Document:

commitletter.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Exhibit 10.1

	 	 	March 19, 2008
	 
	 
	 
	Borders Group, Inc.	 	 
	100 Phoenix Drive	 	 
	Ann Arbor, MI 48108	 	 
	 
	Attention:  Mr. George L. Jones,	 	 
	                 President and Chief Executive Officer	 	 

COMMITMENT LETTER

Ladies and Gentlemen:

               We write in response to your request for a non-exclusive financing commitment from Pershing Square Capital Management, L.P., on behalf of one or more of its managed funds or affiliates of such managed funds (“Pershing Square”) to (i) provide a senior secured term loan facility for up to $42,500,000 (the “Term Loan Facility”) to Borders Group, Inc. (the “Company”) and (ii) make an offer to purchase (the “Purchase Offer”) the Company’s business in Australia, New Zealand and Singapore, which consists of Borders Australia Pty. Ltd, Borders New Zealand Limited and Borders Pte., Ltd (Singapore) and their subsidiaries (the “Oceania/Singapore Business”), and the Company’s United Kingdom business which includes Paperchase Products Ltd and its subsidiaries and the Company’s 17% equity interest in Bookshop Acquisitions Ltd (the “UK Business”, and together with the Oceania/Singapore Business, the “Foreign Businesses”) for an aggregate cash price of $125,000,000 (less any attributable indebtedness for borrowed money of the Foreign Businesses). You have informed us that

the proceeds of the Term Loan Facility and any future sale under the Purchase Offer would be used (a) to pay fees and expenses associated with the Transactions (as defined below), (b) in the case of the sale under the Purchase Offer, to prepay the Term Loan and (c) to the extent of remaining proceeds, for working capital and general corporate purposes.

Our Commitment 

               Pershing Square is pleased to inform you of its commitment to provide 100% of the Term Loan Facility and of its commitment to enter into the Purchase Offer, subject to the terms and conditions set forth in this letter, the summary of proposed terms and conditions for the Term Loan Facility attached as Exhibit A (the “Term Loan Term Sheet”), the summary of proposed terms and conditions of the Purchase Offer attached as Exhibit B (the “Purchase Offer Term Sheet”) and the summary of proposed terms and conditions of the Warrant Agreement (defined below) attached as Exhibit C (the “Warrant Agreement Term Sheet”, together with the Term Loan Term Sheet, the Purchase Offer Term Sheet and this letter, the “Commitment Letter”). The Term Loan Facility (together with all related security agreements and other documents), the Purchase Offer (together with the related definitive stock purchase agreement) and the Warrant Agreement are collectively referred to herein as the “Definitive Agreements” and the transactions they contemplate are referred to herein as the “Transactions”. 

Syndication of Term Loan Facility

               Pershing Square reserves the right, prior to or after execution of the definitive credit documentation for the Term Loan Facility, to syndicate all or part of the Term Loan Facility to one or more lenders (each, a “Lender”) that will become parties to such definitive credit documentation pursuant to a syndication to be managed by Pershing Square, provided that the commitment of Pershing Square hereunder will not be reduced by any such syndication prior to the execution of definitive credit documentation. Pershing Square, in consultation with the Company, will manage all aspects of any syndication, including decisions as to the selection of institutions to be approached and when they will be approached (which institutions shall be selected with the consent of the Company, which consent shall not be unreasonably withheld), when their commitments will be accepted, which institutions will participate, the allocation of the commitments among the Lenders, and the amount and distribution of fees among the Lenders.

               Successful syndication will require active cooperation. Each party hereto agrees that the Company and its subsidiaries (each, a “Company Party”) and their respective officers, directors, employees, accountants and advisors (each a “Company Representative”) will reasonably assist Pershing Square actively and diligently to achieve a syndication that is satisfactory to Pershing Square, including without limitation by: (a) providing Pershing Square, the Lenders and potential Lenders with such information, as and when such information becomes available, as Pershing Square determines is reasonably necessary to complete syndication, including without limitation business and 

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financial information, projections and evaluations, (b) assisting us in the preparation of a customary information memorandum and other materials about the Term Loan Facility, the Company and the Company Parties, (c) using commercially reasonable efforts to make the senior management of the Company available to attend and make presentations regarding the business and prospects of the Company and its subsidiaries at meetings with Lenders or potential Lenders, (d) using commercially reasonable efforts to ensure that any syndication efforts benefit materially from existing lending and investment banking relationships of the Company and (e) hosting, with Pershing Square, of one or more meetings with potential Lenders upon reasonable advance notice and on a reasonable number of occasions.

               The Company will be solely responsible for the contents of all information (the “Company Information”) that has been or will hereafter be made available by or on behalf of any Company Party or Company Representative to Pershing Square, any Lender or any of their respective affiliates in connection with the Term Loan Facility and acknowledges that Pershing Square and other Lenders will be using and relying upon the Company Information without independent verification thereof.

Conditions to Our Commitment

               Our commitment to enter into the Definitive Agreements and other obligations arising under or relating to this Commitment Letter are made in reliance on and are subject to the satisfaction or waiver by us in our sole discretion of the following conditions as of the Closing Date (as defined in the Term Loan Term Sheet): (a) compliance by the Company Parties with the terms of this Commitment Letter at all times prior to the Closing Date, (b) the negotiation and execution and delivery of definitive documentation with respect to each of the Definitive Agreements and each of the Transactions in form and substance consistent with this Commitment Letter and otherwise reasonably acceptable to us, (c) the absence of a material adverse effect on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, from the date hereof, (d) no issuance of additional debt, equity or related financial instruments (other than borrowings under the Existing Facility or exercises or grants under employee plans in the ordinary course of business) by the Company or its subsidiaries without the consent of Pershing Square, (e) confirmation that no amendments with respect to employment agreements, change of control severance agreements, equity compensation plans or other compensation arrangements or plans are required to avoid the Transactions triggering change of control, severance, accelerated payment or funding, increased potential severance or similar payments or rights (assuming the Warrants are only issued as Cash Settled Warrants as defined in Exhibit C), (f) our approval, not to be unreasonably withheld or delayed, of the text of your public announcement of the Transactions and the Company’s plan to pursue strategic alternatives, (g) approval of your acceptance of this Commitment Letter and the entering into of the Definitive Agreements and the Transactions by a majority of the disinterested directors of the Company and the determination of such directors, after receiving advice from the Company’s financial and legal advisors, that the Transactions, taken as a whole, 

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are not less favorable to the Company than would be negotiated at arm’s-length and are in the best interests of the Company and its stockholders who are not affiliated with Pershing Square, (h) the approval of the terms of the Transactions by Required Lenders under the Existing Facility, (i) receipt of such customary legal opinions, officers certificates, evidence of authority, good standing, incumbency and similar closing documents as we may reasonably request and (j) all the conditions to the effectiveness and funding of the Term Loans described in the Term Loan Facility Term Sheet.

Expenses and Indemnification

               In further consideration of this Commitment Letter and recognizing that in connection herewith Pershing Square and its affiliates are incurring costs and expenses, the Company agrees to reimburse Pershing Square and its affiliates on request from time to time (promptly upon presentation of invoices specifying the costs and expenses so incurred) for all reasonable fees and expenses, up to $5,000,000, incurred in connection with this Commitment Letter, the Term Loan Facility, the Purchase Offer and the Warrant Agreement and the Transactions (including without limitation reasonable fees and expenses of one counsel and of consultants and advisors, filing and recording fees and costs and expenses of due diligence, syndication efforts, environmental, transportation, duplication, messenger services, appraisal, audit and electronic reporting) (the “Expenses”), whether or not the Term Loan Facility, the Purchase Offer or the Warrant Agreement become effective or definitive documents are executed. The Company also agrees to pay all costs and expenses we and our affiliates incur in connection with the enforcement of any rights and remedies hereunder.

               In the event there is no Closing, the Company also agrees to indemnify and hold harmless Pershing Square, the Lenders, their respective accountants, attorneys, advisors, consultants, agents, affiliates and representatives and each director, officer, employee and partner thereof (each an “Indemnified Person”) from and against any and all third party actions, suits, proceedings (including any investigations or inquiries), claims, losses, costs, damages, liabilities or expenses of any kind or nature whatsoever that may be incurred by or asserted against or involve any such Indemnified Person as a result of or arising out of or related to this Commitment Letter or any of the Definitive Agreements or Transactions, or the use of the proceeds thereof. The Company further agrees to reimburse each Indemnified Person upon demand for any legal or other expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including without limitation any inquiry or investigation) or claim (whether or not Pershing Square or any such other Indemnified Person is a party to any action or proceeding out of which any such expenses arise). Notwithstanding the foregoing, the Company’s obligation to indemnify any Indemnified Person hereunder does not extend to any loss, claim, damage, expense or liability to the extent of a final and non-appealable determination by a court of competent jurisdiction that such loss, claim, damage, expense or liability arose directly from such Indemnified Person’s gross negligence or willful misconduct. No Indemnified Person will be responsible or liable to the Company, or any other person, for any consequential, special, lost profits, punitive or 

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similar damages that may be alleged as a result of this Commitment Letter. In the event of a Closing, the Definitive Agreements will provide for customary indemnification.

Other Activities of Pershing Square

               As you know, Pershing Square and certain of its affiliates are engaged, either directly or through its affiliates, in various activities, including securities trading, investment management, financing and financial planning. In the ordinary course of these activities, Pershing Square and its affiliates may actively trade the debt and equity securities (or related derivative securities) of the Company and other companies which may be the subject of the arrangements contemplated by this letter for their own account and for the accounts of others and may at any time hold long and short positions in such securities. Pershing Square and its affiliates may also co-invest with, make direct investments in, and invest or co-invest client monies in or with funds or other investment vehicles managed by other parties, and such funds or other investment vehicles may trade or make investments in securities or other debt obligations of the Company or other companies which may be the subject of the arrangements contemplated by this Commitment Letter.

