Document:

Exhibit 10.01

 

EXECUTION COPY

 

ADVISORY AGREEMENT

 

among

 

EUPHRATES GLOBAL HORIZONS, LLC

 

BLACKROCK INVESTMENT MANAGEMENT, LLC

 

and

 

ELLINGTON MANAGEMENT GROUP, L.L.C.

 

Dated as of February 7, 2014

 

 

ADVISORY AGREEMENT

 

Table of Contents

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
1.
    	
Undertakings in Connection with Offering of Global Horizons   Units
    	
 
    	
2
    
	
2.
    	
Duties of the Trading Advisor
    	
 
    	
3
    
	
3.
    	
Trading Advisor Independent
    	
 
    	
5
    
	
4.
    	
Commodity Broker; Executing Brokers
    	
 
    	
5
    
	
5.
    	
Allocation of Company Assets to Trading Advisor; Allocation   of Receipts and Charges
    	
 
    	
7
    
	
6.
    	
Compensation
    	
 
    	
8
    
	
7.
    	
Term and Termination
    	
 
    	
10
    
	
8.
    	
Right to Advise Others; Uniformity of Acts and Practices
    	
 
    	
11
    
	
9.
    	
Speculative Position Limits
    	
 
    	
12
    
	
10.
    	
Additional Undertakings by the Trading Advisor
    	
 
    	
12
    
	
11.
    	
Representations and Warranties
    	
 
    	
12
    
	
12.
    	
Entire Agreement
    	
 
    	
16
    
	
13.
    	
Exculpation and Indemnification
    	
 
    	
16
    
	
14.
    	
Assignment
    	
 
    	
18
    
	
15.
    	
Amendment; Waiver
    	
 
    	
19
    
	
16.
    	
Severability
    	
 
    	
19
    
	
17.
    	
No Third-Party Beneficiaries
    	
 
    	
19
    
	
18.
    	
Notices
    	
 
    	
19
    
	
19.
    	
Governing Law
    	
 
    	
20
    
	
20.
    	
Consent to Jurisdiction
    	
 
    	
20
    
	
21.
    	
Promotional Material
    	
 
    	
20
    
	
22.
    	
Confidentiality
    	
 
    	
20
    
	
23.
    	
Counterparts
    	
 
    	
22
    
	
24.
    	
Headings
    	
 
    	
22
    
	
 
    	
 
    	
 
    
	
Appendix A - List of Authorized Traders
    	
 
    	
A-1
    
	
Appendix B - List of Commodity Interests Traded by   Trading Advisor
    	
 
    	
B-1
    
	
Appendix C - Trading Authority
    	
 
    	
C-1
    
	
Appendix D - Acknowledgement of Receipt of   Disclosure Statement
    	
 
    	
D-1
    

 

 

ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT (the “Agreement”), is made as of February 7, 2014, among EUPHRATES GLOBAL HORIZONS, LLC, a Delaware limited liability company (the “Company”), BLACKROCK INVESTMENT MANAGEMENT LLC, a Delaware limited liability company and the manager of the Company (the “Manager”), and ELLINGTON MANAGEMENT GROUP, L.L.C., a Delaware limited liability company (the “Trading Advisor”).

 

WITNESSETH:

 

WHEREAS, the Company trades, buys, sells (including sells short) or otherwise acquires, holds or disposes of forward contracts, futures contracts for commodities, financial instruments and currencies on United States and foreign exchanges, any rights pertaining thereto and any options thereon or on physical commodities and other financial instruments and securities, which may include, without limitation, the financial instruments and securities identified in Appendix B hereto, and engages in all activities incident thereto (the foregoing forms of investment being collectively referred to herein as “commodity interests”);

 

WHEREAS, a holder of interests in the Company, BlackRock Global Horizons I, LP (the “Global Horizons Fund”), currently offers units of limited partnership interests in the Global Horizons Fund (the “Global Horizons Units”) for sale to investors in an offering exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”), pursuant to Section 4(2) thereof and Rule 506 under Regulation D promulgated thereunder, as described in the Global Horizons Fund’s confidential private placement memorandum (the “Global Horizons Memorandum”) that has been filed with the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”) pursuant to the Commodity Exchange Act, as amended (the “CEA”), the commodity pool operator and commodity trading advisor regulations promulgated under the CEA by the CFTC (the “Commodity Regulations”), and NFA rules promulgated under the CEA (the “NFA Rules”);

 

WHEREAS, the Global Horizons Fund had previously sold Global Horizons Units publicly pursuant to an effective registration under the 1933 Act.  Such public offering was discontinued in 1998, and the Global Horizons Units now being offered are the same class of equity securities as the outstanding Global Horizons Units;

 

WHEREAS, interests in the Company may be held by the Global Horizons Fund and by additional entities sponsored or managed by the Manager or an affiliate (each such entity, including the Global Horizons Fund, a “BlackRock Vehicle”);

 

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

 

WHEREAS, the Company desires the Trading Advisor, upon the terms and conditions set forth herein, to act as a trading advisor for the Company and to make commodity

 

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interests investment decisions for the Company with respect to the Company’s assets from time to time, and the Trading Advisor desires to so act;

 

NOW, THEREFORE, the parties hereto do hereby agree as follows:

 

1.                                      Undertakings in Connection with Offering of Global Horizons Units.

 

(a)                     Undertakings by the Trading Advisor.  The Trading Advisor agrees to use its commercially reasonable efforts to cooperate with the Global Horizons Fund and the Manager in amending the Global Horizons Memorandum or any other written materials related to the services provided by the Trading Advisor to the Company, including without limitation by providing, as promptly as may be reasonably practicable, all information (if any) regarding the Trading Advisor and its principals which the Manager reasonably believes to be necessary or advisable to include in the Global Horizons Memorandum, as the same may be amended from time to time; provided, that nothing herein shall require the Trading Advisor to disclose any proprietary or confidential information related to its trading programs, systems or strategies or to its clients.

 

(b)                     Certain Defined Terms.  As used in this Agreement, the term “principal” shall have the same meaning given to such term in Section 4.10(e) of the Commodity Regulations, and the term “affiliate” shall mean an individual or entity (including a stockholder, director, officer, employee, agent, or principal) that directly or indirectly controls, is controlled by, or is under common control with any other individual or entity.

 

(c)                      Use of Global Horizons Memorandum and Other Solicitation Material.  Neither the Trading Advisor, its principals nor any of its employees, affiliates or agents, the employees, affiliates or agents of such affiliates, or their respective successors or assigns shall use, publish, circulate or distribute the Global Horizons Memorandum (including any amendment or supplement thereto) or any related solicitation material nor shall any of the foregoing engage in any marketing, sales or promotional activities in connection with the offering of Global Horizons Units, except as may be requested by the Manager and agreed to by the Trading Advisor.

 

(d)                     Updated Performance Information.  At any time while Global Horizons Units continue to be offered and sold, at the written request of the Global Horizons Fund or the Manager, the Trading Advisor, at its own expense, shall promptly provide the Global Horizons Fund and the Manager with complete and accurate performance information reflecting the actual performance of the Master Fund (as defined below) up to the latest reasonably practicable month-end prior to the date of the Global Horizons Memorandum (as amended or supplemented), together with any reports or letters relating to such performance data received from accountants and in the possession of the Trading Advisor.

 

(e)                      Access to Personnel and Books and Records.  Upon reasonable notice to the Trading Advisor, the Company or the Manager shall have the right to have access to the Trading Advisor’s offices in order to inspect and copy such books and records during normal business hours as may enable them to verify the accuracy and completeness of or to supplement as necessary the data furnished by the Trading Advisor pursuant to Section l(d) of

 

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this Agreement or to verify compliance with the terms of this Agreement (subject to such restrictions as the Trading Advisor may reasonably deem necessary or advisable so as to preserve the confidentiality of proprietary information concerning such trading systems, methods, models, strategies and formulas and of the identity of the Trading Advisor’s clients).  The Company or the Manager shall also have the right upon reasonable notice to the Trading Advisor to have access to appropriate senior personnel of the Trading Advisor in order to discuss matters related to such books and records.

 

2.                                      Duties of the Trading Advisor.

 

(a)                     Speculative Trading.  As of the date of this Agreement, the Trading Advisor acts as the trading advisor for the Company.  The Trading Advisor and the Company agree that in managing the commodity interests of the Company held in the Clearing Broker Account (as defined below), the Trading Advisor shall utilize the investment program (the “Program”) as described in the Confidential Memorandum for Ellington Quantitative Macro Fund Ltd. (the “Ellington Fund”) dated November 2013, as may be amended or restated from time to time (the “Disclosure Statement”).  The Trading Advisor agrees to invest the Company’s assets on a pari passu basis with Ellington Quantitative Macro Master Fund Ltd., the master fund in which the Fund invests all of its assets (the “Master Fund”); provided, however, that the Company and the Manager acknowledge that the portfolio of the Company and its investment performance may differ from that of the Master Fund due to (i) changes in the investment program for the Master Fund that have not been approved for the Company as provided herein, (ii) position lot rounding and minimum position size determinations made by the Trading Advisor with respect to the Company or the Master Fund, (iii) any investment restrictions applicable to the Company, (iv) the frequency of capital contributions and withdrawals from the Master Fund and the Company, (v) different fees and expenses, including, without limitation, trading counterparty fees and expenses, applicable to the Master Fund and the Company, and (vi) the allocation of certain new trading strategies solely to the Master Fund during the first week of implementation.  Except as permitted by the preceding sentence, the Trading Advisor may trade a different portfolio for the Company only with the consent of the Manager.  Except as provided otherwise in this Section 2, the Trading Advisor shall have sole and exclusive authority and responsibility for directing the investment and reinvestment of assets credited to the Clearing Broker Account utilizing the Program pursuant to and in accordance with the Trading Advisor’s best judgment and its approach as described in the Disclosure Statement, and as refined and modified from time to time in the future in accordance herewith, for the period and on the terms and conditions set forth herein.  Only those individuals employed by the Trading Advisor, listed on Appendix A and authorized by the Trading Advisor to do so are permitted to implement trades for the Company.  Notwithstanding the foregoing, the Company or the Manager may override the trading instructions of the Trading Advisor to the extent necessary to comply with applicable law, including speculative position limits.  “Clearing Broker Account” means, collectively, one or more accounts of the Company held in the name of the Company and established at one or more Clearing Brokers (as defined below) upon prior written notice to the Trading Advisor.

 

The Company and the Manager both specifically acknowledge that in agreeing to manage the Company, the Trading Advisor is not making any guarantee of profits or of

 

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protections against loss. The Company and the Manager hereby consent to the treatment of the Company as an exempt account under Rule 4.7 of the CEA.

 

The Trading Advisor shall give the Company and the Manager prompt written notice of any proposed material change in the Program or the manner in which trading decisions are to be made or implemented and, unless consented to in advance by the Company, shall not make any such proposed material change with respect to trading for the Company.  Notwithstanding the foregoing, the Company and the Manager acknowledge and agree that the Trading Advisor anticipates (i) designing and implementing new sub-strategies for the Master Fund and Company from time-to-time consistent with the investment strategies set forth in the Disclosure Statement that only contemplate investment in commodity interests that are set forth on Appendix B, and (ii) the addition and/or the deletion of commodity interests from the Company’s portfolio managed by the Trading Advisor (provided that such commodity interests are set forth on Appendix B), and neither of the foregoing shall be deemed a change in the Trading Advisor’s trading approach and prior written notice to the Company or the Manager shall not be required therefor, except as set forth in Section 2(b) below; provided that, with respect to the Company, the Trading Advisor may trade a trading program other than the Program in managing the Company only with the consent of the Manager, subject to the first paragraph of this Section 2(a).

 

(b)                     List of Commodity Interests Traded by the Trading Advisor.  The Trading Advisor shall provide the Company and the Manager with a complete list of commodity interests which it intends to trade on the Company’s behalf.  All commodity interests other than regulated futures contracts and options on regulated futures contracts traded on a qualified board or exchange in the United States (“Regulated Futures Contracts”) shall be listed on Appendix B to this Agreement.  The addition of commodity interests (other than forward contracts on foreign currencies and Regulated Futures Contracts) to the Company’s portfolio managed by the Trading Advisor as set forth in Appendix B to this Agreement shall require prior written consent of the Company and an amendment to Appendix B (such consent not to be unreasonably withheld or delayed).  Notwithstanding anything contained herein to the contrary, the Trading Adviser shall not trade any securities (including, without limitation, US treasury securities) on behalf of the Company without the prior written consent of the Company.

 

(c)                      Investment of Assets Held in Securities and Cash.  Notwithstanding any provision of this Agreement to the contrary, the Company and the Manager, and not the Trading Advisor, shall have the sole and exclusive authority and responsibility with regard to the investment, maintenance and management of the Company’s assets other than in respect of the Trading Advisor’s trading of the Company’s commodity interests (including engaging in repurchase or reverse repurchase transactions) held in the Clearing Broker Account.

