-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LeHBE+0DRtXU5ybJ6tK/8AzUbHmqRKASp3cOZ2ub9CEb3NV3LRihNu3vJCkupaQI ZOp7LrlIoPk+ZzV3hQHyjQ== 0000950137-05-000599.txt : 20050121 0000950137-05-000599.hdr.sgml : 20050121 20050121173125 ACCESSION NUMBER: 0000950137-05-000599 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20050121 DATE AS OF CHANGE: 20050121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUADRIGA SUPERFUND CENTRAL INDEX KEY: 0001168990 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 000000000 STATE OF INCORPORATION: J5 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-122229 FILM NUMBER: 05542526 MAIL ADDRESS: STREET 1: LE MARQUIS COMPLEX UNIT 5 STREET 2: PO BOX 1479 GRAND ANSE CITY: ST. GEORGE'S STATE: J5 ZIP: 00000 S-1 1 c90749sv1.txt REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 2005 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- QUADRIGA SUPERFUND, L.P. -- SERIES A AND SERIES B (Exact name of registrant as specified in its charter) DELAWARE 6799 (State of Organization) (Primary Standard Industrial Classification Number) 98-0375395 (I.R.S. Employer Identification Number)
CHRISTIAN BAHA LE MARQUIS COMPLEX, UNIT 5 LE MARQUIS COMPLEX, UNIT 5 PO BOX 1479 PO BOX 1479 GRAND ANSE GRAND ANSE ST. GEORGE'S, GRENADA ST. GEORGE'S, GRENADA WEST INDIES WEST INDIES (473) 439- 2418 (473) 439-2418 (Address, including zip code, and telephone (Name, address, including zip code, and number, telephone number, including area code, of registrant's principal including area code, of agent for service) executive offices)
COPY TO: JEFFRY M. HENDERSON DOUGLAS E. AREND HENDERSON & LYMAN 175 WEST JACKSON BOULEVARD, SUITE 240 CHICAGO, ILLINOIS 60604 (312) 986-6960 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act") check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] --------------------- CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING REGISTRATION TITLE OF EACH CLASS OF SECURITIES BEING OFFERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE(2) - ------------------------------------------------------------------------------------------------------------------------ Series A Units............................. $69,841,111 $1,466.67 $69,839,892 -0- 47,618 Units - ------------------------------------------------------------------------------------------------------------------------ Series B Units............................. $60,234,054 $1,730.29 $60,233,125 -0- 34,811 Units - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - --------------- (1) Registrant incorporates 82,429 unsold Units registered previously under Registration No. 333-88460 for which no additional registration fee is payable in accordance with Rule 457(a). (2) Offering price and registration fee are based on estimated net asset value per Unit as of December 31, 2004 in accordance with Rule 457(d). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PROSPECTUS AND DISCLOSURE DOCUMENT QUADRIGA SUPERFUND, L.P. SERIES A AND SERIES B $ UNITS OF LIMITED PARTNERSHIP INTEREST THE OFFERING Quadriga Superfund, L.P. is offering two separate series of limited partnership units, designated Series A and Series B, in an aggregate offering amount of up to $130,075,165 for both Series A and Series B together. The two Series will be traded and managed the same way except for the degree of leverage. The assets of each Series will be segregated from the other Series and each Series will be offered separately. The Units of each Series will be offered at a price of net asset value per unit. Units will be available on the last day of each month. No up-front underwriting discount or commission will be taken. The selling agents will use their best efforts to sell the Units offered. The offering will be conducted on a continuous basis until all Units have been sold. THE RISKS These are speculative securities. BEFORE YOU DECIDE WHETHER TO INVEST, READ THIS ENTIRE PROSPECTUS CAREFULLY AND CONSIDER "THE RISKS YOU FACE" ON PAGE 7. - Each Series is speculative and is leveraged from time to time. - Performance can be volatile and the net asset value per unit may fluctuate significantly in a single month. - You could lose all or substantially all of your investment in each Series. - Quadriga Capital Management has total trading authority over each Series. The use of a single advisor could mean lack of diversification and, consequently, higher risk. - There is no secondary market for the Units, and none is expected to develop. While the Units have redemption rights, there are restrictions. For example, redemptions can occur only at the end of a month. See "Distributions and Redemptions." - Transfers of interest in the Units are subject to limitations, such as 30 days' advance written notice of any intent to transfer. Also, Quadriga Capital Management may deny a request to transfer if it determines that the transfer may result in adverse legal or tax consequences for a Series. See "Limited Partnership Agreement." - Substantial expenses must be offset by trading profits and interest income for each Series to be profitable. - No U.S. regulatory authority or exchange has the power to compel the enforcement of the rules of a foreign board of trade or any applicable foreign laws. --------------------- Investors are required to make representations and warranties in connection with their investment. Each investor is encouraged to discuss the investment with his/her individual financial and tax adviser. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN IMPORTANT INFORMATION. THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. --------------------- QUADRIGA CAPITAL MANAGEMENT, INC. GENERAL PARTNER PROSPECTUS DATED JANUARY 21, 2005 COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 4 AND 5 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 5. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, BEGINNING AT PAGE 7. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. --------------------- THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN EACH SERIES' REGISTRATION STATEMENT. YOU CAN READ AND COPY THE ENTIRE REGISTRATION STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") IN WASHINGTON, D.C. EACH SERIES FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITY IN WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0300 FOR FURTHER INFORMATION. EACH SERIES' FILINGS WILL BE POSTED AT THE SEC WEBSITE AT HTTP://WWW.SEC.GOV. --------------------- QUADRIGA CAPITAL MANAGEMENT, INC. GENERAL PARTNER LE MARQUIS COMPLEX, UNIT 5 PO BOX 1479 GRAND ANSE ST. GEORGE'S, GRENADA WEST INDIES (473) 439-2418 ii STATE SUITABILITY REQUIREMENTS The states listed below (or, in certain cases, in special Supplements attached to the Prospectus) have more restrictive suitability or minimum investment requirements for their residents. Please read the following list to make sure that you meet the minimum suitability and/or investment requirements for the state in which you reside. (As used below, "net worth" means net worth exclusive of home, furnishings, and automobiles; "annual income" means annual gross income; and "taxable income" means annual taxable income for federal income tax purposes.) STATE NET WORTH AND INCOME REQUIREMENTS All states.......... minimum net worth of $150,000* or minimum net worth of $45,000* with minimum annual gross income of $45,000. STATE Arizona............. minimum $225,000 net worth or $60,000 net worth and $60,000 annual taxable income. California.......... minimum $500,000 net worth or $250,000 net worth and $65,000 annual income. Iowa................ minimum $500,000 net worth or $250,000 net worth and $65,000 annual taxable income. Kansas.............. Kansas investors should limit their investment in the partnership and other managed futures programs to not more than 10% of their net worth. Maine............... minimum $200,000 net worth or $50,000 net worth and $50,000 annual income. Michigan............ minimum $225,000 net worth or $60,000 net worth and $60,000 taxable income during the preceding year and the expectation of $60,000 taxable income during the current year. Missouri............ minimum $225,000 net worth or $60,000 net worth and $60,000 annual taxable income. New Mexico.......... minimum $200,000* net worth or $75,000* net worth and $75,000 annual taxable income. New Jersey.......... minimum $225,000 net worth or $60,000 net worth and $60,000 annual taxable income. North Carolina...... minimum $225,000 net worth or $60,000 net worth and $60,000 annual taxable income. Pennsylvania........ minimum $175,000 net worth or $100,000 net worth and $50,000 annual taxable income. (Pennsylvania investors may not invest more than 10% of their net worth, exclusive of home, furnishings, and automobiles in the partnership.) Tennessee........... Minimum $225,000 net worth or $60,000 net worth and $60,000 annual taxable income. Tennessee investors should be aware that the rate at which each Series' performance fee is calculated exceeds the maximum rate for incentive/performance fees payable under the Guidelines for Registration of Commodity Pool Programs (the "Guidelines") adopted by the North American Securities Administrators Association, and may, under certain circumstances, result in Quadriga Capital Management receiving combined management and incentive fees that exceed the maximum compensation permitted by the Guidelines. The Guidelines provide that the maximum incentive or performance fee that the Partnership may charge investors is 23.3% of new trading profits per quarter. Investors in Quadriga Superfund L.P. will be subject to a monthly performance fee of 25% of new appreciation per month. On comparing the Partnership's fee structure to that permitted under the Guidelines, any Series which experiences new appreciation in any given month in excess of 3.46% (equivalent to annual new appreciation in excess of 41.5%) will pay a combination of management and incentive fees to Quadriga Capital Management that would exceed the maximum fees payable under the Guidelines. Texas............... minimum $225,000* net worth or $60,000* net worth and $60,000 annual taxable income. - --------------- * Excluding home, home furnishings and automobiles. iii ORGANIZATIONAL CHART The organizational chart below illustrates the relationships among the various service providers of this offering. Quadriga Capital Management is both the general partner and trading advisor for each Series. The selling agents (other than Quadriga Asset Management, Inc.) and clearing brokers are not affiliated with Quadriga Capital Management or each Series. [ORGANIZATIONAL CHART] (1) If the maximum number of Units are sold publicly, Quadriga Capital Management would have a 1% ownership interest in Quadriga Superfund. (2) If the maximum number of Units are sold publicly, investors would have a 99% ownership interest in Quadriga Superfund. iv TABLE OF CONTENTS SUMMARY..................................................... 1 General................................................... 1 Plan of Distribution...................................... 1 How to Subscribe for Units............................. 1 Who May Invest in Each Series.......................... 2 Is the Quadriga Superfund, L.P. a Suitable Investment for You?.............................................. 2 Risk Factors You Should Consider Before Investing in Either Series......................................... 2 Investment Factors You Should Consider Before Investing in Either Series...................................... 3 Quadriga Capital Management, Inc....................... 4 Charges to Each Series................................. 4 Quadriga Capital Management, Inc....................... 4 Dealers and Others..................................... 4 Breakeven Analysis..................................... 5 Distributions and Redemptions.......................... 5 Federal Income Tax Aspects............................. 6 THE RISKS YOU FACE.......................................... 7 Market Risks.............................................. 7 Possible Total Loss of an Investment in Each Series.... 7 Each Series Will Be Highly Leveraged................... 7 Illiquidity of Your Investment......................... 7 Market Illiquidity..................................... 7 Forward Transactions are Not Regulated and are Subject to Credit Risk........................................ 7 Non-Correlated, Not Negatively Correlated, Performance Objective............................................. 7 Foreign Currency Trading............................... 8 Trading Risks............................................. 8 Quadriga Capital Management Analyzes Only Technical Market Data, Not any Economic Factors External to Market Prices......................................... 8 Speculative Position Limits May Alter Trading Decisions for Each Series....................................... 8 Increase in Assets Under Management May Affect Trading Decisions............................................. 8 Each Series' Trading is Not Transparent................ 9 Tax Risks................................................. 9 Investors are Taxed Based on Their Share of Profits in Each Series........................................... 9 Tax Could Be Due from Investors on Their Share of Each Series' Ordinary Income Despite Overall Losses........ 9 Deductibility of Brokerage and Performance Fees........ 9 Other Risks............................................... 9 Fees and Commissions are Charged Regardless of Profitability and are Subject to Change............... 9 Failure of Brokerage Firms; Disciplinary History of Clearing Brokers...................................... 10 Investors Must Not Rely on Past Performance of Quadriga Capital Management in Deciding Whether to Buy Units... 10 Conflicts of Interest.................................. 10 Lack of Independent Experts Representing Investors..... 10 Reliance on Quadriga Capital Management................ 10 Possibility of Termination of Each Series Before Expiration of its Stated Term......................... 10 Each Series is Not a Regulated Investment Company...... 11
v Proposed Regulatory Change is Impossible to Predict.... 11 Forwards, Swaps, Hybrids and Other Derivatives are Not Subject to CFTC Regulation............................ 11 Options on Futures are Speculative and Highly Leveraged............................................. 11 Each Series Will Trade Extensively in Foreign Markets............................................... 11 Restrictions on Transferability........................ 12 A Single-Advisor Fund May Be More Volatile Than a Multi-Advisor Fund.................................... 12 Money Committed to Margin.............................. 12 Possible Contingent Liability.......................... 12 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS........ 13 QUADRIGA CAPITAL MANAGEMENT, INC. .......................... 13 Description............................................... 13 The Trading Advisor....................................... 14 Trading Systems........................................... 14 Potential Inability to Trade or Report Due to Systems Failure................................................ 15 PAST PERFORMANCE OF TRADING PROGRAMS OF QUADRIGA CAPITAL MANAGEMENT, INC. AND AFFILIATES........................... 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 24 Introduction.............................................. 24 Capital Resources......................................... 24 Liquidity................................................. 24 Results of Operations..................................... 24 Off-Balance Sheet Risk.................................... 26 Critical Accounting Policies -- Valuation of the Fund's Positions.............................................. 27 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................................... 27 Introduction.............................................. 27 Past Results Not Necessarily Indicative of Future Performance........................................... 27 Standard of Materiality................................ 27 Quantifying the Fund's Trading Value at Risk.............. 27 Quantitative Forward-Looking Statements................ 27 The Fund's Trading Value at Risk in Different Market Sectors................................................ 28 Material Limitations on Value at Risk as an Assessment of Market Risk............................................ 29 Non-Trading Risk.......................................... 29 Qualitative Disclosures Regarding Primary Trading Risk Exposures.............................................. 29 Currencies............................................. 29 Interest Rates......................................... 29 Stock Indices.......................................... 30 Energy................................................. 30 Metals................................................. 30 Agricultural Market.................................... 30 Qualitative Disclosures Regarding Non-Trading Risk Exposure............................................... 30 General................................................ 30 Foreign Currency Balances.............................. 31 Treasury Bill Positions................................ 31 Qualitative Disclosures Regarding Means of Managing Risk Exposure............................................... 31
vi CONFLICTS OF INTEREST....................................... 32 Quadriga Capital Management, Inc. ..................... 32 The Clearing Brokers................................... 32 Fiduciary Duty and Remedies............................ 33 Indemnification and Standard of Liability.............. 33 Charges To Each Series.................................... 34 Management Fee......................................... 34 Performance Fee........................................ 34 Organization and Offering Expenses..................... 35 Operating Expenses..................................... 35 Brokerage and Trailing Commissions..................... 35 USE OF PROCEEDS............................................. 35 THE CLEARING BROKERS........................................ 36 Cargill Investor Services, Inc. .......................... 36 ADM Investor Services, Inc. .............................. 36 Fimat USA, Inc. .......................................... 36 Man Financial Inc. ....................................... 36 Bear Stearns Forex Inc. and Bear, Stearns Securities Corp. ................................................. 37 Barclays Capital Inc. .................................... 37 DISTRIBUTIONS AND REDEMPTIONS............................... 37 Distributions............................................. 37 Redemptions............................................... 38 Net Asset Value........................................... 38 QUADRIGA SUPERFUND, L.P. LIMITED PARTNERSHIP AGREEMENT...... 39 Organization and Limited Liabilities...................... 39 Management of Partnership Affairs......................... 39 The Administrator......................................... 39 Sharing of Profits and Losses............................. 40 Federal Tax Allocations................................... 40 Dispositions.............................................. 41 Dissolution and Termination of Each Series................ 41 Amendments and Meetings................................... 41 Indemnification........................................... 41 Reports to Limited Partners............................... 41 FEDERAL INCOME TAX ASPECTS.................................. 43 Each Series' Partnership Tax Status....................... 43 Taxation of Limited Partners on Profits and Losses of Each Series................................................. 43 Partnership Losses by Limited Partners.................... 43 "Passive-Activity Loss Rules" and Their Effect on the Treatment of Income and Loss........................... 43 Cash Distributions and Unit Redemptions................... 43 Gain or Loss on Section 1256 Contracts and Non-Section 1256 Contracts......................................... 43 Tax on Capital Gains and Losses........................... 43 Interest Income........................................... 44 Limited Deduction for Certain Expenses.................... 44 Syndication Fees.......................................... 44 Investment Interest Deductibility Limitations............. 44
vii Unrelated Business Taxable Income......................... 44 IRS Audits of the Partnership and its Limited Partners.... 44 State and Other Taxes..................................... 44 INVESTMENT BY ERISA ACCOUNTS................................ 45 General................................................... 45 Special Investment Consideration.......................... 45 Each Series Should Not Be Deemed to Hold "Plan Assets".... 45 Ineligible Purchasers..................................... 45 PLAN OF DISTRIBUTION........................................ 46 Subscription Procedure.................................... 46 Representations and Warranties of Investors in the Subscription Agreement................................. 46 Minimum Investment........................................ 47 Investor Suitability...................................... 47 The Selling Agents........................................ 47 CERTAIN LEGAL MATTERS....................................... 48 EXPERTS..................................................... 48 INDEX TO FINANCIAL STATEMENTS............................... 49 INDEPENDENT AUDITORS' REPORT Quadriga Superfund, L.P................................... 50 Quadriga Capital Management, Inc. ........................ 75 PART TWO -- STATEMENT OF ADDITIONAL INFORMATION............. 83 TABLE OF CONTENTS........................................... 84 Strategy.................................................... 85 Why Quadriga................................................ 92 Glossary.................................................... 92 The Futures and Forward Markets............................. 94 Regulation.................................................. 95 Advantages of Futures Fund Investments...................... 95 Potential Disadvantages of Futures Fund Investments......... 97 EXHIBITS EXHIBIT A: Quadriga Superfund, L.P. Form of Limited Partnership Agreement..................................... A-1 EXHIBIT B: Quadriga Superfund, L.P. Request for Redemption................................................ B-1 EXHIBIT C: Quadriga Superfund, L.P. Subscription Representations........................................... C-1 EXHIBIT D: Quadriga Superfund, L.P. Suitability Instructions.............................................. D-1 EXHIBIT E: Quadriga Superfund, L.P. Request for Transfer Form...................................................... E-1
An electronic version of this Prospectus is available on a special web site (http://www.superfund.com) being maintained by Quadriga Capital Management, Inc. viii SUMMARY GENERAL Quadriga Superfund, L.P. is offering two separate series of limited partnership units: Quadriga Superfund, L.P. Series A and Quadriga Superfund, L.P. Series B. Each Series trades speculatively in the U.S. and international futures and cash foreign currency markets. Specifically, each Series trades in a portfolio of approximately 100 futures and cash foreign currency markets using a fully automated computerized trading system developed by Christian Baha, President of Quadriga Capital Management, Inc., a Grenada corporation and general partner of the Partnership and Christian Halper, Chief Technology Officer of affiliates of Quadriga Capital Management. This trading system is licensed to Quadriga Capital Management on a non-exclusive basis. This system automatically initiates buy and sell trading signals and monitors relevant risk factors on the markets traded in the United States, Canada, Mexico, Europe and Asia. Each Series' strategy is based on the implementation of a four-point philosophy consisting of (i) market diversification, (ii) technical analysis, (iii) trend-following, and (iv) money management. Quadriga Capital Management may also formulate new approaches to carry out the overall investment objective of each Series. Quadriga Capital Management reserves the right to trade other pools and or funds. The leverage and trading methodology employed with respect to Series A is the same as that for Quadriga AG, a private non-U.S. fund managed by Quadriga Fund Management, Inc., an affiliate of Quadriga Capital Management. The leverage and trading methodology employed with respect to Series B is the same as that for Quadriga Global Consolidated Trust USD, a private non-U.S. fund also managed by Quadriga Fund Management. Series B is leveraged approximately 1.5 times Series A. Performance information for both of these private funds is shown beginning on page 17 of the Prospectus. Each Series trades in approximately 100 futures and cash foreign currency markets globally, including both commodity and financial futures. The approximate allocation between Sectors is: currencies, 18%; livestock, 5%; agricultural, 10%; metals, 10%; interest rate, 12%; energy, 13%; stock indices, 18%; and grains, 14%. Each Series will emphasize instruments with low correlation and high liquidity for order execution. The proprietary software technology embodied in the Quadriga Capital Management's trading system examines a broad array of investments around the world to identify possible opportunities that fit within the Quadriga Capital Management's narrow selection criteria. This methodology primarily uses trend-following technical trading strategies. The duration of these trends vary from days to months. The technology isolates market patterns that offer high reward to risk potential based on historical data. Once potential trades are identified, the system applies additional filters with respect to trend and volatility analysis. Finally, prior to generating definite buy or sell signals, the program takes in consideration macro variables such as overall risk capital and portfolio volatility. All transactions are then executed using a fully automated computerized system. While it is anticipated that each Series will invest primarily in global futures and equities, each Series has broad and flexible investment authority. Accordingly, each Series' assets may at any time include long or short positions in U.S. or foreign publicly traded or privately issued common stocks, preferred stocks, stock warrants and rights, corporate debt, bonds, notes or other debentures, convertible securities, swaps, options, futures contracts and other derivative instruments. Additionally, Quadriga Capital Management may utilize leverage to both enhance performance and hedge positions. The following summary provides a review in outline form of certain important aspects of an investment in each Series. PLAN OF DISTRIBUTION HOW TO SUBSCRIBE FOR UNITS - Investors must submit subscriptions at least five business days prior to the applicable month-end closing date. Approved subscriptions will be accepted once payments are received and cleared at the applicable month-end net asset value for the respective Series. 1 - Each Series will accept subscriptions throughout the continuing offering period, which can be terminated by Quadriga Capital Management at any time. Quadriga Capital Management has no present intention to terminate the offering. - Interest earned while subscriptions are being processed will either be paid to subscribers in the form of additional Units or will be returned in cash to those whose applications are rejected. - The selling agents will use their best efforts to sell the Units offered, without any firm underwriting commitment. Quadriga Capital Management is also offering Units directly to potential investors by distributing this Prospectus and making it available on a special internet website (http://www.superfund.com). Quadriga Capital Management intends to engage in marketing efforts through media including but not limited to third party websites, newspapers, magazines, other periodicals, television, radio, seminars, conferences, workshops, and sporting and charity events. Investors are required to make representations and warranties regarding their suitability to purchase the Units in the Subscription Agreement and Power of Attorney. Read the Subscription Agreement and Power of Attorney as well as this Prospectus carefully before you decide whether to invest. WHO MAY INVEST IN EACH SERIES Minimum initial investment is $5,000 per Series. Persons that become limited partners by holding Units in a particular Series may make additional investments in that same Series of at least $1,000. IS THE QUADRIGA SUPERFUND A SUITABLE INVESTMENT FOR YOU? An investment in each Series is speculative and involves a high degree of risk. Each Series is not a complete investment program. Quadriga Capital Management offers each Series as a diversification opportunity for an investor's entire investment portfolio, and therefore an investment in each Series should only be a limited portion of the investor's portfolio. You must, at a minimum, have: (1) a net worth of at least $150,000, exclusive of home, furnishings and automobiles; or (2) a net worth, similarly calculated, of at least $45,000 and an annual gross income of at least $45,000. A number of jurisdictions in which the Units are offered impose higher minimum suitability standards on prospective investors. These suitability standards are, in each case, regulatory minimums only, and merely because you meet such standards does not mean that an investment in the Units is suitable for you. YOU MAY NOT INVEST MORE THAN 10% OF YOUR NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, IN THE LIMITED PARTNERSHIP. RISK FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN EITHER SERIES - Each Series is a highly volatile and speculative investment. There can be no assurance that each Series will achieve its objectives or avoid substantial losses. You must be prepared to lose all or substantially all of your investment. - For every gain made in a futures, forward or swap transaction, the opposing side of that transaction will have an equal and offsetting loss. Quadriga Capital Management has from time to time in the past incurred losses in trading on behalf of its clients. Quadriga Capital Management expects that performance for each Series may be volatile. Although investments managed by Quadriga Capital Management have produced profits in the past, it is anticipated that each Series will likely experience drawdowns in the future. - Each Series trades in futures and forward contracts. Therefore, each Series is a party to financial instruments with elements of off-balance sheet market risk, including market volatility and possible illiquidity. There is also a credit risk that a counterparty will not be able to meet its obligations to each Series. 2 - There is presently no secondary market for Units of each Series and it is not anticipated that any such market will develop. - Each Series is subject to numerous conflicts of interest including the following: (1) Quadriga Capital Management is both the general partner and trading advisor of each Series and its fees and services have not been negotiated at arm's length; (2) Quadriga Capital Management, each Series' clearing brokers and their respective principals and affiliates, may trade in the futures and forward markets for their own accounts and may take positions opposite or ahead of those taken for each Series. For the same reasons, Quadriga Capital Management has a disincentive to add or replace advisors, even if doing so may be in the best interests of each Series; and (3) Quadriga Capital Management's principals are not obligated to devote any minimum amount of time to Quadriga Superfund. - Limited Partners take no part in the management of each Series and although Quadriga Capital Management is an experienced professional manager, past performance is not necessarily indicative of future results. - Quadriga Capital Management will be paid a monthly management fee of 1/12 of 1.85% of the monthly net asset value (1.85% annually) for each Series, regardless of profitability. Quadriga Capital Management will also be paid monthly performance fees equal to 25% of aggregate cumulative net appreciation of each Series above its previous highest value, excluding interest income, in net asset value, if any. - Each Series is a single-advisor fund which may be inherently more volatile than multi-advisor managed futures products. - Although each Series is liquid compared to other "alternative" investments such as real estate or venture capital, liquidity is restricted, as the Units may only be redeemed on a monthly basis, upon ten business days' written notice. You may transfer or assign your Units after 30 days' advance notice, and only with the consent of Quadriga Capital Management which may not be given if such transfer may result in adverse legal or tax consequences for a Series. - Even though each Series does not intend to make distributions, you will be liable for taxes on your share of the Series which you invest trading profits and other income. For U.S. federal income tax purposes, if the Series in which you invest has taxable income for any year, that income will be taxable to you in accordance with your allocable share of income from the Series in which you invest even though Quadriga Capital Management does not presently intend to make distributions from either Series. INVESTMENT FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN EITHER SERIES - Each Series is a leveraged investment fund managed by an experienced, professional trading advisor and it trades in a wide range of futures and forward markets. - Quadriga Capital Management utilizes a proprietary, fully systematic trading system for each Series. - Each Series has the potential to help diversify traditional securities portfolios. A diverse portfolio consisting of assets that perform in an unrelated manner, or non-correlated assets, may increase overall return and/or reduce the volatility (a primary measure of risk) of a portfolio. However, non-correlation will not provide any diversification advantages unless the non-correlated assets are outperforming other portfolio assets, and there is no guarantee that each Series will outperform other sectors of an investor's portfolio or not produce losses. Each Series' profitability also depends on the success of Quadriga Capital Management trading techniques. If each Series is unprofitable, then it will not increase the return on an investor's portfolio or achieve its diversification objectives. 3 - Investors in each Series get the advantage of limited liability in highly leveraged trading. QUADRIGA CAPITAL MANAGEMENT, INC. Quadriga Capital Management, Inc., a Grenada corporation and the general partner and trading advisor for each Series, administers each Series as well as directs its trading. Affiliates of Quadriga Capital Management manage various offshore investment funds with strategies substantially similar to that of each Series. CHARGES TO EACH SERIES Each Series' charges are substantial and must be offset by trading gains and interest income in order to avoid depletion of each Series' assets. QUADRIGA CAPITAL MANAGEMENT, INC. - 1.85% annual management fee ( 1/12 of 1.85% payable monthly) for each Series. - 25% of new appreciation in each Series' net assets computed on a monthly basis and excluding interest income and as adjusted for subscriptions and redemptions. - 1% of net assets in each Series per year ( 1/12 of 1% payable monthly) for organization and offering expenses incurred in the initial and continuous offering. DEALERS AND OTHERS - An annual selling commission of 4% of the proceeds of the offering for each Series will be paid to Quadriga Asset Management, Inc. an affiliate of Quadriga Capital Management, in monthly installments of 1/12 of 4% of the month end net asset value of each Series. The maximum cumulative selling commission per Unit is 10% of the purchase price for such Unit. - Operating expenses such as legal, auditing, administration, printing and postage, up to a maximum of 0.15% of net assets per year of each Series payable in monthly installments of 1/12 of 0.15% of the month end net asset value of each Series. - $25.00 per round-turn transaction for brokerage fees; for Units sold by Quadriga Asset Management, a portion will be paid to the clearing broker for execution and clearing costs, and the balance will paid to Quadriga Asset Management. - "Bid-ask" spreads and prime brokerage fees for off-exchange contracts. 4 BREAKEVEN ANALYSIS The following tables show the fees and expenses that an investor would incur on an initial investment of $5,000 in Quadriga Superfund and the amount that such investment must earn to break even after one year. SERIES A
DOLLAR RETURN REQUIRED PERCENTAGE RETURN REQUIRED ($5,000 INITIAL INVESTMENT) INITIAL TWELVE MONTHS OF INITIAL TWELVE MONTHS OF ROUTINE EXPENSES INVESTMENT INVESTMENT - ---------------- -------------------------- --------------------------- Management Fees.................................. 1.85% $ 92.50 General Partner Performance Fees(1).............. 25.00% $ 0 Selling Commissions.............................. 4.00% $200.00 Offering Expenses................................ 1.00% $ 50.00 Operating Expenses............................... 0.15% $ 7.50 Brokerage Fees(2)................................ 3.75% $187.50 Redemption Charges(3)............................ 0% $ 0 Less Interest Income............................. 2.00% $100.00 TWELVE-MONTH BREAKEVEN........................... 8.75% $437.50
- --------------- (1) No performance fees will be charged until breakeven costs are met. (2) Assumes 1,500 round-turn transactions per million dollars per year at a rate of $25 per transaction.* (3) No additional charges or fees are proposed on redemption of Units. SERIES B
DOLLAR RETURN REQUIRED PERCENTAGE RETURN REQUIRED ($5,000 INITIAL INVESTMENT) INITIAL TWELVE MONTHS INITIAL TWELVE MONTHS ROUTINE EXPENSES OF INVESTMENT OF INVESTMENT - ---------------- -------------------------- ---------------------------- Management Fees................................. 1.85% $ 92.50 General Partner Performance Fees(1)............. 25.00% $ 0 Selling Commissions............................. 4.00% $200.00 Offering Expenses............................... 1.00% $ 50.00 Operating Expenses.............................. 0.15% $ 7.50 Brokerage Fees(2)............................... 5.63% $281.50 Redemption Charges(3)........................... 0% $ 0 Less Interest Income............................ 2.00% $100.00 TWELVE-MONTH BREAKEVEN.......................... 10.63% $531.50
- --------------- (1) No performance fees will be changed until breakeven costs are met. (2) Assumes 2,250 round-turn transactions per million dollars per year at a rate of $25 per transaction.* (3) No additional charges or fees are proposed on redemption of Units. * In no instance will the total of all fees computed on a net asset basis exceed 20% per annum for either Series A or Series B. DISTRIBUTIONS AND REDEMPTIONS Each Series is intended to be a medium- to long-term, i.e., 3- to 5-year, investment. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days' written notice to Quadriga Capital Management which may deny a 5 request to transfer if it determines that the transfer may result in adverse legal or tax consequences for each Series but not a redemption request submitted in good form and in a timely manner. Quadriga Capital Management does not intend to make any distributions. Upon written request, an investment in either Series may be exchanged for an investment in the other Series at the then applicable respective net asset values of each Series. FEDERAL INCOME TAX ASPECTS In the opinion of Henderson & Lyman, Chicago, Illinois, Quadriga Superfund will be classified as a partnership for federal income tax purposes and will not be considered a publicly-traded partnership taxable as a corporation for federal income tax purposes. As such, whether or not Quadriga Capital Management has distributed any cash to the Limited Partners, each Limited Partner must report his or her allocable share of items of income, gain, loss and deduction of each Series and is individually liable for income tax on such share. To the extent each Series invests in futures and other commodity contracts, gain or loss on which will, depending on the contracts traded, constitute a mixture of: 1) ordinary income or loss; and/or 2) capital gain or loss. Trading losses of each Series, which will generally constitute capital losses, may only be available to offset a limited amount of interest income allocated to the Limited Partners of such Series. Although each Series treats the management fees and performance fees paid to Quadriga Capital Management as ordinary expenses, such expenses may be subject to restrictions on deductibility for federal income tax purposes or be treated as non-deductible syndication costs by the Internal Revenue Service. FEES TO BE PAID BY QUADRIGA SUPERFUND
RECIPIENT PERCENTAGE --------- ---------- Quadriga Capital Management Management Fee......................................... 1.85% Performance Fee........................................ 25.00% Organization and Offering Expenses....................... 1.00% Operating Expenses..................................... 0.15% Quadriga Asset Management Sales Commission....................................... 4.00%*
- --------------- * Pursuant to NASD rules, the maximum cumulative sales commission per Unit is 10.00% of the purchase price of such Unit. Above amounts are annualized and paid monthly in arrears at 1/12 the rates shown. Each Series will be charged a brokerage commission for execution and brokerage services of $25.00 per round-turn transaction plus applicable National Futures Association and exchange fees. For Units sold by Quadriga Asset Management, a portion of this commission will be paid to the clearing broker and the balance will be paid to Quadriga Asset Management. Such brokerage commissions are estimated to be approximately 3.75% for Series A and 5.63% for Series B. In no instance will the total of all fees computed on a net asset basis exceed 20% per annum for either Series A or Series B. 6 THE RISKS YOU FACE MARKET RISKS POSSIBLE TOTAL LOSS OF AN INVESTMENT IN EACH SERIES Futures and forward contracts have a high degree of price variability and are subject to occasional rapid and substantial changes. Consequently, you could lose all or substantially all of your investment in each Series. EACH SERIES WILL BE HIGHLY LEVERAGED Because the amount of margin funds necessary to be deposited with a clearing broker in order to enter into a futures or forward contract position is typically about 2% to 10% of the total value of the contract, each Series will be able to hold positions with face values equal to several times each Series' net assets. The ratio of margin to equity for Series A is approximately 20% and approximately 30% for Series B, but each Series can range from 10% to 50% due to factors such as market volatility and changes in margin requirements. As a result of this leveraging, even a small movement in the price of a contract can cause major losses. Quadriga Capital Management will monitor the leverage of each Series regularly but is not limited by the amount of leverage it may employ, except that Series A will be leveraged less than Series B. ILLIQUIDITY OF YOUR INVESTMENT There is no secondary market for the Units. While the Units have redemption rights, there are restrictions. For example, redemptions can occur only at the end of a month. If a large number of redemption requests were to be received at one time, each Series might have to liquidate positions to satisfy the requests. Such a forced liquidation could adversely affect each Series and consequently your investment. Transfers of the Units are subject to limitations, such as 30 days' advance written notice of any intent to transfer. Also, Quadriga Capital Management may deny a request to transfer if it determines that the transfer may result in adverse legal or tax consequences for each Series. See "Quadriga Superfund, L.P. Limited Partnership Agreement -- Dispositions." MARKET ILLIQUIDITY Futures and forward positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption, such as when foreign governments may take or be subject to political actions which disrupt the markets in their currency or major exports, can also make it difficult to liquidate a position. Unexpected market illiquidity has caused major losses in recent years in such sectors as emerging markets and mortgage- backed securities. There can be no assurance that the same will not happen to each Series at any time or from time to time. The large size of the positions which Quadriga Capital Management anticipates acquiring for each Series increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so. FORWARD TRANSACTIONS ARE NOT REGULATED AND ARE SUBJECT TO CREDIT RISK Each Series trades forward contracts in foreign currencies. Forward contracts are typically traded through a dealer market which is dominated by major money center banks and is not regulated by the Commodity Futures Trading Commission. Thus, you do not receive the protection of CFTC regulation or the statutory scheme of the Commodity Exchange Act in connection with this trading activity by each Series. Also, each Series faces the risk of non-performance by the counterparties to the forward contracts and such non-performance may cause some or all of your gain to be unrealized. NON-CORRELATED, NOT NEGATIVELY CORRELATED, PERFORMANCE OBJECTIVE Historically, managed futures have been generally non-correlated to the performance of other asset classes such as stocks and bonds. Non-correlation means that there is no statistically valid relationship between the past performance of futures and forward contracts on the one hand and stocks or bonds on the 7 other hand. Non-correlation should not be confused with negative correlation, where the performance of two asset classes would be exactly opposite. Because of this non-correlation, each Series cannot be expected to be automatically profitable during unfavorable periods for the stock market, or vice versa. The futures, forward and swap markets are fundamentally different from the securities markets in that for every gain made in a futures, forward or swap transaction, the opposing side of that transaction will have an equal and off-setting loss. If each Series does not perform in a manner non-correlated with the general financial markets or does not perform successfully, you will obtain no diversification benefits by investing in the Units and each Series may have no gains to offset your losses from other investments. FOREIGN CURRENCY TRADING Cash foreign currency markets are substantially unregulated and price movements in such markets are caused by many unpredictable factors including general economic and financial conditions, governmental policies, national and international political and economic events, and changes in interest rates. Such factors combined with the lack of regulation could expose Quadriga Superfund to significant losses which it might otherwise have avoided. Positions in cash foreign currencies can be established using less margin than is typical for futures contracts. Thus, a small movement in the price of the underlying currency can result in a substantial price movement relative to the margin deposit. In addition, cash foreign currencies are traded through a dealer market and not on an exchange. This presents the risks of both counterparty creditworthiness and possible default or bankruptcy by the counterparty. TRADING RISKS QUADRIGA CAPITAL MANAGEMENT ANALYZES ONLY TECHNICAL MARKET DATA, NOT ANY ECONOMIC FACTORS EXTERNAL TO MARKET PRICES The trading systems used by the General Partner for each Series are technical, trend-following methods involving instruments that are not historically correlated with each other. The profitability of trading under these systems depends on, among other things, the occurrence of significant price trends which are sustained movements, up or down, in futures and forward prices. Such trends may not develop; there have been periods in the past without price trends in certain markets. The likelihood of the Units being profitable could be materially diminished during periods when events external to the markets themselves have an important impact on prices. During such periods, the General Partner's historic price analysis could establish positions on the wrong side of the price movements caused by such events. SPECULATIVE POSITION LIMITS MAY ALTER TRADING DECISIONS FOR EACH SERIES The CFTC has established limits on the maximum net long or net short positions which any person may hold or control in certain futures contracts. Exchanges also have established such limits. All accounts controlled by the General Partner, including the account of each Series, are combined for speculative position limit purposes. If positions in those accounts were to approach the level of the particular speculative position limit, such limits could cause a modification of the General Partner's trading decisions for each Series or force liquidation of certain futures positions. INCREASE IN ASSETS UNDER MANAGEMENT MAY AFFECT TRADING DECISIONS The more assets the General Partner manages, the more difficult it may be for the Advisor to trade profitably because of the difficulty of trading larger positions without adversely affecting prices and performance. Accordingly, such increases in equity under management may require the General Partner to modify its trading decisions for each Series which could have a detrimental effect on your investment. 8 EACH SERIES' TRADING IS NOT TRANSPARENT The General Partner makes each Series' trading decisions. While the General Partner receives daily trade confirmations from the clearing broker, only a Series' net trading results are reported to Limited Partners and only on a monthly basis. Accordingly, an investment in each Series does not offer Limited Partners the same transparency, i.e., an ability to review all investment positions daily, that a personal trading account offers. TAX RISKS INVESTORS ARE TAXED BASED ON THEIR SHARE OF PROFITS IN EACH SERIES Investors are taxed each year on their share of each Series' profits, if any, irrespective of whether they redeem any Units or receive any cash distributions from each Series. All performance information included in this prospectus is presented on a pre-tax basis; investors who experience such performance may have to redeem Units or pay the related taxes from other sources. TAX COULD BE DUE FROM INVESTORS ON THEIR SHARE OF EACH SERIES' ORDINARY INCOME DESPITE OVERALL LOSSES Investors may be required to pay tax on their allocable share of each Series' ordinary income, which in the case of each Series is each Series' interest income and gain on some foreign futures contracts, even though each Series incurs overall losses. Capital losses can be used only to offset capital gains and $3,000 of ordinary income each year. Consequently, if an investor were allocated $5,000 of ordinary income and $10,000 of capital losses, the investor would owe tax on $2,000 of ordinary income even though the investor would have a $5,000 loss for the year. The $7,000 capital loss carry forward could be used in subsequent years to offset capital gain and ordinary income, but subject to the same annual limitation on its deductibility against ordinary income. DEDUCTIBILITY OF BROKERAGE AND PERFORMANCE FEES Although each Series treats the brokerage fees and performance fees paid and other expenses of such Series as ordinary and necessary business expenses, upon audit each Series may be required to treat such fees as "investment advisory fees" if each Series' trading activities were determined to not constitute a trade or business for tax purposes. If the expenses were investment advisory expenses, a Limited Partner's tax liability would likely increase. In addition, upon audit, a portion of the brokerage fees might be treated as a non- deductible syndication cost or might be treated as a reduction in each Series' capital gain or as an increase in each Series' capital loss. If the brokerage fees were so treated, a Limited Partner's tax liability would likely increase. OTHER RISKS FEES AND COMMISSIONS ARE CHARGED REGARDLESS OF PROFITABILITY AND ARE SUBJECT TO CHANGE Each Series is subject to substantial charges payable irrespective of profitability in addition to performance fees which are payable based on each Series' profitability. Included in these charges are management, organization and offering, and brokerage fees and operating expenses. On each Series' forward trading, "bid-ask" spreads and prime brokerage fees are incorporated into the pricing of each Series' forward and swap contracts, respectively, by the counterparties in addition to the brokerage fees paid by each Series. It is not possible to quantify the "bid-ask" spreads and prime brokerage fees paid by each Series because each Series cannot determine the profit its counterparty is making on its forward and swap transactions. Such spreads can at times be significant. In addition, while currently not contemplated, the Quadriga Superfund, L.P. Limited Partnership Agreement allows for changes to be made to the brokerage fee and performance fee with respect to each Series upon sixty days' notice to the Limited Partners of such Series. 9 FAILURE OF BROKERAGE FIRMS; DISCIPLINARY HISTORY OF CLEARING BROKERS The Commodity Exchange Act requires a clearing broker to segregate all funds received from customers from such broker's proprietary assets. If any of the clearing brokers fails to do so, the assets of each Series might not be fully protected in the event of the bankruptcy of the clearing broker. Furthermore, in the event of any of the clearing broker's bankruptcy, each Series could be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing broker's combined customer accounts, even though certain property specifically traceable to each Series (for example, Treasury bills deposited by each Series with the clearing broker as margin) was held by the clearing broker. The clearing brokers have been the subject of certain regulatory and private causes of action in the past and may be again in the future. Such actions could affect the ability of a clearing firm to conduct its business. See "The Clearing Brokers." Furthermore, dealers in forward contracts are not regulated by the Commodity Exchange Act and are not obligated to segregate customer assets. As a result, you do not have such basic protections in forward contracts. INVESTORS MUST NOT RELY ON PAST PERFORMANCE OF QUADRIGA CAPITAL MANAGEMENT IN DECIDING WHETHER TO BUY UNITS The future performance of each Series is not predictable, and no assurance can be given that each Series will perform successfully in the future. Past performance of a trading program is not necessarily indicative of future results. CONFLICTS OF INTEREST Quadriga Capital Management has a conflict of interest because it acts as the general partner and sole trading advisor for each Series. Since Quadriga Capital Management acts as both trading advisor and general partner, it is very unlikely that its advisory contract will be terminated by each Series. The fees payable to Quadriga Capital Management were established by it and were not the subject of arm's-length negotiation. Furthermore, the fact that Quadriga Asset Management is an affiliate of Quadriga Capital Management presents the possibility of Quadriga Capital Management increasing the level of trading to generate greater commission income for Quadriga Asset Management. See "Conflicts of Interest." LACK OF INDEPENDENT EXPERTS REPRESENTING INVESTORS Quadriga Capital Management has consulted with counsel, accountants and other experts regarding the formation and operation of each Series. No counsel has been appointed to represent the Limited Partners in connection with the offering of the Units. Accordingly, each prospective investor should consult his own legal, tax and financial advisers regarding the desirability of an investment in each Series. RELIANCE ON QUADRIGA CAPITAL MANAGEMENT The incapacity of Quadriga Capital Management's principals could have a material and adverse effect on Quadriga Capital Management's ability to discharge its obligations under the Partnership Agreement. Neither Quadriga Capital Management nor its principals are under any obligation to devote a minimum amount of time to Quadriga Superfund, which is the first publicly-offered fund managed by Quadriga Capital Management. POSSIBILITY OF TERMINATION OF EACH SERIES BEFORE EXPIRATION OF ITS STATED TERM As general partner, Quadriga Capital Management may withdraw from each Series upon 120 days' notice, which would cause each Series to terminate unless a substitute general partner was obtained. Other events, such as a long-term substantial loss suffered by each Series, could also cause each Series to terminate before the expiration of its stated term. This could cause you to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in the National Futures Association of Quadriga Capital Management or the clearing brokers were revoked or suspended, such entity would no longer be able to provide services to each Series. 10 EACH SERIES IS NOT A REGULATED INVESTMENT COMPANY Although each Series and Quadriga Capital Management are subject to regulation by the CFTC, each Series is not an investment company subject to the Investment Company Act of 1940. Accordingly, you do not have the protections afforded by that statute which, for example, require investment companies to have a majority of disinterested directors and regulate the relationship between the adviser and the investment company. PROPOSED REGULATORY CHANGE IS IMPOSSIBLE TO PREDICT The futures markets are subject to comprehensive statutes, regulations and margin requirements. In addition, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures and forward transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, various national governments have expressed concern regarding the disruptive effects of speculative trading in the currency markets and the need to regulate the "derivatives" markets in general. The effect of any future regulatory change on each Series is impossible to predict, but could be substantial and adverse. FORWARDS, SWAPS, HYBRIDS AND OTHER DERIVATIVES ARE NOT SUBJECT TO CFTC REGULATION Each Series may trade foreign exchange contracts in the interbank market. In addition to swaps, each Series may also trade hybrid instruments and other off-exchange contracts. Swap agreements involve trading income streams such as fixed rate for floating rate interest. Hybrids are instruments which combine features of a security with those of a futures contract. There is no exchange or clearinghouse for these contracts, they are not regulated by the CFTC, and traders must rely on the creditworthiness of the counterparty to fulfill the obligations of the transaction. Each Series will not receive the protections which are provided by the CFTC's regulatory scheme for these transactions. OPTIONS ON FUTURES ARE SPECULATIVE AND HIGHLY LEVERAGED In the future, options on futures contracts may be used by each Series to generate premium income or capital gains. Futures options involve risks similar to futures in that options are speculative and highly leveraged. The buyer of an option risks losing the entire purchase price (the premium) of the option. The writer (seller) of an option risks losing the difference between the premium received for the option and the price of the commodity or futures contract underlying the option which the writer must purchase or deliver upon exercise of the option (which losses can be unlimited). Specific market movements of the commodities or futures contracts underlying an option cannot accurately be predicted. EACH SERIES WILL TRADE EXTENSIVELY IN FOREIGN MARKETS A substantial portion of Quadriga Capital Management's trades takes place on markets or exchanges outside the United States. The risk of loss in trading foreign futures contracts and foreign options can be substantial. Participation in foreign futures contracts and foreign options transactions involves the execution and clearing of trades on, or subject to the rules of, a foreign board of trade. Non-U.S. markets may not be subject to the same degree of regulation as their U.S. counterparts. None of the CFTC, NFA or any domestic exchange regulates activities of any foreign boards of trade, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rules of a foreign board of trade or any applicable foreign laws. Trading on foreign exchanges also presents the risks of exchange controls, expropriation, taxation and government disruptions. The price of any foreign futures or foreign options contract and, therefore, the potential profit and loss thereon, may be affected by any variance in the foreign exchange rate between the time the order is placed and the time it is liquidated, offset or exercised. Certain foreign exchanges may also be in a more or less developmental stage so that prior price histories may not be indicative of current price dynamics. In addition, each Series may not have the same access to certain positions on foreign exchanges as 11 do local traders, and the historical market data on which Quadriga Capital Management bases its strategies may not be as reliable or accessible as it is in the United States. The rights of clients (such as each Series) in the event of the insolvency or bankruptcy of a non-U.S. market or broker are also likely to be more limited than in the case of U.S. markets or brokers. To the extent that a foreign entity does not have assets domiciled in the United States, satisfaction of any judgment against that party may be adversely affected. RESTRICTIONS ON TRANSFERABILITY You may transfer or assign your Units only upon 30 days' prior written notice to Quadriga Capital Management and if Quadriga Capital Management is satisfied that the transfer complies with applicable laws and would not result in the termination of each Series for federal income tax purposes. A SINGLE-ADVISOR FUND MAY BE MORE VOLATILE THAN A MULTI-ADVISOR FUND Each Series is currently structured as a single-advisor managed futures fund. You should understand that many managed futures funds are structured as multi-advisor funds in order to attempt to control risk and reduce volatility through combining advisors whose historical performance records have exhibited a significant degree of non-correlation with each other. As a single-advisor managed futures fund, it is anticipated that each Series may have a greater profit potential than investment vehicles employing multiple advisors, but may also have increased performance volatility and a higher risk of loss. Quadriga Capital Management may retain additional trading advisors on behalf of each Series in the future. MONEY COMMITTED TO MARGIN Each Series may commit up to 50% of its assets as margin for positions held by the clearing brokers. Because such commitment typically represents only a small percentage of the total value of such positions, adverse price movements can cause losses in excess of such commitment and potentially in excess of the total assets of a Series. POSSIBLE CONTINGENT LIABILITY On January 10, 2003 Quadriga Capital Management on behalf of the Fund filed a post-effective amendment to the Registration Statement with the U.S. Securities and Exchange Commission which amended the Plan of Distribution. From the period January 10, 2003 through such amendment being declared effective, the Fund sold a total of 7,123 units of Series A in the principal amount of $8.46 million and 9,985 units of Series B in the principal amount of $12.90 million. Quadriga Capital Management and the Fund may be subject to potential claims for rescission from investors and regulatory or enforcement action for any sales of Units made without an effective Registration Statement. As a regulated company, Quadriga Capital Management faces potential liability in the normal cause of its business from any administrative action or in any situation in which it is found to have engaged in activities which violate applicable law. Quadriga Capital Management is unable to estimate the probability of assertion of any related claims or assessments. 12 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements that reflect Quadriga Capital Management's current expectations about the future results, performance, prospects and opportunities of each Series. Quadriga Capital Management has tried to identify these forward-looking statements by using words such as "may," "will," "expect," "anticipate," "believe," "intend," "should," "estimate," or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to Quadriga Capital Management and are subject to a number of risks, uncertainties and other factors, both known, such as those described in "The Risks You Face" and elsewhere in this prospectus, and unknown, that could cause each Series' actual results, performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws. Quadriga Capital Management undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this prospectus, as a result of new information, future events or changed circumstances or for any other reason after the date of this prospectus. QUADRIGA CAPITAL MANAGEMENT, INC. DESCRIPTION Quadriga Capital Management, Inc. is the general partner and commodity trading advisor of each Series. It is a Grenada corporation with offices located at Le Marquis Complex, Unit 5, P.O. Box 1479, Grand Anse, St. George's, Grenada West Indies, and its telephone number is (473) 439-2418. The firm's books and records are maintained at this location and are available there for inspection. Its sole business is the trading and management of discretionary futures accounts, including commodity pools. It has been registered with the Commodity Futures Trading Commission as a commodity pool operator since May 9, 2001 and has been a member of the National Futures Association in that capacity since January 7, 2003. As of December 31, 2003, Quadriga Capital Management and its affiliates had approximately $1.7 billion in assets under management in the futures and forward markets (including approximately $448 million (EURO equivalent) in assets traded pursuant to the same program as traded by Series A and $524 million in assets traded pursuant to the same program as traded in Series B). Christian Baha owns 100% of Quadriga Capital Management and Quadriga Investment Advisory, Inc. and 50% of two of their affiliates, Quadriga Fund Management, Inc. and Quadriga Trading Management, Inc. Quadriga Fund Management, Quadriga Trading Management and Quadriga Investment Advisory each manages various investment funds with strategies substantially similar to that of each Series. Quadriga Fund Management manages Quadriga Global Consolidated Trust SICAV USD, Quadriga Global Consolidated Trust SICAV EURO, Superfund A USD SICAV, Superfund B USD SICAV, Superfund C USD SICAV, Superfund A EUR SICAV, Superfund B EUR SICAV, and Superfund C EUR SICAV. Quadriga Trading Management manages Quadriga AG, Quadriga AG Ansparplan, Quadriga Prosperity Fund, Quadriga Hedge Fund Class A, Quadriga Hedge Fund Class B, Quadriga Hedge Fund Class C, Quadriga Superfund, Quadriga Zeus Hedge Fund, Superfund Class A, Superfund Class B, Superfund Class C, Superfund Class A, Superfund Class B, Superfund Class C, Quadriga Superfund Guarant IV Class A, Quadriga Superfund Guarant IV Class B, Quadriga Superfund Guarant V Class C and Quadriga Superfund Guarant V Class D. Quadriga Investment Advisory manages Quadriga Partners L.P., a Delaware limited partnership previously managed by Quadriga Capital Management, which no longer manages any of these other funds. Past performance information for Quadriga Capital Management and its affiliates can be found beginning on page 16. The principals of Quadriga Capital Management are Christian Baha and Gerhard Entzmann. As discussed below, they are responsible for the firm's trading decisions through their development of the "TradeCenter" computerized trading system. They have not purchased and do not intend to purchase Units. Quadriga Capital Management has agreed that its capital account as general partner of each Series at all times will equal at least 1% of the net aggregate capital contributions of all Limited Partners in each such 13 Series. There have never been any material administrative, civil or criminal proceedings brought against Quadriga Capital Management or its principals, whether pending, on appeal or concluded. The firm maintains any required past performance information for itself and its trading principals at the address shown above in this section. Mr. Baha is Quadriga Capital Management's President and founder. He is a graduate of the police academy in Vienna, Austria and a student of the Business University of Vienna, Austria. Mr. Baha started a business with Christian Halper in 1991 to develop and market financial software applications to institutions in Austria. From that development, two independent companies were formed: Teletrader.com Software AG and Quadriga Beteiligungs -- und Vermogens AG. Teletrader.com is a publicly-held company that offers financial software products for institutions and is listed on the Austria Stock Exchange. Quadriga Beteiligungs -- und Vermogens AG was founded in 1995. The total combined assets under management for these companies has grown to more than $170 million as of December 31, 2001. Mr. Baha resides in Monte Carlo where he directs the strategic worldwide expansion of the Quadriga group of companies. He is also an associated person and principal of Quadriga Asset Management, introducing broker and broker-dealer for each Series, which positions he has held since July 1999 and June 1997, respectively. Dr. Entzmann is Quadriga Capital Management's secretary and has been associated with the company since 2001. He has been involved in managing Quadriga Capital Management's fund management business for U.S. products and is responsible for monitoring and overseeing the performance of such products. Dr. Entzmann received a degree in mechanical engineering from the University of Vienna and in June 2001 he received his doctor's degree. He was a research assistant at the Institute for Internal Combustion Engines and Vehicle Engineering at the Technical University of Vienna from 1994 to 2001. Dr. Entzmann has a strong background in data analysis and systems engineering. THE TRADING ADVISOR Pursuant to the Partnership Agreement, Quadriga Capital Management has the sole authority and responsibility for managing the Partnership and for directing the investment and reinvestment of each Series' assets. Although Quadriga Capital Management will initially serve as the sole trading advisor of each Series, it may, in the future, retain other trading advisors to manage a portion of the assets of each Series. Limited Partners will receive prior notice, in the monthly report from each Series or otherwise, in the event that additional trading advisors are to be retained on behalf of each Series. TRADING SYSTEMS Quadriga Capital Management makes each Series' trading decisions using a fully automated computerized trading system, "TradeCenter", which trades in approximately 100 futures and cash foreign currency markets, automatically sends buy and sell signals, and constantly monitors relevant risk factors on the traded futures markets in the U.S., Canada, Europe and Asia and on the off-exchange cash foreign currency market. By using TradeCenter, human emotions are completely eliminated from the capital management process. TradeCenter was developed by Christian Baha and Christian Halper, and is licensed on a non-exclusive basis to Quadriga Capital Management. Quadriga Capital Management and its affiliates trade in approximately 100 futures markets globally, including both commodity and financial futures and cash foreign currencies. The approximate allocation between Sectors is: currencies, 18%; livestock, 5%; agricultural, 10%; metals, 10%; interest rate, 12%; energy, 13%; stock indices, 18%; and grains, 14%. TradeCenter emphasizes instruments with low correlation and high liquidity for order execution. Quadriga Capital Management's strategy is based on the implementation of a four-point philosophy consisting of (i) market diversification, (ii) technical analysis, (iii) trend-following, and (iv) money management. TradeCenter scans approximately one hundred different futures markets worldwide on a daily basis and makes the following decisions: whether to establish new positions (long or short), adjustment or placement of stop orders, change in position size based on volatility or change in correlation between markets, and whether to exit open positions. The decision to establish new positions is based on a proprietary algorithm 14 that seeks to identify market trends in advance. This is done by analyzing technical indicators and parameters such as moving averages, bollinger bands, etc. Bollinger bands are technical channel indicators calculated as multiples of the standard deviation above and below a moving average. Because standard deviation measures volatility, these bands expand during volatile market periods and contract during stable ones. Quadriga Capital Management believes that the key to identifying potentially profitable trends using technical analysis is in the way these indicators and perimeters interrelate and are combined. Before entering new positions, TradeCenter defines the maximum open risk per position based on market correlation and market volatility. This money management filter is applied after positions have been established on a daily basis per market and adjusts existing stop order levels or reduces position size if proprietary pre-defined risk measures are met or exceeded due to market volatility or changes in market correlation. Quadriga Capital Management uses the technique called trend following to identify these changes. Positions are exited either by being stopped out or adjusted as a result of the changes in volatility or market correlation discussed above. There can be no assurance that the trading models will produce results similar to those produced in the past. POTENTIAL INABILITY TO TRADE OR REPORT DUE TO SYSTEMS FAILURE Quadriga Capital Management's strategies are dependent to a significant degree on the proper functioning of its internal computer systems. Accordingly, systems failures, whether due to third party failures upon which such systems are dependent or the failure of Quadriga Capital Management's hardware or software, could disrupt trading or make trading impossible until such failure is remedied. Such failures may result from events including "acts of God" and domestic or international terrorism. Any such failure, and consequential inability to trade (even for a short time), could, in certain market conditions, cause Quadriga Superfund to experience significant trading losses or to miss opportunities for profitable trading. Lastly, any such failures could cause a temporary delay in reports to investors. 15 PAST PERFORMANCE OF TRADING PROGRAMS OF QUADRIGA CAPITAL MANAGEMENT, INC. AND AFFILIATES The following performance capsules, tables and accompanying notes are presented in an attempt to provide you with account performance information regarding all pools operated or portfolios managed by Quadriga Capital Management or, for the most recent five calendar years. In the opinion of Quadriga Capital Management, the performance records of the portfolios and pools are fairly stated. The only pool currently managed by Quadriga Capital Management is each Series. Quadriga Capital Management's affiliate, Quadriga Fund Management, Inc., has managed commodity pools since March 1996. Except for each of the Series, none of the pools currently being managed by Quadriga Capital Management or its affiliates has been publicly offered within the U.S. Name of Pool............................... Quadriga Superfund, L.P. -- Series A General Partner............................ Quadriga Capital Management, Inc. Inception of Trading....................... November 2002 Aggregate Subscriptions as of November 30, 2004..................................... $14.68 million Net Asset Value* as of November 30, 2004... $31.28 million Worst Monthly % Drawdown* (March 2003)..... (20.12%) Worst Peak-to-Valley % Drawdown* (February 2004 to August 2004)..................... (25.97%)
HISTORICAL PERFORMANCE
2002 2003 2004 ---- ---- ---- Jan.................. Jan............... 11.38% Jan............... 2.46% Feb.................. Feb............... 12.00% Feb............... 12.65% Mar.................. Mar............... (20.12%) Mar............... (2.10%) Apr.................. Apr............... 0.51% Apr............... (14.20%) May.................. May............... 15.04% May............... 7.21% Jun.................. Jun............... (8.37%) Jun............... (11.62%) Jul.................. Jul............... (8.77%) Jul............... (0.16%) Aug.................. Aug............... 2.16% Aug............... (6.84%) Sep.................. Sep............... 0.12% Sep............... 10.44% Oct.................. Oct............... 3.99% Oct............... 4.88% Nov.................. (3.59%) Nov............... (1.75%) Nov............... 12.30% Dec.................. 13.65% Dec............... 19.45% ANNUAL............... 9.56% ANNUAL............ 20.23% ANNUAL............ 11.13%
* As defined in the Glossary. Past performance is not necessarily indicative of future results. - --------------- Name of Pool............................... Quadriga Superfund, L.P. -- Series B General Partner............................ Quadriga Capital Management, Inc. Inception of Trading....................... November 2002 Aggregate Subscriptions as of November 30, 2004..................................... $18.30 million Net Asset Value* as of November 30, 2004... $42.40 million Worst Monthly % Drawdown* (March 2003)..... (29.11%) Worst Peak-to-Valley % Drawdown* (February 2004 to August 2004)..................... (34.22%)
16 HISTORICAL PERFORMANCE
2002 2003 2004 ---- ---- ---- Jan.................. Jan............... 17.59% Jan............... 3.48% Feb.................. Feb............... 17.07% Feb............... 18.63% Mar.................. Mar............... (29.11%) Mar............... (2.59%) Apr.................. Apr............... 0.87% Apr............... (19.60%) May.................. May............... 21.90% May............... 9.11% Jun.................. Jun............... (11.57%) Jun............... (15.07%) Jul.................. Jul............... (11.96%) Jul............... (0.09%) Aug.................. Aug............... 3.43% Aug............... (9.29%) Sep.................. Sep............... 0.04% Sep............... 14.75% Oct.................. Oct............... 5.92% Oct............... 7.01% Nov.................. (5.84%) Nov............... (2.04%) Nov............... 17.33% Dec.................. 23.17% Dec............... 27.33% ANNUAL............... 15.98% ANNUAL............ 27.71% ANNUAL............ 16.34%
* As defined in the Glossary. Past performance is not necessarily indicative of future results. - --------------- Name of Pool....................................... Quadriga AG Trading Advisor.................................... Quadriga Trading Management Inc. Inception of Trading............................... March 1996 Aggregate Subscriptions as of November 30, 2004.... EUR 211.9 million Net Asset Value* as of November 30, 2004........... EUR 332.6 million Worst Monthly % Drawdown* (March 2003)............. (16.72%) Worst Peak-to-Valley % Drawdown* (Oct. 2001 to Apr. 2002)............................................ (19.93%)
QUADRIGA AG
1999 2000 2001 2002 2003 2004 ----- ----- ------ ------ ------ ------ JAN...................................... 4.11% 1.84% 1.55% (0.59%) 12.76% 2.97% FEB...................................... 0.98% (1.14%) 1.45% (2.48%) 12.04% 8.69% MAR...................................... (1.70%) (4.20%) 12.76% (1.44%) (16.72%) 0.42% APR...................................... 6.32% (0.20%) (12.81%) (2.99%) (1.60%) (11.69%) MAY...................................... (5.80%) 6.27% 4.32% 1.31% 10.04% 4.08% JUN...................................... (0.43%) 1.13% 0.39% 13.67% (4.83%) (7.04%) JUL...................................... 1.13% (4.08%) 1.83% 13.78% (1.02%) 0.52% AUG...................................... (2.71%) 10.90% 6.15% 8.20% 1.47% (3.80%) SEP...................................... 4.53% (6.29%) 15.41% 11.94% (2.87%) 4.04% OCT...................................... (3.17%) (4.42%) 3.95% (13.78%) 6.54% 2.58% NOV...................................... 10.56% 5.06% (12.76%) (6.38%) (2.25%) 8.99% DEC...................................... 10.50% 18.96% (0.98%) 16.58% 12.86% ANNUAL................................... 25.39% 23.19% 18.82% 38.42% 24.33% 8.02%
* As defined in the Glossary. Past performance is not necessarily indicative of future results. 17 Name of Pool......................................... Quadriga GCT USD Trading Advisor...................................... Quadriga Fund Management Inc. Inception of Trading................................. January 2000 Aggregate Subscriptions as of November 30, 2004...... US $383.8 million Net Asset Value* as of November 30, 2004............. US $524.9 million Worst Monthly % Drawdown* (March 2003)............... (23.21%) Worst Peak-to-Valley % Drawdown* (Feb. 2004-Aug. 2004).............................................. (28.22%)
QUADRIGA GCT USD
2000 2001 2002 2003 2004 ----- ------ ------ ------ ------ JAN.................................... 12.32% 3.56% 1.06% 19.99% 1.96% FEB.................................... (5.63%) 4.57% (2.69%) 15.52% 14.05% MAR.................................... (2.45%) 9.95% (5.46%) (23.21%) (0.54%) APR.................................... (0.75%) (8.61%) (0.64%) 1.06% (19.92%) MAY.................................... 6.45% 1.89% 3.56% 9.89% 4.70% JUN.................................... 0.71% 5.02% 23.54% (8.56%) (10.20%) JUL.................................... (8.55%) 1.11% 17.67% (3.14%) 1.70% AUG.................................... 12.32% 10.27% 15.23% 2.62% (5.75%) SEP.................................... (6.91%) 28.42% 9.01% (5.87%) 8.19% OCT.................................... (3.09%) 5.27% (17.23%) 10.23% 5.88% NOV.................................... 8.94% (14.62%) (5.94%) (2.54%) 15.42% DEC.................................... 26.19% (4.85%) 24.42% 16.28% ANNUAL................................. 40.16% 42.56% 69.23% 26.35% 10.37%
* As defined in the Glossary. Past performance is not necessarily indicative of future results. 18 Name of Pool...................................... Quadriga Partners L.P. Trading Advisor................................... Quadriga Investment Advisory, Inc. Inception of Trading.............................. June 2001 Net Asset Value as of November 30, 2004........... $8.43 million
YEAR 2001 2002 2003 2004 ---- ----- ----- ----- ----- ANNUAL RETURN 16.03% 26.77% 19.42% 11.30%
Name of Pool...................................... Quadriga GCT Euro Trading Advisor................................... Quadriga Fund Management, Inc. Inception of Trading.............................. November 2001 Net Asset Value as of November 30, 2004........... EUR 249.3 million
YEAR 2001 2002 2003 2004 ---- ----- ----- ----- ----- ANNUAL RETURN (5.36)% 46.67% 25.53% 9.79%
Name of Pool...................................... Quadriga AG Ansparplan Trading Advisor................................... Quadriga Trading Management, Inc. Inception of Trading.............................. January 2003 Net Asset Value as of November 30, 2004........... EUR 40.4 million
YEAR 2003 2004 ---- ----- ----- ANNUAL RETURN 22.80% 8.80%
Name of Pool...................................... Quadriga Hedge Fund Class A Trading Advisor................................... Quadriga Trading Management, Inc. Inception of Trading.............................. July 2000 Net Asset Value as of November 30, 2004........... EUR 30.8 million
YEAR 2000 2001 2002 2003 2004 ---- ----- ----- ----- ----- ----- ANNUAL RETURN 20.50% 24.52% 36.29% 18.45% 12.25%
Name of Pool...................................... Quadriga Hedge Fund Class B Trading Advisor................................... Quadriga Trading Management, Inc. Inception of Trading.............................. January 2002 Net Asset Value as of November 30, 2004........... EUR 11.8 million
YEAR 2002 2003 2004 ---- ----- ----- ----- ANNUAL RETURN 37.57% 21.82% 14.03%
Name of Pool...................................... Quadriga Hedge Fund Class C Trading Advisor................................... Quadriga Trading Management, Inc. Inception of Trading.............................. July 2002 Net Asset Value as of November 30, 2004........... EUR 9.1 million
YEAR 2002 2003 2004 ---- ----- ----- ----- ANNUAL RETURN 32.57% 16.68% 8.39%
Past performance is not necessarily indicative of future results. 19 Name of Pool....................................... Quadriga Superfund (Cayman Islands) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... May 2001 Net Asset Value as of November 30, 2004............ $75.8 million
YEAR 2001 2002 2003 2004 ---- ----- ----- ----- ----- ANNUAL RETURN 37.30% 79.84% 63.50% 20.25%
Name of Pool....................................... Quadriga Prosperity Fund Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... November 2001 Net Asset Value as of November 30, 2004............ EUR 24.3 million
YEAR 2001 2002 2003 2004 ---- ----- ----- ----- ----- ANNUAL RETURN (3.78)% 35.86% 30.31% 4.76%
Name of Pool....................................... Quadriga Zeus Hedge Fund Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... January 2002 Net Asset Value as of November 30, 2004............ EUR 21.4 million
YEAR 2002 2003 2004 ---- ----- ----- ----- ANNUAL RETURN 34.40% 26.78% 5.67%
Name of Pool....................................... Superfund Class A (Austria) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ EUR 19.4 million
YEAR 2003 2004 ---- ----- ------ ANNUAL RETURN (3.11%) (5.64%)
Name of Pool....................................... Superfund Class B (Austria) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ EUR 71.9 million
YEAR 2003 2004 ---- ----- ------ ANNUAL RETURN (3.77%) (9.47%)
Name of Pool..................................... Superfund Class C (Austria) Trading Advisor.................................. Quadriga Trading Management, Inc. Inception of Trading............................. October 2003 Net Asset Value as of November 30, 2004.......... EUR 64.0 million
YEAR 2003 2004 ---- ----- ------ ANNUAL RETURN (8.08%) (16.93%)
Past performance is not necessarily indicative of future results. 20 Name of Pool....................................... Superfund Class A (Cayman Islands) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ $4.1 million
YEAR 2003 2004 ---- -------- -------- ANNUAL RETURN (3.40%) 3.00%
Name of Pool....................................... Superfund Class B (Cayman Islands) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ $3.2 million
YEAR 2003 2004 ---- -------- -------- ANNUAL RETURN (6.10%) 5.30%
Name of Pool....................................... Superfund Class C (Cayman Islands) Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ $58.7 million
YEAR 2003 2004 ---- -------- -------- ANNUAL RETURN (8.80%) (4.30%)
Name of Pool....................................... Superfund Class C (Cayman Islands) EUR Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... September 2004 Net Asset Value as of November 30, 2004............ EUR 9.6 million
YEAR 2004 ---- -------- ANNUAL RETURN 31.90%
Name of Pool....................................... Quadriga Superfund Guarant IV Class A Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ $9.6 million
YEAR 2003 2004 ---- -------- -------- ANNUAL RETURN 2.40% 10.32%
Name of Pool....................................... Quadriga Superfund Guarant IV Class B Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... October 2003 Net Asset Value as of November 30, 2004............ EUR 3.0 million
YEAR 2003 2004 ---- -------- -------- ANNUAL RETURN 2.20% 9.38%
Past performance is not necessarily indicative of future results. 21 Name of Pool....................................... Quadriga Superfund Guarant V Class C Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... March 2004 Net Asset Value as of November 30, 2004............ $1.5 million
YEAR 2004 ---- -------- ANNUAL RETURN (10.96%)
Name of Pool....................................... Quadriga Superfund Guarant V Class D Trading Advisor.................................... Quadriga Trading Management, Inc. Inception of Trading............................... March 2004 Net Asset Value as of November 30, 2004............ EUR 1.7 million
YEAR 2004 ---- -------- ANNUAL RETURN (5.93%)
Name of Pool....................................... Superfund A USD SICAV Trading Advisor.................................... Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 30, 2004............ $4.7 million
YEAR 2004 ---- -------- ANNUAL RETURN 6.20%
Name of Pool....................................... Superfund B USD SICAV Trading Advisor.................................... Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 30, 2004............ $3.4 million
YEAR 2004 ---- -------- ANNUAL RETURN 7.90%
Name of Pool....................................... Superfund C USD SICAV Trading Advisor.................................... Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 30, 2004............ $2.4 million
YEAR 2004 ---- -------- ANNUAL RETURN 9.30%
Name of Pool....................................... Superfund A EUR SICAV Trading Advisor.................................... Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 30, 2004............ EUR 3.5 million
YEAR 2004 ---- -------- ANNUAL RETURN 4.70%
Past performance is not necessarily indicative of future results. 22 Name of Pool....................................... Superfund B EUR SICAV Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 2004................ EUR 2.7 million
YEAR 2004 ---- -------- ANNUAL RETURN 6.50%
Name of Pool....................................... Superfund C EUR SICAV Trading Advisor.................................... Quadriga Fund Management, Inc. Inception of Trading............................... November 2004 Net Asset Value as of November 30, 2004............ EUR 1.9 million
YEAR 2004 ---- -------- ANNUAL RETURN 7.20%