               Pershing Square and its affiliates may have economic interests that conflict with those of the Company. You agree that we will act under this letter as an independent contractor and that nothing in this Commitment Letter or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any of Pershing Square or its affiliates on the one hand and, on the other, the Company or any of its stockholders or affiliates. You acknowledge and agree that (i) the transactions contemplated by this Commitment Letter are arm’s-length commercial transactions between Pershing Square and its affiliates on the one hand, and you, on the other, (ii) in connection therewith and with respect to the process leading to such transaction each of Pershing Square and its affiliates is acting solely as a principal and not the agent or fiduciary of the Company or its management, stockholders, creditors or any other person, (iii) none of Pershing Square and/or its affiliates has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any of Pershing Square or its affiliates has advised or is currently advising the Company or its subsidiaries on other matters and irrespective of the activities of employees of Pershing Square as directors of the Company or in any other capacity) and has not assumed any other obligation to the Company or its subsidiaries except the obligations expressly set forth in this Commitment Letter and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. You further acknowledge and agree that you are responsible for making your own independent judgment with respect to all of the transactions contemplated herein and the process leading thereto. You agree that you will not claim that any of Pershing Square or its affiliates has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to you or any subsidiary of the Company, whether in connection with such transactions or the process leading thereto. In addition, we may employ the services of 

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our affiliates in providing certain services hereunder and may exchange with such affiliates information concerning the Company and other companies that may be the subject of this arrangement, and such affiliates will be entitled to the benefits afforded to us hereunder. Nothing herein shall negate any fiduciary duties owed by law by any director of the Company.

               In addition, please note that none of Pershing Square or its affiliates provides any accounting, tax or legal advice.

Public Announcement

               Prior to the Closing Date, neither Pershing Square nor the Company shall issue any press release or make any public statement concerning this Commitment Letter or the Transactions unless the releasing party provides a written copy to the other parties and allows such parties the opportunity to review and comment on any such disclosure.

Alternative Transactions

               The Company will promptly inform Pershing Square of any written or oral proposal or indication of interest it receives from any person prior to the Closing Date with respect to a transaction (an “Alternative Transaction”) that is an alternative to any of the Transactions (other than a proposal or indication of interest that is solely with respect to a sale of assets of the Company, a sale of stock or assets of a subsidiary of the Company, a sale of the Company as a whole or an amendment to the Existing Credit Facility that does not increase its committed amount), identify the parties involved and the material proposed or indicative terms and thereafter keep Pershing Square reasonably informed about the status and material changes in proposed terms thereof. The Company agrees that it shall not enter into any definitive agreement with respect to any Alternative Transaction unless (a) it has received a bona fide proposal for an Alternative Transaction that a majority of the disinterested directors of the Company has determined is reasonably capable of being implemented and, as implemented, would be more favorable to the Company than the Transactions, taking into account the circumstances of the Company and any risks or delay associated with the Alternative Transactions and the Transactions, (b) the Company shall have informed Pershing Square of such determination of the disinterested directors and shall have provided to Pershing Square at least two business days thereafter to modify its commitment to enter into the Transactions and (c) Pershing Square has failed to modify its commitment such that, in the judgment of a majority of the disinterested directors of the Company, the Alternative Transaction continues to be more favorable to the Company than the Transactions taking into account the circumstances of the Company and any risks or delay associated with the Alternative Transaction and the Transactions. In the event that Pershing Square does not modify the Transaction as provided in clause (d) above, the Company may proceed to consummate the Alternative Transaction on substantially the terms proposed, provided that the Company shall not agree to any material change to the terms of the Alternative Transaction that is adverse to the Company unless it provides Pershing Square one

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business day in which to modify its commitment and the Alternative Transaction continues to be more favorable to the Company than the Transactions taking into account Pershing Square's modifications.

Termination of Our Commitment

               Once accepted, Pershing Square’s commitment to provide the Term Loan Facility and to enter into the Purchase Offer and other obligations under this Commitment Letter will terminate on the earlier of (a) April 4, 2008, unless all of the Definitive Agreements are executed and are delivered and all the related conditions precedent are satisfied on or before such date or (b) 5 business days after our written notice to the Company of material non-compliance by any Company Party with the terms of this Commitment Letter, which has not been cured.

               Your and our obligations under the sections of this letter entitled “Expenses and Indemnification” and “Other Activities of Pershing Square”, and, to the extent applicable, “Governing Law and Jurisdiction” and “Miscellaneous” will survive the termination of our commitment and obligations (it being understood that the reimbursement and indemnification provisions contained herein shall be superseded by the reimbursement and indemnification provisions contained in the definitive financing documentation when such documentation becomes effective).

Governing Law and Jurisdiction

               THIS COMMITMENT LETTER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

               To the fullest extent permitted by applicable law, each party hereto hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of any New York State or United States Federal court sitting in the Borough of Manhattan, The City of New York in any claim, action, suit or proceeding arising out of or relating to this Commitment Letter or any matters contemplated hereby or thereby, (b) agrees that all claims in such proceeding may be decided in such court and (c) waives any objection it may now or hereafter have to the laying of venue in any such court and any claim that any such proceeding brought in any such court has been brought in an inconvenient forum. Each party hereto agrees that a final judgment in any such proceeding will be conclusive and may be enforced in other jurisdictions.

               EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE FEE LETTER OR ANY MATTERS CONTEMPLATED HEREBY OR THEREBY.

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               Each party hereto has agreed as a material term that, to the fullest extent permitted by New York law, no party hereto will be liable for any special, consequential or similar damages relating to this Commitment Letter or the transactions contemplated hereby or thereby or on any cause of action based on promissory estoppel, detrimental reliance or a similar theory of relief, in each case regardless of whether or not damages or reliance was foreseeable.

Miscellaneous

               This Commitment Letter sets forth your and our entire understanding with respect to the subject matter herein and supersedes all existing agreements concerning the subject matter hereof. This Commitment Letter may be modified or waived only pursuant to an instrument in writing executed by or on behalf of each party hereto. Your rights and obligations under this Commitment Letter may not be assigned without the consent of Pershing Square, and any purported assignment made without such consent will be void. If any provision of this Commitment Letter is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Commitment Letter will not in any way be affected or impaired thereby.

               If you are in agreement with the foregoing, please sign and return to Pershing Square the enclosed copy of this Commitment Letter to Pershing Square at the address or pursuant to the wire instructions set forth below, on or prior to March 19, 2008, New York time. Delivery of an executed counterpart of this Commitment Letter by facsimile, telecopier or electronic mail will be as effective as delivery of a manually executed counterpart. This Commitment Letter may be executed in any number of separate counterparts, each of which will be an original and all of which, taken together, will constitute a single instrument.

[signatures on following page]

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               We are pleased to deliver this Commitment Letter and look forward to working with you to consummate the Transactions.

	 	 			Very truly yours,  
	 
	 
	 	 			PERSHING SQUARE CAPITAL MANAGEMENT, L.P.  
	 	 			By:  PS Management GP, LLC, its General Partner  
	 
	 	 			By:  /s/ William A. Ackman
	 	 			Name:  William A. Ackman, Managing Member  
	 
	 
	 
	 
	Agreed to and accepted this	 	 
	19th day of March, 2008	 	 
	 
	BORDERS GROUP, INC.	 	 
	 
	 
	By:  /s/ George L. Jones	 	 
	Name: George L. Jones	 	 
	Title: President and Chief Executive Officer	 	 

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EXHIBIT A

     SUMMARY OF TERMS AND CONDITIONS 

$42.5 MILLION SENIOR SECURED TERM LOAN FACILITY

	Borrower: 	  	Borders Group, Inc. (the “Company” or the 
	  	  	“Borrower”).     
	  
	Guarantors: 	  	All obligations under the Term Loan Facility 
	  	  	would be unconditionally guaranteed by each 
	  	  	subsidiary that is a guarantor under the 
	  	  	Company’s Second Amended and Restated 
	  	  	Multicurrency Revolving Credit Agreement, 
	  	  	dated as of July 31, 2006, as amended (as of the 
	  	  	date hereof, the “Existing Facility”).   
	  
	Administrative Agent: 	  	Pershing Square or its designee (the 
	  	  	“Administrative Agent”).   
	  
	Collateral Agent: 	  	Pershing Square or its designee (the “Collateral 
	  	  	Agent” and, together with the Administrative 
			Agent, the “Agents”).       
	  
	Lenders: 	  	Pershing Square and/or its permitted assignees 
	  	  	(each, a “Lender” and collectively, the 
	  	  	“Lenders”).     
	  
	Closing Date: 	  	The date on or before April 4, 2008 on which the 
	  	  	borrowings under the Term Loan Facility are 
	  	  	made (the “Closing Date”).   
	  
	Loan: 	  	A senior secured term loan facility in an amount 
	  	  	not to exceed $42,500,000 (the “Term Loan 
	  	  	Facility” and the loan thereunder, the “Term 
	  	  	Loan”).     
	  
	Availability: 	  	The Term Loan would be fully funded at the 
	  	  	Closing Date and amounts repaid would not be 
			able to be reborrowed.       
	  
	Maturity: 	  	The maturity date of the Term Loan Facility 
	  	  	would be January 15, 2009 (the “Maturity 
	  	  	Date”). The outstanding principal balance of the 
	  	  	Term Loan will be due and payable on the 

	  	  	Maturity Date. 	  	  
	  
	Use of Proceeds: 	  	Proceeds of Term Loan borrowed on the Closing 
	  	  	Date would be used to (a) pay fees and expenses 
	  	  	associated with the Transactions and (b) to the 
	  	  	extent of remaining proceeds, for working capital 
	  	  	and general corporate purposes. 
	  