 

(d)                     Trading Authorization.  Prior to the Company’s acceptance of trading advice from the Trading Advisor in accordance with this Agreement, the Company shall deliver to the Trading Advisor a trading authorization in the form of Appendix C hereto appointing the Trading Advisor as an agent of the Company and attorney-in-fact for such purpose.

 

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(e)                      Delivery of Disclosure Statement.  The Trading Advisor shall, during the term of this Agreement, deliver to the Company copies of all updated Disclosure Statements for the Ellington Fund, promptly following preparation of such Disclosure Statements, and the Manager on behalf of the Company shall, if requested, sign the Acknowledgement of Receipt of Disclosure Statement in the form of Appendix D hereto, for the initial Disclosure Statement so delivered.

 

(f)                       Trade Reconciliations.  The Trading Advisor acknowledges its obligation to review the commodity interest positions held in the Clearing Broker Account on a daily basis and to notify the Company and the Manager promptly of any trade errors, representing any realized or unrealized losses to the Clearing Broker Account equal to or greater than 5 basis points of the Company’s net asset value, committed by the Trading Advisor on behalf of the Company or any trade which the Trading Advisor believes was not executed on behalf of the Company in accordance with its instructions which (i) represents a loss to the Company equal to or greater than 5 basis points of the Company’s net asset value and (ii) cannot be promptly resolved.  The Trading Advisor will use its own records to evaluate trade and portfolio information against those of the Clearing Broker and will use commercially reasonable efforts to coordinate with the Company or the Company’s administrator to resolve any inconsistencies between the Trading Advisor’s records and those of the Company.

 

(g)                      Trade Information.   The Trading Advisor shall use reasonable efforts to provide trade information to OMR Systems by electronic file by 6:00 p.m. New York time on the date of any trade made on behalf of the Company.

 

3.                                      Trading Advisor Independent.  For all purposes of this Agreement, the Trading Advisor shall be deemed to be an independent contractor and, except as expressly set forth herein, shall have no authority to act for or represent the Company in any way and shall not otherwise be deemed to be an agent of the Company.  Nothing contained herein shall create or constitute the Trading Advisor and any other trading advisor for the Company, the Global Horizons Fund or the Manager as a member of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, nor shall this Agreement be deemed to confer on any of them any express, implied, or apparent authority to incur any obligation or liability on behalf of any other.  The parties acknowledge that the Trading Advisor has not been an organizer or promoter of the Global Horizons Fund.

 

4.                                      Commodity Broker; Executing Brokers.

 

(a)                     Clearing of All Trades.  The Trading Advisor shall clear orders for all commodity interest transactions for the Company through such commodity broker or brokers as the Company shall designate from time to time in its sole discretion with the prior consent of the Trading Advisor (which consent will not be unreasonably withheld or delayed) (the “Clearing Broker”).  The Trading Advisor will not, without the consent of the Manager, trade on a “give up” basis through executing brokers not associated with the Clearing Broker.  The Manager will review and approve or disapprove all executing brokers proposed by the Trading Advisor for the Company’s account.  The Manager agrees that it will only disapprove a proposed executing broker suggested by the Trading Advisor for cause and that, if an executing broker is approved, the Company will not hold the Trading Advisor liable for any error or

 

5

 

breach of contract by any such executing broker, barring gross negligence, misconduct or bad faith on the part of the Trading Advisor in selecting and monitoring such executing broker.  Even if such executing brokers receive the Manager’s consent to execute trades on behalf of or with the Company, all such trades will be “given-up” to or otherwise be caused to clear at the Clearing Broker.  The Company shall cause the Trading Advisor to receive copies of all daily and monthly brokerage statements for the Company directly from the Clearing Broker.

 

The parties acknowledge that the Trading Advisor has no authority or responsibility for selecting a commodity broker or dealers or for the negotiation of brokerage commission rates.  If necessary for the Trading Advisor to trade pursuant to the Program, the Company shall provide adequate dealing lines of credit for the Trading Advisor to place orders for spot and forward currency contracts on behalf of the Company.

 

(b)                     Forward Trading.  All forward trades for the Company shall be executed through the forward dealer(s) (which may be affiliates of the Manager) designated by the Manager with the prior consent of the Trading Advisor (which consent will not be unreasonably withheld or delayed), provided that at the request of the Trading Advisor, the Manager may consent to some other forward trading arrangement, which consent shall not be unreasonably withheld.  The Trading Advisor shall use such other banks or dealers only for what the Trading Advisor, in good faith, believes to be good cause.

 

(c)                      Executing Brokerage.  Notwithstanding Section 4(a) of this Agreement, the Trading Advisor may place orders for commodity interest transactions for the Company through executing brokers selected by the Trading Advisor, and approved by the Manager, such approval not to be unreasonably withheld or delayed.  Such executing brokers shall “give up” all trades on behalf of the Company to the Clearing Broker for clearance.  The brokerage and execution commissions, “give-up” fees and other transaction costs charged by any executing broker to effect Company transactions shall be subject to the approval of the Manager, such approval not to be unreasonably withheld provided that such fees and transaction costs are competitive with the Clearing Broker’s standard rates.  Further notwithstanding Section 4(a) of this Agreement, the Trading Advisor may solicit and execute trades with the principal trading desk of executing brokers, provided that such executing brokers have been approved by the Manager as described in this Section 4(a), the fees and transactions costs associated with such trades are competitive with those obtained in trades done away from such principal trading desk, and such trades do not constitute cross-trades.  Any trades executed with the principal desk of executing brokers will be cleared with the Clearing Broker.

 

(d)                     Other Financial Instruments.  The Trading Advisor may, from time to time, be eligible to invest the assets of the Company in assets to be listed on Appendix B hereto which may not be eligible for clearing through the Clearing Broker.  Any such instruments, which may include, without limitation, swaps and treasury securities, will be bought and sold for the account in a manner consistent with industry practice using trading counterparties and/or custodians consented to by the Manager (such consent not to be unreasonably withheld) and such financial instruments shall be deemed to be held in the Clearing Broker Account for purposes of this Agreement.

 

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5.                                      Allocation of Company Assets to Trading Advisor; Allocation of Receipts and Charges.

 

(a)                     The Manager has allocated a portion of the assets of the BlackRock Vehicles to the Company in an initial aggregate amount equal to [ ]* to be managed in accordance with the terms of this Agreement.  The Manager may, in its sole discretion, reallocate BlackRock Vehicles’ assets by contributing to or withdrawing amounts from the Company as of any month-end.  The Company may withdraw amounts from the Clearing Broker Accounts as of any month-end, including to fund any distributions or redemptions of interests to be made by the Company and/or to pay the Company’s expenses; provided that the Company and the Manager shall provide the Trading Advisor three business days’ notice so that the Trading Advisor may liquidate positions as may be necessary to satisfy such withdrawals.

 

(b)                     A separate memorandum account (each such account, an “Account”) shall be maintained on the books of the Company with respect to each BlackRock Vehicle’s interest in the Company (or in respect of different portions of a BlackRock Vehicle’s interest in the Company) managed by the Trading Advisor and shall be increased or decreased for allocations, reallocations, distributions, withdrawals and the allocation of gains and receipts, losses and charges (including the Incentive Fee (as defined below) and the Management Fee (as defined below)) with respect to such Account.  The Manager shall, on a monthly basis, provide the Trading Advisor with sufficient information on a BlackRock Vehicle level to calculate accrued Management and Incentive Fees (each as defined below), including, without limitation the amount and dates of allocations, reallocations, distributions and withdrawals with respect to each BlackRock Vehicle.

 

(c)                      Gains and receipts (e.g., trading profits and, in some instances, interest income), losses and charges (e.g., trading losses, brokerage commissions and Company administrative expenses) specific to the Company shall be allocated to the BlackRock Vehicles’ Accounts on a pro rata basis based on the value of each BlackRock Vehicle Account at the beginning of the applicable fiscal period, before reduction for any Incentive Fee (as defined herein), provided that any Management Fees and Incentive Fees shall be allocated to the Accounts to which such fees relate.

 

(d)                     With respect to the Global Horizons Fund, gains and receipts, losses and charges of the Global Horizons Fund not specific to (i) the Company or (ii) any other company or account held by the Global Horizons Fund and managed by a specific trading advisor (e.g., certain interest income and distributions attributable to the Global Horizons Fund), including, but not limited to, the Manager’s sponsor fee, the Global Horizons Fund’s distribution fee and the Global Horizons Fund’s other operating expenses (“Non-Specific Items”), shall be allocated among all of the companies and accounts held by the Global Horizons Fund that are managed by the different trading advisors, including the Global Horizon Fund’s Account with the Company, pro rata based on the beginning of the month value of each such company and account.

 

(e)                      The value of a BlackRock Vehicle’s Account determined after taking into account all realized and unrealized gains and losses, and with respect to Global Horizons

 

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Fund’s Account, after deducting all charges and reserves (including but not limited to, in the case of Global Horizons Fund, (i) the charges and other items specific to Global Horizons Fund’s Account provided for in Section 5(d), and (ii) a pro rata share (based upon the value of Global Horizons Fund’s Account and each other company and account of the Global Horizons Fund) of distribution fees, transfer agent fees, administrator’s fees, brokerage commissions and sponsor fees) is a BlackRock Vehicle’s Account’s “Net Asset Value.”

 

6.                                      Compensation.

 

(a)                                 Management Fee.  Within approximately ten business days of each calendar month-end (but in no event later than 30 days following each calendar month-end), the Company will pay the Trading Advisor a management fee in respect of each BlackRock Vehicle’s Account equal to [ ]* of the month-end Net Asset Value (before deducting the Management Fee being calculated and any accrued and unearned Incentive Fee) of each such BlackRock Vehicle’s Account (the “Management Fee”).

 

The Management Fee for any month will be prorated for any contributions, reallocations of assets, distributions or withdrawals (reallocations of assets, distributions and withdrawals, together (“Reallocations”) from a BlackRock Vehicle’s Account pursuant to Section 5(a) during the month and for any months during which the Trading Advisor did not manage the BlackRock Vehicle Account for the full month.  The Management Fee is also payable upon termination of this Agreement other than at a month-end.

 

In the event that the net aggregate amount (i) invested by investment advisory clients of the Manager or its affiliates in Ellington Quantitative Macro Master Fund Ltd. (the “Master Fund”) (whether directly or indirectly through Ellington Quantitative Macro Fund Ltd. or any other feeder fund created to invest its assets in the Master Fund) and (ii) contributed to the Company (together, the “Aggregate Investment”) is equal to or exceeds [ ]* (the “Allocation Threshold”), then, as of the first business day of the calendar month following the date upon which the Allocation Threshold is met or exceeded (or if the Allocation Threshold is met or exceed on the first business day of a calendar month, then as of such date), the Management Fee shall be [ ]*.  In determining the Aggregate Investment, the greater of (x) the net aggregate amounts contributed to the Master Fund by clients of the Manager or its affiliates and contributed to the Company and (y) the aggregate net asset value of the Company and the interests in the Master Fund held by clients of the Manager or its affiliates will be used.  In the event the Aggregate Investment subsequently falls below the Allocation Threshold then, as of the first day of the calendar month following the date upon which the Allocation Threshold is no longer met or exceeded (or if the Allocation Threshold is no longer met or exceed on the first business day of a calendar month, then as of such date), the Management Fee shall be [ ]*.

 

(b)                                 Incentive Fee.

 

(i)                                    The Company will pay an incentive fee (the “Incentive Fee”) to the Trading Advisor, in respect of each BlackRock Vehicle’s Account for the annual period ending on December 31 of each calendar year (“Incentive Fee Calculation Date”), equal to [ ]* of the New Trading Profit (as defined herein) of such BlackRock Vehicle’s Account as of such Incentive

 

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Fee Calculation Date.  Any Incentive Fee payable to the Trading Advisor will be paid by the Company within approximately 30 days following the applicable Incentive Fee Calculation Date (or the date which is treated as an Incentive Fee Calculation Date) but in no event later than 45 days following such date).  For the avoidance of doubt, the first Incentive Fee period will begin on the date of this Agreement and end as of December 31 of the calendar year which includes the date of this Agreement.

 

(ii)                                 Subject to the adjustments contemplated below, “New Trading Profit” shall mean the excess of (x) the Net Asset Value of a BlackRock Vehicle’s Account as of the current Incentive Fee Calculation Date (less all Management Fees allocable to such BlackRock Vehicle’s Account) over (y) the High Water Mark (as defined below) attributable to such BlackRock Vehicle’s Account.  New Trading Profit will be calculated prior to reduction [ ]*.