Past performance is not necessarily indicative of future results. 23 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Quadriga Superfund, L.P. commenced the offering of its Units of Limited Partnership Interest on October 22, 2002. The initial offering terminated on October 31, 2002 and the Fund commenced operations on November 5, 2002. The continuing offering period commenced at the termination of the initial offering period and is ongoing. For the period ended September 30, 2004, subscriptions totaling $64,490,132 had been accepted and redemptions over the same period totaled $6,150,309. CAPITAL RESOURCES The Fund will raise additional capital only through the sale of Units offered pursuant to the continuing offering and does not intend to raise any capital through borrowings. Due to the nature of the Fund's business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets. LIQUIDITY Most United States commodity exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits." During a single trading day, no trades may be executed at prices beyond the daily limit. This may affect the fund's ability to initiate new positions or close existing ones or may prevent it from having orders executed. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses, which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place. Trading in forward contracts introduces a possible further impact on liquidity. Because such contracts are executed "off exchange" between private parties, the time required to offset or "unwind" these positions may be greater than that for regulated instruments. This potential delay could be exacerbated to the extent a counterparty is not a United States person. Other than these limitations on liquidity, which are inherent in the Fund's futures trading operations, the Fund's assets are expected to be highly liquid. RESULTS OF OPERATIONS FUND RESULTS FOR JANUARY 2004: In January, long positions in stock market indices profited considerably from upward price developments on the stock exchanges. Long positions in the metal sector performed in a successful manner along with most of the foreign currencies. Minor losses were incurred by a combination of long and short positions in the agricultural markets. During the month of January 2004, Series A gained 2.46% and Series B gained 3.49%, including charges. FUND RESULTS FOR FEBRUARY 2004: For the month of February, the continuing upwards movement on the stock exchanges resulted in further profits for long positions. Long positions in the energy and metals markets also performed notably well. In the financial futures sector, long positions in Bonds, Notes and Interest Rates also contributed to this month's positive performance. 24 For February, Series A realized a profit of 12.65% while Series B increased by 18.63%, each including charges. FUND RESULTS FOR MARCH 2004: In the month of March, the upwards trend of the stock indices reversed and caused a loss for the fund's long positions. Also, the strengthening US Dollar caused a negative performance of long positions in foreign currencies. Long positions in the metal sector performed slightly negative, whereas energy and financial futures positions were able to realize minor gains. The net asset value of Series A and B lost 2.10% and 2.59%, respectively, including charges. For the first quarter of 2004, the most profitable market group overall was the metal sector while positions in the currencies markets contributed the greatest amount of losses. FUND RESULTS FOR APRIL 2004: In April, long positions in stock market indices and metals were unprofitable due to falling prices in both market sectors. Long positions in the energy sector were the only notably positive contributors to the fund's performance for this month. The largest losses resulted from a combined long/short strategy in foreign currencies. During the month of April 2004, Series A lost 14.20% and Series B lost 19.59%, including charges. FUND RESULTS FOR MAY 2004: Although the downwards trend on the stock markets reversed, long positions still produced losses for the month. Long positions in the energy markets performed well and were the main source of this month's positive performance. In the financial futures sector, short positions in Bonds, Notes and Interest Rates generated slight profits. Only combined long/short positions in foreign currencies produced significant losses. For May, Series A increased by 7.21% and Series B by 9.11%, each including charges. FUND RESULTS FOR JUNE 2004: In the month of June, long positions in stock indices faced a weakening of the upwards trend, but were still able to perform slightly positive. Short positions in the other financial futures sectors lost along with long positions in the metal markets. The most significant losses were incurred by long positions in the energy sector due to a sharp price-decline in these markets. The net asset value of Series A and B lost 11.62% and 15.07%, respectively, including charges. For the second quarter of 2004, the most profitable market group overall was the energy sector while positions in the currencies markets contributed the greatest amount of losses. FUND RESULTS FOR JULY 2004: For the month of July, long positions in the financial futures sector, most importantly in stock market indices were unprofitable. 25 However, long positions in the energy sector were able to compensate for these losses by profiting from rising prices mainly in the oil and oil-related futures markets. The other market groups didn't reveal significant trends and didn't have any major influence on this month's slightly negative performance. During the month of July, Series A lost 0.16% and Series B lost 0.09%, including charges. FUND RESULTS FOR AUGUST 2004: After last month's rally, which persisted during the first weeks of August, oil prices gave back most of their gains resulting in a negative performance for the fund's long positions in the energy sector, which was the worst among all market groups Long positions in financial futures traded sideward, whereas long and short positions in foreign currencies were able to contribute positively to this month's trading performance. A combined long/short strategy in the agricultural sector produced a slight loss. For August, Series A decreased by 6.84% and Series B by 9.29%, each including charges. FUND RESULTS FOR SEPTEMBER 2004: Due to the impact of Hurricane Ivan on the US oil production in the Gulf of Mexico, rising prices of crude oils as well as oil-related products resulted in a major gain of the fund's long positions in these markets. Long positions in metal markets were able to even outperform these gains and were the most successful contributors to this month's outstanding trading performance. The only notable losses were incurred by long positions in the financial futures sector. The net asset value of Series A and B for September gained 10.44% and 14.75%, respectively, including charges. For the third quarter of 2004, the most profitable market group overall was the energy sector while positions in the stock index markets contributed the greatest amount of losses. OFF-BALANCE SHEET RISK The term "off-balance sheet risk" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. The Fund trades in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, there exists a market risk that such contracts may be significantly influenced by conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if Quadriga Capital Management was unable to offset such positions, the Fund could experience substantial losses. Quadriga Capital Management attempts to minimize market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio in all but extreme instances not greater than 50%. In addition to market risk, in entering into futures and forward contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions. 26 CRITICAL ACCOUNTING POLICIES -- VALUATION OF THE FUND'S POSITIONS Quadriga Capital Management believes that the accounting policies that will be most critical to the Fund's financial condition and results of operations relate to the valuation of the Fund's positions. The majority of the Fund's positions will be exchange-traded futures contracts, which will be valued daily at settlement prices published by the exchanges. Any spot and forward foreign currency contracts held by the Fund will also be valued at published daily settlement prices or at dealers' quotes. Thus, Quadriga Capital Management expects that under normal circumstances substantially all of the Fund's assets will be valued on a daily basis using objective measures. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTRODUCTION PAST RESULTS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business. Market movements can produce frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades. The Fund rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance is not necessarily indicative of its future results. Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund's speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund's experience to date (i.e., "risk of ruin"). In light of this, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Fund's losses in any market sector will be limited to Value at Risk or by the Fund's attempts to manage its market risk. STANDARD OF MATERIALITY Materiality as used in this section, "Quantitative and Qualitative Disclosures About Market Risk," is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Fund's market sensitive instruments. QUANTIFYING THE FUND'S TRADING VALUE AT RISK QUANTITATIVE FORWARD-LOOKING STATEMENTS The following quantitative disclosures regarding the Fund's market risk exposures contain "forward-looking statements" within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical 27 fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the reporting period). The Fund's risk exposure in the various market sectors traded by Quadriga Capital Management is quantified below in terms of Value at Risk. Due to the Fund's mark-to-market accounting, any loss in the fair value of the Fund's open positions is directly reflected in the Fund's earnings (realized or unrealized). Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day intervals. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. In the case of market sensitive instruments which are not exchange-traded (which includes currencies and some energy products and metals in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those cases in which a futures-equivalent margin is not available, dealers' margins have been used. In the case of contracts denominated in foreign currencies, the Value at Risk figures include foreign margin amounts converted into U.S. Dollars with an incremental adjustment to reflect the exchange rate risk inherent to the Dollar-based Fund in expressing Value at Risk in a functional currency other than Dollars. In quantifying the Fund's Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category's aggregate Value at Risk. The diversification effects resulting from the fact that the Fund's positions are rarely, if ever, 100% positively correlated have not been taken into account. THE FUND'S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS The following tables indicate the trading Value at Risk associated with the Fund's open positions by market category as of September 30, 2004. All open position trading risk exposures of the Fund have been included in calculating the figures set forth below. As of September 30, 2004, the net assets for Series A were $25,829,068, and the net assets for Series B as of such date were $33,569,575. SERIES A AS OF SEPTEMBER 30, 2004:
SECTOR MARKET RISK (USD) % OF TOTAL CAPITALIZATION (NET ASSETS) - ------ ----------------- -------------------------------------- Stock Indices.......................... 815,535 3.16 Financial Futures...................... 1,439,477 2.47 Currencies............................. 690,195 2.67 Agricultural Products.................. 187,541 0.73 Energy................................. 2,004,459 7.76 Metals................................. 1,938,308 7.50
SERIES B AS OF SEPTEMBER 30, 2004:
SECTOR MARKET RISK (USD) % OF TOTAL CAPITALIZATION (NET ASSETS) - ------ ----------------- -------------------------------------- Stock Indices.......................... 1,297,226 3.86 Financial Futures...................... 1,127,784 3.36 Currencies............................. 1,201,149 3.58 Agricultural Products.................. 328,846 0.98 Energy................................. 3,506,811 10.45 Metals................................. 3,388,637 10.09
28 MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund. The magnitude of the Fund's open positions creates a "risk of ruin" not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions -- unusual, but historically recurring from time to time -- could cause the Fund to incur severe losses over a short period of time. The foregoing Value at Risk tables -- as well as the past performance of the Fund -- gives no indication of this "risk of ruin." NON-TRADING RISK The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Fund also has non-trading market risk as a result of investing a substantial portion of its available assets in U.S. Treasury Bills. The market risk represented by these investments is immaterial. QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES The following qualitative disclosures regarding the Fund's market risk exposures -- except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures -- constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund's primary market risk exposures as well as the strategies used and to be used by Quadriga Capital Management for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund. The following were the primary trading risk exposures of the Fund as of September 30, 2004 by market sector. CURRENCIES The Fund's currency exposure is to exchange rate fluctuations, primarily those which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political, geopolitical and general economic conditions. The Fund trades in a large number of currencies, including cross-rates, (e.g. positions between two currencies other than the U.S. Dollar). Quadriga Capital Management does not anticipate that the risk profile of the Fund's currency sector will change significantly in the future. As of September 30, 2004 the exposure to these markets was relatively low in comparison to historic levels. INTEREST RATES Interest rate movements directly affect the price of the sovereign bond positions held by the Fund and indirectly the value of the Fund's stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries could materially impact the Fund's profitability. The Fund's primary interest rate exposure is to interest rate fluctuations in the United States, Europe, United Kingdom, Australia and Japan. The changes in interest rates which have the most effect on the Fund are 29 changes in long-term as opposed to short-term rates. As of September 30, 2004 the exposure to these markets was relatively low in comparison to historic levels. STOCK INDICES Generally, the Fund's primary exposure is to the equity price risk in the G-7 countries and certain other countries with high liquidity (Taiwan, Hong Kong, Switzerland and Spain). The Fund is primarily exposed to the risk of adverse price trends or static markets in these countries. Static markets would not cause major price changes but would make it difficult for the Fund to avoid being "whipsawed" into numerous smaller losses. As of September 30, 2004 the exposure to these markets was similar to historic levels. ENERGY The Fund's primary energy market exposure is to crude oil, natural gas and heating oil. Movements in these markets are often due to geopolitical developments in the Middle East but can also be caused by shortage due to extreme weather conditions. The exposure to these markets as of September 30, 2004 was the highest among all market groups. METALS The Fund's metals market exposure derives primarily from fluctuations in the price of gold, silver, platinum, copper, zinc, nickel and aluminum. These markets represent a great diversification in terms of correlation to many of the other sectors the Fund trades. The exposure to these markets as of September 30, 2004 was relatively high in comparison to historic levels. AGRICULTURAL MARKET The Fund's agricultural market exposure is to fluctuations in the price of cocoa, sugar, coffee, cotton, lean hogs and live cattle. These markets represent a great diversification in terms of correlation to many of the other sectors the Fund trades. The exposure to these markets as of September 30, 2004 was the lowest among all market groups. QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE GENERAL On July 22, 2003, Quadriga Capital Management on behalf of the Fund filed an amended registration statement with the U.S. Securities and Exchange Commission which became effective on July 25, 2003. The amended registration statement included as a risk possible contingent liability resulting from potential claims for rescission from investors and regulatory or enforcement action for any sales of Units made without an effective registration statement. On January 10, 2003, Quadriga Capital Management on behalf of the Fund filed a post-effective amendment to the registration statement which amended the plan of distribution. Before such amendment had been declared effective, and as of June 30, 2003, the Fund had sold a total of 5,604 units of Series A in the principal amount of $6.74 million and 8,091 units of Series B in the principal amount of $10.73 million. As a regulated company, Quadriga Capital Management faces potential liability in the normal cause of its business from any administrative action or in any situation in which it is found to have engaged in activities which violate applicable law. Quadriga Capital Management is unable to estimate the probability of assertion of any related claims or assessments. Except as described in the preceding two paragraphs, the Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Fund generally will use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund's operations. 30 FOREIGN CURRENCY BALANCES The Fund's primary foreign currency balances are in the G-7 countries along with Spain and Asian markets. The Fund controls the non-trading risk of these balances by regularly converting these balances back into dollars (no less frequently than weekly, and more frequently if a particular foreign currency balance becomes unusually large based on Quadriga Capital Management's experience). TREASURY BILL POSITIONS The Fund's only market exposure in instruments held other than for trading is in its Treasury Bill portfolio. The Fund holds Treasury Bills (interest bearing and credit risk-free) with durations no longer than six months. Substantial or sudden fluctuations in prevailing interest rates could cause immaterial mark-to-market losses on the Fund's Treasury Bills, although substantially all of these short-term investments are held to maturity. QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE The means by which the Fund and Quadriga Capital Management, each attempt to manage the risk of the Fund's open positions is essentially the same in all market categories traded. Quadriga Capital Management applies risk management policies to its trading which generally limit the total exposure that may be taken per "risk unit" of assets under management. In addition, Quadriga Capital Management follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as imposing "stop-loss" points at which the Fund's brokers must attempt to close out open positions. Quadriga Capital Management controls the risk of the Fund's non-trading instruments (Treasury Bills held for cash management purposes) by limiting the duration of such instruments to no more than six months. 31 CONFLICTS OF INTEREST QUADRIGA CAPITAL MANAGEMENT, INC. Conflicts exist between Quadriga Capital Management's interests in and its responsibilities to each Series. The conflicts are inherent in Quadriga Capital Management acting as general partner and as trading advisor to each Series. These conflicts and the potential detriments to the Limited Partners are described below. Quadriga Capital Management's selection of itself as trading advisor was not objective, since it is also the general partner of each Series. In addition, it has a disincentive to replace itself as the advisor. The advisory relationship between each Series and Quadriga Capital Management, including the fee arrangement, was not negotiated at arm's length. Investors should note, however, that Quadriga Capital Management believes that the fee arrangements are fair to each Series and competitive with compensation arrangements in pools involving independent general partners and advisors. Quadriga Capital Management will review its compensation terms annually to determine whether such terms continue to be competitive with other pools for similar services and will lower such fees if it concludes, in good faith, that its fees are no longer competitive. Neither Quadriga Capital Management nor its principals devote their time exclusively to each Series. Quadriga Capital Management (or its principals) acts as general partner to other commodity pools and trading advisor to other accounts which may compete with each Series for Quadriga Capital Management's services. Thus, Quadriga Capital Management could have a conflict between its responsibilities to each Series and to those other pools and accounts. Quadriga Capital Management believes that it has sufficient resources to discharge its responsibilities in this regard in a fair manner. Quadriga Capital Management may receive higher advisory fees from some of those other accounts than it receives from each Series. Quadriga Capital Management, however, trades all accounts in a substantially similar manner, given the differences in size and timing of the capital additions and withdrawals. In addition, Quadriga Capital Management may find that futures positions established for the benefit of each Series, when aggregated with positions in other accounts of Quadriga Capital Management, approach the speculative position limits in a particular commodity. Quadriga Capital Management may decide to address this situation either by liquidating each Series' positions in that futures contract and reapportioning the portfolio in other contracts or by trading contracts in other markets which do not have restrictive limits. Any principal of Quadriga Capital Management may trade futures and related contracts for its own account. Trading records for any proprietary trading are not available for review by clients or investors. Employees of Quadriga Capital Management are prohibited from trading for their own accounts. A conflict of interest exists if proprietary trades are executed and cleared at more favorable rates than trades cleared on behalf of each Series. A potential conflict also may occur when Quadriga Capital Management or its principals trade their proprietary accounts more aggressively, take positions in proprietary accounts which are opposite, or ahead of, the positions taken by each Series. THE CLEARING BROKERS The clearing brokers, currently Cargill Investors Services, Inc., ADMIS Inc., Fimat USA, Man Financial Inc., Bear Stearns Forex Inc., Bear Stearns Securities Corp, and Barclays Capital Inc., and the affiliates and personnel of such entities, may trade futures and forward contracts for their own accounts. This trading could give rise to conflicts of interest with each Series. The clearing brokers also may serve as a brokers for other commodity pools, which could give rise to conflicts of interest between their responsibility to each Series and to those pools and clients. Any clearing broker that is also a selling agent of each Series could give rise to conflicts of interest because its compensation in each role is based on the net asset value of units outstanding. Further, in making recommendations to redeem or purchase additional Units, employees of the clearing brokers may have a conflict of interest between acting in the best interest of their clients and assuring continued compensation to their employer. 32 FIDUCIARY DUTY AND REMEDIES Subject to the provisions of the Partnership Agreement, a prospective investor should be aware that Quadriga Capital Management, as general partner of a Series, has a responsibility to Limited Partners of that Series to exercise good faith and fairness in all dealings affecting such Series. The Partnership Agreement provisions limiting this responsibility are summarized below under "Indemnification and Standard of Liability." The fiduciary responsibility of a general partner to the Limited Partners is a developing and changing area of the law and Limited Partners who have questions concerning the duties of Quadriga Capital Management as general partner should consult with their counsel. In the event that a Limited Partner of a Series believes that Quadriga Capital Management has violated its fiduciary duty to the Limited Partners of such Series, he may seek legal relief individually or on behalf of such Series under applicable laws, including under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Act") and under commodities laws, to recover damages from or require an accounting by Quadriga Capital Management. The Partnership Agreement is governed by Delaware law and any breach of Quadriga Capital Management's fiduciary duty under the Partnership Agreement will generally be governed by Delaware law. The Partnership Agreement does not limit Quadriga Capital Management's fiduciary obligations under Delaware or common law; however, Quadriga Capital Management may assert as a defense to claims of breach of fiduciary duty that the conflicts of interest and fees payable to Quadriga Capital Management have been disclosed in this Prospectus. Limited Partners may also have the right, subject to applicable procedural and jurisdictional requirements, to bring class actions in federal court to enforce their rights under the federal securities laws and the rules and regulations promulgated thereunder by the SEC. Limited Partners who have suffered losses in connection with the purchase or sale of the Units may be able to recover such losses from Quadriga Capital Management where the losses result from a violation by Quadriga Capital Management of the federal securities laws. State securities laws may also provide certain remedies to Limited Partners. Limited Partners should be aware that performance by Quadriga Capital Management of its fiduciary duty to each Series is measured by the terms of the Partnership Agreement as well as applicable law. Limited Partners are afforded certain rights to institute reparations proceedings under the Commodity Exchange Act for violations of the Commodity Exchange Act or of any rule, regulation or order of the CFTC by Quadriga Capital Management. INDEMNIFICATION AND STANDARD OF LIABILITY Quadriga Capital Management and its controlling persons may not be liable to each Series or any Limited Partner for errors in judgment or other acts or omissions not amounting to misconduct or negligence, as a consequence of the indemnification and exculpatory provisions described in the following paragraph. Purchasers of Units may have more limited rights of action than they would absent such provisions. The Partnership Agreement provides that Quadriga Capital Management and its controlling persons shall not have any liability to each Series or to any Limited Partner for any loss suffered by such Series which arises out of any action or inaction if Quadriga Capital Management, in good faith, determined that such course of conduct was in the best interests of such Series and such course of conduct did not constitute negligence or misconduct of Quadriga Capital Management. Each Series has agreed to indemnify Quadriga Capital Management and its controlling persons against claims, losses or liabilities based on their conduct relating to such Series, provided that the conduct resulting in the claims, losses or liabilities for which indemnity is sought did not constitute negligence or misconduct or breach of any fiduciary obligation to such Series and was done in good faith and in a manner which Quadriga Capital Management, in good faith, determined to be in the best interests of such Series. Controlling persons of Quadriga Capital Management are entitled to indemnity only for losses resulting from claims against such controlling persons due solely to their relationship with Quadriga Capital Management or for losses incurred in performing the duties of Quadriga Capital Management. See Section 17 of the Partnership Agreement, included as Exhibit A to this Prospectus. Each Series will not indemnify Quadriga Capital Management or its controlling persons for any liability arising from securities law violations in connection with the offering of the Units of such Series unless Quadriga Capital Management or its controlling persons prevails on the merits or obtains a court approved settlement (in accordance with 33 Section 17 of the Partnership Agreement). The position of the SEC is that any such indemnification is contrary to the federal securities laws and therefore unenforceable. CHARGES TO EACH SERIES The following list of fees and expenses includes all compensation, fees, profits and other benefits (including reimbursement of out-of-pocket expenses) which Quadriga Capital Management, the selling agents, the clearing brokers and the affiliates of those parties may earn or receive in connection with the offering and operation of each Series. Prospective investors should refer to the Breakeven Analysis for each Series beginning on page 5 for an estimate of the break-even amount that is required for an investor to recoup such fees and expenses, or "break even" in the first year of trading. MANAGEMENT FEE Each Series will pay Quadriga Capital Management a monthly management fee equal to one-twelfth of 1.85% (1.85% annually) of the month end net asset value of such Series. This fee will be paid to Quadriga Capital Management for providing ongoing advisory services and is payable notwithstanding Quadriga Capital Management's actual trading performance. PERFORMANCE FEE Each Series will pay Quadriga Capital Management a monthly incentive fee equal to 25% of the new appreciation (if any) in the net asset value of that Series. "New appreciation" means the total increase in net asset value of a Series from the end of the last period for which a performance fee was earned by Quadriga Capital Management. The performance fee is not reduced for extraordinary expenses, if any, of the Series, and no fee is paid with respect to interest income. If a performance fee payment is made by each Series, and each Series thereafter incurs a net loss, Quadriga Capital Management will retain the amount previously paid. Thus, Quadriga Capital Management may be paid a performance fee during a year in which each Series overall incurred net losses. Trading losses will be carried forward and no further performance fees may be paid until the prior losses have been recovered. Below is a sample calculation of the performance fee with respect to a Series: Assume a Series paid a performance fee at the end of the first month of 2002 and assume that such Series recognized trading profits (net of all brokerage fees and operating and offering expenses) of $200,000 during the second month of 2002. The new appreciation for the month (before interest earned) would be $200,000 and Quadriga Capital Management's performance fee would be $50,000 (0.25 X $200,000). Alternatively, assume that such Series paid a performance fee at the end of the eleventh month of 2001 but did not pay a performance fee at the end of the twelfth month of 2001 because it had trading losses of $100,000. If such Series recognized trading profits of $200,000 at the end of the first month of 2002, the new appreciation (before interest earned) for the month would be $100,000 ($200,000 - $100,000 loss carry forward) and Quadriga Capital Management's performance fee would be $25,000 (0.25 X $100,000). Please note that this simplified example assumes that no Limited Partners of such Series have added or redeemed Units within such Series during this sample time frame. Such capital changes require that the calculation be determined on a "per Unit" per Series basis. If the net asset value per Unit within a Series at the time when a particular investor acquires Units is lower than the net asset value per Unit within a Series as of the end of the most recent prior calendar month for which a performance fee was payable (due to losses incurred between such month-end and the subscription date), such Units might experience a substantial increase in value after the subscription date yet pay no performance fee as of the next calendar month-end because such Series as a whole has not experienced new appreciation. If a performance fee accrual is in effect at the time when particular Units are purchased (due to gains achieved prior to the applicable subscription day), the net asset value per Unit reflects such accrual. In the event the net asset value of a Series declines after the subscription date, the incentive fee accrual is "reversed" and such reversal is credited to all Units within such Series equally, including the Units which were purchased at a net asset value per Unit which fully reflected such accrual. The brokerage fee and performance fee may be increased upon sixty days' notice to the Limited Partners of a Series as long as the notice explains Limited Partners' redemption and voting rights. 34 ORGANIZATION AND OFFERING EXPENSES Each Series will pay a monthly fee equal to one-twelfth of 1% (1% annually) of the month end net asset value of that Series for organization and offering expenses. Organization and offering expenses include all fees and expenses incurred in connection with the formation of each Series and distribution of the Units including printing, mailing, filing fees, escrow fees, salaries and bonuses of employees while engaged in sales activities and marketing expenses of Quadriga Capital Management and the selling agents which are paid by each Series and will be advanced by Quadriga Capital Management. Each Series is required by certain state securities administrators to disclose that the "organization and offering expenses" of each Series, as defined by the NASAA Guidelines, will not exceed 15% of the total subscriptions accepted. OPERATING EXPENSES Each Series bears its operating expenses, including but not limited to administrative, legal and accounting fees, and any taxes or extraordinary expenses payable by each Series, at a fixed rate of 1/12 of 0.15% per month (0.15% annually) of each Series month end net asset value. Quadriga Capital Management will be responsible for any such expenses during any year of operations which exceed 0.15% of each Series' net assets per annum. Indirect expenses in connection with the administration of each Series, such as indirect salaries, rent, travel and overhead of Quadriga Capital Management, may not be charged to each Series. BROKERAGE AND TRAILING COMMISSIONS Each Series will be charged $25.00 per round turn transaction plus applicable National Futures Association and exchange fees for execution and brokerage services, along with an annual 4% selling commission ( 1/12 of 4% per month) of the month-end net asset value of each Series per month. The maximum cumulative selling commission per Unit is 10% of the purchase price for such Unit. These commissions and fees will be paid to Quadriga Asset Management, an introducing broker and affiliate of Quadriga Capital Management, which will, in turn, remit a portion of the commissions to the clearing broker for execution and clearing costs. Quadriga Asset Management will retain the remaining brokerage commission fee. Quadriga Asset Management will also remit a portion of the selling fee to the selling agents for ongoing administrative services to the Limited Partners. The compensation to be paid will not exceed the guidelines established by the North American Securities Administrators Association, Inc. ("NASAA"). USE OF PROCEEDS The entire offering proceeds received from subscription for each Series will be credited to such Series' bank and brokerage accounts for the purpose of engaging in trading activities and as reserves for that trading. Continuing fees and expenses such as operating and management will also be paid from funds in these accounts. Each Series meets its margin requirements by depositing U.S. government securities with the clearing broker. In this way, substantially all (i.e., 95% or more) of each Series' assets, whether used as margin for trading purposes or as reserves for such trading, can be invested in U.S. government securities. Investors should note that maintenance of each Series' assets in U.S. government securities and banks does not reduce the risk of loss from trading futures and forward contracts. Each Series receives all interest earned on its assets. Up to 50% of each Series' assets will be committed as margin for futures contracts and held by the clearing broker, although the amount committed may vary significantly. Such assets are maintained in segregated accounts with the clearing broker pursuant to the Commodity Exchange Act and regulations thereunder. The remaining Series assets will normally be invested in U.S. Treasury bills. A portion of this remaining portion may also be invested in reverse repurchase obligations and short-term corporate debt obligations rated AAA by at least one commercial rating agency. Each Series' assets are not and will not be, directly or indirectly, commingled with the property of any other Series, or any other person by Quadriga Capital Management nor invested with or loaned to Quadriga Capital Management or any affiliated entities. 35 THE CLEARING BROKERS CARGILL INVESTOR SERVICES, INC. Cargill Investor Services, Inc. is registered as a futures commission merchant and is a member of the National Futures Association. Its main office address is located at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606. In the ordinary course of its business, Cargill Investor Services, Inc. is engaged in civil litigation and subject to administrative proceedings which in the aggregate, are not expected to have a material effect upon its condition, financial or otherwise. Neither Cargill Investor Services, Inc. nor any of its principals have been the subject of any material, administrative, civil or criminal action within the five years preceding the date of this letter. ADM INVESTOR SERVICES, INC. ADM Investor Services, Inc. ("ADMIS") is a registered futures commission merchant and is a member of the National Futures Association. Its main office is located at 141 W. Jackson Blvd., Suite 1600A, Chicago, IL 60604. In the normal course of its business, ADMIS is involved in various legal actions incidental to its commodities business. None of these actions are expected either individually or in aggregate to have a material adverse impact on ADMIS. Neither ADMIS nor any of its principals have been the subject of any material administrative or criminal actions within the past five years. FIMAT USA, INC. In connection with the Partnership, Fimat USA, Inc. will be serving as clearing broker. Fimat USA is a wholly owned subsidiary of FIMAT International Banque SA, which itself is a wholly owned subsidiary of Societe Generale. As of October 2001, the Fimat Group (comprising of Fimat International Banque, SA and all its worldwide branches and subsidiaries, as well as Fimat Derivatives Canada Inc., and the divisions of SG Securities North Pacific S.G. and SG Securities (London) Ltd., Seoul Branch doing business as "Fimat" in Japan and Korea, respectively) was present on 35 derivatives exchanges worldwide. Fimat USA is a futures commission merchant and broker dealer registered with the Commodity Futures Trading Commission and the Securities and Exchange Commission, and is a member of the National Futures Association and National Association of Securities Dealers, Inc. Fimat USA is also a clearing member of all principal commodity futures exchanges located in the United States as well as a member of the Chicago Board Options Exchange, Philadelphia Stock Exchange, Options Clearing Corporation, and Government Securities Clearing Corporation. Fimat USA, Inc. is headquartered at 630 Fifth Avenue, Suite 500, New York, New York 10111 and has principal branch offices in Chicago, Illinois; Kansas City, Missouri; Nashville, Tennessee; and Houston, Texas. Fimat USA, Inc. or any of its principals have not been the subject of any material administrative, civil, or criminal action within the past five years, nor is any such action pending. Neither Fimat USA, Inc., nor any affiliate, officer, director or employee thereof have passed on the merits of this Prospectus or offering, or given any guarantee as to the performance or any other aspect of the Partnership. MAN FINANCIAL INC Man Financial Inc is a clearing broker for the Partnership. It is registered under the Commodity Exchange Act, as amended, as a futures commission merchant and a commodity pool operator, and is a member of the National Futures Association in such capacities. Man Financial, part of the Man Group of 36 companies, is a member of all major U.S. futures exchanges. Its main office is located at 717 Fifth Avenue, 9(th) Floor, New York, New York 10022-8101 and its telephone number at such location is (212) 589-6200. At any given time, Man Financial is involved in numerous legal actions and administrative proceedings, which in the aggregate, are not, as of the date of this document, expected to have a material effect upon its condition, financial or otherwise, or to the services it will render to the Partnership. There have been no material administrative, civil or criminal proceedings pending, on appeal or concluded against Man Financial or its principals within the five years preceding the date of this document. Man Financial acts only as a clearing broker for the Partnership and as such is paid commissions for executing and clearing trades on behalf of the Partnership. Man Financial has not passed upon the adequacy or accuracy of this document. Man Financial neither will act in any supervisory capacity with respect to Quadriga Capital Management nor participate in its management or that of the Partnership. Therefore, prospective investors should not rely on Man Financial in deciding whether or not to participate in the Partnership. There have been no material administrative, civil, or criminal actions within the past five years against Man Financial or any of its principals, nor is any such action pending. BEAR STEARNS FOREX INC. AND BEAR, STEARNS SECURITIES CORP. Bear Stearns Forex Inc. ("BSF"), a Delaware corporation, is a foreign currency dealer. Bear, Stearns Securities Corp. ("BSSC"), a Delaware corporation, is a United States licensed broker/dealer. The Partnership and the Partnership's general partner, have selected BSF as one of the foreign exchange ("FX") dealers with whom the Partnership may enter into over-the-counter foreign exchange spot, forward or options ("FX Transactions") as principal/counterparty. When BSF is the FX counterparty to the Partnership, FX spot and forward transactions of the Partnership will clear through BSSC. Since BSSC is acting as a clearance firm, any protections customarily afforded an account that clears its business through a U.S. broker/dealer, including the holding of margin, collateral and positions in such account, will be afforded to the Partnership's account. Neither BSF nor BSSC make any trading decisions for the Partnership or its general partner, nor does BSF or BSSC supervise trading by the Partnership or its general partner in any way. The Partnership and its general partner may choose to enter into FX Transactions with any one of a number of different foreign exchange dealers other than BSF. There have been no material administrative, civil, or criminal actions within the past five years against BSF or BSSC or any of their principals, nor is any such action pending. BARCLAYS CAPITAL INC. Barclays Capital Inc. is a futures commission merchant and a broker dealer registered with the Commodity Futures Trading Commission and the Securities and Exchange Commission and is a member of the National Futures Association and the National Association of Securities Dealers, Inc. There have been no material administrative, civil or criminal proceedings within the past five years against Barclays Capital or any of its principals, nor is any such action pending. Quadriga Capital Management is not obligated to continue to use the clearing brokers identified above and may select others or additional dealers and counterparties in the future, provided Quadriga Capital Management believes that their service and pricing are competitive. DISTRIBUTIONS AND REDEMPTIONS DISTRIBUTIONS Each Series is not required to make any distributions to Limited Partners. While each Series has the authority to make such distributions, it does not intend to do so in the foreseeable future. Quadriga Capital Management believes that distributions of Partnership assets serve no useful purpose since Limited Partners may redeem any or all of their Units at the then current net value per Unit on a periodic basis. The amount 37 and timing of future distributions is uncertain. Because of the potential volatility of the futures and forward contract markets, especially in the short-term, each Series is recommended for those seeking a medium- to long-term investment, i.e., three to five years). If each Series realizes profits for any fiscal year, such profits will constitute taxable income to the Limited Partners of such Series in accordance with their respective investments in such Series whether or not cash or other property has been distributed to Limited Partners. Any distributions, if made by a Series, may be inadequate to cover such taxes payable by the Limited Partners of such Series. REDEMPTIONS A Limited Partner of a Series may request any or all of his investment in such Series be redeemed by such Series at the net asset value of a Unit within such Series as of the end of the month, subject to a minimum redemption of $1,000 and subject further to such Limited Partner having an investment in such Series, after giving effect to the requested redemption, at least equal to the minimum initial investment amount of $5,000. Limited Partners must transmit a written request of such withdrawal to Quadriga Capital Management not less than ten (10) business days prior to the end of the month (or such shorter period as permitted by Quadriga Capital Management) as of which redemption is to be effective. The Request for Redemption must specify the dollar amount for which redemption is sought. Redemptions will generally be paid within 20 days after the date of redemption. However, in special circumstances, including, but not limited to, inability to liquidate dealers' positions as of a redemption date or default or delay in payments due to each Series from clearing brokers, banks or other persons or entities, each Series may in turn delay payment to persons requesting redemption of the proportionate part of the net assets of each Series represented by the sums that are the subject of such default or delay. No such delays have been imposed to date by any pool sponsored by Quadriga Capital Management. The federal income tax aspects of redemptions are described under "Federal Income Tax Aspects." NET ASSET VALUE The net asset value of a Unit within a Series as of any date is (i) the sum of all cash, plus Treasury bills valued at cost plus accrued interest, and other securities of such Series valued at market, plus the market value of all open futures, forward and option positions maintained by such Series, less all liabilities of each Series and accrued performance fees payable by such Series, determined in accordance with the principles specified in the Partnership Agreement, divided by (ii) the number of Units of such Series outstanding as of the date of determination. Where no principle is specified in the Partnership Agreement, the net asset value of a Series is calculated in accordance with accounting principles generally accepted in the United States of America under the accrual basis of accounting. 38 QUADRIGA SUPERFUND, L.P. LIMITED PARTNERSHIP AGREEMENT The following is a summary of the Quadriga Superfund, L.P. Limited Partnership Agreement (the "Partnership Agreement"), a form of which is attached as Exhibit A and incorporated by reference. ORGANIZATION AND LIMITED LIABILITIES Quadriga Superfund is organized under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Act"). The Partnership Agreement provides that Quadriga Superfund shall be organized as separate Series. Under the Partnership Agreement, Quadriga Capital Management has created Series A and Series B. Quadriga Capital Management may create other Series under the Partnership Agreement as provided therein. In general, the liability of a Limited Partner within a Series under the Act is limited to the amount of his capital contribution to such Series and his share of any undistributed profits of such Series. (However, Limited Partners could be required, as a matter of bankruptcy law, to return to each Series' estate any distribution which they received at a time when such Series was in fact insolvent or in violation of the Partnership Agreement.) The assets and estate of one Series is not liable for the liabilities of another Series. MANAGEMENT OF PARTNERSHIP AFFAIRS The Partnership Agreement effectively gives Quadriga Capital Management, as general partner, full control over the management and operations of each Series and the Partnership Agreement gives no management role to the Limited Partners. To facilitate matters for Quadriga Capital Management, the Limited Partners must execute the attached Subscription Agreement and Power of Attorney (Exhibit D). Registered Agents Legal Services, LLC will accept service of legal process on each Series in the State of Delaware. Only Quadriga Capital Management has signed the Registration Statement of which this Prospectus is a part, and only the assets of each Series are subject to issuer liability under the federal securities laws for the information contained in this Prospectus and under federal and state laws with respect to the issuance and sale of the Units. Under the Partnership Agreement, the power and authority to manage, operate and control all aspects of the business of each Series are vested in the General Partner. In addition, QCM has been designated as the "tax matters partner" of each Series and of Quadriga Superfund for purposes of 27-36 the Internal Revenue Code of 1986, as amended (the "Code"). The Limited Partners have no voice in the operations of each Series, other than certain limited voting rights as set forth in the Partnership Agreement. In the course of its management, Quadriga Capital Management may, in its sole and absolute discretion, appoint an affiliate or affiliates of Quadriga Capital Management as additional general partners (except where Quadriga Capital Management has been notified by the Limited Partners that it is to be replaced as the general partner) and retain such persons, including affiliates of Quadriga Capital Management, as it deems necessary for the efficient operation of each Series. THE ADMINISTRATOR RK Consulting, LLC ("RKC" or the "Administrator") is currently Quadriga Superfund's administrator and is a wholly-owned subsidiary of Rothstein, Kass & Co., P.C. ("Rothstein Kass"). Pursuant to an out-sourced Accounting and Tax Services Agreement entered into between Quadriga Superfund and RKC, (the "Accounting Agreement"), RKC will be responsible for, among other things: (i) developing an electronic linkage with each of the Series' Clearing Brokers in order to receive monthly data from such brokers, (ii) calculating the monthly fees and the performance fee payable to Quadriga Capital Management with respect to each Series, (iii) preparing or procuring the preparation of annual financial statements of each Series and furnishing such statements, as well as the monthly reports and quarterly reports regarding each Series' performance and net asset value per Unit, to Quadriga Capital Management and to Limited Partners of such Series, (iv) keeping the accounts of each Series and of Quadriga Superfund and such financial books as required by law or otherwise for the conduct of the financial affairs of each Series, and (v) performing all other accounting services necessary in connection with each Series. 39 The Accounting Agreement provides that RKC shall not be liable to a Series for any acts or omissions in connection with the services rendered to such Series under such agreement in the absence of negligence or willful misconduct by RKC, or a breach by RKC of the Accounting Agreement. In addition, the Series has agreed to indemnify RKC for any and all expenses, costs, damages, or causes of action, including, but not limited to, reasonable attorneys fees, incurred by RKC as the result of the unauthorized acts of such Series, Quadriga Capital Management, its employees or agents, or arising out of such Series' or Quadriga Capital Management's negligence, willful misconduct, or breach of the Accounting Agreement. RKC receives customary fees paid out of a Series' assets based upon the nature and extent of the services performed by RKC for such Series. The Accounting Agreement may be terminated at any time without penalty by either of the parties upon not less than 90 days' written notice. Rothstein Kass is the thirtieth largest accounting firm in the United States and is a member of the SEC Practice Section and the Private Companies Practice Section of the American Institute of Certified Public Accountants. Rothstein Kass has extensive experience providing accounting, tax and management consulting to investment partnerships, offshore funds, funds of funds, registered investment advisors and commodity pools located throughout the United States. In addition, Rothstein Kass has been providing services to domestic funds since the early 1980's and for offshore funds since the early 1990's, including, among other things, portfolio accounting, tax reporting, financial accounting, software development and general administrative services. Quadriga Superfund has entered into an agreement with PFPC, Inc. to act as the fund's administrator beginning March 1, 2005. In such capacity, PFPC will be responsible for performing substantially the same duties as those done previously by RKC and will be subject to a similar standard of liability. PFPC is a leading provider of processing, technology and business solutions to the global investment industry. Its open business model enables them to deliver personalized solutions to meet client needs, preferences and requirements through their component-based Global Enterprise. Platform(SM), clients can access a comprehensive array of investor and securities servicing capabilities, PFPC supports a global client base from offices in the United States and Europe, offering fund accounting and administration, transfer agency, custody and sub-accounting services for $1.6 trillion in total assets and 55 million shareholder accounts. PFPC is a member of The PNC Financial Services Group. Its main office address is 301 Bellevue Parkway, Wilmington, Delaware 19809. SHARING OF PROFITS AND LOSSES Each Limited Partner within a Series has a capital account. Initially, the Limited Partner's balance equals the amount paid for the Units in such Series. The Limited Partner's balance is then proportionally adjusted monthly to reflect any additions or withdrawals by each Limited Partner and his portion of such Series' gains or losses for the month as reflected by changes in the net asset value for such Series. FEDERAL TAX ALLOCATIONS At year-end, each Series will determine the total taxable income or loss for the year. Subject to the special allocation of net capital gain or loss to redeeming Limited Partners, the taxable gain or loss is allocated to each Limited Partner within a Series in proportion to his capital account therein and each Limited Partner is responsible for his share of taxable income of such Series. See Section 8 of the Partnership Agreement, and "Federal Income Tax Aspects." For net capital gain and loss, the gains and losses are first allocated to each Limited Partner who redeemed units during the year. The remaining net capital gain or loss is then allocated to each Limited Partner in proportion to his capital account. Each Limited Partner's tax basis in his units is increased by the taxable income allocated to him and reduced by any distributions received and losses allocated to him. Upon each Series' liquidation, each Limited Partner within such Series will receive his proportionate share of the assets of such Series. 40 DISPOSITIONS A Limited Partner may transfer or assign his units in a Series upon 30 days' prior written notice to Quadriga Capital Management and subject to approval by Quadriga Capital Management of the assignee. Quadriga Capital Management will provide consent when it is satisfied that the transfer complies with applicable laws, and further would not result in the termination of such Series for federal income tax purposes. An assignee not admitted to a Series as a Limited Partner will have only limited rights to share the profits and capital of such Series and a limited redemption right. Assignees receive "carry-over" tax basis accounts and capital accounts from their assignors, irrespective of the amount paid for the assigned Units. DISSOLUTION AND TERMINATION OF EACH SERIES Each Series will be terminated and dissolved upon the happening of the earlier of: 1) the expiration of each Series' stated term on December 31, 2050; 2) Limited Partners owning more than 50% of the outstanding units of such Series vote to dissolve such Series; 3) Quadriga Capital Management withdraws as general partner and no new general partner is appointed; 4) a decline in the aggregate net assets of such Series to less than $500,000; 5) the continued existence of such Series becomes unlawful; or 6) such Series is dissolved by operation of law. AMENDMENTS AND MEETINGS The Partnership Agreement may be amended with the approval of more than fifty percent (50%) of the Units then owned by Limited Partners of each Series. Quadriga Capital Management may make minor changes to the Partnership Agreement without the approval of the Limited Partners. These minor changes can be for clarifications of inaccuracies or ambiguities, modifications in response to changes in tax code or regulations or any other changes the managing owner deems advisable so long as they do not change the basic investment policy or structure of each Series. Limited Partners owning at least 10% of the outstanding units of a Series can call a meeting of such Series. At that meeting, the Limited Partners, provided that Limited Partners owning a majority of the outstanding units of such Series concur, can vote to: 1) amend the Partnership Agreement with respect to such Series without the consent of Quadriga Capital Management; 2) dissolve such Series; 3) terminate contracts with Quadriga Capital Management; 4) remove and replace Quadriga Capital Management as general partner; and 5) approve the sale of Quadriga Superfund's assets. INDEMNIFICATION Each Series agrees to indemnify Quadriga Capital Management, as general partner, for actions taken on behalf of such Series, provided that Quadriga Capital Management's conduct was in the best interests of such Series and the conduct was not the result of negligence or misconduct. Indemnification by each Series for alleged violation of securities laws is only available if the following conditions are satisfied: 1) a successful adjudication on the merits of each count alleged has been obtained, or 2) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or 3) a court of competent jurisdiction approves a settlement of the claims and finds indemnification of the settlement and related costs should be made; and 4) in the case of 3), the court has been advised of the position of the SEC and certain states in which the units were offered and sold as to indemnification for the violations. REPORTS TO LIMITED PARTNERS The Limited Partners in a Series shall have access to and the right to copy such Series' books and records. A Limited Partner may obtain a list of all Limited Partners within such Series together with the number of units owned by each Limited Partner within such Series, provided such request is not for commercial purposes unrelated to such Limited Partner's interest as a beneficial owner of such Series. Quadriga Capital Management will provide various reports and statements to the Limited Partners within a Series including: 1) monthly, Quadriga Capital Management will provide an unaudited income statement of the prior month's Series' activities; 2) annually, Quadriga Capital Management will provide audited financial statements of such Series accompanied by a fiscal year-end summary of the monthly reports described above; 41 3) annually, Quadriga Capital Management will provide tax information necessary for the preparation of the Limited Partners' annual federal income tax returns; and 4) if the net asset value per unit within a Series as of the end of any business day declines by 50% or more from either the prior year-end or the prior month-end unit value of such Series, Quadriga Capital Management will suspend trading activities, notify all Limited Partners within such Series of the relevant facts within seven business days and declare a special redemption period. 42 FEDERAL INCOME TAX ASPECTS The following constitutes the opinion of Henderson & Lyman and summarizes the material federal income tax consequences to individual investors in each Series. EACH SERIES' PARTNERSHIP TAX STATUS Because each Series is treated as a partnership for federal income tax purposes, each Series does not pay any federal income tax. Based on the expected activity of and restrictions on each Series, each Series will not be taxed as a "publicly traded partnership." TAXATION OF LIMITED PARTNERS ON PROFITS AND LOSSES OF EACH SERIES Each Limited Partner must pay tax on his share of each Series' annual income and gains, if any, even if each Series does not make any cash distributions. Each Series generally allocates each Series' gains and losses equally to each Unit. However, a Limited Partner who redeems any Units will be allocated his share of each Series' gains and losses in order that the amount of cash a Limited Partner receives for a redeemed Unit equals the Limited Partner's adjusted tax basis in the redeemed Unit less any offering or syndication expenses allocated to such Units. A Limited Partner's adjusted tax basis in a redeemed Unit equals the amount originally paid for the Unit, increased by income or gains allocated to the Unit and decreased (but not below zero) by distributions, deductions or losses allocated to the Unit. PARTNERSHIP LOSSES BY LIMITED PARTNERS A Limited Partner may deduct Quadriga Superfund losses only to the extent of his tax basis in his Units. Generally, a Limited Partner's tax basis is the amount paid for the units reduced (but not below zero) by his share of any Quadriga Superfund distributions, losses and expenses and increased by his share of each Series' income and gains. However, a Limited Partner subject to "at-risk" limitations (generally, non-corporate taxpayers and closely-held corporations) can only deduct losses to the extent he is "at-risk." The "at-risk" amount is similar to tax basis, except that it does not include any amount borrowed on a non-recourse basis or from someone with an interest in each Series. "PASSIVE-ACTIVITY LOSS RULES" AND THEIR EFFECT ON THE TREATMENT OF INCOME AND LOSS The trading activities of each Series are not a "passive activity." Accordingly, a Limited Partner can deduct Quadriga Superfund losses from taxable income. However, a Limited Partner cannot offset losses from "passive activities" against Quadriga Superfund gains. CASH DISTRIBUTIONS AND UNIT REDEMPTIONS A Limited Partner who receives cash from each Series, either through a distribution or a partial redemption, will not pay tax on that cash until his tax basis in the Units is zero. GAIN OR LOSS ON SECTION 1256 CONTRACTS AND NON-SECTION 1256 CONTRACTS Section 1256 Contracts are futures and most options traded on U.S. exchanges and certain foreign currency contracts. For tax purposes, Section 1256 Contracts that remain open at year-end are treated as if the position were closed at year-end. The gain or loss on Section 1256 Contracts is characterized as 60% long-term capital gain or loss and 40% short-term capital gain or loss regardless of how long the position was open. Non-Section 1256 Contracts include, among other things, certain foreign currency transactions such as transactions when the amount paid or received is in a foreign currency. Gain and loss from these Non-Section 1256 Contracts are generally short-term capital gain or loss or ordinary income or loss. TAX ON CAPITAL GAINS AND LOSSES Long-term capital gains -- net gain on capital assets held more than one year and 60% of the gain on Section 1256 Contracts -- are taxed at a maximum rate of 15% provided the gain is not collectibles gain, gain 43 on qualified small business stock, or unrecaptured Section 1256 gain. Short-term capital gains -- net gain on capital assets held less than one year and 40% of the gain on Section 1256 Contracts -- are subject to tax at the same rates as ordinary income, with a maximum rate of 35% for individuals. Individual taxpayers can deduct capital losses only to the extent of their capital gains plus $3,000. Accordingly, each Series could suffer significant losses and a Limited Partner could still be required to pay taxes on his share of each Series' interest income. An individual taxpayer can carry back net capital losses on Section 1256 Contracts three years to offset earlier gains on Section 1256 Contracts. To the extent the taxpayer cannot offset past Section 1256 Contract gains, he can carry forward such losses indefinitely as losses on Section 1256 Contracts. INTEREST INCOME Interest received by each Series is taxed as ordinary income. Net capital losses can offset ordinary income only to the extent of $3,000 per year. See "-- Tax on Capital Gains and Losses." LIMITED DEDUCTION FOR CERTAIN EXPENSES Quadriga Capital Management does not consider the brokerage fee and the performance fees, as well as other ordinary expenses of each Series, investment advisory expenses or other expenses of producing income. Accordingly, Quadriga Capital Management treats these expenses as ordinary business deductions not subject to the material deductibility limitations which apply to investment advisory expenses. The IRS could contend otherwise and to the extent the IRS recharacterizes these expenses, a Limited Partner would have the amount of the ordinary expenses allocated to him reduced accordingly. SYNDICATION FEES Neither each Series nor any Limited Partner is entitled to any deduction for syndication expenses, if any, in the year they reduce net asset value, nor can these expenses be amortized by each Series or any Limited Partner even though the payment of such expenses reduces net asset value. The IRS could take the position that a portion of the brokerage fee paid by each Series to Quadriga Capital Management constitutes syndication expenses which reduce a Limited Partner's net asset value, but do not reduce a Limited Partner's adjusted tax basis. INVESTMENT INTEREST DEDUCTIBILITY LIMITATIONS Individual taxpayers can deduct "investment interest" -- interest on indebtedness allocable to property held for investment -- only to the extent that it does not exceed net investment income. Net investment income does not include adjusted net capital gain taxed at the lower rate. UNRELATED BUSINESS TAXABLE INCOME Tax-exempt Limited Partners will not be required to pay tax on their share of income or gains of each Series, provided that such Limited Partners do not purchase units with borrowed funds. IRS AUDITS OF THE PARTNERSHIP AND ITS LIMITED PARTNERS The IRS audits Partnership-related items at the entity level rather than at the Limited Partner level. Quadriga Capital Management acts as "tax matters partner" with the authority to determine each Series' responses to an audit. If an audit results in an adjustment, all Limited Partners may be required to pay additional taxes, interest and penalties. STATE AND OTHER TAXES In addition to the federal income tax consequences described above, each Series and the Limited Partners may be subject to various state and other taxes. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE DECIDING WHETHER TO INVEST. 44 INVESTMENT BY ERISA ACCOUNTS GENERAL This section sets forth certain consequences under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, which a fiduciary of an "employee benefit plan" as defined in and subject to ERISA or of a "plan" as defined in and subject to Section 4975 of the Code who has investment discretion should consider before deciding to invest the plan's assets in each Series (such "employee benefit plans" and "plans" being referred to herein as "Plans," and such fiduciaries with investment discretion being referred to herein as "Plan Fiduciaries"). SPECIAL INVESTMENT CONSIDERATION Each Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in each Series, including the role that an investment in each Series plays or would play in the Plan's overall investment portfolio. Each Plan Fiduciary, before deciding to invest in each Series, must be satisfied that such investment is prudent for the Plan, that the investments of the Plan, including each Series, are diversified so as to minimize the risk of large losses and that an investment in each Series complies with the terms of the Plan and related trust. EACH SERIES SHOULD NOT BE DEEMED TO HOLD "PLAN ASSETS" A regulation issued under ERISA (the "ERISA Regulation") contains rules for determining when an investment by a Plan in an equity interest of an entity will result in the underlying assets of the entity being assets of the Plan for purposes of ERISA and Section 4975 of the Code (i.e., "plan assets"). Those rules provide in pertinent part that assets of an entity will not be plan assets of a Plan which purchases an equity interest in the entity if the equity interest purchased is a "publicly-offered security" (the "Publicly-Offered Security Exception"). If the underlying assets of an entity are considered to be assets of any Plan for purposes of ERISA or Section 4975 of the Code, the operations of such entity would be subject to and, in some cases, limited by, the provisions of ERISA and Section 4975 of the Code The Publicly-Offered Security Exception applies if the equity is a security that is: 1) "freely transferable" (determined based on the applicable facts and circumstances); 2) part of a class of securities that is "widely held" (meaning that the class of securities is owned by 100 or more investors independent of the issuer and of each other); and 3) either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933 and the class of which such security is a part is registered under the Securities Exchange Act of 1934 within 120 days (or such later time as may be allowed by the SEC) after the end of the fiscal year of the issuer in which the offering of such security occurred. It appears that all of the conditions described above will be satisfied with respect to the Units and, therefore, the Units should constitute "publicly-offered securities" and the underlying assets of each Series should not be considered to constitute assets of any Plan which purchases Units. INELIGIBLE PURCHASERS In general, Units may not be purchased with the assets of a Plan if Quadriga Capital Management, the clearing brokers, any of the selling agents, any of their respective affiliates or any of their respective employees either: 1) has investment discretion with respect to the investment of such plan assets; 2) has authority or responsibility to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such plan assets and that such advice will be based on the particular investment needs of the Plan; or 3) is an employer maintaining or contributing to such Plan. NONE OF QUADRIGA CAPITAL MANAGEMENT, THE CLEARING BROKERS OR THE SELLING AGENTS MAKE ANY REPRESENTATION THAT THIS INVESTMENT MEETS THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH 45 INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN EACH SERIES IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN. PLAN OF DISTRIBUTION SUBSCRIPTION PROCEDURE Each Series will offer the Units to the public during the continuing offering at the net asset value per Unit as of each month-end closing date on which subscriptions are accepted, subject to calculation of such month-end net asset value by the Administrator. Investors must submit subscriptions at least five (5) business days prior to the applicable month-end closing date and they will be accepted once payments are received and cleared. Investors may rescind their subscription agreement within five (5) business days of receipt of each Series' Prospectus. Quadriga Capital Management may suspend, limit or terminate the continuing offering period at any time. The Units are offered on a "best efforts" basis without any firm underwriting commitment through selling agents which are registered broker-dealers and members of the National Association of Securities Dealers, Inc. Quadriga Capital Management is also offering Units directly to potential investors by distributing this Prospectus and making it available on a special internet website (http://www.superfund.com). Quadriga Capital Management intends to engage in marketing efforts through media including but not limited to third party websites, newspapers, magazines, other periodicals, television, radio, seminars, conferences, workshops, and sporting and charity events. Units are offered until such time as Quadriga Capital Management terminates the continuing offering. Subscriptions received during the continuing offering period can be accepted on a monthly basis. Subscribers whose subscriptions are canceled or rejected will be notified of when their subscriptions, plus interest, will be returned, which shall be promptly after rejection. Subscribers whose subscriptions are accepted will be issued fractional units, calculated to three decimal places, in an amount which will include any interest earned on their subscriptions. Each Series' escrow account is maintained at HSBC Bank USA, 452 Fifth Avenue, New York, New York 10018 (the "Escrow Agent"). All subscription funds are required to be promptly transmitted to the Escrow Agent. Subscriptions must be accepted or rejected by Quadriga Capital Management within five business days of receipt, and the settlement date for the deposit of subscription funds in escrow must be within five business days of acceptance. No fees or costs will be assessed on any subscription while held in escrow, irrespective of whether the subscription is accepted or subscription funds returned. The Escrow Agent will invest the subscription funds in short-term United States Treasury bills or comparable authorized instruments while held in escrow. Subscriptions from customers of any of the selling agents may also be made by authorizing such selling agent to debit the Limited Partner's customer securities account at the selling agent. Promptly after debiting the customer's securities account, the selling agent shall send payment to the Escrow Agent as described above, in the amount of the subscription so debited. Subscribers must purchase Units for investment purposes only and not with a view toward resale. An investor who meets the suitability standards given below must complete, execute and deliver to the relevant selling agent a copy of the Subscription Agreement and Power of Attorney attached as Exhibit D. A Limited Partner can pay either by a check made payable to "Quadriga Superfund, L.P. Series (A or B, as applicable), Escrow Account" or by authorizing his selling agent to debit his customer securities account. Quadriga Capital Management will then accept or reject the subscription within five business days of receipt of the subscription. All subscriptions are irrevocable once subscription payments are deposited in escrow. REPRESENTATIONS AND WARRANTIES OF INVESTORS IN THE SUBSCRIPTION AGREEMENT Investors are required to make representations and warranties in the Subscription Agreement. Each Series' primary intention in requiring the investors to make representations and warranties is to ensure that only persons for whom an investment is suitable invest in each Series. Each Series is most likely to assert representations and warranties if it has reason to believe that the related investor may not be qualified to invest or remain invested in each Series. The representations and warranties made by investors in the Subscription Agreement may be summarized as relating to: 1) eligibility of investors to invest in each Series, including legal age, net worth and annual income; 2) representative capacity of investors; 3) information provided by 46 investors; 4) information received by investors; and 5) investments made on behalf of employee benefit plans. See the Subscription Agreement and Power of Attorney attached as Exhibit D for further detail. MINIMUM INVESTMENT The minimum investment is $5,000 in one Series. Limited Partners in one Series may increase their investment in that same Series with an additional investment of $1,000 or more. Prospective investors must be aware that the price per Unit of a Unit in a Series during the continuing offering period will vary depending upon the month-end net asset value per Unit of such Series. Under the federal securities laws and those of certain states, investors may be subject to special minimum purchase and/or investor suitability requirements. INVESTOR SUITABILITY There can be no assurance that each Series will achieve its objectives or avoid substantial losses. An investment in each Series is suitable only for a limited segment of the risk portion of an investor's portfolio and no one should invest more in each Series than he can afford to lose. The Limited Partner's selling agent is responsible for determining if the Units are a suitable investment for the investor. At an absolute minimum, investors must have (i) a net worth of at least $150,000 (exclusive of home, furnishings and automobiles) or (ii) an annual gross income of at least $45,000 and a net worth (as calculated above) of at least $45,000. No one may invest more than 10% of his net worth (as calculated above) in the Partnership. THESE STANDARDS (AND THE ADDITIONAL STANDARDS APPLICABLE TO RESIDENTS OF CERTAIN STATES AS SET FORTH UNDER "EXHIBIT C -- SUBSCRIPTION REQUIREMENTS" HEREIN) ARE REGULATORY MINIMUMS ONLY. QUALIFICATION UNDER SUCH STANDARDS DOES NOT NECESSARILY IMPLY THAT AN INVESTMENT IN EACH SERIES IS SUITABLE FOR A PARTICULAR INVESTOR. PROSPECTIVE LIMITED PARTNERS SHOULD REVIEW EXHIBIT C AND CONSIDER THE HIGHLY SPECULATIVE AND ILLIQUID NATURE OF AN INVESTMENT IN EACH SERIES AS WELL AS THE HIGH RISK AND HIGHLY LEVERAGED NATURE OF THE FUTURES, FORWARD AND RELATED MARKETS IN DETERMINING WHETHER AN INVESTMENT IN EACH SERIES IS CONSISTENT WITH THEIR OVERALL PORTFOLIO OBJECTIVES. THE SELLING AGENTS The selling agents, the broker-dealers who offer the Units, offer the Units on a best efforts basis without any firm underwriting commitment. Each Series and Quadriga Capital Management may retain additional selling agents. The selling agents, including Quadriga Asset Management, an affiliate of Quadriga Capital Management, and certain foreign dealers who may elect to participate in the offering, are bound by their respective Selling Agreements with each Series. Subject to the limitation contained in the next sentence, Quadriga Asset Management and any additional selling agents will receive collectively 4% from the proceeds of the offering with respect to any Units they sell. Pursuant to NASD rules, the maximum cumulative sales commission per Unit is 10% of the purchase price of such Unit. Other than as described above, Quadriga Capital Management will pay no person any commissions or other fees in connection with the solicitation of purchases for Units. In the Selling Agreement with each selling agent, Quadriga Capital Management has agreed to indemnify the selling agents against certain liabilities that the selling agents may incur in connection with the offering and sale of the Units, including liabilities under the Securities Act of 1933, as amended. Units will be sold on a continuing basis at the net asset value per Unit as of the end of each month. 47 CERTAIN LEGAL MATTERS Henderson & Lyman, Chicago, Illinois has advised Quadriga Capital Management on legal matters in connection with the Units. In the future, Henderson & Lyman may advise Quadriga Capital Management with respect to its responsibilities as general partner and trading advisor of, and with respect to, matters relating to each Series. Henderson & Lyman has not represented, nor will it represent, either Series or the Limited Partners in matters relating to each Series. EXPERTS The financial statements of Quadriga Superfund, L.P. Series A and Series B as of December 31, 2003 and December 31, 2002 and for the year ended December 31, 2003 and for the period from November 5, 2002 (commencement of operations) through December 31, 2002 and of Quadriga Capital Management as of and for the year ended December 31, 2003 have been included herein in reliance upon reports of KPMG LLP, independent auditors, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. [Remainder of page left intentionally blank] 48 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Quadriga Superfund, L.P. Series A as of September 30, 2004 (unaudited), December 31, 2003 and December 31, 2002 Independent Auditors' Report.............................. 50 Statements of Assets and Liabilities...................... 51 Condensed Schedule of Investments as of September 30, 2004................................................... 52 Condensed Schedule of Investments as of December 31, 2003................................................... 53 Condensed Schedule of Investments as of December 31, 2002................................................... 54 Statements of Operations.................................. 55 Statements of Changes in Net Assets....................... 56 Statements of Cash Flows.................................. 57 Quadriga Superfund, L.P. Series B as of September 30, 2004 (unaudited), December 31, 2003 and December 31, 2002 Statements of Assets and Liabilities...................... 58 Condensed Schedule of Investments as of September 30, 2004................................................... 59 Condensed Schedule of Investments as of December 31, 2003................................................... 60 Condensed Schedule of Investments as of December 31, 2002................................................... 61 Statements of Operations.................................. 62 Statements of Changes in Net Assets....................... 63 Statements of Cash Flows.................................. 64 Quadriga Superfund, L.P. Series A and Series B Notes to Unaudited Financial Statements................... 65 Notes to Audited Financial Statements..................... Quadriga Capital Management, Inc. as of September 30, 2004 (unaudited) Statement of Financial Condition.......................... 69 Statement of Income....................................... 70 Statement of Changes in Stockholder's Equity.............. 71 Statement of Cash Flows................................... 72 Notes to Unaudited Financial Statements................... 73 Quadriga Capital Management, Inc. as of December 31, 2003 Independent Auditors' Report.............................. 75 Statement of Financial Condition.......................... 76 Statement of Income....................................... 77 Statement of Changes in Stockholder's Equity.............. 78 Statement of Cash Flows................................... 79 Notes to Audited Financial Statements..................... 80
49 INDEPENDENT AUDITORS' REPORT To the Partners of Quadriga Superfund, L.P. -- Series A and Series B: We have audited the accompanying statements of assets and liabilities of Quadriga Superfund, L.P. -- Series A and Series B (the Fund), including the condensed schedules of investments as of December 31, 2003 and 2002, and the related statements of operations, changes in net assets and cash flows for the year ended December 31, 2003 and for the period from November 5, 2002 (commencement of operations) through December 31, 2002. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quadriga Superfund, L.P. -- Series A and Series B as of December 31, 2003 and 2002, and the results of its operations, changes in its net assets, and its cash flows for the year ended December 31, 2003 and for the period from November 5, 2002 (commencement of operations) through December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. KPMG LLP New York, New York March 9, 2004 50 QUADRIGA SUPERFUND, L.P. -- SERIES A STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2004 (UNAUDITED), DECEMBER 31, 2003 AND DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ----------- ---------- ASSETS US Government securities, at market cost $21,123,951, $13,739,594 and $944,085 as of September 30, 2004, December 31, 2003 and 2002, respectively............. $21,223,954 $13,749,608 $ 945,098 Due from brokers....................................... 512,718 989,646 816,407 Futures contracts purchased............................ 2,096,916 583,646 79,887 Futures contracts sold................................. 210,269 Unrealized appreciation on open forward contracts...... 1,877,068 1,196,849 986 Cash................................................... 1,112,190 1,597,546 402,631 ----------- ----------- ---------- Total assets...................................... 27,033,115 18,117,295 2,245,009 ----------- ----------- ---------- LIABILITIES Futures contracts sold................................. -- 8,595 4,891 Unrealized depreciation on open forward contracts...... 139,042 231,306 7,644 Advance subscriptions.................................. 683,421 1,097,282 972,745 Due to broker.......................................... 230,030 532,552 -- Redemption payable..................................... -- 8,040 -- Fees payable........................................... 151,554 94,731 43,294 ----------- ----------- ---------- Total liabilities................................. 1,204,047 1,972,506 1,028,574 ----------- ----------- ---------- NET ASSETS............................................. $25,829,068 $16,144,789 $1,216,435 =========== =========== ========== Number of shares....................................... 20,780.214 12,256.648 1,110.275 Net assets value per share............................. $ 1,242.96 $ 1,317.23 $ 1,095.62 =========== =========== ==========
See accompanying notes to financial statements. 51 QUADRIGA SUPERFUND, L.P. -- SERIES A CONDENSED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2004 (UNAUDITED)
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS FAIR VALUE ----------- ------------- ----------- DEBT SECURITIES UNITED STATES, AT MARKET United States Treasury Bills due November 26, 2004 (cost $21,123,951), securities are held in margin accounts as collateral for open futures and forwards................................... $21,270,000 82.2% $21,223,954 ---- ----------- FORWARD CONTRACTS, AT FAIR VALUE UNREALIZED APPRECIATION ON FORWARD CONTRACTS CURRENCIES....................................... 1.3% $ 335,547 METALS........................................... 6.0 1,541,521 ---- ----------- Total unrealized appreciation on forward contracts................................... 7.3 1,877,068 ---- ----------- UNREALIZED DEPRECIATION ON FORWARD CONTRACTS CURRENCIES....................................... (0.5) (126,117) METALS........................................... (0.1) (12,925) ---- ----------- Total unrealized depreciation on forward contracts................................... (0.6) (139,042) ---- ----------- TOTAL FORWARD CONTRACTS, AT FAIR VALUE................ 6.7% $ 1,738,026 ==== =========== FUTURES CONTRACTS, AT FAIR VALUE FUTURES CONTRACTS PURCHASED CURRENCY......................................... 0.4% $ 99,260 ENERGY........................................... 5.1 1,310,761 FINANCIAL........................................ 1.3 348,350 GRAINS........................................... 0.0* 425 INDICES.......................................... 0.5 136,982 LIVESTOCK........................................ (0.1) (19,520) METALS........................................... 0.9 220,658 ---- ----------- Total futures contracts purchase............... 8.1 2,096,916 ---- ----------- FUTURES CONTRACTS SOLD CURRENCY......................................... (0.2) (49,356) FOOD & FIBER..................................... 0.1 25,490 GRAINS........................................... 1.2 300,877 INDICES.......................................... (0.3)* (66,742) ---- ----------- Total futures contracts sold................ 0.8 210,269 ---- ----------- TOTAL FUTURES CONTRACTS, AT FAIR VALUE................ 8.9% $ 2,307,185 ==== =========== FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION JAPAN............................................... 1.6% $ 409,618 UNITED KINGDOM...................................... 6.7 1,723,924 UNITED STATES....................................... 6.8 1,746,621 OTHER............................................... 0.6 165,048 ---- ----------- TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY........ 15.7% $ 4,045,211 ==== ===========
- --------------- * Due to rounding See accompanying notes to financial statements. 52 QUADRIGA SUPERFUND, L.P. -- SERIES A CONDENSED SCHEDULE OF INVESTMENTS DECEMBER 31, 2003
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS FAIR VALUE ----------- ------------- ----------- DEBT SECURITIES UNITED STATES, AT MARKET United States Treasury Bills due May 27, 2004 (cost $13,739,594), securities are held in margin accounts as collateral for open futures and forwards................................... $13,805,000 85.2% $13,749,608 ---- ----------- FORWARD CONTRACTS, AT FAIR VALUE UNREALIZED APPRECIATION ON FORWARD CONTRACTS CURRENCIES....................................... 0.9% $ 140,479 METALS........................................... 6.5 1,056,370 ---- ----------- Total unrealized appreciation on forward contracts................................... 7.4 1,196,849 ---- ----------- UNREALIZED DEPRECIATION ON FORWARD CONTRACTS CURRENCIES....................................... (0.4) (65,291) METALS........................................... (1.0) (166,015) ---- ----------- Total unrealized depreciation on forward contracts................................... (1.4) (231,306) ---- ----------- TOTAL FORWARD CONTRACTS, AT FAIR VALUE................ 6.0% $ 965,543 ==== =========== FUTURES CONTRACTS, AT FAIR VALUE FUTURES CONTRACTS PURCHASED ENERGY........................................... 1.7% $ 279,675 GRAINS........................................... 0.1 17,861 INDICES.......................................... 0.2 27,189 METALS........................................... 1.6 258,921 ---- ----------- Total futures contracts purchase............... 3.6 583,646 ---- ----------- FUTURES CONTRACTS SOLD GRAINS........................................... (0.1) (9,521) INDICES.......................................... 0.0* 926 ---- ----------- Total futures contracts sold................... (0.1) (8,595) ---- ----------- TOTAL FUTURES CONTRACTS, AT FAIR VALUE................ 3.5% $ 575,051 ==== =========== FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION JAPAN............................................... 0.4% $ 68,877 UNITED KINGDOM...................................... 6.0 977,375 UNITED STATES....................................... 3.1 494,342 ---- ----------- TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY........ 9.5% $ 1,540,594 ==== ===========