	Security: 	  	The Term Loan Facility would be secured by a 
	  	  	first-priority, perfected security interest in a 
	  	  	number of shares of the capital stock of 
	  	  	Paperchase Products Ltd and related proceeds 
	  	  	and distributions (the “Pledged Shares”), or 
	  	  	equivalent interest in U.K. holding companies, 
	  	  	with a fair market value as pledged as of the 
	  	  	Closing Date equal to $43.8 million. 
	  
	  	  	The Pledged Shares would be free and clear of 
	  	  	other liens, claims and encumbrances, and 
	  	  	delivered to the Collateral Agent in certificated 
	  	  	form with transfer powers. 
	  
	Interest: 	  	The Term Loan would bear interest at a rate per 
	  	  	annum equal to 12.5% per annum, calculated on a 
	  	  	365/366 day basis. 	  	  
	  
	  	  	During the continuance of any Event of Default, 
	  	  	the margin applicable to all loans would be 
	  	  	increased by an additional 2.0% per annum. 
	  
	  	  	Interest in respect of the Term Loans would be 
	  	  	payable monthly in arrears in cash on payment 
	  	  	dates to be agreed.   Interest would also be 
	  	  	payable at the time of repayment of any loans and 
	  	  	at Maturity. 	  	  
	  
	  	  	Customary gross-up provisions for withholding 
	  	  	taxes will apply. 	  	  
	  
	Fees: 	  	2.25% of the initial maximum principal amount 
	  	  	of the Term Loan fully-earned and due and 
	  	  	payable in cash to the initial Lender for its own 
	  	  	account on the Closing Date as a condition to the 
	  	  	effectiveness of the Term Loan Facility. 
	  
	  	  	2.25% of the principal of the Term Loan as and 

	  	  	when repaid, due and payable in cash to the 
	  	  	initial Lender for its own account on the date of 
	  	  	repayment as a condition to the effectiveness of 
	  	  	such repayment.1 
	  
	Mandatory Prepayments: 	  	Mandatory prepayments from 100% of the net 
	  	  	cash proceeds of any disposition of any direct or 
	  	  	indirect interest in the Paperchase Businesses (as 
	  	  	defined below) and 100% of the net proceeds of 
	  	  	any Specified Transactions (as defined in 
	  	  	“Covenants” below) made from the Paperchase 
	  	  	Businesses outside of the ordinary course of 
	  	  	business. 
	  
	  	  	Voluntary prepayments of the Term Loan would 
	  	  	be permitted, in whole or in part, without 
	 		premium or penalty. 
	  
	Conditions: 	  	The effectiveness of this Term Loan Facility 
	  	  	would be conditioned upon (a) the final terms and 
	  	  	conditions of the Term Loan Facility and the 
	  	  	pledge of the Pledged Shares being in customary 
	  	  	and reasonable form consistent with the terms set 
	  	  	forth herein, (b) the satisfaction or waiver of 
	  	  	customary and reasonable legal, documentary and 
	  	  	other conditions precedent to effectiveness and 
	  	  	funding of the Term Loan Facility, (c) 
	  	  	confirmation that the Pledged Shares shall entitle 
	  	  	their holder to the expected proportional interest 
	  	  	in Paperchase Products Ltd, its subsidiaries and 
	  	  	their respective assets and businesses (the 
	  	  	“Paperchase Businesses”) free and clear of 
	  	  	material liabilities relating to the Company and 
	  	  	its subsidiaries (other than liabilities to the extent 
	  	  	relating to the businesses of Paperchase Products 
	  	  	Ltd and its subsidiaries) and (d) the conditions set 
	  	  	forth in the Commitment Letter under the caption 
	  	  	“Conditions to Our Commitment”. 
	  
	Representations and 	  	The final documentation would contain (a) 

	1      	As an alternative, Pershing Square may elect to receive all or part of the payments with regards to the Term Loan Facility as original issue discount that would be payable upon maturity or to make other changes to the economic terms of the Term Loan Facility, so long as the economic effect to the Company is no less favorable than the proposal set forth above. 
	 

	Warranties: 	  	representations and warranties with the same 
	  	  	effect as the representations and warranties in the 
	  	  	Existing Facility and (b) reasonable and 
	  	  	customary representations and warranties relating 
	  	  	to the Paperchase Business, in each of case (a) 
	  	  	and (b), subject to customary and reasonable 
	  	  	exceptions and materiality qualifications. 	  	  
	  
	Covenants: 	  	The final documentation would contain (a) 
	  	  	affirmative and negative covenants applicable to 
	  	  	the Credit Parties and their subsidiaries with the 
	  	  	same effect as the covenants in the Existing 
	  	  	Facility (except that there would be no financial 
	  	  	covenants), subject to customary and reasonable 
	  	  	exceptions and materiality qualifications, and (b) 
	  	  	limitations on the disposition of the Paperchase 
	  	  	Business (other than as a whole) and transactions 
	  	  	by or affecting the Paperchase Business or the 
	  	  	Company’s interests therein outside of the 
	  	  	ordinary course of business, provided that the 
	  	  	Term Loan Facility will not prohibit dividends or 
	  	  	distributions, loans, advances or other payments, 
	  	  	transfers or distributions (such transactions, 
	  	  	“Specified Transactions”) outside of the ordinary 
	  	  	course of business to the extent a prohibition of 
	  	  	such Specified Transactions would violate 
	  	  	Section 9.14 of the Existing Facility. 	  	  
	  
	Events of Default: 	  	The final documentation would contain 
	  	  	customary and reasonable events of default (a) 
	  	  	with the same effect as the events of default in 
	  	  	the Existing Facility, subject to customary and 
	  	  	reasonable exceptions and materiality 
	  	  	qualifications and notice, cure and grace periods, 
	  	  	and (b) with respect to any failure of the security 
	  	  	interest in the Pledged Shares to be valid, 
	  	  	enforceable and fully perfected. 	  	  	  	  
	  
	Expenses: 	  	The Credit Parties would pay all of the initial 
	  	  	Lender’s out-of-pocket costs, including without 
	  	  	limitation the fees and expenses of Sullivan & 
	  	  	Cromwell LLP and Blackstone Advisory Services 
	  	  	L.P., incurred in connection with the 
	  	  	Transactions. 	  	  	  	  	  	  	  	  

	Indemnity: 	  	The Credit Parties would indemnify and hold 
	  	  	harmless each Lender, Agent and their respective 
	  	  	affiliates, officers, directors, employees, agents 
	  	  	and advisors from third party claims and losses 
	  	  	relating to any of the Transactions on terms 
	  	  	customarily contained in loan documentation for 
	  	  	similar secured financings. 
	  
	Governing Law: 	  	New York. 

EXHIBIT B

SUMMARY OF TERMS AND CONDITIONS 

US$125 MILLION PURCHASE OFFER

	Seller: 	  	Borders Group, Inc. (the “Company” or the 
	  	  	“Seller”). 
	  
	Buyer: 	  	Pershing Square (the “Buyer”). 
	  
	Purchase Offer: 	  	Subject to the satisfaction of the conditions 
	  	  	precedent set forth herein, at the election of the 
	  	  	Seller, the Buyer agrees to enter into a definitive 
	  	  	stock purchase agreement (to be promptly agreed 
	  	  	and attached as an exhibit to the Purchase Offer) 
	  	  	to purchase 100% of the capital stock of the 
			following companies:  
	  
	  	  	•  Company’s business in Australia, New 
	  	  	Zealand and Singapore, which consists of 
	  	  	Borders Australia Pty. Ltd, Borders New 
	  	  	Zealand Limited and Borders Pte., Ltd 
	  	  	(Singapore) and their subsidiaries (the 
	  	  	“Oceania/Singapore Business”), and 
	  
	  	  	•  Paperchase Products Ltd and its 
	  	  	subsidiaries and the Company’s 17% 
	  	  	equity interest in Bookshop Acquisitions 
	  	  	Ltd (the “UK Business”) 
	  
	  	  	(together, the “Subject Companies”), or, at the 
	  	  	option of the Company, the UK Business alone or 
	  	  	together with the Company’s business in 
	  	  	Singapore (the “Alternative Sale Transaction”) 
	  
	  	  	Pershing Square may designate an affiliate to 
	  	  	perform its obligations hereunder, provided it is 
	  	  	not released from such obligations. 
	  
	Price: 	  	$125 million in the aggregate in cash for all the 
	  	  	capital stock of all of the Subject Companies, $55 
	  	  	million for the UK Business or $57.5 million for 
	  	  	the UK Business and the Company’s business in 
	  	  	Singapore, as the case may be, minus attributable 
	  	  	indebtedness for borrowed money. The first 

	  	  	proceeds from payment of the purchase price, net 
	  	  	of expenses, will be applied to prepay the 
	  	  	outstanding balance of the Term Loan and related 
	  	  	amounts due under the Term Loan Facility. 
	  	  	Intercompany receivables and payables 
	  	  	(excluding indebtedness for the provision of 
	  	  	goods and services) will be eliminated in a 
	  	  	manner that is tax-efficient for both parties. It is 
	  	  	understood that there would be an increase to the 
	  	  	purchase price to reflect the after-tax benefit to 
	  	  	Buyer to the extent cash remains with the Subject 
	  	  	Companies as of the Closing Date. 	  	  
	  
	Term: 	  	Purchase to be consummated on or prior to 
	  	  	January 15, 2009. 	  	  	  	  
	  
	Exercise: 	  	Requires 10 business day irrevocable written 
	  	  	notice by Seller to Buyer. 	  	  	  	  
	  