 

(iii)                              The “High Water Mark” attributable to a BlackRock Vehicle’s Account shall be equal to the net asset value of such BlackRock Vehicle’s Account (for the avoidance of doubt, after reduction for the Incentive Fee then paid), as of the most recent Incentive Fee Calculation Date as of which an Incentive Fee was charged to such Account (or, for the year in which such BlackRock Vehicle Account was established, the date that the BlackRock Vehicle’s Account was established).  The High Water Mark attributable to a BlackRock Vehicle’s Account shall subsequent to such date be increased dollar-for-dollar by any capital allocated to the Company by such BlackRock Vehicle and decreased proportionately when capital is Reallocated away from the Company (other than to pay expenses) by such BlackRock Vehicle.  The amount of the High Water Mark after giving effect to the proportionate reduction made as a result of a Reallocation shall be calculated by multiplying the High Water Mark of such BlackRock Vehicle’s Account in effect immediately prior to such Reallocation by a fraction the numerator of which is the value of such BlackRock Vehicle’s Account immediately following such Reallocation and the denominator of which is the value of such BlackRock Vehicle’s Account immediately before such Reallocation.

 

(iv)                              If an Incentive Fee is paid as of an Incentive Fee Calculation Date in respect of a BlackRock Vehicle’s Account, the High Water Mark of such BlackRock Vehicle’s Account is reset to the net asset value of the BlackRock Vehicle’s Account immediately following such payment.

 

(v)                                 When there is an accrued Incentive Fee in respect of a BlackRock Vehicle’s Account at any time any Reallocation from the Company by a BlackRock Vehicle is made, the Incentive Fee attributable to such Reallocation will be paid.  Such Incentive Fee shall be determined by multiplying the Incentive Fee that would have been paid in respect of such BlackRock Vehicle’s Account had the date of the Reallocation been an

 

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Incentive Fee Calculation Date by a fraction the numerator of which is the amount of the Reallocation by such BlackRock Vehicle and the denominator of which is the value of the BlackRock Vehicle’s Account immediately prior to the Reallocation, in each case prior to reduction for the accrued Incentive Fee.  Such Incentive Fee will be paid from and reduce the amount of the Reallocation by such BlackRock Vehicle.

 

(vi)                              Interest income and interest expense on cash or cash equivalents (including any interest on cash accounts, clearing brokerage accounts or posted collateral) shall not be included in any of the foregoing calculations; provided, however, that interest income or interest expense on financial instruments identified on Appendix B hereto in which the Company’s assets are invested by the Trading Advisor pursuant to the Program shall be included in the foregoing calculations, irrespective of whether they are deemed to be cash or cash equivalents.  For the avoidance of doubt, no Incentive Fee shall be payable on any interest income earned by a BlackRock Vehicle unless such interest income is earned on financial instruments identified on Appendix B.

 

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

 

7.                                      Term and Termination.

 

(a)                     Term and Renewal.  This Agreement shall continue in effect until December 31, 2014.  Thereafter, this Agreement shall be automatically renewed for successive one-year periods.

 

(b)                     Termination.  Notwithstanding Section 7(a) hereof, this Agreement shall terminate:

 

(i)                                             immediately if the Company shall terminate and be dissolved in accordance with the Limited Liability Company Agreement or otherwise; provided, however, that the Trading Advisor, to the extent reasonably practicable, shall be provided not less than 30 days prior written notice of any such termination or dissolution;

 

(ii)                                          at the discretion of the Manager effective as of the end of any calendar day upon at least 10 days’ prior written notice to the Trading Advisor;

 

(iii)                                       at the discretion of the Trading Advisor, as of the following month-end, should any of the following occur:  (1) the value of the Clearing Broker Account is less than [ ]*, as a result of withdrawals by the Company, at the close of business on any date that is on or after 6 months from the date hereof; or (2) the Trading Advisor has determined to cease managing any customer accounts pursuant to the Program; or

 

(iv)                                      at the discretion of the Trading Advisor as of the end of any month upon 60 days’ prior written notice to the Manager.

 

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(c)                      Except as otherwise provided in this Agreement, any termination of this Agreement in accordance with this Section 7 shall be without penalty or liability to any party, except for any fees due to the Trading Advisor pursuant hereto.

 

(d)                     The following shall survive the termination of this Agreement: (i) each party’s accrued rights and obligations as of the date of termination and (ii) the provisions of Sections 6, 13, 19, 20, 21, and 22.

 

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

 

(a)                     During the term of this Agreement, the Trading Advisor and its affiliates shall be free to advise other investors as to the purchase and sale of commodity interests, to manage and trade other investors’ commodity interests accounts and to trade for and on behalf of their own proprietary commodity interests accounts.  However, under no circumstances shall the Trading Advisor or any of its affiliates favor any commodity interests account directed by any of them (regardless of the date on which they began or shall begin to direct such account) over the Company’s account, giving due consideration to the trading program which the Manager has requested the Trading Advisor to trade on behalf of the Company; provided, however, that each of (i) allocations of investment opportunities made on a fair and equitable basis in accordance with the Trading Advisor’s investment allocation policy, (ii) allocations of expenses made in good faith in accordance with the expense allocation disclosure under “Expenses” in the Disclosure Document and (iii) actions taken with respect to commodity interests accounts directed by the Trading Advisor or any of its affiliates (including the Company) consistent with the “Conflicts of Interest” disclosure in the Disclosure Document shall not be deemed to favor any account over another for purposes of this Agreement.  For purposes of this Agreement, the Trading Advisor and its affiliates shall not be deemed to be favoring another commodity interests account over the Company’s account if the Trading Advisor or its affiliates, in accordance with specific instructions of the owner of such account, trade such account at a degree of leverage or in accordance with trading policies which shall be different from that which shall normally be applied to substantially all of the Trading Advisor’s other accounts, or if the Trading Advisor or its affiliates, in accordance with the Trading Advisor’s money management principles, shall not trade certain commodity interests contracts for an account based on the amount of equity in such account, or if other accounts trade instruments or using strategies that have been proposed to the Company or the Manager but not accepted for trading by the Company as provided herein.

 

(b)                     The Trading Advisor understands and agrees that it and its affiliates shall have a fiduciary responsibility to the Company under this Agreement.

 

(c)                      At the request of the Company, the Trading Advisor and its affiliates shall promptly make available to the Company (if available to it without unreasonable efforts) copies of the normal daily, monthly, quarterly and annual, as the case may be, written reports reflecting the performance of the Master Fund (subject to the need to preserve the confidentiality of proprietary information concerning the Trading Advisor’s trading systems, methods, models, strategies and formulas and the identity of the Trading Advisor’s clients).  At the request of the Company, the Trading Advisor or its affiliates shall promptly deliver to the Company a reasonably satisfactory written explanation, in the judgment of the Company, of

 

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the differences, if any, in the performance between the Company’s account and the Master Fund (subject to the need to preserve the confidentiality of proprietary information concerning the Trading Advisor’s trading systems, methods, models, strategies and formulas and the identity of the Trading Advisor’s clients).

 

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

 

10.                               Additional Undertakings by the Trading Advisor.  Neither the Trading Advisor nor its employees, affiliates or agents, the stockholders, directors, officers, employees, principals, affiliates or agents of such affiliates, or their respective successors or assigns shall knowingly:  (a) use or distribute for any purpose whatsoever any list containing the names and/or residential addresses of and/or other information about the investors of the BlackRock Vehicles, nor (b) directly solicit any investor in a BlackRock Vehicle for any business purpose whatsoever (unless such investor in a BlackRock Vehicle (i) is already a client of the Trading Advisor, (ii) is not known to the Trading Advisor to be an investor in a BlackRock Vehicle, or (iii) was identified by the Trading Advisor as a prospective client, investor or business partner by persons or processes unrelated to such prospective investor’s relationship with any BlackRock Vehicle).

 

11.                               Representations and Warranties.

 

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

 

(i)                                             The Trading Advisor is an entity duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization and in good standing under the laws of each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to be duly qualified would materially adversely affect the Trading Advisor’s ability to perform its obligations under this Agreement.  The Trading Advisor has full corporate, partnership or limited liability company (as the case may be) power and authority to perform its obligations under this Agreement.

 

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

 

(iii)                                       The Trading Advisor has all governmental, regulatory and commodity exchange licenses and approvals and has effected all filings and registrations with governmental and regulatory agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder (including, without limitation, registration

 

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of the Trading Advisor as a commodity trading advisor under the CEA, and membership of the Trading Advisor as a commodity trading advisor in the NFA), and the performance of such obligations will not violate or result in a breach of any provision of the Trading Advisor’s certificate of incorporation, by-laws or any agreement, instrument, order, law or regulation binding on the Trading Advisor.  The principals of the Trading Advisor are duly listed as such on its commodity trading advisor Form 7-R registration.

 

(iv)                                      The Trading Advisor is registered with the CFTC as a commodity pool operator and commodity trading advisor and is a member of the National Futures Association under the CEA or CFTC rules and regulations and such registrations and memberships have not expired or been revoked, suspended, terminated, or not renewed, or limited or qualified in any respect.

 

(v)                                         The Trading Advisor is registered as an investment adviser pursuant to the Investment Advisers Act of 1940.

 

(vi)                                      The Trading Advisor’s implementation of its trading program on behalf of the Company will not infringe any other person’s copyrights, trademark or other property rights.

 

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

 

(viii)                                Other than as may have been disclosed in writing to the Manager by the Trading Advisor, there is not pending, or to the best of the Trading Advisor’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Trading Advisor is a party, or to which any of the assets of the Trading Advisor is subject, which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Trading Advisor.  The Trading Advisor has not received any notice of an investigation or warning letter from the NFA, the CFTC or the Securities and Exchange Commission (the “SEC”) regarding non-compliance by the Trading Advisor with the CEA or any securities laws or the regulations thereunder which, if determined adversely, would reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Trading Advisor.

 

(ix)                                      The Trading Advisor is in compliance in all material respects with all applicable law.

 

(x)                                         The Trading Advisor will be in compliance in all material respects with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and all applicable anti-money laundering regulations with respect to the Trading Advisor.

 

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

 

(i)                                             The Manager is duly organized and validly existing and in good standing under the laws of its jurisdiction of formation and in good standing under the laws of each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would materially adversely affect the Manager’s ability to perform its obligations hereunder.

 

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

 

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

 

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

 

(v)                                         There is not pending, or, to the best of the Manager’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Manager is a party, or to which any of the assets of the Manager is subject, which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Manager or is required to be disclosed pursuant to applicable CFTC regulations.

 

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

 

(vii)                                   The Manager serves as the commodity pool operator of the Company and is registered with the CFTC as a commodity pool operator and commodity trading advisor and is a member of the National Futures Association under the CEA or CFTC rules and regulations and such registrations and memberships have not expired or been revoked, suspended, terminated, or not renewed, or limited or qualified in any respect.

 

(viii)                                The Manager is in compliance in all material respects with all applicable law relating to the Manager’s obligations under this Agreement.

 

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(ix)                                      The Manager will be in compliance in all material respects with the USA PATRIOT Act and all applicable anti-money laundering regulations relating to the Manager’s obligations under this Agreement.

 

(x)                                         The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Company Act”).

 

(c)                      The Company represents and warrants to the other parties as follows:

 

(i)                                             The Company is duly organized and validly existing and in good standing as a limited liability company under the laws of the State of Delaware and in good standing under the laws of each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to be duly qualified would materially adversely affect the Company’s ability to perform its obligations hereunder.

 

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

 

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

 

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

 

(v)                                         There is not pending, or, to the best of the Company’s knowledge, threatened, any action, suit or proceeding before or by any court or other governmental body to which the Company is a party, or to which any of the assets of the Company is subject, which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Company or which is required to be disclosed pursuant to applicable CFTC regulations.

 

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

 

(vii)                                   The Company is (w) a “qualified eligible person” as defined in CFTC Regulation 4.7, (x) an “eligible contract participant” as defined under the CEA, (y) an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended and (z) a “qualified purchaser” as defined in Section 2(a)(51) of the US Investment Company Act of 1940, as amended.

 

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(viii)                                The Company has received and reviewed a copy of (1) the Disclosure Statement and the Company acknowledges that the risk factors and conflicts of interest disclosures set forth therein apply to the Program to be implemented pursuant to this Agreement and (2) the Trading Advisor’s current Form ADV Part 2 and the Company acknowledges receiving disclosure regarding regulatory contacts included in the Form ADV Part 2A disclosure brochure under “Litigation or Regulatory Matters”.

 

(ix)                                      The Company is the owner of all funds deposited in the Clearing Broker Account.

 

(x)                                         The Company shall, at all times during the term of this Agreement comply with (i) all margin and (ii) other contractual requirements that apply or relate to the assets held in the Clearing broker Account.

