Document:

csgs-ex1010_6.htm

Pages where confidential treatment has been requested are stamped “Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission,” and places where information has been redacted have been marked with (***). 

 

EXHIBIT 10.10

 

		
	

	
RBC Capital Markets, LLC
3 World Financial Center
200 Vesey Street
New York, New York 10281
Telephone: (212) 858-7000

 

 

 

 

		
	
DATE:
	
March 3, 2015

	
 
	
 

	
TO:
	
CSG Systems International Inc.

9555 Maroon Circle

Englewood, CO 80112

 

	
ATTENTION:
	
**** ******

	
FACSIMILE:
	
(***) ********

	
 
	
 

	
FROM:
	
RBC Capital Markets, LLC

as agent for

Royal Bank of Canada

 

	
TELEPHONE:
	
(212) 858-7000

	
FACSIMILE:
	
(212) 428-3053

	
 
	
 

	
SUBJECT:
	
Fixed Notional Accelerated Share Repurchase Transaction

___________________________________________________________________________________________

 

Dear Sir/Madam:

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the Transaction entered into between Royal Bank of Canada (“RBC”) and CSG Systems International Inc. (“Counterparty”) on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.

___________________________________________________________________________________________

 

Disclosure of Agency Relationship

 

RBC has appointed as its agent, its indirect wholly-owned subsidiary, RBC Capital Markets, LLC (“RBCCM”), for purposes of conducting on RBC’s behalf, a business in privately negotiated transactions in options and other derivatives. You hereby are advised that RBC, the principal and stated counterparty in the Transactions, duly has authorized RBCCM to market, structure, negotiate, document, price, execute and hedge transactions in over-the-counter derivative products. RBCCM has full, complete and unconditional authority to undertake such activities on behalf of RBC. RBCCM acts solely as agent and has no obligation, by way of issuance, endorsement, guarantee or otherwise with respect to the performance of either party under the Transaction. The Transaction is not insured or guaranteed by RBCCM.

___________________________________________________________________________________________

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions,” as published by the International Swaps and Derivatives Association, Inc. (“ISDA”)) are incorporated into this Confirmation. 

 

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

 

	
1.
	
This Confirmation evidences a complete and binding agreement between RBC and Counterparty as to the terms of the Transaction to which this Confirmation relates and shall supersede all prior or contemporaneous written or oral communications with respect thereto. This Confirmation shall be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement as if RBC and Counterparty had executed an agreement in such form, without any Schedule but with the elections set forth in this Confirmation (and the election of USD as the Termination Currency). 
	
 

 

The Transaction shall be the only transaction under the Agreement. If there exists any ISDA Master Agreement between RBC and Counterparty or any other confirmation or other agreement between RBC and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist between RBC and Counterparty, then, notwithstanding anything to the contrary in such ISDA Master Agreement, confirmation or agreement or any other agreement to which RBC and Counterparty are parties, the Transaction shall not be considered a transaction under, or otherwise governed by, such existing or deemed to be existing ISDA Master Agreement.

 

If there is any inconsistency among the Agreement, this Confirmation and the Equity Definitions, the following will prevail for purposes of the Transaction in the order of precedence indicated: (i) this Confirmation; (ii) the Equity Definitions; and (iii) the Agreement.

 

	
2.
	
The terms of the particular Transaction to which this Confirmation relates are as follows:  
	
 

 

General Terms:

		
	
Trade Date:
	
March 3, 2015

	
Seller:
	
RBC

	
Buyer:
	
Counterparty

	
Shares:
	
The common stock of Counterparty, par value USD0.01 per share (Ticker Symbol: “CSGS”)

	
Prepayment:
	
Applicable

	
Prepayment Amount:
	
As provided in Annex B to this Confirmation.

	
Prepayment Date:
	
The Trade Date

	
Exchange:
	
NASDAQ

	
Related Exchange(s):
	
All Exchanges

	
Calculation Agent:
	
RBC. Whenever the Calculation Agent is required to act or to exercise judgment in any way with respect to the Transaction hereunder, it shall do so in good faith and in a commercially reasonable manner.

 

Valuation Terms:

		
	
Averaging Dates:
	
Each of the consecutive Exchange Business Days commencing on, and including, the Exchange Business Day immediately following the Trade Date and ending on, and including, the Final Averaging Date.

		

2

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Final Averaging Date:
	
The Scheduled Final Averaging Date; provided that RBC shall have the right to elect, in its sole discretion, at any time, to accelerate the Final Averaging Date to any date that is on or after the Scheduled Earliest Acceleration Date by written notice to Counterparty no later than 11:59 P.M., New York City time, on the Exchange Business Day immediately following the accelerated Final Averaging Date.

	
Scheduled Final Averaging Date:
	
As provided in Annex B to this Confirmation.

	
Scheduled Earliest Acceleration Date:
	
As provided in Annex B to this Confirmation.

	
Valuation Date:
	
The Final Averaging Date.

	
Averaging Date Disruption:
	
Modified Postponement, provided that notwithstanding anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Averaging Date, the Calculation Agent may, in its good faith and in commercially reasonable manner, if appropriate in light of market conditions, regulatory considerations or otherwise, take any or all of the following actions: (i) postpone  the Scheduled Final Averaging Date in accordance with Modified Postponement (as modified herein) and/or (ii) determine that such Averaging Date is a Disrupted Day only in part, in which case the Calculation Agent shall (x) determine the VWAP Price for such Disrupted Day based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day taking into account the nature and duration of such Market Disruption Event and (y) determine the Settlement Price in a commercially reasonable manner based on an appropriately weighted average instead of the arithmetic average described under “Settlement Price,”  below, with such Settlement Price based on, the duration of any Market Disruption Event, the volume, historical trading patterns and price of the Shares, and changes in volatility, stock loan rate, value of any commercially reasonable Hedge Positions in connection with the Transaction,  liquidity relevant to the Shares or to the Transaction.  Any Exchange Business Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be an Exchange Business Day; if a closure of the Exchange prior to its normal close of trading on any Exchange Business Day is scheduled following the date hereof, then such Exchange Business Day shall be deemed to be a Disrupted Day in full.  Section 6.6(a) of the Equity Definitions is hereby amended by replacing the word “shall” in the fifth line thereof with the word “may,” and by deleting clause (i) thereof, and Section 6.7(c)(iii)(A) of the Equity Definitions is hereby amended by replacing the word “shall” in the sixth and eighth line thereof with the word “may.”

		

3

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Market Disruption Events:
	
Section 6.3(a) of the Equity Definitions is hereby amended (A) by deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be” in clause (ii) thereof, and (B) by replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.” 

Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.

	
Regulatory Disruption:
	
Any event that RBC, in its reasonable good faith discretion, based on the advice of counsel, determines it appropriate with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures for RBC to refrain from or decrease any market activity in connection with the Transaction. RBC shall notify Counterparty as soon as reasonably practicable that a Regulatory Disruption has occurred and the Averaging Dates affected by it.  

 

Settlement Terms:

		
	
Initial Share Delivery:
	
On the Initial Share Delivery Date, RBC shall deliver to Counterparty the Initial Shares.

	
Initial Share Delivery Date:
	
The first Exchange Business Day following the Trade Date.  

	
Initial Shares:
	
As provided in Annex B to this Confirmation.

	
Settlement Date:
	
The date that falls one Settlement Cycle following the Valuation Date.

	
Settlement:
	
On the Settlement Date, RBC shall deliver to Counterparty the Number of Shares to be Delivered, if a positive number. If the Number of Shares to be Delivered is a negative number, the Counterparty Settlement Provisions in Annex A shall apply.

	
Number of Shares to be Delivered:
	
A number of Shares equal to (a) the Total Number of Shares minus (b) the aggregate number of Shares delivered on the Initial Share Delivery Date.

	
Total Number of Shares:
	
A number of Shares equal to (a) the Prepayment Amount divided by (b) (i) the Settlement Price minus (ii) the Settlement Price Adjustment Amount.

	
Settlement Price Adjustment Amount
	
As provided in Annex B to this Confirmation.

	
Settlement Price:
	
The arithmetic average of the VWAP Prices for all Averaging Dates.

4

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
VWAP Price:
	
For any Averaging Date, the Rule 10b-18 dollar volume weighted average price per Share for such day based on transactions executed during the regular trading session (including any extensions thereof) for the Exchange on such day (without regard to pre-open or after hours trading outside of such regular trading session), as reported on Bloomberg Page “CSGS <Equity> AQR SEC” (or any successor thereto) on such day or, in the event such price is not so reported on such day for any 

reason or is manifestly incorrect, as determined in good faith and in a commercially reasonable manner by the Calculation Agent using a volume weighted method.

	
Excess Dividend Amount:
	
For the avoidance of doubt, all references to the Excess Dividend Amount in Section 9.2(a)(iii) of the Equity Definitions shall be deleted.

	
Other Applicable Provisions:
	
To the extent either party is obligated to deliver Shares hereunder, the provisions of the last sentence of Section 9.2 and Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Counterparty is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction.

 

Dividends:

		
	
Excess Dividend:
	
For any calendar quarter, any dividend or distribution on the Shares with an ex-dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions or any Extraordinary Dividend) (a “Dividend”) the amount or value of which per Share (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount for such quarter.  “Extraordinary Dividend” means the per Share cash dividend or distribution, or a portion thereof, declared by Counterparty on the Shares that is classified by the board of directors of Counterparty as an “extraordinary” dividend.

	
Consequences of Excess Dividend:
	
The declaration by the Issuer of any Excess Dividend, the ex-dividend date for which occurs or is scheduled to occur during the Relevant Dividend Period, shall, at RBC’s election in its sole discretion, constitute an Additional Termination Event, with Counterparty as the sole Affected Party and the Transaction as the sole Affected Transaction.

	
Ordinary Dividend Amount:
	
As set forth in Annex B.

		

5

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Consequences of Early Ordinary Dividend Payment:
	
If an ex-dividend date for any Dividend that is not (x) an Excess Dividend, (y) a dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions and (z) an Extraordinary Dividend, occurs during any calendar quarter occurring (in whole or in part) during the Relevant Dividend Period and is prior to the Scheduled/Estimated Ex-Dividend Date for the relevant calendar quarter (as determined by the Calculation Agent), the Calculation Agent shall make such adjustment to the exercise, settlement, payment or any other terms of the Transaction as the Calculation Agent determines appropriate to preserve the fair value of the Transaction after taking into account such Dividend.

	
Scheduled/Estimated Ex-Dividend Dates:
	
As set forth in Annex B for each calendar quarter.

	
Relevant Dividend Period:
	
The period from, and including, the Trade Date to, and including, the Relevant Dividend Period End Date.

	
Relevant Dividend Period End Date:
	
If the Number of Shares to be delivered is negative, the last day of the Settlement Valuation Period; otherwise, the Settlement Date.

 

Share Adjustments:

		
	
Method of Adjustment:
	
Calculation Agent Adjustment; provided that the declaration or payment of Dividends shall not be a Potential Adjustment Event.

It shall constitute an additional Potential Adjustment Event if the Scheduled Final Averaging Date is postponed pursuant to “Averaging Date Disruption” above, in which case the Calculation Agent may, in its commercially reasonable discretion, adjust any relevant terms of the Transaction as the Calculation Agent determines appropriate to account for the economic effect on the Transaction of such postponement, which adjustments shall be based upon changes in stock price, volatility, interest rates, stock loan rate, value of any commercially reasonable Hedge Positions in connection with the Transaction, liquidity relevant to the Shares or to the Transaction and taking into account whether the Calculation Period had fewer Scheduled Trading Days than originally anticipated.