	Conditions: 	  	The stock purchase agreement would include 
	  	  	customary and reasonable conditions relating to 
	  	  	the Subject Companies, the stock purchase, the 
	  	  	Seller, and material legal and regulatory matters. 
	  	  	In addition, the Buyer’s obligations also would be 
	  	  	subject to the following additional conditions: 
	  
	  	  	  (a)       the Seller representing that (i) it has used 		 
	  	  	             reasonable commercial efforts to find third 
	  	  	             party buyers for the Subject Companies for a 
	  	  	             purchase price in excess of the purchase 
	  	  	             price pursuant to the Purchase Offer and 
	  	  	             (ii) a majority of the independent directors 
	  	  	             of the board of the Seller, after receiving 
	  	  	             advice from financial and legal advisers, has 
	  	  	             concluded that the sale of the Subject 
	  	  	             Companies to the Buyer is fair to and in the 
	  	  	             best interests of the Seller and its 
	  	  	             stockholders not affiliated with Pershing 
	  	  	             Square;       
	  
	  	  	  (b)       operation of the Subject Companies and 
	  	  	             their businesses, working capital and 
	  	  	             commercial relationships in the ordinary 
	  	  	             course of business in all material respects 
	  	  	             and in accordance with interim governance 

	             restrictions customary for arm’s-length stock 
	             purchase agreements for similar companies; 
	  
	  (c)       compliance with agreed procedures for the 
	             provision of material information about the 
	             Subject Companies on an ongoing business, 
	             including without limitation the right of the 
	             Buyer in its capacity as Buyer to appoint a 
	             single board observer with respect to the 
	             board of directors or similar governing body 
	             of each Subject Company from and after the 
	             Closing Date; and 
	  
	  (d)       no breach of the Company’s obligations 
	             under the Warrant Agreement. 

EXHIBIT C

SUMMARY OF TERMS AND CONDITIONS 

WARRANTS

	Issuer: 	  	Borders Group, Inc. (the “Company”). 
	  
	Number of Shares: 	  	Warrants convertible into a number of shares of 
	  	  	common stock equal to 19.99% of fully-diluted 
	  	  	shares (as adjusted to exclude unexercised 
	  	  	warrants and options issued in the ordinary 
	  	  	course of business under employee benefit plans). 
	  
	  	  	Warrants would be fully earned and vested on the 
	  	  	Closing Date. 
	  
	Exercise Price: 	  	Subject to anti-dilution adjustments, $7.00. 
	  
	Term: 	  	7.5 years. 
	  
	Change of Control 	  	Holders would have customary protections upon 
	Protection: 	  	a change in control (definition to be reasonably 
	  	  	acceptable to Pershing Square) including (a) in 
	  	  	the case of a merger for US-listed public stock, 
	  	  	the right to convert into warrants on merger 
	  	  	consideration unless the Company elects (at the 
	  	  	Company’s option) to settle the Warrants for cash 
	  	  	and (b) in the case of any other change of control 
	  	  	transaction or a de-listing, a mandatory cash 
	  	  	settlement. In either case (a) or (b), the cash 
	  	  	settlement price would be determined by a 
	  	  	financial institution chosen by the parties based 
	  	  	on its leading equity derivatives trading expertise 
	  	  	and using standard option pricing models, such as 
	  	  	Black-Scholes, taking into account the intrinsic 
	  	  	and option value of the Warrants, but assuming 
	  	  	annualized volatility of 35% over the Warrant’s 
	  	  	remaining term. If the parties are unable to agree 
	  	  	on a financial institution, each party will appoint 
	  	  	a leading financial institution in New York City 
	  	  	and these two dealers will appoint a third to 
	  	  	establish the cash settlement price. 

	Transferability: 	  	Freely transferable, subject to securities law 
	  	  	restrictions, and benefiting from customary 
	  	  	demand and piggy-back registration rights with 
	  	  	respect to the Warrants and the shares underlying 
	  	  	the Warrants. 	  	  	  	  	  	  
	  
	Anti-Dilution Protection: 	  	Full anti-dilution protection, including 
	  	  	preservation of right to convert into 19.99% of 
	  	  	fully-diluted outstanding common stock at all 
	  	  	times (as adjusted to exclude (x) warrants and 
	  	  	options issued in the ordinary course under 
	  	  	employee benefits plans and any common stock 
	  	  	issued in the future upon exercise of such 
	  	  	warrants and options and (y) the issuance of 
	  	  	restricted stock and restricted stock units in the 
	  	  	ordinary course under employee benefits plans 
	  	  	and common stock issued in the future in 
	  	  	settlement of any restricted stock units), full- 
	  	  	ratchet adjustment to exercise price for future 
	  	  	issuances (other than ordinary course issuances of 
	  	  	equity interests under employee benefit plans), 
	  	  	adjustments to compensate for value of all cash 
	  	  	dividends and distributions and payment of all 
	  	  	non-cash dividends or distributions on an as- 
	  	  	converted basis. In the case of (i) all Warrants 
	  	  	outstanding after a merger for US-listed public 
	  	  	stock in a company with a market capitalization 
	  	  	of over $1 billion or (ii) Warrants no longer 
	  	  	beneficially held by Pershing Square, such 
	  	  	Warrants will have only customary anti-dilution 
	  	  	protections, including institutional weighted 
	  	  	average method adjustments to the exercise price 
	  	  	for future issuances (subject to customary 
	  	  	exceptions), and adjustments to compensate for 
	  	  	the value of dividends and distributions. 
	  
	Cash Settled Election: 	  	Pershing Square will elect prior to the Closing 
	  	  	Date the proportion of Warrants to be held in the 
	  	  	form of Warrants that may be settled by the 
	  	  	applicable Pershing Square entity solely for cash 
	  	  	(“Cash Settled Warrants”). In addition, the 
	  	  	Warrant Agreement would provide that (a) prior 
	  	  	to shareholder approval of the issuance of shares 
	  	  	on exercise of the Warrants (as required by 
	  	  	NYSE shareholder approval policy) or (b) to the 

	  	  	extent necessary to stay below 35% beneficial 
	  	  	ownership and avoid an Event of Default (for 
	  	  	Change in Control) under the Existing Facility 
	  	  	and avoid material change of control triggers in 
	  	  	existing annual incentive plans, the Warrants held 
	  	  	by Pershing Square would cease to be exercisable 
	  	  	for shares and instead be Cash Settled Warrants. 
	  	  	The Company will take such commercially 
	  	  	reasonable actions as Pershing Square may 
	  	  	reasonably request from time to time to maximize 
	  	  	the number of Warrants exercisable for shares 
	  	  	that Pershing Square may hold in a manner 
	  	  	consistent with the foregoing requirements and 
	  	  	applicable anti-takeover and other laws, including 
	  	  	the obligation to call special meetings of 
	  	  	shareholders as Pershing Square may reasonably 
	  	  	request until the shareholder approval has been 
	  	  	received and the obligation to amend the annual 
	  	  	incentive plans to permit exercise of the Warrants 
	  	  	for shares by no later than February 2, 2009. Any 
	  	  	Cash Settled Warrants no longer held by Pershing 
	  	  	Square or its affiliates, will, at Pershing Square’s 
	  	  	option, become Warrants exercisable for shares 
	  	  	upon transfer, except that the foregoing shall not 
	  	  	apply if the issuance of shares upon exercise of 
	  	  	the Warrants has not received shareholder 
	  	  	approval. 
			
	Certain Protection: 	  	So long as (a) the aggregate number of shares of 
	  	  	common stock held by Pershing Square including 
	  	  	Warrants or derivative contracts is at least 15% 
	  	  	and (b) the aggregate number of Warrants held by 
	  	  	Pershing Square is at least 5%, in each of cases 
	  	  	(a) and (b) on a fully-diluted basis (excluding 
	  	  	unexercised warrants and options issued in the 
	  	  	ordinary course of business under employee 
	  	  	benefit plans), then the Warrant Agreement 
	  	  	would prohibit (a) the implementation of a poison 
	  	  	pill or similar defenses or (b) the issuance of 
	  	  	preferred stock or instruments convertible, 
	  	  	exchangeable or exerciseable into preferred stock 
	  	  	or common stock, in each case without the 
	  	  	consent of Pershing Square. 
	  
	Governance Matters: 	  	Pershing Square will agree not to cause the 
	  	  	change of the control provision of the Existing 

	Facility to be breached as a result of the exercise 
	of the Warrants or other action taken by Pershing 
	Square. Pershing Square will further agree that 
	through the 2009 annual shareholders’ meeting it 
	will not seek to prevent the board of the 
	Company from maintaining a majority of 
	independent directors and will condition any 
	material transactions between the Company and 
	Pershing Square on the receipt of independent 
	director approval. In addition, Pershing Square 
	shall not sell or transfer shares or Warrants to 
	others (or cash settle its Warrants) prior to the 
	end of 2008, except after the public 
	announcement of a change of control or other 
	extraordinary transaction involving the Company.efc8-0352_emailedex107.htm

    Exhibit 10.7

     

     

     

    UBS
SECURITIES LLC

     

    ACCOUNT
DOCUMENTS

    FOR
FUTURES AND

    OPTIONS
CONTRACTS

     

     

     

    UBS Managed Futures (Aspect)
LLC

    Customer
Name

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    PLEASE
TAKE NOTE OF THE INFORMATION ON THIS PAGE

    

    The
account documents included herewith are provided to you as a prospective client
of UBS Securities LLC (“UBS-S LLC”).  They are intended to apprise you
of your rights and responsibilities in your relationship with UBS-S LLC. You
must complete, sign and return these account documents to UBS-S LLC before an
account can be opened in your name.  Some of these documents are
required by U.S. regulations and exchange rules, others by UBS-S
LLC.

    

    Also
distributed herewith as a separate booklet are Futures and Options Disclosure
Documents which are designed to inform you of some of the risks involved in
trading futures contracts and options thereon.  You should carefully review and
understand the Futures and Options Disclosure Documents and retain them for your
records.