 

(xi)                                      The Company is not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and shall not be deemed to be a plan asset under Department of Labor Regulations.

 

(xii)                                   The Company acknowledges that the Trading Advisor will not serve as the alternative investment fund manager of the Company for the purposes of the European Union’s Alternative Investment Fund Manager’s Directive (“AIFMD”) and further represents and warrants that in the event that the Company is to be marketed in the European Union the Company will take such steps as are necessary to comply with the AIFMD.

 

(xiii)                                The Company is in compliance in all material respects with all applicable law.

 

(d)                     The foregoing representations and warranties in this Section 11 shall be continuing during the entire term of this Agreement and, if at any time, any event shall occur which would make any of the foregoing representations and warranties of any party no longer true and accurate, such party shall promptly notify the other parties.

 

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

 

13.                               Exculpation and Indemnification.

 

(a)                     The Company shall indemnify, defend and hold harmless the Trading Advisor and its affiliates and their respective directors, officers, shareholders, members, employees and controlling persons from and against any and all losses, claims, damages, liabilities (joint and several), costs and expenses (including any investigatory, legal and other expenses incurred in connection with, and any amounts paid in, any settlement; provided that the Company shall have approved such settlement, such approval not to be unreasonably withheld) resulting from a demand, claim, lawsuit, action or proceeding relating to any of such person’s actions or capacities relating to the business or activities of the Company pursuant to

 

16

 

this Agreement; provided that the conduct of such person which was the subject of the demand, claim, lawsuit, action or proceeding did not constitute gross negligence, intentional misconduct or a material breach of this Agreement or of any fiduciary obligation to the Company and was done in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Company.  The termination of any demand, claim, lawsuit, action or proceeding by settlement shall not, in itself, create a presumption that the conduct in question was not undertaken in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Company.

 

(b)                     The Trading Advisor shall indemnify, defend and hold harmless the Company, the Manager, their respective affiliates and their respective directors, officers, members, shareholders, employees and controlling persons from and against any and all losses, claims, damages, liabilities (joint and several), costs and expenses (including any reasonable investigatory, legal and other expenses incurred in connection with, and any amounts paid in, any settlement; provided that the Trading Advisor shall have approved such settlement, such approval not to be unreasonably withheld) resulting from a demand, claim, lawsuit, action or proceeding relating to any action or omission of the Trading Advisor or any of its respective officers, directors or employees relating to the business or activities of such person under this Agreement or relating to the management of an account of the Company provided: the action or omission of such person which was the subject of the demand, claim, lawsuit, action or proceeding constituted gross negligence or intentional misconduct or a material breach of this Agreement or was an action or omission taken otherwise than in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Company.

 

(c)                      The Trading Advisor, its officers, directors, employees, members and shareholders shall not be liable to the Company, the Manager, their respective officers, directors, shareholders, employees, controlling persons or members or to any of their successors or assigns except by reason of acts or omissions in material breach of the express terms of this Agreement, or due to their intentional misconduct or gross negligence, or by reason of not having acted in good faith and in the reasonable belief that such actions or omissions were in, or not opposed to, the best interests of the Company.

 

(d)                     The foregoing agreement of indemnity shall be in addition to, and shall in no respect limit or restrict, any other remedies which may be available to an indemnified party.

 

(e)                      In the event that a person entitled to indemnification under this Section 13 is made a party to an action, suit or proceeding alleging both matters for which indemnification may be due hereunder and matters for which indemnification may not be due hereunder, such person shall be indemnified only in respect of the former matters.

 

(f)                       Promptly after receipt by any of the indemnified parties under this Agreement of notice of any demand, claim, lawsuit, action or proceeding, the indemnified party shall notify the indemnifying party in writing of the commencement thereof if a claim for indemnification in respect thereof is to be made under this Agreement.  Except to the extent that the indemnifying party is not materially prejudiced thereby, the omission so to notify shall relieve the indemnifying party from any obligation or liability which it may have to any such indemnified party under this section.  In the event that such demand, claim, lawsuit, action or

 

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proceeding is brought against a person entitled to be indemnified under this Agreement, and the indemnifying party is notified of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that the indemnifying party may wish to assume the defense thereof, with counsel selected by the indemnifying party and approved by the indemnified person (provided that approval may not be unreasonably withheld), and after notice from the indemnifying party to such indemnified person of the indemnifying party’s election so as to assume the defense thereof, the indemnifying party shall not be liable to such person under this section for any legal or other expenses subsequently incurred by such person in connection with the defense thereof, unless the indemnifying party approves the employment of separate counsel by such person (it being understood, however, that the indemnifying party shall not be liable for legal or other expenses of more than one separate firm of attorneys for all such persons indemnified hereunder, which firm shall be designated in writing by the Trading Advisor or the Company, as the case may be).

 

(g)                      Notwithstanding the foregoing, nothing contained in this Agreement shall constitute a waiver by the Company or the Manager of any of its legal rights under applicable U.S. federal securities laws or any other laws whose applicability is not permitted to be contractually waived.

 

(h)                     The Trading Advisor represents and warrants that neither it nor any affiliate thereof has entered into, on or prior to the date hereof, any investment advisory agreement with any advisory client or (without duplication) any investment fund managed or advised by the Trading Advisor or an affiliate that is in effect as of the date hereof and contains provisions that provide for a standard of care on the part of the Trading Advisor or limitation to any indemnification obligations on the part of the Trading Advisor that are more beneficial, in the aggregate, to the advisory client or the investment fund than the standard of care or indemnification obligations provided for in this Agreement (e.g., where the Trading Advisor is liable for its negligence) (“Indemnity Rights”).  If, after the date hereof, the Trading Advisor enters into an agreement with any advisory client or investment fund managed or advised by the Trading Advisor or an affiliate that provides such client or investment fund with  more favorable Indemnity Rights, in the aggregate, the Trading Advisor agrees to provide the Manager and the Company with notice of any such agreement and the terms of such Indemnity Rights, and the Manager and the Company within 30 days’ receipt of such notice, will have the right, but not the obligation, upon written request delivered to the Trading Advisor to elect to receive such Indemnity Rights (effective as of the date such Indemnity Rights went into effect pursuant to the applicable agreement).  This Section 13(h) shall not apply to investment advisory agreements entered into by the Trading Advisor or its affiliates (i) which are required by applicable law or regulation to contain more favorable Indemnity Rights or (ii) with advisory clients or investment funds which are or are owned by a domestic or foreign pension or retirement plan or scheme or which relate to assets which are deemed to be a plan asset under DOL Regulations.

 

14.                               Assignment.  This Agreement shall not be assigned (as defined under the Investment Advisers Act of 1940) by any of the parties hereto without the prior express written consent of the other parties hereto; provided, that either party may assign this agreement to an affiliate upon prior notice to the other party.

 

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15.                               Amendment; Waiver.  This Agreement shall not be amended except by a writing signed by the parties hereto.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its rights hereunder on any occasion or series of occasions.

 

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

 

17.                               No Third-Party Beneficiaries.  Nothing contained in this Agreement, express or implied, is intended to confer upon any person or entity, other than the parties and any permitted successors and assigns hereto, any rights or remedies under or by reason of this Agreement.

 

18.                               Notices.  Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered by courier service, facsimile, postage prepaid mail or other similar means and shall be effective upon actual receipt by the party to which such notice shall be directed, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

if to the Company or the Manager:

 

EUPHRATES GLOBAL HORIZONS LLC

c/o BlackRock Investment Management LLC

40 East 52nd Street

10th Floor

New York, New York  10022

Attn:  Edward A. Rzeszowski

Facsimile:  212-810-8745

Email: edward.rzeszowski@blackrock.com

 

with a copy to:

 

BlackRock Investment Management, LLC

One University Square

Princeton, New Jersey  08540-6455

Attn:  Michael Pungello

Facsimile:  609-282-0761

Email: michael.pungello@blackrock.com

 

with a further copy to:

BlackRock Alternative Advisors

601 Union Street, 56th Floor

 

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Seattle, Washington  98101

Attn:  Lawrence M. Gail

Facsimile:  206-225-2684

E-Mail: Larry.Gail@blackrock.com

 

if to the Trading Advisor:

 

Ellington Management Group, L.L.C.

53 Forest Avenue

Old Greenwich, CT 06870

Attn: General Counsel

Facsimile: (203) 698-0869

Email: dmargolis@ellington.com

 

19.                               Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed and performed entirely within the State of New York without regard to principles of conflicts of law.  Each party hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement.

 

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

 

21.                               Promotional Material.  None of the parties hereto will make reference to any other such party in officially filed or publicly or privately distributed material without first submitting such material to the party so named for approval a reasonable period of time in advance of the proposed use of such material.

 

22.                               Confidentiality.  Each party acknowledges that each will have access to the other party’s Confidential Information (as defined below) and each party agrees that it will not disseminate the other party’s Confidential Information, except as required by law or requested by a court regulator, governmental instrumentality or self regulatory organization with oversight over the disclosing party.  A party may use the other party’s Confidential Information solely in connection with its obligations hereunder, and with respect to the Manager, in relation to its obligations to the Company (including, without limitation, any use in relation to monitoring the Trading Advisor’s performance on behalf of the Company).  “Confidential Information” means information concerning a party’s (and its affiliates’) business affairs, trading or investment strategies, methodologies and results; trading or investment systems; trades and

 

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investment positions (whether of the Clearing Broker Account or otherwise); risk management models; revenue models; quantitative and other strategies and methodologies, procedures and techniques; business plans and strategies, pricing and other financial information; lists of investors, clients, vendors and suppliers; any confidential information of any such investors, clients, vendors or suppliers; and other proprietary technologies and processes and other proprietary information used by a party in connection with its business and/or which a party or any of its affiliates is obligated to any third party to maintain as confidential.  Notwithstanding anything to the contrary in this Section 22 or otherwise, (a) the Company and the Manager may disclose: (i) to investors and prospective investors (or their advisers) in the Company (“Investors”), and underlying investors or prospective investors of such Investors (or their advisers) (collectively with Investors, “Underlying Investors”): (A) the name of the Trading Advisor; (B) descriptions of the Trading Advisor and the trading strategies pursued by the Trading Advisor; (C) performance related information for the Company (including the Clearing Broker Account) and the performance of the Master Fund; (D) risk reporting related information for the Company (including duration, geography, industry and sector exposure, and leverage, but no position data); and (E) biographies of key personnel of the Trading Advisor; and (ii) the tax treatment and tax structure of any transactions entered into by the Trading Advisor on behalf of the Company; provided, however, that the Manager and the Company shall not take any action, including, without limitation, the dissemination of information about the Trading Advisor or any fund or account managed or advised by the Trading Advisor, which would require Trading Advisor or such funds or accounts to register pursuant to any applicable securities laws or which would constitute the public offering of any such funds or accounts, (b) the Trading Advisor shall be entitled to use, for all purposes permitted under applicable law, the performance track record of the Company and the Clearing Broker Account as long as the identities of the Company, the Manager and the BlackRock organization are not disclosed, and (c) the Company and the Manager shall not (and shall cause their respective affiliates and service providers not to) (i) disclose the Company’s portfolio holdings level information, trading advice or trading instructions (the “Trading Information”) other than to the Company’s service providers who have a need to know such Trading Information in connection with their responsibilities to the Company or (ii) on their own behalf or on behalf of any other client, entity or individual, place trading instructions (including, but not limited to those relating to derivative or hedging strategies) or otherwise change or alter their trading strategies based in whole or in part on the Trading Information, except as may be necessary to comply with applicable law including, without limitation, speculative position limits.  Each party acknowledges and agrees that irreparable injury will result to the other applicable parties if there are breaches of any of the terms of the covenants set forth in this Section 22 (collectively, the “Covenants”), and that in the event of the actual or threatened breach of any of the Covenants, the applicable parties will have no adequate remedy at law.  Each party accordingly agrees that in the event of any actual or threatened breach by the other party of any of the Covenants, the other applicable parties shall be entitled to immediate temporary injunctive and other equitable relief with respect to such actual or threatened breach, without being required to show actual monetary damages or post any bond or other security.  The remedies and agreements of indemnity contained herein are not exclusive and shall not limit or restrict any other remedies available to a party, including the recovery of damages.

 

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23.                               Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

24.                               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 to affect the meaning or interpretation hereof.

 

*                                         *                                         *                                         *                                         *

 

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PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION (“CFTC”) IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION.  THE CFTC DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF THE COMMODITY TRADING ADVISOR’S DISCLOSURE.  CONSEQUENTLY, THE CFTC HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.