 

Extraordinary Events:

		
	
Consequences of Merger Events:
	
 

	
(a)  Share-for-Share:
	
Cancellation and Payment

	
(b)  Share-for-Other:
	
Cancellation and Payment

	
(c)  Share-for-Combined:
	
Cancellation and Payment

		

6

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Tender Offer:
	
Applicable

	
Consequences of Tender Offers:
	
 

	
(a)  Share-for-Share:
	
Cancellation and Payment

	
(b)  Share-for-Other:
	
Cancellation and Payment

	
(c)  Share-for-Combined:
	
Cancellation and Payment

	
Composition of Combined Consideration:
	
Not Applicable

	
Announcement Event:
	
If an Announcement Event occurs on or prior to the Valuation Date, then such Announcement Event shall be deemed to constitute an Extraordinary Event and Cancellation and Payment shall apply. “Announcement Event” means (i) any announcement of an Acquisition Transaction, (ii) any announcement that Counterparty or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) any announcement of Counterparty’s intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement by any person that in the reasonable judgment of the Calculation Agent is reasonably likely to result in an Acquisition Transaction or (v) any announcement of any change or amendment to any previous announcement described in clauses (i)-(iv) (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention).  “Acquisition Transaction” means (i) any Merger Event (with the definition of Merger Event deemed to be amended for this purpose so that the references therein to “100%” are replaced by “***” and to “***” by “***” and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition) or Tender Offer or any other transaction involving the merger of Counterparty with or into any third party, (ii) the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share exchange in respect of Shares or other similar transaction, (iv) any acquisition, lease, exchange, transfer, disposition (including by way of spin-off or distribution) of assets (including any capital stock or other ownership interests in subsidiaries) or other similar event by Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its subsidiaries exceeds *** of the market capitalization of Counterparty and (v) any transaction in which Counterparty or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).

7

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Announcement Date:
	
The definition of “Announcement Date” in Section 12.1 of the Definitions is hereby amended by (i) replacing the words “a firm” with the word “any” in the second and fourth lines thereof, (ii) replacing the word “leads to the” with the words “, if 

completed, would lead to a” in the third and the fifth lines thereof, (iii) replacing the words “voting shares” with the word “Shares” in the fifth line thereof, and (iv) inserting the words “by any entity” after the word “announcement” in the second and the fourth lines thereof. 

For purposes of this Transaction, the definition of “Merger Date” in Section 12.1(c) of the Equity Definitions shall be amended to read, “Merger Date shall mean the Announcement Date.” For purposes of this Transaction, the definition of “Tender Offer Date” in Section 12.1(e) Equity Definitions shall be amended to read, “Tender Offer Date shall mean the Announcement Date.”

	
Nationalization, Insolvency or Delisting:
	
Cancellation and Payment (Calculation Agent Determination); provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

	
Additional Disruption Events:
	
 

	
Change in Law:
	
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) adding the phrase “and/or Hedge Position” after the word “Shares” in clause (X) thereof and (ii) replacing the parenthetical beginning after the word “regulation” in the second line thereof with the phrase “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”

	
Failure to Deliver:
	
Applicable

	
Insolvency Filing:
	
Applicable

	
Hedging Disruption:
	
Applicable

	
Increased Cost of Hedging:
	
Applicable

	
Loss of Stock Borrow:
	
Applicable

	
Maximum Stock Loan Rate:
	
As provided in Annex B to this Confirmation.

	
Increased Cost of Stock Borrow:
	
Applicable

	
Initial Stock Loan Rate:
	
As provided in Annex B to this Confirmation.

	
Hedging Party:
	
For all applicable events, RBC

8

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Determining Party:
	
For all applicable events, RBC; provided that, upon receipt of written request from Counterparty, the Determining Party shall promptly provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from internal or external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing RBC’s proprietary models or other 

information that may be proprietary or subject to contractual, legal or regulatory obligations to not disclose such information), and shall use commercially reasonable efforts to provide such written explanation within five (5) Exchange Business Days from the receipt of such request.

	
Hedging Adjustments:
	
For the avoidance of doubt, whenever the Calculation Agent is called upon to make an adjustment pursuant to the terms of this Confirmation or the Equity Definitions to take into account the effect of an event, the Calculation Agent shall make such adjustment by reference to the effect of such event on RBC, assuming that RBC maintains a commercially reasonable Hedge Position.

	
Non-Reliance:
	
Applicable

	
Agreements and Acknowledgments Regarding Hedging Activities:
	
Applicable

	
Additional Acknowledgments:
	
Applicable

 

	
3.
	
Additional Provisions Relating to Transactions in the Shares.
	
 

(a)Counterparty acknowledges and agrees that the Shares delivered on the Initial Share Delivery Date may be sold short to Counterparty. Counterparty further acknowledges and agrees that RBC may, during (i) the period from the date hereof to a date up to 5 Exchange Business Days following the Valuation Date or, if later, the Scheduled Earliest Acceleration Date, and (ii) the period from and including the first Settlement Valuation Date to and including the last Settlement Valuation Date or such earlier day as elected by RBC and communicated to Counterparty on such day (together, the “Relevant Period”), purchase Shares in connection with the Transaction, which Shares may be used to cover all or a portion of such short sale or may be delivered to Counterparty.  Such purchases will be conducted independently of Counterparty.  The timing of such purchases by RBC, the number of Shares purchased by RBC on any day, the price paid per Share pursuant to such purchases and the manner in which such purchases are made, including without limitation whether such purchases are made on any securities exchange or privately, shall be within the absolute discretion of RBC.  It is the intent of the parties that the Transaction comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the parties agree that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).  Counterparty acknowledges and agrees that (A) Counterparty does not have, and shall not attempt to exercise, any influence over how, when or whether RBC effects any purchases of Shares in connection with the Transaction, (B) during the period beginning on (but excluding) the date of this Confirmation and ending on (and including) the last day of the Relevant Period, neither Counterparty nor its officers or employees shall, directly or indirectly, communicate any information regarding Counterparty or the Shares to any employee of RBC or its Affiliates responsible for trading the Shares in connection with the transactions contemplated hereby (the “Relevant Bank Personnel”), which persons are set forth in Annex B hereto, (C) Counterparty is entering into the Transaction in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b‐5 promulgated under the Exchange Act and (D) Counterparty will not alter or deviate from this Confirmation or enter into or alter a corresponding hedging transaction with respect to the Shares.  Counterparty also acknowledges and agrees that any amendment, modification or waiver of this Confirmation must be effected in accordance with the requirements for the amendment of a “plan” as defined in Rule 10b5-1(c) under the Exchange Act.  Without limiting the generality of the foregoing, any such amendment, modification or waiver shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment, modification or waiver 

9

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

shall be made at any time at which Counterparty or any officer or director of Counterparty is aware of any material nonpublic information regarding Counterparty or the Shares.

(b)Counterparty agrees that neither Counterparty nor any of its Affiliates or agents shall engage in any distribution (as such term is used in Regulation M under the Exchange Act) of securities of the Counterparty that would cause Regulation M to be applicable to any purchases of Shares, or any security for which the Shares are a reference security (as defined in Regulation M), by Counterparty or any of its affiliated purchasers (as defined in Regulation M) during the Relevant Period unless Counterparty has provided written notice to RBC of such distribution not later than the Scheduled Trading Day immediately preceding the first day of such distribution. Counterparty acknowledges that such notice may constitute a Regulatory Disruption. 

(c)Counterparty shall, at least one day prior to the first day of the Relevant Period, notify RBC of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for Counterparty or any of its affiliated purchasers during each of the four calendar weeks preceding the first day of the Relevant Period and during the calendar week in which the first day of the Relevant Period occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18).

(d)During the Relevant Period, Counterparty shall (i) not make any public announcement (as defined in Rule 165(f) under the Securities Act of 1933, as amended (the “Securities Act”) of any merger, acquisition, or similar transaction involving a recapitalization relating to Counterparty (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (ii) promptly notify RBC following any such announcement that such announcement has been made, and (iii) promptly deliver to RBC following the making of any such announcement a certificate indicating (A) Counterparty’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (B) Counterparty’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of the announcement of such transaction.  In addition, Counterparty shall promptly notify RBC of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.  Counterparty acknowledges that any such public announcement may result in a Regulatory Disruption and may cause the Relevant Period to be suspended.  Accordingly, Counterparty acknowledges that its actions in relation to any such announcement or transaction must comply with the standards set forth in Section 3(a) to the extent applicable.  

(e)Without the prior written consent of RBC, Counterparty shall not, and shall cause its Affiliates and affiliated purchasers (each as defined in Rule 10b-18) not to, directly or indirectly (including, without limitation, by means of a cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable for Shares during the Relevant Period, except through RBC or an affiliate thereof.  

	
4.
	
Representations, Warranties and Agreements.
	
 

(a)In addition to the representations, warranties and agreements in the Agreement and those contained elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with, RBC as follows: 

(i)As of the Trade Date, and as of the date of any election by Counterparty of the Share Termination Alternative under (and as defined in) Section 10(a) below, none of Counterparty and its officers and directors is aware of any material nonpublic information regarding Counterparty or the Shares.

10

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

(ii)Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that RBC is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

(iii)Without limiting the generality of Section 3(a)(iii) of the Agreement, Counterparty shall not take any action that would cause the Transaction to violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

(iv)Prior to the Trade Date, Counterparty shall deliver to RBC a resolution of Counterparty’s board of directors authorizing the Transaction and such other certificate or certificates as RBC shall reasonably request.  Counterparty has publicly disclosed its intention to institute a program for the acquisition of Shares.

(v)Counterparty is not entering into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act, and will not engage in any other securities or derivative transaction to such ends.  

(vi)Counterparty is not, and after giving effect to the transactions contemplated hereby will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

(vii)On the Trade Date, the Prepayment Date, the Initial Share Delivery Date and the Settlement Date, Counterparty is not, or will not be, “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase the Shares hereunder in compliance with the corporate laws of the jurisdiction of its incorporation.

(viii)To the best of the Counterparty’s actual knowledge without any investigation, no state or local (including non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including, without limitation, a requirement to obtain prior approval from any person or entity) as a result of RBC or its affiliates owning or holding (however defined) Shares. 

(ix)[Reserved]

(x)Counterparty understands no obligations of RBC to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate of RBC or any governmental agency.

(b)Each of RBC and Counterparty agrees and represents that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

(c)Each of Counterparty and RBC acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act, by virtue of Section 4(a)(2) thereof.  Accordingly, Each of Counterparty and RBC represents and warrants to the other party that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account and without a view to the distribution or resale thereof, and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be 

11

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

registered under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws.

(d)Counterparty agrees and acknowledges that RBC is a “financial institution” and “financial participant”  within the meaning of Sections 101(22), 101(53C) and 101(22A) of the Bankruptcy Code.  The parties hereto further agree and acknowledge that it is the intent of the parties that (A) this Confirmation is a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment,” within the meaning of Section 546 of the Bankruptcy Code and (B) RBC is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(o), 546(e), 548(d)(2), 555 and 561 of the Bankruptcy Code.

	
5.
	
Agreements and Acknowledgements Regarding Hedging.
	
 

Counterparty acknowledges and agrees that:

(a)During the Relevant Period, RBC and its Affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction;

(b)RBC and its Affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the Transaction;

(c)RBC shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Settlement Price and/or the VWAP Price; and

(d)Any market activities of RBC and its Affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Settlement Price and/or the VWAP Price, each in a manner that may be adverse to Counterparty.

	
6.
	
Other Provisions.
	
 

(a)Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events.  If either party would owe the other party any amount pursuant to Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or pursuant to Section 6(d)(ii) of the Agreement (a “Payment Obligation”), Counterparty shall have the right, in its sole discretion, to satisfy or to require RBC to satisfy, as the case may be, any such Payment Obligation, in whole or in part, by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to RBC, confirmed in writing within one Scheduled Trading Day, no later than 9:30 A.M. New York City time on the Exchange Business Day immediately following the Announcement Date, Early Termination Date or date of cancellation or termination in respect of an Extraordinary Event, as applicable (“Notice of Share Termination”); provided that if RBC would owe Counterparty the Payment Obligation and Counterparty does not elect to require RBC to satisfy such Payment Obligation by the Share Termination Alternative in whole, RBC shall have the right, in its sole discretion, to elect to satisfy any portion of such Payment Obligation that Counterparty has not so elected by the Share Termination Alternative, notwithstanding Counterparty’s failure to elect or election to the contrary; and provided further that Counterparty shall not have the right to so elect (but, for the avoidance of doubt, RBC shall have the right to so elect) in the event of (i) an Insolvency, a Nationalization, a Merger Event, a Tender Offer or an Acquisition Transaction, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash or (ii) an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party, which Event of Default or Termination Event resulted from an event or events within Counterparty’s control.  Upon such Notice of Share 

12

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Announcement Date, Early Termination Date or date of cancellation or termination in respect of an Extraordinary Event, as applicable, with respect to the Payment Obligation or such portion of the Payment Obligation for which the Share Termination Alternative has been elected (the “Applicable Portion”):

		
	
Share Termination Alternative:
	
Applicable and means, if delivery pursuant to the Share Termination Alternative is owed by RBC, that RBC shall deliver to Counterparty the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable, or such later date as the Calculation Agent may reasonably determine (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation or the Applicable Portion, as the case may be. If delivery pursuant to the Share Termination Alternative is owed by Counterparty, paragraphs 2 through 5 of Annex A shall apply as if such delivery were a settlement of the Transaction to which Net Share Settlement (as defined in Annex A) applied, the Cash Settlement Payment Date were the Early Termination Date, the Forward Cash Settlement Amount were zero (0) minus the Payment Obligation (or the Applicable Portion, as the case may be) owed by Counterparty, and “Shares” as used in Annex A were replaced by “Share Termination Delivery Units.”