    

    OPENING
AN ACCOUNT WITH UBS-S LLC REQUIRES THE FOLLOWING:

    

    ·    Complete
and sign the NEW ACCOUNT INFORMATION FORM (pages 3-4)

    

    ·    Review
and sign the CUSTOMER AGREEMENT (pages 5-19)

     

    
      ·    Review
and check the boxes (as applicable) regarding Customer Acknowledgements, Consent
to Transfer Funds and Hedging Representation (pages 17-18)

    

    

    U.S.
citizens or residents must complete Form W-9.  Customers who are
neither U.S. citizens or residents must complete Form W-8.  Forms
W-8 and W-9 appear at the end of this packet of Account Documents for Futures
and Options Contracts.

    

    Customers
who have granted discretionary trading authority over their account to any
individual or entity (an “Advisor”) must review and sign the POWER OF ATTORNEY
LIMITED TO PURCHASES AND SALES OF FUTURES CONTRACTS (page 20) and must
complete ACKNOWLEDGEMENT OF RECEIPT OF COMMODITY TRADING ADVISOR DISCLOSURE
DOCUMENT (page 21).

    

    Some
accounts require the submission of additional documents (e.g., corporations must
submit authorizing resolution, partnerships must submit evidence of authority to
trade futures contracts).  Any additional, special purpose forms, if
required for your account, may be provided separately and your Customer
Representative will advise you about any further documentation
required.

    

    When you
have completed and/or signed the appropriate documents, return them to your
Customer Representative and make arrangements for the transfer of
funds.

     

     

    
      
        
        

      

      
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        5

        
          

        

      

      
        
        

      

    

     

     

     

    CUSTOMER
AGREEMENT

    

    This
Customer Agreement (“Agreement”) between UBS Securities LLC (“UBS-S LLC”) and
_UBS Managed Futures (Aspect) LLC_ (“Customer”) shall govern the purchase and
sale by UBS-S LLC of certain futures contracts, options thereon and options
contracts for the account and risk of Customer through one or more accounts
carried by UBS-S LLC on behalf and in the name of Customer (collectively, the
“Account”), as more fully described below.

    

    1.     UBS-S
LLC’S AUTHORIZATION TO ACT AS BROKER

    

    Customer
authorizes UBS-S LLC, acting through employees and agents selected by it in its
sole discretion, to purchase and sell for the Account contracts for certain
futures contracts, options thereon and options contracts for which UBS-S LLC has
notified Customer that UBS-S LLC is prepared to execute transactions
(collectively, “Contracts”) within or outside the United States of America in
accordance with Customer’s instructions.

    

    2.     CUSTOMER’S
REPRESENTATIONS AND WARRANTIES

     

    (a)            Representations and
Warranties.  Customer represents and warrants as
follows:

    

    (i)    Authority.  Customer
has full right, power and authority to enter into this Agreement and the
Contracts, and the person executing this Agreement on behalf of Customer is
authorized to do so.  This Agreement is binding on Customer and
enforceable against Customer in accordance with its terms;

    

    (ii)   Lawful
Agreement.  Customer may lawfully establish and open the
Account for the purpose of effecting purchases and sales of Contracts through
UBS-S LLC. Transactions entered into pursuant to this Agreement will not violate
any “Applicable Law” (as defined below) to which Customer is subject or any
agreement to which Customer is subject or a party and the execution, delivery
and performance of this Agreement by Customer require no action by or in respect
of or filing with any governmental body, agency or official;

    

    (iii)  Customer’s
Statements.  The statements made to UBS-S LLC by Customer
regarding Customer’s futures trading (including any financial statements
submitted therewith) are true and correct to the best of Customer’s
knowledge;

     

    (iv)   Interest or Control of
Account.  If any person or entity has, or during the term of
this Agreement will have, any interest in the Account other than Customer,
Customer hereby agrees to so notify UBS-S LLC immediately (and no later than
within one business day); and

     

    (v)    Designation.  If
Customer is not a citizen or resident of the United States, Customer has been
informed by UBS-S LLC of Commodity Futures Trading Commission (“CFTC”)
Regulations concerning the designation of a futures commission merchant as the
agent of foreign brokers, customers of a foreign broker and foreign traders for
certain purposes as set forth in CFTC Regulation § 15.05 and
concerning

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
 

    special
calls for information from futures commission merchants, foreign brokers and
members of contract markets as set forth in CFTC Regulation
§ 21.03.

     

    (b)    Notice of
Change.  Customer shall immediately (and no later than within
one business day) notify UBS-S LLC in writing if any of the representations
contained herein materially change or cease to be true and correct.

     

    3.     APPLICABLE
LAW

     

    The
Account and all transactions and agreements in respect of the Account shall be
subject to the regulations of all applicable Federal, state and self-regulatory
agencies or authorities, including but not limited to:  (a) the
provisions of the Commodity Exchange Act, as amended, and any rules,
regulations, orders and interpretations promulgated thereunder by the CFTC;
(b) the constitution, by-laws, rules, regulations, orders and
interpretations of the relevant board of trade, trading facility, market, or
exchange and its clearing house, if any (each, an “exchange”) on or subject to
the rules of which such transactions are executed and/or cleared, and any
relevant registered futures association, including, without limitation, the
National Futures Association (“NFA”); and (c) custom and usage of the
trade.  All such provisions, rules, regulations, orders,
interpretations, constitution, by-laws, custom and usage, as in effect from time
to time, are hereinafter collectively referred to as “Applicable
Law.”

     

    4.     RELIANCE ON INSTRUCTIONS

     

    UBS-S LLC
shall be entitled to rely on any instructions, notices and communications,
whether oral or in writing, that it believes to be that of an individual
authorized to act on behalf of Customer, including, but not limited to, any
individual identified in writing by Customer as authorized to act on its behalf,
and Customer shall be bound thereby.  Customer hereby waives any
defense that any such instruction was not in writing as may be required by the
Statute of Frauds or any other similar law, rule or regulation.

     

    5.     ACCEPTANCE
OF ORDERS; POSITION LIMITS

     

    (a)    Acceptance of Orders.  UBS-S LLC shall have the
right to limit the size of open positions (net or gross) of Customer with
respect to the Account at any time and to refuse acceptance of orders to
establish new positions (whether such refusal or limitation is required by, and
whether such refusal is based on position limits imposed under, Applicable
Law).  UBS-S LLC shall immediately notify Customer of its rejection of
any order.  Unless specified by Customer, UBS-S LLC may designate the
exchange or trading system on which it will attempt to execute
orders.

     

    (b)    Position Limits.  Customer shall not, either
alone or in combination with others, violate any position or exercise limit
established by or under Applicable Law.  If Customer intends at any
time to exceed such position limits, Customer shall cause to be filed an
application with the CFTC or the relevant exchange requesting authorization for
Customer to exceed such position limits and shall provide UBS-S LLC with a copy
of such application and such other information as UBS-S LLC may reasonably
request with respect to such application.  Customer shall indemnify
and hold UBS-S LLC harmless from and against all claims, damages, fines or
assessments of any kind whatsoever, including reasonable attorneys’ fees in
connection with the

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    defense
thereof, made and incurred in connection with any violation by Customer of its
obligations under this Section 5(b).

     

    6.     ORIGINAL
AND VARIATION MARGIN; PREMIUMS; OTHER CONTRACT OBLIGATIONS

     

    With
respect to every Contract purchased, sold or cleared for the Account, Customer
shall make, or cause to be made, all applicable original margin, variation
margin, intra-day margin and premium payments, and perform all other obligations
attendant to transactions or positions in such Contracts, as may be required by
Applicable Law or by UBS-S LLC in its sole and absolute
discretion.  Requests for margin deposits and/or premium payments may,
at UBS-S LLC’s election, be communicated to Customer orally, telephonically or
in writing.  Margin requirements established by UBS-S LLC may exceed
the margin requirements set by any exchange on which transactions are executed
or cleared or caused to be executed or cleared by UBS-S LLC or any agent thereof
for Customer and may be changed by UBS-S LLC without prior notice to
Customer.  Except as otherwise provided herein, all such margin and
premium payments shall be in the form, as UBS-S LLC permits, of cash in U.S.
dollars, securities of the U.S. Government, or a combination
thereof.  If at any time Customer fails timely to deposit or maintain
required margin, or Customer fails timely to make any premium payments, UBS-S
LLC may at any time, without further notice to Customer, close out Customer’s
open position in whole or in part and take any action it deems
appropriate.

    

    7.     SECURITY INTEREST AND RIGHTS RESPECTING
COLLATERAL

    

    All
Contracts, cash, securities, and/or other property of Customer, including all
proceeds of all such property such as profits from Account transactions
(collectively, the “Collateral”) now or at any future time in the Account or
otherwise held by UBS-S LLC or its affiliates, any exchange through which trades
of the Account are executed and/or positions are held, or any other entity
authorized to act as an agent of UBS-S LLC or Customer, hereby are pledged to
UBS-S LLC and shall be subject to a first priority lien and security interest in
UBS-S LLC’s favor to secure any indebtedness or other amounts at any time owing
from Customer to UBS-S LLC, and to secure any and all other obligations and
liabilities of Customer to UBS-S LLC (collectively, the “Customer’s
Liabilities”).  Customer hereby grants UBS-S LLC the right to borrow,
pledge, repledge, hypothecate, rehypothecate, loan or invest any of the
Collateral without notice to Customer, and without any obligation to pay or to
account to Customer for any interest, income or benefit that may be derived
therefrom.  UBS-S LLC shall be under no obligation to deliver to
Customer the identical Collateral in the Account, but shall only be under an
obligation to deliver to Customer Collateral of like or equivalent kind and
amount.  The rights of UBS-S LLC set forth above shall be qualified by
any applicable requirements for segregation of customer’s property under
Applicable Law.