 

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

 

	
 
    	
EUPHRATES GLOBAL HORIZONS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
BLACKROCK INVESTMENT MANAGEMENT, LLC, 
    
	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BLACKROCK INVESTMENT MANAGEMENT, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ELLINGTON MANAGEMENT GROUP, L.L.C.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

23

 

APPENDIX A

 

AUTHORIZED TRADERS

 

A. Rasheed Sabar

 

Igor Desvatnikov

 

Jae-Min Hyun

 

David Potter

 

Steven Shadman

 

David Smalling

 

Tseno Tselkov

 

Matthew Victory

 

Xinying Zhang

 

A-1

 

APPENDIX B

 

COMMODITY INTERESTS TRADED BY ELLINGTON MANAGEMENT GROUP, L.L.C.

 

The undersigned represents that the following is the current list of all commodity interests which the undersigned intends to trade on behalf of EUPHRATES GLOBAL HORIZONS LLC other than regulated futures contracts and options on regulated futures contracts traded on a qualified board of trade or exchange:

 

Clearable Futures and Options on Futures Products:

 

3 month EUROYEN, 3M Euro Euribor Future, 90-Day Bank Bill, Amsterdam IDX Future, Australian Dollar Future, Bankers Acceptance Future, Brent Crude, British Pound Future, CAC 40 (EUR 10) Index Future, CAN 10yr BOND Future, Canadian Dollar Future, CBOE Volatility Index Future (VIX), Cocoa Future, Cocoa Future LIF, Coffee ‘C’ Future, Copper Future, Corn Future, Cotton No. 2 Future, DAX Future, E-Mini Dow Index Future, EURO BUXL 30Y Bond Future, Euro FX Curr Future, Euro Stoxx 50 Future, Euro-Bobl Future, Euro-Bund Future, Eurodollar Future, Euro-OAT Future, Euroswiss Future, Gas Oil, Gasoline RBOB Future, Gold 100 OZ Future, Hang Seng Stock Index Future, Heating Oil Future, IBEX 35 Index Future, Japanese Yen Future, JGB Future, Lean Hogs Future, Libor Future, Light Sweet Crude Oil Future, Live Cattle Future, Long Gilt Future, Lumber Future, MSCI Taiwan Stock Index Future, NASDAQ 100 E-Mini Future, Natural Gas Future, New FTSE 100 Index Future, New Zealand Dollar Future, Nikkei 225 Index Future — Osaka, Oats Future, OMXS30 Index Future, Orange Juice Future, Palladium, Platinum, RBOB Gasoline, Robusta Coffee Future, Russell 2000 E-Mini Index Future, S&P 500 E-Mini Future, S&P ASX 200 Index Future, S&P/MIB IDX Future, S&P/TSE 60 IX Future, Silver Future, Soybean Meal, Soybean Oil, Soybeans, Sugar #11 (World), Swiss Franc Future, Swiss Mkt Index Future, Ultralong US Treasury Bond Future, US 10YR Note Future, US 2YR Note future, US 30YR Bond Future, US 5YR Note Future, US Dollar Index Future, Wheat Future CBOT, Wheat Future KCB, White Sugar Future, WTI Light Sweet Crude Oil

 

FX Spot and Forward Trading in any Combination of:

 

AUD, BRL, CAD, CHF, CLP, CZK, EUR, GBP, HKD, ILS, JPY, KRW, MXN, NOK, NZD, PLN, SEK, SGD, USD, ZAR

 

US Treasury Securities, Including on a When-Issued Basis

 

OTC Derivatives:

 

Interest Rate Swaps:  USD, EUR, GBP, CAD, AUD, NZD, CHF, JPY, MXN, NOK, SEK, ILS, CLP, KRW

 

B-1

 

Swaptions:  USD, EUR, GBP, CAD, AUD, NZD, CHF, JPY, MXN

 

Basis Swaps:  USD, EUR, GBP

 

Cross Currency Swaps:  EUR, GBP, AUD, CHF, JPY

 

Listed Options on Major Indices, Including Without Limitation, the VIX Index, other Volatility Indices and Equity Indices

 

 

	
 
    	
ELLINGTON   MANAGEMENT GROUP, L.L.C.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Dated as of February 7, 2014

 

B-2

 

APPENDIX C

 

TRADING AUTHORITY

 

Ellington Management Group, L.L.C.

53 Forest Avenue

Old Greenwich, CT 06870

Attn: General Counsel

Facsimile: (203) 698-0869

Email: dmargolis@ellington.com

 

Dear Ellington Management Group, L.L.C.:

 

EUPHRATES GLOBAL HORIZONS LLC (the “Company”) does hereby make, constitute and appoint you as its attorney-in-fact to buy and sell commodity futures and forward contracts (including foreign futures and options contracts) and such other financial instruments as are authorized in accordance with the Advisory Agreement between us and certain others dated February 7, 2014.

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    	
 
    
	
 
    	
EUPHRATES   GLOBAL HORIZONS LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
BLACKROCK   INVESTMENT MANAGEMENT, LLC,
    
	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Dated as of February 7, 2014

 

C-1

 

APPENDIX D

 

ACKNOWLEDGEMENT OF RECEIPT OF DISCLOSURE STATEMENT

 

The undersigned hereby acknowledges receipt of Ellington Management Group, L.L.C.’s Disclosure Statement for Ellington Quantitative Macro Fund Ltd. dated November 2013.

 

 

	
 
    	
EUPHRATES   GLOBAL HORIZONS LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
BLACKROCK   INVESTMENT MANAGEMENT, LLC,
    
	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Dated as of February 7, 2014

 

D-1EXHIBIT 10.45

 

OLD LINE BANK

SALARY CONTINUATION PLAN AGREEMENT
 (2014)

 

THIS AGREEMENT is made and entered into this 27th day of March, 2014, by and between Old Line Bank, a banking corporation organized and existing under the laws of the State of Maryland, hereinafter referred to as the “Plan Sponsor”, and Mark Semanie, hereinafter referred to as the “Participant”.

 

WITNESSETH

 

WHEREAS, it is the consensus of the Board that the Participant’s services to the Plan Sponsor in the past have been of exceptional merit and have constituted an invaluable contribution to the general welfare of the Plan Sponsor bringing it to its present status of operating efficiency, and its present position in its field of activity; and,

 

WHEREAS, the experience of the Participant, the Participant’s knowledge of the affairs of the Plan Sponsor, the Participant’s reputation and contacts in the industry are so valuable that assurance of the Participant’s continued services is essential for the future growth and profits of the Plan Sponsor and it is in the best interests of the Plan Sponsor to arrange terms of continued employment for the Participant so as to reasonably assure the Participant’s remaining in the Plan Sponsor’s employment during the Participant’s lifetime or until the age of retirement; and,

 

WHEREAS, it is the desire of the Plan Sponsor that the Participant’s services be retained as herein provided; and,

 

WHEREAS, the Participant is willing to continue in the employ of the Plan Sponsor provided the Plan Sponsor agrees to pay to the Participant and/or the Participant’s beneficiaries certain benefits in accordance with the terms and conditions hereinafter set forth; and,

 

WHEREAS, the Plan Sponsor intends that the Plan shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation plan for tax purposes and for purposes of Title I of ERISA. This Plan is not intended to qualify for favorable tax treatment pursuant to IRC Section 401(a) of the Code or any successor section or statute. This Plan is intended to comply with IRC Section 409A as created under The American Jobs Creation Act of 2004 (the “Jobs Act of 2004”). It is both anticipated and expected that the terms and provisions of this Plan may need to be amended in the future to assure continued compliance. The Plan Sponsor and the Participant acknowledge that fact and agree to take any and all steps necessary to operate the plan in “good faith” based on their current understanding of the regulations;

 

NOW THEREFORE, in consideration of services performed in the past and to be performed in the future as well as of the mutual promises and covenants herein contained, it is agreed as follows:

 

ARTICLE 1

DEFINITIONS

 

DEFINITION OF TERMS. Certain words and phrases are defined when first used in later Articles of this Plan. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. For the purpose of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

 

1

 

1.1     “Accrued Benefit” shall mean, as of any date, the benefit accrued and recorded on the books of the Plan Sponsor on behalf of the Participant with respect to service beginning January 1, 2014, as shown on the attached Schedule A.

 

1.2       “Applicable Guidance” shall mean, as the context requires, Code § 409A and the Final Treasury Regulations issued thereunder, or other written Treasury or IRS guidance regarding or affecting Code § 409A.

 

1.3     “Beneficiary”  shall mean the person or persons,  natural or otherwise, designated in writing by a Participant in accordance with Article 5 before the Participant’s death to receive Plan benefits in the event of the Participant’s death.

 

1.4     “Board”  shall mean the board of director’s of the Plan Sponsor,  unless specifically noted otherwise.

 

1.5       “Cause” shall mean any of the following acts or circumstances: (i) willful destruction by the Participant of property of the Plan Sponsor having a material value to the Plan Sponsor; (ii) fraud, embezzlement, theft, or comparable dishonest activity committed by the Participant (excluding acts involving a de minimis dollar value and not related to the Plan Sponsor); (iii) the Participant’s conviction of or entering a plea of guilty or nolo contendere to any crime constituting a felony or any misdemeanor involving fraud, dishonesty, or moral turpitude (excluding acts involving a de minimis dollar value and not related to the Plan Sponsor); (iv) the Participant’s breach, neglect, refusal, or failure to materially discharge the Participant’s duties (other than due to physical or mental illness) commensurate with the Participant’s title and function or the Participant’s failure to comply with the lawful directions of a senior managing officer of the Plan Sponsor in any such case that is not cured within fifteen (15) days after the Participant has received written notice thereof from such senior managing officer; or (v) any willful misconduct by the Participant which may cause substantial economic or reputation injury to the Plan Sponsor, including, but not limited to, sexual harassment.

 

1.6     “Change in Control” shall mean the occurrence of a Change in Control event, within the meaning of Treasury Regulations §1.409A-3(i)(5) and described in any of subparagraph (a), (b), or (c), (collectively referred to as “Change in Control Events”), or any combination of the Change in Control Events. To constitute a Change in Control Event with respect to the Participant or Beneficiary, the Change in Control Event must relate to: (i) the corporation for whom the Participant is performing services at the time of the Change in Control Event; (ii) the corporation that is liable for the payment of the deferred compensation (or all corporations liable for the payment if more than one corporation is liable); or (iii) a corporation that is a majority shareholder of a corporation identified in clause (i) or (ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in clause (i) or (ii).

 

(a)        Change in Ownership.  A Change in Ownership occurs if a person, or a group of persons acting together, acquires more than fifty percent (50%) of the stock of the corporation, measured by voting power or value. Incremental increases in ownership by a person or group that already owns fifty percent (50%) of the corporation do not result in a Change of Ownership, as defined in Treasury Regulations §1.409A-3(i)(5)(v).

 

(b)        Change in Effective Control. A Change in Effective Control occurs if, over a twelve (12) month period: (i) a person or group acquires stock representing thirty percent (30%) of the voting power of the corporation; or (ii) a majority of the members of the board of directors of the ultimate parent corporation is replaced by directors not endorsed by the persons who were members of the board before the new directors’ appointment, as defined in Treasury Regulations §1.409A-3(i)(5)(vi).

 

(c)        Change in Ownership of a Substantial Portion of Corporate Assets. A Change in Control based on the sale of assets occurs if a person or group acquires Forty percent (40%) or more of the gross fair market value of the assets of a corporation over a

 

2

 

twelve (12) month period. No change in control results pursuant to this Article (c) if the assets are transferred to certain entities controlled directly or indirectly by the shareholders of the transferring corporation,  as defined in Treasury Regulations §1.409A-3(i)(5)(vii).

 

1.7     “Claimant” shall mean a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

 

1.8      “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

1.9     “Disability” shall mean a condition of the Participant whereby he or she either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Plan Sponsor. The Administrator will determine whether the Participant has incurred a Disability based on its own good faith determination and may require the Participant to submit to reasonable physical and mental examinations for this purpose. The Participant will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration, Railroad Retirement Board, or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the requirements of Treasury Regulation §1.409A-3(i)(4) and authoritative guidance.

 

1.10      “Effective Date” shall mean the later of (i) the date specified on the first page of this Plan or (ii) the date the Plan is executed by the Plan Sponsor.

 

1.11     “Eligible Employee” shall mean for any Plan Year (or applicable portion of a Plan Year), an Employee who is determined by the Plan Sponsor, or its designee, to be a Participant under the Plan. If the Plan Sponsor determines that an Employee first becomes an Eligible Employee during a Plan Year, the Plan Sponsor shall notify the individual in writing of its determination and of the date during the Plan Year on which the individual shall first become a Plan Participant.

 

1.12   “Employee” shall mean a person providing services to the Plan Sponsor in the capacity of a common law Employee of the Plan Sponsor.

 

1.13    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

 

1.14   “Normal Retirement Age” shall mean the date the Participant attains age 65.