- --------------- * Due to rounding See accompanying notes to financial statements. 53 QUADRIGA SUPERFUND, L.P. -- SERIES A CONDENSED SCHEDULE OF INVESTMENTS DECEMBER 31, 2002
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS UNREALIZED ---------- ------------- ---------- Debt Securities United States, at market United States Treasury Bills due May 29, 2003 (cost $944,085), securities are held in margin accounts as collateral for open futures and forwards.............. $950,000 77.7% $945,098 ---- -------- Forward contracts, at fair value Unrealized appreciation on forward contracts Metals................................................ 0.1 986 ---- -------- Unrealized depreciation on forward contracts Metals................................................ (0.6) (7,644) ---- -------- Total forward contracts, at fair value.............. (0.5)% $ (6,658) ==== ======== Futures contracts, at fair value Futures contracts purchased Energy................................................ 3.3 40,276 Grains................................................ 0.1 731 Livestock............................................. 0.3 3,180 Metals................................................ 2.9 35,700 ---- -------- Total futures contracts purchased................... 6.6 79,887 ---- -------- Futures contracts sold Grains................................................ (0.2) (2,368) Softs................................................. (0.3) (3,423) Metals................................................ 0.1 900 ---- -------- Total futures contracts sold........................ (0.4) (4,891) ---- -------- Total futures contracts, at fair value.............. 6.2% $ 74,996 ==== ======== Futures and forward contracts by country composition Japan.................................................... 2.2% $ 26,536 United Kingdom........................................... 0.7 8,142 United States............................................ 2.8 33,660 ---- -------- Total futures and forward contracts by country...... 5.7% $ 68,338 ==== ========
See accompanying notes to financial statements. 54 QUADRIGA SUPERFUND, L.P. -- SERIES A STATEMENTS OF OPERATIONS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ----------- -------- Investment income, interest............................. $ 182,263 $ 73,045 $ 1,100 ----------- ----------- -------- Expenses Management fee........................................ 311,329 166,849 3,486 Organization and offering expenses.................... 168,286 90,189 1,885 Operating expenses.................................... 25,242 13,528 282 Selling commission.................................... 673,141 360,755 7,538 Incentive fee......................................... 651,950 226,783 35,946 Brokerage commissions................................. 635,428 420,816 -- Other................................................. 33,590 19,997 -- ----------- ----------- -------- Total expenses..................................... 2,498,966 1,298,917 49,137 ----------- ----------- -------- Net investment loss..................................... (2,316,703) (1,225,872) (48,037) ----------- ----------- -------- Realized and unrealized gain (loss) on investments Net realized gain (loss) on futures and forward contracts.......................................... (2,042,213) 1,867,602 88,636 Net change in unrealized appreciation on futures and forward contracts.................................. 2,504,617 1,472,256 68,338 ----------- ----------- -------- Net gain on investments................................. 462,404 3,339,858 156,974 ----------- ----------- -------- Net increase (decrease) in net assets from operations... $(1,854,299) $ 2,113,986 $108,937 =========== =========== ========
See accompanying notes to financial statements. 55 QUADRIGA SUPERFUND, L.P. -- SERIES A STATEMENTS OF CHANGES IN NET ASSETS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ----------- ---------- Net increase in net assets from operations: Net investment loss.................................. $(2,316,703) $(1,225,872) $ (48,037) Net realized gain (loss) on futures and forward contracts......................................... (2,042,213) 1,867,602 88,636 Net change in unrealized appreciation on futures and forward contracts................................. 2,504,617 1,472,256 68,338 ----------- ----------- ---------- Net increase (decrease) in net assets from operations........................................... (1,854,299) 2,113,986 108,937 Capital share transactions Issuance of shares................................... 13,470,189 13,267,146 1,107,498 Redemption of shares................................. (1,931,611) (452,778) -- ----------- ----------- ---------- Net increase in net assets from capital share transactions...................................... 11,538,578 12,814,368 1,107,498 ----------- ----------- ---------- Net increase in net assets........................... 9,684,279 14,928,354 1,216,435 Net assets, beginning of period........................ 16,144,789 1,216,435 -- ----------- ----------- ---------- Net assets, end of period.............................. $25,829,068 $16,144,789 $1,216,435 =========== =========== ========== Shares, beginning of period............................ 12,256.648 1,110.275 -- Issuance of shares..................................... 10,057.734 11,558.690 1,110.275 Redemption of shares................................... (1,534.168) (412.317) -- ----------- ----------- ---------- Shares, end of period.................................. 20,780.214 12,256.648 1,110.275 =========== =========== ==========
See accompanying notes to financial statements. 56 QUADRIGA SUPERFUND, L.P. -- SERIES A STATEMENTS OF CASH FLOWS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ------------ ----------- Cash flows from operating activities Net increase (decrease) in net assets from operations..................................... $ (1,854,299) $ 2,113,986 $ 108,937 Adjustments to reconcile net increase (decrease) in net assets to net cash used in operating activities: Changes in operating assets and liabilities: US Government securities..................... (7,474,346) (12,804,510) (945,098) Due from brokers............................. 174,406 (173,239) (816,407) Unrealized appreciation on open futures positions................................. (1,513,270) (503,759) (79,887) Unrealized appreciation on open forward contracts................................. (680,219) (1,195,863) (986) Unrealized depreciation on open futures positions................................. (218,864) 3,704 4,891 Unrealized deprecation on open forward contracts................................. (92,264) 223,662 7,644 Due to brokers............................... -- 532,552 -- Fees payable................................. 56,823 51,437 43,294 ------------ ------------ ----------- Net cash used in operating activities............... (11,602,033) (11,752,030) (1,677,612) ------------ ------------ ----------- Cash flows from financing activities Subscriptions, net of change in advance subscriptions.................................. 13,056,328 13,391,683 2,080,243 Redemptions, net of redemption payable............ (1,939,651) (444,738) -- ------------ ------------ ----------- Net cash provided by financing activities........... 11,116,677 12,946,945 2,080,243 ------------ ------------ ----------- Net increase in cash................................ (485,356) 1,194,915 402,631 Cash, beginning of period........................... 1,597,546 402,631 -- ------------ ------------ ----------- Cash, end of period................................. $ 1,112,190 $ 1,597,546 $ 402,631 Supplemental disclosure of non-cash financing activities: 2003 Subscriptions received in 2002............... -- $ 972,745 -- ============ ============ =========== 2004 Subscriptions received in 2003............... $ 1,097,282 -- -- ============ ============ =========== Redemptions payable............................... -- $ 8,040 -- ============ ============ ===========
See accompanying notes to financial statements. 57 QUADRIGA SUPERFUND, L.P. -- SERIES B STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2004 (UNAUDITED), DECEMBER 31, 2003 AND DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ----------- ---------- ASSETS US Government securities, at market cost $24,193,621, $17,392,760 and $1,540,776 as of September 30, 2004, December 31, 2003 and December 31, 2002.............. $24,307,298 $17,405,163 $1,542,197 Due from brokers....................................... 2,285,766 3,187,377 1,152,562 Futures contracts purchased............................ 3,531,796 1,030,282 223,285 Futures contracts sold................................. 498,767 -- -- Unrealized appreciation on open forward contracts...... 3,306,767 2,176,599 7,562 Cash................................................... 1,251,909 854,910 396,680 ----------- ----------- ---------- Total assets...................................... 35,182,303 24,654,331 3,322,286 ----------- ----------- ---------- LIABILITIES Futures contracts sold................................. -- 15,398 12,973 Unrealized depreciation on open forward contracts...... 265,271 436,869 25,854 Advance subscriptions.................................. 913,395 920,395 961,768 Due to broker.......................................... 237,090 1,006,857 -- Redemption payable..................................... -- 8,152 -- Fees payable........................................... 196,972 129,889 124,710 ----------- ----------- ---------- Total liabilities................................. 1,612,728 2,517,560 1,125,305 =========== =========== ========== NET ASSETS............................................. $33,569,575 $22,136,771 $2,196,981 =========== =========== ========== Number of shares....................................... 24,457.461 14,945.226 1,894.331 =========== =========== ========== Net assets value per share............................. $ 1,372.57 $ 1,481.19 $ 1,159.77 =========== =========== ==========
See accompanying notes to financial statements. 58 QUADRIGA SUPERFUND, L.P. -- SERIES B CONDENSED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2004 (UNAUDITED)
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS FAIR VALUE ----------- ------------- ----------- Debt Securities United States, at market United States Treasury Bills due November 26, 2004 (cost $24,193,621), securities are held in Margin accounts as collateral for open futures and forwards......................................... $24,360,000 72.4% $24,307,298 ---- ----------- Forward contracts, at fair value Unrealized appreciation on forward contracts Currencies.......................................... 1.8% $ 596,117 Metals.............................................. 8.1 2,710,650 ---- ----------- Total unrealized appreciation on forward contracts...................................... 9.9 3,306,767 ---- ----------- Unrealized depreciation on forward contracts Currencies.......................................... (0.7) (220,033) Metals.............................................. (0.1) (45,238) ---- ----------- Total unrealized depreciation on forward contracts...................................... (0.8) (265,271) ---- ----------- Total forward contracts, at fair value................ 9.1% $ 3,041,496 ==== =========== Futures contracts, at fair value Futures contracts purchased Currency............................................ 0.7% $ 235,303 Energy.............................................. 6.7 2,239,212 Financial........................................... 1.6* 556,489 Grains.............................................. 0.0* (1,850) Indices............................................. 0.3 98,009 Livestock........................................... (0.1) (31,531) Metals.............................................. 1.3 436,164 ---- ----------- Total futures contracts purchased................ 10.5 3,531,796 ---- ----------- Futures contracts sold Currency............................................ (0.3) (87,747) Food & Fiber........................................ 0.1 44,450 Grains.............................................. 1.6 527,711 Indices............................................. 0.1 18,886 Livestock........................................... 0.0 (4,533) ---- ----------- Total futures contracts sold..................... 1.5 498,767 ---- ----------- Total futures contracts, at fair value................ 12.0% $ 4,030,563 ==== =========== Futures and forward contracts by country composition Japan............................................... 2.1% $ 711,923 United Kingdom...................................... 9.1 3,065,218 United States....................................... 9.1 3,067,160 Other............................................... 0.8* 227,758 ---- ----------- Total futures and forward contracts by country........ 21.1% $ 7,072,059 ==== ===========
- --------------- * Due to rounding See accompanying notes to financial statements. 59 QUADRIGA SUPERFUND, L.P. -- SERIES B CONDENSED SCHEDULE OF INVESTMENTS DECEMBER 31, 2003
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS FAIR VALUE ----------- ------------- ----------- Debt Securities United States, at market United States Treasury Bills due May 27, 2004 (cost $17,392,760), securities are held in margin accounts as collateral for open futures and forwards......................................... $17,475,000 78.6% $17,405,163 ---- ----------- Forward contracts, at fair value Unrealized appreciation on forward contracts Currencies....................................... 1.2% $ 267,624 Metals........................................... 8.6 1,908,975 ---- ----------- Total unrealized appreciation on forward contracts................................... 9.8 2,176,599 ---- ----------- Unrealized depreciation on forward contracts Currencies....................................... (0.6) (127,939) Metals........................................... (1.4) (308,930) ---- ----------- Total unrealized depreciation on forward contracts................................... (2.0) (436,869) ---- ----------- Total forward contracts, at fair value................ 7.8% $ 1,739,730 ---- ----------- Futures contracts, at fair value Futures contracts purchased Energy........................................... 2.2% $ 485,012 Grains........................................... 0.2 34,904 Indices.......................................... 0.2 48,460 Metals........................................... 2.1 461,906 ---- ----------- Total futures contracts purchased.............. 4.7 1,030,282 ---- ----------- Futures contracts sold Grains.............................................. (0.1) (17,045) Indices............................................. 0.0* 1,647 ---- ----------- Total futures contracts sold................... (0.1) (15,398) ---- ----------- Total futures contracts, at fair value................ 4.6% $ 1,014,884 ---- ----------- Futures and forward contracts by country composition Japan............................................... 0.5% $ 108,030 United Kingdom...................................... 7.9* 1,755,449 United States....................................... 4.0 891,135 ---- ----------- Total futures and forward contracts by country........ 12.4% $ 2,754,614 =========== ==== ===========
- --------------- * Due to rounding See accompanying notes to financial statements. 60 QUADRIGA SUPERFUND, L.P. -- SERIES B CONDENSED SCHEDULE OF INVESTMENTS DECEMBER 31, 2002
PERCENTAGE OF MARKET OR FACE VALUE NET ASSETS UNREALIZED ---------- ------------- ---------- Debt Securities United States, at market United States Treasury Bills due May 29, 2003 (cost $1,540,776), securities are held in margin accounts as collateral for open futures and forwards.......................................... $1,550,000 70.2% $1,542,197 ---- ---------- Forward contracts, at fair value Unrealized appreciation on forward contracts Metals............................................ 0.4 7,562 Unrealized depreciation on forward contracts Metals............................................ (1.2) (25,854) ---- ---------- Total forward contracts, at fair value.......... (0.8)% $ (18,292) ==== ========== Futures contracts, at fair value Futures contracts purchased Energy............................................ 5.5 120,786 Grains............................................ 0* 676 Indices........................................... 0* 185 Livestock......................................... 0.4 8,820 Metals............................................ 4.2 92,818 ---- ---------- Total futures contracts purchased............... 10.1 223,285 ---- ---------- Futures contracts sold Grains............................................ (0.3) (6,308) Softs............................................. (0.4) (8,951) Metals............................................ 0.1 2,286 ---- ---------- Total futures contracts sold.................... (0.6) (12,973) ---- ---------- Total futures contracts, at fair value.......... 9.5% $ 210,312 ==== ========== Futures and forward contracts by country composition Japan................................................ 3.0% $ 66,227 United Kingdom....................................... 1.0 22,307 United States........................................ 4.7 103,486 ---- ---------- Total futures and forward contracts by country...................................... 8.7% $ 192,020 ==== ==========
- --------------- * Due to rounding See accompanying notes to financial statements. 61 QUADRIGA SUPERFUND, L.P. -- SERIES B STATEMENTS OF OPERATIONS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ----------- --------- Investment income, interest............................ $ 233,717 $ 99,890 $ 1,543 ----------- ----------- --------- Expenses Management fee....................................... 418,649 235,286 5,536 Organization and offering expenses................... 226,297 127,182 2,993 Operating expenses................................... 33,945 19,077 449 Selling commission................................... 905,187 508,727 11,969 Incentive fee........................................ 1,158,857 486,682 111,167 Brokerage commissions................................ 1,199,328 769,895 -- Other................................................ 64,963 11,915 -- ----------- ----------- --------- Total expenses.................................... 4,007,226 2,158,764 132,114 ----------- ----------- --------- Net investment loss.................................... (3,773,509) (2,058,874) (130,571) ----------- ----------- --------- Realized and unrealized gain (loss) on investments Net realized gain (loss) on futures and forward contracts......................................... (3,758,228) 3,065,723 273,596 Net change in unrealized appreciation on futures and forward contracts................................. 4,317,445 2,562,594 192,020 ----------- ----------- --------- Net gain on investments................................ 559,217 5,628,317 465,616 ----------- ----------- --------- Net increase in net assets from operations............. $(3,214,292) $ 3,569,443 $ 335,045 =========== =========== =========
See accompanying notes to financial statements. 62 QUADRIGA SUPERFUND, L.P. -- SERIES B STATEMENTS OF CHANGES IN NET ASSETS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
2004 2003 2002 ----------- ----------- ---------- Net increase (decrease) in net assets from operations: Net investment loss................................... $(3,773,509) $(2,058,874) $ (130,571) Net realized gain (loss) on futures and forward contracts.......................................... (3,758,228) 3,065,723 273,596 Net change in unrealized appreciation on futures and forward contracts.................................. 4,317,445 2,562,594 192,020 ----------- ----------- ---------- Net increase (decrease) in net assets from operations... (3,214,292) 3,569,443 335,045 Capital share transactions Issuance of shares.................................... 17,067,911 17,715,452 1,861,936 Redemption of shares.................................. (2,420,815) (1,345,105) -- ----------- ----------- ---------- Net increase in net assets from capital share transactions....................................... 14,647,096 16,370,347 1,861,936 ----------- ----------- ---------- Net increase in net assets............................ 11,432,804 19,939,790 2,196,981 Net assets, beginning of period......................... 22,136,771 2,196,981 -- ----------- ----------- ---------- Net assets, end of period............................... $33,569,575 $22,136,771 $2,196,981 =========== =========== ========== Shares, beginning of period............................. 14,945.226 1,894.331 -- Issuance of shares...................................... 11,483.511 14,228.020 1,894.331 Redemption of shares.................................... (1,971.276) (1,177.125) -- ----------- ----------- ---------- Shares, end of period................................... 24,457.461 14,945.226 1,894.331 =========== =========== ==========
See accompanying notes to financial statements. 63 QUADRIGA SUPERFUND, L.P. -- SERIES B STATEMENTS OF CASH FLOWS PERIOD FROM JANUARY 1, 2004 THROUGH SEPTEMBER 30, 2004 (UNAUDITED), YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 2002
SEPTEMBER 30, 2004 2003 2002 ------------- ------------ ----------- Cash flows from operating activities Net increase (decrease) in net assets from operations..................................... $ (3,214,292) $ 3,569,443 $ 335,045 Adjustments to reconcile net increase (decrease) in net assets to net cash used in operating activities: Changes in operating assets and liabilities: US Government securities..................... (6,902,135) (15,862,966) (1,542,197) Due from brokers............................. 131,844 (2,034,815) (1,152,562) Unrealized appreciation on open futures positions................................. (2,501,514) 806,997 (223,285) Unrealized appreciation on open forward contracts................................. (1,130,168) (2,169,037) (7,562) Unrealized depreciation on open futures positions................................. (514,165) 2,425 12,973 Unrealized depreciation on open forward contracts................................. (171,598) 411,015 25,854 Due to brokers............................... 67,083 1,006,857 -- Fees payable................................. -- 5,179 124,710 ------------ ------------ ----------- Net cash used in operating activities............... (14,234,945) (15,878,896) (2,427,024) ------------ ------------ ----------- Cash flows from financing activities Subscriptions, net of change in advance subscriptions.................................. 17,060,911 17,674,079 2,823,704 Redemptions, net of redemption payable............ (2,428,967) (1,336,953) -- ------------ ------------ ----------- Net cash provided by financing activities........... 14,631,944 16,337,126 2,823,704 ------------ ------------ ----------- Net increase in cash................................ 396,999 458,230 396,680 Cash, beginning of period........................... 854,910 396,680 -- ------------ ------------ ----------- Cash, end of period................................. $ 1,251,909 $ 854,910 396,680 Supplemental disclosure of non-cash financing activities: 2003 subscriptions received in 2002............... -- $ -- -- 2004 subscriptions received in 2003............... $ 920,395 961,768 -- ============ ============ =========== Redemptions payable............................... -- $ 8,152 -- ============ ============ ===========
See accompanying notes to financial statements. 64 1. NATURE OF OPERATIONS ORGANIZATION AND BUSINESS Quadriga Superfund, L.P. (the "Fund"), a Delaware Limited Partnership, commenced operations on November 5, 2002. The Fund was organized to trade speculatively in the United States of America (U.S.) and International commodity equity markets using a strategy developed by Quadriga Capital Management, Inc., the General Partner and Trading Manager of the Fund. The Fund has issued two classes of Units, Series A and Series B. The two Series will be traded and managed the same way except for the degree of leverage. The term of the Fund shall continue until December 31, 2050, unless terminated earlier by the General Partner or by operation of the law or a decline in the aggregate net assets of such series to less than $500,000. 2. SIGNIFICANT ACCOUNTING POLICIES (A) VALUATION OF INVESTMENTS IN FUTURES AND FORWARD CONTRACTS All commodity interests (including derivative financial instruments and derivative commodity instruments) are used for trading purposes. The commodity interests are recorded on trade date basis and open contracts are recorded in the statements of assets and liabilities at fair value on the last business day of the period, which represents market value for those commodity interests for which market quotes are readily available. (B) TRANSLATION OF FOREIGN CURRENCY Assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the period end exchange rates. Purchases and sales of investments, and income and expenses, that are denominated in foreign currencies, are translated into U.S. dollar amounts on the transaction date. Adjustments arising from foreign currency transactions are reflected in the statements of operations. The Fund does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net gain (loss) on investments in the statements of operations. (C) INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME Investment transactions are accounted for on a trade-date basis. Interest is recognized on the accrual basis. (D) INCOME TAXES The Fund does not record a provision for income taxes because the partners report their share of the Fund's income or loss on their returns. The financial statements reflect the Fund's transactions without adjustment, if any, required for income tax purposes. (E) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the General Partner to make estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ from those estimates. 65 (F) RECLASSIFICATION Certain prior period amounts have been reclassified to conform to current year presentation. 3. DUE FROM/TO BROKERS Amounts due from brokers may be restricted to the extent that they serve as deposits for securities sold short. Amounts due to brokers represent margin borrowings that are collateralized by certain securities. In the normal course of business, all of the Fund's marketable securities transactions, money balances and marketable security positions are transacted with brokers. The Fund is subject to credit risk to the extent any broker with which it conducts business is unable to fulfill contractual obligations on its behalf. The General Partner monitors the financial condition of such brokers and does not anticipate any losses from these counterparties. 4. ALLOCATION OF NET PROFITS AND LOSSES In accordance with the Limited Partnership Agreement, net profits and losses of the Fund are allocated to partners according to their respective interests in the Fund as of the beginning of each month. Advance subscriptions represent cash received prior to December 31, 2003 for contributions of the subsequent month and do not participate in the earnings of the Fund until January 1, 2004. 5. RELATED PARTY TRANSACTIONS In accordance with the Limited Partnership Agreement, Quadriga Capital Management, Inc., the General Partner shall be paid a monthly management fee equal to one-twelfth of 1.85% (1.85% per annum), a monthly organization and offering fee equal to one-twelfth of 1% (1% per annum) and monthly operating expenses equal to one-twelfth of 0.15% (0.15% per annum). In accordance with the Prospectus dated October 31, 2002 Part One-Disclosure Document, Quadriga Asset Management, Inc., shall be paid monthly selling commissions equal to one-twelfth of 4% (4% per annum), of the month end net asset value of the Fund. The General Partner will also be paid a monthly performance/incentive fee equal to 25% of the new appreciation without respect to interest income. Trading losses will be carried forward and no further performance/incentive fee may be paid until the prior losses have been recovered. 66 6. FINANCIAL HIGHLIGHTS Financial highlights for the period January 1, 2003 through December 31, 2003 are as follows:
SERIES A SERIES B --------- --------- Total return Total return before incentive fees........................ 21.9% 30.5% Incentive fees............................................ (1.7) (2.8) --------- --------- Total return after incentive fees......................... 20.2% 27.7% ========= ========= Ratio to average partners' capital Operating expenses before incentive fees.................. 11.5% 12.8% Incentive fees............................................ 2.4% 3.7% --------- --------- Total expenses............................................ 13.9% 16.5% ========= ========= Net investment income (loss).............................. (10.7)% (12.0)% ========= ========= Net asset value per unit, beginning of period............... $1,095.62 $1,159.77 Net investment income....................................... 440.31 617.90 Net gain on investments..................................... (218.70) (296.48) --------- --------- Net increase in net assets from operations.................. 221.61 321.42 Net asset value per unit, end of period..................... 1,317.23 1,481.19 ========= =========
Financial highlights are calculated for each series taken as a whole. An individual partner's return and ratios may vary based on the timing of capital transactions. 7. FINANCIAL INSTRUMENT RISK In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. The term "off balance sheet risk" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. These financial instruments may include forwards, futures and options, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, to purchase or sell other financial instruments at specific terms at specific future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter ("OTC"). Exchange traded instruments are standardized and include futures and certain option contracts. OTC contracts are negotiated between contracting parties and include forwards and certain options. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange traded instruments because of the greater risk of default by the counter party to an OTC contract. Market risk is the potential for changes in the value of the financial instruments traded by the Fund due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity of security prices. In entering into these contracts, there exists a market risk that such contracts may be significantly influenced by conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interest positions at the same time, and the General Partner was unable to offset such positions, the Fund could experience substantial losses. Credit risk is the possibility that a loss may occur due to the failure of a counter party to perform according to the terms of a contract. Credit risk with respect to exchange-traded instruments is reduced to the extent that an exchange or clearing organization acts as a counter party to the transactions. The Fund's risk of loss in the event of counter party default is typically limited to the amounts recognized in the statements of 67 assets and liabilities and not represented by the contract or notional amounts of the instruments. The Fund has credit risk and concentration risk because the brokers with respect to the Fund's assets are ADM Investor Services Inc., FIMAT USA Inc., Bear Stearns & Co. Inc., Barclays Capital Inc. and Man Financial. The General Partner monitors and controls the Fund's risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Fund is subject. These monitoring systems allow the Fund's General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, on-line monitoring systems provide account analysis of futures and forward positions by sector, margin requirements, gain and loss transactions, and collateral positions. The majority of these instruments mature within one year of December 31, 2003. However, due to the nature of the Fund's business, these instruments may not be held to maturity. 8. SUBSCRIPTIONS AND REDEMPTIONS Investors must submit subscriptions at least five business days prior to the applicable month-end closing date and they will be accepted once payments are received and cleared. All subscriptions funds are required to be promptly transmitted to HSBC Bank USA (the "Escrow Agent"). Subscriptions must be accepted or rejected by Quadriga Capital Management, Inc. within five business days of receipt, and the settlement date for the deposit of subscription funds in escrow must be within five business days of acceptance. No fees or costs will be assessed on any subscription while held in escrow, irrespective of whether the subscription is accepted or subscription funds returned. The Escrow Agent will invest the subscription funds in short-term United States Treasury bills or comparable authorized instruments while held in escrow. A limited partner of a Series may request any or all of his investment in such Series be redeemed by such Series at the net asset value of a Unit within such Series as of the end of the month, subject to a minimum redemption of $1,000 and subject further to such limited partner having an investment in such Series, after giving effect to the requested redemption, at least equal to the minimum initial investment amount of $5,000. Limited partners must transmit a written request of such withdrawal to Quadriga Capital Management, Inc. not less than ten business days prior to the end of the month (or such shorter period as permitted by Quadriga Capital Management, Inc.) as of which redemption is to be effective. Redemptions will generally be paid within 20 days after the date of redemption. However, in special circumstances, including, but not limited to, inability to liquidate dealers' positions as of a redemption date or default or delay in payments due to each Series from clearing brokers, banks or other persons or entities, each Series may in turn delay payment to persons requesting redemption of the proportionate part of the net assets of each Series represented by the sums that are subject of such default or delay. 68 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF FINANCIAL CONDITION (UNAUDITED) (IN U.S. DOLLARS) SEPTEMBER 30, 2004
ASSETS Cash........................................................ $ 852,871 Due from affiliated limited partnerships.................... 149,369 Investment in affiliated limited partnership (cost, $1,500,000)............................................... 2,131,531 Fixed assets, net of accumulated depreciation of $40,073.... 53,094 Other....................................................... 40,105 ---------- $3,226,970 ========== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Other liabilities......................................... $ 17,916 ---------- Total liabilities...................................... 17,916 ---------- Stockholder's equity: Contributed capital, $50 par value. Authorized, issued, and outstanding 0 shares............................... 100,000 Additional paid-in-capital................................ 2,227,378 Retained earnings......................................... 881,675 ---------- Total stockholder's equity............................. 3,209,054 ---------- $3,226,970 ==========
See accompanying notes to unaudited financial statements. 69 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF INCOME (UNAUDITED) (IN U.S. DOLLARS) NINE MONTHS ENDED SEPTEMBER 30, 2004 Income: Other income.............................................. $ 4,946 Equity in loss of unconsolidated investment in affiliated limited partnership.................................... (166,651) Management and incentive fees from affiliated limited partnerships........................................... 2,994,555 ---------- Total income........................................... 2,832,850 ---------- Expenses: Other..................................................... 7,467 Professional fees......................................... 330,390 Operating expenses........................................ 99,158 Salaries.................................................. 102,341 Depreciation.............................................. 34,231 ---------- Total expenses......................................... 573,587 ---------- Net income............................................. $2,259,262 ==========
See accompanying notes to unaudited financial statements. 70 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED) (IN U.S. DOLLARS) NINE MONTHS ENDED SEPTEMBER 30, 2004
COMMON ADDITIONAL RETAINED STOCK PAID-IN CAPITAL EARNINGS TOTAL -------- --------------- ---------- ---------- Balance at December 31, 2003................. $100,000 2,227,378 922,413 3,249,791 Capital contribution......................... -- -- -- -- Capital distribution......................... -- -- (2,300,000) (1,200,000) Net income................................... -- -- 2,259,262 2,259,262 -------- --------- ---------- ---------- Balance at September 30, 2003................ $100,000 2,227,378 881,675 3,209,054 ======== ========= ========== ==========
See accompanying notes to unaudited financial statements. 71 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF CASH FLOWS (UNAUDITED) (IN U.S. DOLLARS) NINE MONTHS ENDED SEPTEMBER 30, 2004 Cash flows from operating activities: Net income................................................ $ 2,259,262 Adjustments to reconcile net income to net cash provided by operating activities: Decrease in due from affiliated limited partnerships... (51,861) Decrease in professional fees payable.................. (106,508) Increase in other liabilities.......................... 12,895 ----------- Net cash provided by operating activities............ 2,113,789 ----------- Cash flows from investing activities: Redemption from investment in affiliated limited partnership............................................ 500,000 Equity in loss of unconsolidated investment in affiliated limited partnership.................................... 166,889 Depreciation.............................................. 34,231 Purchase of fixed assets.................................. (44,953) ----------- Net cash used in investing activities................ 656,167 ----------- Cash flows from financing activities: Contributed capital....................................... (2,300,000) ----------- Net cash provided by financing activities............ (2,300,000) ----------- Net change in cash................................... 469,956 Cash at beginning of year................................... 382,915 ----------- Cash at end of period....................................... $ 852,871 ===========
See accompanying notes to unaudited financial statements. 72 QUADRIGA CAPITAL MANAGEMENT, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies which have been followed in preparing the accompanying financial statements is set forth below: NATURE OF BUSINESS Quadriga Capital Management Inc. (the Company) was incorporated in Grenada, West Indies, in March 2001. The Company's sole business is the trading and management of discretionary futures trading accounts, including commodity pools which are domiciled in the United States of America. The Company presently serves as commodity pool operator for Quadriga Superfund L.P. (Quadriga Superfund) and served as commodity pool operator for Quadriga Partners L.P. until October 10, 2003. The Company is wholly owned by one shareholder. INVESTMENT IN AFFILIATED LIMITED PARTNERSHIP The Company has invested in Quadriga Superfund, a Delaware limited partnership, organized to trade speculatively in the United States of America and international commodity equity markets using a strategy developed by the Company. The Company's investment in Quadriga Superfund is recorded based upon the equity method of accounting. REVENUE RECOGNITION The Company earns management fees and an incentive fee for trading and management services provided to Quadriga Partners and Quadriga Superfund. Management fees and incentive fees are accrued as earned. EXPENSES The Company incurs operating expenses relating to normal activities in connection with managing the business. Expenses are recorded as incurred. FIXED ASSETS Fixed assets are stated net of accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized straight line over the remainder of the lease term. USE OF ESTIMATES The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from such estimates. INCOME TAXES The Company has no income that is effectively connected in the United States of America, and therefore is not subject to income tax for the period ended September 30, 2004. 73 QUADRIGA CAPITAL MANAGEMENT, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED) FUNCTIONAL CURRENCY The Company's functional currency is the U.S. dollar. In addition to maintaining a bank account in U.S. Dollars, the Company also has two accounts denominated in foreign currencies (Eastern Caribbean dollars and Euros) used for various immaterial operating expenses. Cash assets denominated in these foreign currencies are translated to U.S. dollars at the current exchange rate. The resulting adjustments are charged or credited directly to income or expenses in the statement of income. Expenses are translated at the weighted-average exchange rate for the period. There has been no material impact of changes in the exchange rates during the period covered by the financial statements. (2) RELATED PARTIES The Company is the general partner and is responsible for the trading and management of Quadriga Superfund. As general manager of Quadriga Superfund, the Company receives a monthly management fee computed at an annual rate of 2.00% of the net assets of Quadriga Superfund at the beginning of such month. Management fees, which are accrued ratably as services are performed, compensate the Company for services rendered to and on behalf of and Quadriga Superfund. In addition, the Company receives an incentive fee from Quadriga Superfund in an amount equal to 25% of the excess of net profits over net losses allocated to the limited partners' capital accounts as of the end of each fiscal year. For the period from January 1 to September 30, 2004, the Company had earned management fees and incentive fees of $1,034,379 and $1,810,807, respectively, which is included in fee income. At September 30, 2004, the Company had accrued management fee revenue receivable of $149,369, which is included in due from affiliated limited partnerships. The Company utilizes an automated trading system to execute its commodity trades on behalf of Quadriga Partners. The trading system is owned by Christian Baha and Christian Halper, and is licensed to the Company on a nonexclusive basis at no cost. For the period ended September 30, 2004, the actual costs of acquiring and operating the automated trading system which would have been allocated to the Company, based upon assets managed, were immaterial. Such costs may be allocated in future periods and would be recorded as an expense, with an offsetting credit to additional paid-in capital. The Company executes its trades through Quadriga Asset Management, Inc. (QAM), an introducing broker located in Chicago, IL. The sole stockholder of the Company is also a majority shareholder of QAM. Brokerage costs are recognized in the account for which the Company is trading. No brokerage costs are incurred directly by the Company. (3) POSSIBLE CONTINGENT LIABILITY On January 10, 2003 management of Quadriga Superfund (the Fund) filed a post-effective amendment to the Registration Statement with the U.S. Securities and Exchange Commission which amended the Plan of Distribution. Before such amendment had been declared effective, and as of June 30, 2003, the Fund had sold a total of 5,640 units of Series A in the principal amount of $6.74 million and 8,224 units of Series B in the principal amount of $10.73 million. Quadriga Capital Management and the Fund may be subject to potential claims for rescission from investors and regulatory or enforcement action for any sales of Units made without an effective Registration Statement. As a regulated company, Quadriga Capital Management faces potential liability in the normal cause of its business from any administrative action or in any situation in which it is found to have engaged in activities which violate applicable law. Quadriga Capital Management is unable to estimate the probability of assertion of any related claims or assessments. 74 INDEPENDENT AUDITORS' REPORT The Shareholder Quadriga Capital Management, Inc. We have audited the accompanying statement of financial condition of Quadriga Capital Management, Inc. (the Company) as of December 31, 2003, and the related statements of income, changes in stockholder's equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quadriga Capital Management, Inc. as of December 31, 2003, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. KPMG LLP New York, New York March 18, 2004 75 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2003 (IN U.S. DOLLARS) ASSETS Cash........................................................ $ 382,915 Due from affiliated limited partnerships.................... 100,357 Investment in affiliated limited partnership (cost, $2,000,000)............................................... 2,798,420 Fixed asset, net of accumulated depreciation of $72,982..... 42,372 Other assets................................................ 37,256 ---------- $3,361,320 ========== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Other liabilities......................................... $ 5,021 Professional fees payable................................. 106,508 ---------- Total liabilities...................................... 111,529 ---------- Stockholder's equity: Contributed capital, $50 par value. Authorized, issued, and outstanding 0 shares............................... 100,000 Additional paid-in-capital................................ 2,227,378 Retained earnings......................................... 922,413 ---------- Total stockholder's equity............................. 3,249,791 ---------- $3,361,320 ==========
See accompanying notes to financial statements. 76 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2003 (IN U.S. DOLLARS) Income: Equity in earnings of unconsolidated investment in affiliated limited partnership......................... $ 543,030 Management and incentive fees from affiliated limited partnerships........................................... 1,894,799 Other income.............................................. 44,034 ---------- Total income........................................... 2,481,863 ---------- Expenses: Professional fees......................................... 545,476 Operating expenses........................................ 139,723 Salaries.................................................. 109,580 Depreciation.............................................. 40,309 Other expenses............................................ 809 ---------- Total expenses......................................... 835,897 ---------- Net income............................................. $1,645,966 ==========
See accompanying notes to financial statements. 77 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY YEAR ENDED DECEMBER 31, 2003 (IN U.S. DOLLARS)
ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL -------- --------------- ---------- ---------- Balance at December 31, 2002......... $100,000 2,199,862 476,447 2,776,309 Capital distribution................. -- -- (1,200,000) (1,200,000) Capital contribution................. -- 27,516 -- 27,516 Net income........................... -- -- 1,645,966 1,645,966 -------- --------- ---------- ---------- Balance at December 31, 2003......... $100,000 2,227,378 922,413 3,249,791 ======== ========= ========== ==========
See accompanying notes to financial statements. 78 QUADRIGA CAPITAL MANAGEMENT, INC. STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2003 (IN U.S. DOLLARS) Cash flows from operating activities: Net income................................................ $ 1,645,966 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................................... 40,309 Equity in earnings of unconsolidated investment in affiliated limited partnership........................ (543,030) Decrease in due from affiliated limited partnerships... 158,289 Increase in other assets............................... (37,256) Increase in professional fees payable.................. 73,466 Decrease in other liabilities.......................... (35,660) ----------- Net cash provided by operating activities............ 1,302,084 ----------- Cash flows from investing activities: Purchase of fixed assets.................................. (27,770) ----------- Net cash used in investing activities................ (27,770) ----------- Cash flows from financing activities: Capital distribution...................................... (1,200,000) Capital contribution...................................... 27,516 ----------- Net cash used in financing activities................ (1,172,484) ----------- Net change in cash................................... 101,830 Cash at beginning of year................................... 281,085 ----------- Cash at end of year......................................... $ 382,915 ===========
See accompanying notes to financial statements. 79 QUADRIGA CAPITAL MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies which have been followed in preparing the accompanying financial statements is set forth below: NATURE OF BUSINESS Quadriga Capital Management Inc. (the Company) was incorporated in Grenada, West Indies, in March 2001. The Company's sole business is the trading and management of discretionary futures trading accounts, including commodity pools which are domiciled in the United States of America. The Company presently serves as commodity pool operator for Quadriga Superfund L.P. (Quadriga Superfund) and served as commodity pool operator for Quadriga Partners L.P. (Quadriga Partners) until October 10, 2003. The Company is wholly owned by one shareholder. INVESTMENT IN AFFILIATED LIMITED PARTNERSHIP The Company has invested in Quadriga Superfund, a Delaware limited partnership, organized to trade speculatively in the United States of America and international commodity equity markets using a strategy developed by the Company. The Company's investment in Quadriga Superfund is recorded based upon the equity method of accounting. REVENUE RECOGNITION The Company earns management fees and an incentive fee for trading and management services provided to Quadriga Partners and Quadriga Superfund. Management fees and incentive fees are accrued as earned. EXPENSES The Company incurs operating expenses relating to normal activities in connection with managing the business. Expenses are recorded as incurred. FIXED ASSETS Fixed assets are stated net of accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized straight line over the remainder of the lease term. USE OF ESTIMATES The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from such estimates. INCOME TAXES The Company has no income that is effectively connected in the United States of America, and therefore is not subject to income tax for the year ended December 31, 2003. 80 QUADRIGA CAPITAL MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) FUNCTIONAL CURRENCY The Company's functional currency is the U.S. Dollar. In addition to maintaining bank accounts in U.S. Dollars, the Company also has two accounts denominated in foreign currencies (Eastern Caribbean dollars and Euros) used for various operating expenses. Cash assets denominated in these foreign currencies are translated to U.S. dollars at the current exchange rate. The resulting adjustments are charged or credited directly to income or expenses in the statement of income. Expenses are translated at the weighted average exchange rate for the period. There has been no material impact of changes in the exchange rates during the period covered by the financial statements. (2) RELATED PARTIES The Company is the general partner and is responsible for the trading and management of Quadriga Superfund and Quadriga Partners until October 10, 2003. As general manager of Quadriga Superfund, the Company receives a monthly management fee computed at an annual rate of 2.00% of the net assets of Quadriga Superfund at the beginning of such month. Management fees, which are accrued ratably as services are performed, compensate the Company for services rendered to and on behalf of Quadriga Superfund. In addition, the Company receives an incentive fee from Quadriga Superfund in an amount equal to 25% of the excess of net profits over net losses allocated to the limited partners' capital accounts as of the end of each fiscal year. For the period from January 1 to December 31, 2003, the Company earned management fees and incentive fees of $512,924 and $1,131,899, respectively, which is included in fee income. At December 31, 2003, the Company had accrued management fee revenue receivable of $59,364, which is included in due from affiliated limited partnerships. The Company utilizes an automated trading system to execute its commodity trades on behalf of Quadriga Partners. The trading system is owned by Christian Baha and Christian Halper, and is licensed to the Company on a nonexclusive basis at no cost. For the period ended December 31, 2003, the actual costs of acquiring and operating the automated trading system which would have been allocated to the Company, based upon assets managed, were immaterial. Such costs may be allocated in future periods and would be recorded as an expense, with an offsetting credit to additional paid-in capital. The Company executes its trades through Quadriga Asset Management, Inc. (QAM), an introducing broker located in Chicago, IL. The sole stockholder of the Company is also a majority shareholder of QAM. Brokerage costs are recognized in the account for which the Company is trading. No brokerage costs are incurred directly by the Company. (3) INVESTMENT IN AFFILIATED LIMITED PARTNERSHIPS The following represents investments in Quadriga Superfund as of December 31, 2003: Investment in Quadriga Superfund at January 1, 2003......... $2,255,390 Equity in earnings.......................................... 543,030 ---------- Investment in Quadriga Superfund at December 31, 2003....... $2,798,420 ==========
81 QUADRIGA CAPITAL MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (4) LEASE The future minimum lease payments under the non cancelable office rental lease as of December 31, 2003 are:
MINIMUM PAYMENTS -------- Year ending December 31: 2004*..................................................... $ 5,952 ------- $ 5,952 =======
- --------------- * There are no rental commitment beyond August 2004. (5) POSSIBLE CONTINGENT LIABILITY On January 10, 2003 management of Quadriga Superfund (the Fund) filed a post-effective amendment to the Registration Statement with the U.S. Securities and Exchange Commission which amended the Plan of Distribution. Since that date, the Fund has sold a total of 11,343 units in the principal amount of $14,201,005. Quadriga Capital Management and the Fund may be subject to potential claims for rescission from investors and regulatory or enforcement action for any sales of the Units made without an effective Registration Statement. As a regulated company, Quadriga Capital Management faces potential liability in the normal cause of its business from any administrative action or in any situation in which it is found to have engaged in activities which violate applicable law. Quadriga Capital Management is unable to estimate the probability of assertion of any related claims or assessments. 82 PART TWO -- STATEMENT OF ADDITIONAL INFORMATION QUADRIGA SUPERFUND, L.P. $200,000,000 UNITS OF BENEFICIAL INTEREST SERIES A SERIES B --------------------- THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH INVOLVES THE RISK OF LOSS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 7 IN PART ONE --------------------- THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN IMPORTANT INFORMATION. --------------------- QUADRIGA CAPITAL MANAGEMENT, INC. GENERAL PARTNER --------------------- 83 PART TWO STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
PAGE ---- Strategy.................................................... 85 Why Quadriga................................................ 92 Glossary.................................................... 92 The Futures and Forward Markets............................. 94 Regulation.................................................. 95 Advantages of Futures Fund Investments...................... 95 Potential Disadvantages of Futures Fund Investments......... 97 EXHIBITS Exhibit A: Quadriga Superfund, L.P. Form of Limited Partnership Agreement..................................... A-1 Exhibit B: Request for Redemption........................... B-1 Exhibit C: Suitability Requirements......................... C-1 Exhibit D: Subscription Instructions........................ D-1
84 STRATEGY MARKET DIVERSIFICATION Quadriga Capital Management, Inc. and its affiliates (collectively, "Quadriga") use a proprietary system designed to ensure minimal correlation to traditional investments. The spectrum of traded instruments globally consists of 100 futures markets in both commodity and financial futures. Fundamental to Quadriga's trading style is low correlation between the different instruments and high liquidity for order execution. [PIE GRAPH] TECHNICAL TRADING SYSTEM Positions are initiated using a proprietary technical algorithm that attempts to predict price trends in advance. Most systematic trend following systems employ technical indicators such as moving averages or bollinger bands to identify trending markets. Quadriga believes the key to using such indicators successfully lies in the way they are interrelated and applied in combination. 85 TREND FOLLOWING At present, Quadriga's trading strategy is based on short and midterm time horizons. One key to Quadriga's past success is to limit drawdowns by daily maintenance of stop orders. In this way, if a trend reverses Quadriga's loss is theoretically limited, while if a trend continues Quadriga's profits are theoretically protected. By this measure, Quadriga seeks to optimize winning trades. [TREND FOLLOWING GRAPH] MONEY MANAGEMENT Risk management plays a key role in Quadriga's investment strategy. Quadriga's proprietary program limits initial risk per trade to a theoretical maximum of 1.5 percent of total funds assets. In addition, the system continuously screens volatility and adjusts portfolio exposure accordingly. 86 PERFORMANCE QAGB (COMPARABLE TO THE TRADING PROGRAM FOR "SUPERFUND, L.P. SERIES A")* QAG is Quadriga's flagship product and was introduced to retail investors in Europe on March 8, 1996. The targeted annualized performance of this strategy is 30 percent with an annualized standard deviation (measurement of risk) of 20 percent. This chart was prepared by Quadriga Capital Management, Inc. See the glossary on page 45 of Part Two for information integral to this chart. [PERFORMANCE QAG GRAPH] HISTORICAL PERFORMANCE
1996 -10.30% 1997 +20.70% ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 1998 1999 2000 2001 2002 2003 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Jan 1055.11 -2.54% 1832.17 +4.11% 2247.35 +1.84% 2760.49 +1.55% 3211.04 -0.59% 5041.62 +12.76% Feb 1103.48 +4.58% 1850.18 +0.98% 2221.75 -1.14% 2800.64 +1.45% 3131.50 -2.48% 5648.54 +12.04% Mar 1143.25 +3.60% 1818.72 -1.70% 2128.48 -4.20% 3157.97 +12.76% 3086.26 -1.44% 4704.38 -16.72% Apr 1088.28 -4.81% 1933.67 +6.32% 2124.26 -0.20% 2753.39 -12.81% 2994.10 -2.99% 4629.32 -1.60% May 1183.39 +8.74% 1821.48 -5.80% 2257.38 +6.27% 2872.26 +4.32% 3033.24 +1.31% 5094.14 +10.04% Jun 1206.53 +1.96% 1813.69 -0.43% 2282.98 +1.13% 2883.43 +0.39% 3447.95 +13.67% 4847.91 -4.83% Jul 1332.06 +10.40% 1834.26 +1.13% 2189.90 -4.08% 2936.31 +1.83% 3923.06 +13.78% 4798.53 -1.02% Aug 1463.65 +9.88% 1784.54 -2.71% 2428.51 +10.90% 3117.01 +6.15% 4244.76 +8.20% 4869.26 +1.47% Sep 1454.13 -0.65% 1865.34 +4.53% 2275.67 -6.29% 3597.23 +15.41% 4751.49 +11.94% 4729.52 -2.87% Oct 1407.45 -3.21% 1806.20 -3.17% 2175.12 -4.42% 3739.17 +3.95% 4096.59 -13.78% Nov 1601.23 +13.77% 1997.01 +10.56% 2285.23 +5.06% 3262.23 -12.76% 3835.39 -6.38% Dec 1759.81 +9.90% 2206.66 +10.50% 2718.42 +18.96% 3230.16 -0.98% 4471.13 +16.58% ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- +62.55% +25.39% +23.19% +18.82% +38.42% +5.78% ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
STATISTICS
- -------------------------------- --------------------------------------- -------------------------------------- RETURN STATISTICS RISK STATISTICS EFFICIENCY STATISTICS - -------------------------------- --------------------------------------- -------------------------------------- since inception 372.95% annual standard deviation* 24.61% sharpe ratio** 0.92 annualized geometric* 22.74% monthly standard deviation* 7.11% sharpe ratio one year** -0.01 YTD 5.78% max. initial risk per trade 1.00% sharpe ratio three years** 0.89 one year rolling -0.46% typical margin to equity 20.00% sharpe ratio five years** 0.98 three year rolling 107.83% maximum drawdown* 19.93% five year rolling 225.25% maximum time off peak* 11 months correlation to S&P (3 years) -0.61 average monthly* 1.72% correlation to MAR (34 months) 0.87 highest monthly* 18.96% correlation to CSFB (35 months) 0.04 lowest monthly* -16.72% correlation to DAX (3 years) -0.59 % of positive months* 54.95% - ------------------------------ --------------------------------------- -------------------------------------- * since inception ** modified
Past performance is not indicative of future results. The foregoing performance results are shown net of all fees. * "Quadriga Superfund, L.P. -- Series A" employs a very similar strategy to Quadriga AG; however, it is traded at a higher level of risk because of higher fees. The performance shown does not represent that of Quadriga Superfund, L.P. Series A and there is no guarantee of Quadriga Superfund, L.P. Series A achieving the same results as Quadriga AG. Past performance is not necessarily indicative of future results. 87 PERFORMANCE Q-GCT (COMPARABLE TO THE TRADING PROGRAM FOR "SUPERFUND, L.P. SERIES B")* Q-GCT is the more aggressive fund strategy and was introduced on January 4, 2000 to investors. The targeted annualized performance of this strategy is between 40-50 percent with an annualized standard deviation (measurement of risk) of max. 30 percent. This chart was prepared by Quadriga Capital Management, Inc. See the glossary on page 45 for information integral to this chart. [PERFORMANCE Q-GCT GRAPH] HISTORICAL PERFORMANCE
- ------------------------ ------------------------- ------------------------- ------------------------- 2000 2001 2002 2003 - ------------------------ ------------------------- ------------------------- ------------------------- Jan 619.08 +12.32% Jan 799.99 +3.56% Jan 1112.97 +1.06% Jan 2236.19 +19.99% Feb 584.24 -5.63% Feb 836.53 +4.57% Feb 1082.99 -2.69% Feb 2583.34 +15.52% Mar 569.91 -2.45% Mar 919.74 +9.95% Mar 1023.91 -5.46% Mar 1983.71 -23.21% Apr 565.61 -0.75% Apr 840.60 -8.61% Apr 1017.38 -0.64% Apr 2004.71 +1.06% May 602.08 +6.45% May 856.46 +1.89% May 1053.60 +3.56% May 2203.04 +9.89% Jun 606.34 +0.71% Jun 899.47 +5.02% Jun 1301.64 +23.54% Jun 2014.56 -8.56% Jul 554.52 -8.55% Jul 909.41 +1.11% Jul 1531.66 +17.67% Jul 1951.28 -3.14% Aug 622.85 +12.32% Aug 1002.83 +10.27% Aug 1764.97 +15.23% Aug 2002.46 +2.62% Sep 579.83 -6.91% Sep 1287.86 +28.42% Sep 1923.95 + 9.01% Sep 1884.88 -5.87% Oct 561.93 -3.09% Oct 1355.72 + 5.27% Oct 1592.41 -17.23% Oct Nov 612.17 +8.94% Nov 1157.47 -14.62% Nov 1497.89 -5.94% Nov Dec 772.51 +26.19% Dec 1101.29 -4.85% Dec 1863.67 +24.42% Dec - ------------------------ ------------------------- ------------------------- ------------------------- +40.16% +42.56% +69.23% +1.14% - ------------------------ ------------------------- ------------------------- -------------------------
STATISTICS
- -------------------------------- -------------------------------------- -------------------------------------- RETURN STATISTICS RISK STATISTICS EFFICIENCY STATISTICS - -------------------------------- -------------------------------------- -------------------------------------- since inception 241.98% annual standard deviation* 39.57% sharpe ratio** (36 months) 1.14 annualized geometric* 38.80% monthly standard deviation* 11.42% sharpe ratio** (12 months) -0.04 YTD 1.14% typical margin to equity 30.00% one year rolling -2.03% max. initial risk per trade 1.50% correlation to S&P (36 months) -0.58 average monthly* 2.77% maximum drawdown* 27.04% correlation to MAR (34 months) 0.83 highest monthly* 28.42% maximum time off peak* 9 months correlation to CSFB (35 months) 0.01 lowest monthly* -23.21% correlation to DAX (36 months) -0.56 % of positive months* 60.00% - --------------------------- --------------------------------------- -------------------------------------- * since inception ** modified
Past performance is not indicative of future results. The foregoing performance results are shown net of all fees. * "Quadriga Superfund, L.P. -- Series B" is expected to employ a very similar strategy to Quadriga GCT; however, it will be traded at a higher level of risk because of higher fees. But please understand, that the figures shown do not represent the figures of Quadriga Superfund, L.P. Series B and that there is no guarantee of Quadriga Superfund, L.P. Series B achieving the same results as Quadriga GCT. Past performance is not necessarily indicative of future results. 88 CORRELATION COMPARISON 89 CORRELATION COMPARISON One of the key tenets of Modern Portfolio Theory, as developed by the Nobel Prize economist Dr. Harry M. Markowitz, is more efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations. [CORRELATION COMPARISON GRAPH]
QUADRIGA AG S&P 500 NASDAQ COMP. MSCI WORLD ----------- ------- ------------ ---------- Performance PERFORMANCE SINCE 1.1.97 427.28% 34.41% 0.98% 10.88% PERFORMANCE P.A. 27.93% 4.48% 0.15% 1.54% Risk MAXIMUM DRAWDOWN 19.93% 46.28% 75.04% 48.45% VOLATILITY P.A. 25.70% 17.86% 34.71% 16.24% Statistics MOD. SHARPE RATIO 1.09 0.25 0.00 0.09 CORRELATION TO QUADRIGA 1.00 -0.25 -0.15 -0.19
01/97-09/03 This chart was prepared by Quadriga Capital Management, Inc. See the glossary on page 45 for information integral to this chart. COMMENTS Over the past six years, Quadriga AG (QAG) not only outperformed the major indices but also had either zero or even negative correlation to such indices. In general, this attribute will allow investors to potentially reduce the risk in their portfolios through diversification. Past performance is not indicative of future results. The foregoing performance results are shown net of all fees. *"Quadriga Superfund, L.P. -- Series A" employs a very similar strategy to Quadriga AG; however, it is traded at a higher level of risk because of higher fees. The figures shown do not represent the figures of Quadriga Superfund, L.P. Series A and there is no guarantee of Quadriga Superfund, L.P. Series A achieving the same results as Quadriga AG. 90 [CHANGING INVESTMENT WORLD GRAPH] 91 WHY QUADRIGA WHY A MANAGED FUTURES FUND? Managed futures investments are intended to generate long-term capital growth by providing global portfolio diversification. This diversification can be utilized by investing in Quadriga Superfund. A primary reason to invest in a managed futures (alternative investment) product, such as Quadriga Superfund, is to provide a fully diversified portfolio of investments that has the potential to improve returns while protecting against risk. This is possible because managed futures (alternative investment) products historically have not been correlated to traditional markets, such as stocks and bonds. WHY QUADRIGA SUPERFUND? Quadriga has a proven track record of performance for the past eight years. The funds trade more than 100 futures markets and 1200 equities markets worldwide using a proprietary trading system designed and developed by its founders. Quadriga's funds have consistently produced double-digit returns, even during down markets, due to diversified trades and the ability to spot trends, while insuring strict risk controls are always in place. WHY NOW? The recent fluctuation in world markets has proven that long-only equity portfolios cannot make money during downward cycles. For continued portfolio performance, a fund that hedges its trades is the only way to limit losses and insure gains in any economic environment. HISTORICAL NON CORRELATED PERFORMANCE Historically, managed futures investments have had very little correlation to the stock and bond markets. While there is no guarantee of positive performance in a managed futures component of a portfolio, the non-correlation characteristic of managed futures can improve risk adjusted returns in a diversified investment portfolio. Having the ability to go long and short gives managed futures the ability to profit from up or down markets. In other words, profit or loss in managed future funds is not dependent on economic cycles. GLOSSARY QUADRIGA SUPERFUND LIMITED PARTNERSHIP Quadriga Superfund has two series of units, Series A and Series B. Series A has a strategy similar to the Quadriga AG Fund, which has a Global Macro trading strategy and an eight year track record. Series B has a strategy similar to the Quadriga GCT fund, which employs more leverage than the AG Fund, and has a Managed Futures trading strategy. QUADRIGA AG QAG is the group's flagship product and was introduced to the retail investor in Europe on March 8th, 1996. This product is not available for US investors. QUADRIGA GCT Q-GCT is the more aggressive fund strategy and was introduced on January 4, 2000 to investors. This product is not available for US investors. 92 AGGREGATE SUBSCRIPTIONS Total gross capital subscriptions made to a pool or account from inception through the date indicated. DRAWDOWN Losses experienced by a pool or account over a specified period. WORST MONTH PEAK-TO-VALLEY DRAWDOWN Greatest cumulative percentage decline in month-end net asset value due to losses sustained by a pool or account during any period in which the initial month-end net asset value is not equaled or exceeded by a subsequent month-end net asset value. MAR FUND/POOL QUALIFIED UNIVERSE INDEX A dollar weighted index that includes the performance of current, as well as, retired public futures funds, private pools and offshore funds that have the objective of speculative trading profits. The MAR Index is utilized as a broad measure of overall managed futures returns, as compared to other indices that measure the overall returns of stocks and bonds as separate asset classes. The MAR Index is not the same as an investment in the Fund, and the Fund may perform quite differently than the Index, just as an individual stock may perform quite differently from the S&P 500 Index. MSCI WORLD INDEX The MSCI World Index consists of more than 1,500 stocks in 23 countries globally and represents approximately 85 percent of the total market capitalization in those countries. NASDAQ COMPOSITE INDEX The National Association of Securities Dealers Automated Quotation is an electronic-over the counter exchange. Unlike the NYSE auction market where orders meet on a trading floor, NASDAQ orders are paired and executed on a computer network. NET ASSET VALUE Net Asset Value of each Series B is that Series' assets less liabilities determined in accordance with accounting principles generally accepted in the United States. STANDARD & POOR'S 500 COMPOSITE STOCK INDEX (S&P 500 INDEX) A capitalization weighted index of 500 stocks. The Standard and Poor 500 Index represents the price trend movements of the major common stock of U.S. public companies. It is used to measure the performance of the entire U.S. domestic stock market. LEHMAN AGGREGATE BOND INDEX Index composed of corporate bonds, such as those from Fannie Mae (FNM), which is a quasi-governmental issuer, as well as major companies like General Electric (GE). CISDM CISDM is a non-profit academic and research center that provides monthly reports on academic and practitioner research, asset allocation, and performances of different alternative investment strategies including approximately 1,800 active hedge funds and 600 active commodity trading advisors, commodity pool operators and managed futures programs. 93 THE FUTURES AND FORWARD MARKETS FUTURES CONTRACTS Futures contracts are standardized agreements traded on commodity exchanges that call for the future delivery of the commodity or financial instrument at a specified time and place. A futures trader that enters into a contract to take delivery of the underlying commodity is "long" the contract, or has "bought" the contract. A trader that is obligated to make delivery is "short" the contract or has "sold" the contract. Actual delivery on the contract rarely occurs. Futures traders usually offset (liquidate) their contract obligations by entering into equal but offsetting futures positions. For example, a trader who is long one September Treasury bond contract on the Chicago Board of Trade can offset the obligation by entering into a short position in a September Treasury bond contract on that exchange. Futures positions that have not yet been liquidated are known as "open" contracts or positions. Futures contracts are traded on a wide variety of commodities, including agricultural products, metals, livestock products, government securities, currencies and stock market indices. Options on futures contracts are also traded on U.S. commodity exchanges. Each Series concentrates its futures trading in the U.S. and international futures and equity markets. FORWARD CONTRACTS Currencies and other commodities may be purchased or sold for future delivery or cash settlement through banks or dealers pursuant to forward or swap contracts. Currencies also can be traded pursuant to futures contracts on organized futures exchanges; however, Quadriga Capital Management will use the dealer market in foreign exchange contracts for most of each Series' trading in currencies. Such dealers will act as "principals" in these transactions and will include their profit in the price quoted on the contracts. Unlike futures contracts, foreign exchange contracts are not standardized. In addition, the forward market is largely unregulated. Forward contracts are not "cleared" or guaranteed by a third party. Thus, each Series is subject to the creditworthiness of the foreign exchange dealer with whom it maintains all assets and positions relating to each Series' forward contract investments. There also is no daily settlement of unrealized gains or losses on open foreign exchange contracts as there is with futures contracts on U.S. exchanges. SWAP TRANSACTIONS Each Series may periodically enter into transactions in the forward or other markets which could be characterized as swap transactions and which may involve interest rates, currencies, securities interests, commodities and other items. A swap transaction is an individually negotiated, non-standardized agreement between two parties to exchange cash flows measured by different interest rates, exchange rates, or prices, with payments calculated by reference to a principal ("notional") amount or quantity. Transactions in these markets present certain risks similar to those in the futures, forward and options markets: (1) the swap markets are generally not regulated by any United States or foreign governmental authorities; (2) there are generally no limitations on daily price moves in swap transactions; (3) speculative position limits are not applicable to swap transactions, although the counterparties with which each Series may deal may limit the size or duration of positions available as a consequence of credit considerations; (4) participants in the swap markets are not required to make continuous markets in swaps contracts; and (5) the swap markets are "principal markets," in which performance with respect to a swap contract is the responsibility only of the counterparty with which the trader has entered into a contract (or its guarantor, if any), and not of any exchange or clearinghouse. As a result, each Series will be subject to the risk of the inability of or refusal to perform with respect to such contracts on the part of the counterparties with which each Series trades. The CFTC has adopted Part 35 to its Rules which provides non-exclusive safe harbor treatment from regulations under the Commodity Exchange Act as amended for swap transactions which meet certain specified criteria, over which the CFTC will not exercise its jurisdiction and regulate as futures or commodity option transactions. Notwithstanding the CFTC's position, the CFTC or a court could conclude in the future that certain swap transactions entered into by each Series constitute unauthorized futures or commodity option contracts subject to the CFTC's jurisdiction or attempt to prohibit each Series from engaging in such transactions. If each Series were restricted in its ability to trade in the swap markets, the activities of Quadriga 94 Capital Management, to the extent that it trades in such markets on behalf of each Series, might be materially affected. REGULATION The U.S. futures markets are regulated under the Commodity Exchange Act, which is administered by the CFTC, a federal agency created in 1974. The CFTC licenses and regulates commodity exchanges, commodity pool operators, commodity trading advisors and clearing firms which are referred to in the futures industry as "futures commission merchants." Quadriga Capital Management is registered with the CFTC as a commodity pool operator. Futures professionals are also regulated by the NFA, a self-regulatory organization for the futures industry that supervises the dealings between futures professionals and their customers. If the pertinent CFTC licenses or NFA memberships were to lapse, be suspended or be revoked, Quadriga Capital Management would be unable to act as each Series' commodity pool operator and commodity trading advisor. The CFTC has adopted disclosure, reporting and recordkeeping requirements for commodity pool operators and disclosure and recordkeeping requirements for commodity trading advisors. The reporting rules require pool operators to furnish to the participants in their pools a monthly statement of account, showing the pool's income or loss and change in net asset value, and an annual financial report, audited by an independent certified public accountant. The CFTC and the exchanges have pervasive powers over the futures markets, including the emergency power to suspend trading and order trading for liquidation of existing positions only. The exercise of such powers could adversely affect each Series' trading. The CFTC does not regulate forward contracts. Federal and state banking authorities also do not regulate forward trading or forward dealers. Trading in foreign currency futures contracts may be less liquid and each Series' trading results may be adversely affected. MARGIN In order to establish and maintain a futures position, a trader must make a type of good-faith deposit with its broker, known as "margin," of approximately 2%-10% of contract value. Minimum margins are established for each futures contract by the exchange on which the contract is traded. The exchanges alter their margin requirements from time to time, sometimes significantly. For their protection, clearing brokers may require higher margins from their customers than the exchange minimums. Margin also is deposited in connection with forward contracts but is not required by any applicable regulation. There are two types of margin. "Initial" margin is the amount a trader is required to deposit with its broker to open a futures position. The other type of margin is "maintenance" margin. When the contract value of a trader's futures position falls below a certain percentage, typically about 75%, of its value when the trader established the position, the trader is required to deposit additional margin in an amount equal to the loss in value. ADVANTAGES OF FUTURES FUND INVESTMENTS Both the futures and forward markets and funds investing in those markets offer many structural advantages that make managed futures an efficient way to participate in global markets. PROFIT POTENTIAL Futures, forwards and options contracts can easily be leveraged, which magnifies the potential profit and loss. As a result of this leveraging, even a small movement in the price of a contract can cause major losses. 100% INTEREST CREDIT Unlike some alternative investment funds, each Series does not borrow money in order to obtain leverage, so each Series does not incur any interest expense. Rather, each Series' margin deposits are maintained in cash equivalents, such as U.S. Treasury bills, and interest is earned on 100% of each Series' available assets, which include unrealized profits credited to each Series' accounts. 95 GLOBAL DIVERSIFICATION WITHIN A SINGLE INVESTMENT Futures and related contracts can be traded in many countries, which makes it possible to diversify risk around the globe. This diversification is available both geographically and across market sectors. For example, an investor can trade interest rates, stock indices and currencies in several countries around the world, as well as energy and metals. While each Series itself trades across a diverse selection of global markets, an investment in each Series is not a substitute for overall portfolio diversification. ABILITY TO PROFIT OR LOSE IN A RISING OR FALLING MARKET ENVIRONMENT Each Series can establish short positions and thereby profit from declining markets as easily as it can establish long positions. This potential to make money, whether markets are rising or falling around the globe, makes managed futures particularly attractive to sophisticated investors. Of course, if markets go higher while an investor has a short position, he will lose money until the short position is exited. PROFESSIONAL TRADING Quadriga Capital Management's approach includes the following elements: - Disciplined Money Management. Quadriga Capital Management generally allocates between 0.6% to 0.8% of portfolio equity to any single market position with a maximum risk of 1% to 1.5% from initial risk. However, no guarantee is provided that losses will be limited to these percentages. - Balanced Risk. Quadriga Capital Management will allocate each Series' capital to more than 100 markets around the world 24 hours a day. Among the factors considered for determining the portfolio mix are market volatility, liquidity and trending characteristics. - Capital Management. When proprietary risk/reward indicators reach predetermined levels, Quadriga Capital Management may increase or decrease commitments in certain markets in an attempt to reduce performance volatility. - Multiple Systems. While Quadriga Capital Management's approach is to find emerging trends and follow them to conclusion, no one system is right all of the time. Quadriga Capital Management utilizes a multi-system strategy on behalf of each Series that divides capital among different trading systems in an attempt to reduce performance volatility. CONVENIENCE Through each Series, investors can participate in global markets and opportunities without needing to master complex trading strategies and monitor multiple international markets. LIQUIDITY In most cases the underlying markets have sufficient liquidity. Some markets trade 24 hours on business days. While there can be cases where there may be no buyer or seller for a particular market, each Series tries to select markets for investment based upon, among other things, their perceived liquidity. Exchanges impose limits on the amount that a futures price can move in one day. Situations in which markets have moved the limit for several days in a row have not been common, but do occur. See "The Risks You Face -- Illiquidity of Your Investment." Also, investors may redeem all or a portion of their units on a monthly basis. See "Distributions and Redemptions." LIMITED LIABILITY Investors' liability is limited to the amount of their investment in each Series. Investors will not be required to contribute additional capital to each Series. 96 POTENTIAL DISADVANTAGES OF FUTURES FUND INVESTMENTS Some potential disadvantages of investing in futures and forward markets and funds investing in those markets include the following: LACK OF DIVERSIFICATION Because a single advisor fund does not allocate its assets among a group of advisors, such fund is less likely to achieve the potential benefits derived from diversification in trading strategies and markets associated with a multi-advisor fund or available to an investor that makes its own allocation decisions. SELECTION OF BROKERS AND CLEARING FIRM The manager of a futures fund typically selects the brokers and clearing firm or firms whose services the fund will utilize and investors in the fund are not consulted in such decision. As a result, investors are not able to evaluate competing brokers and clearing firms and select those they feel most satisfactorily suits their requirements. POTENTIALLY HIGHER FEES A futures fund typically incurs various fees and expenses not associated with separate managed accounts. Organization and offering expenses and selling expenses are not generally incurred in managed accounts. As a result, investors in such funds must realize a greater gross return from the fund in order to net the same effective return after allowing for such expenses. LACK OF TRANSPARENCY Clearing brokers produce daily and monthly statements for accounts they carry. Such information is not directly available to investors in a futures fund and, consequently, such investors do not have access to the same degree of information regarding trading activity that holders of separately managed accounts do. 97 EXHIBIT A QUADRIGA SUPERFUND, L.P. FORM OF FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT This First Amended and Restated Limited Partnership Agreement (the "Agreement") is made as of January 15, 2005, by and among Quadriga Capital Management, Inc., a Grenada corporation (the "General Partner") and each other party who becomes a party to this Limited Partnership Agreement as an owner of a unit ("Unit") of beneficial interest in a series ("Series") created hereunder and who is shown on the books and records of such Series as a Limited Partner (individually, a "Limited Partner" and collectively, the "Limited Partners"). 1. Formation; Name. The parties to this Agreement have formed a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended and in effect on the date of this Agreement (the "Act"). The name of the limited partnership is Quadriga Superfund, L.P. (the "Partnership"). The General Partner has executed and filed a Certificate of Limited Partnership of the Partnership (the "Certificate of Limited Partnership") in the form attached hereto as Appendix 1 and in accordance with the Act, and has executed, filed, recorded and published as appropriate such amendments, assumed name certificates and other documents as are or become necessary or advisable in connection with the operation of the Partnership, as determined by the General Partner, and will take all steps which the General Partner may deem necessary or advisable to allow the Partnership to conduct business as a limited partnership where the Partnership conducts business in any jurisdiction, and to otherwise provide that Limited Partners will have limited liability with respect to the activities of the Partnership in all such jurisdictions, and to comply with the law of any jurisdiction. Each Limited Partner hereby undertakes to furnish to the General Partner a power of attorney and such additional information as the General Partner may request to complete such documents and to execute and cooperate in the filing, recording or publishing of such documents as the General Partner determines appropriate. 