     

    8.     PAYMENT OBLIGATIONS OF CUSTOMER

     

    (a)    Charges to the
Account.  With respect to every Contract purchased, sold or
cleared for the Account, Customer shall pay UBS-S LLC upon demand and UBS-S LLC
hereby is authorized to charge Customer’s Account for:  (i) all
brokerage charges, give-up fees, commissions and service fees as UBS-S LLC may
from time to time charge; (ii) all exchange,

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    clearing
member, NFA or CFTC fees or charges, fines or penalties; (iii) any tax
imposed on such transactions by any competent taxing authority; (iv) the
amount of any trading losses in the Account; (v) any debit balance or
deficiency in the Account; (vi) interest and service charges on any debit
balances or deficiencies in the Account, any advances or any loan (including
interest on the amount of variation margin calls, until satisfaction of such
calls, when the Customer posts U.S. Treasury Bills for original margin
purposes), at the rate customarily charged by UBS-S LLC (which may be at the
prevailing and/or allowable rates according to the laws of the State of
Illinois) from the day any such deficit was incurred to (but not including) the
day of payment (calculated on the basis of a 360 day year and for the actual
number of days elapsed for all deficits, except for those denominated in foreign
currencies for which generally accepted accounting principles require that the
interest rate shall be calculated otherwise), together with costs and reasonable
attorneys’ fees incurred in collecting any such deficit; (vii) all storage
and delivery service fees; and (viii) any other amounts owed by Customer to
UBS-S LLC with respect to the Account or any transactions therein.

    

    (b)    Payment in U.S.
Dollars.  Any and all payment obligations of Customer, if not
deducted from Customer’s Account as permitted hereunder, shall be made upon
demand in immediately available U.S. dollars to UBS-S LLC or at such other place
and at such time and in such manner as UBS-S LLC notifies
Customer.  The obligation of Customer to make all payments due
hereunder shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, which is expressed in or converted into any other
currency other than U.S. dollars, except to the extent that such tender or
recovery shall result in the actual receipt by UBS-S LLC of the full amount of
such U.S. dollars expressed to be payable in respect of such
amounts.  Customer agrees that its obligations to make payment in U.S.
dollars as aforesaid shall be enforceable as an alternative or additional cause
of action for the purpose of recovery of the amount (if any) by which such
actual receipt shall fall short of the full amount of U.S. dollars expressed to
be payable in respect of such amount due hereunder, and shall not be affected by
judgment being obtained for other sums due hereunder.

     

        (c)    Setoff.  Any
Collateral may at any time or from time to time without notice or compliance
with any condition precedent (which notice hereby is expressly waived) be
setoff, appropriated and applied by UBS-S LLC against any and all payment
obligations of Customer hereunder including, but not limited to, any deficit
balance or margin deficiency in the Account (or any sub-account within the
Account), in such manner as UBS-S LLC in its discretion may
determine.

     

    (d)    Netting.  UBS-S LLC
may at any time or from time to time without notice or compliance with any
condition precedent (which notice hereby is expressly waived) net (i) any
Collateral held in or on behalf of the Account (or any sub-account within the
Account) or liabilities or payment obligations of UBS-S LLC to Customer or the
Account (or any sub-account within the Account) against (ii) any
liabilities or payment obligations of Customer thereunder, including, but not
limited to any deficit balance or margin deficiency in the Account (or any
sub-account within the Account), paying to Customer only the amount by which the
aggregate amount of (i) above exceeds the aggregate amount of (ii)
above.

    

    (e)    Gross-Up.  All
payments made by Customer to UBS-S LLC hereunder will be made without setoff or
counterclaim free and clear and without deduction or withholding for,
any

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    present
or future taxes, levies, assessments or other charges of whatever nature, now or
hereinafter imposed by any jurisdiction or by any agency, state or other
political subdivision or taxing authority thereof or therein, and all interest,
penalties, or similar liabilities with respect thereto (collectively,
“Taxes”).  If any Taxes are so levied or imposed, Customer agrees to
pay the full amount of such Taxes, and such additional amounts as may be
necessary so that every net payment of all amounts due hereunder, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein.  Customer will furnish to UBS-S LLC,
within thirty days after the date the payment of any Taxes is due pursuant to
Applicable Law, certified copies of tax receipts evidencing such payment by
Customer.

    

    9.            
DELIVERY PROCEDURES; OPTIONS ALLOCATION PROCEDURE

    

    (a)    Instructions.  Customer
will provide UBS-S LLC with instructions either to liquidate Contracts
previously established by Customer, make or take delivery under any such
Contracts, or exercise options entered into by Customer, within such time limits
as may be specified by UBS-S LLC. UBS-S LLC shall have no responsibility to take
any action on behalf of Customer, including, without limitation, exercising
option Contracts, unless and until UBS-S LLC receives oral or written
instructions reasonably acceptable to UBS-S LLC indicating the action UBS-S LLC
is to take.  Any instructions, if given orally to UBS-S LLC, shall
immediately be confirmed in writing by Customer.  Funds sufficient to
take delivery pursuant to such Contract or deliverable grade commodities to make
delivery pursuant to such Contract must be delivered to UBS-S LLC at such time
and location as UBS-S LLC may require in connection with any
delivery.

     

    (b)    Allocation
Procedures.  Short option Contracts may be subject to exercise
at any time.  Exercise notices received by UBS-S LLC with respect to
option Contracts sold by Customer may be allocated to Customer pursuant to a
random allocation procedure, and Customer shall be bound by any such allocation
of exercise notices.  Such notices may be allocated to Customer after
the close of trading on the day on which such notices have been allocated to
UBS-S LLC by the applicable exchange.  In the event of any allocation
to Customer, unless UBS-S LLC has previously received instructions from
Customer, UBS-S LLC’s sole responsibility shall be to use commercially
reasonable efforts to notify Customer by telephone of such allocation at any
time before trading commences on the first day on which such option Contracts
are traded on the applicable exchange following the day on which the applicable
contract market has allocated such notices to UBS-S LLC.

     

    (c)    Failure to Provide
Instructions.  If Customer fails to comply with any of the
foregoing obligations, UBS-S LLC may, in its sole and absolute discretion,
liquidate any open positions, make or receive delivery of any commodities or
instruments, or exercise or allow the expiration of any options, in such manner
and on such terms as UBS-S LLC, in its sole and absolute discretion, deems
necessary or appropriate.  Any such action taken shall be in the sole
and absolute discretion of UBS-S LLC and Customer shall remain fully liable for
all costs, losses, expenses, liabilities and damages (including special,
indirect and consequential damages, penalties and fines) which UBS-S LLC may be
required to pay or which it has sustained in connection with such transactions
and for any remaining debit balance in the Account.

    
      
         

      

      
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    10.   EVENTS OF DEFAULT;
UBS-S LLC’S REMEDIES

     

     (a)   Events of
Default.  As used herein, each of the following shall be deemed
an “Event of Default”:  (i) the commencement of a case under any
bankruptcy, insolvency or reorganization law or similar law effecting creditors’
rights of any jurisdiction, or the filing of a petition for the appointment of a
receiver by or against Customer, an assignment made by Customer for the benefit
of creditors, an admission in writing by Customer that it is insolvent or is
unable to pay its debts when they mature, or the suspension by the Customer of
its usual business or any material portion thereof; (ii) the issuance of
any warrant or order of attachment against the Account or the levy of a judgment
against the Account; (iii) if Customer is an employee benefit plan, the
termination of Customer or the filing by Customer of a notice of intent to
terminate with the Pension Benefit Guaranty Corporation (or other similar
governmental agency or body of any jurisdiction), or the receipt of a notice of
the Pension Benefit Guaranty Corporation’s (or other similar governmental
agency’s or body’s) intent to terminate Customer, or the inability of Customer
to pay benefits under the relevant employee benefit plan when due; (iv) the
failure by Customer to deposit or maintain margins, to pay required premiums, or
to make payments required by Section 8 hereof; (v) UBS-S LLC in its
sole and absolute discretion determines that the Collateral in Customer’s
Account, regardless of current market quotations, is inadequate to secure the
Account and Customer’s obligations to UBS-S LLC hereunder; (vi) the Account
shall incur a deficit balance; (vii) the failure by Customer to perform, in
any material respect, its obligations respecting delivery, exercise or a notice
of allocation of exercise, payment for delivery, or settlement under Contracts
held in the Account (it being understood that any failure to comply with any
Applicable Law shall be deemed material); or (viii) the failure by
Customer, in any material respect, to perform any of its other obligations
hereunder (it being understood that any failure to comply with any Applicable
Law shall be deemed material).

     

    (b)    Remedies.  Upon the
occurrence of an Event of Default or in the event UBS-S LLC, in its sole and
absolute discretion, considers it necessary for its protection, UBS-S LLC shall
have the right, in addition to any other remedy available to UBS-S LLC at law or
in equity, and in addition to any other action UBS-S LLC may deem appropriate
under the circumstances, to liquidate, spread or roll-forward any or all open
Contracts held in or for the Account, sell any or all of the securities or other
property of Customer held by UBS-S LLC and its affiliates and to apply the
proceeds thereof to any amounts owed by Customer to UBS-S LLC, borrow or buy any
options, securities, Contracts or other property for the Account and cancel any
unfilled orders for the purchase or sale of Contracts for the Account, or take
such other or further actions as UBS-S LLC, in its reasonable discretion, deems
necessary or appropriate for its protection, all without demand for margin and
without notice or advertisement.  In the event UBS-S LLC’s position
would not be jeopardized thereby, UBS-S LLC will make reasonable efforts under
the circumstances to notify Customer prior to taking any such
action.  Any such liquidation, sale, purchase, borrowing or
cancellation shall be made at the discretion of UBS-S LLC on, through or subject
to the rules of an exchange, on other markets, at public auction or by private
transaction, including, without limitation, by an exchange for physical
transaction or similar transaction wherein UBS-S LLC may act as agent and/or as
principal in such transaction.  Customer acknowledges and agrees that
a prior demand or margin call of any kind from UBS-S LLC or prior notice from
UBS-S LLC shall not be considered a waiver of UBS-S LLC’s right to take any
action without notice or demand.  In any transaction described above,
UBS-S LLC may sell any Collateral to itself or its affiliates or buy any
Collateral from itself or its affiliates.  UBS-

    
      
         

      

      
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    S LLC
may, to the extent permitted by law, purchase the whole or any part thereof free
from any right of redemption.  In all cases, Customer shall remain
liable for and shall pay to UBS-S LLC on demand the amount of any deficiency in
its Account resulting from any such transaction, and Customer shall reimburse,
compensate and indemnify UBS-S LLC for any and all costs, losses, penalties,
fines, taxes and damages which UBS-S LLC may incur, including reasonable
attorneys’ fees incurred in connection with the exercise of its remedies and the
recovery of any such costs, losses, penalties, fines, taxes and
damages.