 

1.15   “Normal Retirement Benefit” shall mean an annual benefit payment in the amount of One hundred Fifty Four Thousand Four Hundred Thirty Five Dollars ($154,435), which shall be paid each year for a period of fifteen (15) years in the form of equal monthly installments.  For purposes of this Section 1.15, the “annual” period over which the Normal Retirement Benefit shall be paid is a period of twelve (12) consecutive months that begins on the payment commencement date determined in accordance with Article 3 (rather than a calendar or Taxable Year of the Plan Sponsor).

 

1.16   “Participant” shall mean the Employee identified as the Participant on the first page of the Agreement.

 

1.17    “Plan” shall mean this Old Line Bank Salary Continuation Plan Agreement, all Election Forms, the Trust, (if any), and any other written documents relevant to the Plan. For purposes of applying Code § 409A requirements, this Plan is a non-account balance plan under Treasury Regulation §1.409-1(c)(2)(i)(A).

 

3

 

1.18   “Plan Administrator” or “Administrator” shall be a committee designated by the Plan Sponsor. If a Participant is part of a group of persons designated as a committee or Plan Administrator, then the Participant may not participate in any activity or decision relating solely to the Participant’s individual benefits under this Plan. Matters solely affecting the applicable Participant will be resolved by the remaining committee members.

 

1. 19  “Plan Sponsor” shall mean the person or entity receiving the services of the Participant, as identified on the first page of this Plan.

 

1.20    “Plan Year” shall mean, for the first Plan Year, the period beginning on the Effective Date of the Plan and ending December 31 of such calendar year, and thereafter, a twelve (12) month period beginning January 1 of each calendar year and continuing through December 31 of such calendar year.

 

1.21   “Section 409A” shall mean Section 409A of the Code and other Applicable Guidance issued under that Section.

 

1.22    “Separation from Service” shall mean the occurrence of a Participant’s death, retirement, or “other termination of employment” (as defined in Treasury Regulations §1.409A- 1(h)(1)(ii)) with the Plan Sponsor.  If the Plan Sponsor is a member of a controlled group of corporations or a group of trades or business under common control (as described in Code Section 414(b) or (c), but substituting a 50% ownership level for the 80% level set forth in those Code Sections), all members of the group shall be treated as a single employer for purposes of whether there has occurred a Separation from Service. However, a Separation from Service shall not occur if the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Plan Sponsor under an applicable statute or by contract.

 

In accordance with Section 409A, a Participant will have incurred a Separation from Service where the Plan Sponsor and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the Participant has been providing services to the Plan Sponsor less than 36 months).

 

1.23   “Schedule A” shall mean the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Article 3.

 

1.24    “Specified Employee”  shall mean that the Participant also satisfies the definition of a “key employee” as such term is defined in Code §416(i) (without regard to Section 416(i)(5)). However, the Participant is not a Specified Employee unless any stock of the Plan Sponsor is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Participant is a key employee at any time during the twelve (12) months ending on the identification date (see below), the Participant is a Specified Employee for the twelve (12) month period commencing on the first day of the fourth month following the identification date. For purposes of this Article, the identification date is December 31. The determination of the Participant as a Specified Employee shall be made by the Administrator in accordance with IRC Section 416(i), the “specified employee” requirements of Section 409A, and Treasury Regulations.

 

1.25   “Taxable Year” shall mean the twelve (12) consecutive month period ending each December 31.

 

4

 

1.26    “Treasury Regulations” shall mean regulations promulgated by the Internal Revenue Service for the U.S. Department of the Treasury, as they may be amended from time to time.

 

1.27    “Trust” shall mean one or more trusts that may be established in accordance with the terms of this Plan.

 

ARTICLE 2

Selection, Enrollment, Eligibility

 

2.1     Selection by Plan Sponsor. Participation in the Plan shall be limited to a select group of management or highly compensated employees of the Plan Sponsor, as determined by the Plan Sponsor in its sole and absolute discretion. The initial group of Eligible Employees shall become Participants on the Effective Date. Any Eligible Employee selected as a Plan Participant after the Effective Date, shall become a Participant on a date determined by the Plan Sponsor.

 

2.2       Re-Employment. If a Participant who incurs a Separation from Service is subsequently re-employed, he or she may, at the sole and absolute discretion of the Plan Administrator, become a Participant in accordance with the provisions of the Plan.

 

2.3       Enrollment Requirements. As a condition of participation, each selected Employee shall complete, execute, and return to the Plan Administrator all form(s) required by the Plan Administrator and within the time specified by the Plan Administrator. In addition, the Plan Administrator shall establish such other enrollment requirements as it determines necessary or advisable.

 

2.4     Eligibility;  Commencement of Participation.  Provided that an Employee selected to participate in the Plan has met all enrollment requirements set forth in the Plan and required by the Plan Administrator, the Employee shall commence participation in the Plan on the date the Plan is executed by the Plan Sponsor.

 

2.5      Termination of Participation. If the Plan Administrator determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Section 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Plan Administrator shall cease further benefit accruals hereunder.

 

ARTICLE 3

BENEFITS

 

3.1      Normal Retirement Benefit. If the Participant remains in the service of the Plan Sponsor until reaching the Participant’s Normal Retirement Age,  the Participant shall be entitled to the Participant’s Normal Retirement Benefit.  The Normal Retirement Benefit shall commence to be paid on the on the first day of the second month following the date the Participant achieves Normal Retirement Age.

 

3.2       Death Prior to Commencement of Benefit Payments. In the event the Participant should die while actively employed by the Plan Sponsor at any time after the date of this Plan but prior to the Participant’s Normal Retirement Age, the Participant shall be entitled to the benefit amount shown on Schedule A under the column labeled “Early Termination Annual Benefit”  for the Plan Year in which the Participant’s death occurs, multiplied by fifteen (15) (the “Death Benefit”).  The Death Benefit shall be paid in one hundred eighty (180) equal monthly installments to the Participant’s Beneficiary, and shall commence to be paid on the first day of the second month following the month in which the Participant dies.

 

5

 

3.3      Death Subsequent to Commencement of Benefit Payments. In the event the Participant dies while receiving payments, but prior to receiving all the payments due and owing hereunder, the unpaid balance of the payments shall continue to be paid to the Participant’s Beneficiary at the same time and in the same form as those payments would have made to the Participant had the Participant survived.

 

3.4      Disability Benefit. In the event the Participant becomes Disabled prior to the date the Participant dies or experiences a Separation from Service, and prior to the date of a Change in Control, the Participant shall be entitled to receive the benefit amount shown on Schedule A under the column labeled “Disability Annual Benefit” for the Plan Year in which the Participant’s Disability occurs, multiplied by fifteen (15) (the “Disability Benefit”). The Disability Benefit shall be paid in one hundred eighty (180) equal monthly installments, and shall commence to be paid on the first day of the second month following the month in which the Participant achieves Normal Retirement Age or dies (whichever occurs first).

 

3.5      Separation from Service Benefit. If the Participant experiences a Separation from Service prior to Normal Retirement Age because the Participant’s employment is terminated voluntarily or involuntarily for reasons other than death, Disability, or as described in the second paragraph of Section 3.6, then the Participant shall be entitled to the benefit amount shown on Schedule A under the column labeled “Early Termination Annual Benefit” for the Plan Year in which the Participant’s Separation from Service occurs, multiplied by fifteen (15) (the “Early Termination Benefit”). The Early Termination Benefit shall be paid in one hundred eighty (180) equal monthly installments, and shall commence to be paid on the first day of the second month following the month in which the Participant achieves Normal Retirement Age (or, if the Participant is determined by the Plan Administrator to be a Specified Employee, the later of (i) the second month following the month in which the Participant achieves Normal Retirement Age or (ii) the first day of the seventh month following Separation from Service) or dies (whichever occurs first).

 

3.6     Change in Control Benefit. Upon a Change in Control prior to the Participant’s attainment of Normal Retirement Age, Separation from Service, death or Disability, the Participant shall be entitled to the benefit amount shown on Schedule A under the column labeled “Change in Control Annual Benefit” for the Plan Year in which the Change in Control occurs, multiplied by fifteen (15) (the “Change in Control Benefit”).  Subject to the paragraph below, the Change in Control Benefit shall be paid in one hundred eighty (180) equal monthly installments, and shall commence to be paid on the first day of the second month following the Participant’s Separation from Service. Notwithstanding the foregoing, in the event that the Participant is determined by the Plan Administrator to be a Specified Employee, the first benefit payment shall be paid on the first day of the seventh month following Separation from Service.

 

Notwithstanding the preceding, if the Participant experiences a Separation from Service within 24 months following the Change in Control, the following provisions apply.  In lieu of receiving one hundred eighty (180) equal monthly installments, the Participant may elect to receive the Participant’s Change in Control Benefit in the form of (i) a lump sum, (ii) equal monthly installments over two (2) years, or (iii) equal monthly installments over five (5) years, so long as the election is made by the Participant and submitted to the Plan Sponsor by the Effective Date or within thirty (30) days thereafter.  Any payment made pursuant to this paragraph shall commence to be paid on the first day of the second month following the Participant’s Separation from Service (unless the Participant is determined by the Plan Administrator to be a Specified Employee, in which case payments shall commence on the first day of the seventh month following Separation from Service).

 

3.7     Termination for Cause.  Notwithstanding anything in this Plan to the contrary, if the Plan Sponsor terminates the Participant’s employment for “Cause”, then the Participant shall not be entitled to any benefits under the terms of this Plan.

 

3.8      Prohibition on Acceleration of Payments. Notwithstanding anything in this Plan to the contrary, neither the Plan Sponsor nor a Participant may accelerate the time or schedule of any payment or amount scheduled to be paid under this Plan, except that the Plan Sponsor, in its discretion, may accelerate payments as permitted by Treasury Regulations

 

6

 

§1.409A-3(j)(4). The Plan Sponsor shall deny any change made to an election if the Plan Sponsor determines that the change violates the requirements of Applicable Guidance.

 

3.9                                 Subsequent Changes in the Time or Form of Payment. If permitted by the Plan Sponsor, a Participant may elect to change the time or form of payments (collectively, “payment elections”), provided the following conditions are met:

 

(i)         Such change will not take effect until at least twelve (12) months after the date on which the new payment election is made and approved by the Plan Administrator;

 

(ii)        If the change of payment election relates to a payment based on Separation from Service, or if the payment is at a specified time or pursuant to a fixed schedule, the change of payment election must result in payment being deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid (or in the case of installment payments, which are treated as a single payment, five (5) years from the date the first amount was scheduled to be paid);

 

(iii)      If the change of payment election relates to a payment at a specified time or pursuant to a fixed schedule, the Participant or Plan Sponsor must make the change of payment election not less than twelve (12) months before the date the payment is scheduled to be paid (or in the case of installment payments, which are treated as a single payment, twelve (12) months before the date the first amount was scheduled to be paid).

 

3.10                     Delay in Payment by Plan Sponsor.

 

(a)           A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Plan Sponsor treats all payments to similarly situated Participants on a reasonably consistent basis.

 

(i)        Payments subject to Section  162(m).  A payment may be delayed to the extent that the Plan Sponsor reasonably anticipates that if the payment were made as scheduled, the Plan Sponsor’s deduction with respect to such payment would not be permitted due to the application of Code §162(m). If a payment is delayed, such payment must be made either:

 

(1)  during the Participant’s first Taxable Year in which the Plan Sponsor reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by application of Code §162(m) or,

 

(2)  during the period beginning with the date of the Participant’s Separation from Service and ending on the later of the last day of the Taxable Year of the Plan Sponsor in which the Participant separates from service or the 15th day of the third month following the Participant’s Separation from Service. Where any scheduled payment to a specific Participant in the Plan Sponsor’s Taxable Year is delayed in accordance with this Article, the delay in payment will be treated as a subsequent deferral election unless all scheduled payments to the Participant that could be delayed in accordance with this Article are also delayed. Where the payment is delayed to a date on or after the Participant’s Separation from Service, the payment will be considered a payment upon a Separation from Service for purposes of the rules under Treasury Regulations §1.409A-3(i)(2) (payments to specified employees upon a separation from service) and, the 6 month delay rule will apply for Specified Employees.

 

7

 

(ii)           Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Plan Sponsor reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Plan Sponsor reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Internal Revenue Code is not treated as a violation of applicable law.

 

(iii)          Other events and conditions. The Plan Sponsor may delay a payment upon such other events and conditions as the Commissioner of the IRS may prescribe.

 

(iv)     Notwithstanding the above, a payment may be delayed in accordance with Code section 409A where the payment would jeopardize the ability of the Plan Sponsor to continue as a going concern.