	
Share Termination Delivery Property:
	
A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation (or the Applicable Portion, as the case may be) divided by the Share Termination Unit Price.  The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.

	
Share Termination Unit Price:
	
The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to the parties at the time of notification of the Payment Obligation.

	
Share Termination Delivery Unit:
	
In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization,  Merger Event, Tender Offer or an Acquisition Transaction, one Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event, Tender Offer or Acquisition Transaction.  If such Insolvency, Nationalization, Merger Event, Tender Offer or an Acquisition Transaction involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.

	
Failure to Deliver:
	
Applicable

13

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
Other applicable provisions:
	
If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or 

requirements under applicable securities laws arising as a result of the fact that Counterparty is the issuer of the Shares or any portion of the Share Termination Delivery Units) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”.

	

	

	
 

(b)Equity Rights.  RBC acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Counterparty’s bankruptcy.  For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Counterparty’s bankruptcy to any claim arising as a result of a breach by Counterparty of any of its obligations under this Confirmation or the Agreement.  For the avoidance of doubt, the parties acknowledge that this Confirmation is not secured by any collateral that would otherwise secure the obligations of Counterparty herein under or pursuant to any other agreement.

(c)Indemnification.  In the event that RBC or the Calculation Agent or any of their Affiliates becomes involved in any capacity in any action, proceeding or investigation brought by or against any person in connection with any breach (including a breach of representations) of or default under this Confirmation (or the Transactions thereunder) of the other party hereto, Counterparty shall reimburse RBC or the Calculation Agent or such Affiliate for its reasonable and documented legal and other out-of-pocket expenses (including the cost of any investigation and preparation) incurred in connection therewith within 30 days of receipt of notice of such expenses, and shall indemnify and hold RBC or the Calculation Agent or such Affiliate harmless against any losses, claims, damages or liabilities to which RBC or the Calculation Agent or such Affiliate may become subject in connection with any such action, proceeding or investigation.  If for any reason the foregoing indemnification is unavailable to RBC or the Calculation Agent or such Affiliate or insufficient to hold it harmless, then Counterparty shall contribute to the amount paid or payable by RBC or the Calculation Agent or such Affiliate as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of Counterparty and RBC or the Calculation Agent or such Affiliate with respect to such losses, claims, damages or liabilities and any other relevant equitable considerations.  The reimbursement, indemnity and contribution obligations of Counterparty under this Section 10(c) shall be in addition to any liability that Counterparty may otherwise have, shall extend upon the same terms and conditions to the partners, directors, officers, agents, employees and controlling persons (if any), as the case may be, of RBC or the Calculation Agent or such Affiliate and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of Counterparty, RBC or the Calculation Agent any such Affiliate and any such person.  Notwithstanding the foregoing, the indemnity and contribution obligations of Counterparty under this Section 6(c) shall not apply for the benefit of RBC or the Calculation Agent or such Affiliate to the extent that any losses, claims, damages, liabilities or expenses incurred by RBC or the Calculation Agent or such Affiliate result from the gross negligence or bad faith of RBC or the Calculation Agent or a breach by RBC or the Calculation Agent of any of its covenants or obligations. The foregoing provisions shall survive any termination or completion of the Transaction. 

(d)Staggered Settlement.  If RBC would owe Counterparty any Shares pursuant to the “Settlement Terms” above, RBC may, by notice to Counterparty on or prior to the Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares deliverable on such Nominal Settlement Date on two or more dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal Settlement Date as follows: (i) in such notice, RBC will specify to Counterparty the related Staggered Settlement Dates (each of which will be on or prior to such Nominal Settlement Date) or delivery times and how it will allocate the Shares it is required to deliver under “Settlement Terms” above among the Staggered Settlement Dates or delivery times; and (ii) the aggregate number of Shares that RBC will deliver to Counterparty hereunder on all such Staggered Settlement Dates and delivery times will equal the number of Shares that RBC would otherwise be required to deliver on such Nominal Settlement Date.

14

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

(e)Transfer and Assignment.  RBC may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, (a) to any of its Affiliates whose obligations are guaranteed by RBC without the consent of Counterparty, or (b) to any third party of equivalent credit quality with the prior written consent of Counterparty, which consent shall not be withheld unreasonably (for the avoidance of doubt, if consenting to such transfer or assignment would cause any reasonable concern of Counterparty with respect to compliance with any legal requirements, Counterparty shall not be required to give such consent).

(f)Amendments to Equity Definitions.  The following amendments shall be made to the Equity Definitions:

(i)Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative effect on the theoretical value of the relevant Shares” and replacing them with the words “a material economic effect on the relevant Transaction”; 

(ii)The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction or Share Forward Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material economic effect on the Transaction and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, stock loan rate or liquidity relative to the relevant Shares, but not for any event that is based on (a) an observable market, other than the market for Counterparty’s own stock or (b) an observable index, other than an index calculated measured solely by reference to Counterparty’s own operations )”; 

(iii)Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “diluting or concentrative effect on the theoretical value of the relevant Shares” and replacing them with the words “is the result of a corporate event involving the Issuer or its securities that has a material economic effect of the Transaction or”; and adding the phrase “or the relevant Transaction; provided that such event is not based on (a) an observable market, other than the market for Counterparty’s own stock or (b) an observable index, other than an index calculated measured solely by reference to the Counterparty’s own operations” at the end of the sentence; 

(iv)Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at RBC’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that Issuer”;

(v)Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and (B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

(vi)Section 12.9(b)(v) of the Equity Definitions is hereby amended by (1) inserting the following words “; provided that the Non-Hedging Party may make such election only if the Non-Hedging Party represents and warrants to the Hedging Party in writing on the date it notifies the Hedging Party of such election that, as of such date, the Non-Hedging Party is not 

15

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

aware of any material non-public information concerning the Shares and is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws” at the end of second sentence and (2) deleting clause (X) in the final sentence. 

(g)No Netting and Set-off.  Each party waives any and all rights it may have to set off obligations arising under the Agreement and the Transaction against other obligations between the parties, whether arising under any other agreement, applicable law or otherwise.

(h)Disclosure.  Effective from the date of commencement of discussions concerning the Transaction, Counterparty and each of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to Counterparty relating to such tax treatment and tax structure.

(i)Designation by RBC.  Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing RBC to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, RBC (the “Designator”) may designate any of its Affiliates (the “Designee”) to deliver or take delivery, as the case may be, and otherwise perform its obligations to deliver, if any, or take delivery of, as the case may be, any such Shares or other securities in respect of the Transaction, and the Designee may assume such obligations, if any.  Such designation shall not relieve the Designator of any of its obligations, if any, hereunder. Notwithstanding the previous sentence, if the Designee shall have performed the obligations, if any, of the Designator hereunder, then the Designator shall be discharged of its obligations, if any, to Counterparty to the extent of such performance.

(j)Right to Extend.  RBC may postpone or add, in whole or in part, any date of valuation, averaging or delivery to the extent RBC reasonably determines in good faith that such postponement or addition is necessary or appropriate to preserve RBC’s commercially reasonable hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market, the stock loan market or other relevant market.

(k)Termination Currency.  The Termination Currency shall be USD.

(l)Wall Street Transparency and Accountability Act.  In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA (or any statute containing any legal certainty provision similar to Section 739 of the WSTAA) or any regulation under the WSTAA (or any such statute), nor any requirement under WSTAA (or any statute containing any legal certainty provision similar to Section 739 of the WSTAA) or an amendment made by WSTAA (or any such statute), shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, Increased Cost of Hedging or Illegality (as defined in the Agreement)).

(m)Additional Termination Event.  It shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction, Counterparty shall be the sole Affected Party and RBC shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement if, at any time during the Relevant Period, the price per Share on the Exchange, as determined by the Calculation Agent, is at or below the Threshold Price (as provided in Annex B to this Confirmation). 

(n)RBC Maximum Share Delivery.  Notwithstanding anything to the contrary in this Confirmation, in no event shall RBC be required to deliver any Shares, or any Shares or other securities comprising Alternative Delivery Units, in respect of the Transaction in excess of the Maximum Number of Shares set forth in Annex B. 

16

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

(o)Delivery of Cash. For the avoidance of doubt, other than payment of the Prepayment Amount by Counterparty, nothing in this Confirmation shall be interpreted as requiring Counterparty to cash settle the Transaction, except in circumstances where cash settlement is within Counterparty’s control (including, without limitation, where Counterparty timely elects not to receive or deliver Alternative Delivery Units in accordance with Section 6(a)) or in those circumstances in which holders of the Shares would also receive cash.

	
7.
	
Account Details.
	
 

 

			
	
 
	
Account for Payments to RBC:
	
To be provided separately

 

			
	
 
	
Account for Payments to Counterparty:
	
To be provided by Counterparty

 

	
8.
	
Offices.
	
 

 

	
 
	
(a)
	
The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is not a Multibranch Party
	
 

	
 
	
(b)
	
The Office of Dealer for the Transaction is: New York
	
 

 

	
9.
	
Notices.
	
 

 

	
 
	
(a)
	
Address for notices or communication to Counterparty:
	
 

 

		
	
To:
	
CSG Systems International Inc.

9555 Maroon Circle

Englewood, CO 80112

	
Attention:
	
**** ******

	
Telephone:
	
************

	
Facsimile:
	
***** ***-****

 

	
 
	
(b)
	
Address for notices or communications to Dealer:
	
 

 

		
	
For purpose of Giving Notice:

 

	
To:
	
RBC Capital Markets, LLC

Three World Financial Center

200 Vesey Street

New York, NY 10281

	
Attention:
	
ECM

	
Email:
	
****************************************@***.***

 

		
	
For Trade Affirmations and Settlements:

 

	
To:
	
RBC Capital Markets, LLC

Three World Financial Center

200 Vesey Street

New York, NY 10281

	
Attention:
	
Back Office

	
Email:
	
**************

		

17

#86902642v5

	
***
	
Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. 

 

	
For Trade Confirmations:

 

	
To:
	
RBC Capital Markets, LLC

Three World Financial Center

200 Vesey Street

New York, NY 10281

	
Attention:
	
Structured Derivatives Documentation

	
Email:
	
************.***

 

	
10.
	
No Deposit Insurance. Counterparty understands that no obligations of RBC to Counterparty hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate of RBC or any governmental agency.
	
 

 

	
11.
	
Governing Law and Waiver of Jury Trial. The laws of the State of New York.
	
 

 

EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONFIRMATION OR THE TRANSACTION CONTEMPLATED HEREBY.

12. Confidentiality. Each party agrees, and agrees to cause its affiliates, subsidiaries, officers and directors, to keep this Confirmation and the terms of the Transaction confidential and not to disclose this Confirmation or the terms of the Transaction to any third party except as required by law, rule or regulation of any governmental authority, court or self-regulatory agency and except Counterparty may disclose all or any portion of this Confirmation and the terms of the Transaction in its sole discretion.

 

 

 

 

18

#86902642v5

 

Please confirm your agreement to be bound by the terms stated herein by executing the copy of this Confirmation enclosed for that purpose and returning it to us by mail or facsimile transmission to the address for Notices indicated above.

	
	
Yours sincerely,

 

	
ROYAL BANK OF CANADA,

	
By its agent

 

	
RBC Capital Markets, LLC

 

	
By:      /s/ Makouê Tourê

	
Name:  Makouê Tourê

	
Title:  Associate Director

 

 

	
	
Confirmed as of the date first above written:

 

	
CSG Systems International Inc.

 

	
By: /s/ RandyWiese

	
Name: Randy Wiese

	
Title:  EVP & CFO

	
 

 

 

 

 

#86902642v5

SC1:3793656.2B

ANNEX A

COUNTERPARTY SETTLEMENT PROVISIONS

	
1.
	