    

    11.   EXCULPATION AND
INDEMNIFICATION

    

     (a)    Exculpation.  Neither
UBS-S LLC nor any of its managing directors, officers, employees or affiliates
shall be liable for any costs, losses, penalties, fines, Taxes and damages
sustained or incurred by Customer other than as a result of UBS-S LLC’s gross
negligence or reckless or intentional misconduct.  In no event will
UBS-S LLC be liable to Customer for consequential, incidental or special
damages.  Without limiting the generality of the foregoing, neither
UBS-S LLC nor any of its managing directors, officers, employees or affiliates
shall have any responsibility or liability to Customer hereunder for any costs,
losses, penalties, fines, Taxes and damages, including consequential, incidental
or special damages, sustained or incurred by Customer, (i) in connection
with the performance or non-performance by any exchange, clearing firm or other
third party (including other exchange members, banks and floor brokers) to UBS-S
LLC of its obligations in respect of any Contract or other property of Customer;
(ii) as a result of any prediction, recommendation or advice made or given
by a representative of UBS-S LLC whether or not made or given at the request of
Customer; (iii) as a result of any delay in the performance or
non-performance of any of UBS-S LLC’s obligations hereunder to the extent that
losses arising therefrom are, directly or indirectly, caused by the occurrence
of any contingency beyond the control of UBS-S LLC including, but not limited
to, the unscheduled closure of an exchange or contract market or delays in the
transmission of orders due to breakdowns or failures of transmission or
communication facilities, execution, and/or trading facilities or other systems;
(iv) as a result of any action taken by UBS-S LLC, its managing directors,
officers, employees, agents (including other clearing firms through which
transactions are effected on behalf of Customer) or floor brokers, to comply
with Applicable Law; or (v) for any acts or omissions of those neither
employed nor supervised by UBS-S LLC. Moreover, UBS-S LLC shall have no
responsibility for compliance by Customer with any law or regulation governing
Customer’s conduct as a fiduciary, if applicable.

     

    (b)    Force Majeure and Acts of
State.  In the event that UBS-S LLC’s performance of any of its
obligations and undertakings hereunder shall be interrupted or delayed by any
occurrence not occasioned by the conduct of either party hereto, whether such
occurrence shall be an act of God or the common enemy or the result of war,
riot, fire, flood, civil commotion, acts of terrorism, sovereign conduct or
other acts of State, or the act or conduct of any person or persons not party or
privy hereto, then UBS-S LLC shall be excused from performance for such period
of time as is reasonably necessary after such occurrence to remedy the effects
thereof and neither UBS-S LLC nor any of its managing directors, officers,
employees or affiliates shall be directly or indirectly responsible for losses
occasioned thereby.

    

    (c)    Electronic Trading Systems
Waiver.  In consideration of UBS-S LLC making electronic
trading systems or services available, in whole or in part, directly or
indirectly,

    
      
         

      

      
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    Customer
agrees that neither UBS-S LLC, the electronic trading systems or services
provided, exchanges whose products may be traded on or through such electronic
trading systems or services, nor any other entities controlling, controlled by
or under common control with such entities, nor their respective directors,
officers, or employees, shall be liable for any losses, damages, costs or
expenses (including, but not limited to, loss of profits, loss of use,
incidental or consequential damages), regardless of the cause, arising from any
fault, delay, omission, inaccuracy or termination of the electronic trading
systems or services, or the inability to enter or cancel orders, or any other
cause in connection with the furnishing, performance, maintenance, or use of or
inability to use all or any part of the electronic trading systems or
services.  The foregoing shall apply regardless of whether a claim
arises in contract, tort, negligence, strict liability or
otherwise.

    

    (d)    Indemnification of
UBS-S LLC.  Customer agrees to indemnify and hold
UBS-S LLC and its managing directors, officers, employees and affiliates
harmless from and against any and all costs (including reasonable attorneys’
fees), losses, penalties, fines, taxes and damages incurred by UBS-S LLC as a
result of any action taken or not taken by UBS-S LLC in reliance upon any
instructions, notices and communications which UBS-S LLC believes to be that of
an individual authorized to act on behalf of Customer, or in connection with
UBS-S LLC’s recovery of any such costs, losses, penalties, fines, taxes and
damages.

    

    12.   TERMINATION

     

    This
Agreement may be terminated at any time by Customer or UBS-S LLC by written
notice to the other; provided, however, that any such termination shall not
relieve either party of any obligations in connection with any debit or credit
balance in the Account or other liability or obligation arising or accruing
prior to such termination.  In the event of such notice, Customer
shall either close out open positions in the Account or arrange for such open
positions to be transferred to another futures commission
merchant.  Upon satisfaction by Customer of all of Customer’s
Liabilities, UBS-S LLC shall transfer to another futures commission merchant all
Contracts, if any, then held for the Account, and shall transfer to Customer or
to another futures commission merchant, as Customer may instruct, all cash,
securities and other property held in the Account, whereupon this Agreement
shall terminate.

     

    13.   LIQUIDATION OF OFFSETTING
POSITIONS

    

    UBS-S LLC
shall liquidate any Contract for which an offsetting order is entered by
Customer, unless Customer instructs UBS-S LLC not to liquidate such Contract and
to maintain the offsetting Contracts as open positions; provided, that UBS-S LLC
shall not be obligated to comply with any such instructions given by Customer if
Customer fails to provide UBS-S LLC with any representations, documentation or
information reasonably requested by UBS-S LLC or if, in UBS-S LLC’s reasonable
judgment, any failure to liquidate such offsetting Contracts against each other
would result in a violation of Applicable Law.

    

    14.   REPORTS AND OBJECTIONS

    

    (a)            All
confirmations, purchase and sale notices, correction notices and account
statements (collectively, “Reports”) shall be submitted to Customer and shall be
conclusive and

    
      
         

      

      
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    binding
on Customer unless Customer notifies UBS-S LLC of any objection thereto prior to
the opening of trading on the contract market on which such transaction occurred
on the business day following the day on which Customer receives such Report;
provided, that with respect to monthly statements, Customer may notify UBS-S LLC
of any objection thereto within five business days after receipt of such monthly
statement, provided the objection could not have been raised at the time any
prior Report was received by Customer as provided for above.  Any such
notice of objection, if given orally to UBS-S LLC, shall immediately (and in no
event later than within one business day) be confirmed in writing by
Customer.

     

    (b)           Customer
consents to the electronic delivery of Reports via facsimile, electronic mail,
computer networks (e.g., local area networks, commercial on-line services and
SwisKey, Abacus or any similar online statement delivery system) or other
electronic means agreed upon by Customer and UBS-S LLC. Customer may revoke its
consent at any time upon reasonable notice to UBS-S LLC.

    

    15.   FOREIGN
CURRENCY TRANSACTIONS

     

    In the
event that the Customer directs UBS-S LLC to enter into any Contract on an
exchange on which such transactions are effected in a currency other than the
U.S. dollar, any profit or loss arising as a result of a fluctuation in the
exchange rate affecting such currency will be entirely for the account and risk
of the Customer.  All initial and subsequent deposits for margin
purposes, and the return to the Customer of any funds, are expected to be made
in the currency of contract settlement.  Should the Customer elect to
deposits funds other than the currency of settlement or instruct UBS-S LLC to
convert funds which are already on deposit in another currency, UBS-S LLC shall
debit or credit the Account of Customer at a rate of exchange determined by
UBS-S LLC in its sole discretion on the basis of the then prevailing market rate
of exchange for such foreign currency.  Customer authorizes UBS-S LLC
to deposit Customer funds in depositories located outside of the United States
consistent with the requirements of Applicable Law.

     

    16.   UBS-S LLC’S RESPONSIBILITY

     

    UBS-S LLC
is not acting as a fiduciary, foundation manager, commodity pool operator,
commodity trading advisor or investment adviser in respect of any Account opened
by Customer and UBS-S LLC shall have no responsibility hereunder for compliance
with any law or regulation governing the conduct of fiduciaries, foundation
managers, commodity pool operators, commodity trading advisors or investment
advisers.

    

    17.   ADVICE

     

    All
advice communicated by UBS-S LLC with respect to any Account opened by Customer
hereunder is incidental to the conduct of UBS-S LLC’s business as a futures
commission merchant, does not constitute an offer to sell or the solicitation of
an offer to buy any Contract, and such advice will not serve as the primary
basis for any decision by or on behalf of Customer.  UBS-S LLC shall
have no discretionary authority, power or control over any decisions made by or
on behalf of Customer in respect of the Account, regardless of whether Customer
relies on the advice of UBS-S LLC in making any such decision.  Any
such advice,

    
      
         

      

      
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    although
based upon information from sources UBS-S LLC believes to be reliable, may be
incomplete or inaccurate, may not be verified and may be changed without notice
to Customer.  UBS-S LLC makes no representation as to the accuracy,
completeness, reliability or prudence of any such advice or information or as to
the tax consequences of Customer’s futures or options trading.  UBS-S
LLC is a separate and independent corporate entity, distinct from its affiliates
and it shall be free to purchase and sell Contracts for any affiliates without
limitation or restriction.  The relationship between UBS-S LLC and
Customer as described herein shall not affect any provisions of credit to
Customer by UBS AG or any other subsidiary of UBS AG. Moreover, Customer
acknowledges that UBS-S LLC and its managing directors, officers, employees and
affiliates may take or hold positions in, or advise other customers concerning,
contracts which are the subject of advice from UBS-S LLC to
Customer.  The positions and advice of UBS-S LLC and its managing
directors, officers, employees and affiliates may be inconsistent with or
contrary to positions of, and the advice given by, UBS-S LLC to
Customer.