 

(b)             Treatment of Payment as Made on Designated Payment Date. Each payment under this Plan is deemed made on the required payment date even if the payment is made after such date, provided the payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) in case the Plan Sponsor cannot calculate the payment amount on account of administrative impracticality which is beyond the Participant’s control (or the control of the Participant’s estate), in the first calendar year in which payment is practicable; (iv)  in case the Plan Sponsor does not have sufficient funds to make the payment without jeopardizing the Plan Sponsor’s solvency, in the first calendar year in which the Plan Sponsor’s funds are sufficient to make the payment.

 

3.11  Unsecured General Creditor Status of Participant:

 

(a)          Payment to the Participant or any Beneficiary hereunder shall be made from assets which shall continue,  for all purposes,  to be part of the general, unrestricted assets of the Plan Sponsor and no person shall have any interest in any such asset by virtue of any provision of this Plan.  The Plan Sponsor’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any person acquires a right to receive payments from the Plan Sponsor under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Plan Sponsor and no such person shall have or acquire any legal or equitable right, interest, or claim in or to any property or assets of the Plan Sponsor.

 

(b)          In the event that the Plan Sponsor purchases an insurance policy or policies insuring the life of a Participant or employee, to allow the Plan Sponsor to recover or meet the cost of providing benefits, in whole or in part, hereunder, no Participant or Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom. The Plan Sponsor or the Trustee of the Trust (if any) shall be the primary owner and beneficiary of any such insurance policy or property and shall possess and may exercise all incidents of ownership therein. No insurance policy with regard to any director, “highly compensated employee”, or “highly compensated individual” as defined in IRS Section 101(j) shall be acquired before satisfying the Section 101(j) “Notice and Consent” requirements.

 

(c)          In the event that the Plan Sponsor purchases an insurance policy or policies on the life of a Participant as provided for above, then all of such policies shall be subject to the claims of the creditors of the Plan Sponsor.

 

(d)         If the Plan Sponsor chooses to obtain insurance on the life of a Participant in connection with its obligations under this Plan,  the Participant hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Plan Sponsor or the insurance company

 

8

 

designated by the Plan Sponsor.

 

3.12   Facility of Payment.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Plan Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Plan Sponsor and the Plan Administrator from further liability on account thereof.

 

3.13   Excise Tax Limitation.  In the event that any payment or benefit (within the meaning of Code §280G(b)(2) of the Code) to the Participant or for the Participant’s benefit paid or payable or distributed or distributable (including, but not limited to, the acceleration of the time for the vesting or payment of such benefit or payment) pursuant to the terms of this Plan or otherwise in connection with, or arising out of, the Participant’s employment with the Plan Sponsor or any of its Affiliates or a Change in Control within the meaning of Code §280G of the Code (a “Payment” or “Payments”), would be subject to the excise tax imposed by Code §4999 of the Code (the “Excise Tax”), then the Payments shall be increased in an amount necessary to provide for the payment of the excise tax imposed by Code § 4999 (the “Section 4999 Limit”). Any payment made to the Participant under this Section 3.13 shall be made no later than the end of the calendar year following the calendar year in which the Participant remits the related taxes.

 

ARTICLE 4

Taxes

 

4.1                               Vesting.

 

(a)        Normal Retirement Benefit.  Upon attainment of Normal Retirement Age, the Participant shall be one hundred (100%) percent vested in the Normal Retirement Benefit.

 

(b)       Death Benefit.  Upon death, the Participant shall be one hundred (100%) percent vested in the Death Benefit (as defined in Section 3.2).

 

(c)        Disability Benefit.  Upon the Participant’s Disability, the Participant shall be one hundred (100%) percent vested in the Disability Benefit (as defined in Section 3.4).

 

(d)        Early Termination Benefit.  On each January 1 during which the Plan is in effect and the Participant is employed by the Plan Sponsor, the Participant shall be one hundred (100%) percent vested in the Early Termination Benefit (as defined in Section 3.5).

 

(e)        Change in Control Benefit.  Upon a Change in Control, the Participant shall be one hundred (100%) percent vested in the Change in Control Benefit (as defined in Section 3.6).

 

4.2                              FICA, Withholding and Other Taxes:

 

(a)        When a Participant becomes vested in a benefit under the Plan, the Plan Sponsor shall withhold from the Participant’s cash compensation in a manner determined in the sole discretion of the Plan Sponsor, the Participant’s share of FICA and other employment taxes on such vested benefit.

 

(b)        Distributions. The Plan Sponsor, or trustee of the Trust, shall withhold from any payments made to a Participant or Beneficiary under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Plan Sponsor in a manner determined in the sole discretion of the Plan Sponsor or the trustee of the Trust in compliance with applicable tax withholding requirements.

 

9

 

ARTICLE 5

BENEFICIARY DESIGNATION

 

5.1                               Designation of Beneficiaries.

 

(a)       The Participant may designate any person or persons (who may be named contingently or successively) to receive any benefits payable under the Plan upon the Participant’s death, and the designation may be changed from time to time by the Participant by filing a new designation.  Each designation will revoke all prior designations by the Participant and shall be in the form prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during the Participant’s lifetime.

 

(b)       In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Plan Sponsor shall pay the benefit payment to the Participant’s spouse, if then living, and if the spouse is not then living to the Participant’s then living descendants, if any, per stirpes, and if there are no living descendants, to the Participant’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Plan Sponsor may rely conclusively upon information supplied by the Participant’s personal representative, executor, or administrator.

 

(c)       If a question arises as to the existence or identity of anyone entitled to receive a death benefit payment under the Plan, or if a dispute arises with respect to any death benefit payment under the Plan,  the Plan Sponsor may distribute the payment to the Participant’s estate without liability for any tax or other consequences, or may take any other action which the Plan Sponsor deems to be appropriate.

 

5.2          Information to be Furnished by Participants and Beneficiaries; Inability to Locate Participants or Beneficiaries.  Any communication, statement, or notice addressed to the Participant or to a Beneficiary at his or her last post office address as shown on the Plan Sponsor’s records shall be binding on the Participant or Beneficiary for all purposes of this Plan. The Plan Sponsor shall not be obligated to search for any Participant or Beneficiary beyond the sending of a registered letter to the last known address.

 

ARTICLE 6

ADMINISTRATION

 

6.1               Administrator Duties. The Administrator shall be responsible for the management,  operation,  and administration of the Plan.  The Administrator shall act at meetings by affirmative vote of a majority of its members. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a unanimous written consent to the action is signed by all members and such written consent is filed with the minutes of the proceedings of the Administrator, provided, however that no member may vote or act upon any matter which relates solely to the Participant. The chair, or any other member or members of the Administrator designated by the chair,  may execute any certificate or other written direction on behalf of the Administrator. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Participant or the Plan Sponsor. No provision of this Plan shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

 

6.2                          Administrator Authority.  The Administrator shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:

 

(a)                                      To construe and interpret the terms and provisions of this Plan;

 

10

 

(b)       To compute and certify the amount and kind of benefits payable to the Participant and their Beneficiaries; to determine the time and manner in which such benefits are paid; and to determine the amount of any withholding taxes to be deducted;

 

(c)       To maintain all records that may be necessary for the administration of this Plan;

 

(d)       To provide for the disclosure of all information and the filing or provision of all reports and statements to the Participant,  Beneficiaries, and governmental agencies as shall be required by law;

 

(e)         To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof;

 

(f)      To administer this Plan’s claims procedures;

 

(g)      To approve election forms and procedures for use under this Plan; and

 

(h)       To appoint a plan record keeper or any other agent, and to delegate to them such powers and duties in connection with the administration of this Plan as the Administrator may from time to time prescribe.

 

6.3                                 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Plan.

 

6.4                                 Compensation,  Expenses,  and Indemnity.  The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Plan Sponsor to employ such legal counsel and/or Plan record keeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Plan shall be paid by the Plan Sponsor.

 

6.5                                 Plan Sponsor Information.  To enable the Administrator to perform its functions, the Plan Sponsor shall supply full and timely information to the Administrator, on all matters relating to the compensation of the Participant, the date and circumstances of the Disability, death, or Separation from Service of the Participant, and such other pertinent information as the Administrator may reasonably require.

 

6.6                                 Periodic Statements.    Under procedures established by the Administrator, Participant shall be provided a statement on an annual basis.

 

ARTICLE 7

CLAIMS PROCEDURE

 

7.1                                 Claims Procedures. This Section 7.1 is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at section 2560.503 1 of the Department of Labor Regulations. If any provision of this Section 7.1 conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

 

(a)       Initial Claim.  A Participant or Beneficiary who believes he or she is entitled to any Benefit (a “Claimant”) under this Plan may file a claim with the Administrator. The Administrator will review the claim itself or appoint another individual or entity to review the claim.

 

(i)                                      Benefit Claims that do not Require a Determination of Disability. If the claim is for a benefit other than a disability benefit, the Claimant will be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the

 

11

 

Claimant receives written notice from the Administrator or appointee of the Administrator before the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed.

 

(ii)       Disability Benefit Claims.  In the case of a benefits claim that requires a determination by the Plan Administrator of a Participant’s disability status, the Plan Administrator will notify the Claimant of the Plan’s adverse benefit determination within a reasonable period of time, but not later than forty-five (45) days after receipt of the claim.  If, due to matters beyond the control of the Plan, the Plan Administrator needs additional time to process a claim, the Claimant will be notified, within forty-five (45) days after the Plan Administrator receives the claim, of those circumstances and of when the Plan Administrator expects to make its decision but not beyond seventy-five (75) days.  If, prior to the end of the extension period, due to matters beyond the control of the Plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to one hundred five (105) days, provided that the Plan Administrator notifies the Claimant of the circumstances requiring the extension and the date as of which the Plan expects to render a decision.  The extension notice will specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant will be afforded at least forty-five (45) days within which to provide the specified information.

 

(iii)           Manner and Content of Denial of Initial Claims.  If the Plan Administrator denies a claim, it must provide to the Claimant, in writing or by electronic communication:

 

(A)       The specific reasons for the denial;

 

(B)        A reference to the Plan provision or insurance contract provision upon which the denial is based;

 

(C)      A description of any additional information or material that the Claimant must provide in order to perfect the claim; 

 

(D)      An explanation of why such additional material or information is necessary;

 

(E)         Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and

 

(F)         A statement of the participant’s right to bring a civil action under ERISA section 502(a) following a denial on review of the initial denial.

 

In addition, in the case of a denial of disability benefits on the basis of the Plan Administrator’s independent determination of the Participant’s disability status, the Plan Administrator will provide a copy of any rule, guideline, protocol, or other similar criterion relied upon in making the adverse determination (or a statement that the same will be provided upon request by the Claimant and without charge).

 

(b)                                Review Procedures.

 

(i)                                            Benefit Claims that do not Require a Determination of Disability. Except for claims requiring an independent determination of a Participant’s disability status, a request for review of a denied claim must be made in writing to the Plan Administrator within sixty (60) days after receiving notice of denial.  The decision upon review will be made within sixty (60) days after the Plan Administrator’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review.  A

 

12

 

notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision.

 

The reviewer will afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Plan Administrator.  The reviewer will take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

 

(ii)         Disability Benefit Claims.  In addition to having the right to review documents and submit comments as described in (i) above, a Claimant whose claim for disability benefits requires an independent determination by the Plan Administrator of the Participant’s disability status has at least one hundred eighty (180) days following receipt of a notification of an adverse benefit determination within which to request a review of the initial determination. In such cases, the review will meet the following requirements:

 

(A)       The Plan will provide a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the Plan who did not make the initial determination that is the subject of the appeal, nor is a subordinate of the individual who made the determination.

 

(B)       The appropriate named fiduciary of the Plan will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment before making a decision on review of any adverse initial determination based in whole or in part on a medical judgment.  The professional engaged for purposes of a consultation in the preceding sentence will not be an individual who was consulted in connection with the initial determination that is the subject of the appeal or the subordinate of any such individual.

 

(C)         The Plan will identify to the Claimant the medical or vocational experts whose advice was obtained on behalf of the Plan in connection with the review, without regard to whether the advice was relied upon in making the benefit review determination.

 

(D)       The decision on review will be made within forty-five (45) days after the Plan Administrator’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than ninety (90) days after receipt of a request for review.  A notice of such an extension must be provided to the Claimant within the initial forty-five (45) day period and must explain the special circumstances and provide an expected date of decision.

 

(iii)        Manner and Content of Notice of Decision on Review.  Upon completion of its review of an adverse initial claim determination, the Plan Administrator will give the Claimant, in writing or by electronic notification, a notice containing:

 

(A)      its decision;

 

(B)      the specific reasons for the decision;

 

(C)       the relevant Plan provisions or insurance contract provisions on which its decision is based;

 

(D)       a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan’s files which is relevant to the Claimant’s claim for benefits;

 

(E)       a statement describing the Claimant’s right to bring an action for judicial review under ERISA section 502(a); and

 

13

 

(F)      if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.