The following Counterparty Settlement Provisions shall apply to the extent indicated under the Confirmation:
	
 

 

		
	
Settlement Currency:
	
USD

	
Settlement Method Election
	
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby amended by deleting the word “Physical” in the sixth line thereof and replacing it with the words “Net Share” and (ii) the Electing Party may make a settlement method election only if the Electing Party represents and warrants to RBC in writing on the date it notifies RBC of its election that, as of such date, none of Counterparty and its officers and directors is aware of any material nonpublic information regarding Counterparty or the Shares.

	
Electing Party:
	
Counterparty

	
Settlement Method Election Date:
	
 

A date on or prior to the Scheduled Final Averaging Date; provided that if RBC accelerates the Final Averaging Date pursuant to the proviso to the definition of Final Averaging Date, the Settlement Method Election Date shall be the second Exchange Business Day immediately following the Valuation Date. 

 

	
Default Settlement Method:
	
Cash Settlement

	
Special Settlement:
	
Either (i) a settlement to which this Annex A applies that follows the occurrence of an Announcement Event or (ii) any settlement to which paragraphs 2 through 5 of this Annex A apply that follows a termination or cancellation of the Transaction pursuant to Section 6 of the Agreement or Article 12 of the Equity Definitions to which Section 6(a) of this Confirmation applies.

	
Forward Cash Settlement Amount:
	
The Number of Shares to be Delivered multiplied by the Settlement Valuation Price.

	
Settlement Valuation Price:
	
The arithmetic average of the VWAP Prices for all Settlement Valuation Dates, subject to Averaging Date Disruption, determined as if each Settlement Valuation Date were an Averaging Date (with Averaging Date Disruption applying as if the last Settlement Valuation Date were the Final Averaging Date and the Settlement Valuation Price were the Settlement Price).

		

A-1

#86902642v5

	
Settlement Valuation Dates:
	
A number of Scheduled Trading Days selected by RBC in its commercially reasonable discretion, beginning on the Scheduled Trading Day immediately following the later of the Settlement Method Election Date and the Final Averaging Date. 

	
Cash Settlement:
	
If Cash Settlement is applicable, then Counterparty shall pay to RBC the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date. 

	
Cash settlement Payment Date:
	
The date one Settlement Cycle following the last Settlement Valuation Date.

	
Net Share Settlement Procedures:
	
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 5 below.

 

	
2.
	
Net Share Settlement shall be made by delivery on the Settlement Date of a number of Shares equal to the product of **** of the absolute value of the Number of Shares to be Delivered; provided that in the case of a Special Settlement, Net Share Settlement shall be made (i) by delivery on the Cash Settlement Payment Date (such date, the “Net Share Settlement Date”) of a number of Shares (the “Restricted Payment Shares”) with a value equal to the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the realizable market value thereof to RBC (which value shall take into account a commercially reasonably illiquidity discount resulting from the fact that the Restricted Payment Shares will not be registered for resale), as determined by the Calculation Agent in a commercially reasonable manner in good faith (the “Restricted Share Value”), and paragraph 3 of this Annex A shall apply to such Restricted Payment Shares, and (ii) by delivery of the Make-Whole Payment Shares as described in paragraph 4 below. 
	
 

	
3.
	
(a)All Restricted Payment Shares and Make-Whole Payment Shares shall be delivered to RBC (or any affiliate of RBC designated by RBC) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof.
	
 

(b)As of or prior to the date of delivery, Counterparty shall enter into a customary and reasonable confidentiality agreement with RBC and any potential purchaser of any such Shares from RBC (or any affiliate of RBC designated by RBC) identified by RBC, and each such person shall be, subject to execution of a reasonably satisfactory confidentiality agreement with Counterparty, afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection financial and other records, pertinent corporate documents and other information reasonably requested by them).

(c)As of the date of delivery, Counterparty shall enter into an agreement (a “Private Placement Agreement”) with RBC (or any affiliate of RBC designated by RBC) in connection with the private placement of such Shares by Counterparty to RBC (or any such affiliate) and the private resale of such shares by RBC (or any such affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities of similar size by similar issuers, in form and substance commercially reasonably satisfactory to RBC and Counterparty, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the liability of, RBC and its affiliates, and shall provide for the payment by Counterparty of all commercially reasonable fees and expenses in connection with such resale, including all commercially reasonable fees and expenses of counsel for RBC, and, to the extent such private placement agreement requires the delivery of further documentation, to use best efforts to deliver such documentation so long as it is appropriate for a private placement of similar size, 

A-2

#86902642v5

and shall contain representations, warranties and agreements of Counterparty necessary to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales.

 

(d)Counterparty shall not take or cause to be taken any action that would make unavailable either (i) the exemption set forth in Section 4(a)(2) of the Securities Act for the sale of any Restricted Payment Shares or Make-Whole Payment Shares by Counterparty to RBC or (ii) all exemptions from the registration requirements of the Securities Act for resales of Restricted Payment Shares and Make-Whole Payment Shares by the RBC (or an affiliate of RBC). 

	
4.
	
If Restricted Payment Shares are delivered in accordance with paragraph 3 above, on the last Settlement Valuation Date, a balance (the “Settlement Balance”) shall be established with an initial balance equal to the absolute value of the Forward Cash Settlement Amount.  Following the delivery of Restricted Payment Shares or any Make-Whole Payment Shares, RBC shall sell all such Restricted Payment Shares or Make-Whole Payment Shares in a commercially reasonable manner.  At the end of each Exchange Business Day upon which sales have been made, the Settlement Balance shall be reduced by an amount equal to the aggregate proceeds received by RBC or its affiliate upon the sale of such Restricted Payment Shares or Make-Whole Payment Shares, less a customary and commercially reasonable private placement fee for private placements of common stock by similar issuers.  If, on any Exchange Business Day, all Restricted Payment Shares and Make-Whole Payment Shares have been sold and the Settlement Balance has not been reduced to zero, Counterparty shall, at Counterparty’s election, (i) deliver to RBC one Settlement Cycle following such Exchange Business Day an additional number of Shares (the “Make-Whole Payment Shares” and, together with the Restricted Payment Shares, the “Payment Shares”) equal to (x) the Settlement Balance as of such Exchange Business Day divided by (y) the Restricted Share Value of the Make-Whole Payment Shares as of such Exchange Business Day or (ii) promptly deliver to RBC cash in an amount equal to the then remaining Settlement Balance.  This provision shall be applied successively until either the Settlement Balance is reduced to zero or the aggregate number of Restricted Payment Shares and Make-Whole Payment Shares equals the Maximum Deliverable Number. If on any Exchange Business Day, Restricted Payment Shares and Make-Whole Payment Shares remain unsold and the Settlement Balance has been reduced to zero, RBC shall promptly return such unsold Restricted Payment Shares or Make-Whole Payment Shares.
	
 

	
5.
	
Notwithstanding the foregoing, in no event shall Counterparty be required to deliver more than the Maximum Deliverable Number of Shares as Payment Shares hereunder.  “Maximum Deliverable Number” means the number of Shares set forth as such in Annex B to this Confirmation.  Counterparty represents and warrants to RBC (which representation and warranty shall be deemed to be repeated on each day from the date hereof to the Settlement Date or, if Counterparty has elected to deliver any Payment Shares hereunder in connection with a Special Settlement, to the date on which resale of such Payment Shares is completed (the “Final Resale Date”)) that the Maximum Deliverable Number is equal to or less than the number of authorized but unissued Shares of Counterparty that are not reserved for future issuance in connection with transactions in such Shares (other than the transactions under this Confirmation) on the date of the determination of the Maximum Deliverable Number (such Shares, the “Available Shares”).  In the event Counterparty shall not have delivered the full number of Shares otherwise deliverable as a result of this paragraph 5 (the resulting deficit, the “Deficit Shares”), Counterparty shall be continually obligated to deliver, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, Shares when, and to the extent that, (i) Shares are repurchased, acquired or otherwise received by Counterparty or any of its subsidiaries after the date hereof (whether or not in exchange for cash, fair value or any other consideration), (ii) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date that prior to the relevant date become no longer so reserved or (iii) Counterparty additionally authorizes any unissued Shares that are not reserved for other transactions.  Counterparty shall immediately notify RBC of 
	
 

A-3

#86902642v5

		
the occurrence of any of the foregoing events (including the number of Shares subject to clause (i), (ii) or (iii) and the corresponding number of Shares to be delivered) and promptly deliver such Shares thereafter.
	
 

 

A-4

#86902642v5

ANNEX B

 

		
	
Prepayment Amount:
	
USD 50,000,000

 

	
Scheduled Final Averaging Date:
	
12/15/2015

 

	
Scheduled Earliest Acceleration Date:
	
10/15/2015

 

	
Initial Shares:
	
1,335,000 Shares

 

	
Settlement Price Adjustment Amount:
	
USD 0.00

 

	
Maximum Stock Loan Rate:
	
*******

 

	
Initial Stock Loan Rate:
	
******

 

	
Threshold Price:
	
USD 15.00

 

	
Maximum Deliverable Number:
	
3.3 million Shares

 

	
Relevant Bank Personnel:
	
***** ****

***** ****

**** ** ****

 

	
Ordinary Dividend Amount:
	
USD 0****

 

	
Scheduled/Estimated Ex-Dividend Dates for the relevant calendar quarter:
	
********

********

********

*********

 

	
RBC Maximum Share Delivery in Section 6(n) of this Confirmation:
	
15,000,000

 

B-1Exhibit 10.1

 

MANAGEMENT AGREEMENT

AGREEMENT made as of the 14th day of September, 2015 by and among CERES MANAGED FUTURES LLC, a Delaware limited liability company (“CMF”), ORION FUTURES FUND L.P., a New York limited partnership (the “Partnership”) and SYSTEMATICA INVESTMENTS LIMITED, a company incorporated under the laws of Jersey (the “Advisor”).

W I T N E S S E T H :

WHEREAS, CMF is the general partner of the Partnership, a limited partnership organized for the purpose of speculative trading of commodity interests, including futures contracts, options, forward contracts, swaps and other derivative instruments with the objective of achieving substantial capital appreciation; and

WHEREAS, the Fourth Amended and Restated Limited Partnership Agreement, dated August 31, 2012 (the “Partnership Agreement”) permits CMF to delegate to one or more commodity trading advisors CMF’s authority to make trading decisions for the Partnership; and

WHEREAS, the Advisor is registered as a commodity trading advisor with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). The Advisor is regulated and authorized by the Jersey Financial Services Commission, and/or any successor authority carrying out all or part of the relevant functions thereof (the “JFSC”) for conduct of the relevant classes of fund services business under the Jersey Laws Jersey Financial Services Commission; and

WHEREAS, CMF is registered as a commodity pool operator with the CFTC and is a member of NFA; and

WHEREAS, CMF, the Partnership and the Advisor wish to enter into this Agreement in order to set forth the terms and conditions upon which the Advisor will render and implement advisory services in connection with the conduct by the Partnership of its commodity interest trading activities during the term of this Agreement.

NOW, THEREFORE, the parties agree as follows:

1.            APPOINTMENT OF THE ADVISOR.  The Advisor is acting in its capacity as general partner of Systematica Investments LP, a limited partnership formed in Guernsey and registered with number 2193, and is entering into this Agreement solely in that capacity.

2.            DUTIES OF THE ADVISOR.  (a) For the period and on the terms and conditions of this Agreement, the Advisor shall have sole authority and responsibility, as one of the Partnership’s agents and attorneys in fact, for directing the investment and reinvestment of the assets and funds of the Partnership allocated to it from time to time, in accordance with the terms hereof, by CMF in commodity interests, including commodity futures, options on futures, spot and forward contracts (including over-the-counter forward foreign currency contracts).  The Advisor may also engage in other swap and derivative transactions on behalf of the Partnership with the prior

 

 

 

 

- 1 -

 

 

written approval of CMF, such approval not to be unreasonably withheld or delayed.  All such trading on behalf of the Partnership shall be (i) in accordance with the trading policies set forth in Appendix A, and as such trading policies may be changed from time to time upon receipt by the Advisor of prior written notice of such change and (ii) pursuant to the trading strategy selected by CMF to be utilized by the Advisor in managing the Partnership’s assets.  CMF has initially selected the Advisor’s BlueTrend Program (the “Program”), as described in Appendix B attached hereto, to manage the Partnership’s assets allocated to it.  Any open positions or other investments at the time of receipt of such notice of a change in trading policy shall not be deemed to violate the changed policy and shall be closed or sold in the ordinary course of trading.  The Advisor may not deviate from the trading policies set forth in Appendix A without the prior written consent of the Partnership given on its behalf by CMF.  The Advisor makes no representation or warranty that the trading to be directed by it for the Partnership will be profitable or will not incur losses.