    

    18.   FINANCIAL AND OTHER INFORMATION

    

    Customer
agrees to furnish appropriate financial statements to UBS-S LLC and to inform
UBS-S LLC of any material changes in the financial position of Customer and to
furnish promptly such other information concerning Customer as UBS-S LLC
reasonably requests.  UBS-S LLC is authorized from time to time to
contact banks, financial institutions and credit agencies for verification of
the financial condition of Customer.  Customer agrees that UBS-S LLC
may, from time to time, share with its branches, agencies and affiliates,
certain non-public information concerning Customer.

    

    19.   RECORDING

     

    UBS-S
LLC, in its sole and absolute discretion, may record, on tape or otherwise, any
telephone conversation between UBS-S LLC and Customer involving their respective
officers, agents and employees.  Customer hereby agrees and consents
to such recording, with or without the use of an automatic tone warning device,
and waives any right Customer may have to object to the use or admissibility
into evidence of such recording in any legal proceeding between Customer and
UBS-S LLC or in any other proceeding to which UBS-S LLC is a party or in which
UBS-S LLC’s records are subpoenaed.  Customer acknowledges that UBS-S
LLC may erase such recordings after a reasonable period of time.

    

    20.   ACCOUNTS
INTRODUCED BY OTHER BROKERS

     

    If UBS-S
LLC is carrying the Account of Customer as executing or clearing broker by
arrangement with another broker through whose courtesy the Account has been
introduced to UBS-S LLC, then, until receipt from Customer of written notice to
the contrary, UBS-S LLC may accept from such other broker, without inquiry or
investigation by UBS-S LLC, (i) orders for the purchase or sale in the
Account of Contracts, and (ii) any other instructions concerning the
Account.  UBS-S LLC shall not be responsible or liable for any acts or
omissions of such other broker or its employees.

    
      
         

      

      
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    21.   SEVERABILITY

    

    If any
provision of this Agreement is, or at any time becomes, inconsistent with any
present or future Applicable Law, and if any of these authorities have
jurisdiction over the subject matter of this Agreement, the inconsistent
provision shall be deemed superseded or modified to conform with such law, rule
or regulation but in all other respects, this Agreement shall continue and
remain in full force and effect.

    

    22.   BINDING
EFFECT

    

    This
Agreement shall be binding on and inure to the benefit of the parties and their
successors.  In accordance with CFTC regulations, UBS-S LLC may assign
Customer’s Account(s) and this Agreement to another registered Futures
Commission Merchant (“FCM”) by notifying Customer of the date and name of the
intended assignee FCM. Unless Customer objects to the assignment prior to the
scheduled date for the assignment, the assignment will be binding on
Customer.  Customer may not assign this Agreement without UBS-S LLC’s
prior consent.

    

    23.   ENTIRE
AGREEMENT

    

    This
Agreement contains the entire agreement between the parties and supersedes any
prior agreements between the parties as to the subject matter
hereof.  No provision of this Agreement shall in any respect be
waived, altered, modified, or amended unless such waiver, alteration,
modification or amendment is signed by the party against whom such waiver,
alteration, modification or amendment is to be enforced.

    

    24.   INSTRUCTIONS, NOTICES OR COMMUNICATIONS

     

    (a)    Except as
specifically otherwise provided in this Agreement, all instructions, notices or
other communications may be oral or written.  All oral instructions,
unless custom and usage of trade dictate otherwise, shall be promptly confirmed
in writing.  All written instructions, notices or other communications
shall be addressed as follows:

    

    (i) 
if to
UBS-S LLC:

    

    UBS
Securities LLC

    One North Wacker Drive

    Chicago, IL 60606

    Attn:  ETD Legal Department, 31st
Floor

    

    (ii) 
if to
Customer at the address as indicated on the New Account Information
Form.

    

    (b)    All
instructions, notices or other communications sent, whether by mail, telex,
facsimile transmission or otherwise, shall be deemed given when deposited in the
mail, or sent by telex or facsimile transmission or other electronic means
acceptable to the recipient thereof, and deemed delivered to Customer
personally, whether actually received by Customer or not.  All
instructions, notices or other communications to UBS-S LLC shall be directed to
UBS-S

    
      
         

      

      
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    LLC’s
office at the address listed above or such other addresses as UBS-S LLC may
hereafter direct to Customer in writing.

    

    25.   RIGHTS AND REMEDIES
CUMULATIVE

     

    All
rights and remedies arising under this Agreement as amended and modified from
time to time are cumulative and not exclusive of any rights or remedies which
may be available at law or otherwise.

    

    26.   NO
WAIVER

     

    No
failure on the part of UBS-S LLC to exercise, and no delay in exercising, any
contractual right will operate as a waiver thereof, nor will any single or
partial exercise by UBS­S LLC of any right preclude any other or future
exercise thereof or the exercise of any other partial right.

    

    27.   GOVERNING
LAW

     

    THE
INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE RIGHTS, OBLIGATIONS AND
REMEDIES OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF CHOICE OF
LAW.

    

    28.   CONSENT
TO JURISDICTION

     

    Any
litigation between UBS-S LLC and Customer relating to this Agreement or
transactions hereunder shall take place in the Courts of the State of Illinois
located in Cook County or in the United States District Court for the Northern
District of Illinois, and the parties agree to submit to such exclusive
jurisdiction.  Customer consents to the service of process by the
mailing to Customer of copies of such court filing by certified mail to the
address of Customer as it appears on the books and records of UBS-S LLC, such
service to be effective ten days after mailing.  Customer hereby
waives irrevocably any immunity to which it might otherwise be entitled in any
arbitration, action at law, suit in equity or any other proceeding arising out
of or based on this Agreement or any transaction in connection
herewith.

    

    29.   WAIVER
OF JURY TRIAL

     

    Customer
hereby waives trial by jury in any action or proceeding arising out of or
relating to this Agreement or any transaction in connection
herewith.

    

    30.   ACCEPTANCE
OF AGREEMENT

     

    This
Agreement shall not be deemed to be accepted by UBS-S LLC or become a binding
contract between Customer and UBS-S LLC until approved by a duly authorized
officer of UBS­-S LLC in writing.

    
      
         

      

      
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    31.   CUSTOMER
ACKNOWLEDGEMENTS (please check boxes below with an “x” where
applicable):    

     

             þ    (a)           RISK DISCLOSURE
STATEMENT

     

    CUSTOMER
HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED, UNDERSTANDS AND CONSENTS TO THE RISK
DISCLOSURE STATEMENT FOR FUTURES AND OPTIONS FURNISHED HEREWITH INCLUDING
DISCLOSURES REGARDING:

    

    Notice
Regarding Average Pricing

     

    Electronic
Trading and Order Routing Systems Disclosure Statement

     

    UBS-S LLC
Special Disclosure Statement

     

    Cross
Trade Consent

     

    Foreign
Futures and Options Direct Order Transmittal Customer Disclosure
Statement

     

    LME
Guidelines (applicable to customers trading LME contracts)

     

    Hong Kong
Position Limit Notice (applicable to customers trading on Hong Kong
Exchanges)

     

    o    (b)           CONSENT TO TRANSFER
FUNDS

     

    The
undersigned acknowledges that UBS-S LLC may, until it receives a written notice
of revocation with respect thereto, in its sole and absolute discretion and
without prior notice to the undersigned, transfer any funds, securities,
commodities, Contracts or other property from any account (segregated, secured
or non-regulated) maintained by the undersigned to any other account
(segregated, secured or non-regulated) of the undersigned maintained by UBS-S
LLC or any of its affiliates.  UBS-S LLC will promptly confirm in
writing each transfer of funds, securities, commodities, Contracts or other
property pursuant hereto.  UBS-S LLC shall not be liable for making or
failing to make any transfer authorized hereby.

     

    32.   HEDGING REPRESENTATION (The following
must be completed by Customers who will engage in transactions for
bona fide hedging purposes only.) Customer has indicated on the New
Account Information Form that the Account is for hedging
purposes.  Customer represents that it is familiar with CFTC and
exchange rules, regulations, and advisories concerning
hedging.  Unless Customer specifically notifies UBS-S LLC to the
contrary in writing with respect to any transaction, all transactions effected
for the Account will be bona fide hedging transactions as described in
Section 4a of the Commodity Exchange Act, as amended,

    
      
         

      

      
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    and
Rule 1.3(z) promulgated thereunder (a copy of which may be obtained from
UBS-S LLC upon request).  As such, in accordance with CFTC
Rule 190.06, Customer may specify whether, in the unlikely event of UBS-S
LLC’s bankruptcy, Customer prefers that the trustee liquidate open commodity
contracts in the Account without seeking Customer’s
instructions.  Accordingly, in the event of UBS-S LLC’s bankruptcy,
the trustee should (check one
of the following):

    

    
      	
              X

            	
              Attempt
      to contact Customer for instructions regarding the disposition of open
      contracts in the Account.

            

    

     

    o           
Liquidate open commodity contracts without seeking Customer’s
instructions.

     

    This
instruction may be changed at any time by written notice sent to UBS-S
LLC.

     

    Specify
Commodities to be Hedged: 
____________________________________________________________________

     

    ________________________________________________________________________________________________

     

    ________________________________________________________________________________________________

     

    

     

    

     

    *           *           *           *           *

     

    (signature
page on next page)

     

     

    
      
         

      

      
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    23

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