2. (a) Units of Limited Partnership. The beneficial interest in the Partnership shall be divided into an unlimited number of Units. The General Partner may, from time to time, authorize the division of the Units into one or more Series as provided in Section 2(b) below. All Units issued hereunder shall be fully paid and nonassessable. The General Partner in its discretion may, from time to time, without vote of the Limited Partners, issue Units, in addition to the then issued and outstanding Units, to such party or parties and for such amount and type of consideration, subject to applicable law, including cash or securities, at such time or times and on such terms as the General Partner may deem appropriate, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with, the assumption of liabilities) and businesses. In connection with any issuance of Units, the General Partner may issue fractional Units. The General Partner may from time to time divide or combine the Units into a greater or lesser number without thereby changing the proportionate beneficial interests in a particular Series. Contributions to a Series of the Partnership may be accepted for, and Units of such Series shall be redeemed as, whole Units and/or 1/1,000 of a Unit or integral multiples thereof. (b) Creation of Series. The Partnership shall consist of one or more separate and distinct Series as contemplated by Section 17-218 of the Act. The General Partner hereby establishes and designates the following Series: "Quadriga Superfund, L.P. Series A" ("Series A") and "Quadriga Superfund, L.P. Series B" ("Series B") (each, a "Series"). Any additional Series created hereunder shall be established by the adoption of a resolution by the General Partner and shall be effective upon the date stated therein (or, if no such date is stated, upon the date of such adoption). The Units of each Series shall have the relative rights and preferences provided for herein and such rights as may be designated by the General Partner. The General Partner shall cause separate and distinct records for each Series to be maintained and the Partnership shall hold and account for the assets belonging thereto separately from the other Partnership property and the assets belonging to any other Series. Each Unit of a Series shall represent an equal beneficial interest in the net assets belonging to that Series. Unless the establishing resolution or A-1 any other resolution adopted pursuant to this Section 2(b) otherwise provides, Units of each Series established hereunder shall have the following relative rights and preferences: (i) Limited Partners of a Series shall have no preemptive or other right to subscribe to any additional Units in such Series or other securities issued by the Partnership. (ii) All consideration received by the Partnership for the issue or sale of the Units within a Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived form the sale, exchange, or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held and accounted for separately from the other assets of the Partnership and of every other Series and may be referred to herein as "assets belonging to" that Series or the "Series Estate". The assets belonging to a particular Series shall belong to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. In addition, any assets, income, earnings, profits, or payments and proceeds with respect thereto, which are not readily identifiable as belonging to any particular Series shall be allocated by the General Partner between and among one or more of the Series for all purposes and such assets, income, earnings, profits, or funds, or payments and proceeds with respect thereto, shall be assets belonging to that Series. (iii) A particular Series shall be charged with the liabilities of that Series, and all expenses, costs, charges and reserves attributable to any particular Series shall be borne by such Series. Any general liabilities, expenses, costs, charges or reserves of the Partnership (or any Series) that are not readily identifiable as chargeable to or bearable by any particular Series shall be allocated and charged by the General Partner between or among any one or more of the Series in such manner as the General Partner in its sole discretion deems fair and equitable. Each such allocation shall be conclusive and binding upon the Limited Partners for all purposes. Without limitation of the foregoing provisions of this subsection, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of the Partnership generally or the assets belonging to any other Series. Notice of this contractual limitation on inter-Series liabilities is set forth in the Certificate of Limited Partnership attached as Appendix 1 hereto, and upon the giving of such notice in the Certificate of Limited Partnership, the statutory provisions of Section 17-218 of the Act relating to limitations on inter-Series liabilities (and the statutory effect under Section 17-218 setting forth such notice in the Certificate of Limited Partnership) shall become applicable to the Partnership and each Series. (c) Creation of Accounts. For the benefit of the Series A Limited Partners, the General Partner shall establish and maintain a segregated account entitled "Quadriga Superfund, L.P. Series A Account" (the "Series A Account"). For the benefit of the Series B Limited Partners, the General Partner shall establish and maintain a segregated account entitled "Quadriga Superfund, L.P. Series B Account" (the "Series B Account"). The General Partner hereby acknowledges that it has deposited the sum of $1,000.00 in the Series A Account and that it has deposited the sum of $1,000.00 in the Series B Account. The sums held in the Series A Account shall be held for the benefit of the Series A Limited Partners and the sums held in the Series B Account shall be held for the benefit of Series B Limited Partners and such accounts shall be segregated and separate records with respect thereto shall be kept for purposes of Section 17-218 of the Act. The General Partner shall hold, invest and disburse the funds held in the accounts at its discretion. (d) Creation of Additional Accounts. The General Partner is authorized to establish and maintain one or more separate accounts for each Series (the "Additional Accounts") with such institutions as the General Partner shall select for the following purposes: (i) to receive and deposit subscriptions for such Series; and (ii) to pay Limited Partners for such Series for redemptions of all or a portion of their Units. A-2 The General Partner acknowledges that the funds held in any such Additional Accounts of a Series will be held for that Series only and that such Additional Accounts should be segregated from other Additional Accounts and that separate records shall be maintained with respect to each Additional Account. (e) Limited Liability of Limited Partners. Each Unit, when purchased by a Limited Partner in accordance with the terms of this Agreement, will be fully paid and nonassessable. No Limited Partner will be liable for the Partnership's obligations in excess of that Partner's unredeemed capital contribution, undistributed profits, if any, and any distributions and amounts received upon redemption of Units. The Partnership will not make a claim against a Limited Partner with respect to amounts distributed to that Partner or amounts received by that Partner upon redemption of Units unless the Net Assets of the Partnership (which will not include any right of contribution from the General Partner except to the extent previously made by it under this Agreement) are insufficient to discharge the liabilities of the Partnership which have arisen before the payment of these amounts. 3. Principal Office. The address of the principal office of each Series shall be c/o Quadriga Capital Management, Inc., Le Marquis Complex, Unit 5, P.O. Box 1479, Grand Anse, St. George's, Grenada, West Indies; telephone (473) 439-2418. The General Partner is located at the same address. Registered Agents Legal Services, LLC shall receive service of process on each Series of the Partnership in the State of Delaware at 1220 North Market Street, Suite 606, Wilmington, Delaware 19801. 4. Business. Each Series' business and purpose is to trade, buy, sell, swap or otherwise acquire, hold or dispose of commodities (including, but not limited to, foreign currencies, mortgage-backed securities, money market instruments, financial instruments, and any other securities or items which are now, or may hereafter be, the subject of futures contract trading), domestic and foreign commodity futures contracts, commodity forward contracts, foreign exchange commitments, options on physical commodities and on futures contracts, spot (cash) commodities and currencies, securities (such as United States Treasury securities) approved by the Commodity Futures Trading Commission ("CFTC") for investment of customer funds and other securities on a limited basis, and any rights pertaining thereto and any options thereon, whether traded on an organized exchange or otherwise, and to engage in all activities necessary, convenient or incidental thereto. Each Series may also engage in "hedge," arbitrage and cash trading of any of the foregoing instruments. Each Series may engage in such business and purpose either directly or through joint ventures, entities or partnerships, provided that each Series' participation in any of the foregoing has no adverse economic or liability consequences for the Limited Partners, which consequences would not be present had each Series engaged in that same business or purpose directly. The objective of each Series' business is appreciation of its assets through speculative trading by the General Partner and independent professional trading advisors ("Advisors") selected from time to time by the General Partner. 5. Term, Dissolution, Fiscal Year. (a) Term. The term of Series A and Series B commenced on the day on which the Certificate of Limited Partnership was filed with the Secretary of State of the State of Delaware pursuant to the provisions of the Act and the term of any Series shall end upon the first to occur of the following: (1) December 31, 2050; (2) receipt by the General Partner of an approval to dissolve such Series at a specified time by Limited Partners owning Units representing more than fifty percent (50%) of the outstanding Units of such Series then owned by Limited Partners of such Series, notice of which is sent by certified mail return receipt requested to the General Partner not less than 90 days prior to the effective date of such dissolution; (3) withdrawal, insolvency or dissolution of the General Partner or any other event that causes the General Partner to cease to be the General Partner of such Series, unless (i) at the time of such event there is at least one remaining general partner of such Series who carries on the business of each Series (and each remaining general partner of such Series is hereby authorized to carry on the business of general partner of such Series in such an event), or (ii) within 120 days after such event A-3 Limited Partners of such Series holding a majority of Units of such Series agree in writing to continue the business of such Series and to the appointment, effective as of the date of such event, of one or more general partners of such Series; (4) a decline in the aggregate Net Assets of such Series to less than $500,000 at any time following commencement of trading in such Series; (5) dissolution of such Series pursuant hereto; or (6) any other event which shall make it unlawful for the existence of such Series to be continued or require termination of such Series. (b) Dissolution. Upon the occurrence of an event causing the dissolution of such Series, such Series shall be dissolved and its affairs wound up. Upon dissolution of a Series, the General Partner, or another person approved by Limited Partners of a majority of the Units of such Series, shall act as liquidator trustee. (c) Fiscal Year. The fiscal year of each Series shall begin on January 1 of each year and end on the following December 31. (d) Net Asset Value; Net Asset Value per Unit. The "Net Assets" of each Series are such Series' assets less such Series' liabilities determined in accordance with accounting principles generally accepted in the United States. If a contract cannot be liquidated on the day with respect to which Net Assets are being determined, the settlement price on the first subsequent day on which the contract can be liquidated shall be the basis for determining the liquidating value of such contract for such day, or such other value as the General Partner may deem fair and reasonable. The liquidating value of a commodity futures or option contract not traded on a commodity exchange shall mean its liquidating value as determined by the General Partner on a basis consistently applied for each different variety of contract. Accrued Performance Fees (as described in the Prospectus defined in Section 9 hereof) shall reduce Net Asset Value, even though such Performance Fees may never, in fact, be paid. The "Net Asset Value per Unit" of a Series is the Net Assets of such Series divided by the number of Units outstanding within such Series as of the date of determination. Each Series may issue an unlimited number of Units at the Net Asset Value per Unit. 6. Net Worth of the General Partner. The General Partner agrees that at all times so long as it remains general partner of a Series, it will maintain its net worth at an amount not less than 5% of the total contributions to the Partnership by all Partners and to any other limited partnership for which it acts as a general partner by all partners; provided, however, that in no event may the General Partner's net worth be less than $50,000 nor will it be required to be more than $1,000,000. The requirements of the preceding sentence may be modified if the General Partner obtains an opinion of counsel for each Series that a proposed modification will not adversely affect the treatment of such Series as a partnership for federal income tax purposes and if such modification will reflect or exceed applicable state securities and Blue Sky laws limitations and qualify under any guidelines or statements of policy promulgated by any body or agency constituted by the various state securities administrators having jurisdiction in the premises. 7. Capital Contributions; Units. The Limited Partners' respective capital contributions to each Series shall be as shown on the books and records of the applicable Series. The General Partner, so long as it is general partner of a Series and so long as it is required to characterize such Series as a partnership for federal income tax purposes, shall invest in such Series, sufficient capital so that the General Partner will have at all times a capital account equal to 1% of the total capital accounts of such Series (including the General Partner's). The General Partner may withdraw any interest it may have in such Series in excess of such requirement, and may redeem as of any month-end any interest which it may acquire on the same terms as any Limited Partner of such Series, provided that it must maintain the minimum interest in such Series described in the preceding sentence. The requirements of this Section 7 may be modified if the General Partner obtains an opinion of counsel for such Series that a proposed modification will not adversely affect the classification of such Series as a partnership for federal income tax purposes and if such modification will reflect or exceed applicable state securities and Blue Sky laws limitations and qualify under any guidelines or A-4 statements of policy promulgated by any body or agency constituted by the various state securities administrators having jurisdiction in the premises. The General Partner may, without the consent of any Limited Partners of a Series, admit to such Series purchasers of Units as Limited Partners of each Series. All Units subscribed for in a Series upon receipt of a check or draft of the Limited Partner are issued subject to the collection of the funds represented by such check or draft. In the event a check or draft of a Limited Partner for Units representing payment for Units in a Series is returned unpaid, such Series shall cancel the Units issued to such Limited Partner represented by such returned check or draft. Any losses or profits sustained by a Series in connection with such Series' commodity trading allocable to such cancelled Units of such Series shall be deemed an increase or decrease in Net Assets of such Series and allocated among the remaining Limited Partners within such Series as described in Section 8. Each Series may require a Limited Partner to reimburse such Series for any expense or loss (including any trading loss) incurred in connection with the issuance and cancellation of any Units issued to him or her. Any Units acquired by the General Partner or any of its affiliates will be non-voting, and will not be considered "outstanding" for purposes of determining whether the majority approval of the outstanding Units of a Series has been obtained. Each Limited Partner of a Unit in a Series shall be deemed a beneficial owner of such Series within the meaning of the Act. 8. Allocation of Profits and Losses. (a) Capital Accounts and Allocations. A capital account will be established for each Partner. The initial balance of each Partner's capital account will be the amount of a Partner's initial capital contribution to a Series less, in the case of a Limited Partner, the amount of offering expenses and selling commissions initially allocable to the Limited Partner's Units, if any. As of the close of business (as determined by the General Partner) on the last day of each calendar month ("Determination Date") during each fiscal year of a Series, the following determinations and allocations will be made subsequently with respect to each Series: (i) Net Assets will be determined. (ii) Accrued monthly management, organization and offering, and operating fees will then be charged against Net Assets. (iii) Accrued monthly performance fees, if any, will then be charged against Net Assets. (iv) Any increase or decrease in Net Assets (after the adjustments in subparagraphs (ii) and (iii) above), over those of the immediately preceding Determination Date (or, in the case of the first Determination Date, the first closing of the sale of Units to the public), will then be credited or charged to the capital account of each Partner in the ratio that the balance of each account bears to the balance of all accounts. (v) Any accrued interest will be credited to the capital account of each Partner on a pro rata basis. (vi) The amount of any distribution to a Partner, any amount paid to a Partner on redemption of Units and any redemption fee paid to the General Partner upon the redemption of Units will be charged to that Partner's capital account. (b) Allocation of Profit and Loss for Federal Income Tax Purposes. As of the end of each fiscal year of a Series, the Partnership's realized profit or loss attributable to that Series will be allocated among the Partners under the following subparagraphs for federal income tax purposes. These allocations of profit and loss will be pro rata from net capital gain or loss and net operating income or loss realized by such Series. For United States federal income tax purposes, a distinction will be made between net short-term gain or loss and net long-term gain or loss. (i) Items of ordinary income (such as interest or credits in lieu of interest) and expense (such as the management fees, performance fees, brokerage fees and extraordinary expenses) will be allocated pro rata among the Partners based on their capital accounts (exclusive of these items of ordinary income or expense) as of the end of each month in which the items of ordinary income or expense accrued. A-5 (ii) Net realized capital gain or loss from the Series' trading activities will be allocated as follows: (A) For the purpose of allocating the Series' net realized capital gain or loss among the Partners, the General Partner will establish an allocation account with respect to each outstanding Unit. The initial balance of each allocation account will be the amount paid by the Partner for the Unit. Allocation accounts will be adjusted as of the end of each fiscal year and as of the date a Partner completely redeems his Units as follows: (1) Each allocation account will be increased by the amount of income allocated to the holder of the Unit under subparagraph (b)(i) above and subparagraph (b)(ii)(C) below. (2) Each allocation account will be decreased by the amount of expense or loss allocated to the holder of the Unit under subparagraph (b)(i) above and subparagraph (b)(ii)(E) below and by the amount of any distribution the holder of the Unit has received with respect to the Unit (other than on redemption of the Unit). (3) When a Unit is redeemed, the allocation account with respect to that Unit will be eliminated. (B) Net realized capital gain will be allocated first to each Partner who has partially redeemed his Units during the fiscal year up to the excess, if any, of the amount received upon redemption of the Units over the allocation account attributable to the redeemed Units. (C) Net realized capital gain remaining after the allocation of that capital gain under subparagraph (b)(ii)(B) above will be allocated next among all Partners whose capital accounts are in excess of their Units' allocation accounts (after the adjustments in subparagraph (b)(ii)(B) above) in the ratio that each such Partner's excess bears to all such Partners' excesses. If gain to be allocated under this subparagraph (b)(ii)(C) is greater than the excess of all such Partners' capital accounts over all such allocation accounts, the excess will be allocated among all Partners in the ratio that each Partner's capital account bears to all Partners' capital accounts. (D) Net realized capital loss will be allocated first to each Partner who has partially redeemed his Units during the fiscal year up to the excess, if any, of the allocation account attributable to the redeemed Units over the amount received upon redemption of the Units. (E) Net realized capital loss remaining after the allocation of such capital loss under subparagraph (b)(ii)(D) above will be allocated next among all Partners whose Units' allocation accounts are in excess of their capital accounts (after the adjustments in subparagraph (b)(ii)(D) above) in the ratio that each such Partner's excess bears to all such Partners' excesses. If loss to be allocated under this subparagraph (b)(ii)(E) is greater than the excess of all of these allocation accounts over all such Partners' capital accounts, the excess loss will be allocated among all Partners in the ratio that each Partner's capital account bears to all Partners' capital accounts. (iii) The tax allocations prescribed by this Section 8(b) will be made to each holder of a Unit whether or not the holder is a substituted Limited Partner. If a Unit has been transferred or assigned, the allocations prescribed by this Section 8(b) will be made with respect to such Unit without regard to the transfer or assignment, except that in the year of transfer or assignment the allocations prescribed by this Section 8(b) will be divided between the transferor or assignor and the transferee or assignee based on the number of months each held the transferred or assigned Unit. For purposes of this Section 8(b), tax allocations will be made to the General Partner's Units of General Partnership Interest in a Series on a Unit-equivalent basis. (iv) The allocation of profit and loss for federal income tax purposes set forth in this Agreement is intended to allocate taxable profits and loss among Partners in a Series generally in the ratio and to the extent that net profit and net loss are allocated to the Partners under Section 8(a) of this Agreement so as to eliminate, to the extent possible, any disparity between a Partner's capital account and his allocation account with respect to each Unit then outstanding, consistent with the principles set forth in Section 704(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). A-6 (c) Performance Fees. Performance Fees shall be payable by a Series to the General Partner as of the end of each month and upon redemption of Units within such Series. Performance Fees shall equal a percentage, as specified in the current prospectus in respect of the Units of a Series of New Appreciation (if any) calculated as of the end of each month and upon redemption of Units within such Series. "New Appreciation" shall be the total increase, if any, in Net Asset Value of a series from the end of the last period for which a performance fee was earned by the Managing Partner, net of all fees and expenses paid or accrued by such Series other than the Performance Fee itself and after subtraction of all interest income received by such Series. Performance Fees shall be paid by each Series as a whole, irrespective of whether the Net Asset Value of such Series has declined below the purchase price of a Unit of such Series. Accrued Performance Fees payable by a Series shall reduce the redemption price of Units of such Series and shall be paid to the General Partner by such Series upon redemptions within such Series. The amount (if any) of the accrued Performance Fee that shall be paid to the General Partner upon the redemption of any Unit within a Series shall be determined by dividing the total Performance Fee as of such redemption date payable by such Series by the number of Units within such Series then outstanding (including Units within such Series redeemed as of such date); the remainder of the accrued Performance Fee payable by such Series shall be paid to the General Partner on the last day of each month. In the event assets are withdrawn from a Limited Partner's account or a Series as a whole (other than to pay expenses), any loss carry forward shall be proportionally reduced for purposes of calculating subsequent Performance Fees. Loss carry forward reductions shall not be restored as a result of subsequent additions of capital. The General Partner may adjust the allocations set forth in this Section 8(c), in the General Partner's discretion, if the General Partner believes that doing so will achieve more equitable allocations or allocations more consistent with the Code. (d) Expenses. (1) The General Partner shall advance the organization and offering expenses of the initial and continuous offerings of the Units of each Series, and no such expenses shall be deducted from the proceeds of the offering. The General Partner shall be reimbursed such amounts advanced on behalf of a Series by such Series via payments equal to 1/12 of 1% per month (1% per annum) of such Series' month-end Net Asset Value. The General Partner shall have discretion to adopt reasonable procedures to implement the authorization of such expenses, including grouping expenses related to the same offering period and expensing de minimus amounts as they are incurred. In the event a Series terminates prior to completion of its reimbursement of advanced expenses, the General Partner will not be entitled to receive additional reimbursement from such Series and such Series will have no obligation to make further reimbursement payments to the General Partner. For purposes of this Agreement, organization and offering expenses shall mean all costs paid or incurred by the General Partner or a Series in organizing such Series and offering the Units of such Series, including legal and accounting fees incurred, bank account charges, all Blue Sky filing fees, filing fees payable upon formation and activation of such Series, and expenses of preparing, printing and distributing the prospectus and registration statement, but in no event shall exceed limits set forth in Section 9 herein or guidelines imposed by appropriate regulatory bodies. (2) Each Series shall be obligated to pay all liabilities incurred by such Series, including without limitation, (i) brokerage fees; (ii) operating expenses (whether direct or indirect) in an amount equal to 1/12 of 0.15% of such Series' month-end Net Asset Value (0.15% per annum), management fees equal to 1/12 of 1.85% of such Series' month-end Net Asset Value (1.85% per annum), and performance fees; (iii) subject to a maximum cumulative selling commission of 10% of the purchase price of a Unit, monthly selling commissions of 1/12 of 4% (4% per annum); (iv) legal and accounting fees; and (v) taxes and other extraordinary expenses incurred by such Series. During any year of operations, the General Partner shall be responsible for payment of operating expenses of a Series in excess of 0.15% of such Series' month-end Net Asset Value during that year. Indirect expenses of the General Partner, such as indirect salaries, rent and other overhead expenses, shall not be liabilities of a Series. Each Series shall receive all interest earned on its assets. (3) Compensation to any party, including the General Partner (or any Advisor which may be retained in the future), shall not exceed the limitations, if any, imposed by the North American A-7 Securities Administrators Association ("NASAA") currently in effect. In the event the compensation exceeds such limitations, the General Partner shall promptly reimburse each Series for such excess. (4) Each Series shall also be obligated to pay any costs of indemnification payable by such Series to the extent permitted under Section 17 of this Agreement. (e) Limited Liability of Limited Partners. Each Unit, when purchased in accordance with this Agreement, shall, except as otherwise provided by law, be fully paid and nonassessable. Any provisions of this Agreement to the contrary notwithstanding, except as otherwise provided by law, no Limited Partner of a Series shall be liable for such Series' obligations in excess of the capital contributed by such Limited Partner, plus his share of undistributed profits and assets of such Series. Each Limited Partner will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit. (f) Return of Capital Contributions. No Limited Partner or subsequent assignee shall have any right to demand the return of his capital contribution or any profits added thereto, except through redeeming Units or upon dissolution of each Series, in each case as provided herein and in accordance with the Act. In no event shall a Limited Partner or subsequent assignee be entitled to demand or receive property other than cash. 9. Management of each Series and the Limited Partnership. The General Partner, to the exclusion of all Limited Partners, shall have the power to control, conduct and manage the business of each Series and the Partnership. The General Partner shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that it may consider necessary or appropriate in connection with the management of the Partnership. The General Partner shall have sole discretion in determining what distributions of profits and income, if any, shall be made to the Limited Partners of any Series (subject to the allocation provisions hereof), shall execute various documents on behalf of each Series and the Limited Partners pursuant to powers of attorney and supervise the liquidation of each Series if an event causing dissolution of such Series occurs. The General Partner may in furtherance of the business of each Series cause such Series to retain Advisors, including, but not limited to, the General Partner, to act in furtherance of such Series' purposes set forth in Section 4, all as described in the Prospectus relating to the offering of the Units of such Series (the "Prospectus") in effect as of the time that such Limited Partner last purchased Units. The General Partner may engage, and compensate on behalf of a Series from funds of such Series, or agree to share profits and losses with, such persons, firms or corporations, including (except as described in Section 8(d) of this Agreement) the General Partner and any affiliated person or entity, as the General Partner in its sole judgment shall deem advisable for the conduct and operation of the business of such Series, provided, that no such arrangement shall allow brokerage commissions paid by a Series in excess of the amount described in the Prospectus or as permitted under applicable North American Securities Administrators Association, Inc. Guidelines for the Registration of Commodity Pool Programs ("NASAA Guidelines") in effect as of the date of the Prospectus, whichever is higher (the "Cap Amount"). The General Partner shall reimburse each Series, on an annual basis, to the extent that such Series' brokerage commissions paid to the General Partner and the Quarterly Performance Fee, as described in the Prospectus, exceed the Cap Amount. The General Partner is hereby specifically authorized to enter into, on behalf of each Series, the initial subscription escrow agreements, the Advisory Agreements and the Selling Agreement as described in the Prospectus. The General Partner shall not enter into an Advisory Agreement with any trading advisor that does not satisfy the relevant experience (i.e., ordinarily a minimum of three years) requirements under the NASAA Guidelines. Each Series' brokerage commissions may not be increased without prior written notice to Limited Partners within such Series within sufficient time for the exercise of their redemption rights prior to such increase becoming effective. Such notification shall contain a description of such Limited Partner's voting and redemption rights and a description of any material effect of such increase. In addition to any specific contract or agreements described herein, the General Partner on behalf of each Series may enter into any other contracts or agreements specifically described in or contemplated by the Prospectus without any further act, approval or vote of the Limited Partners of such Series notwithstanding any other provisions of this Agreement, the Act or any applicable law, rule or regulations. The General Partner shall be under a fiduciary duty to conduct the affairs of each Series in the best interests of such Series. The Limited Partners of a Series will under no circumstances be deemed to have contracted away the fiduciary obligations owed them by the General Partner. The General Partner's fiduciary duty includes, among other things, the safekeeping of all A-8 Series funds and assets and the use thereof for the benefit of such Series. The General Partner shall at all times act with integrity and good faith and exercise due diligence in all activities relating to the conduct of the business of each Series and in resolving conflicts of interest. Each Series' brokerage arrangements shall be non-exclusive, and the brokerage commissions paid by each Series shall be competitive. Each Series shall seek the best price and services available for its commodity transactions. The General Partner is hereby authorized to perform all other duties imposed by Sections 6221 through 6234 of the Code on the General Partner as the "tax matters partner" of each Series and the Partnership. Each Series shall make no loans to any party, and the funds of each Series will not be commingled with the funds of any other person or entity or other Series (deposit of funds with a clearing broker, clearinghouse or forward dealer or entering into joint ventures or partnerships shall not be deemed to constitute "commingling" for these purposes). Except in respect of the Performance Fee, no person or entity may receive, directly or indirectly, any advisory, management or performance fees, or any profit-sharing allocation from joint ventures, partnerships or similar arrangements in which a Series participates, for investment advice or management, who shares or participates in any clearing brokerage commissions; no broker may pay, directly or indirectly, rebates or give-ups to any trading advisor or manager or to the General Partner or any of their respective affiliates in respect of sales of the Units within such Series; and such prohibitions may not be circumvented by any reciprocal business arrangements. The foregoing prohibition shall not prevent each Series from executing, at the direction of any Advisor, transactions with any futures commission merchant, broker or dealer. The maximum period covered by any contract entered into by each Series, except for the various provisions of the Selling Agreement which survive each closing of the sales of the Units of such Series, shall not exceed one year. Any material change in a Series' basic investment policies or structure shall require the approval of Limited Partners of such Series owning Units representing more than fifty percent (50%) of all Units within a Series then owned by the Limited Partners. Any agreements between a Series and the General Partner or any affiliate of the General Partner (as well as any agreements between the General Partner or any affiliate of the General Partner and any Advisor) shall be terminable without penalty by such Series upon no more than 60 days' written notice. All sales of Units in the United States will be conducted by registered brokers. Each Series is prohibited from employing the trading technique commonly known as "pyramiding" as such term is defined in Section I.B. of the NASAA Guidelines. A trading manager or Advisor of each Series taking into account each Series' open trade equity on existing positions in determining generally whether to acquire additional commodity positions on behalf of each Series will not be considered to be engaging in "pyramiding." The General Partner may take such other actions on behalf of each Series as the General Partner deems necessary or desirable to manage the business of such Series. The General Partner is engaged, and may in the future engage, in other business activities and shall not be required to refrain from any other activity nor forego any profits from any such activity, whether or not in competition with each Series. Limited Partners may similarly engage in any such other business activities. The General Partner shall devote to each Series such time as the General Partner may deem advisable to conduct such Series' business and affairs. 10. Audits and Reports to Limited Partners. Each Series' books shall be audited annually by an independent certified public accountant. The General Partner will use its best efforts to cause each Limited Partner of a Series to receive (i) within 90 days after the close of each fiscal year certified financial statements of such Series for the fiscal year then ended, (ii) within 90 days of the end of each fiscal year (but in no event later than March 15 of each year) such tax information as is necessary for a Limited Partner to complete his federal income tax return, (iii) any applicable Form 1099 or other documentation evidencing payment of interest income to each Limited Partner, and (iv) such other annual and monthly information as the CFTC may by regulation require. The General Partner of a Series shall notify its Limited Partners within seven business days of any material change (i) in the agreements with such Series' Advisors, including any modification in the method of calculating the advisory fee and (ii) in the compensation of any party relating to such Series. Limited Partners of a Series or their duly authorized representatives may inspect such Series' books and records during normal business hours upon reasonable written notice to the General Partner and obtain copies of such records (including by post upon payment of reasonable mailing costs), upon payment of reasonable reproduction costs; provided, however, upon request by the General Partner, the Limited Partner shall represent that the inspection and/or copies of such records will not be for commercial purposes unrelated to such Limited Partner's interest as a beneficial owner of such Series. The General Partner shall have the A-9 right to keep confidential from the Limited Partners of a Series, for such period of time as the General Partner deems reasonable, any information that the General Partner reasonably believes that such Series is required by law or by agreement with a third party to keep confidential, provided that such information may not be kept confidential if it involved a transaction between such Series and an affiliate of the General Partner. The General Partner shall calculate the approximate Net Asset Value per Unit of each Series on a daily basis and furnish such information upon request to any Limited Partner of the applicable Series. The General Partner shall maintain and preserve all Partnership records for a period of not less than six years. The General Partner will, with the assistance of each Series' clearing brokers, make an annual review of the clearing brokerage arrangements applicable to such Series. In connection with such review, the General Partner will ascertain, to the extent practicable, the clearing brokerage rates charged to other major commodity pools whose trading and operations are, in the opinion of the General Partner, comparable to those of each Series in order to assess whether the rates charged each Series are competitive in light of the services it receives. If, as a result of such review, the General Partner determines that such rates are not competitive in light of the services provided to each Series, the General Partner will notify the Limited Partners, setting forth the rates charged to each Series and several funds which are, in the General Partner's opinion, comparable to each Series. 11. Assignability of Units. Each Limited Partner expressly agrees that he will not voluntarily assign, transfer or dispose of, by gift or otherwise, any of his Units or any part or all of his right, title and interest in the capital or profits of a Unit in violation of any applicable federal or state securities laws or without giving written notice to the General Partner at least 30 days prior to the date of such assignment, transfer or disposition. No assignment, transfer or disposition by an assignee of Units of any Series or of any part of his right, title and interest in the capital or profits of such Units shall be effective against such Series or the General Partner until the General Partner receives the written notice of the assignment; the General Partner shall not be required to give any assignee any rights hereunder prior to receipt of such notice. The General Partner may, in its sole discretion, waive any such notice. No such assignee, except with the consent of the General Partner, which consent may be withheld only to prevent or minimize potential adverse legal or tax consequences to a Series, may become a substituted Limited Partner of a Series, nor will the estate or any beneficiary of a deceased Limited Partner or assignee have any right to redeem Units from such Series except by redemption as provided in Section 12 hereof. Each Limited Partner agrees that with the consent of the General Partner any assignee may become a substituted Limited Partner without need of the further act or approval of any Limited Partner. If the General Partner withholds consent, an assignee shall not become a substituted Limited Partner, and shall not have any of the rights of a Limited Partner, except that the assignee shall be entitled to receive that share of capital and profits and shall have that right of redemption to which his assignor would otherwise have been entitled. No assignment, transfer or disposition of Units of a Series shall be effective against each Series or the General Partner until the first day of the month succeeding the month in which the General Partner consents to such assignment, transfer or disposition. No Units of a Series may be transferred where, after the transfer, either the transferee or the transferor would hold less than the minimum number of Units of such Series equivalent to an initial minimum purchase, except for transfers by gift, inheritance, intrafamily transfers, family dissolutions, and transfers to Affiliates. 12. Redemptions. A Limited Partner or any assignee of Units of whom the General Partner has received written notice as described above may redeem all or, subject to the provisions of this Section 12, a portion of his Units, in an amount not less than $1,000.00 within a Series (such redemption being herein referred to as a "redemption") effective as of the close of business (as determined by the General Partner) on the last day of any month; provided that: (i) all liabilities, contingent or otherwise, of such Series (including such Series' allocable share of the liabilities, contingent or otherwise, of any entities in which such Series invests), except any liability to Limited Partners within such Series on account of their capital contributions, have been paid or there remains property of such Series sufficient to pay them; (ii) the General Partner shall have timely received a request for redemption, as provided in the following paragraph, and (iii) with respect to a partial redemption, such Limited Partner shall have a remaining investment in such Series after giving effect to the requested redemption at least equal to the minimum initial investment amount of $5,000. Requests for redemption must be received by the General Partner at least ten calendar days, or such lesser period as shall be acceptable to the General Partner, in advance of the requested effective date of A-10 redemption. The General Partner may declare additional redemption dates upon notice to the Limited Partners of a Series as well as to those assignees of whom the General Partner has received notice as described above. Requests for redemption accepted by the General Partner are payable at the applicable month-end Net Asset Value per Unit of the Series being redeemed. The General Partner is authorized to liquidate positions to the extent it deems necessary or appropriate to honor any such redemption requests. If at the close of business (as determined by the General Partner) on any day, the Net Asset Value per Unit of a Series has decreased to less than 50% of the Net Asset Value per Unit of such Series as of the most recent month-end, after adding back all distributions, the General Partner shall notify Limited Partners within such Series within seven business days thereafter and shall liquidate all open positions with respect to such Series as expeditiously as possible and suspend trading. Within ten business days after the date of suspension of trading, the General Partner (and any other general partners of such Series) shall declare a Special Redemption Date with respect to such Series. Such Special Redemption Date shall be a business day within 30 business days from the date of suspension of trading by such Series, and the General Partner shall mail notice of such date to each Limited Partner of such Series and assignee of Units within such Series of whom it has received written notice, by first-class mail, postage prepaid, not later than ten business days prior to such Special Redemption Date, together with instructions as to the procedure such Limited Partner or assignee must follow to have his interest in such Series redeemed on such date (only entire, not partial, interests may be so redeemed unless otherwise determined by the General Partner). Upon redemption pursuant to a Special Redemption Date, a Limited Partner or any other assignee of whom the General Partner has received written notice as described above, shall receive from the applicable Series an amount equal to the Net Asset Value of his interest in such Series, determined as of the close of business (as determined by the General Partner) on such Special Redemption Date. No redemption charges shall be assessed on any such Special Redemption Date. As in the case of a regular redemption, an assignee shall not be entitled to redemption until the General Partner has received written notice (as described above) of the assignment, transfer or disposition under which the assignee claims an interest in the Units to be redeemed. If, after such Special Redemption Date, the Net Assets of such Series are at least $500,000 and the Net Asset Value of a Unit within such Series is in excess of $250, such Series may, in the discretion of the General Partner, resume trading. The General Partner may at any time and in its discretion declare a Special Redemption Date, should the General Partner determine that it is in the best interests of a Series to do so. The General Partner in its notice of a Special Redemption Date may, in its discretion, establish the conditions, if any, under which other Special Redemption Dates must be called, which conditions may be determined in the sole discretion of the General Partner, irrespective of the provisions of this paragraph. The General Partner may also, in its discretion, declare additional regular redemption dates for Units within a Series and permit certain Limited Partners to redeem at other than month-end. Except as otherwise set forth above, redemption payments will be made within 20 business days after the month-end of redemption, except that under special circumstances, including, but not limited to, inability to liquidate dealers' positions as of a redemption date or default or delay in payments due a Series from clearing brokers, banks or other persons or entities, such Series may in turn delay payment to Limited Partners or assignees requesting redemption of their Units of the proportionate part of the Net Asset Value of such Units within such Series equal to that proportionate part of such Series' aggregate Net Asset Value represented by the sums which are the subject of such default or delay. The General Partner shall cause redemption payments to be sent from the Additional Accounts to the last known addresses of the Limited Partner requesting redemption; provided, however, that such Limited Partners shall cease to be Limited Partners upon payment of the redemption amounts and such Limited Partners shall have no claim against the assets of a Series in which they were Limited Partners except for such redemption payments. The General Partner may require a Limited Partner to redeem all or a portion of such Limited Partner's Units within a Series if the General Partner considers doing so to be desirable for the protection of such Series, and will use best efforts to do so to the extent necessary to prevent each Series from being deemed to hold "plan assets" under the provisions of the Employee Retirement Income Security Act of 1974, as amended A-11 ("ERISA"), or the Code, with respect to any "employee benefit plan" subject to ERISA or with respect to any plan or account subject to Section 4975 of the Code. 13. Offering of Units. The General Partner on behalf of each Series shall (i) cause to be filed a Registration Statement or Registration Statements, and such amendments thereto as the General Partner deems advisable, with the Securities and Exchange Commission for the registration and ongoing public offering of the Units, (ii) use its best efforts to qualify and to keep qualified Units for sale under the securities laws of such States of the United States or other jurisdictions as the General Partner shall deem advisable and (iii) take such action with respect to the matters described in (i) and (ii) as the General Partner shall deem advisable or necessary. The General Partner shall use its best efforts not to accept any subscriptions for Units if doing so would cause a Series to hold "plan assets" under ERISA or the Code with respect to any "employee benefit plan" subject to ERISA or with respect to any plan or account subject to Section 4975 of the Code. If such a Limited Partner has its subscription reduced for such reason, such Limited Partner shall be entitled to rescind its subscription in its entirety even though subscriptions are otherwise irrevocable. 14. Additional Offerings. The General Partner may, in its discretion, make additional public or private offerings of Units, provided that the net proceeds to a Series of any such sales of additional Units of such Series shall in no event be less than the Net Asset Value per Unit within such Series (as defined in Section 5(d) hereof) at the time of sale (unless the new Unit's participation in the profits and losses of such Series is appropriately adjusted). No Limited Partner shall have any preemptive, preferential or other rights with respect to the issuance or sale of any additional Units, other than as set forth in the preceding sentence. The Partnership may offer different Series or classes of Units having different economic terms than previously offered Series or classes of Units as determined by the General Partner; provided that the issuance of such a new Series or class of Units shall in no respect adversely affect the holders of outstanding Units; and provided further that the assets attributable to each such Series or class shall, to the maximum extent permitted by law, be treated as legally separate and distinct pools of assets, and the assets attributable to one such Series or class be prevented from being used in any respect to satisfy or discharge any debt or obligation of any other such Series or class. 15. Special Power of Attorney. Each Limited Partner by his execution of this Agreement does hereby irrevocably constitute and appoint the General Partner and each officer of the General Partner, with power of substitution, as his true and lawful attorney-in-fact, in his name, place and stead, to execute, acknowledge, swear to (and deliver as may be appropriate) on his behalf and file and record in the appropriate public offices and publish (as may in the reasonable judgment of the General Partner be required by law): (i) this Agreement, including any amendments and/or restatements hereto duly adopted as provided herein; (ii) certificates in various jurisdictions, and amendments and/or restatements thereto, and of assumed name or of doing business under a fictitious name with respect to each Series or the Partnership; (iii) all conveyances and other instruments which the General Partner deems appropriate to qualify or continue each Series or the Partnership in the State of Delaware and the jurisdictions in which each Series or the Partnership may conduct business, or which may be required to be filed by each Series or the Limited Partners under the laws of any jurisdiction or under any amendments or successor statutes to the Act, to reflect the dissolution or termination of each Series or the Partnership, or each Series or the Partnership being governed by any amendments or successor statutes to the Act or to reorganize or refile each Series or the Partnership in a different jurisdiction; and (iv) to file, prosecute, defend, settle or compromise litigation, claims or arbitrations on behalf of each Series. The Power of Attorney granted herein shall be irrevocable and deemed to be a power coupled with an interest (including, without limitation, the interest of the other Limited Partners in the General Partner being able to rely on the General Partner's authority to act as contemplated by this Section 15) and shall survive and shall not be affected by the subsequent incapacity, disability or death of a Limited Partner. 16. Withdrawal of a Limited Partner. The Partnership shall be dissolved upon the final dissolution of each Series created hereunder. Each Series shall be dissolved upon the withdrawal, dissolution, insolvency or removal of the General Partner with respect to such Series, or any other event that causes the General Partner to cease to be a general partner with respect to such Series under the Act, unless such Series is continued pursuant to the terms of Section 5(a)(3). In addition, the General Partner may withdraw from each Series, A-12 without any breach of this Agreement, at any time upon 120 days' written notice by first class mail, postage prepaid, to each Limited Partner of such Series and assignee of whom the General Partner has notice; provided, that such resignation shall not become effective unless and until a successor general partner is in place. If the General Partner withdraws as general partner with respect to a Series and such Series' business is continued, the withdrawing General Partner shall pay all expenses incurred directly as a result of its withdrawal. In the event of the General Partner's removal or withdrawal, with respect to a Series, the General Partner shall be entitled to a redemption of its interest in such Series at its Net Asset Value with respect to such Series on the next closing date following the date of removal or withdrawal. The General Partner may not assign its interest in the Partnership or its obligation to direct the trading of each Series' assets without the consent of each Limited Partner of the effected Series. The death, incompetency, withdrawal, insolvency or dissolution of a Limited Partner or any other event that causes a Limited Partner to cease to be a Limited Partner (within the meaning of the Act) in a Series shall not terminate or dissolve such Series, and a Limited Partner, his estate, custodian or personal representative shall have no right to redeem or value such Limited Partner's interest in such Series except as provided in Section 12 hereof. Each Limited Partner within a Series agrees that in the event of his death, he waives on behalf of himself and his estate, and directs the legal representatives of his estate and any person interested therein to waive, the furnishing of any inventory, accounting or appraisal of the assets of such Series or the Partnership and any right to an audit or examination of the books of such Series or the Partnership. Nothing in this Section 16 shall, however, waive any right given elsewhere in this Agreement for a Limited Partner to be informed of the Net Asset Value of his Units, to receive periodic reports, audited financial statements and other information from the General Partner or to redeem or transfer Units. 17. Standard of Liability; Indemnification. (a) Standard of Liability for the General Partner. The General Partner and its Affiliates, as defined below, shall have no liability to any Series or to any Limited Partner of such Series for any loss suffered by such Series or such Limited Partner which arises out of any action or inaction of the General Partner or its Affiliates if the General Partner, in good faith, determined that such course of conduct was in the best interests of such Series and such course of conduct did not constitute negligence or misconduct of the General Partner or its Affiliates. (b) Indemnification of the General Partner by each Series. To the fullest extent permitted by law, subject to this Section 17, the General Partner and its Affiliates shall be indemnified by each Series against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with such Series; provided that such claims were not the result of negligence or misconduct on the part of the General Partner or its Affiliates, and the General Partner, in good faith, determined that such conduct was in the best interests of such Series; and provided further that Affiliates of the General Partner shall be entitled to indemnification only for losses incurred by such Affiliates in performing the duties of the General Partner with respect to such Series and acting wholly within the scope of the authority of the General Partner. Notwithstanding anything to the contrary contained in the preceding two paragraphs, the General Partner and its Affiliates and any persons acting as Selling Agents for the Units shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless (1) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee and the court approves indemnification of the litigation costs, or (2) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee and the court approves indemnification of the litigation costs, or (3) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and related costs should be made. In any claim for indemnification for federal or state securities law violations, the party seeking indemnification shall place before the court the position of the Securities and Exchange Commission, the California Department of Corporations, the Massachusetts Securities Division, the Missouri Securities Division, the Pennsylvania Securities Commission, the Tennessee Securities Division, the Texas Securities Board and any other state or applicable regulatory authority with respect to the issue of indemnification for securities law violations. Each Series shall not bear the cost of that portion of any insurance which insures any party against any liability the indemnification of A-13 which is herein prohibited. For the purposes of this Section 17, the term "Affiliates" shall mean any person acting on behalf of or performing services on behalf of any Series who: (1) directly or indirectly controls, is controlled by, or is under common control with the General Partner; or (2) owns or controls 10% or more of the outstanding voting securities of the General Partner; or (3) is an officer or director of the General Partner; or (4) if the General Partner is an officer, director, partner or trustee, is any entity for which the General Partner acts in any such capacity. Advances from a Series Estate to the General Partner and its Affiliates for legal expenses and other costs incurred as a result of any legal action initiated against the General Partner by a Limited Partner are prohibited. Advances from any Series' Estate to the General Partner and its Affiliates for legal expenses and other costs incurred as a result of a legal action will be made only if the following three conditions are satisfied: (1) the legal action relates to the performance of duties or services by the General Partner or its Affiliates on behalf of such Series; (2) the legal action is initiated by a third party who is not a Limited Partner; and (3) the General Partner or its Affiliates undertake to repay the advanced funds, with interest from the date of such advance, to such Series in cases in which they would not be entitled to indemnification under the standard of liability set forth in Section 17(a). In no event shall any indemnity or exculpation provided for herein be more favorable to the General Partner or any Affiliate than that contemplated by the NASAA Guidelines as currently in effect. In no event shall any indemnification permitted by this subsection (b) of Section 17 be made by a Series unless all provisions of this Section for the payment of indemnification have been complied with in all respects. Furthermore, it shall be a precondition of any such indemnification that the effected Series receive a determination of qualified independent legal counsel in a written opinion that the party which seeks to be indemnified hereunder has met the applicable standard of conduct set forth herein. Receipt of any such opinion shall not, however, in itself, entitle any such party to indemnification unless indemnification is otherwise proper hereunder. Any indemnification payable by a Series hereunder shall be made only as provided in the specific case. In no event shall any indemnification obligations of a Series under this subsection (b) of this Section 17 subject a Limited Partner to any liability in excess of that contemplated by subsection (e) of Section 8 hereof. (c) Indemnification of each Series by the Limited Partners. In the event a Series is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of or in connection with any of such Series' Limited Partner's activities, obligations or liabilities unrelated to such Series' business, such Limited Partner shall indemnify and reimburse such Series for all loss and expense incurred, including reasonable attorneys' fees. 18. Amendments; Meetings. (a) Amendments with Consent of the General Partner. The General Partner may amend this Agreement with the approval of more than fifty percent (50%) of the Units then owned by Limited Partners of each Series. No meeting procedure or specified notice period is required in the case of amendments made with the consent of the General Partner, mere receipt of an adequate number of unrevoked written consents from Limited Partners of each Series being sufficient. The General Partner may amend this Agreement without the consent of the Limited Partners of each Series in order (i) to clarify any clerical inaccuracy or ambiguity or reconcile any inconsistency (including any inconsistency between this Agreement and the Prospectus), (ii) to effect the intent of the tax allocations proposed herein to the maximum extent possible in the event of a change in the Code or the interpretations thereof affecting such allocations, (iii) to attempt to ensure that either Series is not treated as an association taxable as a corporation for federal income tax purposes, (iv) to qualify or maintain the qualification of the Partnership as a limited partnership in any jurisdiction, (v) to delete or add any provision of or to this Agreement required to be deleted or added by the Staff of the Securities and Exchange Commission or any other federal agency or any state "Blue Sky" official or similar official or in order to opt to be governed by any amendment or successor statute to the Act, (vi) to make any amendment to this Agreement which the General Partner deems advisable, including amendments that reflect the offering and issuance of additional Units, whether or not issued through a Series, provided that such amendment is not adverse to the Limited Partners of either Series, or that is required by law, and (vii) to make any amendment that is appropriate or necessary, in the opinion of the general partner, to prevent each Series or the General Partner or its directors, officers or controlling persons from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, or to prevent the assets of A-14 either Series from being considered for any purpose of ERISA or Section 4975 of the Code to constitute assets of any "employee benefit plan" as defined in and subject to ERISA or of any "plan" subject to Section 4975 of the Code. (b) Amendments and Actions without Consent of the General Partner. In any vote called by the General Partner or pursuant to section (c) of this Section 18, upon the affirmative vote (which may be in person or by proxy) of more than fifty percent (50%) of the Units then owned by Limited Partners of each Series, the following actions may be taken, irrespective of whether the General Partner concurs: (i) this Agreement may be amended, provided, however, that approval of all Limited Partners of each Series shall be required in the case of amendments changing or altering this Section 18, extending the term of each Series or the Partnership, or materially changing each Series' basic investment policies or structure; in addition, reduction of the capital account of any Limited Partner or assignee or modification of the percentage of profits, losses or distributions to which a Limited Partner or an assignee is entitled hereunder shall not be effected by any amendment or supplement to this Agreement without such Limited Partner's or assignee's written consent; (ii) each Series or the Partnership may be dissolved; (iii) the General Partner may be removed and replaced; (iv) a new general partner or general partners may be elected if the General Partner withdraws from each Series; (v) the sale of all or substantially all of the assets of each Series may be approved; and (vi) any contract with the General Partner or any affiliate thereof may be disapproved of and, as a result, terminated upon 60 days' notice. (c) Meetings; Other Voting Matters. A Limited Partner in either Series upon request addressed to the General Partner shall be entitled to obtain from the General Partner, upon payment in advance of reasonable reproduction and mailing costs, a list of the names and addresses of record of all Limited Partners within such Series and the number of Units held by each (which shall be mailed by the General Partner to the Limited Partner within ten days of the receipt of the request); provided, that the General Partner may require any Limited Partner requesting such information to submit written confirmation that such information will not be used for commercial purposes and will only be used for a legitimate purpose related to such person being a Limited Partner. Upon receipt of a written proposal, signed by Limited Partners owning Units representing at least 10% of the Units then owned by Limited Partners, that a meeting of such Series be called to vote upon any matter upon which the Limited Partners may vote pursuant to this Agreement, the General Partner shall, by written notice to each Limited Partner within that Series of record sent by certified mail within 15 days after such receipt, call a meeting of such Series or the Partnership. Such meeting shall be held at least 30 but not more than 60 days after the mailing of such notice, and such notice shall specify the date of, a reasonable place and time for, and the purpose of such meeting. The General Partner may not restrict the voting rights of Limited Partners as set forth herein. In the event that the General Partner or the Limited Partners vote to amend this Agreement in any material respect, the amendment will not become effective prior to all Limited Partners having an opportunity to redeem their Units. 19. Miscellaneous. (a) Notices. All notices under this Agreement shall be in writing and shall be effective upon personal delivery, or if sent by first class mail, postage prepaid, addressed to the last known address of the party to whom such notice is to be given, upon the deposit of such notice in the United States mail. (b) Binding Effect. This Agreement shall inure to and be binding upon all of the parties, all parties indemnified under Section 17 hereof, and their respective successors and assigns, custodians, estates, heirs and personal representatives. For purposes of determining the rights of any Limited Partner or assignee hereunder, each Series and the Partnership, the General Partner may rely upon each Series records as to who are Limited Partners and assignees of such Series, and all Limited Partners and assignees agree that their rights shall be determined and they shall be bound thereby. (c) Captions. Captions in no way define, limit, extend or describe the scope of this Agreement nor the effect of any of its provisions. Any reference to "persons" in this Agreement shall also be deemed to include entities, unless the context otherwise requires. A-15 20. Benefit Plan Investors. Each Limited Partner that is an "employee benefit plan" as defined in and subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "plan" as defined in Section 4975 of the Code (each such employee benefit plan and plan, a "Plan"), and each fiduciary thereof who has caused the Plan to become a Limited Partner (a "Plan Fiduciary"), represents and warrants that: (a) the Plan Fiduciary has considered an investment in each Series for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in each Series for such Plan is consistent with the Plan Fiduciary's responsibilities under ERISA; (c) the investment in a Series by the Plan does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan's investment in a Series has been duly authorized and approved by all necessary parties; (e) none of the General Partner, any Advisor to a Series, any selling agent, the clearing broker, the escrow agent, any broker or dealer through which any Advisor requires each Series to trade, any of their respective affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of assets of the Plan used to purchase the Units; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase the Units for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary: (i) is authorized to make, and is responsible for, the decision for the Plan to invest in each Series, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to the risks of large losses; (ii) is independent of the General Partner, any Advisor to each Series, any selling agent, the clearing broker, the escrow agent, any broker or dealer through which any Advisor requires each Series to trade, and any of their respective affiliates; and (iii) is qualified to make such investment decision. 21. No Legal Title to Series Estate. The Limited Partners within a Series shall not have legal title to any part of such Series Estate. 22. Legal Title. Legal title to all Series Estate shall be vested in such Series; except where applicable law in any jurisdiction requires any part of such Series Estate to be vested otherwise, the General Partner may cause legal title to each Series Estate or any portion thereof to be held by or in the name of the General Partner or any other person as nominee for and on behalf of such Series. 23. Creditors. No creditors of any Limited Partners within a Series shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, such Series Estate. A-16 IN WITNESS WHEREOF, the undersigned have duly executed this First Amended and Restated Limited Partnership Agreement as of the day and year first above written. QUADRIGA CAPITAL MANAGEMENT, INC. as General Partner By: -------------------------------------- Name: Christian Baha Title: President All Limited Partners now and hereafter admitted as Limited Partners of each Series, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to, the General Partner. By: QUADRIGA CAPITAL MANAGEMENT, INC. as Attorney-in-Fact By: -------------------------------------- Name: Christian Baha Title: President A-17 [SUBSCRIPTION INSTRUCTIONS] B-1 EXHIBIT C QUADRIGA SUPERFUND, L.P. SUBSCRIPTION REPRESENTATIONS By executing the Subscription Agreement and Power of Attorney for Quadriga Superfund, L.P., each purchaser ("purchaser") of units of beneficial interest in each Series ("Series") irrevocably subscribes for Units at a price equal to the net asset value per unit as of the end of the month in which the subscription is accepted, provided such subscription is received at least five business days prior to such month end, as described in each Series' prospectus dated October 9, 2002. The minimum subscription is $5,000 per Series; additional Units may be purchased with a minimum investment of $1,000 for each Series in which the investor has made the minimum investment. Subscriptions must be accompanied by a check in the full amount of the subscription and made payable to "Quadriga Superfund, L.P. Series (A or B as applicable)." unless the purchaser's payment will be made by debiting their brokerage account maintained with their selling agent. Purchaser is also delivering to the selling agent an executed Subscription Agreement and Power of Attorney (Exhibit D to the prospectus) and any other documents needed (i.e., Trust, Pension, Corporate). If purchaser's Subscription Agreement and Power of Attorney is accepted, purchaser agrees to contribute purchaser's subscription to each Series and to be bound by the terms of the Limited Partnership Agreement, attached as Exhibit A to the prospectus. Purchaser agrees to reimburse each Series and Quadriga Capital Management, Inc., as general partner, for any expense or loss incurred as a result of the cancellation of purchaser's units due to a failure of purchaser to deliver good funds in the amount of the subscription price. By execution of the Subscription Agreement and Power of Attorney, purchaser shall be deemed to have executed each Series Agreement. As an inducement to the General Partner to accept this subscription, purchaser (for the purchaser and, if purchaser is an entity, on behalf of and with respect to each of purchaser's shareholders, partners, members or beneficiaries), by executing and delivering purchaser's Subscription Agreement and Power of Attorney, represents and warrants to the General Partner, the clearing broker, the selling agent who solicited purchaser's subscription and each Series, as follows: (a) Purchaser is of legal age to execute the Subscription Agreement and Power of Attorney and is legally competent to do so. Purchaser acknowledges that purchaser has received a copy of the prospectus, including each Series Agreement. (b) All information that purchaser has furnished to the General Partner or that is set forth in the Subscription Agreement and Power of Attorney submitted by purchaser is correct and complete as of the date of such Subscription Agreement and Power of Attorney, and if there should be any change in such information prior to acceptance of purchaser's subscription, purchaser will immediately furnish such revised or corrected information to the General Partner. (c) Unless (d) or (e) below is applicable, purchaser's subscription is made with purchaser's funds for purchaser's own account and not as trustee, custodian or nominee for another. (d) The subscription, if made as custodian for a minor, is a gift purchaser has made to such minor and is not made with such minor's funds or, if not a gift, the representations as to net worth and annual income set forth below apply only to such minor. (e) If purchaser is subscribing in a representative capacity, purchaser has full power and authority to purchase the units and enter into and be bound by the Subscription Agreement and Power of Attorney on behalf of the entity for which he is purchasing the units, and such entity has full right and power to purchase such units and enter into and be bound by the Subscription Agreement and Power of Attorney and become a Limited Partner pursuant to the Partnership Agreement which is attached to the prospect us as Exhibit A. (f) Purchaser either is not required to be registered with the Commodity Futures Trading Commission or to be a member of the National Futures Association or if required to be so registered is duly registered with the CFTC and is a member in good standing of the NFA. (g) Purchaser represents and warrants that purchaser has (i) a net worth of at least $150,000 (exclusive of home, furnishings and automobiles) or (ii) an annual gross income of at least $45,000 and a net worth (similarly calculated) of at least $45,000. Residents of the following states must meet the requirements set forth below (net worth in all cases is exclusive of home, furnishings and automobiles). In addition, purchaser may not invest more than 10% of his net worth (exclusive of home, furnishings and automobiles) in each Series. (h) If the undersigned is acting on behalf of an "employee benefit plan," as defined in and subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "plan" as defined in and subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (a "Plan"), the individual signing this Subscription Agreement and C-1 Power of Attorney on behalf of the undersigned hereby further represents and warrants as, or on behalf of, the Plan responsible for purchasing units (the "Plan Fiduciary") that: (a) the Plan Fiduciary has considered an investment in each Series for such plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in each Series is consistent with the Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in each Series does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan's investment in each Series has been duly authorized and approved by all necessary parties; (e) none of the General Partner, each Series' advisor, each Series' cash manager, each Series' clearing broker, any selling agent, any of their respective affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of assets of the Plan used to purchase units; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase units for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to make, and is responsible for, the decision to invest in each Series, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to minimize the risks of large losses, (ii) is independent of the General Partner, each Series' advisor, each Series' cash manager, each Series' clearing broker, any selling agent, each of their respective affiliates, and (iii) is qualified to make such investment decision. The undersigned will, at the request of the General Partner, furnish the General Partner with such information as the General Partner may reasonably require to establish that the purchase of the units by the Plan does not violate any provision of ERISA or the Code, including without limitation, those provisions relating to "prohibited transactions" by "parties in interest" or "disqualified persons" as defined therein. (i) If the undersigned is acting on behalf of a trust (the "Limited Partner Trust"), the individual signing the Subscription Agreement and Power of Attorney on behalf of the Limited Partner Trust hereby further represents and warrants that an investment in each Series is permitted under each Series agreement of the Limited Partner Trust, and that the undersigned is authorized to act on behalf of the Limited Partner Trust under each Series agreement thereof. 1. Arizona -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual taxable income of at least $60,000. 2. California -- Net worth of at least $500,000 or a net worth of at least $250,000 and an annual income of at least $65,000. 3. Iowa -- Net worth of at least $500,000 or a net worth of at least $250,000 and an annual taxable income of at least $65,000. 4. Maine -- Net worth of at least $200,000 or a net worth of at least $50,000 and an annual income of at least $50,000. 5. Michigan -- Net worth of at least $225,000 or a net worth of at least $60,000 and a taxable income during the preceding year of at least $60,000. 6. Missouri -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual taxable income of $60,000. 7. New Mexico -- Net worth of at least $200,000 or a net worth of at least $75,000 and an annual income at $75,000. 8. New Jersey -- Net worth of at least $225,000 or a net worth of at least $60,000 and a taxable income during the preceding year of at least $60,000. 9. North Carolina -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual taxable income of $60,000. 10. Pennsylvania -- Net worth of at least $175,000 or a net worth of at least $100,000 and an annual taxable income of $50,000. C-2 11. Tennessee -- Net worth of at least $250,000 or a net worth of at least $65,000 and an annual taxable income of at least $65,000. Tennessee investors should be aware that the rate at which each Series' performance fee is calculated exceeds the maximum rate for incentive/performance fees payable under the Guidelines for Registration of Commodity Pool Programs (the "Guidelines") adopted by the North American Securities Administrators Association, and may, under certain circumstances, result in Quadriga Capital Management receiving combined management and incentive fees that exceed the maximum compensation permitted by the Guidelines. The Guidelines provide that the maximum incentive or performance fee that the Partnership may charge investors is 23.3% of new trading profits per quarter. Investors in Quadriga Superfund L.P. will be subject to a monthly performance fee of 25% of new appreciation per month. On comparing the Partnership's fee structure to that permitted under the Guidelines, any Series which experiences new appreciation in any given month in excess of 3.46% (equivalent to annual new appreciation in excess of 41.5%) will pay a combination of management and incentive fees to Quadriga Capital Management that would exceed the maximum fees payable under the Guidelines. 12. Texas -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual taxable income of at least $60,000. C-3 [SUBSCRIPTION INSTRUCTIONS] D-1 [SUBSCRIPTION INSTRUCTIONS] D-2 [POWER OF ATTORNEY FORM] D-3 [SUITABILITY REQUIREMENTS FORM] D-4 6. REPRESENTATIONS AND WARRANTIES By executing the Subscription Agreement, you (for yourself and any co-subscriber, and, if you are signing on behalf of an entity, on behalf of and with respect to that entity and its shareholders, partners, beneficiaries or members), represent and warrant to the General Partner and the Partnership as follows (As Used Below, The Terms "You and Your" Refer To You And Your Co-Subscriber, If Any, Or If You Are Signing On Behalf Of An Entity, That Entity): (PLEASE INITIAL EACH ITEM TO INDICATE YOUR ACKNOWLEDGEMENT OR REPRESENTATION) ______ 1. I have received a copy of the Prospectus, including the Limited Partnership Agreement. ______ 2. If an individual subscriber, I am of legal age to execute this Agreement and am legally competent to do so. Minnesota residents are not required to represent that they are legally competent. ______ 3. I satisfy the applicable financial suitability and minimum investment requirements, as set forth below under the caption State Suitability Requirements (or in a special Supplement to the Prospectus) for residents of the state in which I reside. I agree to provide any additional documentation requested by the General Partner, as may be required by the securities administrator of my state of residence, to confirm that I meet the applicable minimum financial suitability standards to invest in the Partnership. ______ 4. The address on the Subscription Agreement and above is my true and correct residence and I have no present intention of becoming a resident of any other state or country. All the information that I have provided on the Subscription Agreement and above is correct and complete as of the date of this Agreement, and, if there is any material change in that information before my admission as a Limited Partner, I will immediately furnish such revised or corrected information to the General Partner, represented through the Placement Agent. ______ 5. If I am representing an employee benefit plan, to the best of my knowledge, neither the General Partner nor any Trading Advisor, nor any of their affiliates: (a) has investment discretion with respect to the investment of my plan assets; (b) has authority or responsibility to give or regularly gives investment advice with respect to such plan assets for a fee and under an agreement or understanding that such advice (i) will serve as a primary basis for investment decisions with respect to such plan assets and (ii) will be based on the particular investment needs of the plan; or (c) is an employer maintaining or contributing to that plan. For purposes of this representation (5), an "employee benefit plan" includes plans and accounts of various types (including their related trusts) which provide for the accumulation of a portion of an individual's earnings or compensation, as well as investment income earned thereon, free from federal income tax until such time as funds are distributed from the plan, and include corporate "pension" and profit-sharing plans, "simplified employee pension plans", "Keogh" plans for self-employed individuals and individual retirement accounts ("IRAs"). ______ 6. Unless representation (7) or (8) below is applicable, my subscription is made with my funds for my own account and not as trustee, custodian, or nominee for another. ______ 7. If I am subscribing as a custodian for a minor, either (a) the subscription is a gift I have made to that minor and is not made with that minor's funds. In which case the representations as to net worth and annual income below apply only to myself, acting as custodian. Or (b) if the subscription is not a gift, the representations as to net worth, and annual income below apply only to that minor. ______ 8. If I am subscribing as a trustee or custodian of an employee benefit plan, or of an IRA, at the direction of the beneficiary of that plan or IRA, all representations in this subscription agreement and Power of Attorney apply only to the beneficiary of that plan or IRA. ______ 9. If I am subscribing in a representative capacity, I have full power and authority to purchase units and enter into and be bound by this Agreement on behalf of the entity for which I am purchasing the units, and that entity has full right and power to purchase the units and enter into and be bound by this Agreement, and become a Limited Partner under the Limited Partnership Agreement. ______ 10. I am either; (a) not required to be registered with the Commodity Futures Trading Commission ("CFTC") nor to be a member of the National Futures Association ("NFA"); or (b) if so required, I am duly registered with the CFTC and am a member in good standing of the NFA. It is an NFA requirement that the General Partner attempt to verify that any person or entity that seeks to purchase units be duly registered with the CFTC and a member of the NFA, if required. I agree to supply the General Partner with such information as the General Partner may reasonably request to attempt such verification. Certain entities that acquire units may, as a result, themselves become "commodity pools" within the intent of applicable CFTC and NFA rules, and their sponsors, accordingly, may be required to register as "commodity pool operators". ______ 11. I understand that the Partnership's Limited Partnership Agreement imposes substantial restrictions on the transferability of my units and that my investment is not liquid except for limited redemption provisions, as set forth in the Prospectus and the Limited Partnership Agreement. Maine residents are not required to represent that they understand the Limited Partnership Agreement of the provisions set forth therein. By making the representations and warranties set forth above, investors should be aware that they have not waived any rights of action which they may have under applicable federal or state securities laws. Federal and state securities laws provide that any such waiver would be unenforceable. Investors should be aware, however, that the representations and warranties set forth above may be asserted in the defense of the Partnership, the General Partner, any Trading Advisor, or others in any subsequent litigation or other proceedings. (QUADRIGA LOGO) QUADRIGA THE FUTURE OF INVESTING 430 Park Avenue, NEW YORK NY 10022, USA D-5 [REQUEST FOR TRANSFER FORM] E-1 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Quadriga Capital Management will advance certain offering expenses, as described in the Prospectus, for which it shall be reimbursed by the Registrant in monthly installments throughout the offering period up to the lesser of the actual amount of offering expenses advanced by Quadriga Capital Management, Inc. or 1% of net assets of each Series per annum. The following is an estimate of the expenses for the next twelve-month period:
APPROXIMATE AMOUNT ----------- Securities and Exchange Commission Registration Fee......... $ -0- National Association of Securities Dealers, Inc. Filing Fee....................................................... -0- Printing Expenses........................................... 50,000 Fees of Certified Public Accountants........................ 50,000 -------- Blue Sky Expenses (Excluding Legal Fees).................... 35,000 Fees of Counsel............................................. 60,000 Salaries of Employees Engaged in Sales Activity............. 300,000 -------- Miscellaneous Offering Costs................................ 25,000 -------- Total............................................. $520,000 --------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 17 of the Partnership Agreement (attached as Exhibit A to the Prospectus which forms a part of this Registration Statement) provides for the indemnification of Quadriga Capital Management and certain of its controlling persons by the Registrant in certain circumstances. Such indemnification is limited to claims sustained by such persons in connection with the Registrant; provided that such claims were not the result of negligence or misconduct on the part of Quadriga Capital Management, Inc. or such controlling persons. The Registrant is prohibited from incurring the cost of any insurance covering any broader indemnification than that provided above. Advances of Registrant funds to cover legal expenses and other costs incurred as a result of any legal action initiated against QCM by a Limited Partner are prohibited unless specific court approval is obtained. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES On August 5, 2002, 10.073 Units in Series A and 10.003 Units in Series B of limited partnership were sold to Quadriga Capital Management in order to permit the filing of a Certificate of Limited Partnership. The sale of these Units was exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof. No discounts or commissions were paid in connection with the sale, and no other offeree or purchaser was solicited. There have been no other unregistered sales of Units. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents (unless otherwise indicated) are filed herewith and made a part of this Registration Statement. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 1.01 Form of Selling Agreement among each Series, Quadriga Capital Management, and the Selling Agent.* 1.02 Form of Additional Selling Agreement among each Series, Quadriga Capital Management and the Additional Selling Agent. 3.01 Quadriga Superfund, L.P. Limited Partnership Agreement (included as Exhibit A to the Prospectus).* 3.02 Certificate of Limited Partnership* 5.01(a) Opinion of Henderson & Lyman relating to the legality of the Units. 5.01(b) Opinion of Henderson & Lyman with respect to federal income tax consequences. 10.01(a) Form of Cargill Investor Services, Inc. Customer Agreement between each Series and the Clearing Broker.* 10.01(b) Form of ADM Investor Services, Inc. Customer Agreement between each Series and the Clearing Broker.* 10.01(c) Form of Fimat USA, Inc. Customer Agreement between each Series and the Clearing Broker.* 10.01(d) Form of Man Financial Inc Customer Agreement between each Series and the Clearing Broker. 10.01(e) Forms of Bear Stearns Fonex Inc. and Bear, Stearns Securities Corp. Customer Agreements between each Series and the Clearing Broker. 10.01(f) Form of Barclays Capital Inc. Customer Agreement between each Series and the Clearing Broker. 10.02 Subscription Agreement and Power of Attorney (included as Exhibit D to Prospectus)* 10.03(a) Form of Escrow Agreement between Series A and HSBC Bank USA.* 10.03(b) Form of Escrow Agreement between Series B and HSBC Bank USA.* 23.02 Consent of KPMG LLP.