(b)            CMF acknowledges receipt of  the description of the Advisor’s Program, attached hereto as Appendix B.  All trades made by the Advisor for the account of the Partnership shall be made through such clearing commodity broker or brokers as CMF shall direct, and the Advisor shall have no authority or responsibility for selecting or supervising any such clearing broker in connection with the clearance or confirmation of transactions for the Partnership or for the negotiation of brokerage rates charged therefor.  The Advisor may direct the execution of any and all trades in commodity futures and options to any futures commission merchant or independent floor broker listed on Appendix C or, with the prior written permission (by original, fax copy or email copy) of CMF, such permission not to be unreasonably withheld or delayed, any other futures commission merchant or independent floor broker it chooses for execution with instructions to give-up the trades to the clearing broker designated by CMF, provided that the new futures commission merchant or independent floor broker and any new give-up or floor brokerage fees are approved in advance by CMF, such approval not to be unreasonably withheld or delayed.  The Advisor may enter into over-the-counter forward foreign currency transactions with any over-the-counter foreign exchange dealer listed on Appendix C or, with the prior written permission (by original, fax copy or email copy) of CMF, such permission not to be unreasonably withheld or delayed, any other over-the-counter foreign exchange dealer it chooses for execution with instructions to give-up the trades to the clearing broker designated by CMF, provided that the new over-the-counter foreign exchange dealer and any new give-up or other fees are approved in advance by CMF.  All give-up or similar fees relating to the foregoing shall be paid by the Partnership after all relevant parties have executed the relevant give-up agreements (via EGUS or by either original, fax copy or email copy).  CMF agrees that it will confirm the authority of the Advisor to any futures commission merchant, independent floor brokers, counterparties and/or brokers (each, an “Approved Counterparty”) specified in Appendix C, and any further permitted brokers and/or counterparties, and ratify such contracts, agreements and undertakings in connection with the obligations on request, in each case in connection with the Advisor’s duties and obligations under this Agreement.

(c)            The initial allocation of the Partnership’s assets to the Advisor shall be made to the Program, as described in Appendix B.  In the event the Advisor wishes to use a trading system or methodology other than or in addition to the Program in connection with its trading for the Partnership, either in whole or in part, it may not do so unless the Advisor gives CMF prior written notice of its intention to utilize such different trading system or methodology and CMF consents thereto in writing.  In

 

 

 

- 2 -

 

addition, the Advisor will provide five days’ prior written notice to CMF of any change in the trading system or methodology to be utilized for the Partnership which the Advisor deems material.  If the Advisor deems such change in system or methodology or in markets traded to be material, the changed system or methodology or markets traded will not be utilized for the Partnership without the prior written consent of CMF.  In addition, the Advisor will notify CMF of any changes to the trading system or methodology that would require a change in the description of the trading strategy or methods described in Appendix B to be materially accurate.  Further, the Advisor has provided the Partnership with a list of all commodity interests and other swap and derivative transactions to be traded for the Partnership’s account which is set forth in Appendix D hereto, and the Advisor will not trade any additional commodity interests for such account without providing notice thereof to CMF and receiving CMF’s written approval, such approval not to be unreasonably withheld or delayed.  The Advisor also agrees to provide CMF, on a monthly basis, with a written report of the assets under the Advisor’s management together with all other matters deemed by the Advisor to be material changes to its business, including, but not limited to, changes to its principals as defined in Part 4 of the CFTC’s regulations (“principals”), main business office and material changes to its ownership, not previously reported to CMF.  The Advisor further agrees that it will hedge all realized non-U.S. dollar balances in excess of US$100,000 (that are not required to margin positions denominated in a non-U.S. dollar currency) to U.S. dollars on a monthly basis, based on balances provided to the Advisor by Morgan Stanley & Co. LLC, in its role as the Partnership’s clearing broker, or any other clearing broker selected by CMF consistent with Section 2(b).

(d)            The Advisor agrees to make all material disclosures to the Partnership regarding itself and its principals, its officers, directors, employees and shareholder(s), its customer accounts (but not the identities of or identifying information with respect to its customers) and otherwise as are required to be disclosed by the Partnership in any filings required by federal or state law or NFA rule or order.  Notwithstanding Sections 2(d) and 5(d) of this Agreement, the Advisor is not required to disclose the actual trading results of proprietary accounts of the Advisor or its principals unless CMF reasonably determines that such disclosure is required in order to fulfill its fiduciary obligations to the Partnership or the reporting, filing or other obligations imposed on it by federal or state law or NFA rule or order, but subject always to any applicable confidentiality obligations.  The Partnership and CMF acknowledge that the trading advice to be provided by the Advisor is a property right belonging to the Advisor and that they will keep all such advice confidential in accordance with the provisions of this Agreement.

(e)            The Advisor understands and agrees that CMF may designate other trading advisors for the Partnership and apportion or reapportion to such other trading advisors the management of an amount of Net Assets of the Partnership (as defined in Section 4(b) hereof) as it shall determine in its absolute discretion, subject to Section 2(f) below).  The designation of other trading advisors and the apportionment or reapportionment of Net Assets of the Partnership to any such trading advisors pursuant to this Section 2 shall neither terminate this Agreement nor modify in any regard the respective rights and obligations of the parties hereunder.

 

 

 

 

- 3 -

(f)            CMF may, from time to time, in its absolute discretion, select additional trading advisors and reapportion funds among the trading advisors for the Partnership as it deems appropriate.  CMF shall use its best efforts to make reapportionments, if any, as of the first day of a calendar month.  The Advisor agrees that it may be called upon promptly to liquidate positions in CMF’s sole discretion so that CMF may reallocate the Partnership’s assets, meet margin calls on the Partnership’s account, fund redemptions, or for any other reason, except that CMF will not require the liquidation of specific positions by the Advisor.  CMF will use its best efforts to give two Business Days’ prior notice to the Advisor of any reallocations or liquidations.  Business Day means a day on which banks in London and New York are ordinarily open for business.

(g)            The Advisor shall assume financial responsibility for any errors committed or caused by its negligence, bad faith, recklessness, intentional misconduct, a breach of its fiduciary obligations to the Partnership as a commodity trading advisor, or a material breach of a material term of this Agreement, to the Partnership as a commodity trading advisor, in transmitting orders for the purchase or sale of commodity interests for the Partnership’s account including payment to the brokers of the floor brokerage commissions, exchange, NFA fees, and other transaction charges and give-up charges incurred by the brokers on such trades.  The Advisor shall have an affirmative obligation to promptly notify CMF in accordance with the provisions of Section 10(a)(iii), following becoming aware of, of any trade errors with respect to the account, and the Advisor shall use its reasonable efforts to identify and promptly notify CMF and the administrator of any order or trade which the Advisor reasonably believes was not executed in accordance with its instructions to any broker utilized to execute orders for the Partnership in accordance with Section 10(a)(iii).

(h)            Notwithstanding anything to the contrary in this Agreement, the Advisor shall not be under any obligation to take legal action, or any representative or class action (or similar) in behalf of or in connection with the Partnership or CMF.

(i)            In the event of any obligation of disclosure being imposed on the Advisor by any applicable legislation or regulatory requirement with respect to any position of the Partnership, the Advisor shall, to the extent permitted by applicable law, make the appropriate disclosure or, if not so permitted, notify CMF without undue delay of the obligation of disclosure and the transaction giving rise to such obligation.

3.            INDEPENDENCE OF THE ADVISOR.  For all purposes herein, the Advisor shall be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Partnership in any way and shall not be deemed an agent, promoter or sponsor of the Partnership, CMF, or any other trading advisor.  The Advisor shall not be responsible to the Partnership, CMF, any trading advisor or any limited partners for any acts or omissions of any other trading advisor to the Partnership.  Subject to Section 2(g), the Advisor shall not be responsible for supervising any Approved Counterparty or have any responsibility or liability for any custody, settlement or related functions in respect of the Partnership.

 

 

 

 

- 4 -

4.            COMPENSATION.  (a) In consideration of and as compensation for all of the services to be rendered by the Advisor to the Partnership under this Agreement, the Partnership shall pay the Advisor (i) an incentive fee (“Incentive Fee”) payable quarterly equal to 20% of New Trading Profits (as such term is defined below) earned by the Advisor for the Partnership and (ii) a monthly fee for professional management services (“Management Fee”) equal to 1/12 of 1% (1% per year) of the month-end Net Assets of the Partnership allocated to the Advisor (computed monthly by multiplying the Net Assets of the Partnership allocated to the Advisor as of the last Business Day of each month by 1% and dividing the result thereof by 12).

(b)            “Net Assets of the Partnership” shall have the meaning set forth in Section 7(d)(2) of the Partnership Agreement and without regard to further amendments thereto, provided that in determining the Net Assets of the Partnership on any date, no adjustment shall be made to reflect any distributions, redemptions, Management Fees, administrative fees or Incentive Fees payable as of the date of such determination.

(c)            “New Trading Profits” shall mean the excess, if any, of Net Assets of the Partnership managed by the Advisor at the end of the fiscal period over Net Assets of the Partnership managed by the Advisor at the end of the highest previous fiscal period or Net Assets of the Partnership allocated to the Advisor at the date trading commences by the Advisor for the Partnership, whichever is higher, and as further adjusted to eliminate the effect on Net Assets of the Partnership resulting from new capital contributions, redemptions, reallocations or distributions, if any, made during the fiscal period decreased by interest or other income, not directly related to trading activity, earned on the Partnership’s assets during the fiscal period, whether the assets are held separately or in margin accounts.  Ongoing expenses shall be attributed to the Advisor pro-rata based on the Advisor’s proportionate share of Net Assets of the Partnership.  Ongoing expenses shall not include expenses of litigation not involving the activities of the Advisor on behalf of the Partnership.  Ongoing expenses include offering and organizational expenses of the Partnership.  No Incentive Fee shall be paid to the Advisor until the end of the first full calendar quarter of the Advisor’s trading for the Partnership, which fee shall be based on New Trading Profits (if any) earned from the commencement of trading by the Advisor on behalf of the Partnership through the end of the first full calendar quarter of such trading.  Interest income earned, if any, shall not be taken into account in computing New Trading Profits earned by the Advisor.  If Net Assets of the Partnership allocated to the Advisor are reduced due to redemptions, distributions or reallocations (net of additions), there shall be a corresponding proportional reduction in the related loss carryforward amount that must be recouped before the Advisor may receive another Incentive Fee.

(d)            Quarterly Incentive Fees and monthly Management Fees shall be paid within twenty (20) Business Days following the end of the period for which such fee is payable.  In the event of the termination of this Agreement as of any date which shall not be the end of a calendar quarter or a calendar month, as the case may be, the quarterly Incentive Fee shall be computed as if the effective date of termination were the last day of the then current quarter and the monthly Management Fee shall be prorated to the effective date of termination.  If, during any month, the Partnership does not conduct business operations as a result of action or inaction by the Advisor or the Advisor is unable to provide the services contemplated herein as a result of action or inaction by the Advisor for more than two successive Business Days, the monthly

 

 

 

- 5 -

 

Management Fee shall be prorated by the ratio which the number of Business Days during which CMF conducted the Partnership’s business operations or utilized the Advisor’s services bears in the month to the total number of Business Days in such month.  The calculation of the Net Assets of the Partnership shall be performed by the administrator of the Partnership in accordance with the methodologies set out in the Partnership Agreement.  The administrator shall also calculate the Management Fee and Incentive Fee, and the Advisor shall be given reasonable prior written notice in advance of any proposed change to the administrator.  If the Advisor disputes the amount of Management Fees or Incentive Fees paid in any month, the parties agree to resolve any disputed amounts in good faith in an expeditious manner.

(e)            Subject to Section 4(b) and (c), the Partnership shall be responsible for the fees and expenses of the Partnership’s auditors, administrator and all other service providers.

(f)            The provisions of this Section 4 shall survive the termination of this Agreement.

