.

IN WITNESS WHEREOF, Joining Partnership, by Authorized Agent, has executed this Agreement on the date indicated below.

Joining Partnership:  Each Partnership set forth on the attached schedule, in its individual capacity

By:        Authorized Agent

By:                                                                                                                                                                                                                                                                                                                                                           

		(Please Print Name and Title)	(Date)

SCHEDULE OF JOINING PARTNERSHIPS

	
PARTNERSHIP

	
STATE AND DATE OF ORGANIZATION

	
ONGOING SELLING AGENT FEE

	
DATE OF JOINDER TO THE AGREEMENT

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