* Filed previously. (b) Financial Statement Schedules. No Financial Schedules are required to be filed herewith. ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 118 (b) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the II-2 Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14 above, or otherwise, the registrant had been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Quadriga Capital Management, Inc., as general partner of the Registrant, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in St. George's, Grenada, West Indies, on the 21st day of January, 2005. QUADRIGA SUPERFUND, L.P. By: QUADRIGA CAPITAL MANAGEMENT, INC. General Partner By: /s/ CHRISTIAN BAHA ------------------------------------ Title: President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following person on behalf of Quadriga Capital Management in the capacity and on the date indicated. SIGNATURES TITLE WITH REGISTRANT DATE (BEING THE PRINCIPAL EXECUTIVE OFFICER, THE PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER AND A MAJORITY OF THE DIRECTORS OF QUADRIGA CAPITAL MANAGEMENT, INC.) QUADRIGA CAPITAL MANAGEMENT, INC. Managing Owner of Registrant By: /s/ CHRISTIAN BAHA ------------------------------------ Title: President January 21, 2005 EX-1.01 2 c90749exv1w01.txt FORM OF SELLING AGREEMENT Exhibit No. 1.01 SELLING AGENT AGREEMENT _______________, 2002 Quadriga Asset Management, Inc. 180 North LaSalle Street Suite #2416 Chicago, Illinois 60601 Ladies and Gentlemen: Quadriga Superfund, L.P., a Delaware limited partnership issuing Series A and Series B units (the "Company"), whose general partner is Quadriga Capital Management, Inc. ("QCM"), hereby confirms its agreement with Quadriga Asset Management, Inc. ("QAM", "Agent" or "you"), as follows: Introductory The Company is offering (the "Offering") for sale of its newly issued units of business trust (the "Units"). It is acknowledged that QCM may, in its sole discretion, regardless of any priorities or preferences, accept or reject subscriptions in whole or in part in the Offering and terminate the Offering at any time. Once made, subscriptions are irrevocable provided that a subscriber may revoke his subscription within 10 business days prior to the applicable Closing (defined below), whichever comes first, by the subscriber delivering written notice to QCM. The term "Initial Offering Period" is the period commencing on the date of the Prospectus and ending on April 30, 2003 (unless extended by QCM upon amendment of the Registration Statement (defined below)) or such earlier date as QCM has accepted subscriptions for at least $2,000,000 in either Series. During the Initial Offering Period, Agent will offer Units for sale at an "Initial Closing" at a price equal to $1,000 per Unit, which Initial Closing will not take place unless QCM has accepted subscriptions for at least 2,000 Units in any single Series. If the minimum number of Units is not sold during the Initial Offering Period, the Offering will terminate and all subscription amounts (together with any interest earned thereon) will be refunded to subscribers, as described in the Prospectus. Units which remain unsold following the Initial Closing will be offered for sale in a continuing offering (the "Continuing Offering") at monthly closings ("Monthly Closings;" the Initial Closing or any Monthly Closing, each a "Closing") to be held on the last day of each month at a price per Unit equal to 100% of the Net Asset Value, as defined in the Company's restated trust agreement (the "Trust Agreement"), as of the close of business on the date of such Monthly Closing. The minimum initial subscription for an investor is $5,000. Once an investor has been admitted to the Company, there is no minimum for additional subscriptions, except that they must be in multiples of $1,000. The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 containing a prospectus relating to the Offering for the registration of the Units under the Securities Act of 1933, as amended (the "1933 Act"). The Registration Statement, as amended and as declared effective by the Commission, is hereinafter referred to as the "Registration Statement." The prospectus on file with the Commission at the time the Registration Statement initially becomes effective is hereinafter called the "Prospectus," except that if the Company files a Prospectus pursuant to Rule 424 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") which differs from the Prospectus on file at the time the Registration Statement initially becomes effective, or if the Company files an amendment to the Registration Statement subsequent to the time it initially becomes effective and such amendment contains a Prospectus which differs from the Prospectus on file at the time the Registration Statement initially becomes effective, the term "Prospectus" refers to the Prospectus filed pursuant to Rule 424 or contained in such amendment to the Registration Statement from and after the time said Prospectus is filed with or transmitted to the Commission for filing. Any terms not expressly defined herein have the same definition and meaning as is set forth in the Prospectus. SECTION 1. APPOINTMENT OF AGENT Subject to the terms and conditions herein set forth, the Company hereby appoints Quadriga Asset Management, Inc. as its exclusive marketing agent to consult with and advise the Company, and, on a "best efforts" basis, to assist the Company with the solicitations of subscriptions for Units in connection with the Company's offering of the Units in the Offering. Agent will offer and sell Units in compliance with the requirements set forth in the Registration Statement, the Prospectus, the Subscription Agreement and this Agreement. On the basis of the representations, warranties and agreements herein contained, and subject to the terms and conditions herein set forth, Quadriga Asset Management, Inc. accepts such appointment and agrees to consult with and advise the Company as to matters relating to the Offering and agrees to use its best efforts to solicit subscriptions for Units in accordance with this Agreement; provided, however, that the Agent will not be responsible for obtaining subscriptions for any specific number of Units, will not be required to purchase any Units and will not be obligated to take any action which is 2 inconsistent with any applicable law, regulation, decision or order or decree, directive, agreements or memorandum of or with any court, regulatory body, administrative agency, or other government body. Units will be offered by means of Subscription Agreements and Subscription Agreement for Existing Investors or Subscribers, substantially in the respective forms set forth as Exhibit C and D to the Prospectus (each a "Subscription Agreement"). The parties agree that Units may be sold by the Agent or by other broker-dealers appointed by the Agent (each an "Additional Selling Agent"), provided that each such other broker-dealer executes a Selected Additional Selling Agent Agreement in the form attached hereto as Exhibit A. The Selling Agent and each Additional Selling Agent will notify the Company of the identity of the registered representative of the Agent or Additional Selling Agent, as the case may be, credited with the sale of each Unit (such registered representative being referred to as the "Responsible Broker" and such Unit being referred to as a "Credited Unit"). The Selling Agent and each Additional Selling Agent will agree diligently to make inquiries of each prospective purchaser of Units concerning the suitability of such an investment for such person and to retain in its records and make available to the Company for a period of a least six years, information establishing that an investment in Units is suitable for each purchaser of Units solicited by them. SECTION 2. COMPENSATION OF THE SELLING AGENT, ADDITIONAL SELLING AGENTS AND RESPONSIBLE BROKERS As compensation for the Agent's services under this Agreement or an Additional Selling Agent's services under an Additional Selling Agent Agreement, the Company will pay to the Agent or such Additional Selling Agent, as the case may be, an annual 4% selling commission payable at the rate of 1/12 of 4% per month of the month-end net asset value of the Company. To be eligible to receive such selling commission, the Responsible Broker must, at the date of payment, be a registered representative of a broker-dealer that is registered with the Commission and is a member of the National Association of Securities Dealers, Inc. (the "NASD") or be an associated person of a futures commission merchant registered with the Commodity Futures Trading Commission (the "CFTC") (such requirements being referred to as the "Eligibility Requirements"). Once you or an Additional Selling Agent sell Units to a particular investor, you or such Additional Selling Agent will be entitled to a selling commission on any Units subsequently purchased by that investor, and such units will be deemed Credited Units of the Responsible Broker, for which he will 3 be entitled to a selling commission so long as he satisfies the Eligibility Requirements. The appointment of the Agent hereunder will terminate upon completion or termination of the Offering. SECTION 3. CLOSING DATES, RELEASE OF FUNDS (a) The Initial Closing, if any, for the acceptance of subscriptions for Units of Currency is currently scheduled to be held on or before December 31, 2002. Monthly Closings in the Continuing Offering for Units will be held as of the last day of each month. (b) Subject to its right to reject any subscription in its sole discretion in whole or in part at any time prior to acceptance, the QCM, on behalf of the Company, will accept subscriptions for Units properly made and cause proper entry to be made in the Unit register to be maintained by the QCM. No certificate evidencing Units will be issued to any subscriber; rather, Agent will deliver confirmations in its customary form to subscribers whose subscriptions have been accepted by the QCM at each Closing. (c) At each Closing, the delivery, receipt, and acceptance of subscriptions for Units will be subject to the terms and conditions set forth in this Agreement, including payment of the full subscription price for Units and delivery of a properly completed Subscription Agreement by each subscriber. (d) Upon the satisfaction of such terms and conditions, the aggregate subscription price for Units will be paid and delivered to the Company at each Closing. SECTION 4. REPRESENTATIONS AND WARRANTIES The Company and QCM represent and warrant to the Agent as follows: (a) The Company intends to file the Registration Statement with the Commission or before March 1, 2002. The Company also intends to file copies of the Registration Statement with (i) the CFTC under the Commodity Exchange Act (the "CEA") and the rules and regulations promulgated thereunder by the CFTC (the "CFTC Rules"); (ii) NASD Regulation, Inc. ("NASD-R") pursuant to its Conduct Rules; and (iii) the National Futures Association (the "NFA") in accordance with NFA Compliance Rule 2-13. At the time the Registration Statement becomes effective and at all times thereafter, including the Initial Closing and each Monthly Closing, the Registration Statement shall comply in all material respects with the requirements of the 1933 Act, the 1933 Act Regulations, the CEA, the CFTC Rules, and the rules of NASD-R and NFA. The 4 Registration Statement and the Prospectus contain all statements and information required to be included therein by the CEA and the CFTC Rules. The Registration Statement, the Prospectus, and any Sales Information (as such terms are defined previously herein or in Section 7 hereof) authorized by the Company for use in connection with the Offering does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and, if applicable, at such later time as any Prospectus was filed with or mailed to the Commission for filing, the Prospectus will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, provided, however, that the representations and warranties in this Section 4(a) will not apply to statements in or omissions from such Registration Statement, Prospectus or any Sales Information made in reliance upon and in conformity with information furnished to the Company by the Agent expressly regarding the Agent for use in the Prospectus or Sales Information, which information includes the disclosure included in the Prospectus under the caption "THE SELLING AGENTS." The Sales Information will comply with the 1933 Act, the 1973 Act Regulations, the CEA, the CFTC Rules and the Rules of NASD-R and the NFA. (b) The Trust Agreement provides for the subscription for and sale of the Units; all action required to be taken by QCM and the Company as a condition to the sale of the Units to qualified subscribers therefor has been, or prior to each Closing will have been, taken; and, upon payment of the consideration therefor specified in each accepted Subscription Agreement, the Units will constitute valid interests in the Company for which Units were subscribed. (c) The Company has been duly formed and is validly existing as a business trust in good standing under the laws of the State of Delaware with full power and authority to conduct its business as described in the Prospectus, and has been duly qualified to do business under the laws of, and is in good standing as such in, every jurisdiction where the conduct of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the business, operations or income of the Company (a "Material Adverse Effect"). (d) QCM is a corporation duly organized, validly existing, and in good standing under the laws of Grenada, and is qualified to do business and is in good standing as a foreign corporation under the laws of each jurisdiction in which the nature or conduct of its business requires such qualification and where the failure to be so qualified could materially adversely affect QCM's ability to perform its obligations hereunder or under the Trust Agreement or as described in the Prospectus. 5 (e) Each of the Company and QCM has full power and authority, as applicable, under applicable law, to conduct its business and perform its respective obligations, as applicable, under this Agreement and all other agreements referred to in the Prospectus or the Registration Statement to which the Company or QCM is a party. (f) QCM will have a net worth at each Closing sufficient in amount and satisfactory in form to meet the net worth requirements set forth in the Prospectus. (g) The Company does not own, directly or indirectly, other than in the ordinary course of its business, equity securities or any equity interest in any business enterprises. (h) KPMG LLP, the firm which have issued its reports on certain financial statements included in the Registration Statement and the Prospectus, are independent certified public accountants within the meaning of the Code of Professional Conduct of the American Institute of Certified Public Accountants and are independent accountants as required by the 1933 Act and the 1933 Act Regulations. (i) This Agreement, and all other agreements referred to in the Prospectus or the Registration Statement to which the Company or QCM is a party have each been duly and validly authorized, executed and delivered by QCM on behalf of the Company and QCM, as applicable, and each constitutes a valid and binding agreement of the Company and QCM, as applicable, enforceable against the Company and QCM, as applicable, in accordance with its terms except to the extent limited by bankruptcy, reorganization, insolvency, moratorium and other laws of general application relating to or affecting the enforcement of creditors' rights and by general equitable principles and except as rights to indemnity hereunder may be limited by applicable securities laws. The Company has full power and lawful authority to issue and sell the Units to be sold by it hereunder on the terms and conditions set forth herein, all necessary corporate proceedings therefor have been duly and validly taken, and no consent, approval, authorization or other order of any governmental authority is required in connection with such authorization, execution and delivery or with the authorization, issue and sale of the Units, except such as may be required under the 1933 Act or state securities laws. (j) The Units have been duly and validly authorized and, when issued and delivered pursuant to this Agreement, will be duly and validly issued, fully paid and nonassessable. The Units are not subject to preemptive rights of any security holder of the Company. 6 (k) The consummation of the transactions herein contemplated and the fulfillment of the terms of this Agreement, and all other agreements referred to in the Prospectus or the Registration Statement to which the Company or QCM is a party, to be performed by the Company and QCM, as applicable, will not conflict in any material respect with or result in a material breach of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company or QCM pursuant to the terms of any indenture, mortgage, deed of Company, agreement for money borrowed or any other material agreement or instrument to which the Company or QCM is a party, or by which the Company or QCM may be bound, or to which any of the property or assets of the Company or QCM are subject, nor will such action result in any violation of the provisions of the charter or the bylaws, certificate of limited Company or Company agreement, as applicable, of the Company or QCM, or any statute or any order, rule or regulation applicable to the Company or QCM of any court or any regulatory authority or other governmental body having jurisdiction over the Company or QCM, assuming satisfaction by the Agent of the terms of this Agreement and full compliance by the Agent and any other broker-dealers and their associated persons with all applicable statutes, orders, rules, or regulations in connection with the Offering. (l) The financial statements of the Company and QCM, together with the related notes thereto, set forth in the Registration Statement and the Prospectus, fairly present the financial position and results of operations of the Company and QCM on the basis stated in the Registration Statement, at the respective dates and for the respective periods to which they apply. Such statements and related notes are accurate, complete and correct, comply as to form in all material respects with all applicable accounting requirements, including the 1933 Act Regulations, have been prepared in accordance with generally accepted accounting principles ("GAAP"), which were consistently applied throughout the periods involved, except as otherwise disclosed therein. Since the date of the statements of financial condition included in the Registration Statement, except as contemplated in the Prospectus, no events have occurred that have had a Material Adverse Effect. The summaries of such financial statements and other financial, statistical and pro forma information and related notes set forth in the Registration Statement and the Prospectus are (i) accurate and correct and fairly present the information purported to be shown thereby at the dates and for the periods indicated on a basis consistent with the audited financial statements of the Company and QCM and (ii) in compliance in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (m) Except as disclosed in the Registration Statement and Prospectus, there is not now pending or, to the knowledge of QCM, threatened, any action, suit or proceeding, before or by any court, governmental agency or body or 7 self-regulatory organization to which QCM, any "principals" of QCM, as defined in CFTC Rule 4.10(e) ("QCM Principals") or the Company is a party, which might result in a Material Adverse Effect, nor is QCM aware of any facts which would form the basis for the assertion of any material claim or liability that are not disclosed in the Registration Statement and Prospectus, and neither QCM nor any QCM Principal has received any notice of an investigation by the Commission, the CFTC, NASD-R or the NFA regarding noncompliance by QCM, the QCM Principals or the Company with the 1933 Act, the 1933 Act Regulations, the Securities Exchange Act of 1934, as amended (the "1934 Act"), any other federal securities laws, rules or regulations, the CEA, the CFTC Rules, or the rules of NASD-R or the NFA, which action, suit, proceeding, or investigation resulted or might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business or prospects of QCM or of the Company, or which could be material to an investor's decision to invest in any of the Company. (n) QCM and each "principal" of QCM, as defined in CFTC Rule 3.1(a), have all federal, state, and foreign governmental, regulatory, self-regulatory, and exchange approvals, licenses, registrations, and memberships, and have effected all filings with federal, state, and foreign governmental regulators, self-regulatory organizations, and exchanges required to conduct their business and to act as described in the Registration Statement and the Prospectus, or required to perform their obligations under this Agreement and all other agreements referred to in the Prospectus or the Registration Statement to which the Company or QCM is a party. QCM is registered as a commodity pool operator under the CEA and is a member in good standing of the NFA. QCM's principals identified in the Prospectus are all of QCM's Principals. (o) To the extent required under CFTC Rules and applicable CFTC staff no-action letters, the actual performance of all pools "operated" within the meaning of the CEA by QCM and of QCM's Principals is disclosed in the Prospectus. (p) The Company and QCM have filed all necessary federal, state, local and foreign income and franchise tax returns and have paid, or are contesting in good faith, all taxes shown as due thereon; and QCM has no knowledge of any tax deficiency which has been or might be asserted against the Company or QCM, which would result in a Material Adverse Effect. (q) All contracts and other documents of the Company or QCM which are, under the 1933 Act Regulations, required to be filed as exhibits to the Registration Statement have been so filed. (r) The conduct of the businesses of the Company and QCM is in compliance in all respects with applicable federal, state, local and foreign laws 8 and regulations, except where the failure to be in compliance would not have a Material Adverse Effect. The Company and QCM are in possession of all necessary licenses, permits, consents, certificates, orders, and other governmental authorizations currently required for the conduct of their respective businesses, except where failure to obtain such licenses, permits, consents, certificates, orders or other governmental authorizations would not have a Material Adverse Effect, and all such licenses, permits, consents, certificates, orders and other governmental authorizations are in full force and effect and neither the Company nor QCM has received any notice of proceedings related to the revocation or modification thereof, and the Company and QCM are in all material respects complying therewith; the expiration of any such licenses, permits, consents, certificates, orders and other governmental authorizations would not materially affect their operations; and none of the activities or businesses of the Company or QCM is in violation of, or causes the Company or QCM to violate, any material law, rule, regulation or order of the United States, any state, county or locality, or any agency or body of the United States or of any state, county or locality. (s) Neither the Company nor QCM is in violation, breach or default of or under its charter or bylaws, certificate of limited Company or limited Company agreement, as applicable, or any material bond, debenture, note or other evidence of indebtedness or any material contract, agency agreement, indenture, mortgage, loan agreement, lease, joint venture or other material agreement or instrument to which the Company or QCM is a party or by which it or any of its properties may be bound, or is in material violation of any federal, foreign, state or local law, order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, which violation would have a Material Adverse Effect. (t) The Company and QCM will make and keep accurate books and records reflecting their respective assets and maintain internal accounting controls which provide reasonable assurance that (i) transactions are executed with management's authorization; (ii) transactions are recorded as necessary to permit preparation of the Company's consolidated financial statements and to maintain accountability for the assets of the Company and QCM; (iii) access to the assets of the Company and QCM is permitted only in accordance with management's authorization; and (iv) the reported accountability of the assets of the Company and QCM is compared with existing assets at reasonable intervals. (u) The Company knows of no outstanding claims for finder's, origination or underwriting fees with respect to the sale of the Units except as contemplated herein. (v) All material transactions between the Company or QCM and the officers, directors, partners or shareholders who beneficially own more than 5% of any class of the Company's voting securities required to be disclosed under 9 the rules of the Commission, have been accurately disclosed in the Registration Statement and the Prospectus, and, except as noted therein, the terms of each such transaction are fair to the Company and no less favorable to the Company than the terms that could have been obtained from unrelated parties. (w) The Company will not take, directly or indirectly, any action (and does not know of any action taken by its directors, officers, shareholders or others) designed to or which has constituted or which might reasonably be expected to cause or result in, under the 1934 Act, stabilization or manipulation of the price of any security of the Company to facilitate, the sale or resale of the Units. Any certificate signed by an officer of QCM and delivered to the Agent or its counsel that refers to this Agreement will be deemed to be a representation and warranty by QCM to the Agent as to the matters covered thereby with the same effect as if such representation and warranty were set forth herein. SECTION 5. COVENANTS OF THE COMPANY The Company and QCM hereby covenant with the Agent as follows: (a) The Company will not, at any time before or after the Registration Statement, including any supplement filed pursuant to Rule 424 under the 1933 Act, is declared effective by the Commission file any amendment to such Registration Statement without so notifying the Agent and without providing the Agent a reasonable opportunity to review such amendment. (b) The Company will immediately upon receipt of any information concerning the events listed below notify the Agent and promptly confirm the notice in writing: (i) of the receipt of any comments from the Commission, or any other governmental entity having authority with respect to the transactions contemplated by this Agreement; (ii) any requests by the Commission or any other governmental entity having authority for any amendment or supplement to the Registration Statement or for additional information; (iii) of the issuance by the Commission or any other governmental entity having authority of any order or other action suspending the Offering or the use of the Registration Statement or the Prospectus; (iv) the issuance by the Commission or any state authority having jurisdiction of any stop order suspending the effectiveness of the Registration 10 Statement or of the initiation or threat of initiation or threat of any proceedings for that purpose; or (v) of the occurrence of any event mentioned in paragraph (g) below. The Company will make every reasonable effort to prevent the issuance by the Commission or any state authority having jurisdiction of any such order and, if any such order at any time is issued, to obtain the lifting thereof at the earliest possible time. (c) The Company will give the Agent notice of its intention to file, and reasonable time to review prior to filing, any amendment or supplement to the Registration Statement or the Prospectus. (d) The Company has delivered or will deliver to the Agent and to its counsel two complete conformed copies (including all exhibits) of the Registration Statement, as originally filed and each amendment thereto. (e) The Company will furnish to the Agent, without charge, from time to time during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of such Prospectus (as amended or supplemented) as the Agent may reasonably request for the purposes contemplated by the 1933 Act or the 1934 Act or the respective applicable rules and regulations of the Commission thereunder. The Company authorizes the Agent to use the Prospectus (as amended or supplemented, if amended or supplemented) for any lawful manner in connection with the sale of the Units by the Agent. (f) The Company will comply in all material respects with the 1933 Act Regulations, the 1934 Act and the rules and regulations of the Commission promulgated under the 1934 Act (the "1934 Act Regulations"), and all other applicable laws (including state Blue Sky laws) to be complied with prior to, at, and subsequent to each Closing. During the periods prior to each Closing and when the Prospectus is required to be delivered, the Company will comply in all material respects, at its own expense, with all requirements imposed upon it by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations, in each case as from time to time in force, in accordance with the provisions hereof and the Prospectus. (g) If, at any time during the period when the Prospectus relating to the Units is required to be delivered (including the period after the Initial Closing and prior to each Monthly Closing), any event relating to or affecting the Company occurs, as a result of which it is necessary or appropriate, in the reasonable good faith opinion of the Agent's counsel, to amend or supplement 11 the Registration Statement or Prospectus in order to make the Registration Statement or Prospectus not misleading in light of the circumstances existing at the time it is delivered to a purchaser, the Company will, at its expense, forthwith prepare, file with the Commission and furnish to the Agent a reasonable number of copies of an amendment or amendments of, or a supplement or supplements to, the Registration Statement or Prospectus (in form and substance satisfactory to the Agent and its counsel after a reasonable time for review) which will amend or supplement the Registration Statement or Prospectus so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading. For the purpose of this Agreement, the Company will timely furnish to the Agent such information with respect to itself as the Agent may from time to time reasonably request. (h) If required, the Company will take all necessary actions, in cooperation with you, to qualify or register the Units for offering and sale by the Company under the applicable securities or Blue Sky laws of each jurisdiction as you may reasonably designate, provided, however, that the Company will not be obligated to qualify to do business in any jurisdiction in which it is not so qualified. In each jurisdiction where any of the Units has been qualified or registered as above provided, the Company will make and file such statements and reports in each fiscal period as are or may be required by the laws of such jurisdictions. (i) During the period which the Units are registered under the 1934 Act or for the three years from the final Closing, whichever period is greater, the Company will furnish to its unitholders as soon as practicable after the end of each fiscal year an annual report (including a consolidated statement of financial condition and consolidated statements of income or operations, changes in shareholders' equity and cash flows of the Company and QCM as at the end of and for such year, certified by independent public accountants in accordance with Regulation S-X under the 1933 Act). (j) The Company will use the net proceeds from the sale of the Units in the manner set forth in the Prospectus under the caption "Use of Proceeds." (k) Other than as permitted by the 1933 Act, the 1933 Act Regulations and the laws of any state in which the Units are qualified for sale, the Company will not distribute any Prospectus, offering circular or other offering material in connection with the offer and sale of Units. (l) The Company will make generally available to its security holders as soon as practicable, but not later than 90 days after the close of the period covered thereby, an earning statement (in form complying with the provisions of 12 Rule 158 of the regulations promulgated under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company's fiscal quarter next following the effective date (as defined in such Rule 158) of the Registration Statement. (m) The Company will file, if required, with the Commission such reports on Form SR as may be required pursuant to Rule 463 under the 1933 Act. (n) The Company will register the Units under Section 12(g) of the 1934 Act prior to execution of the Public Offering Acknowledgment and will not deregister the Units for a period of at least three years thereafter, unless such registration is no longer required. (o) The Company will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with the "Interpretation With Respect to Free Riding and Withholding" of NASD-R. (p) Prior to each Closing, the Company will conduct its business in compliance in all material respects with all applicable federal and state laws, rules, regulations, decisions, directives and orders including, without limitation, all decisions, directives and orders of the NFA, the CFTC and NASD-R. (q) The Company will not, prior to each Closing, incur any liability or obligation, direct or contingent, or enter into any material transactions, other than in the ordinary course of business, except as contemplated by the Prospectus. (r) The representations and warranties made in this Agreement will be true and correct as of the date hereof and as of each Closing. SECTION 6. PAYMENT OF EXPENSES The Company agrees to pay or cause to be paid and reimburse the party making payment for all expenses incident to the performance of the obligations of the Company under this Agreement, including, without limitation, thc following: (i) the fees and disbursements of the Company's counsel, accountants and other advisors; (ii) the qualification of the Units under all applicable securities or Blue Sky laws, including filing fees and the fees and disbursements of counsel in connection therewith and in connection with the preparation of a Blue Sky memorandum; (iii) the printing and delivery to the Agent in such quantities as the Agent reasonably request of copies of the Registration Statement and the Prospectus, as amended or supplemented and all other documents in connection with this Agreement; (iv) filing fees incurred in connection with the review of the Offering by the Commission, CFTC and by NASD-R. 13 SECTION 7. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless the Agent and any Additional Selling Agent, its respective officers, directors, agents, servants and employees and each person, if any, who controls the Agent within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss, liability, claim, damage or expense whatsoever (including but not limited to settlement expenses), joint or several, that any indemnified party may suffer or to which any indemnified party may become subject under all applicable federal and state laws or otherwise, and to promptly reimburse any indemnified party upon written demand for any expenses (including fees and disbursements of counsel) incurred by such indemnified party in connection with investigating, preparing or defending any actions, proceedings or claims (whether commenced or threatened) to the extent such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in (a) the Registration Statement (or any amendment or supplement thereto), the Prospectus (or any amendment or supplement thereto), (b) any application or other instrument or document of the Company or based upon written information supplied by the Company or their representatives filed in any state or jurisdiction to register or qualify any or all of the Units under the securities laws thereof (collectively, the "Blue Sky Application"), or (c) any application or other document, advertisement, oral statement, or communication ("Sales Information") prepared, made or executed by or, with its consent, on behalf of the Company, or based upon written or oral information furnished by, or with its consent, on behalf of the Company, in connection with or in contemplation of the transactions contemplated by this Agreement; (ii) arise out of or are based upon the omission or alleged omission to state in any of the foregoing documents or information a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iii) arise from any theory of liability whatsoever relating to or arising from or based upon the Registration Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), Blue Sky Application or Sales Information or other documentation distributed in connection with the Offering; provided, however, that no indemnification is required under this paragraph (a) to the extent such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statements or alleged untrue statements in, or material omission or alleged material omission from, the Registration Statement (or any amendment or supplement thereto), Prospectus or Sales Information made in reliance upon and in conformity with information furnished to the Company by the Agent regarding QAM expressly for use in the Prospectus, which information consists of the disclosure included in the Prospectus contained in the first paragraph under the caption "TERMS OF THE OFFERING - General." 14 (b) The Agent agrees to indemnify and hold harmless the Company, its directors, officers, agents, servants and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss, liability, claim, damage or expense whatsoever (including but not limited to settlement expenses), joint or several, that the Company or any of them may suffer or to which the Company or any of them may become subject under all applicable federal and state laws or otherwise, and to promptly reimburse the Company and any such persons upon written demand for any expenses (including fees and disbursements of counsel) incurred by the Company or any of them in connection with investigating, preparing or defending any actions, proceedings or claims (whether commenced or threatened) to the extent such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto) or the Prospectus (or any amendment or supplement thereto), the Sales Information, or arise out of or are based upon the omission or alleged omission to state in any of the foregoing documents a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that your obligations under this Section 7(b) will exist only if, and only to the extent, that such untrue statement or alleged untrue statement was made in, or such material fact or alleged material fact was omitted from the Registration Statement (or any amendment or supplement thereto) or the Prospectus (or any amendment or supplement thereto) or the Sales Information in reliance upon and in conformity with information furnished to the Company by the Agent regarding Atrium Securities expressly for use in the Prospectus, which information consists of the disclosure included in the Prospectus contained in the first paragraph under the caption "TERMS OF THE OFFERING - General." (c) Each indemnified party must give prompt written notice to each indemnifying party of any action, proceeding, claim (whether commenced or threatened), or suit instituted against it in respect of which indemnity may be sought hereunder. No indemnification will be available to any party who fails to give notice as provided in this Section 7(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but otherwise the omission so to notify the indemnifying party will not relieve it from any liability that it may have to an indemnified party under this Section 7. An indemnifying party may participate at its own expense in the defense of such action. In addition, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the 15 indemnified parties that are defendants in such action, and such indemnified parties will not be liable for any fees and expenses of such counsel for the indemnified parties incurred thereafter in connection with such action, proceeding or claim, other than reasonable costs of investigation. In any action, proceeding or claim, the indemnified party will have the right to retain its own counsel, but the fees and disbursements of such counsel will be at its own expense unless (i) the parties to any such action, proceeding or claim include both the indemnifying party and the indemnified party and (ii) representation of both parties by the same counsel reasonably would be deemed inappropriate due to actual or potential conflicting interests between them. In no event will the indemnifying parties be liable for the fees and expenses of more than one separate firm of attorneys (other than any special counsel that said firm may retain) for each indemnified party in connection with any one action, proceeding or claim or separate but similar or related actions, proceedings or claims in the same jurisdiction arising out of the same general allegations or circumstances. SECTION 8. CONTRIBUTION In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 7 is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company or the Agent, the Company or the Agent will contribute to the aggregate losses, claims, damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting any contribution received by the Company or the Agent from persons other than the other party thereto, who may also be liable for contribution) to the party entitled to indemnification in such proportion so that the Agent is responsible for that portion represented by the percentage that the fees paid to the Agent pursuant to Section 1 of this Agreement (not including expenses) bears to the gross proceeds received by the Company from the sale of the Units in the Offering and the Company will be responsible for the balance. If, however, the allocation provided above is not permitted by applicable law, then each indemnifying party will contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damage or liabilities (or actions, proceedings or claims in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Agent on the other will be deemed to be in the same proportion as the total gross proceeds from the Offering (before deducting expenses) received by the Company bears to the total fees (not including expenses) received by the Agent. The relative fault will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or other omission or alleged omission to state 16 a material fact relates to information supplied by the Company on the one hand or the Agent on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Agent agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 8. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions, proceedings or claims in respect thereof referred to above in this Section 8 will be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action, proceeding or claim. It is expressly agreed that the Agent will not be liable for any loss, liability, claim, damage or expense or be required to contribute any amount which in the aggregate exceeds the amount paid to the Agent under the Agreement. It is understood that the above-stated limitation on the Agent's liability is essential to the Agent and that the Agent would not have entered into this Agreement if such limitation had not been agreed to by the parties to this Agreement. No person found guilty of any fraudulent misrepresentation (within the meaning of Section 11 (f) of the 1933 Act) will be entitled to contribution from any person who was not also found guilty of such fraudulent misrepresentation. The obligations of the Company and the Agent under this Section 8 and under Section 7 hereof will be in addition to any liability which the Company and the Agent may otherwise have. For purposes of this Section 8, each of the Agent's officers and directors and each person, if any, who controls the Agent within the meaning of the 1933 Act and the 1934 Act will have the same rights to contribution as each officer and director of the Company and each person, if any, who controls the Company within the meaning of the 1933 Act and the 1934 Act, and each officer and director of the Agent or the Company, will have the same rights to contribution as the Agent or the Company, respectively. Any party entitled to contribution, promptly after receipt of notice of commencement of any action, suit, claim or proceeding against such party in respect of which a claim for contribution may be made against another party under this Section 8, will notify such party from whom contribution may be sought. No person will be entitled to contribution hereunder who fails to give notice as provided in this Section 8 if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but otherwise the omission so to notify the party from whom contribution is sought will not relieve it from any liability that it may have to a party seeking contribution under this Section 8. SECTION 9. TERMINATION (a) In the event the Company elects not to accept any subscriptions for Units in the Offering, this Agreement will terminate upon refund by the Company to each person who has ordered any of the Units the full amount 17 which it may have received from such persons and no party to this Agreement will have any obligation to the other hereunder, except for the Company's obligations under Sections 1, 6, 7 and 8 hereof. (b) In the event that at least 1,000 Units are not sold by the end of the Initial Offering Period, this Agreement will terminate and any such termination will be without liability of any party to any other party except as otherwise provided in Sections 1, 6, 7 and 8 hereof. SECTION 10. SURVIVAL The respective indemnities, agreements, representations, warranties and other statements of the Company and the Agent, as set forth in this Agreement, will remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Agent or any of its officers or directors or any person controlling the Agent, or the Company or any officer, director or person controlling the Company, and will survive termination of the Agreement and the receipt or delivery of any payment for the Units. SECTION 11. MISCELLANEOUS Notices hereunder, except as otherwise provided herein, must be given in writing or by telegraph, addressed (a) to the Agent at 180 North LaSalle Street, Suite #2416, Chicago, Illinois 60601 (Attention: President) with a copy and (b) to the Company at Le Marquis Complex, Unit 5, P.O. Box 1479, Grand Anse, St. George's, Grenada, West Indies (Attention: President), with a copy (which will not constitute notice) to Henderson & Lyman, 175 West Jackson Blvd., Suite 240, Chicago, Illinois 60604 (Attention: Douglas E. Arend, Esq.). This Agreement is made solely for the benefit of and will be binding upon the parties hereto and their respective successors and the controlling persons, directors and officers referred to in Section 7 hereof and no other person will have any right or obligations hereunder. The term "successor" does not include any purchaser of any of the Units. This Agreement will be governed by and construed in accordance with the laws of the State of Illinois. This Agreement may be signed in various counterparts which together will constitute one agreement. If the foregoing correctly sets forth the arrangement among the Company and the Agent, please indicate acceptance thereof in the space provided below for that purpose, whereupon this letter and your acceptance will constitute a binding agreement. 18 Very truly yours, QUADRIGA SUPERFUND By: Quadriga Capital Management, Inc., its Managing Owner By: ------------------------------------- Christian Baha Chairman Accepted as of the date first above written. QUADRIGA ASSET MANAGEMENT, INC. By: ------------------------------------ George Fountas, President 19 EX-1.02 3 c90749exv1w02.txt FORM OF ADDITIONAL SELLING AGREEMENT Exhibit 1.02 [QUADRIGA LOGO] ADDITIONAL SELLING AGENT AGREEMENT Made on _______________, 200__ between: QUADRIGA ASSET MANAGEMENT INC. 430 PARK AVENUE SUITE 1501 NEW YORK, NY 10022 and ____________________________ ____________________________ ____________________________ ____________________________ (sometimes hereinafter called the "Additional Selling Agent") Whereas: A. Quadriga Capital Management, Inc. ("QCM") is an International Business Company registered on the 11th day of November, 1999 pursuant to CAP 152 of the 1990 Revised Laws of Grenada Company No. 1102 of 1999 - 2046, and is the general partner of Quadriga Superfund, L.P., Series A and Series B (the "Partnership"). B. Quadriga Asset Management, Inc. ("QAM") is a registered Broker/Dealer and NASD Member and has been appointed by the Partnership as exclusive marketing agent to assist the Partnership with the solicitation of subscriptions for "Units" (as hereinafter defined) in the Partnership. 1 C. The "Additional Selling Agent" is a Broker/Dealer and NASD member and is organized in accordance with the laws of the state or country of its formation. D. "Units" means units or other participation rights in the Partnership, which are expressly announced to the Additional Selling Agent as covered by this Agreement. Now in consideration of the mutual promises and agreements contained in this Additional Selling Agent Agreement, including all attached schedules (collectively, the "Agreement"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. APPOINTMENT OF THE ADDITIONAL SELLING AGENT 1.1 QAM hereby invites the Additional Selling Agent to participate as an additional selling agent on a non-exclusive, non-transferable and non-assignable basis to offer for sale Units. The Additional Selling Agent hereby accepts such invitation and agrees to participate in such offer for sale on the terms and conditions set out in this Agreement. 1.2 The Additional Selling Agent warrants that it has obtained all necessary licenses and authorizations of all applicable authorities to engage in the activities covered by this Agreement and the Additional Selling Agent shall immediately inform QAM in writing if at any time such license or authorization expires or is withdrawn. Without limiting the foregoing, Additional Selling Agent represents and warrants that it is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"). The Additional Selling Agent acknowledges its understanding that it is not entitled to any remuneration or other compensation hereunder for any period during which it has been suspended or expelled from membership in the NASD. The Additional Selling Agent further acknowledges that it shall not be permitted to receive trailing commission payments for any sales in the Partnership unless the Additional Selling Agent is registered with the CFTC and is a member in good standing of the NFA and the NASD. Notwithstanding the foregoing, if the Additional Selling Agent is not registered with the CFTC, it may receive additional selling commissions from QAM as set forth in the attached Schedule I. 2 1.3 The Additional Selling Agent agrees to offer, sell and distribute Units in the above-described public offering only in such states or territories where it is permitted to offer, sell and distribute Units. 1.4 The Partnership reserves the right to cancel or refuse or terminate, in whole or in part, any instruction or application to subscribe for Units or contract for purchase of any Units. The Additional Selling Agent agrees that no commission will be due or owing to the Additional Selling Agent on any transactions, which are refused or cancelled. 1.5 The Additional Selling Agent shall perform the services hereunder as an independent contractor and not as an employee of the Partnership or QAM. Nothing in the Agreement shall constitute or is deemed to constitute a partnership, joint venture, agency, trust, formal business organization, separate legal entity or other association of any kind between the parties hereto. The Additional Selling Agent shall have no authority to bind or act on behalf of the Partnership or QAM. Except as specifically provided by this Agreement, Additional Selling Agent shall not act or represent or hold itself out as having authority to act as agent or partner of the Partnership or QAM, or in any way bind or commit the Partnership or QAM to any obligations. Any such act will create a separate liability of Additional Selling Agent to any and all third parties affected as a consequence. The rights, duties, obligations and liabilities of the parties shall be several and not joint or collective and each party shall be responsible individually only for its obligations described by this Agreement. 2. DUTIES OF THE ADDITIONAL SELLING AGENT 2.1 The Additional Selling Agent: (a) shall not make any representation other than as set out in the sales documents, offering memorandum, prospectus or similar documents issued by the Partnership (each a "Disclosure Document"), or give or make any warranty on behalf of the Partnership or QAM; (b) shall observe the terms and conditions relating to the promotion of the Partnership and to the issuance and sale of the Units whether contained in the sales documentation issued by the Partnership or in any directions of QAM provided to the Additional Selling Agent, or imposed by law or regulations having the force of law in any country or territory in which the Additional Selling Agent is promoting the Units or in which any investor or potential investor 3 in the Units is a resident or of which such investor is a citizen or national and, in particular, but without limitation, the Additional Selling Agent shall not promote the Units or procure or seek to procure subscriptions for the Units from any person (whether an individual, firm or corporation) who is not eligible by reason of nationality or otherwise, to invest in the Units; and (c) acknowledges its responsibility under applicable law to make every reasonable effort to determine that the purchase of Units is a suitable and appropriate investment for each person to whom Additional Selling Agent introduces Units, based on information provided by such person. 2.2 In connection with its activities under this Agreement, the Additional Selling Agent shall use only such sales documents and/or promotional brochures as have been approved by the Partnership or QAM. QAM shall obtain approval for such sales documents to the extent legally required by the supervisory authority in any relevant jurisdiction prior to their use. The Additional Selling Agent shall not circulate any prospectus, which has been withdrawn or supplemented. 2.3 The Additional Selling Agent shall have no authority to accept applications for Units on behalf of the Partnership and shall in no circumstances have any power to enter into a transaction on behalf or in any other way to bind the Partnership or QAM. 2.4 The Additional Selling Agent warrants to observe the conduct of business rules applicable in any state or territory in which the Additional Selling Agent is promoting the Units or - if applicable - in which any investor or potential investor in the Units is a resident or of which such investor is a citizen or national. It is the Additional Selling Agent's duty to inform investors and potential investors in a reasonable manner about the Units and about the risks of investing in them, as presented and disclosed in the Partnership's Disclosure Documents, and to observe the terms and conditions relating to the sale and distribution of Units imposed by law or regulations having the force of law in any applicable state or territory. 2.5 Additional Selling Agent recognizes and acknowledges that all rights and goodwill in or to any and all trademarks, trade names and logos of the Partnership or QAM (each a "Mark") belong solely and exclusively to the Partnership, QAM and/or their respective licensors, and that all rights resulting from Additional Selling Agent's use of any Mark shall inure to the sole and exclusive benefit of the Partnership, QAM and/or their respective licensors. Additional Selling Agent's use of a Mark 4 shall be in a form and manner satisfactory to QAM (which shall exercise its commercially reasonable discretion in determining whether such use is of a satisfactory quality and standard), and in compliance with any applicable country-of-origin labeling requirements. Additional Selling Agent's use of any Marks shall be restricted to and coextensive with the performance of all of Additional Selling Agent's duties under this Agreement, shall cease immediately in the event this Agreement is terminated, and shall not be construed as conferring upon Additional Selling Agent any right or interest in or to such trademarks, trade names, or logos or to any registration thereof. 2.6 Additional Selling Agent shall submit all advertising copy and promotional materials, including but not limited to sales brochures, newspaper and yellow page advertisements, radio and television commercials, internet-based web material, to QAM for approval, in QAM's sole discretion, prior to using the same in commerce. 3. DUTIES OF QAM QAM shall support the Additional Selling Agent concerning the offering and distribution of the Units by providing the Additional Selling Agent with such sales documents and promotional brochures as have been approved by the Partnership or QAM, including copies of the prospectus and on a timely basis, any amendments and supplements thereto, without charge, and providing the Additional Selling Agent with such current information or modifications regarding the Partnership or the distribution of Units as is necessary to promote the Units and comply with the terms of this Agreement. 4. TERRITORY The Additional Selling Agent is authorized to promote, offer, sell, distribute and deliver Units only in states in which both the Additional Selling Agent is properly registered and authorized to do business and in which the Partnership has registered the offering of Units pursuant to applicable state "blue sky" laws. 5. COMPENSATION The remuneration payable to the Additional Selling Agent on transactions in assets raised in Units is set out in the attached Schedule I. All fees shall be paid monthly in arrears no later than the 20th calendar day of such subsequent month according to Schedule I based on the assets raised in Units which the Additional Selling Agent is credited as having sold. The Partnership shall have the right, in 5 its sole discretion, to evaluate potential purchasers procured by the Additional Selling Agent, and decline to sell Units to any potential purchaser for any reason. Nothing in this Agreement shall be construed so as to require any payment to the Additional Selling Agent for procuring potential purchasers who, for any reason, do not purchase Units. 6. PREVENTION OF MONEY LAUNDERING 6.1 The Additional Selling Agent shall use due diligence to learn the essential facts relative to every person or entity for whom orders for the purchase of Units are effected and shall follow procedures that are at least equivalent to those required by the USA Patriot Act and regulations adopted thereunder on prevention of the use of the financial system for the purposes of money laundering as amended from time to time. In the event that QAM or the Partnership requires information or is required by any competent authority to provide information as to the identity of investors or in the event that any form of money laundering is suspected, the Additional Selling Agent agrees to make a full disclosure of such information to QAM and/or all appropriate authorities. Where the Additional Selling Agent is a resident in a country, which is a member of the Financial Action Task Force, such disclosure shall be made to the extent provided by local law. The Additional Selling Agent will retain the evidence of verification of identity and records of all transactions for at least five years following the ending of the relationship with any person for whom orders for the subscription of Units have been effected. 6.2 QAM reserves the right to seek and the Additional Selling Agent agrees to supply to the Partnership and QAM and/or any designated representative of them, without undue delay, such documentation as it may request in order to satisfy itself as to the essential facts relative to the Additional Selling Agent and any suspected or potential money laundering. If the Additional Selling Agent fails to supply such documentation as requested by the Partnership, QAM and/or any representative of either of them within a reasonable period of time, this Agreement may be terminated for cause at the sole discretion of QAM in accordance with Subsection 7.1 hereof. In the event that the Partnership, QAM, and/or any representative of either of them is required by any competent authority to provide information as to the identity of the Additional Selling Agent or in the event that money laundering is suspected, the Additional Selling Agent agrees to make a full disclosure of all relevant information to the Partnership, QAM, and/or all appropriate authorities. 6 6.3 The Additional Selling Agent warrants and agrees to indemnify the Partnership and QAM and hold the Partnership and QAM harmless from and against any and all liabilities, losses, damages, claims and expenses, including attorneys' and other legal fees, in connection with any breach of the Additional Selling Agent's obligations under Section 6 of this Agreement. 7. TERMINATION 7.1 QAM may terminate or suspend this Agreement immediately if any licenses or approvals required of the Additional Selling Agent are suspended, expire or are revoked or if the Additional Selling Agent is otherwise unable to perform its duties hereunder, or if any finding of wrongdoing or breach of any applicable laws or regulations is made against it or if the Additional Selling Agent breaches any term or conditions of this Agreement. 7.2 Either Party may terminate this Agreement without cause upon 30 days written notice given to the other party. In the event that QAM terminates this Agreement without cause under this Subsection 7.2, then the Additional Selling Agent shall be entitled to receive the remuneration identified herein for an additional eighteen (18) months subsequent to the termination of this Agreement provided, however, that the Additional Selling Agent continues to comply with all of its obligations hereunder during said period of time. 7.3 If this Agreement is terminated by the Additional Selling Agent, or by QAM pursuant to Article 7.1, then the Additional Selling Agent shall not be entitled to any commissions, or any other remuneration, subsequent to the first to occur of (i) the suspension, expiration or revocation of any licenses or approvals required of the Additional Selling Agent, or (ii) the date that Additional Selling Agent is otherwise unable to perform its duties hereunder, or (iii) the date of any wrongdoing or breach of any applicable laws or regulations or this Agreement by Additional Selling Agent, or (iv) the date of termination hereof. 8. INDEMNIFICATION 8.1 QAM agrees to indemnify and hold harmless the Additional Selling Agent and each person, if any, who controls such person within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages, costs, expenses, liabilities, joint or several (including 7 any investigatory, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), and actions to which they, or any of them, may become subject under the Securities Act, the Securities Exchange Act of 1934, the Commodity Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages, costs, expenses, liabilities or actions arise out of or are based upon any untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto, or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Prospectus, of any amendment or supplement thereto, in the light of the circumstances under which such statements were made); provided, however, that in no event shall the indemnification agreement contained in this Subsection 8.1 of Section 8 inure to the benefit of any of the indemnified parties (or any person controlling any such party within the meaning of Section 15 of the Securities Act) on account of any losses, claims, damages, costs, expenses, liabilities or actions arising from the sale of the Units to any person if such losses, claims, damages, costs, expenses, liabilities or actions arise out of or are based upon, an untrue statement or omission in a preliminary prospectus or the Prospectus or a supplement or amendment thereto, if a preliminary prospectus, the Prospectus, the Prospectus as amended or supplemented or as further amended or supplemented, respectively, shall correct, prior to the delivery to such person of his subscription, the untrue statement or omission which is the basis of the loss, claim, damage, expense, liability or action for which indemnification is sought and a copy of a preliminary prospectus, the Prospectus or the Prospectus as amended or supplemented or as further amended or supplemented, as the case may be, had not been sent or given to such indemnified person at or prior to the receipt of the subscription. 8.2 The Additional Selling Agent agrees to indemnify and hold harmless the Partnership, QCM and QAM, as the case may be, and each person, if any, who controls the Partnership or as the case may be, within the meaning of Section 15 of the Securities Act to the same extent as the foregoing indemnity from QAM set forth in subsection 8.1 of this Section 8 (and, in the case of QAM, for any indemnity paid by QAM pursuant to subsection 8.1 of this Section 8), insofar as such losses, claims, damages, costs, expenses, liabilities or actions arise out of or are based upon a breach of any agreement, covenant, representation or warranty set forth in this Agreement by the Additional Selling Agent. 8 8.3 Each of the parties to this Agreement understands that the obligations of each party subject to this Section 8 are separate and distinct. Notwithstanding any other provision of this Section 8 (i) QAM shall have no obligation to indemnify the Additional Selling Agent for more than the amount of proceeds resulting from assets raised in the sale of Units by the Additional Selling Agent plus the Additional Selling Agent's actual expenses incurred in connection with any loss, claim, damage, charge or liability (including reasonable attorneys' and accountants' fees incurred in defense thereof) and (ii) any obligation of QAM to indemnify the Additional Selling Agent shall be adjusted to reflect the relative responsibility of the Additional Selling Agent (if any) for the circumstances giving rise to the losses, claims, damages, costs, expenses, liabilities or actions for which indemnification is sought. 8.4 Notwithstanding any other provision of this Agreement, indemnification of QAM or its controlling persons by the Partnership shall be permitted only to the extent permitted by the Agreement of Limited Partnership, as amended. 8.5 Any party which proposes to assert the right to be indemnified under this Section 8 will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against an indemnified party under this Section 8, notify each such indemnifying party of the commencement of such action, suit or proceeding but the omission to notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have to any indemnified party under this Section 8 except to the extent, and only to the extent, that such omission was prejudicial to the indemnifying party. In no event shall any such omission relieve an indemnifying party of any liability which it may have to an indemnified party otherwise than under this Section 8. In case any such action, suit or proceeding shall be brought against any indemnified party, and such party shall notify the indemnifying party of the commencement thereof; the indemnifying party shall be entitled to participate therein, and, if it shall wish, individually or jointly with any other indemnifying party, to assume (or have such other party assume) the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election (or the election of such other party) so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses, other than reasonable costs of investigation requested by the indemnifying party (or such other party), subsequently incurred by such indemnified party in connection with the defense thereof. The 9 indemnified party shall have the right to employ its counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of counsel by such indemnified party has been authorized by the indemnifying party (or such other indemnifying party as may have assumed the defense of the action in question), (ii) the indemnified party shall have reasonably concluded that there may be a conflict of interest between the indemnifying party (or such other party) and the indemnified party in the conduct of the defense of such action (in which case the indemnifying party (or such other party) shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying party shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party (subject to possible reimbursement of the indemnifying party by such other party). An indemnifying party shall not be liable for any settlement of any action or claim effected without its consent. In the case of (ii) above, the indemnifying party (or the indemnifying parties, if an indemnified party shall have a claim for indemnification against more than one indemnifying party) shall not be liable for the expenses of more than one separate counsel for each of the following groups: (x) the Additional Selling Agent and any person who controls the Additional Selling Agent within the meaning of Section 15 of the Securities Act, and (y) the Partnership and QAM and any person who controls the Partnership or QAM within the meaning of Section 15 of the Securities Act. 9. MISCELLANEOUS 9.1 This Agreement embodies the entire understanding between the parties hereto in respect of the subject matter hereof and no modification or amendment of any provision of this Agreement shall be effective unless the same shall be reduced to writing and signed by the parties hereto. 9.2 The illegality, invalidity or enforceability of any provision of this Agreement under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. 9.3 In case that single terms of this Agreement are or become inoperative or impracticable, the rest of this Agreement shall remain unaffected thereby. To the extent practicable, any invalid or inoperative terms will be replaced by valid and operative terms, which are closest to the real 10 purpose of the invalid or inoperative terms. 9.4 Any controversy, claim or dispute arising out of or relating to this Agreement shall be referred to arbitration in accordance with the rules of the NASD and judgment upon any award rendered may be entered in any court of competent jurisdiction. 9.5 This Agreement is deemed to have been drafted jointly by the parties, and any uncertainty or ambiguity shall not be construed for or against either party as an attribution of drafting to either party. 9.6 This Agreement may be executed in any one or more counterparts, each of which shall constitute an original, no other counterpart needing to be produced, and all of which, when taken together, shall constitute but one and the same instrument. If this Agreement is signed and transmitted by facsimile machine or electronic mail, the signature of any party on such Agreement transmitted by facsimile or electronic mail shall be considered, and have the same force and effect, as an original document. 9.7 The terms and provisions of this Agreement shall be construed under New York law. Any disputes arising from, or in any way relating to, this Agreement or the subject matter thereof shall be determined under the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. FOR QUADRIGA ASSET MANAGEMENT INC.: FOR THE ADDITIONAL SELLING AGENT: __________________________________ _____________________________________ George Fountas (President) Print name: _________________________ Print title: ________________________ 11 SCHEDULE I REMUNERATION Made on _______________, 200__ between: QUADRIGA ASSET MANAGEMENT INC. 430 PARK AVENUE, SUITE 1501 NEW YORK, NY 10022 and ____________________________ ____________________________ (sometimes hereinafter called the "Additional Selling Agent") This Schedule I is attached to, and made a part of that certain Additional Selling Agent Agreement, of even date herewith, between QAM and the Additional Selling Agent. Any and all defined terms used herein shall have the meaning(s) assigned to them in said agreement. 1. PAYMENT OF REMUNERATION. In consideration of the Additional Selling Agent soliciting and obtaining purchasers of the Units, Quadriga Asset Management, Inc. ("QAM") shall pay the Additional Selling Agent remuneration as follows: a) Initial Commission. For up to twelve months immediately following the sale of any Units, QAM will pay to the Additional Selling Agent a sales commission (the "Initial Commission") equal to the Annual Percentage set forth in Paragraph 2 below. A pro rata portion of the Initial Commission will be paid to the Additional Selling Agent on a monthly basis (i.e., one twelfth of the Initial Commission per month), commencing no later than the 20th calendar day of the month following the month in which an applicable purchase of Units occurs, until the entire Initial Commission is paid in full. 12 b) Service Fees. Provided that the Additional Selling Agent is registered with the CFTC as a futures commission merchant or introducing broker and is a member in good standing of the NFA in such capacity then, in consideration of the provision by the Additional Selling Agent of such ongoing services in connection with the Units sold by the Additional Selling Agent as is required by applicable law or regulation in order to receive a continuing or trailing commission, QAM will pay to the Additional Selling Agent a monthly service fee (the "Service Fee") equal to one twelfth of the Annual Percentage set forth in Paragraph 2 below. Payment of the monthly Service Fee shall commence no later than the 20th calendar day of the month following the month in which the full Initial Commission is paid, but in no event earlier than the thirteenth full month after the sale of applicable Units. The Additional Selling Agent shall forfeit its rights hereunder to receive any Service Fees for the entirety of any month during which it is not duly registered with the CFTC as a futures commission merchant or introducing broker and a member in good standing of NFA. c) Subsequent Commissions: In addition to the Initial Commission, if the Additional Selling Agent is not (i) registered with the CFTC as a futures commission merchant or introducing broker and (ii) a member in good standing of the NFA in such capacity, shall receive additional selling commissions ("Subsequent Commissions") from QAM, paid on the same basis as the Service Fees provided, however, that the total of the Subsequent Commissions plus the Initial Commission and offering costs properly deemed to constitute costs allocable to the Additional Selling Agent (such as a selling brochure, seminar costs and travel expenses) do not exceed 10% of applicable Units' initial sale price. Any such ongoing payments or additional selling commission will be paid by QAM and not by the Partnership, but may be deemed to constitute underwriting compensation. 2. ANNUAL PERCENTAGE. The "Annual Percentage" shall be two percent (2%) of the value of assets raised which the Additional Selling Agent is credited as having sold. The Annual Percentage shall be based solely on amounts actually invested by purchasers of Units procured by the Additional Selling Agent and without taking into consideration any further performance of any such amounts invested. 3. LIMITATIONS ON REMUNERATION. In no event may an Additional Selling Agent be entitled to receive any more than one of the foregoing three methods of remuneration (Initial Commission, Service Fees and Subsequent Commission) for the same month(s) or any other given time period. The Additional Selling Agent shall not be entitled to receive any remuneration for periods of time subsequent to a Purchaser's redemption of Units, or for any 13 period of time on any amounts that a Purchaser does not leave invested with the Partnership. Additionally, payment of remuneration is subject to the rules promulgated by the NASD and other governing regulatory bodies. In the event that the NASD, or any other governing regulatory body, imposes any restriction on any remuneration hereunder, then QAM's obligation to pay such remuneration shall be limited to the extent of any such restriction. Regardless of whether the Additional Selling Agent is registered with the CFTC as a futures commission merchant or introducing broker and is a member in good standing of the NFA in such capacity, in no event shall the Additional Selling Agent be entitled to receive any remuneration under this Agreement unless the Additional Selling Agent is registered with the NASD. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. FOR QUADRIGA ASSET MANAGEMENT INC.: FOR THE ADDITIONAL SELLING AGENT: __________________________________ _____________________________________ George Fountas (President) Print name: _________________________ Print title: ________________________ 14 [QUADRIGA LOGO] QUADRIGA SUPERFUND, L.P. - ADDITIONAL SELLING AGENT AGREEMENT APPENDIX SELLING AGREEMENT DATED__________, 200__ Please provide the following information. 1) Company Legal Name____________________________ 2) Company Address_______________________________________________________ Street (P.O Box not acceptable) City State Zip Code 3) Contact Name____________________________ 4) Phone/Fax________________________ 5) E-mail____________________________ 6) Bank name____________________________ 7) Account Number____________________________ 8) ABA Nr.