5.            RIGHT TO ENGAGE IN OTHER ACTIVITIES.  (a) The services provided by the Advisor hereunder are not to be deemed exclusive.  CMF on its own behalf and on behalf of the Partnership acknowledges that, subject to the terms of this Agreement, the Advisor and its Affiliates (as defined below), officers, directors, employees and shareholder(s) may render advisory, consulting, management and other services to other clients and accounts.  The Advisor and its Affiliates, officers, directors, employees and shareholder(s) shall be free to trade for their own accounts and to advise other investors or clients and manage other funds, vehicles or accounts during the term of this Agreement and to use the same information, computer programs and trading strategies, programs or formulas which they obtain, produce or utilize in the performance of services to CMF for the Partnership.  However, the Advisor represents, warrants and agrees that it believes the rendering of such other services to other investors, clients, accounts and entities will not require any material change in the Advisor’s basic trading strategies for the Partnership and will not affect the capacity of the Advisor to continue to render services to CMF for the Partnership of the quality and nature contemplated by this Agreement.  For the purposes of this Agreement, (i) with respect to the Advisor, the term “Affiliate” shall mean any corporation, company, partnership, trust or other body or entity, wherever established, which is owned and/or controlled, directly or indirectly, by the Advisor and, (ii) with respect to CMF and/or the Partnership, the term “Affiliate” shall mean any corporation, company, partnership, trust or other body or entity, wherever established, which is owned and/or controlled, directly or indirectly, by Morgan Stanley.

(b)            If, at any time during the term of this Agreement, the Advisor is required to aggregate the Partnership’s commodity positions with the positions of any other person for purposes of applying CFTC‐ or exchange‐imposed speculative position limits, the Advisor agrees that it will promptly notify CMF in writing if the Partnership’s positions are included in an aggregate amount which exceeds the applicable speculative position limit.  The Advisor agrees that, if its trading recommendations are altered because of the application of any speculative position limits, it will modify the trading instructions with respect to the Partnership’s account and its other clients or accounts in a fair manner.  The Advisor further represents, warrants and agrees that under no circumstances will it knowingly or deliberately use trading programs, strategies or methods for the Partnership that are inferior to strategies or methods employed for any other client or account, it being acknowledged, however, that different trading programs, strategies or methods may be utilized for differing sizes of accounts, accounts with different trading policies or risk parameters, counterparties, accounts experiencing differing inflows or outflows of equity, accounts that commence trading at different times, accounts that have different portfolios or different fiscal years, accounts utilizing different executing brokers and accounts with other differences, and that such differences may cause divergent trading results including, without limitation, BlueTrend Master Fund Limited.

 

 

 

 

- 6 -

(c)            It is acknowledged that the Advisor and/or its Affiliates, officers, directors, employees and shareholder(s) presently act, and it is agreed that they may continue to act, as advisor for other accounts managed by them, and may continue to receive compensation with respect to services for such accounts in amounts which may be more or less than the amounts received from the Partnership.

(d)            The Advisor agrees that it shall make such information available to CMF respecting the performance of the Partnership’s account as compared to the performance of other accounts managed by the Advisor or its principals, if any, as shall be reasonably requested by CMF subject to applicable confidentiality obligations.  The Advisor presently believes and represents that existing speculative position limits will not materially adversely affect its ability to manage the Partnership’s account given the potential size of the Partnership’s account and the Advisor’s and its principals’ current accounts and all proposed accounts for which they have contracted to act as trading advisor.

(e)            The Advisor may not delegate any or all of its functions under this Agreement to a party that is not a Systematica Related Party (as defined below), without CMF’s prior written consent.  Notwithstanding the foregoing and subject to the overall supervision and control of the Advisor for investment management and risk management, the Advisor may delegate any of its obligations or functions under this Agreement to a Systematica Related Party (a “Delegatee”), which may in turn sub-delegate to any other Systematica Related Party (a “Sub-Delegatee”), upon notice to CMF but without CMF’s prior written consent.  For purposes of this Section 5(e), “Systematica Related Party” shall mean Systematica Investments Jersey Limited, BlueCrest Capital Management Guernsey LP, BlueCrest Capital Management (Singapore) Pte. Ltd, BlueCrest Capital Management (UK) LLP, Systematica Investments Singapore Pte. Ltd, Systematica Investments Services Limited and/or Systematica Investments GP Limited, operating through its Geneva branch and as general partner of Systematica Investments Guernsey LP.  In case of such delegation of its functions under this Agreement, the Advisor and the delegate shall comply with the Delegation Policy and shall ensure that its obligations under this Agreement are fully complied with and that CMF and its agents receive from the Advisor or the delegate any reasonably requested information in a timely manner.  “Delegation Policy” shall mean the JFSC’s Policy Statement and Guidance Notes on Outsourcing and Delegation by Jersey certified funds and fund services businesses

6.            TERM.  (a) This Agreement shall continue in effect until June 30, 2016 (the “Initial Termination Date”).  If this Agreement is not terminated as of the Initial Termination Date, as provided for herein, then, this Agreement shall automatically renew for an additional one-year period and shall continue to renew for additional one-year periods until this Agreement is otherwise terminated, as provided for herein.  At any time during the term of this Agreement, CMF may elect to immediately terminate this Agreement upon 5 days’ notice to the Advisor.  At any time during the term of this Agreement, CMF may elect to immediately terminate this Agreement if (i) the Net Asset Value per unit of any class of the Partnership shall decline as of the close of business on any day to $400 or less; (ii) the Net Assets of the Partnership allocated to the Advisor (adjusted for redemptions, distributions, withdrawals or reallocations, if any) decline by 20% or more as of the end of a trading day from such Net Assets of the Partnership’s previous highest value; (iii) limited partners owning at least 50% of the outstanding units of the Partnership having voted to require CMF to terminate this Agreement; (iv) the Advisor fails to comply with the material terms of this Agreement; (v) the Advisor merges, consolidates with another entity, sells a substantial portion of its

 

 

 

 

- 7 -

assets, or becomes bankrupt or insolvent, (vi) CMF, in good faith, reasonably determines that the performance of the Advisor has been such that CMF’s fiduciary duties to the Partnership require CMF to terminate this Agreement; (vii) CMF reasonably believes that the application of speculative position limits will substantially affect the performance of the Partnership; (viii) the Advisor fails to conform to the trading policies set forth in Appendix A as they may be changed from time to time in accordance with the terms hereof; (ix) Leda Braga dies, becomes incapacitated, leaves the employ of the Advisor, ceases to control the Advisor or is otherwise not managing the Program, (x) the Advisor’s registration as a commodity trading advisor with the CFTC or its membership in NFA or any other relevant regulatory authority necessary to perform its obligations hereunder, is terminated or suspended; or (ix) CMF reasonably believes that the Advisor has contributed to any material operational, business or reputational damage to CMF or CMF’s Affiliates.  This Agreement will immediately terminate upon dissolution of the Partnership, upon cessation of trading by the Partnership prior to dissolution or upon the Advisor ceasing to be licensed and regulated by the JFSC.

(b)            The Advisor may terminate this Agreement by giving not less than 5 days’ written notice to CMF and may terminate this Agreement immediately (i) in the event that CMF or the Partnership fails to comply with the material terms of this Agreement, (ii) the Advisor reasonably believes that CMF has contributed to any material operational, business or reputational damage to the Advisor or the Advisor’s Affiliates, (iii) CMF’s registration as a commodity pool operator or its membership in NFA is terminated or suspended or (iv) if the Advisor reasonably concludes that the Partnership is not a “Materially Equivalent Fund” (as such term is defined in the Jersey Laws).

(c)            Except as otherwise provided in this Agreement, any termination of this Agreement in accordance with this Section 6 shall be without penalty or liability to any party, except for any fees due to the Advisor pursuant to Section 4 hereof.

7.            INDEMNIFICATION AND LIMITATION OF LIABILITY.  (a)  The Advisor shall not be liable to CMF or the Partnership for any act or failure to act taken or omitted in good faith in a manner reasonably believed to be in or not opposed to the best interests of the Partnership if such act or failure to act did not constitute (i) negligence, bad faith, recklessness or intentional misconduct on the part of the Advisor or its Affiliates, principals, officers, directors, employees and shareholder(s) (each, an “Advisor Indemnified Person” and collectively, the “Advisor Indemnified Persons”), (ii) a breach of the Advisor’s fiduciary obligations to the Partnership as a commodity trading advisor or (iii) a material breach of a material term of this Agreement.

 

 

 

 

- 8 -

(b)      The Partnership and CMF shall not be liable to Advisor for any act or failure to act taken or omitted in good faith in the course of performing their respective obligations under this Agreement if such act or failure to act did not constitute (i) negligence, bad faith, recklessness or intentional misconduct on the part of the Partnership or CMF and its Affiliates, principals, officers, directors, employees and shareholder(s) (each, a “CMF Indemnified Party” and collectively, the “CMF Indemnified Parties”) or (ii) a material breach of a material term of this Agreement.

(c)      The Partnership and CMF shall, subject to Section 7(e), indemnify, defend and hold harmless the Advisor Indemnified Persons against any loss, liability, damage, fine, penalty, obligation, cost, expense (including, without limitation, attorneys’ and accountants’ fees, collection fees, court costs and other legal expenses), judgments and awards and amounts paid in settlement actually and reasonably incurred in connection with this Agreement (together, “Losses”) by the Advisor Indemnified Person, provided that the Advisor Indemnified Person acted in good faith in a manner reasonably believed to be in or not opposed to the best interests of the Partnership and the Advisor Indemnified Person’s conduct did not constitute (i) negligence, bad faith, recklessness or intentional misconduct, (ii) a breach of the Advisor’s fiduciary obligations to the Partnership as a commodity trading advisor or (iii) a material breach of a material term of this Agreement, and further provided that no indemnification shall be available from the Partnership if such indemnification is prohibited by Section 16 of the Partnership Agreement as of the date the Loss is incurred; provided further that CMF shall notify the Advisor as soon as practicable in advance of any material change to Section 16 of the Partnership Agreement.

(d)      The Advisor shall, subject to Section 7(f), indemnify, defend and hold harmless the Partnership and the CMF Indemnified Parties against any Losses by them as a result of (i) the negligence, bad faith, recklessness or intentional misconduct on the part of an Advisor Indemnified Person, (ii) a breach of the Advisor’s fiduciary obligations to the Partnership as a commodity trading advisor or (iii) a material breach of a material term of this Agreement.

(e)      Any indemnification under Section 7(c) hereof, unless ordered by a court or administrative forum, shall be made by the Partnership and CMF only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the Advisor Indemnified Party has met the applicable standard of conduct set forth in Section 7(c) hereof.  Such independent legal counsel shall be selected by CMF in a timely manner, subject to the Advisor’s approval, which approval shall not be unreasonably withheld.  The Advisor shall be deemed to have approved CMF’s selection unless the Advisor notifies CMF in writing, received by CMF within five days of CMF’s providing to the Advisor of the notice of CMF’s selection, that the Advisor does not approve the selection.

 

 

 

 

- 9 -

(f)      Any indemnification under Section 7(d) hereof, unless ordered by a court or administrative forum, shall be made by the Advisor only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because an Advisor Indemnified Party has breached the applicable standard of conduct set forth in Section 7(d) hereof.  Such independent legal counsel shall be selected by the Advisor in a timely manner, subject to the CMF’s approval, which approval shall not be unreasonably withheld.  CMF shall be deemed to have approved the Advisor’s selection unless CMF notifies the Advisor in writing, received by the Advisor within five days of the Advisor’s providing to CMF of the notice of the Advisor’s selection, that CMF does not approve the selection.

(g)      In the event that a person entitled to indemnification under this Section 7 is made a party to an action, suit or proceeding alleging both matters for which indemnification can be made hereunder and matters for which indemnification may not be made hereunder, such person shall be indemnified only for that portion of the loss, liability, damage, cost or expense incurred in such action, suit or proceeding which relates to the matters for which indemnification can be made.

(h)      Notwithstanding the foregoing, no party shall be liable for any other person with respect to, special, indirect, consequential, punitive or exemplary damages, lost profits or loss of business. Each party hereto agrees that it will take reasonable steps to mitigate and not exacerbate any loss, liability, claim, expense or damage that they incur or suffer in connection with this Agreement.

(i)      None of the indemnifications contained in this Section 7 shall be applicable with respect to default judgments, confessions of judgment or settlements entered into by the party claiming indemnification without the prior written consent, which shall not be unreasonably withheld or delayed, of the party obligated to indemnify such party.

(j)      The provisions of this Section 7 shall survive the termination of this Agreement.