 

(c)        Calculation of Time Periods. For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim.  If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

 

(d)       Failure of Plan to Follow Procedures. If the Plan fails to follow the claims procedures required by this Section 7.1, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under ERISA section 502(a)  on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

 

(e)        Failure of Claimant to Follow Procedures.  A Claimant’s compliance with the foregoing provisions of this Section 7.1 is a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

 

7.2                                 Arbitration of Claims.  All claims or controversies arising out of or in connection with this Plan shall, subject to the initial review provided for in the foregoing provisions of this Article, be resolved through arbitration. Except as otherwise mutually agreed to by the parties, any arbitration shall be administered under and by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with the JAMS procedures then in effect. The arbitration shall be held in the JAMS office nearest to where the Claimant is or was last employed by the Plan Sponsor or at a mutually agreeable location.

 

ARTICLE 8

AMENDMENT AND TERMINATION

 

8.1                                 Amendment. The Plan Sponsor reserves the right to amend this Plan at any time to comply with Section 409A or for any other purpose, provided that such amendment will not cause the Plan to violate the provisions of Section 409A. Except to the extent necessary to bring this Plan into compliance with Section 409A, no amendment or modification shall be effective to decrease the value or vested percentage of a Participant’s Accrued Benefit in existence at the time an amendment or modification is made to the Plan.

 

8.2                                 Plan Termination.  The Plan Sponsor reserves the right to terminate this Plan in accordance with one of the following, subject to the restrictions imposed by Section 409A and authoritative guidance:

 

(a)       Corporate Dissolution or Bankruptcy. This Plan may be terminated within twelve (12) months of a corporate dissolution taxed under Code § 331, or with the approval of a Plan Sponsor bankruptcy court pursuant to 11  U.S.C.  Section 503(b)(1)(A), and distributions may then be made to the Participant provided that the amounts payable under this Plan are included in the Participants’ gross income in the latest of:

 

(i)                                     The calendar year in which the Plan termination occurs;

 

(ii)                                         The calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

 

14

 

(iii)    The first calendar year in which the payment is administratively practicable.

 

(b)         Change in Control.  This Plan may be terminated within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Plan will then be treated as terminated only if all substantially similar arrangements sponsored by the Plan Sponsor are terminated so that all participants in all similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date of termination of the arrangements.

 

(c)                                  Discretionary Termination. The Plan Sponsor may also terminate this Plan and make distributions provided that:

 

(i)        All plans sponsored by the Plan Sponsor that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated;

 

(ii)       No payments, other than payments that would be payable under the terms of this plan if the termination had not occurred, are made within twelve (12) months of this plan termination;

 

(iii)      All payments are made within twenty-four (24) months of this plan termination; and

 

(iv)     Neither the Plan Sponsor nor any of its affiliates adopts a new plan that would be aggregated with any terminated plan if the same Participant participated in both arrangements at any time within three (3) years following the date of termination of this Plan.

 

(v)         The termination does not occur proximate to a downturn in the financial health of the Plan Sponsor.

 

ARTICLE 9

THE TRUST

 

9.1                                 Establishment of Trust.  The Plan Sponsor may establish a grantor trust (the “Trust”), of which the Plan Sponsor is the grantor, within the meaning of subpart E, part I, subchapter J, subtitle A of the Code, to pay benefits under this Plan. If the Plan Sponsor establishes a Trust, all benefits payable under this Plan to a Participant shall be paid directly by the Plan Sponsor from the Trust. To the extent such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Plan Sponsor. The Trust, (if any), shall be a grantor trust which conforms to the terms of the model trust as described in IRS Revenue Procedure 92-64, I.R.B. 1992-33, as same may be amended or modified from time to time. If the Plan Sponsor establishes a Trust, the assets of the Trust will be subject to the claims of the Plan Sponsor’s creditors in the event of its insolvency. Except as may otherwise be provided under the Trust, the Plan Sponsor shall not be obligated to set aside, earmark, or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and/or her designated Beneficiaries shall not have any property interest in any specific assets of the Plan Sponsor other than the unsecured right to receive payments from the Plan Sponsor, as provided in this Plan.

 

9.2                                         Interrelationship of the Plan and the Trust.  The provisions of this Plan shall govern the rights of a Participant to receive distributions pursuant to this Plan. The provisions of the Trust (if established) shall govern the rights of the Participant and the creditors of the Plan Sponsor to the assets transferred to the Trust. The Plan Sponsor and each Participant shall at all times remain liable to carry out its obligations under this Plan. The Plan Sponsor’s obligations under this Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust.

 

15

 

9.3                                 Contribution to the Trust.  Amounts may be contributed by the Plan Sponsor to the Trust at the sole discretion of the Plan Sponsor.

 

ARTICLE 10

MISCELLANEOUS

 

10.1                          Validity.  In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein; except to the extent that Section 409A requires that this Section 10.1 be disregarded because it purports to nullify Plan terms that are not in compliance with Section 409A.

 

10.2                          Nonassignability. Neither any Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate, alienate, or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part hereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment,  be subject to seizure,  attachment, garnishment (except to the extent the Plan Sponsor may be required to garnish amounts from payments due under this Plan pursuant to applicable law), or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency, or be transferable to a spouse as a result of a property settlement or otherwise. If any Participant, Beneficiary, or successor in interest is adjudicated bankrupt or purports to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber transfer, hypothecate, alienate, or convey in advance of actual receipt, the amount, if any, payable hereunder, or any part thereof, the Plan Administrator, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary, or successor in interest in such manner as the Plan Administrator shall direct.

 

10.3                          Not a Contract of Employment.  The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Plan Sponsor and the Participant. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Plan Sponsor as an employee or otherwise or to interfere with the right of the Plan Sponsor to discipline or discharge the Participant at any time.

 

10.4                          Unclaimed Benefits. In the case that the Plan Administrator is unable to locate the Participant or Beneficiary to whom a benefit is payable, such Plan benefit shall be forfeited to the Plan Sponsor upon the Plan Administrator’s determination. Notwithstanding the foregoing, payment may be made to a Participant, and that payment will be treated as made upon the date specified under the Plan, if the Participant provides notice to the Plan Sponsor within ninety (90) days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and Section 409A, and if not paid, if the Participant takes further enforcement measures within one-hundred eighty (180) days after such latest date.

 

10.5                          Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Maryland without regard to its conflicts of laws principles.

 

10.6                           Notice.  Any notice, consent or demand required or permitted to be given under the provisions of this Plan shall be in writing and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed, it shall be sent by United States certified mail, postage prepaid, addressed to the addressee’s last known address as shown on the records of the Plan Sponsor. The date of such mailing shall be deemed the date of notice consent or demand. Any person may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

 

16

 

10.7                          Coordination with Other Benefits.  The benefits provided for a Participant and Participant’s Beneficiary under this Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Plan Sponsor. This Plan shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

 

10.8                          Compliance.  A Participant shall have no right to receive payment with respect to the Participant’s Accrued Benefit until all legal and contractual obligations of the Plan Sponsor relating to establishment of the Plan and the making of such payments shall have been complied with in full.

 

10.9                          Compliance with Section 409A and Authoritative Guidance. Notwithstanding anything in this Plan to the contrary, all provisions of this Plan, including but not limited to the definitions of terms, elections to defer, and distributions, shall be made in accordance with and shall comply with Section 409A and any authoritative guidance.  The Plan Sponsor will amend the terms of this Plan retroactively, if necessary, to the extent required to comply with Section 409A and any authoritative guidance.  No election made by a Participant hereunder, and no change made by a Participant to a previous election, shall be accepted by the Plan Sponsor if the Plan Sponsor determines that acceptance of such election or change could violate any of the requirements of Section 409A or the authoritative guidance.  This Plan and any accompanying forms shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A and the authoritative guidance, including, without limitation, any such Treasury Regulations or other guidance that may be issued after the date hereof.

 

10.10                   Aggregation of Plans.  If the Plan Sponsor offers non-account balance deferred compensation plans in addition to the Plan, those plans, together with the Plan, shall be treated as a single plan to the extent required under Section 409A.

 

17

 

IN WITNESS WHEREOF, the Plan Sponsor and Participant have signed this Plan document as of the date indicated below.

 

 

	
WITNESS:
    	
FOR THE PLAN SPONSOR:
    	
 
    
	
 
    	
 
    	
 
    
	
(signature)
    	
 
    	
(signature)   
    	
 
    
	
 
    	
 
    	
 
    
	
(print   name)
    	
 
    	
(print   name)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(date)
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
PARTICIPANT:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(signature)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(print   name)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(date)
    	
 
    

 

18

 

Schedule A
 Mark A. Semanie

 

	
Assumed
   Separation
   Date
    	
 
    	
Age
    	
 
    	
Early
   Termination
   Annual
   Benefit(1)
    	
 
    	
Disability
   Annual
   Benefit(1)
    	
 
    	
Change in Control
   Annual Benefit(2)
    	
 
    
	
1/1/2014
    	
 
    	
50
    	
 
    	
0
    	
 
    	
0
    	
 
    	
77,055
    	
 
    
	
1/1/2015
    	
 
    	
51
    	
 
    	
10,838
    	
 
    	
10,838
    	
 
    	
80,907
    	
 
    
	
1/1/2016
    	
 
    	
52
    	
 
    	
21,675
    	
 
    	
21,675
    	
 
    	
84,953
    	
 
    
	
1/1/2017
    	
 
    	
53
    	
 
    	
32,513
    	
 
    	
32,513
    	
 
    	
89,200
    	
 
    
	
1/1/2018
    	
 
    	
54
    	
 
    	
43,350
    	
 
    	
43,350
    	
 
    	
93,660
    	
 
    
	
1/1/2019
    	
 
    	
55
    	
 
    	
54,188
    	
 
    	
54,188
    	
 
    	
98,343
    	
 
    
	
1/1/2020
    	
 
    	
56
    	
 
    	
65,025
    	
 
    	
65,025
    	
 
    	
103,260
    	
 
    
	
1/1/2021
    	
 
    	
57
    	
 
    	
75,863
    	
 
    	
75,863
    	
 
    	
108,424
    	
 
    
	
1/1/2022
    	
 
    	
58
    	
 
    	
86,700
    	
 
    	
86,700
    	
 
    	
113,845
    	
 
    
	
1/1/2023
    	
 
    	
59
    	
 
    	
97,538
    	
 
    	
97,538
    	
 
    	
119,537
    	
 
    
	
1/1/2024
    	
 
    	
60
    	
 
    	
108,375
    	
 
    	
108,375
    	
 
    	
125,514
    	
 
    
	
1/1/2025
    	
 
    	
61
    	
 
    	
119,213
    	
 
    	
119,213
    	
 
    	
131,789
    	
 
    
	
1/1/2026
    	
 
    	
62
    	
 
    	
130,050
    	
 
    	
130,050
    	
 
    	
138,379
    	
 
    
	
1/1/2027
    	
 
    	
63
    	
 
    	
140,888
    	
 
    	
140,888
    	
 
    	
145,298
    	
 
    
	
1/1/2028
    	
 
    	
64
    	
 
    	
151,726
    	
 
    	
151,726
    	
 
    	
152,563
    	
 
    
	
4/22/2028 (3)
    	
 
    	
65
    	
 
    	
154,435
    	
 
    	
154,435
    	
 
    	
154,435
    	
 
    

 

(1) As described in the Plan, the Participant’s Early Termination Benefit or Disability Benefit under the plan shall be the Annual Benefit amount determined for the year in which termination or disability occurs, as applicable, multiplied by fifteen(15).

 

(2) As described in the Plan, the Participant’s Change in Control Benefit shall be the Change in Control Annual Benefit amount determined for the year in which the Change in Control occurs, multiplied by fifteen (15).

 

(3) This is the date the Participant reaches Normal Retirement Age and becomes vested in the Normal Retirement Benefit.

 

 

OLD LINE BANK

Salary Continuation Agreement (2014)

BENEFICIARY DESIGNATION FORM

 

o New Designation

 

o Change in Designation

 

I                                                     , designate the following as Beneficiary under this Agreement:

 

Primary:                                                                                                                                         % Name of Beneficiary

 

                                                                        % Name of Beneficiary

 

Contingent:                                                                                          % Name of Beneficiary

 

                                                                        % Name of Beneficiary

 

Notes:

                                                                                     Please PRINT CLEARLY the names of the beneficiaries.

To name a Trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

To name your Estate as Beneficiary, please write “Estate of <your name>”.

Be aware that none of the contingent beneficiaries will receive anything unless

ALL of the primary beneficiaries predecease you.

 

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death.  I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I named my spouse as Beneficiary and our marriage is subsequently dissolved.

 

	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
 
    	
 
    	
Date:
    	
 
    
					

 

Received by the Plan Administrator this                   day of                                 ,                               .

 

	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
				

 

20

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