____________________________ 15 EX-3.02 4 c90749exv3w02.txt CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT NO. 3-02 STATE OF DELAWARE CERTIFICATE OF LIMITED PARTNERSHIP - - THE UNDERSIGNED, desiring to form a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act, 6 Delaware Code, Chapter 17, does hereby certify as follows: - - FIRST: The name of the limited partnership is Quadriga Superfund, L.P. - - SECOND: The address of its registered office in the State of Delaware is 1220 North Market Street, Suite 606 in the city of Wilmington 19801. The name of the Registered Agent at such address is Registered Agents Legal Services, LLC. - - THIRD: The name and mailing address of each general partner is as follows: Quadriga Capital Management, Inc. LeMarquis Complex, Unit 5 P.O. Box 1479 Grand Anse, St. George's, Grenada, West Indies - - FOURTH: The limited partnership shall have two series of interests, Series A and Series B. The debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable only against the assets of such series and not against the assets of the limited partnership generally, or any other series thereof. - - IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership of Quadriga Superfund, L.P. as of April 17, 2002. BY: /s/ CHRISTIAN BAHA ----------------------------------------- Christian Baha, President of Quadriga Capital Management, Inc., general partner STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 05/03/2002 020284389 - 3521636 EX-5.01(A) 5 c90749exv5w01xay.txt OPINION OF HENDERSON & LYMAN EXHIBIT NO. 5.01(a) OPINION OF HENDERSON & LYMAN [HENDERSON & LYMAN LETTERHEAD] January 21, 2005 Quadriga Superfund, L.P. Series A and Series B Le Marquis Complex, Unit 5, P.O. Box 1479 Grand Anse, St. George's Grenada, West Indies RE: RE: QUADRIGA SUPERFUND, L.P. SERIES A AND SERIES B UNITS OF LIMITED PARTNERSHIP INTEREST Ladies and Gentlemen: We refer to the Registration Statement on Form S-1 filed on or about the date hereof by Quadriga Superfund, L.P., a Delaware limited partnership (the "Partnership"), under the Securities Act of 1933 (the "1933 Act"), with the Securities and Exchange Commission, relating to the registration under the 1933 Act of $130,075,165 of Units of Limited Partnership Interest (the "Units"), as the same may be amended from time to time ("Registration Statement"). For purposes of expressing the opinions hereinafter set forth, our examination of documents has been limited to the examination of executed or conformed counterparts, or copies otherwise proved to our satisfaction, of the following: (a) The Certificate of Limited Partnership of the Partnership, dated April 17, 2002 (the "Certificate of Partnership"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State"); (b) The First Amended and Restated Limited Partnership Agreement of the Partnership, dated as of January 15, 2005, attached to the Registration Statement as Exhibit "A"; (c) The Registration Statement; (d) A form of Subscription Agreement and Power of Attorney, including a Subscription Agreement and Power of Attorney Signature Page of the Partnership (the "Subscription Agreement"), attached to the Registration Statement as Exhibit "D"; and (f) A Certificate of Good Standing for the Partnership ("Certificate") obtained from the Delaware Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Registration Statement. For purposes of this opinion, we have not reviewed any documents other than the documents listed above, and we have assumed that there exists no provision in any document not listed above that bears upon or is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own, but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed that (i) all signatures of parties except for the Partnership on documents examined by us are genuine, and (ii) all documents submitted to us as copies conform to the original copies of those documents. For purposes of this opinion, we have assumed (i) the due authorization, execution and delivery by all parties thereto except for the Partnership of all documents examined by us, (ii) that the Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the admission of beneficial owners to, and the creation, operation and termination of, the Partnership and that the Agreement and the Certificate are in full force and effect, have not been amended and no amendment of the Agreement or the Certificate is pending or has been proposed, and (iii) except for the due creation and valid existence in good standing of the Partnership as a business Partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del. Code Section 17-101, et seq.) (the "Act"), the due creation, organization or formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation and the capacity of persons and entities who are parties to the documents examined by us. Insofar as the opinions expressed herein relate to the Units and persons and entities to be admitted to the Partnership as beneficial owners of the Partnership in connection with the Registration Statement (the "Unitholders"), the opinions expressed herein relate solely to the Unitholders and the Units to be issued in connection with the Registration Statement. Based upon the foregoing, and upon our examination of such questions of law and statutes as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Partnership has been duly created and is validly existing in good standing as a limited partnership under the Act. 2. Assuming (i) the due authorization, execution and delivery to the General Partner of a Subscription Agreement by each Unitholder, (ii) the due acceptance by the General Partner of each Subscription Agreement and the due acceptance by the General Partner of the admission of the Unitholders as beneficial owners of the Partnership to the Partnership, (iii) the payment by each Unitholder to the Partnership of the full consideration due from it for the Units subscribed to by it, (iv) that the books and records of the Partnership set forth all information required by the Agreement and the Act, including all information with respect to all persons and entities to be admitted as Unitholders and their contributions to the Partnership, and (v) that the Units are offered and sold as described in the Registration Statement and the Agreement, the Units to be issued to the Unitholders will be validly issued and, subject to the qualifications set forth herein, will be fully paid and nonassessable beneficial interests in the Partnership, as to which the Unitholders, as beneficial owners of the Partnership, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit, subject to the obligation of a Unitholder to make contributions required to be made by it to the Partnership, to make other payments provided for in the Agreement and to repay any funds wrongfully distributed to it from the Partnership. We do not find it necessary for the purposes of this opinion to cover, and accordingly we express no opinion as to, the application of the securities or blue sky laws of the various states (including the state of Delaware) to the sale of the Units. This opinion speaks as of the date hereof, and we assume no obligation to update this opinion as of any future date. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to all references to our firm included in or made a part of the Registration Statement. This opinion shall not be used by any other person for any purpose without our written consent. Very truly yours, HENDERSON & LYMAN EX-5.01(B) 6 c90749exv5w01xby.txt OPINION OF HENDERSON & LYMAN EXHIBIT NUMBER 5.01.(b) OPINION OF HENDERSON & LYMAN [HENDERSON & LYMAN LETTERHEAD] January 21, 2005 Quadriga Superfund, L.P. Series A and Series B Le Marquis Complex, Unit 5, P.O. Box 1479 Grand Anse, St. George's Grenada, West Indies RE: RE: QUADRIGA SUPERFUND, L.P. SERIES A AND SERIES B UNITS OF LIMITED PARTNERSHIP INTEREST Ladies and Gentlemen: We have acted as your counsel in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of Post-Effective Amendment No. 6 to the Registration Statement on Form S-1 on or about the date hereof, as the same may be amended from time to time (the "Registration Statement"), relating to Units of Limited Partnership Interest ("Units") of Quadriga Superfund, L.P. (the "Partnership"), a limited Partnership organized under the Delaware Revised Uniform Limited Partnership Act. We have reviewed such data, documents, questions of law and fact and other matters as we have deemed pertinent for the purpose of this opinion. Based upon the foregoing, we hereby confirm our opinion expressed under the caption "Federal Income Tax Aspects" in the Prospectus (the "Prospectus") constituting a part of the Registration Statement that the Partnership will be taxed as a partnership for federal income tax purposes. We also advise you that in our opinion, the description set forth under the caption " Federal Income Tax Aspects" in the Prospectus correctly describes (subject to the uncertainties referred to therein) the material considerations of the federal income tax treatment to a United States individual taxpayer, as of the date hereof, of an investment in the Partnership. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and all references to our firm included in or made a part of the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Very truly yours, HENDERSON & LYMAN EX-10.01(A) 7 c90749exv10w01xay.txt FORM OF CARGILL INVESTOR SERVICES, INC. CUSTOMER AGREEMENT EXHIBIT NO. 10.01(a) Cargill Investor Services, Inc. [CIS LOGO] FUTURES ACCOUNT AGREEMENT INSTITUTIONAL INTERNATIONAL - --------------------------------------- ----------------------------- Customer Name Customer Account Number In consideration of the agreement of Cargill Investor Services, Inc. ("CIS") to act as broker for the Customer in the purchase or sale of futures (which term shall include contracts relating to immediate or future delivery of commodities, financial futures and options) Customer agrees, in respect to all futures accounts which the Customer now has or may at any future time have with CIS, or its successors, including accounts closed and then reopened, as follows: 1. AUTHORIZATION. Orders for the purchase or sale of futures shall be received and executed with the express intent that actual delivery is contemplated. All transactions shall be subject to the constitution, by-laws, rules, regulations, customs and usages of the exchange or market where executed (and of its clearing house if any) and to any applicable law, rule and regulation, including but not limited to, the provisions of the Commodity Exchange Act, as amended, and the rules and regulations thereunder, and CIS shall have no liability to the Customer as a result of any action taken by CIS to comply with the foregoing. The foregoing provision is intended solely for the protection and benefit of CIS and any failure by CIS to comply with exchange rules, regulations, customs and usages shall not relieve the Customer of any obligations under this agreement nor be construed to create rights hereunder in favor of the Customer. CIS reserves the right to refuse to accept any order. 2. BROKER'S LIEN. To secure any indebtedness or other obligation owed by the Customer to CIS, CIS is hereby granted a lien on all of the Customer's property at any time held by CIS. 3. TRANSFER OF FUNDS. CIS may without notice transfer any money or other property interchangeably between any accounts of the Customer. In the event that at any time the Customer has an account in futures or options which comes under the regulation of the Commodity Futures Trading Commission ("CFTC") and also an account in non-CFTC regulated futures or options, the Customer hereby authorizes CIS, without prior notice to the Customer to transfer from the Customer's regulated Futures Account to its non-regulated account such amount of excess funds as in CIS' judgment may be reasonably required to avoid the calling of margins for such other account. 4. MARGINS. The Customer recognizes that margin deposits are due and must be paid immediately upon entering into positions on futures exchanges and from time to time as market conditions dictate and agrees to make such deposits immediately on demand. CIS shall have the right to set and revise margin requirements. Customer acknowledges CIS' right to limit, with notices to Customer, the number of open positions which Customer may maintain or acquire through CIS. 5. CUSTOMER'S OBLIGATIONS. The Customer agrees to pay promptly on demand any and all sums due to CIS for monies advanced, with interest thereon at 1% over the prime rate. The Customer agrees to pay when due, CIS' charges for commissions at rates established between CIS and the Customer. 6. LIQUIDATION OF POSITIONS. CIS shall have the right, in the event the Customer fails to timely discharge its obligations to CIS, or in the event that a petition in bankruptcy or for the appointment of a receiver is filed by or against the Customer, to sell any or all futures, or other property in any account of the Customer and to buy any or all futures which may be short in any account of the Customer, and to close out and liquidate any and all outstanding contracts of the Customer, and any such sales or purchases may be made at CIS' discretion on any exchange or other market where such business is then usually transacted; it being understood that a prior demand, or call, or prior notice of the time and place of such sale or purchase, if any be given, shall not be considered a waiver of CIS' right to sell or to buy without demand or notice as herein provided. The Customer shall at all times be liable to CIS for the payment of any debit balance owing in the accounts of the Customer with CIS, and shall be liable for any deficiency remaining in any such account in the event of the liquidation thereof in whole or in part, and shall be liable for any reasonable costs of collection including attorney's fees. [CIS LOGO] 7. NOTICES. Any notices and other communications may be transmitted to the Customer at the address, or telephone number given herein, or at such other address or telephone number as the Customer hereafter shall notify CIS in writing. All notices or communications shall be deemed transmitted when telephoned or deposited in the mail, sent via facsimile or computer by CIS. Confirmations, purchase and sale statements and account statements shall be deemed accurate unless written objection is delivered within 10 business days from the date of such notice to CIS, Sears Tower, Suite 2300, 233 S. Wacker Drive, Chicago, Illinois 60606, Facsimile No. (312) 460-4015, Attention: Compliance Officer. 8. COMMUNICATION DELAYS. CIS will not be responsible for delays or failure in the transmission of orders caused by a breakdown of communication facilities or by any other cause beyond CIS' reasonable control. 9. ACKNOWLEDGMENT. The Customer acknowledges that CIS is a wholly-owned subsidiary of Cargill, Incorporated and that the market recommendations of CIS may or may not be consistent with the market position or intentions of Cargill, Incorporated, its subsidiaries and affiliates. The market recommendations of CIS are based upon information believed to be reliable, but CIS cannot and does not guarantee the accuracy or completeness thereof or represent that following such recommendations will eliminate or reduce the risks inherent in trading futures. 10. NOTIFICATION OF RECORDING. CIS is hereby granted permission to record telephone conversations between its employees and the Customer. 11. INDEPENDENT AGENTS. If Customer's account is carried by CIS only as the clearing broker, Customer acknowledges that CIS has no responsibility for the actions of the introducing broker or executing broker. Customer agrees to indemnify and hold CIS harmless, for any actions or omissions of such introducing broker or executing broker. 12. LIMITATION OF ACTIONS. Any action against CIS must be instituted within two years of the action/or inaction giving rise to the alleged claim. 13. BINDING EFFECT. This agreement shall be irrevocable as long as the Customer shall have any account with CIS; it shall be binding upon the Customer and upon the Customer's administrators, and assigns; it can be amended only in writing duly signed by the Customer and an officer of CIS. 14. CUSTOMER REPRESENTATION. Customer represents and warrants that Customer is under no legal disability which would prevent it from trading in futures or entering into this Agreement and that all information contained in the New Account Customer Fact Sheet is true, complete, and correct as of the date hereof. Customer will promptly notify CIS in writing of any changes in such information or any change in circumstances which would affect the representations and information given CIS or which would in any way affect Customer's ability to make any transactions contemplated by this Agreement. 15. EXPIRATION PROCEDURES. At least two business days prior to the first notice day in the case of long positions in futures or forward contracts, and at least two business days prior to the last trading day in the case of short positions in futures or forward contracts or long and short positions in options, Customer agrees to either give CIS instructions to liquidate or make or take delivery under such futures or forward contracts, or to liquidate, exercise or allow the expirations of such options, and will deliver to CIS sufficient funds and/or documents required in connection with exercise or delivery. If such instructions or such funds and/or documents, with regard to option transactions, are not received by CIS prior to the expiration of the option, CIS may allow such option to expire. 16. SECURITIES. THIS STATEMENT IS FURNISHED TO YOU BECAUSE RULE 190.10(c) OF THE COMMODITY FUTURES TRADING COMMISSION REQUIRES IT FOR REASONS OF FAIR NOTICE UNRELATED TO THIS COMPANY'S CURRENT FINANCIAL CONDITION: (1) YOU SHOULD KNOW THAT IN THE UNLIKELY EVENT OF THIS COMPANY'S BANKRUPTCY, PROPERTY, INCLUDING PROPERTY SPECIFICALLY TRACEABLE TO YOU, WILL BE RETURNED, TRANSFERRED OR DISTRIBUTED TO YOU, OR ON YOUR BEHALF, ONLY TO THE EXTENT OF YOUR PRO RATA SHARE OF ALL PROPERTY AVAILABLE FOR DISTRIBUTION TO CUSTOMERS. (2) NOTICE CONCERNING THE TERMS FOR THE RETURN OF SPECIFICALLY IDENTIFIABLE PROPERTY WILL BE BY PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION. (3) THE COMMISSION'S REGULATION CONCERNING BANKRUPTCY OF COMMODITY BROKERS CAN BE FOUND AT 17 CODE OF FEDERAL REGULATIONS PART 190. 17. JURISDICTION. The Customer understands that this contract will not be binding on CIS until accepted and approved by one of its authorized officers at its headquarters in Chicago, Illinois, U.S.A. ACCORDINGLY, THE CUSTOMER HEREBY ACKNOWLEDGES AND AGREES THAT THE FORMATION OF THIS CONTRACT CONSTITUTES THE MAKING OF A CONTRACT WITHIN THE STATE OF ILLINOIS, FURTHER AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS WITH RESPECT TO ALL DISPUTES ARISING OUT OF THIS CONTRACT, WAIVES ANY AND ALL OBJECTIONS TO PERSONAL JURISDICTION WITHIN THE STATE OF ILLINOIS, AND AGREES THAT PROCESS MAY BE SERVED ON THE CUSTOMER IN ANY SUCH PROCEEDING IN ACCORDANCE WITH THE PROVISIONS OF THE LAWS OF ILLINOIS WITH RESPECT TO SERVICE OF PROCESS OF NON-RESIDENTS. THIS AGREEMENT IS MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, U.S.A., IN ALL RESPECTS, INCLUDING CONSTRUCTION AND PERFORMANCE THE UNDERSIGNED UNDERSTANDS AND ACCEPTS THAT AS A U.S. COMPANY, CIS IS SUBJECT TO THE JURISDICTION AND POWERS (INCLUDING COMPULSORY DISCLOSURE OF DOCUMENTS SUCH AS BUT NOT LIMITED TO, CUSTOMER ACCOUNT RECORDS) OF U.S. COURTS AND GOVERNMENT AGENCIES. 18. RESPONSIBILITY OF AGENTS. If applicable, the CIS agents and representatives who are not domiciled in the U.S. shall be in no manner held responsible for the performance by CIS of its obligations under this Agreement. 19. REGULATION 15.05. Pursuant to regulation 15.05 of the Commodity Futures Trading Commission, CIS is deemed to be agent of the Customer for purposes of accepting delivery and service of any communication issued by or on behalf of the Commission to the Customer with respect to any futures contracts which are or have been maintained in any accounts with CIS. If the Customer is a foreign broker CIS shall also be deemed the agent of its Customers for the above purpose. CIS shall transmit any such communications promptly to the Customer. This section shall not apply if the Customer has furnished CIS with a copy of a written agency agreement in compliance with regulation 15.05(D). 20. REGULATION 21.03. The Customer has read and understood the provisions of regulation 21.03 of the Commodity Futures Trading Commission as provided in this document package. 21. GIVE-UP PROCEDURES. The executing brokers shown on the list delivered to CIS will execute orders for Customer as transmitted by Customer or its Agent to the executing broker, and will report a fill to Customer in a timely fashion. CIS, if it has given prior written notice to the executing broker, may place limits on the positions it will accept for give-up for the Customer's account. Executing broker will bill commissions for executing trades to CIS, in the amount agreed from time to time, on a monthly basis. CIS shall be responsible for verifying billing and making payment. CIS shall charge the commissions to Customer's Account. 22. LONDON METALS EXCHANGE TRADING. The London Metals Exchange Limited ("LME") is a principal-to-principal market. Cargill Investor Services Limited ("CISL"), is a dealing member of the LME and has appointed CIS as its agent for the purpose of issuing LME Client Contracts and for buying, selling and trading, and all actions consequent to trading in LME contracts on CISL's behalf. The Customer's contractual counterparty is CISL. Any issues or questions relating to LME Client Contracts should be addressed to CIS who will forward them to CISL. 23. INTERPRETATION. The section headings are for convenience of reference only and shall not affect the meaning or construction of any provision of this agreement. EX-10.01(B) 8 c90749exv10w01xby.txt FORM OF ADM INVESTOR SERVICES, INC. CUSTOMER AGREEMENT EXHIBIT NO. 10.01(b) ADM Investor Services, Inc. CUSTOMER AGREEMENT To: ADM Investor Services, Inc. 141 West Jackson Blvd. Chicago, IL 60604 Gentlemen: In consideration of the acceptance by ADM Investor Services, Inc. ("ADMIS") acting as broker, of one or more accounts of the undersigned ("Customer") for the purchase or sale of commodity futures, commodity options, forward contracts, foreign exchange, physical or cash commodities, and exchange for physical ("EFP") transactions (Collectively "contracts") it is agreed as follows: 1. Customer acknowledges the following: (a) The purchase and sale of commodity futures contracts, exchange-traded and dealer options (commodity options) is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits or of the entire option cost. Customer understands that because of the low margin normally required in commodity futures trading, price changes in commodity futures contracts may result in significant Customer losses, which losses may substantially exceed Customer's margin deposits and any other deposits he may make. Customer also acknowledges that he has received, has read and understands this agreement. (b) Customer authorizes ADMIS to execute such transactions for the Customer's account and exercise commodity options for Customer's account in accordance with Customer's oral or written instructions. ADMIS shall have the right to refuse to accept any orders. ADMIS shall also have the right to tape record all telephone conversations with customer. (c) Customer understands that ADMIS or its affiliates will at times act as principal in regard to cash, forward, or foreign exchange transactions. (d) ADMIS shall not be responsible to Customer in any case for a floor brokers' liability to execute orders, or for error or negligence on the part of floor brokers who are not employees of ADMIS. Furthermore, ADMIS is not obligated to quote a price for any principal transaction. (e) The Customer acknowledges that the execution of a futures contract always anticipates making or accepting delivery. Customer hereby authorizes ADMIS to take all action deemed necessary by ADMIS in the event ADMIS takes physical delivery for customer and customer hereby agrees to indemnity ADMIS from all costs associated therewith, ADMIS may, in its sole discretion, liquidate any short position in Customer's account if Customer has not delivered to ADMIS certificates, receipts, or other appropriate instruments of delivery at least seven days prior to the last trading day of the futures contract. (f) Customer acknowledges the right of ADMIS to limit, without notice to Customer, the number of open positions which Customer may maintain or acquire through ADMIS. 2. Customer shall deposit with ADMIS (1) the applicable initial and maintenance requirements; pay interest, commission charges in effect from time to time, (which commissions may be shared by more than one of customers agents) and other costs to ADMIS occasioned by carrying the account of the customers; (2) deposit the amount of any deficit balance that may result from transactions executed by ADMIS for Customer's account, and (3) pay the interest and service charges on any Customer deficit balances at the rates customarily charged by ADMIS together with ADMIS's cost and attorney's fees incurred in collecting any such deficit or defending claims brought by Customer in which ADMIS is the prevailing party. 3. Customer understands and acknowledges that ADMIS, acts as agent for all transactions which are executed on commodity futures exchanges and among other requirements, is financially liable to the exchange clearing houses of which it is a member and to the clearing members through which it clears transactions on exchanges of which it is not a clearing member, for deficit balances occurring in the Customer's accounts; because of this, ADMIS is the guarantor of the financial responsibility of the Customer. Therefore, Customer agrees to hold ADMIS harmless with respect to any and all losses sustained by ADMIS resulting from deficit balances which may occur in the Customer's account. 4. Customer shall, without notice or demand from ADMIS, at all times, maintain adequate margins, so as continually to meet the margin requirements established by ADMIS. Such margin requirements established by ADMIS, in its sole and absolute discretion, may exceed the margin requirements set by any commodity exchange, or other regulatory authority. Customer agrees, when required, to wire transfer margins to ADMIS or any monies so required, and to furnish ADMIS with names of bank officers for immediate verification of such transfers. 5. If, at any time, Customer's account does not contain the amount of margin required by ADMIS, or by any exchange, clearing house or other regulatory authority, ADMIS may, at its sole and absolute discretion, at any time or from time to time, without notice to Customer, close out Customer's open positions in whole or in part or take any other action it deems necessary to satisfy such requirements, including, but not necessarily limited to, transferring funds from other accounts of customer including transfers between CFTC Segregated and other accounts. Failure of ADMIS to so act in such circumstance, in whole or in part, shall not constitute a waiver of its rights so to do any time or from time to time thereafter, nor shall ADMIS be subject to any liability to Customer for its failure so to act. In addition, ADMIS has the right, but not the obligation, to liquidate the account(s) upon receipt of notice of the death of customer (if applicable). 6. All monies, securities negotiable instruments, forward contracts, foreign exchange contracts, physical or cash contracts, commodity options, open position in futures contracts and commodities, or other property now or at any future time in Customer's account, or held by ADMIS or its affiliates for Customer, are hereby pledged with ADMIS, and shall be subject to a security interest in ADMIS's favor to secure any indebtedness, at any time, owing from Customer to ADMIS without regard to whether or not ADMIS or its affiliates has made advances with respect to such property. Customer will not cause or allow any of the property held in his accounts to be subject to any other liens, security interests, mortgages or other encumbrances without the express written approval of ADMIS. 7. Customer understands that obligations arising out of transactions denominated and/or paid for in currencies other than U.S. Dollars may be converted to U.S. Dollars at the discretion of ADMIS at an exchange rate determined by ADMIS at its discretion based on prevailing market rates and customer will be required to pay ADMIS in U.S. Dollars. 8. Customer acknowledges that: (1) any market recommendations and information communicated to Customer by ADMIS do not constitute an offer to sell, or the solicitation of an offer to buy any commodity, or any commodity futures contract; (2) such recommendations and information, although based upon information obtained from sources believed by ADMIS to be reliable, may be incomplete and may not be verified; and (3) ADMIS makes no representation, warranty or guarantee as to, and shall be responsible for, the accuracy or completeness of any information or trading recommendation furnished to Customer. Customer understands that ADMIS and/or its officers, directors, affiliates, stockholders or representatives may have a position or positions in and may intend to buy or sell commodities or commodity futures contracts, which are the subject 7 (continued on next page) of market recommendations furnished to Customer, and that the position or positions of ADMIS or any such officer, director, affiliate, stockholder, or representative may or may not be consistent with the recommendations furnished to Customer by ADMIS. 9. All transactions by ADMIS on Customer's behalf shall be subject to the applicable constitution, rules, regulations, customs, usages, rulings, and interpretations of the exchanges or markets on which such transactions are executed by ADMIS or its agents for Customer's account (such as the Board of Trade of the City of Chicago, The Chicago Mercantile Exchange, and the MidAmerica Commodity Exchange and the clearing houses affiliated with each, if any) and to all applicable governmental acts and statutes (such as the Commodity Exchange Act of the Commodity Futures Trading Commission Act of 1974) and to rules and regulations made thereunder; ADMIS shall not be liable to Customer as a result of any action taken by ADMIS, or its agents, to comply with any such constitution, rule, regulation, custom, usage, ruling, interpretation, act or statue. If Customer is subject to regulation, Customer agrees that ADMIS has no duty to ascertain or ensure that Customer is in compliance with any governing statutes or rules. 10. If, at any time, Customer shall be unable to deliver to ADMIS any security, commodity or other property previously bought or sold by ADMIS on Customer's behalf, Customer authorizes ADMIS, in its discretion, to borrow or to buy any security, commodity, or other property necessary to make delivery thereof, and Customer shall pay and indemnify ADMIS for any cost, loss, and damage (including consequential costs, losses and damages) which ADM may sustain thereby and any premiums which ADMIS may be required to pay thereon, and for any cost, loss and damage (including consequential costs, losses, and damages) which ADMIS may sustain thereby and any premiums which ADMIS may be required to pay thereon, and for any cost, loss and damage (including consequential costs, losses and damages) which ADMIS may sustain from its inability to borrow or buy any such security, commodity or other property. 11. Customer acknowledges and agrees that ADMIS shall not be responsible to Customer for any losses resulting from conduct or advice (including but not limited to errors and negligence) on the part of any broker/dealer, futures commission merchant, introducing broker, commodity trading advisor, or any other person or entity introducing Customer to ADMIS or having trading authority over the account of Customer at ADMIS. Customer specifically agrees that ADMIS shall have no obligation to supervise the activities of any such person or entity and Customer will indemnify ADMIS and hold ADMIS harmless from and against all losses, liabilities, and damages (including attorney's fees) incurred by ADMIS as a result of any actions taken or not taken by such person or entity. 12. Customer authorizes ADMIS to contact such banks, financial institutions, credit agencies, and other references as ADMIS shall deem appropriate from time to time verify the information regarding Customer which may be provided by Customer. Customer understands that an investigation may be made pertaining to his personal and business credit standing and that Customer may make a written request within a reasonable period of time for complete and accurate disclosure of its nature and scope. 13. ADMIS shall not be responsible for delays in the execution of orders due to breakdown, or failure of transmission, or communication facilities, or to any other cause beyond ADMIS's control. 14. Confirmation of trades, contracts statements of account, margin calls, and any other notices sent by ADMIS to Customer shall be sent to the address shown in and to the attention of the person(s) named in the "Commodity Agreement" and they shall be conclusively deemed accurate and complete, if not objected to, in writing, prior to the opening of trading on the contract market on which such transaction occurred on the next business day following the day on which such communication was first received. The price at which an order is executed shall be binding notwithstanding the fact an erroneous report is made. An order which was executed but in error reported as not executed shall be binding. Customer shall direct all objections to ADM Investor Services, Inc., 141 West Jackson Boulevard, Suite #1600A, Chicago, Illinois 60604, Phone No. (312) 435-7000. 15. All transactions for or on Customer's behalf shall be deemed to be included in a single account whether or not such transactions are segregated on ADMIS's records into separate accounts, either severally or jointly with others, for purposes including reportable positions as required by regulatory authorities. 16. The Agreement, including all authorizations, shall insure to the benefit of ADMIS, its successors and assigns and shall be binding upon Customer and Customer's personal representatives, executors, trustees, administrators, agents, successors, and assigns. In the event that Customer's financial condition becomes unsatisfactory to ADMIS, in its sole discretion, or that a petition, voluntary or involuntary, in bankruptcy to reorganize, or to effect a composition or extension, is filed by or against Customer, or in the event a receiver is appointed of Customer's property or business in any proceeding whatsoever, state or federal, or in the event of Customer's legal incapacity or death (and whenever the Customer consists of more than one person, then upon the occurrence or any of the aforementioned contingencies to any of them), ADMIS may, at its sole and absolute discretion, either continue to carry or close and liquidate the account of Customer, including the covering of short positions, exercise of options or offset of forward contracts and foreign exchange contracts subject to no liability to the personal representatives, executors, trustee, administrators, agents, successors or assigns of Customer for the use of such discretion. 17. The rights and remedies conferred upon the parties hereto shall be cumulative, and the exercise or waiver of any thereof shall not preclude or inhibit the exercise of additional rights or remedies. 18. Customer agrees that ADMIS may, from time to time, change the account number assigned to any account covered by this Agreement, and that this Agreement shall remain in full force and effect. Customer agrees further that this account, as well as all additional accounts opened by him at ADMIS, shall be covered by this same Agreement with the exception of any new account for which a new Customer Agreement is signed. 19. All actions or proceedings arising directly, indirectly or otherwise in connection with, out of, related to, or from this Agreement or any transaction covered hereby shall be governed by the law of Illinois and may, at the discretion and election of ADMIS, be litigated in courts whose situs in within Illinois. 20. Customer represents that (1) he/she is (or, if Customer is a corporation, that each officer and director is, if Customer is a partnership, that each partner is) an adult of sound mind and is under no legal disability which would prevent him/her form trading in commodities, commodity futures contracts, options contracts, forward contracts, foreign exchange or other physical or cash contracts therein or entering into this Agreement; (2) he/she is (or its officers and directors or its partners are) authorized to enter into this Agreement. Name (Print)______________________ Name (Print)_______________________ X Name (Signature)__________________ X Name (Signature)___________________ Customer/Officer/Partner Customer/Officer/Partner Date_______________ Date_______________ 8 EX-10.01(C) 9 c90749exv10w01xcy.txt FORM OF FIMAT USA, INC. CUSTOMER AGREEMENT Exhibit No. 10.01(c) Fimat USA, Inc. CUSTOMER AGREEMENT In consideration of the acceptance by FIMAT USA, Inc. ("FIMAT") of one or more accounts (the "Account(s)") of the undersigned ("Customer"), and of FIMAT acting as broker for Customer, the Customer agrees as follows: I. RISKS AND AUTHORITY A. RISKS OF COMMODITY TRADING. In addition to the Commodity Futures Trading Commission ("CFTC") mandated Risk Disclosure Statement attached hereto, Customer understands that (i) Customer may be trading in commodity futures contracts, options on commodity futures contracts, foreign futures contracts and options on foreign futures contracts (collectively, "Commodity Futures Contracts"), securities and securities options (collectively, "Securities"), derivative instruments, spot and forward contracts, physical commodities, cash and other properties and options thereon (collectively, "Other Account Instruments") and/or currencies and foreign exchange contracts and options thereon ("Forex," and together with Commodity Futures Contracts, Securities, Other Account Instruments and Forex being herein collectively defined as "Commodities"), and such trading is highly speculative, (ii) prices are subject to sharp upward and downward movements, (iii) price fluctuations may result in losses which substantially exceed the capital in Customer's Account(s), (iv) on trading days on which the subject of Customer's trading reaches its permissible exchange price limit, trading may cease, as a result of which Customer may be locked into substantial losses, and (v) in transactions on exchanges on which foreign currency is used, any profit or loss may be affected by exchange rate fluctuations. Customer is willing and able, financially and otherwise, to assume the risks of such trading. Customer recognizes that assurance of profit or freedom from loss is impossible to guaranty. Customer has received no assurance and will place no orders in reliance on any such assurance or similar representations. Customer understands that FIMAT may without notice to Customer exercise any of the remedies listed in Sections III.O and IV hereof if Customer fails to maintain adequate margin or if any other event of default occurs. Customer agrees to review carefully each confirmation statement FIMAT sends Customer and notify FIMAT immediately in accordance with Section III.F hereof. B. FIMAT'S AUTHORITY AND RESPONSIBILITY. Customer authorizes FIMAT to purchase and sell Commodities, as agent for Customer's Account(s) in accordance with the oral or written instructions of Customer or persons authorized in writing to act, or persons reasonably believed by FIMAT to be acting, on Customer's behalf. Unless Customer specifies to the contrary, FIMAT is authorized to execute all orders on any exchange or other market where such business is conducted which may be deemed by FIMAT, in its sole discretion, to be appropriate. Customer hereby waives any defense that any such instruction was not in writing, as may be required by any law, rule or regulation. FIMAT agrees to provide the services contemplated hereunder in any commercially reasonable manner. Customer authorizes FIMAT or its agents to investigate Customer's credit standing and in connection therewith to contact such banks (including, without limitation, any of FIMAT's Affiliates, such as Societe Generale), financial institutions and credit agencies, as FIMAT shall deem appropriate to verify information regarding Customer. Customer authorizes FIMAT, in its sole discretion, to provide and/or exchange any financial information with respect to Customer with any of FIMAT's Affiliates. C. INTRODUCED ACCOUNTS (ONLY IF APPLICABLE). Customer understands that Customer's Account(s) with FIMAT was introduced to FIMAT by an Intermediary (as defined in Section II.F below), and that, except for companies which are members of the FIMAT Group, the Intermediary is an independent business entity which is not in any way affiliated with or an agent of FIMAT. Customer hereby authorizes FIMAT to accept all orders and instructions from its Intermediary and hereby ratifies all orders and instructions which FIMAT believes in good faith to have been transmitted by its Intermediary on Customer's behalf, which FIMAT is authorized to act upon. If Customer is dealing with an Intermediary, make all checks payable to, and wire all funds directly to "FIMAT USA, Inc." FIMAT INTERMEDIARIES DO NOT HANDLE CUSTOMER FUNDS, EXCEPT TO FORWARD TO FIMAT CHECKS MADE OUT TO FIMAT. D. Customer Representations and Warranties. Except as disclosed in writing to FIMAT prior to execution an( delivery of this Agreement or in a subsequent written notice from Customer to FIMAT, Customer represents an( warrants as follows: (1) Customer is not (a) a general partner, officer, director, more than ten percent owner correspondent, agent (or person associated with an agent), associated person, or employee of a futures commission merchant, commodity trading advisor, commodity pool operator, or an introducing broker, (b) a relative, spouse, o: relative of a spouse of any of the foregoing persons who shares the same home with any such person, (c) a member of an exchange or a director or employee of an exchange, bank, trust company, insurance company, or regulator or self-regulatory organization, or (d) engaged individually or as an employee in the business of dealing, as broke or principal, in Commodities other items, documents of title relating to Commodities, bills of exchange -7- acceptances, or other forms of commercial paper, and if Customer becomes so employed or engaged Customer will promptly notify FIMAT in writing; (2) Customer, if applicable, (a) is duly organized and in good standing under the laws of the jurisdiction in which it was organized and in all jurisdictions where it is qualified to do business; (b), has the requisite capacity, power and authority to execute, deliver and perform its obligations under this Agreement and such Other Agreement, including without limitation, the granting of any security interests in the Collateral as contemplated hereby and thereby; (c) none of the execution, delivery or performance by Customer of its obligations under this Agreement or such Other Agreement conflict with the provisions of any material contract, agreement or instrument binding upon you or your properties, or the provisions of any law, statute, rule, regulation or decree, order or determination of any court of law applicable to Customer; and (d) no consent, authorization, permit or filing is required in connection with the execution, delivery and performance by Customer of this Agreement or such Other Agreement, except those that have been obtained or made and filings necessary to create, perfect and retain any security interest in, or lien upon, any Collateral for any of Customer's obligations to FIMAT; (3) Customer, if an individual, is of sound mind, legal age and legal competence; (4) no person other than Customer has or will have an interest in Customer's Account(s) except as otherwise disclosed in writing to FIMAT and (5) all the information provided in the Customer Application is true, correct and complete as of the date hereof and that Customer will promptly notify FIMAT of any material changes in such information. E. CUSTOMER IS PRINCIPAL. Unless Customer has advised FIMAT in writing otherwise prior to execution and delivery of this Agreement, Customer is acting for Customer's Account(s) as principal and not as agent in transactions under this Agreement. Customer will give written notice to FIMAT before granting any person or entity any interest in Customer's Account(s) or undertaking to act as agent for any party with respect to Customer's Account(s). II. DEFINITIONS (As used in the singular or plural) A. AFFILIATE. "Affiliate" includes Societe Generale, FIMAT International Banque, SA and any of their affiliates or subsidiaries. B. AGREED BY FIMAT. "Agreed by FIMAT" means an agreement in writing under the hand of a person whose name and signature at the material time appear on a list of authorized signatories maintained by FIMAT at its offices. A copy of the list is available for inspection upon reasonable notice at FIMAT's offices during usual business hours. C. APPLICABLE LAW. "Applicable Law" shall have the meaning set forth in Section III.A.3 below. D. COLLATERAL. "Collateral" means all of Customer's right, title and interest in and to all goods and other property, including without limitation, Commodities, the Account(s), inventory, documents, accounts, general intangibles, chattel paper and all proceeds of such property including but not limited to interest on or profits from the Account(s). Any property en route to or allocated by any third party to FIMAT and/or any Affiliate shall be deemed "Collateral" for purposes of this Agreement. E. COMMODITY EXCHANGE. "Commodity Exchange" means any exchange, association, contract market or clearing association, whether incorporated or unincorporated, or persons who are engaged in the business of buying or selling any commodity or receiving the same for sale on consignment. F. INTERMEDIARY. "Intermediary" includes an introducing broker, fully disclosed futures commission merchant, foreign broker, or any other person or entity acting in a similar capacity. G. LIABILITY. "Liability" means all Customer's obligations direct or indirect to FIMAT or its Affiliates of whatever form and however arising, including any indebtedness now or hereafter existing under this Agreement or any Other Agreement or any debit balances in the Account(s). H. OTHER AGREEMENT. "Other Agreement" means any and all agreements, documents and instruments (including, without limitation, promissory note(s), security agreement(s), pledge agreement(s) and guaranty(s)) executed by or on behalf of Customer in favor of FIMAT and/or an Affiliate, as such agreements, documents and instruments may be amended, supplemented or otherwise modified. from time to time in accordance with their respective terms. -8- III. TERMS OF TRANSACTIONS A. APPLICABLE RULES AND TERMS. The Account(s) and all transactions and agreements in respect of the Account(s) shall be subject to: 1. the terms of this Agreement and any other terms Agreed by FIMAT and Customer; 2. FIMAT's terms from time to time in effect with respect to the specific type of transaction and the terms of FIMAT's confirmation of the transaction, except to the extent specifically inconsistent with Subsection III.A.1 above; 3. the regulations of all applicable Federal, state and self-regulatory agencies or authorities, including but not limited to: (i) the provisions of the Commodity Exchange Act, as amended, and any rules, regulations, orders and interpretations promulgated thereunder by the CFTC; and (ii) the constitution, by laws, rules, regulations, orders and interpretations of the Commodity Exchange (and its clearing house, if any) on which such transactions are executed and cleared, and any relevant registered futures association, including, without limitation, the National Futures Association ("NFA"), except to the extent Subsections III.A.1 or III.A.2 above provide more specific restrictions. All such provisions, rules, regulations, orders, interpretations, constitution, by-laws, custom and usage are hereinafter collectively referred to as "Applicable Law;" and 4. customary practice in the trade, except to the extent specifically inconsistent with Subsections III.A.1, III.A.2, or III.A.3 above. B. MARGIN. Customer will pay to FIMAT (and only to FIMAT) all amounts FIMAT requires as margin or to satisfy any other of Customer's obligations under this Agreement in U.S. Dollars in immediately available funds, unless otherwise agreed, as FIMAT requires. FIMAT at any time may change the margin requirements with respect to Customer's Account(s) for existing positions as well as for new positions. The required margin may exceed the margin required by the Commodity Exchange (and its clearing house, if any) on which trades are cleared on behalf of Customer. FIMAT HAS NO OBLIGATION TO NOTIFY CUSTOMER OF ANY INSUFFICIENCY OF MARGIN IN CUSTOMER'S ACCOUNT(S) PRIOR TO EXERCISING RIGHTS AND REMEDIES UNDER SECTION IV OF THIS AGREEMENT. C. FEES AND COMMISSIONS. Customer will pay the fees and commissions FIMAT charges from time to time. FIMAT may share its fees, commissions and amounts accruing on Customer's Account(s) with persons that introduce Customer to FIMAT or provide other services to FIMAT. D. INTEREST. If Customer fails to pay FIMAT in immediately available funds any sum when due, then unless otherwise provided in any, Other Agreement, Customer will pay interest to FIMAT on the unpaid sum, while outstanding, at the lesser of (i) the maximum legal rate or (ii) 150% of the publicly announced prime lending rate of Societe Generale New York Branch as in effect from time to time while the unpaid sum is outstanding, compounded monthly. Customer acknowledges that FIMAT may receive and retain as its own any increment or interest accruing from any of the funds FIMAT receives from Customer. E. NO STANDARD REQUIREMENT. FIMAT has no obligation to impose uniform margin requirements, to publish details of fees or commissions, or to charge uniform fees, commissions or interest rates. F. CONFIRMATIONS AND STATEMENTS. FIMAT will promptly confirm in writing all transactions undertaken for Customer's Account(s). Customer shall timely review all confirmations received from FIMAT to check that the description of the transactions is accurate and that no transaction is omitted. Customer is conclusively bound by FIMAT's confirmations and statements of Customer's Account(s) if Customer does not object in writing before the earlier of ten days following transmission to Customer or by market opening on the day following Customer's actual receipt of such confirmation statements. With respect to transactions which Customer authorizes but for which no confirmation is received, Customer shall be deemed to have waived all objections unless FIMAT has received Customer's written request for a copy of the confirmation within five days of the transaction date. Customer understands that Customer should direct inquiries to FIMAT at 630 Fifth Avenue, Suite 500, New York, New York 10111, Attention: Compliance Department, or such other address as FIMAT may hereafter provide Customer. For the reporting of any alleged unauthorized trades or other trade improprieties, FIMAT authorizes and will accept "collect" telephone calls to the Compliance Department at (212) 504-7446. FIMAT is not bound by prices or transactions reported in error on confirmations and statements of Customer's Account(s). -9- Customer hereby authorizes FIMAT to transmit to it all confirmation and other statements of account activity, funds and positions by facsimile transmission or through the Internet to such address as Customer designates on the Customer Application, or as Customer designates from time in a writing addressed to the Compliance Department, as set forth in this paragraph. FIMAT reserves the right to assess its standard charge from time to time in effect for confirmation and other statements of account activity, funds and positions provided to customer through any other medium, as well as for duplicate statements of any kind. This authorization shall be; perpetual, unless revoked in writing by Customer in a writing addressed to the Compliance Department, as set forth in this paragraph. G. CAPACITY OF FIMAT; FLOOR BROKERS AND OTHERS; INDEMNIFICATION. FIMAT will execute Customer's; transactions solely as agent of Customer. In executing transactions on a Commodity Exchange, FIMAT may utilize floor brokers (who may be employees or other agents of FIMAT), and will be responsible for reasonable care in the selection of such brokers, but will not be responsible to Customer for negligence or misconduct of an independent floor broker if, at the time the floor broker was selected, the floor broker was authorized to act as suck under the rules of the relevant Commodity Exchange and the appropriate regulatory agency. FIMAT will not be responsible to Customer in the event of error, failure, negligence, or misconduct on the part of any Intermediary, commodity trading advisor, or other person acting on Customer's behalf and, without limiting the foregoing, FIMAT has no obligation to investigate the facts surrounding any transaction in Customer's Account(s) which is introduced by such Intermediary, commodity trading advisor, or other person. Customer will indemnify FIMAT and hold it harmless from and against any and all liabilities, penalties, losses, and expenses, including legal expenses, incurred by FIMAT as a result of any error, failure, negligence, or misconduct on the part of any such Intermediary, commodity trading advisor, or other person acting on Customer's behalf. FIMAT shall not responsible for any loss or damage caused, directly or indirectly, from any delays or inaccuracies in the transmission of orders, including but not limited to our automated order routing systems, or other information d to a breakdown in or. failure of any transmission or communication facilities for any reason including those reasons described in Section V.D. hereof. FIMAT shall only be liable for actions or inactions by FIMAT which amount to gross negligence or fraud. Customer also agrees that FIMAT shall not be liable to Customer for any losses, costs; expenses, or other damages sustained by Customer in the event of any failure or delay by any exchange, market, clearing house, bank or other depository institution where any of Customer's funds or other assets are maintained; or a failure or delay by any member, bank or agent of any of the foregoing, or a failure or delay by any of the foregoing to enforce its rules, to fulfill its obligations, or to make any payment, for any reason whatsoever. Customer waives any claim, cause of action or right as against FIMAT, its employees or agents which may arise or occur as a result thereof. H. Transaction Limits; Acceptance of Orders. FIMAT, solely for its own benefit and the benefit of other customers, may limit the number of transactions FIMAT executes, and the open positions FIMAT maintains or acquires, for Customer. Customer, acting alone or in concert with others, will not make any trade through FIMAT which would have the effect of exceeding the lower of limits imposed by FIMAT, the Commodity Exchange on which the transactions are executed, or any regulatory agency. If Customer exceeds its limit, FIMAT may require. the transfer of Customer's positions to another firm, or FIMAT may liquidate some or all of the Customer's positions as FIMAT elects in its sole discretion. Customer agrees to promptly advise FIMAT if Customer is required to file reports of its positions to the CFTC or any Commodity Exchange. I. Liquidation of Offsetting Positions. FIMAT shall liquidate any contract for which an offsetting order is entered by Customer on a first in, first out ("FIFO") basis, unless Customer instructs FIMAT not to liquidate such contract and to maintain the offsetting contracts as open positions; provided, that FIMAT shall not be obligated to comply with any such instructions given by Customer if Customer fails to provide FIMAT with any representations, documentation or information reasonably requested by FIMAT or if in FIMAT's reasonable judgment, any failure, to liquidate such offsetting contracts against each other on a FIFO basis would result in a violation of Applicable Law. J. Separate Accounts. Pursuant to CFTC Rule 1.46(e)(1), if FIMAT maintains or directs the trading for more than one account for Customer then, if held open, offsetting long and short positions in the separate accounts may result in the charging of additional fees and commissions and the payment of additional margin, although offsetting positions will result in no additional market gain or loss. K. Failure of Delivery. At least five business days prior to the earlier of first notice or last trading day of the delivery month, Customer must advise FIMAT whether Customer intends to take or make delivery, as the case may be, of items purchased and sold by FIMAT at Customer's direction, and, if delivery is intended, Customer must demonstrate to FIMAT's satisfaction Customer's ability to perform Customer's delivery obligations, in any manner required by FIMAT including, without limitation, by depositing with FIMAT the funds or documents necessary for -10- delivery. If Customer fails to so advise FIMAT or to demonstrate satisfactorily Customer's ability to perform, then without notice or demand to Customer, FIMAT may, but shall have no duty to, liquidate such positions on terms FIMAT deems reasonable, or take any other action FIMAT deems reasonable, including taking or making delivery as the case may be. If Customer fails to supply FIMAT, in a timely manner, with any item FIMAT has sold Customer's direction, FIMAT may borrow or purchase the item from any party, including an Affiliate, to make the delivery. FIMAT has no duty to borrow or purchase the item. Customer shall comply fully with Applicable Laws relating to taking or making any delivery, and shall, if taking delivery, take all steps as provided thereunder ensure that all items to be delivered are in compliance with Applicable Law. Customer will hold harmless and indemnify FIMAT for all liabilities, penalties, losses, and expenses, including any legal expenses and any penalty imposed by any Commodity Exchange, FIMAT incurs or reasonably anticipates incurring if Customer fails timely (1) to take good delivery of any item FIMAT has purchased at Customer's direction, (2) to supply FIMAT with or otherwise make good delivery of any item FIMAT has sold at Customer's direction, or otherwise, in connection with a delivery, or (3) to comply with Applicable Law, and FIMAT may in the event of any such failure, apparent failure, or otherwise withhold from Customer's Account(s) with FIMAT or any Affiliates the amount (however denominated) estimated by FIMAT as sufficient to satisfy the above indemnity, for application as FIMAT deems appropriate. L. FORWARDING AND STORAGE OF MATERIAL. If FIMAT on Customer's behalf arranges for packaging, shipping storage, or insurance, FIMAT's only liability will be for gross negligence or willful misconduct in the making of the arrangements. M. REIMBURSEMENT FOR TAXES, ETC. Customer will indemnify FIMAT for all taxes, levies, imposts, duties, charges and fees (including legal expenses) incurred in connection with any sale, purchase, forwarding or storage. N. PAYMENT. Customer's payments must be in freely transferable and immediately available funds to FIMAT account at a bank designated by FIMAT and without deduction for any taxes, imposts, duties, charges, or fees, free and clear of any withholding, restrictions, or conditions of any nature when received by FIMAT. Payment may not be effected by the delivery of bank notes or other legal tender unless Agreed by FIMAT. FIMAT may withhold any delivery until it receives payment in the foregoing manner. O. CLOSEOUT. Whenever FIMAT in its sole discretion, considers it necessary for Customer's protection or FIMAT's protection, FIMAT may, but is not obligated to, refuse to accept new positions and/or close out otherwise liquidate Customer's positions, and Customer will be liable for any deficiency in Customer's Account that may result therefrom. P. OPTIONS EXERCISE. Customer agrees that if Customer has a commodity option position with FIMAT and does provide timely instructions regarding the exercise of a commodity option on the last day of trading in that option. FIMAT, in its sole discretion and without prior notice to Customer, is authorized to exercise or abandon (i.e. let expire) the option. Customer further agrees that any exercise or abandonment of an option by FIMAT pursuant to this Agreement shall be for Customer's sole account and risk and FIMAT shall have no liability with respect thereto, and FIMAT shall have no duty to exercise such authority. Customer further agrees that, without FIMAT's written consent, Customer may not, on any day, exercise more than 20 options contracts with FIMAT unless Customer has margin with FIMAT in excess of the amount of margin FIMAT requires for the futures contract Customer would be assigned as a result of such exercise. Customer acknowledges that FIMAT's confirmation of purchase and sale statements will reflect option expiration dates that FIMAT obtains from sources generally believed to be reliable, and FIMAT will be responsible only for gross negligence, willful misconduct or fraud in connection therewith. If Customer holds options with a Friday expiration date, it is possible that, if a grantor, Customer could be assigned a futures position after the expiration of the option on Friday, and on some exchanges, as late as Saturday morning. Q. ADJUSTMENTS. On rare occasion FIMAT may, in error, not fill Customer's order or fill Customer's order at a price which is less favorable than the price which could have been obtained if the error had not occurred. In these circumstances, FIMAT will give Customer the filled order and cash adjust Customer's Account(s) so as to restore the price at which the order could have been executed had the error not occurred. Customer agrees however that when correcting its error, FIMAT obtains a position at a better price than Customer's order could have been filled at, Customer will only receive the fill Customer could have obtained if Customer's orders had been executed without error (and FIMAT will receive any difference). R. EXCHANGE OF PHYSICAL FOR FUTURES TRANSACTION. Customer agrees to create, retain, and produce, upon request a Commodity Exchange, the CFTC, or the United States Department of Justice, documentation of cash transaction -11- underlying exchanges of futures for cash commodities or exchanges of futures in connection with cash commodities transactions in accordance with Applicable Law. Documentation means those documents customarily generated in accordance with cash market practices and/or required by the relevant Commodity Exchange or regulatory authority which demonstrate the existence and nature of the underlying cash transactions, including, but not limited to, contracts, confirmation statements, telex printouts, invoices, and warehouse receipts or other documents of title. S. DIRECT ORDER TRANSMITTAL CLIENT DISCLOSURE. On occasion, when FIMAT's offices are closed, Customer may request that FIMAT grant it authority to place orders directly with one or more of FIMAT's non-U.S. Affiliates for execution on non-U.S. exchanges, or for transactions on U.S. exchanges to be executed on GLOBEX, NYMEX ACCESS or other electronic trading systems. If FIMAT grants Customer such authority, the following conditions shall apply: (1) the order(s) Customer places with FIMAT's non-U.S. Affiliate will be for FIMAT's omnibus account maintained directly or indirectly with FIMAT's non-U.S. Affiliate; (2) Customer will be a client of FIMAT and not of the non-U.S. Affiliate; (3) all monies, securities and property of Customer will be maintained log FIMAT; and (4) unless Customer objects within five days after receipt of this Agreement, FIMAT may assume Customer consents to these conditions. IV. SECURITY AGREEMENT AND DEFAULT PROVISIONS A. SECURITY INTEREST. Customer hereby grants FIMAT a security interest in the Collateral and proceeds thereof, security for the prompt payment and performance of any and all Liabilities. B. FIMAT'S RIGHTS RESPECTING COLLATERAL. Customer will sign and deliver all agreements, instruments, certificates and documents FIMAT requests to create, perfect, preserve and protect the security interest in any of the Collateral, accompanied by such instruments of assignment and transfer and in such form as FIMAT should reasonably request. Customer appoints FIMAT as Customer's agent to sign, deliver, complete and file any such agreements, instruments, certificates and documents on Customer's behalf. FIMAT has no obligation to return the identical item of Collateral, but only to replace the item with property of like kind and substantially similar quantity, subject to adjustment for quantity variations at then prevailing market prices. FIMAT may, at any time and without limitations except those imposed by law, pledge, re-pledge, hypothecate, loan or invest any Collateral without notice to Customer or the obligation to account to Customer for any interest, income, or other benefit from any of the Collateral. Customer agrees to permit FIMAT and/or its agents and representatives at any time to inspect any of the Collateral and make abstracts or copies from any of Customer's books and records pertaining to the Collateral. The right is expressly granted to FIMAT, in its sole discretion, to notify warehousemen, consignees, bailees or any other persons in possession of Collateral of FIMAT's security interest therein. Unless Agreed by FIMAT, the undersigned will not file or authorize or permit to be filed in any jurisdiction any such financing or like statement in which FIMAT is not named as the sole secured party. Upon the request of FIMAT Customer shall, at Customer's expense, keep insured all Collateral which is tangible property for full value, with such coverage as FIMAT may approve, and the policies shall be duly endorsed in FIMAT's favor and delivered to FIMAT. C. EVENTS OF DEFAULT. In addition to any "Event of Default" which may be defined in any Other Agreement, and not by way of limitation of any right FIMAT otherwise has to demand payment at any time of any of the Liabilities, the following events shall constitute an "Event of Default": (1) Customer breaches, repudiates, or defaults in any way on any agreement with FIMAT or any Affiliate (including Customer's agreement to provide margin) or with a third party; or (2) FIMAT, in its sole discretion, determines that it has sufficient grounds for insecurity with respect to Customer's performance of any obligation to any person and Customer fails to provide assurance of performance of the obligation satisfactory to FIMAT; or (3) any proceeding is commenced by or against Customer under any bankruptcy, insolvency, relief of debtor, or similar law, or Customer makes an assignment for the benefit of creditors, a receiver, trustee, conservator, liquidator or similar officer is appointed for Customer or any of Customer's property; or (4) Customer's Account(s) are attached or levied against; or (5) any of Customer's representations to FIMAT or any Affiliate, whenever or wherever made, were misleading when made or deem made or later becomes untrue; or (6) Customer dies, is disabled or becomes legally incompetent; or (7) Customer or any organization of which Customer is a member suspends or threatens to suspend the transaction of its usual business, or any proceeding is commenced with respect to any of Customer's property or any such organization; or (8) Customer is a party to any merger, consolidation or sale of all or substantially all of its assets unless Agreed by FIMAT prior thereto; or (9) FIMAT has reason to believe that any of the foregoing is likely to occur imminently. -12- D. FIMAT's Remedies Upon Default. l. Customer absolutely and unconditionally agrees that upon the occurrence of an Event of Default, FIMAT, on behalf of itself and as agent for any Affiliate, may exercise any one or more of the following remedies (except that, upon the occurrence of any Event of Default set forth in Section IV.C.(3) above, the remedies specified in subparagraphs a, b, c, and g below shall thereupon be deemed for all purposes to have been exercised, immediately and without action by FIMAT), with only such notice as is required by Applicable Law and cannot be waived, without prejudice to any other remedies: a. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may terminate any or all of FIMAT's and/or any Affiliates obligations to Customer for future performance; b. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may treat any or all of Customer's Liabilities and/or Customer's obligations to any Affiliates, including credit or debit balances, as immediately due, and may treat all limits, margin facilities and call tolerance facilities in place as revoked; c. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may consolidate Customer's Account(s) or any of them at FIMAT and/or any Affiliates; d. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may sell any or all non-cash Collateral held long by FIMAT and/or any Affiliates; e. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may close out or hedge for Customer's Account(s) any or all open positions in Customer's Account(s) at FIMAT and/or any Affiliates pursuant to Section III.O above or otherwise, in any manner it deems reasonable under the circumstances; f. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may borrow, lend, sell or buy from any party, including itself and/or any Affiliates, any property necessary to cover or hedge any or all positions in Customer's Account(s) at FIMAT and/or any Affiliates; and g. FIMAT, on its own behalf and/or on behalf of any of its Affiliates, may offset the proceeds of the sale of non-cash Collateral, cash Collateral, and sums owing Customer by FIMAT and/or Affiliates (including any sums arising from the operation of this Section D), against Customer's Liabilities and Customer's obligations to any Affiliates, without prejudice to FIMAT's right to recover the balance of Customer's Liabilities and any Affiliates' right to recover the balance of Customer's obligations to them. Customer appoints FIMAT as Customer's agent to sign, complete, and deliver any and all documents necessary or desirable to carry out the foregoing. None of FIMAT nor any of its Affiliates, nor any of its agents or representatives will be responsible for losses or lost profits, accrued or anticipated, resulting from any position or transaction entered to enforce the foregoing remedies. Customer waives the right of set off in any action brought by FIMAT to collect amounts owned by Customer to FIMAT. Customer will indemnify and hold harmless FIMAT and its Affiliates, and their respective agents and representatives from any liabilities, penalties, losses, costs and expenses, including but not limited to reasonable attorney fees (whether the reasonable fees and charges of external legal counsel and/or the costs and charges, if any, allocated by internal legal department), which FIMAT and/or any Affiliates incur in connection with (i) the exercise of any remedy hereunder or under any Other Agreement, (ii) the care or custody of the Collateral and defending or asserting the rights and claims of FIMAT and/or any Affiliates in respect thereof, and (iii) meeting any obligation of FIMAT and/or any Affiliates which would otherwise fail to be performed by reason of an Event of Default. -13- V. MISCELLANEOUS A. GOVERNING LAW AND SUBMISSION TO JURISDICTION. All disputes between FIMAT and Customer including, but not limited to, disputes arising directly or indirectly as a result of, or the relationship established as a result of, this Agreement, shall be governed by the substantive laws of the State of New York, without regard to principles of choice of law. Notwithstanding any provision of Applicable Law, Customer agrees to commence all actions of any kind against FIMAT within one year of the event giving rise to any dispute. Customer irrevocably submits to the jurisdiction of the courts of New York and of the Federal Courts of the Southern District of New York with respect to litigation relating to all such disputes, including, but not limited to, disputes arising directly or indirectly as a result of or the relationship established as a result of this Agreement and transactions subject to this Agreement, agrees to commence actions and proceedings and assert claims for relief involving them only in such courts (unless Customer has otherwise agreed to arbitrate all disputes against FIMAT, in which case such arbitration shall be held only in New York City), and consents to service of process by the mailing of copies to Customer by certified mail to Customer's address as it appears on the books of FIMAT. Such service shall be effective ten days after mailing. B. WAIVER OF JURY TRIAL. CUSTOMER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO, BUT NOT LIMITED TO, DISPUTES ARISING DIRECTLY OR INDIRECTLY AS A RESULT OF, OR THE RELATIONSHIP ESTABLISHED AS A RESULT OF, THIS AGREEMENT OR ANY TRANSACTION IN CONNECTION THEREWITH. CUSTOMER'S WAIVER OF TRIAL BY JURY IS A PREREQUISITE TO, AND INDUCEMENT OF FIMAT TO OFFER, THE OPENING OF CUSTOMER'S ACCOUNT(S). C. APPLICABLE LAW AND NOTES FOR GERMAN CLIENTS. Contrary to German Law, the substantive law of New York does not distinguish between binding and non-binding terminal (futures) transactions (see paragraph 53 of the German Borsengesetz). All trades under this Agreement are therefore binding market transactions. Customer acknowledges that under German Law futures trading gives rise to an imperfect obligation (as provided in paragraphs 762 and 764 of the Burgerliches Gesetzbuch ("BGB") and paragraph 58 of the German Borsengesetz). Customer also acknowledges that under paragraph 814 of the BGB disclosure of this fact removes any and all rights Customer might otherwise have as a result of the "Differenzeinwand" (paragraph 812 of the BGB). Customer credit balance held by FIMAT will be applied to fulfill, discharge and perform the transaction(s) and as an advance performance or down payment to cover any transaction(s) trading costs. D. Force Majeure; Warranty and Disclaimer of Warranties. FIMAT shall not be liable for any delay in performance or for non-performance of its obligations caused by any event beyond the reasonable control of FIMAT. FIMAT may, without liability, cancel this Agreement or any particular transaction contemplated hereunder if its performance is delayed or rendered impossible due to any such event. FIMAT's sole warranty is that any commodity delivered by it will conform to the description on any confirmation prepared and delivered by FIMAT with respect thereto. FIMAT EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED. E. NON-WAIVER; NON-ASSIGNMENT; TIME OF THE ESSENCE. This Agreement and the Other Agreements, if any, constitute the entire Agreement between FIMAT and Customer with respect to the subject matter hereof and supersede all other understandings, agreements, or communications concerning such subject matter. Any oral representations, warranties, inducements, or agreements made by any representative of FIMAT inconsistent with the provisions of this Agreement are excluded and will not bind FIMAT. FIMAT will be bound by waivers and modifications of any of the terms of this Agreement, any other written agreement, or any transaction, or any attempted assignment by Customer of any right or interest in this Agreement, any other agreement, or any transaction, only if Agreed by FIMAT (as defined). Such agreement will bind FIMAT only in relation to the waiver, modification, or assignment, to which FIMAT has consented in writing. Customer hereby waives the right to claim estoppel or forbearance unless Agreed by FIMAT. Any agreement by FIMAT to forbear liquidation, pursuant to any of its rights and remedies hereunder, may be revoked by FIMAT upon 24 hours notice to Customer (unless a shorter time is commercially reasonable under the circumstances), which notice Customer hereby deems reasonable. FIMAT's failure to exercise any right or remedy is not a waiver of the right or remedy not exercised or any other right or remedy. Time is of the essence in the performance of Customer's obligations. F. BINDING EFFECT. This Agreement covers all of Customer's Account(s) with FIMAT, is binding on Customer and Customer's estate, legal representatives, successors and assigns and inures to the benefit of FIMAT and its successors and assigns. -14- G. COMMUNICATIONS. Communications may be sent to Customer by mail, telex, telegraph, facsimile transmission, messenger, or other reasonable means at its current address shown on FIMAT's records, and are deemed received when Customer actually receives them or 24 hours after they are sent, whichever first, occurs. FIMAT, in its sole discretion, may record, on tape or otherwise, any telephone conversation between FIMAT 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 FIMAT or in any other proceeding to which FIMAT is a party or in which FIMAT's records are subpoenaed. Customer acknowledges that FIMAT may erase such recordings after a reasonable period of time. FIMAT 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 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. Customer will indemnify FIMAT and hold FIMAT harmless from and against all liabilities, penalties, losses, and expenses, including legal expenses, incurred by FIMAT as a result of FIMAT's acting upon such instructions. H. NON-EXECUTION. Any failure by Customer to duly sign this Agreement is not a waiver by FIMAT of any rights it otherwise has against Customer. I. FIMAT HAS NO RESPONSIBILITY FOR ADVICE. FIMAT is not acting as fiduciary, foundation manager, commodity pool operator, commodity trading advisor or investment adviser in respect of any Account(s) opened by Customer and FIMAT 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. Customer will not enter into any transaction with FIMAT, and will not hold FIMAT responsible for losses, as a result of any prediction, recommendation, or representation made by any representative of FIMAT. Any information or advice communicated by FIMAT, although based upon information from sources FIMAT believes to be reliable, may be incomplete or inaccurate, may not be verified, and may be changed without notice to Customer. FIMAT makes no representation as to the accuracy, completeness, reliability or prudence of any such information or advice or as to the tax consequences of Customer's futures or options trading. J. APPOINTMENT OF AGENT. Customer's appointment of an agent on the "Trading and Fee Payment Authorization Limited to Purchases and Sales of Commodities" form ("Trading Authorization"), if applicable, is notice to FIMAT that the person so designated (the "Agent") is Customer's agent in respect of Customer's Account(s) with FIMAT, with complete authority on Customer's behalf to place orders for purchases and sales, including short sales, for cash or on margin, of Commodities other items in respect of which Customer may from time to time enter into transactions in one or more of Customer's Account(s) with FIMAT, for immediate or future delivery, to effect delivery and performance of the orders and of the obligations undertaken in connection with the orders, to borrow funds from FIMAT to finance any of the transactions, to lend or pledge Customer's properties with MAT and otherwise to secure Customer's Liabilities, withdraw or direct the payment of monies, securities, commodities, or other property from Customer's Account(s) with FIMAT, including to compensate Agent for its services, to settle Customer disputes with FIMAT or between Customer or any other party with whom FIMAT deals for Customer or with whom Customer deals through FIMAT as broker for the third party, and. to sign and deliver on Customer's behalf notices and other documents and to take all other actions necessary or desirable to carry out the terms of this Agreement. Customer agrees to notify FIMAT promptly in writing of the revocation or modification of the Agent's authority. Customer will indemnify FIMAT and hold FIMAT harmless from and against all liabilities, penalties, losses, and expenses, including legal expenses, incurred by FIMAT in acting as instructed by the Agent and in continuing to act in reliance on the Trading Authorization after revocation or modification but prior to FIMAT's receipt of written notice thereof. K. TERMINATION. Customer may terminate this Agreement, at any time when Customer has no Liabilities and no open positions which could give rise to subsequent Liabilities, upon the actual receipt by FIMAT of written notice of termination. FIMAT may terminate this Agreement at any time upon mailing or delivery of written notice of termination to Customer, provided that any such termination will not affect any transactions theretofore entered into and will not relieve either party of any obligations in connection with any debt or credit balance or other liability or obligation incurred prior to the termination. -15- L. MULTIPLE PARTIES. If any Account(s) established pursuant to this Agreement is on behalf of more than one person: 1. each signing person is jointly and severally liable for the full and timely performance of all the obligations of all signing persons in connection with this Agreement and any account established and any transaction effected under this Agreement; and the terms hereof shall survive the legal incompetence or death of any or all signing persons; 2. in connection with any Account(s) established under this Agreement, FIMAT may act upon any order, request or instruction from any one signing person without the necessity of confirmation from any other; 3. the delivery of any report, statement, notice or other communication to any one signing person is deemed to have been to all of the signing persons; 4. FIMAT may deliver any Collateral of any of the signing persons to any one or more of the signing persons, and make payments from any Account(s) established pursuant to this Agreement to or upon the order or direction of any one of them, and FIMAT is under no obligation to inquire into the purpose of any request for the delivery of any such Collateral or the making of any such payment, or to see to the disposition or application thereof; and 5. unless FIMAT is advised otherwise in writing, the interest of the signing persons in any Account(s) established under this Agreement shall be deemed to be a joint tenancy with rights of survivorship and not a tenancy in common. M. SEVERABILITY. If any provision of this Agreement, or the application of such provision to any person or circumstances, is held invalid, the remainder of this Agreement, and the application of such provision to persons or circumstances other than these as to which it is held invalid, shall not be affected thereby. N. CAPTIONS. Captions used in this Agreement are used for convenience and neither form an integral part of this Agreement nor limit the applicability or affect the meaning of any of the Agreement's provisions. VI. ELECTRONIC TRADING SYSTEMS FIMAT may make available to Customer the ability to trade, directly or indirectly (in whole or in part), through electronic trading systems (ETS) such as GLOBEX or ACCESS or other electronic systems. The sponsoring organizations or such systems may make certain information available and in some cases require special disclosures for these systems. To the extent these disclosures are required and other information is available, it has been set forth in the accompanying booklet entitled "Exchange Disclosures and Notices," which Customer acknowledges receiving by signing below. VII. ACCEPTANCE OF AGREEMENT This Agreement shall not be deemed to be accepted by FIMAT or become a binding contract between Customer and FIMAT until approved by a duly authorized officer of FIMAT in writing in accordance with its internal procedures. Customer represents, unless Customer has executed the Joint Tenants Agreement; the Partnership Authorization; the Certificate of Corporate Resolution; or the Trust Authorization, that this is an individual account and, no one else has an interest in this account and Customer has authority and capacity to enter into this Agreement. VIII. OTHER AGREEMENTS AMONG THE PARTIES; CONFLICTS Customer acknowledges that in addition to this Agreement, FIMAT may request that Customer and/or any Affiliate of Customer to execute and deliver such agreement(s), instrument(s) and document(s) as FIMAT may prescribe, which agreement(s), instrument(s) and documents upon their execution, shall become an Other Agreement. In the event of a conflict between the provisions of this Agreement and the provisions of any Other Agreement, the provisions of this Agreement shall govern to the extent the underlying transactions relate to futures contracts or options thereon. -16- IX. FOR HEDGE CUSTOMERS ONLY CUSTOMER WARRANTS, BY INITIALLING IN A BOX BELOW, THAT IT WILL ENGAGE IN BONA FIDE HEDGING TRANSACTIONS PURSUANT TO CFTC REGULATION 1.3(z). IN THE EVENT OF BANKRUPTCY, CUSTOMER PREFERS THAT THE TRUSTEE (PLEASE INITIAL CHOICE) [ ] LIQUIDATE [ ] NOT LIQUIDATE OPEN COMMODITY CONTRACTS IN CUSTOMER'S HEDGE ACCOUNT WITHOUT SEEKING ITS INSTRUCTIONS. PLEASE ACKNOWLEDGE YOUR AGREEMENT AND CONSENT TO THIS CUSTOMER AGREEMENT BY SIGNING BELOW. BY SIGNING BELOW, CUSTOMER ALSO ACKNOWLEDGES THAT CUSTOMER HAS RECEIVED AND UNDERSTANDS THE FOLLOWING ATTACHED DISCLOSURE STATEMENT PRESCRIBED BY THE CFTC: Please initial if received and understood: [ ] Risk Disclosure Statement for Futures and Options Attached at pg. 1 ACCOUNT NAME: -------------------------------- BY: ------------------------------ --------- -------------------------------- Authorized Signature Date Name (Please Print) BY: ------------------------------ --------- -------------------------------- Authorized Signature Date Name (Please Print) EX-10.01(D) 10 c90749exv10w01xdy.txt FORM OF MAN FINANCIAL INC. CUSTOMER AGREEMENT Exhibit 10.01(d) MAN FINANCIAL INC CUSTOMER AGREEMENT This agreement ("Agreement") sets forth the terms and conditions under which we, Man Financial Inc, will open and maintain one or more accounts (collectively, the "account") in your name and on your behalf and otherwise transact business with you. If this account has been introduced to us, all references to us in this Agreement shall include your broker, and your broker shall enjoy all benefits and rights here under. 