8.            MARKETING INFORMATION, USE OF NAME AND IP. (a) The Advisor consents to the use of its name, biographical data of its personnel and other pertinent data in the Partnership’s Private Placement Offering Memorandum and Disclosure Document (the “Memorandum”) and in any other marketing materials used by CMF, for use in marketing to its clients or prospective clients.  CMF shall provide the Advisor with portions of the Memorandum and any supplements thereto, and any other marketing materials, referencing the Advisor, biographical data of its personnel or the Program and shall allow a reasonable period of time for the Advisor to comment on the content of such portions and will incorporate any reasonable comments of the Advisor therein, prior to their use.  CMF will provide the Advisor with copies of any such materials with such frequency as may be reasonably requested by the Advisor.

(b)            In the event of termination of its appointment under this Agreement, the Advisor shall have the right by written request to require CMF, in all prospectuses and offering documentation, advertising material, letterheads and other material designed to be read by investors and prospective investors, to state in a prominent position and in prominent type that the Advisor has ceased to be a trading advisor of the Partnership and CMF shall comply with such request within a reasonable period of time following such termination.  CMF shall otherwise cease to use the Advisor’s name (and that of its Affiliates or connected persons and any other references to “Systematica” or “BlueTrend”) in any marketing materials or otherwise.

 

 

 

 

- 10 -

(c)            The Advisor’s and/or its Affiliates’ intellectual property (being proprietary information, intellectual property or know-how, including patents, inventions, copyright, trademarks and service marks, business names and domain names, database rights and any rights to the foregoing), is the property of the Advisor and/or its Affiliates and shall not be used by CMF and/or the Partnership without the prior written consent of the Advisor. The ownership of the intellectual property of the Advisor and/or its Affiliates shall remain exclusively vested in the Advisor and/or its Affiliates.

9.            REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

(a)            The Advisor represents and warrants that:

(i)            All material information with respect to the Advisor and its principals and the trading performance of any of them has been provided to CMF, including, without limitation, the description of the Program contained in Appendix B, and such information is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact that is necessary to make such statements and information therein not misleading.  All references to the Advisor and its principals, if any, in the Memorandum or a supplement thereto will, after review and approval of such references by the Advisor prior to the use of such Memorandum in connection with the offering of Partnership units, be accurate in all material respects.

(ii)            The Advisor will be acting as a commodity trading advisor with respect to the Partnership and not as a securities investment adviser and is duly registered with the CFTC as a commodity trading advisor, is a member of NFA, and is in compliance with any such other registration and licensing requirements as shall be necessary to enable it to perform its obligations hereunder.  The Advisor agrees to maintain and renew such registrations and licenses during the term of this Agreement including, without limitation, registration as a commodity trading advisor with the CFTC and membership in NFA.  The Advisor is licensed and regulated by the JFSC for the conduct of the relevant classes of “fund services business” under the Jersey Laws.  The Advisor agrees that for so long as this Agreement remains in force it shall carry out its duties and obligations and exercise its powers and discretions under this Agreement in accordance with Jersey Laws. “Jersey Laws” means the Financial Services (Jersey) Law 1998 (as amended) and all subordinate legislation or regulations promulgated thereunder, including the JFSC’s Codes of Practice for fund services business and all other policy statements and guidance notes published by the JFSC from time to time.

(iii)            The Advisor is a limited company duly organized, validly existing and in good standing under the laws of Jersey and has full corporate power and authority to enter into this Agreement and to provide the services required of it hereunder.

 

 

 

 

- 11 -

(iv)            The Advisor will not, by acting as a commodity trading advisor to the Partnership, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound which would materially limit or affect the performance of its duties under this Agreement.

(v)            This Agreement has been duly and validly authorized, executed and delivered by the Advisor and is a valid and binding agreement enforceable in accordance with its terms.

(vi)            At any time during the term of this Agreement that an offering memorandum or a prospectus relating to the Partnership units is required to be delivered in connection with the offer and sale thereof, the Advisor agrees upon the timely request of CMF to promptly provide the Partnership with such information as shall be reasonably necessary so that, as to the Advisor and its principals, such offering memorandum or prospectus is accurate.

(b)            Each of CMF and the Partnership represents and warrants that:

(i)            CMF is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has full limited liability company power and authority to perform its obligations under this Agreement.

(ii)            CMF and the Partnership have the capacity and authority to enter into this Agreement on behalf of the Partnership.

(iii)            This Agreement has been duly and validly authorized, executed and delivered on CMF’s and the Partnership’s behalf and is a valid and binding agreement of CMF and the Partnership enforceable in accordance with its terms.

(iv)            CMF will not, by acting as the general partner to the Partnership, and the Partnership will not, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound which would materially limit or affect the performance of its duties under this Agreement.

(v)            CMF is registered as a commodity trading advisor, a commodity pool operator and is a member of NFA, and it will maintain and renew such registration and membership during the term of this Agreement. CMF is in compliance with any such other registration and licensing requirements as shall be necessary to enable it to perform its obligations hereunder.

(vi)            The Partnership is a limited partnership duly organized and validly existing under the laws of the State of New York and has full limited partnership power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(vii)            The Partnership is a qualified eligible person, as defined in CFTC Rule 4.7, and an eligible contract participant, as defined in CFTC Rule 1.3(m).

 

 

 

 

- 12 -

(viii)            The Partnership is not permitted to trade non-CFTC approved products.

(ix)            Any offering memorandum or a prospectus relating to the Partnership units and other marketing, advertising or any promotion of the Partnership and materials produced in connection therewith, shall be in accordance with all applicable laws and regulations.

10.            COVENANTS OF THE ADVISOR, CMF AND THE PARTNERSHIP.  (a) The Advisor agrees as follows:

(i)            In connection with its activities on behalf of the Partnership, the Advisor will comply with all applicable laws, including Jersey Law, rules and regulations of the CFTC, NFA, swap execution facility and/or the commodity exchange on which any particular transaction is executed.

(ii)            The Advisor will promptly, upon knowledge, notify CMF of the commencement of any material investigation, suit, action or proceeding involving it or any of its officers, directors, employees or Leda Braga, whether or not any such investigation, suit, action or proceeding also involves CMF, to the extent permitted by law, regulation and/or confidentiality obligation.  The Advisor will provide CMF with copies of any correspondence (including, but not limited to, any notice or correspondence regarding the violation, or potential violation, of position limits) from or to the CFTC, NFA or any commodity exchange in connection with any material non-routine investigation or audit of the Advisor’s business activities, to the extent permitted by law, regulation and/or confidentiality obligation.

(iii)            In the placement of orders for the Partnership’s account and for the accounts of any other client, the Advisor will adhere to its allocation policy, a copy of which has been provided to CMF; provided that the Advisor will notify CMF promptly of any material change to the allocation policy and provide CMF promptly with an updated copy of such policy.  The Advisor acknowledges its obligation to report all of its trade activity for the Partnership’s account to the Partnership’s administrator and clearing broker on each Business Day and within two Business Days to notify, in writing, the executing broker and CMF and the Partnership’s clearing broker(s) of (A) any trade error committed by the Advisor in respect of the Partnership, subject to the terms hereof; (B) any trade for the Partnership which the Advisor believes was not executed in accordance with its instructions; and (C) any discrepancy with a value of $10,000 or more (due to differences in the positions, prices or equity in the account) between its records and the information reported on the account’s daily and monthly broker statements.

(iv)            The Advisor will use its reasonable efforts to close out all futures positions prior to any applicable delivery period, and will use its reasonable efforts to avoid causing the Partnership to take delivery of any commodity.

(v)            The Advisor will update any material information previously provided to CMF and/or the Partnership under this Agreement including, without limitation, the information referenced in Section 9(a)(i).

 

 

 

 

- 13 -

(b)            Each of CMF and the Partnership agrees that:

(i)            CMF and the Partnership will comply with all applicable laws, including rules and regulations of the CFTC, NFA, swap execution facility and/or the commodity exchange on which any particular transaction is executed.

(ii)            CMF will promptly notify the Advisor of the commencement of any material suit, action or proceeding involving it or the Partnership, whether or not such suit, action or proceeding also involves the Advisor.

(iii)            CMF or the selling agents for the Partnership have policies, procedures, and internal controls in place that are reasonably designed to comply with applicable anti-money laundering laws, rules and regulations, including applicable provisions of the USA PATRIOT Act.  CMF or the selling agents for the Partnership have Customer Identification Programs (“CIP”), which require the performance of CIP due diligence in accordance with applicable USA PATRIOT Act requirements and regulatory guidance.  CMF or the selling agents for the Partnership also have policies, procedures, and internal controls in place that are reasonably designed to comply with regulations and economic sanctions programs administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control.

11.            CONFIDENTIALITY.  (a) None of CMF, the Partnership or the Advisor shall disclose “Confidential Information” acquired in consequence of this Agreement, except information which they may be bound to disclose by law, regulation or which is disclosed to their Auditors, professional advisers and agents (including, but not limited to, Affiliates, officers, directors and employees) (“Permitted Disclosees”) where reasonably necessary for the performance of their professional services. “Confidential Information” shall mean any information relating to the organization, finances, business, transactions, or affairs of the Partnership or the parties, save for, in each case, any such information which (i) has been properly entered into the public domain otherwise than through the default of any party, (ii) is in the possession of the recipient prior to its disclosure pursuant to the terms hereof, (iii) is or becomes available to the recipient from a source that is not bound by a confidentiality agreement with regard to such information or by any other legal obligation of confidentiality prohibiting such disclosure or (iv) is independently developed by the recipient without use of the Confidential Information.

(b)            If, in accordance with this Section 11, the Confidential Information is disclosed to a Permitted Disclosee, the party receiving Confidential Information from the other party shall:

(i)            expressly inform the Permitted Disclosee of the confidentiality provisions of this Agreement and the confidential nature of the Confidential Information and the purpose for which it may be used; and

(ii)            take reasonable steps to procure the Permitted Disclosee’s compliance with the terms of this Agreement as if they were a party to this Agreement.

 

 

 

 

- 14 -

 

(c)            Other than as explicitly provided for under this Agreement, each party shall retain full control of its own brand and the use of its name.

(d)            Without prejudice to Section 11(a), each party undertakes to hold in confidence and not to disclose to third parties without the prior written consent of the other parties the existence of terms and conditions of this Agreement, other than as expressly contemplated herein or as required by applicable law or regulation.

Upon receipt of a written request from a Party or following the termination of this Agreement in accordance with terms herein, the other Party shall, subject to any applicable confidentiality provisions in connection therewith (including so as to preserve the confidentiality of any client of either Party):

(i)            at its sole discretion: either return (in a form capable of delivery) to the requesting Party; or, destroy (in a form capable of destruction or eradication) all documents and all other materials (including computer media) or such parts thereof which contain or reflect any Confidential Information, together with any copies which are in the its possession or control or are in the possession or control of any of its directors, officers, employees or professional advisers; and

(ii)            to the extent practicable and subject to Section 11(e), expunge all Confidential Information from any computer, word processor, mobile telecommunications device or device similar to the foregoing into which it was programmed by or on behalf of that Party.

(e)            Notwithstanding Section 11(d), each of the parties shall be permitted to retain:

(i)            one copy of the Confidential Information for the purposes of and for so long as required by any law, court or regulatory agency or authority or its internal compliance procedures; and

(ii)            copies of any computer records and files containing any Confidential Information which has been created pursuant to its automatic archiving and back-up procedures.

(f)            Each of the parties acknowledges that neither the destruction nor return of any Confidential Information nor the expunging of any of the same from any of the devices listed at Section 11(d) above or any other similar such devices will release it from the obligations contained in this Agreement.

12.            TELEPHONE RECORDING.  Each party may record telephone conversations between it and any other party and may produce such recordings in evidence if the producing party is required by law, rule or regulation to produce such recordings; provided, that, to the extent such action would not violate or conflict with any law, rule or regulation, the producing party shall promptly notify the other party of such law, rule or regulation so that the other party may, at its sole expense, seek an appropriate protective order.

 

 

 

 

 

- 15 -

13.            FORCE MAJEURE.  None of the parties to this Agreement shall be deemed to be in breach of this Agreement or otherwise liable to the other as a result of any delay, failure or defective performance of its obligations under this Agreement if and to the extent that such delay or failure arises out of causes beyond the reasonable control and without the fault or negligence of the party in question. Such party shall be entitled to a reasonable extension of the time for performing such obligations as a result of such cause. Events outside a party’s reasonable control shall include without limitation: acts of God, an act of terrorism, any failure or breakdown in communications not reasonably within the control of the party affected by it and the failure of any relevant exchange or clearinghouse.

14.            COMPLETE AGREEMENT.  This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof.

15.            ASSIGNMENT.  This Agreement may not be assigned by any party without the express written consent of the other parties.

16.            AMENDMENT.  This Agreement may not be amended except by the written consent of the parties.

17.            NOTICES.  All notices, demands or requests required to be made or delivered under this Agreement shall be effective upon actual receipt and shall be made either by electronic (email) copy or in writing and delivered personally or by registered or certified mail or expedited courier, return receipt requested, postage prepaid, to the addresses below or to such other addresses as may be designated by the party entitled to receive the same by notice similarly given:

If to CMF or to the Partnership:

Ceres Managed Futures LLC

522 Fifth Avenue

New York, New York  10036

 Attention:  Patrick Egan

Email:  patrick.egan@morganstanley.com

If to the Advisor:

Systematica Investments Limited

47 Esplanade

St Helier

Jersey JE1 0BD

Channel Islands

 Attention: General Counsel

Email: legal@systematica.com

 

 

 

 

- 16 -

18.            GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

19.            ARBITRATION.  The parties agree that any dispute or controversy arising out of or relating to this Agreement or the interpretation thereof, shall be settled by arbitration in accordance with the rules, then in effect, of NFA or, if NFA shall refuse jurisdiction, then in accordance with the rules, then in effect, of the American Arbitration Association; provided, however, that the power of the arbitrator shall be limited to interpreting this Agreement as written and the arbitrator shall state in writing his reasons for his award, and further provided, that any such arbitration shall occur within the Borough of Manhattan in New York City.  Judgment upon any award made by the arbitrator may be entered in any court of competent jurisdiction.

20.            NO THIRD PARTY BENEFICIARIES.  There are no third  party beneficiaries to this Agreement, except that certain persons not party to this Agreement may have rights under Section 7 hereof.

21.            COUNTERPARTS.  This Agreement may be executed in any number of counterparts, including via facsimile or email, each of which is an original and all of which when taken together evidence the same agreement.

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

 

 

 

 

 

- 17 -

 

PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION 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 COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE.  CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.

YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY TRADING ADVISOR MAY ENGAGE IN TRADING FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE YOUR TRANSACTIONS MAY BE EFFECTED.

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

 

	 	
CERES MANAGED FUTURES LLC

	 	 
	 	
By

	
/s/ Patrick T. Egan                               

	 	 	
Patrick T. Egan

	 	 	
President and Director

	 	 
	 	
ORION FUTURES FUND L.P.

	 	 
	 	
By:

	
Ceres Managed Futures LLC

	 	 	
(General Partner)

	 	 
	 	
By:

	
/s/ Patrick T. Egan                               

	 	 	
Patrick T. Egan

	 	 	
President and Director

	 	 
	 	
SYSTEMATICA INVESTMENTS LIMITED, acting

as general partner of SYSTEMATICA

INVESTMENTS LP

	 	 
	 	
By

	
/s/ Ben Dixon                                      

	 	 	
Name: Ben Dixon

	 	 	
Title:  Director

	 	 

 

 

 

 

- 18 -

Appendix A

Trading Policies

	1.	The Partnership will invest its assets only in commodity interests that the Advisor believes are traded in sufficient volume to permit ease of taking and liquidating positions.  Sufficient volume, in this context, refers to a level of liquidity that the Advisor believes will permit it to enter and exit trades without noticeably moving the market.

	2.	The Advisor will not initiate additional positions in any commodity interest if these positions would result in aggregate positions requiring margin of more than 66 2/3% of the Partnership’s net assets allocated to that the Advisor.  To the extent the CFTC and/or exchanges have not otherwise established margin requirements with respect to particular contracts, (i) forward contracts in currencies will be deemed to have approximately the same margin requirements as the same or similar futures contracts traded on the Chicago Mercantile Exchange and (ii) swap contracts will be deemed to have margin requirements equivalent to the collateral deposits, if any, made with swap counterparties.

	3.	The Partnership may occasionally accept delivery of a commodity.  Unless such delivery is disposed of promptly by retendering the warehouse receipt representing the delivery to the appropriate clearinghouse, the physical commodity position will be fully hedged.

	4.	The Partnership will not employ the trading technique commonly known as “pyramiding,” in which the speculator uses unrealized profits on existing positions as margin for the purchase or sale of additional positions in the same or related commodities.

	5.	The Partnership will not utilize borrowings except short-term borrowings if the Partnership takes delivery of any cash commodities.

	6.	The Advisor may, from time to time, employ trading strategies such as spreads or straddles on behalf of the Partnership.  The term “spread” or “straddle” describes a commodity futures trading strategy involving the simultaneous holding of futures contracts on the same commodity but involving different delivery dates or markets and in which the trader expects to earn a profit from a widening or narrowing of the difference between the prices of the two contracts.

	7.	The Partnership will not permit the churning of its commodity trading account.  The term “churning” refers to the practice of entering and exiting trades with a frequency unwarranted by legitimate efforts to profit from the trades, driven by the desire to generate commission income.

 

 

 

 

 

 

 

- 19 -

Appendix B

 BlueTrend Program

The BlueTrend Program has maximum flexibility to invest in a wide range of derivative instruments, including currencies, futures, options and, with the prior written approval of CMF, other swaps and derivative instruments.  Derivative instruments may be exchange-traded or over-the-counter, as permitted by the Commodity Exchange Act and the rules promulgated thereunder. The BlueTrend Program may engage in short sales.  The BlueTrend Program may also retain amounts in cash pending reinvestment or if this is considered appropriate to the investment objective.

The BlueTrend Program seeks to achieve its investment objective through the implementation of a systematic trading model or portfolio of systematic trading models.  Such model(s) trade in a number of foreign exchange and commodity instruments, and derivatives relating to those instruments, including swaps, indices, forwards, futures and option contracts.

 

 

 

 

 

 

 

 

 

- 20 -

Appendix C

 Approved Futures Commission Merchants, Independent Floor Brokers and OTC FX Dealers

FCM

JP Morgan

Morgan Stanley

Credit Suisse

Barclays Capital

FUTURES EXECUTING BROKERS

ICAP Corporates

ICAP Energy

JP Morgan

SG America Securities

Tullett

ADM

Barclays Capital

Credit Suisse

Deursche Bank

Merrill Lynch International

Morgan Stanley & Co

Goldman Sachs

HSBC

Societe Generale

 

 

- 21 -

FX PB

UBS

FX EXECUTING BROKERS

The Bank Of New York

Barclays Bank Plc

BNP Paribas (London Branch)

Citigroup Global Markets Ltd

Credit Suisse International

Deutsche Bank AG, London Branch

Goldman Sachs International

Hsbc Bank PLC

ING Bank NV

Jeffries Bache Limited

JP Morgan Chase Bank NA

Merrill Lynch International

Morgan Stanley & Co International London

Nomura International PLC

The Royal Bank Of Scotland PLC

Societe Generale Paris

Standard Chartered Bank

UBS AG London

 

 

  

- 22 -

Appendix D

 List of Commodity Interests and Other Swap and Derivative Transactions

	
Sector

	
Market

	
Sector

	
Market

	
Sector

	
Market

	
Sector

	
Market

	
EQ

	
ALLORDS

	
FI

	
AUS10Y

	
FX

	
FAUDUSD

	
M

	
ALUMINIUM

	
EQ

	
ALLSHARE

	
FI

	
AUS3Y

	
FX

	
FEURUSD

	
M

	
COPPER

	
EQ

	
AMSTIDX

	
FI

	
AUSBILL2

	
FX

	
FGBPUSD

	
M

	
COPPER_L

	
EQ

	
CAC40

	
FI

	
AUSBILL3

	
FX

	
FNZDUSD

	
M

	
GOLD

	
EQ

	
DAX

	
FI

	
AUSBILL4

	
FX

	
FUSDCAD

	
M

	
LEAD

	
EQ

	
DJEURSTX

	
FI

	
BOBL

	
FX

	
FUSDCHF

	
M

	
NICKEL

	
EQ

	
DOWJONESEM

	
FI

	
BUND

	
FX

	
FUSDJPY

	
M

	
PALLADIUM

	
EQ

	
FTSE

	
FI

	
BUXL

	
FX

	
FUSDNOK

	
M

	
PLATINUM

	
EQ

	
HANGSENG

	
FI

	
CAN10Y

	
FX

	
FUSDSEK

	
M

	
SILVER

	
EQ

	
HSHARES

	
FI

	
CANBILL2

	
FX

	
FUSDBRL

	
M

	
TIN

	
EQ

	
MIB30

	
FI

	
EURIBOR1

	
FX

	
FUSDCLP

	
M

	
ZINC

	
EQ

	
NASDAQEM

	
FI

	
EURIBOR10

	
FX

	
FUSDCZK

	
N

	
BRENT

	
EQ

	
NIFTYFIFTY1

	
FI

	
EURIBOR2

	
FX

	
FUSDHUF

	
N

	
BRENT2

	
EQ

	
NIKKEI

	
FI

	
EURIBOR3

	
FX

	
FUSDIDR

	
N

	
BRENT3

	
EQ

	
OMX

	
FI

	
EURIBOR4

	
FX

	
FUSDINR

	
N

	
GASOIL

	
EQ

	
OSE_NIKKEI

	
FI

	
EURIBOR5

	
FX

	
FUSDKRW

	
N

	
GASOIL2

	
EQ

	
RUSL2000EM

	
FI

	
EURIBOR6

	
FX

	
FUSDMXN

	
N

	
GASOIL3

	
EQ

	
SINGIDX

	
FI

	
EURIBOR7

	
FX

	
FUSDMYR

	
N

	
HEATOIL

	
EQ

	
SP500EM

	
FI

	
EURODOL1

	
FX

	
FUSDPHP

	
N

	
HEATOIL2

	
EQ

	
SPMIDEM

	
FI

	
EURODOL10

	
FX

	
FUSDPLN

	
N

	
HEATOIL3

	
EQ

	
TAIWAN

	
FI

	
EURODOL11

	
FX

	
FUSDRUB

	
N

	
HEATOIL4

	
EQ

	
TOPIX

	
FI

	
EURODOL12

	
FX

	
FUSDSGD

	
N

	
NPOOLBASEQTRLY

	
EQ

	
TSE60

	
FI

	
EURODOL13

	
FX

	
FUSDTHB

	
N

	
PHELIXBASE

	
EQ

	
VIX1

	
FI

	
EURODOL14

	
FX

	
FUSDTRY

	
N

	
RBOBGAS

	
EQ

	
VIX2

	
FI

	
EURODOL15

	
FX

	
FUSDILS

	
N

	
RBOBGAS2

	
EQ

	
VIX3

	
FI

	
EURODOL16

	
FX

	
FUSDTWD

	
N

	
RBOBGAS3

	
EQ

	
VIX4

	
FI

	
EURODOL2

	
FX

	
FUSDZAR

	
N

	
RBOBGAS4

	
EQ

	
FTSE/JSE TOP 40

	
FI

	
EURODOL3

	
FX

	
CNH FORWARD

	
N

	
UKNATGAS

	
EQ

	
S&P MID 400

	
FI

	
EURODOL4

	
FX

	
CNY FORWARD

	
N

	
WTI

	 	 	
FI

	
EURODOL5

	
FX

	
HKD FORWARD

	
N

	
WTI_ICE

	 	 	
FI

	
EURODOL6

	 	 	
N

	
WTI_ICE2

	 	 	
FI

	
EURODOL7

	
G

	
CANOLA

	
N

	
WTI_ICE3

	 	 	
FI

	
EUROSWS2

	
G

	
CORN

	
N

	
WTI_ICE4

	 	 	
FI

	
GILTS

	
G

	
COTTON

	
N

	
WTI2

	 	 	
FI

	
ITAL10Y

	
G

	
PALMOIL

	
N

	
WTI3

	 	 	
FI

	
JGB

	
G

	
SOYABEAN_C

	
N

	
WTI4

	 	 	
FI

	
SCHATZ

	
G

	
SOYAMEAL

	
NG

	
NATGAS

	 	 	
FI

	
SHRTSTL10

	
G

	
SOYAOIL

	
NG

	
NATGAS2

	 	 	
FI

	
US10Y

	
G

	
WHEAT_C

	
NG

	
NATGAS3

	 	 	
FI

	
US2Y

	
G

	
WHEAT_K

	
NG

	
NATGAS4

	 	 	
FI

	
US5Y

	 	 	 	 
	 	 	
FI

	
USLONG

	 	 	 	 
	 	 	
Bonds

	
EURO-BTB

	 	 	 	 

 

 

  

- 23 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00249-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00249-of-00352.parquet"}]]