1. PARTIES. You agree that the parties to this Agreement shall consist of us and you. If this is a joint account (including a community property account), the term "you" refers to each account holder. Except as disclosed in writing to us, no person other than you has any interest in the account. If this is a joint account, each account holder has full authority to act on behalf of the account and you authorize us to follow the instructions of any account holder as if such person were the sole account holder. All obligations arising hereunder are joint and several and may be enforced by us against any or all account holders. Notwithstanding the foregoing, we may require joint action by all account holders with respect to any matter concerning the account, including the giving or cancellation of orders, and the withdrawal of monies, securities or other property. In the event of the death of either or any of the joint account holders, the surviving joint account holder(s) shall immediately give us written notice thereof, and we m a y, before or after receiving such notice, take such action, require such papers and inheritance or estate tax waivers, retain such portion of and/or restrict transactions in the account as we may deem advisable. The surviving joint account holder(s) and the estate of the deceased joint account holder shall be jointly and severally liable to us for any net debit balance or loss in the account in any way resulting from transactions initiated prior to the receipt by us of the written notice of the death or incurred in the liquidation of the account or the adjustment of the interests of the respective parties. Laws governing joint ownership of property vary from jurisdiction to jurisdiction. Generally, however, for joint tenants with rights of survivorship, in the event of the death of either tenant, the entire interest in the joint account shall be vested in the surviving joint tenant(s) on the same terms and conditions. For tenants in common, the interest in the tenancy shall be equal unless specified and in the event of death of either tenant, the interest in their share of the tenancy shall vest in the decedent's legal representative. State laws regulating community property vary. Consult your own legal adviser. 2. APPLICABLE LAW AND REGULATIONS; MARKETS. All transactions shall be subject to all applicable law and the rules and regulations of all federal, state and self-regulatory agencies including, but not limited to, the Board of Governors of the Federal Reserve System and the constitution, rules and customs of the exchange or market (and clearing house) where executed. Unless you provide us with specific instructions, we may use our discretion in selecting the market in which to place your orders. 3. DEPOSITS ON TRANSACTIONS. You agree to maintain, without demand from us, such margin, cash or other acceptable collateral as we in our discretion require from time to time and you agree to pay on demand any debit balances in your account. You will make deposits of such margin or collateral immediately upon our request. You will provide us with any information we may require for immediate confirmation of wire transfers. 4. SECURITY INTEREST AND LIEN. As security for the payment of all of your obligations and liabilities to us or any of our affiliates through whom you conduct business, we shall have a continuing security interest in all property in which you have an interest held by or through us or any of our affiliates including, but not limited to, securities, futures contracts, cash commodities, commercial paper, monies, any a f t e r-acquired property and all rights you may have against us or any of our affiliates. In addition, in order to satisfy any such outstanding liabilities or obligations, we may, at any time and without prior notice to you, use, apply or transfer any of such securities or property interchangeably (including cash and fully-paid securities). In the event of a breach or default under this Agreement or any other agreement you may have with us or any of our affiliates, we shall have all rights and remedies available to a secured creditor under any applicable law in addition to the rights and remedies provided herein. 5. DEFAULT. Should we deem it desirable for our protection, or should we feel insecure, or should you be in breach of or violate any of the terms of this Agreement, we are authorized to declare (and without the necessity of a call for additional capital) you in default under this and any other agreement you may then have with us or our affiliates, whether heretofore or hereafter entered into. In the event of default, each of us and our affiliates reserves the right to sell, without prior notice to you, any and all property in which you have an interest held by or through us or our affiliates, to buy any or all property which may have been sold short, to cancel any or all outstanding transactions and/or to purchase or sell any other property to offset market risk, and to offset any indebtedness or position you may have, including by means of an exchange for physicals transaction, after which you shall be liable to us, for any remaining deficiencies, losses, costs or expenses sustained by us in connection therewith. Such purchases and/or sales may be effected publicly or privately without notice or advertisement in such manner as we may in our sole discretion determine. At any such sale or purchase, we may purchase or Electronic Version sell the property free of any right of redemption. In addition, we shall have the right to set off and apply any amount owing from our affiliates to you against any indebtedness in your account, whether matured or unmatured. You are unconditionally obligated to pay to us the amount of any debit balance in your account, however incurred, at the lesser of the highest rate permitted by applicable law or two percent above the current prime rate as announced from time to time by the banking institutions with which we normally do business. 6. FEES AND CHARGES. You understand that we will charge commissions and other fees for clearing, execution, custody, storage, delivery or any other service furnished to you and you agree to pay such commissions, fees and interest on monies owed to us at our then-prevailing rates. You understand further that such commissions, fees and interest rates may be changed from time to time. You will also be charged a fee for positions transferred to another broker. We may receive remuneration for directing orders to a particular broker or dealer or market center for execution. Such remuneration is considered compensation to us. We may pay a portion of fees and commissions charged to your Account to third-parties that have introduced your account to us or serviced your account. You understand that we or an affiliate may act as principal in certain transactions with you, including but not limited to, cash market transactions, forward contracts, or exchanges of physicals for futures ("EFPs"). 7. MAKING DELIVERY; LIQUIDATION INSTRUCTIONS. You agree to give us timely notice if you intend to make or take delivery under a contract or to exercise any option contract. If so requested by us, you shall satisfy us that you can fulfill your obligations to make or take delivery and shall furnish us with property deliverable by you under any contract in accordance with our directions. We shall not have any obligation to exercise any long option contract unless you have furnished us with timely exercise instructions and sufficient initial margin with respect to each underlying contract. If we sell any property at your direction and you fail for any reasons to supply us with such property, we may (but shall not be obligated to) borrow or buy for you any property necessary to make such delivery. Under no circumstances shall we be obliged to make any payment or delivery to you except against receipt of payment or delivery by you of monies or other property requested by us. You shall be responsible for providing insurance coverage for any deliveries made or accepted by you. We do not provide any insurance coverage. If you do not provide insurance coverage, you agree to bear the risk of loss. 8. CONSENT TO LOAN OR PLEDGE. Within the limits of applicable law and regulations, you hereby authorize us to lend either to ourselves or to others any securities or other property held by us in your margin account together with all attendant rights of ownership, and to use all such property as collateral for our general loans. Any such property, together with all attendant rights of ownership, may be pledged, repledged, hypothecated or rehypothecated either separately or in common with other such property for any amounts due to us thereon or for a greater sum, and we shall have no obligation to retain a like amount of similar property in our possession and control. 9. REPORTS. Reports of execution of orders sent by us to you shall be binding and conclusive on you unless, in the case of a verbal report, you object at the time the report is received by you or your agent; and in the case of a written report, you object in writing prior to the opening of trading on the business day following the day you have received the report. In addition, if after you have placed an order with us and have not received a written or verbal confirmation thereof in accordance with our practice, you immediately shall notify us thereof. If you fail to notify us as set forth in this section, you agree that you shall be deemed estopped to object and to have waived any objection to our execution or failure to execute any transaction. Nothing contained in this section, however, shall bind us with respect to any transaction or price reported (whether verbal or in writing) in error, or prevent us, upon discovery of any error or omission, from correcting the error or omission, and putting the account in the same position it would have been in if the error or omission had not occurred. 10. WAIVER, ASSIGNMENT AND NOTICES. Neither our failure to insist at any time upon strict compliance with this Agreement or with any of the terms hereof nor any continued course of such conduct on our part shall constitute or be considered a waiver by us of any of our rights or privileges hereunder. We may assign this Agreement and your account upon notice to you. Any assignment of your rights and obligations hereunder or interest in any property held by or through us without obtaining the prior written consent of an authorized representative of ours shall be null and void. Notices or other communications, including margin calls, delivered or mailed, including by facsimile or electronic transmission, to the address provided by you, shall, until we have received notice in writing of a different address, be deemed to have been personally delivered to you. 11. CLEARANCE ACCOUNTS. If your account has been introduced to us by another broke r, that broker is acting as your agent and your broker in this relationship is not an agent of or affiliated with us. You agree that your broker and its employees are third-party beneficiaries of this Agreement. Unless we receive from you prior written notice to the contrary, we may accept from such other broke r, without any inquiry or investigation: (a) orders for the purchase or sale of securities and other property in your account on margin or otherwise; and (b) any other instructions concerning your account or the property therein. YOU UNDERSTAND AND AGREE THAT OUR ROLE IS LIMITED TO EXECUTION, CLEARING AND BOOKKEEPING FOR TRANSACTIONS MADE PURSUANT TO INSTRUCTIONS FROM YOU OR YOUR BROKER, AND WE GENERALLY WILL NOT INQUIRE INTO THE CIRCUMSTANCES SURROUNDING ANY TRANSACTION FOR YOUR ACCOUNT. WE ARE NOT 2 Electronic Version RESPONSIBLE FOR ANY ACTS OR OMISSIONS OF YOUR BROKE R, INCLUDING, BUT NOT LIMITED TO, SALES PRACTICES, TRADING PRACTICES OR RECOMMENDATIONS. YOU AGREE TO LOOK SOLELY TO YOUR BROKER FOR REDRESS OF ANY LOSS OR DAMAGE ARISING OUT OF CIRCUMSTANCES OTHER THAN OUR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT IN THE EXECUTION, CLEARANCE OR BOOKKEEPING OF TRANSACTIONS FOR YOUR ACCOUNT. YOU UNDERSTAND AND AGREE THAT WE WILL PAY A SUBSTANTIAL PORTION OF THE BROKERAGE COMMISSIONS CHARGED TO YOUR ACCOUNT IN CONSIDERATION OF INTRODUCING AND SERVICING YOUR ACCOUNT. 12. INDEMNIFICATION; COSTS OF COLLECTION. You agree to indemnify and hold harmless each of us, our affiliates and our respective shareholders, directors, officers, employees and agents from and against any liability, damage, cost or expense (including, without limitation, legal fees and expenses, amounts paid in settlement of any claims, interest and any fines or penalties imposed by any exchange, self-regulatory organization or governmental agency) any of them may incur or be subjected to with respect to you or your Account or any transaction or position therein, or as a result of your violation of any of your representations, agreements or obligations under this Agreement. You agree to pay and authorize us to charge you for any direct or indirect costs of collection, defense and enforcing any of our rights under this Agreement including, but not limited to, interest, legal fees, court costs and other expenses. 13. FREE CREDIT BALANCES; TRANSFER ARRANGEMENTS. You hereby direct us to use any free credit balance in your account in accordance with all applicable rules and regulations and you authorize us, in our discretion, to transfer any free credit balances and cash in your account daily to a non-regulated account. 14. RESTRICTIONS. You understand that we may restrict or prohibit trading in, or close, your account. 15. CREDIT INFORMATION AND INVESTIGATION. You authorize us and, if applicable, your broker, in our or their discretion, to make and obtain reports concerning your credit standing and business conduct. 16. LEGALLY BINDING. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and supersedes any prior agreements between the parties with respect to the subject matter hereof. You further agree that all purchases and sales shall be exclusively for your account in accordance with your oral or written instructions. You hereby waive any and all defenses that any such instruction was not in writing as may be required by the statute of frauds or any similar law, rule or regulation. 17. AMENDMENT. You agree that we may modify the terms of this Agreement at any time upon prior written notice to you. By continuing to accept services from us, you will have indicated your acceptance of any such modification. If you do not accept any such modification, you must notify us thereof in writing and your account may then be terminated, but you will still be liable thereafter to us for all remaining liabilities and obligations. Otherwise, this Agreement may not be waived or modified absent a written instrument signed by an authorized representative of ours. No oral agreements or instructions purporting to amend this Agreement will be recognized or enforceable. 18. SEVERABILITY. If any provision hereof is or should become or be deemed to be inconsistent with any present or future law, rule or regulation of any court, arbitral body, sovereign government or regulatory body having jurisdiction over the subject matter of this Agreement, such provision shall be deemed to be rescinded or modified in accordance with any such law, rule or regulation. In all other respects, this Agreement shall continue to remain in full force and effect. 19. LIMITATION OF LIABILITY. You shall have no claim against us or any of our affiliates for any loss, damage, liability, cost, charge, expense, penalty, fine or tax caused directly or indirectly by: (A) any law, regulation, rule or order; (B) suspension, or termination of trading; (C) w a r, civil or labor disturbance; (D) any delays or inaccuracies in the transmission or reporting of orders or other information due to a breakdown or failure of any transmission or communication facilities for any reason; (E) failure or delay for any reason of any broker, bank, depository or custodian to fulfill its obligations or to pay in full any amounts owed to us; (F) failure or delay by any entity which, consistent with applicable regulations, is holding customer segregated funds, securities or other property, to pay or deliver same to us; or (G) any other causes beyond our control. We will execute your transactions solely as your agent. In executing transactions on an exchange, we may use floor brokers (who may be our employees or other agents of ours), but we will not be responsible to you for negligence or misconduct of an independent floor broker if, at the time the floor broker was selected, the floor broker was authorized to act as such under the rules of the relevant exchange and the appropriate regulatory agency. We will not be responsible to you in the event of error, failure, negligence or misconduct on the part of any intermediary, commodity trading advisor or other person acting on your behalf and, without limitation, we have no obligation to investigate the facts surrounding any transaction in your Account(s) which is introduced by such intermediary, commodity trading advisor or other person. You will indemnify us and hold us harmless from and against any and all liabilities, penalties, losses and expenses, including legal expenses and attorneys' fees, incurred by us as a result of any error, failure, negligence or misconduct on the part of any 3 Electronic Version such intermediary, commodity trading advisor or other person acting on your behalf. We shall only be liable for actions or inactions by us which amount to gross negligence or fraud. You also agree that we shall not be liable to you for any losses, costs, expenses or other damages sustained by you in the event of any failure or delay by any exchange, market, clearing house, bank or other depository institution where any of your funds or other assets are maintained, or a failure or delay by any member, bank or agent of any of the foregoing, or a failure or delay by any of the foregoing to enforce its rules, to fulfill its obligations or to make any payment, for any reason whatsoever. You waive any claim, cause of action or right as against us, our employees or agents that may arise or occur as a result thereof. 20. TELEPHONE CONVERSATIONS. For the protection of both you and us, and as a way of correcting misunderstandings, you hereby authorize us, at our discretion and without prior notice to you, to monitor and/or record (with or without tone warning devices) any or all telephone conversations between you and any of our employees or agents. 21. ADDITIONAL RIGHTS AND REMEDIES. The rights and remedies granted herein to us are in addition to any other rights and remedies provided to us in any other agreement you may have with us, and you hereby appoint us as your agent to take any action necessary to perfect ourselves with respect to the security interest granted to us in this Agreement. 22. AUTHORITY. You represent that this Agreement has been duly authorized and executed by you and that you have full power and authority to trade futures, physical commodities, currencies, securities and options on the foregoing and related instruments. By signing this Agreement on behalf of an entity, you represent that the entity on whose behalf you are acting is authorized to enter into this Agreement and that you are duly authorized to sign this Agreement in its name. 23. CUSTOMER'S REPRESENTATIONS AND WARRANTIES. You represent to us that all information supplied by you in connection with the opening of your account, including the Customer Account Application, is accurate and complete, and that we are legally entitled to rely on such information, and you agree to report promptly to us any material change in such information. You represent to us that you have read and understand all risk disclosure statements that we have provided to you, and understand that all transactions effected for your account are at your risk, and that you are solely liable therefor under all circumstances. You acknowledge that futures trading is only suitable for persons who are financially able to withstand losses. Such losses may substantially exceed margins or other funds you have deposited with us. You agree to inform us immediately if you cease to be willing or financially able to sustain such losses. 24. PENSION ACCOUNTS. If you are a Keogh Plan, Pension and Profit Sharing Trust, or other employee benefit plan as defined by Section 3(3) of the Employee Retirement Income Security Act (Collectively a "Plan"; "ERISA"), the undersigned trustee ("Trustee") acknowledges that the establishment of the account and all transactions executed through the account are subject to certain restrictions under Section 404(a) of ERISA, including the requirement that such transactions be prudent, that the investments be diversified, and that there are certain transactions which the Plan is prohibited from entering into under Section 406 of ERISA and Section 4975 of the Internal Revenue Code ("Code"), regardless of whether such transactions are prudent; and Trustee further acknowledges that certain transactions if entered into by the Plan may result in the recognition of taxable income under Section 511 of the Code. Trustee represents and warrants that, with respect to each transaction to be executed through the account, the determination as to whether such transaction complies with the standards of Section 404(a) of ERISA, will constitute a transaction prohibited under Section 406 of ERISA, or Section 4975 of the Code, or will result in the recognition of taxable income, will be made either by Trustee or by another person who has been determined by Trustee to be either a fiduciary or an investment manager properly delegated the authority to make, or to advise the Plan as to, such determinations. Trustee understands and agrees that the individual account plan permits participant-directed investments pursuant to Section 404(c) of ERISA. In no event shall we have any responsibility or authority to make, or to advise the Plan or Trustee as to, such determinations. Trustee understands and agrees that we are neither a fiduciary nor an investment manager with respect to the Plan as defined in Sections 3(21) and 3(38) of ERISA. Nevertheless, if, contrary to the expectations of the parties, it is ever finally determined that we are a fiduciary or investment manager, our responsibility and authority in acting in such capacity shall be limited to performing our obligations as specifically set forth herein, and Trustee represents and warrants that such allocation of fiduciary responsibility is authorized under the instrument pursuant to which you maintained in accordance with Section 402(c) of ERISA. By signing this Agreement, Trustee agrees to indemnify us for any liability which may be imposed on us including, but not limited to, Section 409 of ERISA or any tax which may be assessed against us under Section 4975 of the Code, or any other damage or expense which may be suffered by us by reason of your being subject to the provisions of ERISA, including all costs and expense (including attorneys' fees) incurred by us in defending against the foregoing. The foregoing provision shall also apply to any federal or state fiduciary law governing the investments of employee benefit plans which is supplementary to, or in lieu of, the specific provisions of ERISA referred to herein. 25. CURRENCY EXCHANGE RATES. 4 Electronic Version If any transaction is effected in a foreign currency, any profit or loss arising as a result of a fluctuation in the exchange rate affecting such currency will be entirely for your account and risk. All deposits shall be made in United States currency, unless we request any such deposit in the currency of some other country, in which case such deposit shall be made in such currency. When any position is liquidated, we shall debit or credit your account in United States currency at the rate of exchange determined by us in our sole discretion on the basis of the then prevailing money rates for such foreign currency, unless you shall have given us specific written instructions to make such debit or credit in the foreign currency involved. 26. FUNDS ON DEPOSIT IN NON-U.S. BANKING INSTITUTIONS. Funds of customers trading on United States contract markets may be held in accounts denominated in a foreign currency with depositories located outside the United States or its territories if you are domiciled in a foreign country or if the funds are held in connection with contracts priced and settled in a foreign currency. Such accounts are subject to the risk that events could occur which would hinder or prevent the availability of these funds for distribution to you. Such accounts may also be subject to foreign currency exchange rate risks. You authorize the deposit of funds into such foreign depositories. For customers domiciled in the United States, this authorization permits the holding of funds in regulated accounts offshore only if such funds are used to margin, guarantee, or secure positions in such contracts or accrue as a result of such positions. In order to avoid the possible dilution of other customer funds, if you have funds held outside the United States, you further agree that your claims based on such funds will be subordinated in the unlikely event BOTH of the following conditions are met: (1) Your futures commission merchant is placed in receivership or bankruptcy; and (2) there are insufficient funds available for distribution denominated in the foreign currency as to which you have a claim to satisfy all claims against those funds. You agree that if both of the conditions listed above occur, your claim against our assets attributable to funds held overseas in a particular foreign currency may be satisfied out of segregated customer funds held in accounts denominated in dollars or other foreign currencies only after each customer whose funds are held in dollars or in such other foreign currencies received its pro-rata portion of such funds. You further agree that in no event may a customer whose funds are held overseas receive more than its pro-rata share of the aggregate pool consisting of funds held in dollars, funds held in the particular foreign currency, and nonsegregated assets of the company. 27. CFTC REGULATIONS. You are aware that CFTC Regulation 1.35(a-2)(2) requires you to create, retain and produce upon the request of the CFTC, the United States Department of Justice and the applicable exchange, documentation of cash transactions underlying exchanges of futures for cash commodities or exchanges of futures in connection with cash commodity transactions and, if you effect any such exchange of futures, you will comply with Regulation 1.35 (1-2)(2). If you maintain separate accounts in which, pursuant to CFTC Regulation 1.46(d)(6), offsetting positions are not closed out, you understand that, if held open, offsetting long and short positions in the separate accounts may result in the charging of additional margins even though offsetting positions will result in no additional market gain or loss. If you are a non-United States person, you acknowledge that: (a) CFTC Regulation 15.05 designates us as the agent of foreign brokers, customers of foreign brokers, and foreign traders for certain purposes; and (b) CFTC Regulation 21.03 authorizes the CFTC to request, when unusual market circumstances exist, certain account information from us as well as foreign brokers and traders. 28. ONLINE SERVICES/ELECTRONIC STATEMENTS. If we provide you with access to online brokerage service facilities, you agree to our posted terms of use, privacy statement and service agreement and the Electronic Order Entry & Account Access Agreement as if the same were set forth in this Agreement. We do not guarantee access to your account at all times, nor do we guarantee the receipt, acceptance and entry of any order transmitted to us electronically. You further agree that any market data or information provided to you will not be broadcast, retransmitted or commercially exploited and you acknowledge that exchanges and markets have a proprietary interest in this data and information. If you have agreed to the electronic transmission of information, you understand that we do not guarantee delivery. 29. GOVERNING LAW; JURISDICTION AND VENUE; SERVICE OF PROCESS; LIMITATION ON ACTIONS; WAIVER OF JURY TRIAL. In order to induce us to accept this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you hereby agree to the following: A. This Agreement is made, upon acceptance by us, in the State of Illinois, and shall be governed by, and the rights and liabilities of the parties shall be determined in accordance with, the laws of the State of Illinois, without regard to any of its conflicts of laws, principles or rules, and by the laws of the United States. B. IF YOU HAVE NOT ENTERED INTO AN ARBITRATION AGREEMENT OR IF ARBITRATION IS UNAVAILABLE, ALL ACTIONS OR PROCEEDINGS, WHETHER INITIATED BY YOU OR US, WITH RESPECT TO ANY CONTROVERSY ARISING OUT OF OR RELATED TO THIS AGREEMENT, SHALL BE LITIGATED ONLY IN COURTS WHOSE SITUS IS IN THE STATE OF ILLINOIS. YOU HEREBY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, AND ANY OTHER COURT OF COMPETENT JURISDICTION WHOSE SITUS IS IN CHICAGO, ILLINOIS. IF YOU BRING ANY ARBITRATION (INCLUDING, BUT 5 Electronic Version NOT LIMITED TO, NFA ARBITRATIONS), ADMINISTRATIVE OR REPARATIONS PROCEEDINGS AGAINST US, YOU HEREBY AUTHORIZE AND DIRECT SUCH ARBITRATORS, ADMINISTRATIVE LAW JUDGES, OR JUDGMENT OFFICERS TO HOLD ANY SUCH PROCEEDINGS IN CHICAGO, ILLINOIS. YOU HEREBY WAIVE ANY RIGHT YOU MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION YOU MAY BRING AGAINST US, OR THAT SUCH LITIGATION IS BROUGHT IN AN INCONVENIENT FORUM OR THAT FORUM IS IMPROPER. C. You agree to accept court service of process by registered or certified mail addressed to you at the address you provided in your customer application, or to such other addresses as you have supplied to us in writing, and such service shall constitute personal service of process. D. No judicial, administrative, arbitration or reparations proceeding may be commenced by you or us more than one (1) year after any claim arises, directly or indirectly, out of this Agreement or the transactions contemplated thereby. You hereby waive any statutes of limitation, including, but not limited to, the Commodity Exchange Act's and the National Futures Association's two (2) year limitation on actions. E. You hereby waive any right you may have to a trial by jury. 30. HEADINGS. The headings of the provisions hereof are for descriptive purposes only and shall not modify or qualify any of the rights or obligations set forth in such provisions. CUSTOMER AGREEMENT I ACKNOWLEDGE THAT THIS IS A CONTRACTUAL AGREEMENT. I HAVE READ IT CAREFULLY AND, BY SIGNING, I AGREE TO BE BOUND BY EVERY TERM AND CONDITION, INCLUDING THE CONSENTS RELATING TO JURISDICTION, VENUE, SERVICE AND LIMITATIONS ON ACTIONS SET FORTH IN PARAGRAPH 29. NO MODIFICATION OF THIS AGREEMENT IS VALID UNLESS ACCEPTED BY US IN WRITING AS PROVIDED IN PARAGRAPH 17. [I CONFIRM THAT I HAVE DOWNLOADED A FULL SET OF ACCOUNT DOCUMENTS FROM YOUR WEBSITE AND I HAVE NOT MADE ANY ALTERATIONS OR DELETIONS TO THIS AGREEMENT OR ANY SUCH DOCUMENTS FROM THE ORIGINAL FORMS POSTED ON THE WEBSITE. IN THE EVENT THAT THERE ARE ANY ALTERATIONS OR DELETIONS TO THIS AGREEMENT OR ANY SUCH DOCUMENTS, SUCH ALTERATIONS AND DELETIONS SHALL NOT BE BINDING ON YOU AND SAID ORIGINAL FORMS SHALL GOVERN MY ACCOUNT RELATIONSHIP WITH YOU.] Signature of Customer _______________________ Title ___________________ Date__________________________ Signature of Customer _______________________ Title ___________________ Date__________________________ Signature of Customer _______________________ Title ___________________ Date__________________________ Signature of Customer _______________________ Title ___________________ Date__________________________
IF A PARTNERSHIP ACCOUNT, EACH GENERAL PARTNER MUST SIGN; IF A CORPORATE ACCOUNT, AN AUTHORIZED OFFICER MUST SIGN; IF AN L.L.C. ACCOUNT, EACH MANAGING MEMBER MUST SIGN; IF A TRUST ACCOUNT, EACH TRUSTEE MUST SIGN. 6 Electronic Version EX-10.01(E) 11 c90749exv10w01xey.txt FORMS OF BEAR STEARNS FOREX INC. CUSTOMER AGREEMENT Exhibit 10.01(e) FOREIGN EXCHANGE MASTER AGREEMENT This FOREIGN EXCHANGE MASTER AGREEMENT sets forth the terms and conditions that will govern foreign currency trading between Bear Stearns Forex Inc. ("BSF") and (CUSTOMER NAME) (an investment fund organized under Luxembourg law, which hereinafter shall be referred to as the "Counterparty"). This Agreement shall not require the Parties to enter into any Forex or Option Contracts but shall govern any Forex or Option Contracts which are currently outstanding or hereafter entered into. All transactions are entered into in reliance on the fact that this Master Agreement and all confirmations form a single agreement between the Parties, and the parties would not otherwise enter into any transactions. Each Party hereto represents and warrants that it is fully authorized under its charter and/or by-laws and under local and United States ("U.S.") law and regulations and an appropriate and suitable "person" to enter into this Agreement and into the type of transactions described herein. An advisor ("Advisor") may be appointed to act as Counterparty's advisor and agent for any and all purposes under this Agreement; said appointment will be by investment management agreement between Counterparty and Advisor and may also be documented on a power of attorney. 1. DEFINITIONS As used in this Foreign Exchange Master Agreement, the following terms shall have the following meanings unless the context clearly indicates otherwise: (a) "Account" means the account maintained by BSSC as agent for BSF in the name of Counterparty. (b) "Advisor" means one or more entities appointed pursuant to Section 12(k) and the Schedule, Part I., of this Agreement. (c) "Affiliate" means parent company or affiliate of BSF, including but not limited to BSSC. (d) "Agreement" means this Master Foreign Exchange Agreement, including the Schedule hereto, together with all Forex or Option Contracts entered into hereunder. (e) "American Style Option" means an Option which may be exercised on any Business Day up to and including the Expiration Time. (f) "Broker's Call Rate" means the broker's call rate quoted daily by BSSC at its main office in New York. Factors affecting the determination of BSSC's broker's call rate are the broker's call rates posted by various money center banks that BSSC selects, other representative broker's call rates, such as the "call money" rate published by the Wall Street Journal and the New York Times, and the rate that BSSC is charged when borrowing money. (g) "BSSC" means Bear, Stearns Securities Corp. (h) "Business Day" means any day, excluding Saturday or Sunday, on which commercial banks in New York City are open for business, provided however, that for purposes of settlement under a Forex or Option Contract, a Business Day must also be a day on which banks are open for business in the principal financial center of each of the countries whose currencies are covered by that Forex or Option Contract. (i) "Buyer" means the owner of an Option. (j) "Call" means an option entitling, but not obligating, the Buyer to purchase from the Seller, at the Strike Price, a specified quantity of the Call Currency. (k) "Call Currency" means the currency agreed as such at the time an Option is entered into. (l) "Contract Value" shall mean the U.S. Dollar value of the Currency subject to such Forex or Option Contract, at the contract price. BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (m) "Currency Pair" means the two currencies which may be potentially exchanged upon the exercise of an Option, one of which shall be the Put Currency and the other the Call Currency. (n) "European Style Option" means an Option for which Notice of Exercise may be given only on the Option's Expiration Date, up to and including the Expiration Time, unless otherwise agreed. (o) "Exercise Date" means the Business Day on which a Notice of Exercise received by the Seller becomes effective. (p) "Expiration Date" means the date specified as such in a Confirmation. (q) "Expiration Time" means the latest time on the Expiration Date on which the Seller must accept a Notice of Exercise as specified in a Confirmation. (r) "Forex Contract" means a Forward Contract or Spot Contract; "Forward Contract" means any contract between the Parties for the purchase or sale of currency having a maturity date of more than two Business Days after the date on which such contract is entered into, provided, however, that for purposes of Section 4 of this Agreement, Forward Contract shall be any contract having a maturity date more than two days after the date on which such contract is entered into; and "Spot Contract" means any contract between the Parties for the purchase or sale of currency having a maturity date of two Business Days or less after the date on which such contract is entered into. (s) "In-the-Money-Amount" means (i) in the case of a Call, the excess of the Spot Price over the Strike Price, multiplied by the aggregate amount of the Call Currency to be purchased under the Call, where both prices are quoted in terms of the amount of the Put Currency to be paid for one unit of the Call Currency; and (ii) in the case of a Put, the excess of the Strike Price over the Spot Price, multiplied by the aggregate amount of the Put Currency to be sold under the Put, where both prices are quoted in terms of the amount of the Call Currency to be paid for one unit of the Put Currency. (t) "Market Value" of any currency at any time means (i) for U.S. Dollars, the amount of U.S. Dollars, and (ii) for any other currency, the amount of U.S. Dollars that could be purchased at that time in exchange for that amount of currency, based on then current exchange rates in the New York foreign exchange market for delivery of such currency on the relevant Settlement Date, as determined by BSF in any commercially reasonable manner. (u) "Maturity Date" shall mean the date such Forex Contract or Option is to be performed between the parties to that Contract. (v) "Notice of Exercise" means telex, telephonic or other electronic notification (excluding facsimile transmission) providing assurance of receipt, given by the Buyer prior to or at the Expiration Time, of the exercise of an Option, which notification shall be irrevocable. (w) "Offsetting Forward Contracts" mean any two or more outstanding Forward Contracts having the same Settlement Date where under one or more of such Forward Contracts BSF has agreed to receive one currency in exchange for a second currency, and under the other of such Forward Contracts, BSF has agreed to receive such second currency in exchange for such first currency. (x) "Option" means a Put or a Call on a Forex Contract, as the case may be, including any unexpired Put or Call previously entered into by the Parties, which shall become subject to the Agreement unless otherwise noted. (y) "Parties" means the parties to this Agreement including their successors and permitted assigns (but without prejudice to the application of clause 4.(a)(vii)); and the term "Party" shall mean whichever of the Parties is appropriate in the context in which such expression may be used. (z) "Person" means an appropriate person or entity to engage in Forex or Option Contracts, both under applicable laws and under any internal documents authority. Page 2 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (aa) "Premium" means the purchase price of the Option as agreed upon by the Parties, and payable by the Buyer to the Seller thereof. (ab) "Premium Payment Date" means unless otherwise agreed by the parties hereto the date specified at the time of the execution of the option unless otherwise provided for in the Confirmation. (ac) "Put" means an option entitling, but not obligating, the Buyer to sell to the Seller at the Strike Price a specified quantity of the Put Currency. (ad) "Put Currency" means the currency agreed as such at the time an Option is entered into. (ae) "Seller" means the Party granting an Option. (af) "Settlement Date" means the Business Day specified for delivery of the currencies bought and sold under a Forex or Option Contract, or the date such Forex Contract or Option is to be performed between the Parties. (ag) "Spot Date" means the spot delivery day for the relevant Currency Pair as generally used by the foreign exchange market; (ah) "Spot Price" means the price at the time at which such price is to be determined for foreign exchange transactions in the relevant Currency Pair for value on the Spot Date, as determined in good faith by the Seller and/or BSF; (ai) "Strike Price" means the price specified in a Confirmation at which the Currency Pair may be exchanged. 2. ENTRY INTO FOREX CONTRACTS AND OPTIONS The Parties shall be legally bound by the terms of each Forex Contract or Option (hereinafter Forex Contracts and Options may be collectively referred to as "FX Transaction(s)") from the moment they agree to those terms (whether orally or otherwise). BSF shall issue a confirmation ("Confirmation") or shall procure that BSSC does so as soon as practicable after an FX Transaction is entered into. Absent manifest error, unless the Counterparty objects to the terms contained in any Confirmation within one (1) Business Day of receipt (as such term is defined in Section 12 (c)) thereof (the "Applicable Period"), the terms of such Confirmation shall be deemed correct. However, if a corrected Confirmation is issued by BSF or an Affiliate of BSF within the Applicable Period, it shall supersede the previous Confirmation and be deemed correct, unless the Counterparty objects to the terms contained in such corrected Confirmation within the subsequent Applicable Period, as measured from the receipt (as such term is defined in Section 12 (c)) of the corrected Confirmation. The failure by BSF or its Affiliates to issue a Confirmation shall not prejudice or invalidate the terms of any FX Transactions governed by the Agreement. Should Counterparty request suppression of Confirmations, that lack of a Confirmation shall not prejudice or invalidate the terms of any FX Transaction governed by this Agreement. 3. NETTING (a) If at the time the Parties enter into a Forward Contract, one or more other Forward Contracts are outstanding, which, when taken together with such new Forward Contract, constitute Offsetting Forward Contracts, then (unless the Parties otherwise specifically agree in writing or by exchange of telexes evidencing mutual agreement with respect to one or more such Forward Contracts) all such Offsetting Forward Contracts will automatically be canceled and discharged and simultaneously replaced through novation by a new Forward Contract which provides as follows: with respect to each currency, the amount to be delivered by each Party under such Offsetting Forward Contracts shall be compared and the Party having the greater obligation with respect to such currency shall deliver to the other Party on the Settlement Date of such Offsetting Forward Contracts an amount of such currency equal to the difference between the amounts originally required to be delivered by the Parties pursuant to such Offsetting Forward Contracts. Such new Forward Contract should be considered a "Forward Contract" under this Agreement. Page 3 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (b) If each Party has sold a Call Option to the other Party, or if each Party has sold a Put Option to the other Party, then such pair of Call Options or such pair of Put Options shall be terminated and discharged automatically upon the payment in full of the last Premium payable in respect of such Options; provided that such termination and discharge may only occur in respect of Options: (i) each being with respect to the same Currency Pair; (ii) each having a Put Currency amount equal to the Put Currency amount of the other and a Call Currency amount equal to the Call Currency amount of the other; (iii) each having the same Expiration Date and Expiration Time; (iv) each being of the same style, i.e., either both being American Style Options or both being European Style Options; (v) each having the same Strike Price; (vi) neither of which shall have been exercised by delivery of a Notice of Exercise; and (vii) that are otherwise identical in terms that are material for purposes of set-off and discharge. In the case of a pair of Options meeting all the conditions for termination and discharge except condition (ii) above, the Option having the smaller Put Currency amount and Call Currency amount shall be automatically terminated and discharged in its entirety upon payment in full of the last premium payable in respect of such Options; and the Put Currency and Call Currency amounts of the surviving Option shall be reduced by the respective Put Currency and Call Currency amount of the Option discharged. The surviving Option, with Put Currency and Call Currency amounts reduced as aforesaid, shall continue to be an Option for all purposes of this Agreement, including this Section 3. Upon the occurrence of termination and discharge under this Section 3., neither Party shall have any further obligation to the other party in respect of Options discharged. Any Forward Contract and Option resulting from netting as provided for in this Section 3 remains a "Forward Contract" and "Option", respectively, hereunder. 4. LIQUIDATION OF CONTRACTS (a) A "default" shall occur with respect to any Party if: (i) the defaulting Party shall fail to pay or perform any obligation under this Agreement or any FX Transaction; (ii) the defaulting Party shall commence a case or proceeding under any bankruptcy or insolvency law or have any such case or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent (however evidenced) or be unable to pay its debts as they become due; (iv) the defaulting Party shall have a trustee, receiver, liquidator, conservator, administrator, custodian or other similar official appointed with respect to itself or any substantial part of its assets under the laws of any jurisdiction application to it or to all or part of its assets, and in each such case such event is not cured after notice from BSF; (v) the defaulting Party shall disaffirm, disclaim or repudiate any obligation; (vi) any representation or warranty of the defaulting Party shall prove to have been false or misleading in any material respect when made or repeated or when deemed to be made or repeated; (vii) the defaulting Party consolidates or amalgamates with, or merges into, or transfers all or substantially all its assets to, another entity and the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of the defaulting Party immediately prior to such action; (viii) Counterparty fails to give adequate assurance of its ability and/or its eligibility to perform its obligations under this Agreement after a written notice requesting it to do so when BSF or any Affiliate has reasonable grounds for insecurity; (ix) Counterparty is in default under any other agreement with any Bear Stearns Entity; or (x) Counterparty fails to provide to BSF a copy of payment instructions from their paying bank by 3:00 p.m. New York time after a request by BSF on any day that a payment is due. (b) Notwithstanding any other provision of this or any other agreement between the Counterparty and BSF, immediately upon the occurrence of a default, BSF shall have the right, in its sole and absolute discretion, to cancel, terminate and liquidate any or all Forward Contracts then outstanding at any time or from time to time by: Page 4 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (i) closing out each such Forward Contract at a price equal to the difference between the respective Market Values of the currencies that are the subject of that Forward Contract at the time of liquidation, so that such Forward Contract is canceled and a settlement payment in an amount equal to the difference between such Market Values is due to the Party owed the currency having the greater Market Value; (ii) discounting each amount then due, where applicable, under clause (i) to present value as at the time of liquidation (to take account of the period between the date of liquidation and the Settlement Date of the relevant Forward Contract) or in the case of Forward Contracts where the Settlement Date has occurred adding interest to the amount owing by the Defaulting Party at a rate equal to Broker's Call Rate plus a spread to be determined by BSF in a commercially reasonable manner; and (iii) closing out each such Option at the time of liquidation so that each such Option is canceled. Market damages shall be calculated in U.S. Dollars for each party such that they are equal to the aggregate of (a) with respect to each Option purchased by a party, the current market value for such Option, (b) with respect to each Option sold by a party, any unpaid Premium, and, to the extent permitted by applicable law, interest on any unpaid Premium in the same currency as such Premium at the then prevailing market rate, and (c) with respect to any exercised Option, any unpaid amount due in settlement of such Option and, to the extent permitted by applicable law, interest thereon from the applicable Settlement Date to the day of close-out; and (d) any costs and expenses incurred by the non-defaulting Party in covering its obligations (including a delta hedge) with respect to such Option, all as determined in good faith by the non-defaulting Party; and (iv) setting-off against each other or aggregating, as appropriate, all such discounted amounts owing by one Party to the other and, at the election of BSF any or all Margin (as defined below) then held by BSF, and any or all other amounts owing by one Party to the other which relate to this Agreement or any Forward Contract (whether or not then due), so that all such amounts are netted to a single net amount due to one Party. The net amount due after liquidation shall be paid within one Business Day. (c) After a default by Counterparty, BSF or an Affiliate may at any time and from time to time, liquidate any or all non-cash Margin (as defined in Section 11) without notice to Counterparty. BSF or an Affiliate may, at its option, include the proceeds of any such liquidation in any set off under Section 4(b)(iv) and/or Section 4(e). (d) The rate of interest to be used for purposes of calculating present value under Section 4 (b) (ii) and Section 4 (e) shall be as determined by BSF in any commercially reasonable manner. (e) BSF's rights under this Section 4 shall be in addition to, and not in limitation or exclusion of, any other rights which BSF or any of its Affiliates may have (whether by agreement, operation of law or otherwise), and BSF and its Affiliates shall have a general right of set-off with respect to all amounts owed by Counterparty to BSF or to any of BSF's Affiliates whether due or not due (provided that any amount not due at the time of such set-off shall be discounted to present value). In addition to, and without limiting any of BSF's rights under Section 4 (b), after a default, BSF may, in its sole and absolute discretion, liquidate any or all outstanding such Spot Contracts in a manner comparable to that set forth in Section 4 (b) (i) and (if BSF so elects) including any settlement payments resulting from that close out in any set-off pursuant to Section 4 (b) (iv) and/or this Section 4 (e). (f) BSF's parent, subsidiaries and affiliates have the right to liquidate any other positions which Counterparty may have in any other accounts with BSF, its parent, subsidiaries, and affiliates, and to set-off the proceeds therefrom against any amounts owing by Counterparty to BSF and/or to any of its affiliates and subsidiaries. Any property of Counterparty in accounts of Counterparty at BSF, its parent, subsidiaries or Affiliates (collectively and individually "Bear Stearns Entity" or "Bear Stearns") is subject to a first security interest and lien by said Bear Stearns Page 5 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT Entity. Each Bear Stearns entity is an intended third-party beneficiary of this Agreement and BSF is entering into this Agreement upon reliance of said fact. (g) BSF and its Affiliates shall have a general right of set-off with respect to all amounts owed by Counterparty to BSF or to any of BSF's Affiliates or by BSF or any of its Affiliates to Counterparty, whether due or not due (provided that any amount not due at the time of such set-off shall be discounted to present value). (h) To the extent any margin posted by Counterparty pursuant to this Agreement is held in another Bear Stearns Entity (parent, subsidiary, or affiliate of BSF), said Bear Stearns Entity has all the rights which BSF has under this Agreement and under any agreement between Counterparty and such Affiliate, including but not limited to the rights of liquidation and set-off. (i) In addition to each Party's obligations noted in this Section 4, each Party shall be liable to the other Party (and in the case of BSF, this means BSF and its Affiliates) for any remaining deficiency, loss, costs or expenses sustained by the other Party and pay to such other Party all out-of-pocket expenses incurred (including fees and disbursements of counsel) in connection with any reasonable collection or other enforcement proceedings related to any required payments. (j) In the event of default, the Bear Stearns Entity reserves the right to sell, without prior notice to Counterparty, any and all property in which Counterparty has an interest held by or through a Bear Stearns Entity, to buy any or all property which may have been sold short, to cancel any or all outstanding transactions and/or to purchase or sell any other securities or property to offset market risk, and to offset any indebtedness it may have, after which the Counterparty shall be liable to the Bear Stearns Entity for any remaining deficiency, loss, costs or expenses sustained by the Bear Stearns Entity in connection therewith. Such purchases and/or sales may be effected publicly or privately without notice or advertisement in such manner as the Bear Stearns Entity may in its sole reasonable discretion determine. At any such sale or purchase, the Bear Stearns Entity may purchase or sell the property free of any right of redemption. 5. OPTIONS PREMIUMS (a) The Premium related to an Option shall be paid on its Premium Payment Date in the currency specified by the parties and in immediately available funds. (b) If any Premium is not received on the Premium Payment Date, BSF may elect either: (i) to accept a late payment of such Premium; or (ii) to give written notice of such non-payment and treat the related Option as void and/or treat such non-payment as an Event of Default under clause (i) of the definition of Event of Default. Counterparty shall pay all out-of-pocket costs and actual damages incurred in connection with any unpaid or late Premium or void Option, including, without limitation, interest on any Premium in the same currency as such Premium at the then prevailing market rate and any other costs or expenses incurred by the Seller in covering its obligations (including, without limitation, a delta hedge) with respect to such Option. 6. EXERCISE OF OPTIONS (a) The Buyer may exercise an Option by delivery to the Seller of a Notice of Exercise. If an Option has not been exercised prior to or at the Expiration Time, it shall expire and become void and of no effect. Any Notice of Exercise shall: (i) if received prior to 3:00 p.m. on a Business Day, be effective upon receipt thereof by the Seller; and (ii) if received after 3:00 p.m. on a Business Day, be effective only as of the opening of business of the Seller on the first Business Day subsequent to its receipt, or if the Expiration Date occurs before such Business Day, at the Expiration Time on the Expiration Date. Any Notice of Exercise relating to a European Style Option, if received prior to or at the Expiration Time on the Expiration Date, or at any time prior to the Expiration Date, shall be effective at the Expiration Time on the Expiration Date. (b) Unless the Seller is otherwise instructed by the Buyer, if an Option has an In-the-Money Amount at its Expiration Time that equals or exceeds the product of 1% of the Strike Price and the amount of the Call or Put Currency, as appropriate, then the Option shall be deemed automatically exercised. Page 6 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT 7. PAYMENT NETTING; MANNER OF PAYMENT (a) Prior to the Settlement Date of each Forex Contract, such Forex Contract shall, by mutual agreement, be offset or rolled forward; provided, however, that if, such Forex Contract has not been offset or rolled forward by mutual agreement, the Parties agree that BSF shall have the right but not the obligation in its sole discretion to (i) close out such Forex Contract (the "Old Contract") at a price equal to the difference between the respective Market Values of the currencies that are the subject of the Old Contract at the time of such close out, so that such Old Contract is canceled and a settlement payment in an amount equal to the difference between such Market Values is due to the Party owed the currency having the greater Market Value, which settlement payment shall be due and payable on the Settlement Date of such Old Contract, and (ii) establish a new Forex Contract between the Parties for the purchase and sale of the same currencies for delivery on a Settlement Date (the "New Settlement Date") that is the first Business Day following the Settlement Date of the Old Contract at a price based on then current exchange rates in the New York foreign exchange market for delivery of such currencies on the New Settlement Date, as determined by BSF in any commercially reasonable manner. (b) If, at any time, BSF, in its sole discretion, allows Counterparty to settle rather than roll a contract, then: if, on any date, any amounts would otherwise be payable hereunder by each Party to the other in the same currency, then (subject to any right to liquidate under Section 4) each Party's obligation to make payment of any such amount in that currency will be automatically satisfied and discharged on such date and, if the aggregate amount that would otherwise have been payable by one Party exceeds the aggregate amount that would otherwise have been payable by the other Party, replaced by an obligation upon the Party by whom the larger aggregate amount would have been payable to pay the other Party the excess of the larger aggregate amount over the smaller aggregate amount. (c) All payments under this Agreement or any Forex or Option Contract (i) if of U.S. Dollars, shall be made by wire transfer of immediately available funds to the bank account in a major U.S. financial center designated by the Party receiving payment, and (ii) if of any other currency, shall be made by wire transfer of immediately available funds to the bank account in a major financial center in the country in which that currency is legal tender designated by the Party receiving payment, provided that each such bank designated hereunder must be reasonably acceptable to the other Party. (d) If, at any time, BSF, in its sole discretion, allows Counterparty to take or make delivery, then payment shall be per paragraph 7(c) above and with a written record. (e) Regarding the netting of Options, if on any date, Premiums would otherwise be payable hereunder, in the same currencies, between the Parties then, on such date, each Party's obligation to make payment of any such Premium will be automatically satisfied and discharged and, if the aggregate Premium(s) that would otherwise have been payable by one Party exceeds the aggregate Premium(s) that would otherwise have been payable the other Party, replaced by an obligation upon the Party by whom the larger aggregate Premium(s) would have been payable to the other Party the excess of the larger aggregate Premium(s) over the smaller aggregate Premium(s). The netting and settlement of Premiums shall be separate from the netting and settlement of Forex Contracts. (f) Any obligation of BSF (whether or not matured) to pay any sums to Counterparty under this Agreement shall be conditional upon all obligations (whether or not matured) owed by the Counterparty to BSF hereunder having been fully and effectively discharged (or if not matured, provided for in a manner acceptable to BSF.) Page 7 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT 8. TERMINATION This Agreement may be terminated by either Party on five (5) days prior written notice, but such termination shall not affect any rights of any Party which have arisen prior to such termination including, but not limited to any Forex or Option Contract outstanding at the time such termination is effective, which shall remain subject to the terms and conditions of this Agreement until all outstanding obligations are performed or liquidated. Nothing herein shall be construed to limit BSF or any of its Affiliates' right to refuse to engage in any Forex or Option Contract with Counterparty or to limit open positions in accordance with any agreement between the Parties. The provisions of Section 4 (h) and 12 (n) shall survive the termination of this Agreement. 9. ILLEGALITY, IMPOSSIBILITY AND FORCE MAJEURE If either Party is prevented from or hindered or delayed by reason of force majeure or act of State in the delivery or payment of any currency under a Forex or Option Contract, or if it becomes unlawful or impossible for either Party to make or receive any such payment, then the Party for whom such performance has been prevented, hindered or delayed or has become illegal or impossible shall promptly give notice thereof to the other Party and such notified Party may, by written notice to the Counterparty, require the close-out of each affected Forex or Option Contract in accordance with the provisions of Section 4. 10. CREDIT INFORMATION Counterparty shall give BSF such credit information concerning Counterparty as BSF may reasonably request from time to time including, without limitation, annual financial statements for Counterparty in certified or audited form commencing with the most recent such report issued when this Agreement is entered into and thereafter for each fiscal year as soon as available. Counterparty agrees to promptly advise BSF in writing should there be any material change in Counterparty's financial condition, business, or prospects. BSF may obtain this information as a credit review process to protect firm exposure, but not to determine status or suitability to engage in FX Transactions. Since such a credit check is not a suitability test, and you should not engage in any FX Transactions simply because you are deemed credit eligible. 11. MARGIN/MARK-TO-MARKET Initial Margin (as defined below) and Variation Margin (as defined below) shall be paid and returned as provided for in this Section 11. (Initial Margin and Variation Margin are referred to collectively as "Margin".) (a) At the time of entry into each Forex Contract, Counterparty shall provide BSF, or an Affiliate, as initial margin ("Initial Margin"), a percentage of that Contract's Contract Value (as defined below), as BSF elects from time to time in BSF's sole discretion. After a Forex Contract ceases to be outstanding, BSF shall return to Counterparty any Initial Margin that BSF holds with respect to such Forex Contract. The "Contract Value" of a Forex Contract is the amount of U.S. Dollars to be delivered on the Settlement Date of that Contract. But, if the U.S. Dollar is not one of the currencies covered by that Forex Contract, then the "Contract Value" is the amount of U.S. Dollars that could be purchased on the date such Forex Contract is entered into, in exchange for the amount of currency to be purchased by BSF under that Contract, based on the then current exchange rate in the New York foreign exchange market on such date for delivery of such currency on the relevant Settlement Date, as determined by BSF in any commercially reasonable manner. (b) At the time of sale of an Option Contract by Counterparty, it shall provide BSF as initial margin a percentage of that Option Contract value (as defined below). The "Option Contract Value" of an Option Contract is (i) the amount of U.S. Dollars to be delivered on the Settlement Date if that contract is exercised or (ii) if the U.S. Dollar is not one of the currencies covered by such Option, the amount of U.S. Dollars that could be purchased on the date such Option is entered into, in exchange for the currency to be delivered by the Seller under such Option, based on the then current exchange rate in the New York foreign exchange market for delivery of such currency on the Expiration Date of such Option, as determined by BSF in any commercially reasonable manner. Page 8 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (c) As of the close of business on each Business Day, the net aggregate unrealized gain on all Forex Contracts and the market value of Option Contracts then outstanding shall be calculated by BSF by: (i) first determining for each such Forex Contract the difference between the respective Market Values of each of the Currencies that is the subject of that Forex Contract, it being understood that the party owed the Currency with the larger Market Value has an unrealized gain equal to such difference, (ii) then determining the sum of each party's unrealized gains under all such Forex Contracts, and (iii) plus the Market Value of long options positions, less the Market Value of short options positions. If the aggregate unrealized gain of BSF, adjusted for the Market Value of Forex Options, exceeds that of the Counterparty, BSF shall have a "Market Exposure" in an amount equal to such excess. (d) If on any Business Day, the Market Exposure of BSF exceeds a percentage (as determined by BSF in its sole discretion from time to time) of the aggregate amount of Initial Margin then held by BSF with respect to all Forex and Option Contracts then outstanding, Counterparty shall provide BSF with additional Margin ("Variation Margin") in an amount equal to such Market Exposure. (e) If, on any Business Day, the aggregate amount of Variation Margin held by BSF with respect to all Forex or Option Contracts then outstanding exceeds BSF's Market Exposure, BSF shall return the Variation Margin to Counterparty in an amount equal to such excess. (f) Each payment or return of Variation Margin shall be made on the day demanded if notified by 1:00 p.m. New York time and otherwise within the Business Day after notification. Margin shall be provided in the form of: (i) cash; (ii) U.S. Treasury Bills maturing not more than 180 days from the date of delivery from Counterparty to BSF (provided that for purposes of determining the amount of Margin held by BSF at any time, U.S. Treasury Bills shall be valued at 90% of their then current market value for sale in the ordinary course in the government securities market, as determined by BSF in any commercially reasonable manner) or (iii) such other collateral as BSF, in its sole discretion, shall deem acceptable with such "haircut" applied thereto as BSF, in its sole discretion, shall deem appropriate. Non-cash Margin shall be delivered to BSF in accordance with its instructions. (g) Counterparty hereby grants to each Bear Stearns Entity a valid and first priority, perfected, continuing security interest in and assign (a) all property now or hereafter held or carried by any Bear Stearns Entity in any of your accounts, in all property in which you now have or hereafter acquire an interest, which is now or hereafter held by or through any Bear Stearns Entity and all property or otherwise held or subject to the control of any Bear Stearns Entity or agent thereof, including (without limitation) all margin, securities, monies, investment property (including without limitation all financial assets and instruments), (b) all rights you have in any Obligation (as defined below) of any Bear Stearns Entity, and (c) any and all rights, claims or causes of actions you may now or hereafter have against any Bear Stearns Entity (including without limitation all rights you have in any repurchase agreement to which any Bear Stearns Entity is a party) and, (d) all proceeds of or distributions on any of the foregoing (collectively (a) through (d), "Collateral"), as security for the payment and performance of any and all of your Obligations to each Bear Stearns Entity. The description of any property that is collateral under any activity, including, but not limited to, collateral described in any confirmation, account statement, or activity report, is hereby incorporated into this Agreement as if fully set forth herein and constitutes collateral hereunder. You hereby acknowledge and agree that all such property of yours held by or through any Bear Stearns Entity is held as Collateral by such Bear Stearns Entity as agent and bailee for itself and all other Bear Stearns entities. Each Bear Stearns Entity agrees to act as agent and bailee of and for each other Bear Stearns Entity in respect of the Collateral and shall hold any Collateral both secured party and as agent and bailee of and for each other Bear Stearns Entity. Each Bear Stearns Entity shall, and hereby agrees to, comply without your further consent with any orders or instructions of each other Bear Stearns Entity with respect to the Collateral, including (without limitation), (i) any entitlement orders, including without limitation, all notifications it receives directing it to transfer or redeem any Collateral and (ii), if the Bear Stearns Entity is a commodity intermediary, any instructions to Page 9 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT Stearns Entity to apply any value distributed on account of a commodity contract as directed by each other Bear Stearns Entity. Each Bear Stearns Entity has the right, in its sole discretion, to not comply with (i) any entitlement order originated by you or a third party that would require a Bear Stearns Entity to make a delivery of Collateral to you or any other person and (ii) any instruction from you to apply any value on account of any commodity contract (whether such value is distributable or not), to the extent that such Collateral is necessary to satisfy any Obligation (including, without limitation, any requirement for margin or other security) to another Bear Stearns Entity if such other Bear Stearns Entity requests (orally or in writing) that such entitlement order or instruction not be complied with. Each activity has been entered into in consideration of each other and your performance of each and every one of your Obligations is a condition precedent to Bear Stearns' performance of its Obligations; provided however, that Activities shall not be merged. In furtherance of the foregoing, any Bear Stearns Entity may, at any time and without prior notice to you, use, credit, apply or transfer any such Collateral between your accounts (or other arrangements) at any Bear Stearns Entity to satisfy or secure any of your Obligations. Collateral pledged by you in connection with a particular Activity shall secure first your Obligations under that Activity and second, your Obligations under all Activities. "Obligations" means each and every obligation or liability (including payment and delivery obligations, any "debt" as defined in the United States Bankruptcy Code, any obligation arising under a guarantee that you have provided to a Bear Stearns Entity and every obligation or requirement you have under any activity to maintain or deliver margin or other collateral with respect to such other activity) between Bear Stearns and you in connection with a guarantee, or an activity or its acceleration, cancellation, termination or liquidation, whether arising hereunder, heretofore, or hereafter. (h) BSF shall have the free and unrestricted right to use and dispose of any Margin provided to it hereunder, subject only to its obligation to return Margin (or, in the case of Treasury Bills, comparable Treasury Bills) when and if so provided in this Agreement. (i) Cash held by BSF as Margin shall bear interest calculated on a daily basis at the Broker's Call Rate as in effect, as advised by BSF, minus a spread to be determined by BSF from time to time, with the amount of interest accrued and paid monthly. (j) Notwithstanding any other provision of this Section 11, BSF may from time to time make intra-day Margin calls and/or change Margin provisions contained in this Section 11 (including, without limitation, by increasing and/or decreasing any of the percentages or amounts set forth in this Section 11), effective immediately, on notice actually received by the Counterparty. Each such change in Margin provisions shall apply to Forex or Option Contracts outstanding at the time such revised provisions become effective, as well as to Forex or Option Contracts entered into thereafter. (k) The parties acknowledge and agree that the security interest granted hereunder shall be an automatically perfected security interest of first priority (i) granted by an "entitlement holder" (as defined in Section 8-102(a)(7) of the Uniform Commercial Code as in effect in the State of New York (the "UCC")) in favor of a "securities intermediary" (as defined in Section 8-102(a)(14) of the UCC) and (ii) granted by a "commodity customer" (as defined in Section 9-115(1)(c) of the UCC) in favor of a "commodity intermediary" (as defined is Section 9-115(1)(d) of the UCC). The Parties acknowledge and agree that New York shall be the security intermediary's jurisdiction, pursuant to Section 8-110 of the UCC, and the commodity intermediary's jurisdiction, pursuant to Section 9-103(6) of the UCC. 12. MISCELLANEOUS (a) This Agreement is solely for the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party. This Agreement may not be amended except by a writing signed by both Parties. The Section headings in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any provision of this Agreement. (b) Any rights granted to BSF under this Agreement may be exercised by any of BSF's Affiliates, its successors or assigns. Page 10 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (c) All notices, requests and other communications shall be delivered by hand, registered mail (return receipt requested), telex, facsimile or by electronic mail if the Counterparty has been approved by Bear Stearns to trade electronically and there is confirmation that the e-mail was delivered to the proper e-mail address, or telephone when a section hereof so allows, and shall be deemed to have been received on the date received if delivered by hand; on the date stated in the return mail receipt if sent to the respective Party's address set forth in the Schedule; when transmitted to the telex number of the respective Party set forth in the Schedule (if confirmed by the respective answerback set forth in the Schedule); when received at the facsimile number set forth in the Schedule; when delivered by e-mail; or when spoken when delivered telephonically to the telephone number set forth in the Schedule. These addresses, telex numbers, facsimile numbers and answerbacks may be changed by written notice, which shall only be effective upon receipt; it is each Party's obligation to keep the other Party appraised of such updates. (d) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of law, and any dispute arising hereunder shall be resolved by binding and final arbitration between BSF and Counterparty at the facilities and before an all securities panel, to the maximum extent allowed by law or arbitration law, of the National Association of Securities Dealers, Inc. (NASD) or of the New York Stock Exchange, Inc. By entering into this arbitration clause BSF and Counterparty waive any and all rights to trial and rights to trial by jury they would otherwise have. Any arbitration which occurs hereunder shall be at a situs in New York, New York. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. (e) Each Party hereby irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any proceedings. (f) Counterparty agrees to file whatever documents and notices are required of it under its own local law, with copies to BSF, in order to allow it to carry out each provision of this Agreement. In addition, Counterparty agrees to execute such documents and to take all steps necessary to make the terms of this Agreement effective. To the extent the filing of any such documents and notices may violate your local jurisdiction laws on secrecy; you waive any rights to such secrecy provision. (g) Counterparty agrees to irrevocably appoint a process agent as indicated in Part II of the Schedule to this Agreement if Counterparty is not domiciled in the United States. (h) No waiver of any breach or condition of this Agreement shall be deemed a waiver of any other breach or condition, whether of a like or different nature. This Agreement represents the entire agreement with respect to transactions described herein and supersedes any prior or contemporaneous oral or written agreements between the Parties. In the event that any provision of this Agreement is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision, unless the deletion of such provision shall substantially impair the benefits of the remaining provisions of this Agreement. (i) The Parties agree that each may electronically record all telephonic conversations between or among them and their respective employees and that any such recordings may be submitted in evidence to any court or in any Proceeding for the purpose of establishing any matters pertinent to this Agreement. (j) Should Counterparty appoint an advisor, Counterparty hereby appoints the Advisor that is listed in Part I of the Schedule to this Agreement. (k) Counterparty hereby makes the following representations and warranties which are deemed to be repeated at the time of entry into any FX Transaction: Page 11 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (i) None of the assets of Counterparty are "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101; (ii) Counterparty is not subject to the fiduciary responsibilities of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and (iii) Counterparty's entry into Forex or Option Contracts under this Agreement will not give rise to any prohibited transaction under Title I of ERISA or Section 4975 of the Internal Revenue Code. (iv) Counterparty is an "eligible swap participant" within the meaning of Commodity Futures Trading Commission Rule 35.1 (codified at 17 C.F.R. Section. 35.1). Counterparty agrees to notify BSF promptly if, at any time, it no longer is an "eligible swap participant." (v) (a) Counterparty understands that the foreign exchange spot, forward, and options markets are subject to complex risks which may arise without warning and may at times be volatile and that losses may occur quickly and in unanticipated magnitude, (b) Counterparty is a sophisticated investor able to evaluate the risks of FX Transactions, (c) Counterparty is prepared to bear and is capable of bearing (financially and otherwise) all risks associated with FX Transactions, and (d) Counterparty is entering into FX Transactions based upon the advice of its Advisor and its traders, and is not relying upon advice of Bear Stearns. (vi) Counterparty understands that whether or not an affiliate of BSF has acted as agent for other transactions, for these FX Transactions, BSF and its affiliates will be acting as principal, neither in an agency capacity nor as broker nor as advisor. (vii) Counterparty understands that BSF may have or take positions similar or opposite to those of Counterparty, and further that the price of each FX Transaction will be as mutually agreed upon by the Parties, and in this instance, Counterparty may by verbal instruction give time and price discretion to BSF. (viii) Counterparty understands that BSF is dealing on a principal basis and that the prices of FX Transactions quoted by BSF may not be the best prices available in the market and are subject to a mark-up. (l) BSF represents and warrants that it is a financial institution under the provisions of Section IV of The Federal Deposit Insurance Corporation Improvement Act of 1991 as amended by regulation EE in January 1994 ("FDICIA"). This Agreement shall be a Netting Contract, as defined in FDICIA, and each receipt or payment for delivery obligation hereunder shall be a covered contractual payment entitlement or covered contractual payment obligation, respectively as defined in FDICIA. (m) The receipt or recovery by either Party (the "first Party") of any amount in respect of an obligation of the other Party (the "second Party") in a Currency other than that in which such amount was due, whether pursuant to a judgment of a court or pursuant to Section 4 or 9, shall discharge such obligation only to the extent that on the first day on which the first Party is open for business immediately following such receipt, the first Party shall be able, in accordance with normal banking practice, to purchase the Currency in which such amount was due with the Currency received. If the amount so purchasable shall be less than the original amount of the Currency in which such amount was due, the second Party shall, as a separate obligation and notwithstanding any judgment of any court, indemnify the first Party against any loss sustained by it. The second Party shall in any event indemnify the first Party against any costs incurred by it in making such purchase of Currency. Page 12 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT (n) Each Party shall enter into each FX Transaction governed by the Agreement in reliance only upon its own judgment. Neither Party holds itself out as advising, or any of its employees or agents as having the authority to advise, the other Party as to whether or not it should enter into any such Forex or Option Contract as to any subsequent actions relating thereto or on any other commercial matters concerned with any Forex or Option Contract governed by the Agreement. Neither Party shall have any responsibility or liability whatsoever in respect of any advice of this nature given, or views expressed, by it or any of such persons to the other Party, whether or not such advice is given or such views are expressed at the request of the Party. To the extent Counterparty may communicate with BSF traders or other personnel or receive information from or on behalf of BSF, Counterparty acknowledges and agrees that any such information and/or recommendation may be incomplete, may not be verified, and may be changed without notice to Counterparty. (o) This Agreement, the particular terms agreed between the Parties in relation to each and every FX Transaction governed by this Agreement (and, insofar as such terms are recorded in a Confirmation, each such Confirmation), the Schedule to this Agreement and all amendments to any of such items shall together form the agreement among the Parties and shall together constitute a single agreement among the Parties. The Parties acknowledge that all FX Transactions governed by the Agreement are entered into in reliance upon the fact that all items constitute a single Agreement among the Parties. (p) For FX Forward and Spot transactions, BSSC carries the Counterparty's account(s) as clearing broker for Counterparty. For FX Options, BSF carries the accounts and BSSC solely provides an operational reporting service. Unless BSSC receives from Counterparty prior written notice to the contrary, BSF, BSSC or their affiliates may accept from Counterparty without any inquiry or investigation: (a) orders for the purchase or sale of securities, futures, foreign exchange and other property in the Counterparty's account(s) on margin or otherwise; (b) any positions executed in FX Transactions, and (c) any other instructions concerning the Counterparty's account(s) or the property therein. (q) Counterparty hereby acknowledges, consents and agrees that, in accordance with Bear Stearns and industry policies, practices and procedures, Bear Stearns and its affiliates and branches may transmit any and all information relating to you, this Agreement, and the transactions undertaken hereunder to such affiliates and branches for efficient processing, database maintenance, record keeping or other use in accordance with such practices, policies and procedures, and that Bear Stearns and such affiliates may disclose the same as Bear Stearns determines in good faith to be appropriate to auditors, counsel, regulators and self-regulatory organizations. In addition Bear Stearns may disclose such information to the extent that it determines in good faith to be required by applicable law, rule, regulation or order. (r) This Agreement may be executed in counterparts, each of which when executed shall be deemed an original. Page 13 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT SCHEDULE Part I. APPOINTMENT OF ADVISOR Should Counterparty appoint an advisor, Counterparty hereby appoints QUADRIGA ASSET MANAGEMENT INC. ("Advisor") as its agent and attorney-in-fact for any and all purposes under this Agreement. Advisor shall act through its officers, employees and agents. The powers of Advisor shall include, without limitation, the right to enter into or liquidate Forex or Option Contracts on behalf of Counterparty in such amounts, at such times and on such other terms as Advisor shall determine, the right to give and receive notices hereunder on behalf of Counterparty, and the right to agree to amendments to this Agreement on behalf of Counterparty. All acts or omissions of Advisor under or in connection with this Agreement shall have the same force and effect as if taken by a duly authorized employee of Counterparty. BSF is hereby authorized and directed to follow the instructions of Advisor in every respect concerning this Agreement and all matters related thereto. Counterparty hereby ratifies and confirms any and all Forex or Option Contracts and instructions made or given by Advisor. Counterparty's appointment of Advisor is coupled with an interest and is irrevocable. Neither BSF nor BSSC, nor its employees, officers, or directors have any duty to supervise or review the acts or advice of the Advisor, nor shall Bear Stearns, its officers, directors or employees be liable for any damage which arise from Advisor's acts or omissions. Part II. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS FOR NON-U.S. ENTITIES Counterparty agrees to irrevocably appoint as process agent ("Process Agent") to receive, for it and on its behalf, service of process in any proceeding. If for any reason Counterparty's Process Agent is unable to act as such, Counterparty will promptly notify the other party and within 10 days appoint a substitute process agent acceptable to the other party. Counterparty irrevocably consents to service of process in the manner provided for in this Agreement. Nothing in this Agreement will affect the right of BSF to serve process in any other manner permitted by law. Part III. TRADING AUTHORIZATION FOR FX TRANSACTIONS The following individuals are authorized to engage in FX Transactions:
Name Title ---- ----- ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________
Page 14 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT Trade confirmation should be addressed as follows:
Original Interested Party -------- ---------------- Name: Name: ___________________________ ___________________________ Address: Address: ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ Attention: Attention: ___________________________ ___________________________
As changes in trading personnel or address occur we will forward a revised Schedule. Bear Stearns Forex Inc. may rely upon this authorization as continuing in full force and effect until Bear Stearns receives a revised Schedule changing the above information or notice of termination. In either event, however, it is understood that no change or termination will effect our obligations to you with respect to any transaction arising prior to your receipt of such written notice. Part IV. ADDRESS FOR NOTICES Address for notices or communications to Counterparty: Address: ___________________________ ___________________________ Attention: ___________________________ Telephone: ___________________________ Facsimile: ___________________________ Address for notices or communications to Bear Stearns Forex Inc.: Address: 383 Madison Avenue New York, NY 10179 Attention: David M. Schoenthal Foreign Exchange - 7th Floor Telephone: (212) 272-7683 Facsimile: (212) 272-2314 Page 15 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective authorized officers as of the ______ day of _______________, 2003. BEAR STEARNS FOREX INC. Attention: David Schoenthal By: ______________________________ Address: 383 Madison Avenue President & Director New York, NY 10179 (CUSTOMER NAME) Attention: ______________________________ By: ______________________________ Address: ______________________________ Title: QUADRIGA ASSET MANAGEMENT INC. Attention: ______________________________ By: ______________________________ Address: ______________________________ Title: Page 16 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT PRECIOUS METALS SUPPLEMENT to the Foreign Exchange Master Agreement (the "Agreement") annexed hereto, between Bear Stearns Forex Inc. ("BSF") and (CUSTOMER NAME). This Precious Metals Supplement sets forth the additional terms and conditions that will govern precious metals trading and precious metal options trading between BSF and (CUSTOMER NAME) ("Counterparty"). This Precious Metals Supplement shall not require the Parties to enter into any Precious Metals Transactions (as defined below), but shall govern any such Transactions which are currently outstanding or hereafter entered into. Each Party hereto represents and warrants that it is fully authorized to enter into this Agreement and into the type of transactions described herein and is a commercial user of or a merchant handling precious metals with the capacity to make or take delivery of precious metals. 1. Definitions (a) "Precious Metal" means Gold, Silver, Platinum and Palladium in each case in the form and having the minimum fineness required for good delivery at the agreed delivery location. (b) "Precious Metals Contract" means a Forward Contract or Spot Contract for Precious Metals; "Forward Contract" shall also mean any contract between the Parties for the purchase and sale of a type of Precious Metal having a settlement date of more than two Business Days after the date on which such contract is entered into; provided, however, that for purposes of Section 4 of the Agreement, Forward Contract shall be any such contract having a settlement date more than two days after the date on which such contract is entered into; and "Spot Contract" shall also mean any contract between the Parties for the purchase and sale of a type of Precious Metal having a settlement date of two Business Days or less after the date on which such contract is entered into. "FX Transactions" shall also include any Precious Metals Contracts or options thereupon. All terms used herein and not defined shall have the meanings ascribed thereto in the Agreement. 2. Delivery And Purchase Price (a) On the settlement Date of each Transaction, Seller shall deliver the agreed quantity of the agreed type of Precious Metals (a) if delivery is to be in London, by transfer to Buyer's unallocated account at a member of the London Bullion Market for that type of Precious Metal or another London bullion dealer or bank designated by Buyer which is reasonably acceptable to Seller, (b) if delivery is in New York, to a Comex depository, and (c) if delivery is in a different city, to a mutually agreed depository. Each Party acknowledges that (i) unallocated gold represents only the right to receive Precious Metal from the dealer or bank (collectively, "Depository") it selects and (ii) it bears responsibility for the selection of the Depository at which it maintains unallocated Precious Metal and for any credit or operational rules at that Depository. The Buyer shall pay the agreed price for that Precious Metal on the Settlement Date. 3. Title And Risk Of Loss (a) Title to and all risk of loss or damage of or to any and all Precious Metals delivered hereunder shall pass to Buyer on delivery. 4. Warranty (a) Seller represents and warrants that (a) title to Precious Metals delivered hereunder will pass to Buyer on delivery free and clear of all liens, encumbrances and claims; (b) it has the right to sell such Precious Metal hereunder; and (c) such Precious Metals meet the requirements specified in the definition of that term herein. THERE ARE, HOWEVER, NO OTHER WARRANTIES, EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY. Page 17 of 18 BEAR STEARNS FOREX INC. FOREIGN EXCHANGE AGREEMENT 5. Taxes (a) When laws, ordinances and regulations permit, Counterpart shall assume liability for and pay, in addition to the purchase price of the precious metal, all federal, state, municipal and foreign taxes (including Value Added Taxes), excises, charges and other fees now or hereinafter imposed, levied or assessed by any governmental authority or agency that may be applicable to the sale and/or delivery of precious metals hereunder (but excluding net income, excess profits, or corporate franchise taxes). (b) In those cases in which the laws, regulations or ordinances impose upon the Seller the obligation to collect or pay such taxes, excises, charges, or other fees, Buyer shall pay to Seller an amount equivalent to such governmental execution for which Seller shall be liable. If Buyer is entitled to purchase precious metals free of any tax, fee or charge, Buyer shall furnish to Seller proper exemption certificates to cover such purchase or purchases. In addition, Buyer acknowledges receipt of the disclosure statement from Seller (as set forth in Section 4101 of Internal Revenue Code of 1986) or is knowledgeable of the contents thereof. Page 18 of 18 EX-10.01(F) 12 c90749exv10w01xfy.txt FORM OF BARCLAYS CAPITAL INC. CUSTOMER AGREEMENT Exhibit 10.01(f) BARCLAYS CAPITAL INC. FUTURES AND OPTIONS CUSTOMER ACCOUNT AGREEMENT This Futures and Options Customer Account Agreement ("Agreement") between BARCLAYS CAPITAL INC., a registered futures commission merchant ("FCM") and broker/dealer, and the undersigned ("Customer") shall govern all transactions that Barclays Capital Inc. or any of its affiliates or agents (collectively, "Barclays," unless otherwise specified) may execute, clear and/or carry on Customer's behalf for the purchase or sale of commodities, commodity futures, security futures, option and forward contracts thereon and interests therein (including exchange-for-physical ("EFPs"), exchange-for-swap ("EFSs"), and exchange-for-risk ("EFRs") transactions) (collectively, "Contracts") and any accounts, including reactivated accounts, carried by Barclays on behalf and in the name of Customer (each, an "Account"). 1. APPLICABLE LAW. Each Account and all Contracts, transactions and agreements in respect of each Account shall be subject to (i) the Commodity Exchange Act ("CEA") and all rules and interpretations of the Commodity Futures Trading Commission ("CFTC") and the National Futures Association ("NFA"); (ii) the constitution, by-laws, rules, regulations, policies, procedures, interpretations and customs of any applicable U.S. or non-U.S. board of trade, exchange, contract market, trading facility or execution facility, including, without limitation, an electronic trading system, facility or service, or clearing organization (each, a "Transaction Facility") or of any clearing firm or self-regulatory agency or organization; and (iii) any other laws, rules, interpretations, customs or usage of the trade applicable to Customer's trading of Contracts. All such laws, rules, regulations, policies, procedures, interpretations, customs and usage, as in force from time to time, are hereinafter collectively referred to as "Applicable Law". 2. GENERAL AGREEMENTS. Customer acknowledges and agrees that: (a) Barclays' Responsibility. Barclays is responsible solely for the execution, carrying and/or clearing of Contracts in each Account in accordance with the terms of this Agreement. Neither Barclays nor any managing director, officer or employee of Barclays is acting as a fiduciary or advisor in respect of Customer or any Contract or Account. Barclays shall have no responsibility for compliance with any law or regulation governing the conduct of any fiduciary or advisor. Barclays shall have no responsibility for Customer's compliance with any law or regulation governing or affecting Customer's trading hereunder. (b) Information and Positions. Any information on the market or on matters incidental to the operation of any of your Accounts or the nature of any of the Contracts provided by Barclays is solely incidental to the conduct of Barclays' business as an FCM. Barclays makes no representation as to the accuracy, completeness or reliability of any such information. Barclays and its managing directors, officers and employees may take, hold or liquidate positions in, or provide such information to other customers with respect to, Contracts that are the subject of such information furnished by Barclays to Customer, and such other positions and/or information may be inconsistent with the positions held by or information given to Customer. (c) Limitation of Barclays' Liability. Barclays shall not be liable to Customer (i) in connection with the performance or non-performance by any Transaction Facility or by any other third party where the use of such third party was not required by Barclays (including, without limitation, floor brokers, executing agents, banks, clearing firms and other depositories) in respect of any Contract or other property of Customer; (ii) as a result of any prediction or information made or given by a representative of Barclays, 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 Barclays' obligations hereunder directly or indirectly caused by the occurrence of any contingency beyond the control of Barclays including, but not limited to, the unscheduled closure of a Transaction Facility, clearing firm or other depository or delays in the transmission of orders due to breakdowns or failures of transmission or communication facilities, Transaction Facilities or other systems, it being understood that Barclays shall be excused from performance of its obligations hereunder for such period of time as is reasonably necessary after such occurrence to remedy the effects therefrom; (iv) as a result of any action taken by or on behalf of Barclays or its floor brokers and agents to comply with Applicable Law; or (v) for any acts or omissions of those neither employed nor supervised by Barclays. Neither Barclays nor its managing directors, officers or employees shall be responsible for any loss, liability, damage or expense except to the extent that such loss, liability, damage or expense arises from its gross negligence or willful misconduct. In no event will Barclays, its managing directors, officers or employees be liable to Customer for consequential, incidental or special damages under or relating to this Agreement. (d) Security Interest. Except to the extent proscribed by Applicable Law not subject to waiver, all Contracts, funds, margin, performance bond, premium, currencies, securities, credit balances and other property from time to time held by, to the order of or on behalf of Barclays or held for the benefit of the Customer by Barclays including, without limitation, by any Transaction Facility or clearing firm through which transactions are executed, carried and/or cleared and/or positions are held by Barclays, on behalf of the Customer, and all proceeds thereof (collectively, "Collateral") are hereby pledged to Barclays, and shall be subject to a general lien and a continuing, perfected first security interest in Barclays' favor to secure any and all of Customer's indebtedness or other obligations and/or liabilities owed to Barclays. Customer agrees to execute any documents reasonably required by Barclays for the perfection or negotiation of such general lien or security interest. Customer hereby grants Barclays the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan or invest any of the Collateral, including without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements or reverse repurchase agreements with any party, in each case without notice to Customer. Unless mutually agreed otherwise, Barclays shall pay to Customer the interest or income earned from the investment or utilization of such Collateral at a rate not to exceed the Fed Funds rate minus 0.75%. (e) Conclusiveness of Reports and Objections. All written and oral reports or communications related to transactions in the Accounts, including but not limited to confirmations, purchase and sale statements, monthly statements and correction notices (collectively, "Reports"), shall be conclusive and binding on Customer unless Customer notifies Barclays of any objection as follows: (i) in the case of any written Reports, prior to the opening of trading on the Transaction Facility on or through which such transaction occurred on the business day following the day on which Customer receives such Report, and (ii) in the case of any oral Report, at the time such Report is given to Customer. Nothing herein, however, shall prevent Barclays upon discovery of any error or omission, from correcting a Report. (f) Delivery and Exercise Instructions. If Customer intends to make or take delivery under any futures Contract or to exercise any option Contract, Customer agrees to notify Barclays not later than the time specified by Barclays and in any event at least (i) with respect to long positions, two (2) business days prior to first notice day of the applicable Transaction Facility, and (ii) with respect to short positions, two (2) business days prior to the last trading day for the Contract in question (such time periods are referred to herein as the "Notice Periods"). Notwithstanding the foregoing, Customer agrees that Customer will not make or take delivery through Barclays with respect to any Contract that provides for the physical delivery of an underlying commodity that is not an energy, metal, financial, currency, 2 March 2003 equity or interest rate product (a "Non-Deliverable Contract") except with the prior consent of an officer or director of Barclays. Customer further agrees that, absent such consent to delivery, Customer shall liquidate all of Customer's open positions in Non-Deliverable Contracts no later than the end of the applicable Notice Period. With respect to any deliverable Contract, Customer shall ensure Barclays holds sufficient funds in Customer's Account to fulfill Customer's obligations to make or take delivery and shall furnish Barclays with property deliverable by Customer under any Contract in accordance with Barclays' directions. If Customer fails to comply with any of the foregoing obligations, Barclays may, at its discretion and upon Barclays' good faith effort to notify Customer, liquidate and/or roll forward to a later delivery month any open Contracts, make or receive delivery of any commodities or instruments, or exercise or allow the expiration of any options, for Customer's Account and risk, and in such manner and on such terms as Barclays in its discretion deems necessary or appropriate. Customer shall remain fully liable for, and Customer's Account will be debited for, any loss, costs, expenses and liabilities incurred by Barclays in connection with such transactions and for any remaining debit balance in Customer's Account. (g) Options Exercise and Allocation Procedure. Customer understands and acknowledges that certain option Contracts sold by Customer may be subject to exercise at any time. Exercise notices received by Barclays with respect to option Contracts sold by Barclays customers shall be allocated among customers (including Customer) pursuant to a random allocation procedure, and Customer shall be bound by any such allocation made to it. Information regarding Barclays' random allocation procedure is available upon request. Such notices may be allocated to Customer after the close of trading on the day on which such notices have been allocated to Barclays by the applicable Transaction Facility. In the event of the allocation of an exercise notice(s) to Customer, Barclays shall use reasonable efforts to notify Customer promptly. Barclays shall have no responsibility for any action it takes or fails to take with respect to any option Contract (and, without limiting the foregoing, shall have no responsibility to exercise any option Contract purchased by Customer) unless and until Barclays receives acceptable and timely instructions from Customer indicating the action to be taken. (h) Acceptance of Orders; Position Limits. Barclays shall have the right, whenever in its discretion it deems it appropriate, to limit the number of open Contracts (net or gross) that Barclays will at any time execute, clear and/or carry for Customer, to require Customer to reduce open positions carried with Barclays, and to refuse the acceptance of orders to establish new positions. Barclays shall immediately notify Customer of its rejection of any order. Unless specified by Customer, Barclays may designate the Transaction Facilities (including, without limitation, any electronic trading systems or facilities) on or through which it will attempt to execute orders. Customer shall comply at all times, including throughout the trading day, with all position limit rules imposed by Applicable Law. (i) Liquidation of Offsetting Positions. Barclays shall liquidate any Contract for which an offsetting order is entered by Customer, unless Customer instructs Barclays not to liquidate such Contract and to maintain the offsetting Contracts as open positions, provided, however, that Barclays shall not be obligated to comply with any such instructions given by Customer if Customer fails to provide Barclays with any representations, documentation or information reasonably requested by Barclays or if, in Barclays' reasonable judgment, any failure to liquidate such offsetting Contracts against each other would result in a violation of Applicable Law. (j) Reliance on Instructions. Barclays and its managing directors, officers and employees shall be entitled to rely, and shall not be liable for any reliance, on any instruction, notice or communication that it reasonably believes to have originated from Customer or Customer's duly authorized agent (including a third-party advisor, if any), and Customer shall be bound thereby. 3 March 2003 (k) Use of Clearing Brokers. Customer authorizes Barclays in its discretion to select for and on behalf of Customer floor brokers and execution agents and, on Transaction Facilities where Barclays is not a clearing member, unaffiliated clearing brokers, which will act as brokers and agents of Customer in connection with transactions in Contracts for the Account(s). Such transactions may be cleared through accounts maintained by Barclays in its own name with one or more clearing brokers. (l) Give-Ups. Absent a separate written agreement with Customer with respect to give-ups, Barclays, in its discretion, may, but shall not be obligated to, accept from other brokers Contracts executed by such brokers for Customer and to be given up to Barclays for clearance or carrying in an Account. (m) Financial and Other Information. Customer shall provide to Barclays such financial and other information regarding Customer as Barclays may from time to time reasonably request. Customer authorizes Barclays to contact such banks, financial institutions and credit agencies as Barclays shall deem appropriate from time to time for verification of such information. Customer shall notify Barclays promptly of any material adverse change to its condition, financial or otherwise. Customer acknowledges and agrees that Barclays may provide financial and other information regarding Customer to any Transaction Facility, clearing firm or self-regulatory agency or organization upon the request of any such entity and as permitted by Applicable Law. (n) Currency Exchange Risk. Customer shall bear all risk and cost in respect of the conversion of currencies incident to transactions effected on behalf of Customer pursuant hereto. Unless otherwise specified in the Reports sent to Customer with respect to its Contracts and Accounts, all margin deposits in connection with any Contracts, and any debits or credits to Customer's Account(s), shall be stated in U.S. Dollars. By placing an order in a Contract settled in a particular currency (the "Contract Currency"), Customer agrees to convert to the Contract Currency funds sufficient to meet the applicable margin requirement. Any conversions of currency shall be at a rate of exchange reasonably determined by Barclays based on prevailing money market rates of exchange for such currencies. (o) Recording of Telephone Conversations. Customer acknowledges, authorizes and consents to the recording of any telephone conversation between Customer and Barclays, on tape or otherwise, with or without the use of an automatic tone warning device. Customer hereby waives any and all objections to the admissibility into evidence of any such tape recording in any legal proceedings between the parties hereto. (p) Inactive Accounts. Customer acknowledges that Barclays may from time to time place accounts in which there is no trading on inactive status and Customer agrees to provide whatever reasonably requested information Barclays may require upon Customer's request to reactivate any such inactive Account. 3. CUSTOMER REPRESENTATIONS. Customer represents, warrants and agrees as of the date hereof and on the date of each transaction executed hereunder that: (a) Customer has full right, power and authority to enter into this Agreement, and the person executing this Agreement on behalf of Customer is authorized to do so; (b) this Agreement is binding on Customer and enforceable against Customer in accordance with its terms; 4 March 2003 (c) Customer is an "eligible contract participant," as such term is defined in Section 1a(12) of the CEA; (d) Customer may lawfully establish and open the Account for the purpose of effecting purchases and sales of Contracts through Barclays; (e) transactions entered into pursuant to this Agreement will not violate any applicable law (including any Applicable Law), judgment, order or agreement to which Customer or its property is subject or by which it or its property is bound; (f) all information provided by Customer in the Futures and Options Account Application (which application and the information contained therein hereby is incorporated into this Agreement) is true, correct, complete and accurate; (g) it will not rely on any communication (written or oral) of Barclays as investment advice or as a recommendation to enter into any transaction, and no such communication (written or oral) received from Barclays shall be deemed to be an assurance or guarantee as to the expected results of the transaction; (h) Customer is acting for its own Account, is capable of assessing the merits of, understanding (on its own behalf or through independent professional advice) and assuming, and understands, accepts and assumes, the terms, conditions and risks of each transaction, and will make its own independent decisions to enter into Contracts and as to whether each Contract is appropriate or proper for it based on Customer's own judgment and upon advice from such advisors as it has deemed necessary; (i) Barclays 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 information provided by Barclays in making any such decisions; (j) except as disclosed in writing to Barclays, Customer is acting solely as principal and not as agent for any other party and no other customer has any interest in the Account; (k) Customer has reviewed the registration requirements of the CEA, CFTC and NFA relating to commodity pool operators and commodity trading advisors and has determined that it and any person that has trading authority or control over its Account are in compliance with such requirements. (l) Customer has made no changes to this form of Agreement, or any other form of agreement, authorization, tax form or other document relating to this Agreement or the Account(s), provided by Barclays; (m) Barclays is relying on the representations and warranties of Customer contained herein in entering into this Agreement and opening the Account and Customer will immediately notify Barclays of any changes to the accuracy thereof; (n) Customer expressly agrees to waive any and all claims, rights or causes of action which Customer has or may have against Barclays, its managing directors, officers and/or employees arising in whole or in part, directly or indirectly, out of any act or omission of a party who refers or introduces Customer to Barclays or who places orders on behalf of Customer; and 5 March 2003 (o) No person or entity other than Customer has, nor during the term of this Agreement will have, any ownership interest of ten percent or more in any Account, and no person other than Customer and Advisor, if any, has or will have any control over any Account, except as otherwise disclosed to Barclays in writing. 4. PAYMENT OBLIGATIONS OF CUSTOMER. With respect to every Contract purchased, sold or cleared for the Account, Customer shall pay Barclays upon demand (which demand may be written or oral): (a) all brokerage charges, give-up fees, commissions and service fees as Barclays may from time to time charge; (b) all Transaction Facility, clearing firm or NFA fees or charges, or any other transaction fees, regulatory fees and service charges incurred with respect to each transaction; (c) any tax imposed on such transactions by any competent taxing authority; (d) any debit balance or deficiency in the Account; (e) interest on any debit balances remaining in the Account at a rate equal to the Fed Funds rate plus 0.75%, or at such other rate as may be mutually agreed upon from time to time, together with Barclays' costs and reasonable attorneys' fees incurred in collecting any such debit balance; and (f) any other amounts owed by Customer to Barclays with respect to the Account, any Contracts carried therein or transactions undertaken in connection therewith. Any and all payments required to be made by Customer hereunder shall be made by wire transfer, in immediately available funds, to an account designated by Barclays, unless otherwise agreed by Barclays. 5. MARGIN AND 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 initial margin, variation margin, intra-day margin and premium payments, and perform all other obligations attendant to Contracts or positions in such Contracts, as such payments or performance may be required by Barclays consistent with Applicable Law or as such payments or performance may be required of Barclays by any member of any Transaction Facility clearing such Contract on Barclays' behalf. Customer acknowledges and agrees that Barclays has no obligation to establish uniform margin requirements among products or customers and margins required by Barclays may exceed the minimum margin requirements of the applicable Transaction Facility and be increased or decreased from time to time at the discretion of Barclays, without advance notice to Customer. Requests for margin deposits and/or premium payments may, at Barclays' election, be communicated to Customer orally, telephonically, electronically, or in writing. Customer margin deposits and/or premium payments shall be made to such omnibus customer account(s) as directed by Barclays, and shall be in such form as Barclays deems appropriate. 6 March 2003 6. CUSTOMER DEFAULT AND BARCLAYS' REMEDIES. (a) Each of the following events shall be a default ("Default") by Customer under this Agreement: (i) Customer breaches or fails to timely and fully perform any of its obligations hereunder or otherwise in respect of any Contract; (ii) Customer fails to deposit or maintain required margin, fails to pay required premiums or fails to make any other payments required hereunder or otherwise in respect of any Contract; (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 a governmental agency or body, or the receipt of a notice of intent to terminate Customer from a governmental agency or body, or the inability of Customer to pay benefits under the relevant employee benefit plan when due; (iv) any representation made by Customer or Advisor (if any) is not or ceases to be accurate and complete in any material respect; (v) a case in bankruptcy is commenced or a proceeding under any insolvency or other law for the protection of creditors or for the appointment of a receiver, trustee or similar officer is filed by or against Customer; (vi) Customer makes or proposes to make any arrangement or composition for the benefit of its creditors, or Customer or any of its property is subject to any agreement, order or judgment providing for Customer's dissolution, liquidation or reorganization, or for the appointment of a receiver, trustee or similar officer for Customer or its property; (vii) Customer makes an admission in writing that it is insolvent or is unable to pay its debts when they mature or the suspension by Customer of its usual business or any material portion thereof; and (viii) any warrant or order of attachment is issued against any Account or a judgment is levied against any Account. (b) Upon the occurrence of a Default, or if Barclays reasonably considers it necessary for its protection to exercise any of the following remedies, then Barclays shall have the right, in addition to any other remedy available at law or equity to Barclays, all without demand for margin and without notice or advertisement (except as provided in Section 6(c) below): (i) close out any or all of Customer's open Contracts, including, without limitation, through EFPs, EFSs or EFRs. For the purposes of this provision, Customer expressly authorizes Barclays to act as broker for Customer or as principal opposite Customer with respect to such EFP, EFS or EFR transactions and to execute such physical commodity, swap or over-the-counter transactions and documents on behalf of Customer as may be necessary to effect such EFP, EFS or EFR transactions. Customer recognizes that such EFP, EFS or EFR transactions are not competitively executed by open outcry on a Transaction Facility but will be executed at the market price then available to Barclays; (ii) cancel any or all of Customer's outstanding orders; 7 March 2003 (iii) treat any or all of Customer's obligations due Barclays as immediately due and payable; (iv) set off any obligations of Barclays to Customer against any obligations of Customer to Barclays; (v) sell any Collateral and/or set off and apply any Collateral or the proceeds of the sale of any Collateral to satisfy any obligations of Customer to Barclays; (vi) borrow or buy any Contracts, options, securities or other property for any Account; (vii) terminate any or all of Barclays' obligations for future performance to Customer; and/or (viii) take such other or further action as Barclays in its discretion reasonably considers necessary or appropriate for its protection. (c) So long as Barclays' rights or position would not be jeopardized thereby, Barclays shall make a good faith effort to notify Customer of its intention to take any of the actions specified in (i) through (viii) of Section 6(b) above before taking any such action. Barclays shall not be deemed to have breached any obligation to Customer if no such notice is given. Any sale or purchase hereunder may be made in any manner determined by Barclays to be commercially reasonable. In all cases a prior demand, margin call or notice of any kind shall not be considered a waiver of Barclays' right to take any action provided for herein. Customer shall be liable for the payment of any deficiency remaining in each Account after any such action is taken, together with interest thereon. 7. TERMINATION. (a) This Agreement may be terminated by Customer or Barclays by written notice to the other. Such termination shall be effective when received by the addressee thereof and shall be of no effect in relation to any orders placed or transactions executed prior to such notice. 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 FCM. (b) Upon satisfaction by Customer of all liabilities to Barclays arising hereunder (including payment obligations with respect to the transfer of Contracts to another FCM), Barclays shall transfer to the FCM specified by Customer all Contracts, cash, securities and other property then held for any Account, whereupon this Agreement shall terminate. The representations, warranties and indemnities contained in this Agreement shall survive any termination of this Agreement. 8. INDEMNIFICATION. Customer hereby agrees to pay, indemnify and hold Barclays, its managing directors, officers and employees harmless from and against any and all loss, liability, damage, cost, penalty, fine, tax or expense (including, without limitation, reasonable attorneys' fees, costs of collection and any cost incurred in successfully defending against any claim asserted by Customer) (collectively, "Losses") incurred by Barclays or such other persons in connection with the Account and/or any transactions or positions established or maintained therein. Such indemnification shall include, without limitation, Losses with respect to (i) any action taken or not taken by Barclays and its managing directors, officers or employees in reliance upon any instruction, notice or communication that it reasonably believes to have originated from Customer or Customer's duly authorized agent (including a 8 March 2003 third-party advisor, if any), and (ii) the exercise of Barclays' default remedies under Section 6 of this Agreement. 9. GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL. (a) THE CONSTRUCTION, VALIDITY, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES). (b) TO THE EXTENT NOT OTHERWISE REQUIRED UNDER APPLICABLE LAW, ANY DISPUTES ARISING UNDER THIS AGREEMENT OR ANY TRANSACTION IN CONNECTION HEREWITH SHALL BE RESOLVED IN A COURT OF LAW LOCATED IN THE STATE OF NEW YORK, BOROUGH OF MANHATTAN OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURTS AND AGREE THAT VENUE BEFORE SUCH COURTS IS PROPER. CUSTOMER CONSENTS TO THE SERVICE OF PROCESS BY THE MAILING TO CUSTOMER OF COPIES OF THE APPROPRIATE COURT FILING BY CERTIFIED MAIL TO THE ADDRESS OF CUSTOMER AS IT APPEARS ON THE BOOKS AND RECORDS OF BARCLAYS, SUCH SERVICE TO BE EFFECTIVE THREE 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. (c) CUSTOMER HEREBY WAIVES A TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION IN CONNECTION THEREWITH. 10. MISCELLANEOUS. (a) Severability. If any provision of this Agreement is or at any time becomes inconsistent with or invalid under any present or future Applicable Law, such inconsistent or invalid provision shall be deemed to be superseded or modified to conform to such Applicable Law, but in all other respects this Agreement shall continue in full force and effect. (b) Successors; Binding Effect. This Agreement shall be binding on and inure to the benefit of each of the parties and their respective successors and assigns. This Agreement and the obligations of Customer hereunder may not be assigned or delegated without the prior written consent of Barclays. Customer agrees that Barclays shall have the right to transfer or assign this Agreement (and the Account) to any successor entity or to another properly registered FCM in its discretion without obtaining the consent of Customer provided that Barclays provides Customer with prior written notice if required under Applicable Law. (c) Entire Agreement. This Agreement and the attached appendices, consents, certifications and authorizations constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior agreements between the parties as to the subject matter hereof. (d) Amendments or Waiver. No provision of this Agreement shall in any respect be waived, hereto modified or amended unless such waiver, modification or amendment is in writing and signed by authorized representatives of each party hereto. 9 March 2003 (e) Notice. Except as otherwise expressly provided in this Agreement, all instructions, notices or other communications shall be given orally, unless requested to be in writing. All oral or written instructions, notices or other communications shall be directed as follows: (i) if to Barclays: Barclays Capital Inc. 222 Broadway, 7th Floor New York, New York 10038 Attention: Futures Operations Manager telephone: 212-412-2580 facsimile: 212-412-6913 Any customer complaints or legal notices shall be directed to "Attention: Futures Compliance Officer." (ii) if to Customer, at the address, telephone or facsimile number as indicated on the Futures and Options Account Application. (iii) if to an Advisor, at the address, telephone or facsimile number indicated on the Futures and Options Account Application. Written notices shall be deemed to have been given by a party hereto if (a) personally delivered to the other party, (b) sent by certified mail, return receipt requested, postage prepaid, or (c) sent by confirmed facsimile transmission. A notice sent by certified mail shall be deemed given on the third business day after the mailing date. (f) No Waiver. No failure on the part of Barclays or Customer to exercise and no delay in exercising, any contractual right will operate as a waiver or modification thereof, nor will any single or partial exercise by Barclays or Customer of any right preclude any other or future exercise thereof. (g) Rights and Remedies Cumulative. All rights and remedies 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. 10 March 2003 11. CUSTOMER ACKNOWLEDGMENTS. (PLEASE INITIAL APPROPRIATE CLAUSES BELOW.) (a) CUSTOMER HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED AND UNDERSTANDS THE FOLLOWING DISCLOSURE STATEMENT PRESCRIBED BY THE CFTC AND FURNISHED HEREWITH: RISK DISCLOSURE STATEMENT FOR FUTURES AND OPTIONS INITIAL (Appendix A to CFTC Rule 1.55(c) transcribed in full on pages 1-3 of Booklet 2 - Risk Disclosure Statements) (b) If Customer (i) maintains one or more other accounts (such as a securities, commodities, cash or margin account) at Barclays and (ii) wants to permit Barclays to transfer funds from such accounts without obtaining specific instructions in each case, Customer should initial the following section: Customer hereby specifically authorizes Barclays, INITIAL until further notice in writing, to transfer any excess funds from/to Customer's regulated commodity account, whether a segregated account or a secured account, (i) to/from any other account that Customer maintains with Barclays, if in Barclays' judgment such transfer is necessary to avoid or reduce a margin call or to reduce a debit balance in such other account, or (ii) to Barclays in order to satisfy any obligation of Customer to Barclays. Barclays will notify Customer in writing of any transfer of funds made pursuant to this authorization within a reasonable time after each transfer. IN WITNESS WHEREOF, the Customer has executed this Agreement as of the date set forth below. CUSTOMER Account Name:_____________________ By:________________________________ Date:_____________________________ Print Name:________________________ Title:_____________________________ PLEASE BE CERTAIN YOU HAVE INITIALED OR CHECKED ALL APPROPRIATE ELECTIONS ABOVE AND THAT YOU HAVE FULLY COMPLETED THE ABOVE SIGNATURE BLOCK. 11 March 2003 EX-10.03(A) 13 c90749exv10w03xay.txt FORM OF ESCROW AGREEMENT EXHIBIT NO. 10.03(a) [HSBC LOGO] SERIES A ESCROW AGREEMENT, dated as of September 30, 2002, by and between Quadriga Superfund, L.P., a Delaware limited partnership ("Quadriga Superfund") and HSBC BANK USA, a banking corporation and trust company organized and existing under the laws of the State of New York, as escrow agent hereunder (the "Escrow Agent"). WITNESSETH: WHEREAS, Quadriga Superfund is offering its Series A units of limited partnership interest on a best efforts basis to qualified investors (the "Agreement") dated as of September 24, 2002; WHEREAS, the Agreement provides for certain funds to be deposited in an escrow account to be held and distributed in accordance with the terms and conditions hereinafter set forth; WHEREAS, Quadriga Superfund, desires to appoint HSBC Bank USA, as the Escrow Agent and HSBC Bank USA is willing to act as Escrow Agent hereunder in accordance with the terms and conditions hereof; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Unless otherwise defined herein, terms which are defined in the Agreement, as in effect on the date hereof, and used herein are so used as so defined. Section 2. Establishment of Escrow Account. Funds in the amount of up to Ten Million ($10,000,000) United States Dollars (the "Escrow Amount") delivered from time to time but no later than June 30, 2003 unless extended in writing and accepted by the Escrow Agent, shall be accepted by the Escrow Agent and placed into an account (the "Escrow Account") to be held and administered in accordance with the terms and conditions of this Agreement. Section 3. Investments. The Escrow Agent agrees to invest and reinvest the Escrow Account, in (i) obligations issued or guaranteed by the United States Government, its agencies or instrumentalities or (ii) Certificates of Deposit issued by any bank, trust company or national banking association (including HSBC Bank USA) authorized to do business in the State of New York, provided the capital stock, surplus, and undivided profits of such institution are not less than $500,000,000 which in each case shall mature not later than the date amounts are to be paid under this agreement or (iii) a money market account managed by HSBC Bank USA or any of its subsidiaries or affiliates with a stated investment objective of investing only in the foregoing overnight deposits, as the Escrow Agent shall be advised from time to time in writing by the Depositor and the Beneficiary provided. The earnings realized from investments and all interest, if any, accruing on monies held in Escrow Account shall be added to the Escrow Account. Any loss incurred from an 2 investment, including all costs of investment or liquidation, including without limitation all withholding and other taxes, will be borne by the Escrow Account. The Depositor agrees to furnish to the Escrow Agent upon execution of this Agreement and as subsequently required all appropriate U.S. tax forms and information in order for the Escrow Agent to comply with U.S. tax regulations. The Escrow Agent shall not be accountable or liable for any losses resulting from the sale or depreciation in the market value of such investments thereof. Section 4. Payments from Escrow Account. (a) For each payment from the Escrow Account, Quadriga Superfund shall deliver, by facsimile, to Escrow Agent a letter of direction (a "Certificate"), which Certificate shall specify (i) the dollar amount of the funds in the Escrow Account to be paid to the recipient, (ii) the name and address of the recipient, and (iii) the date on which such payment or payments shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. (b) Escrow Agent shall make any payment to the recipient by wire or other transfer to the account of such recipient as directed by Quadriga Superfund. Section 5. Termination of Escrow Account. (a) Except as hereinafter provided, the Escrow Account shall terminate without further action of parties upon the later of: (i) the date on which the Escrow Agent completes paying out all of the Escrow Account to the recipients, or (ii) nine (9) months from the date hereof, at which time the balance of the Escrow Account shall be distributed to the recipients. 3 (b) In the event of any dispute or misunderstanding, Escrow Agent shall have the option to pursue any legal remedies that may be available to it, including the right to deposit the subject matter hereof in interpleader in the U.S. District Court having jurisdiction of the subject matter, and upon doing so to be absolved from all further obligations or liability hereunder. Quadriga Superfund agrees to pay to Escrow Agent all costs and expenses, including reasonable attorney's fees, incurred by Escrow Agent in any interpleader action. Section 6. Escrow Agent. Quadriga Superfund agrees to pay the Escrow Agent its agreed-upon compensation, as set forth in a separate agreement, for its services as Escrow Agent hereunder promptly upon request therefor, and to reimburse the Escrow Agent for all expenses of or disbursements incurred by the Escrow Agent in the performance of its duties hereunder, including reasonable fees, expenses and disbursements of counsel to the Escrow Agent. The Escrow Agent shall have a lien upon the Escrow Account for its costs, expenses and fees which may arise hereunder and may retain that portion of the Escrow Account equal to such unpaid amounts, until all such costs, expenses and fees have been paid. Section 7. Rights, Duties and Immunities of Escrow Agent. Acceptance by the Escrow Agent of its duties under this Escrow Agreement is subject to the following terms and conditions, which all parties to this Escrow Agreement hereby agree shall govern and control the rights, duties and immunities of the Escrow Agent. 4 (a) The duties and obligations of the Escrow Agent shall be determined solely by the express provisions of this Escrow Agreement and the Escrow Agent shall not be liable except for the performance of such duties and obligations as are specifically set out in this Escrow Agreement. This Escrow Agreement shall not be deemed to create a fiduciary relationship between the parties hereto under state or federal law. (b) The Escrow Agent shall not be responsible in any manner for the validity or sufficiency of any property delivered hereunder, or for the value or collectability of any note, check or other instrument so delivered, or for any representations made or obligations assumed by any party other than the Escrow Agent. Nothing herein contained shall be deemed to obligate the Escrow Agent to deliver any cash, instruments, documents or any other property referred to herein, unless the same shall have first been received by the Escrow Agent pursuant to this Escrow Agreement. (c) Quadriga Superfund will reimburse and indemnify the Escrow Agent for, and hold it harmless against any loss, liability or expense, including but not limited to counsel fees, incurred without bad faith, gross negligence or willful misconduct on the part of the Escrow Agent arising out of or in conjunction with its acceptance of, or the performance of its duties and obligations under this Escrow Agreement as well as the costs and expenses of defending against any claim or liability arising out of or relating to this Escrow Agreement. (d) The Escrow Agent shall be fully protected in acting on and relying upon any written notice direction, request, waiver, consent, receipt or other paper or documents which the Escrow Agent in good faith believes to have been 5 signed and presented by the proper party or parties. (e) The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith or for any mistake in act or law, or for anything which it may do or refrain from doing in connection herewith, except its own willful misconduct. (f) The Escrow Agent may seek the advice of legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Escrow Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel. The parties hereto agree that should any dispute arise with respect to the payment, ownership or right of possession of the Escrow Account, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, except for its bad faith, willful misconduct or gross negligence, all or any part of the Escrow Account until such dispute shall have been settled either by mutual agreement by the parties concerned or by the final order, decree or judgment of a court or other tribunal of competent jurisdiction in the United States of America, and a notice executed by the parties to the dispute or their authorized representatives shall have been delivered to the Escrow Agent setting forth the resolution of the dispute. The Escrow Agent shall be under no duty whatsoever to institute, defend or partake in such proceedings. (g) The agreements set forth in this Section 7 shall survive the termination of this Escrow Agreement and the payment of all amounts hereunder. Section 8. Resignation of Escrow Agent. 6 The Escrow Agent shall have the right to resign upon 30 days written notice to Quadriga Superfund. In the event of such resignation, Quadriga Superfund shall appoint a successor escrow agent hereunder by delivering to the Escrow Agent a written notice of such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to the designated successor escrow agent all money and other property held hereunder and shall thereupon be released and discharged from any and all further responsibilities whatsoever under this Escrow Agreement; provided, however, that the Escrow Agent shall not be deprived of its compensation earned prior to such time If no successor escrow agent shall have been designated by the date specified in the Escrow Agent's notice, all obligations of the Escrow Agent hereunder shall nevertheless cease and terminate. Its sole responsibility thereafter shall be to keep safely all property then held by it and to deliver the same to a person designated by the other parties hereto or in accordance with the direction of a final order or judgment of a court of competent jurisdiction. Section 9. Notices. All claims, notices and other communications hereunder to be effective shall be in writing and shall be deemed to have been duly given when delivered by hand, or five days after being deposited in the mail or sent by registered or certified first class mail postage prepaid, or, in the case of facsimile transmission, when received and telephonically confirmed, in each case addressed to the parties at the addresses set forth herein and to the Escrow Agent at the address set forth opposite its name on the signature pages hereto (or to such other person or address as the parties shall have notified each other and the Escrow Agent in writing, provided that notices of a 7 change of address shall be effective only upon receipt thereof. Section 10. Binding Effect. This Escrow Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, successors and assigns. Section 11. Amendments. This Escrow Agreement may be amended or modified at any time or from time to time in writing executed by the parties to the Escrow Agreement. Section 12. Governing Law. This Escrow Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts to be performed entirely within the State of New York, without reference to or application of rules or principles of conflicts of law. Section 13. Interpretation. The headings of the sections contained in this Escrow Agreement are solely for convenience or reference and shall not affect the meaning or interpretation of this Escrow Agreement. Section 14. Counterparts. This Escrow Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 15. Consent to Jurisdiction. Each of the parties hereto hereby irrevocably agrees that any action, suit or proceedings against any of them by any of the other aforementioned parties with respect to this Agreement shall be brought before the exclusive jurisdiction of the federal or state courts located in the Borough of Manhattan 8 in the State of New York, unless all the parties hereto agree in writing to any other jurisdiction. Each of the parties hereto hereby submits to such exclusive jurisdiction. Section 16. Severability. If any provisions of this Agreement shall be declared by any court of competent jurisdiction illegal, void or unenforceable, the other provisions shall not be affected, but shall remain in full force and effect. Section 17. Exhibits. The terms and conditions of Exhibit A and Exhibit B attached hereto are incorporated herein and form a part hereof. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date and the year first above written. 9 Quadriga Superfund, L.P. Series A Quadriga Superfund, L.P. Le Marquis Complex, Unit 5 By: Quadriga Capital P.O. Box 1479 Management, Inc. Grand Anse General Partner St. George's, Grenada West Indies By:______________________ Christian Baha Title President HSBC Bank USA HSBC BANK USA, Issuer Services AS ESCROW AGENT 10 East 40th Street, 14th Floor New York, NY 10018-2706 By: Deirdra N. Ross Title: Assistant Vice President 10 HSBC BANK USA QUADRIGA SUPERFUND, L.P. ESCROW AGREEMENT dated as of September 30, 2002 EXHIBIT A Section 1. For each payment from the Escrow Account, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a letter of direction (a "Certificate"), which Certificate shall specify (i), the dollar amount of the funds in the Escrow Account to be paid to Series A of Quadriga Superfund and (ii) the date on which such payment shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. Section 2. In the event Series A of Quadriga Superfund has not received an aggregate of $1,000,000 in subscriptions on or before April 30, 2003, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a Certificate stating that all funds in the associated Escrow Account shall be returned to the persons from whom such amounts were received, together with any interest earned thereon. Section 3. Escrow Agent shall make any payment to the person or persons designated in Section 1. or Section 2. above by wire or other transfer or as otherwise directed by Quadriga Superfund. 11 HSBC BANK USA QUADRIGA SUPERFUND, L.P. ESCROW AGREEMENT dated as of September 30, 2002 EXHIBIT B Section 1. There is hereby created within each account maintained by Escrow Agent pursuant to the Escrow Agreement a sub-account (a "Sub-Account") which shall be designated "Quadriga Superfund, L.P. Pennsylvania Escrow Sub-Account." Funds to be deposited into a Sub-Account shall be identified as such by Quadriga Superfund and shall be invested and reinvested by the Escrow Agent in accordance with the terms of the Escrow Agreement. Section 2. For each payment from a Sub-Account, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a letter of direction (a "Certificate"), which Certificate shall specify (i), the dollar amount of the funds in the Sub-Account to be paid to the respective series of Quadriga Superfund; and (ii) the date on which such payment shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. Section 3. In the event Series A of Quadriga Superfund has not received an aggregate of $10,000,000 in subscriptions on or before April 30, 2003, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a Certificate stating that all funds in the associated Sub-Account shall be returned to the persons from whom such amounts were received, together with any interest earned thereon. Section 4. Escrow Agent shall make any payment to the person or persons designated in Section 2. or Section 3. above by wire or other transfer or as otherwise directed by Quadriga Superfund. 12 EX-10.03(B) 14 c90749exv10w03xby.txt FORM OF ESCROW AGREEMENT EXHIBIT No. 10.03(b) [HSBC LOGO] SERIES B ESCROW AGREEMENT, dated as of September 30, 2002, by and between Quadriga Superfund, L.P., a Delaware limited partnership ("Quadriga Superfund") and HSBC BANK USA, a banking corporation and trust company organized and existing under the laws of the State of New York, as escrow agent hereunder (the "Escrow Agent"). WITNESSETH: WHEREAS, Quadriga Superfund is offering its Series B units of limited partnership interest on a best efforts basis to qualified investors (the " Agreement") dated as of September 24, 2002; WHEREAS, the Agreement provides for certain funds to be deposited in an escrow account to be held and distributed in accordance with the terms and conditions hereinafter set forth; WHEREAS, Quadriga Superfund, desires to appoint HSBC Bank USA, as the Escrow Agent and HSBC Bank USA is willing to act as Escrow Agent hereunder in accordance with the terms and conditions hereof; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Unless otherwise defined herein, terms which are defined in the Agreement, as in effect on the date hereof, and used herein are so used as so defined. Section 2. Establishment of Escrow Account. Funds in the amount of up to Ten Million ($10,000,000) United States Dollars (the "Escrow Amount") delivered from time to time but no later than June 30, 2003 unless extended in writing and accepted by the Escrow Agent, shall be accepted by the Escrow Agent and placed into an account (the "Escrow Account") to be held and administered in accordance with the terms and conditions of this Agreement. Section 3. Investments. The Escrow Agent agrees to invest and reinvest the Escrow Account, in (i) obligations issued or guaranteed by the United States Government, its agencies or instrumentalities or (ii) Certificates of Deposit issued by any bank, trust company or national banking association (including. HSBC Bank USA) authorized to do business in the State of New York, provided the capital stock, surplus, and undivided profits of such institution are not less than $500,000,000 which in each case shall mature not later than the date amounts are to be paid under this agreement or (iii) a money market account managed by HSBC Bank USA or any of its subsidiaries or affiliates with a stated investment objective of investing only in the foregoing overnight deposits, as the Escrow Agent shall be advised from time to time in writing by the Depositor and the Beneficiary provided. The earnings realized from investments and all interest, if any, accruing on monies held in Escrow Account shall be added to the Escrow Account. Any loss incurred from an 2 investment, including all costs of investment or liquidation, including without limitation all withholding and other taxes, will be borne by the Escrow Account. The Depositor agrees to furnish to the Escrow Agent upon execution of this Agreement and as subsequently required all appropriate U.S. tax forms and information in order for the Escrow Agent to comply with U.S. tax regulations. The Escrow Agent shall not be accountable or liable for any losses resulting from the sale or depreciation in the market value of such investments thereof. Section 4. Payments from Escrow Account. (a) For each payment from the Escrow Account, Quadriga Superfund shall deliver, by facsimile, to Escrow Agent a letter of direction (a "Certificate"), which Certificate shall specify (i) the dollar amount of the funds in the Escrow Account to be paid to the recipient, (ii) the name and address of the recipient, and (iii) the date on which such payment or payments shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. (b) Escrow Agent shall make any payment to the recipient by wire or other transfer to the account of such recipient as directed by Quadriga Superfund. Section 5. Termination of Escrow Account. (a) Except as hereinafter provided, the Escrow Account shall terminate without further action of parties upon the later of: (i) the date on which the Escrow Agent completes paying out all of the Escrow Account to the recipients, or (ii) nine (9) months from the date hereof, at which time the balance of the Escrow Account shall be distributed to the recipients. 3 (b) In the event of any dispute or misunderstanding, Escrow Agent shall have the option to pursue any legal remedies that may be available to it, including the right to deposit the subject matter hereof in interpleader in the U.S. District Court having jurisdiction of the subject matter, and upon doing so to be absolved from all further obligations or liability hereunder. Quadriga Superfund agrees to pay to Escrow Agent all costs and expenses, including reasonable attorney's fees, incurred by Escrow Agent in any interpleader action. Section 6. Escrow Agent. Quadriga Superfund agrees to pay the Escrow Agent its agreed-upon compensation, as set forth in a separate agreement, for its services as Escrow Agent hereunder promptly upon request therefor, and to reimburse the Escrow Agent for all expenses of or disbursements incurred by the Escrow Agent in the performance of its duties hereunder, including reasonable fees, expenses and disbursements of counsel to the Escrow Agent. The Escrow Agent shall have a lien upon the Escrow Account for its costs, expenses and fees which may arise hereunder and may retain that portion of the Escrow Account equal to such unpaid amounts, until all such costs, expenses and fees have been paid. Section 7. Rights, Duties and Immunities of Escrow Agent. Acceptance by the Escrow Agent of its duties under this Escrow Agreement is subject to the following terms and conditions, which all parties to this Escrow Agreement hereby agree shall govern and control the rights, duties and immunities of the Escrow Agent. 4 (a) The duties and obligations of the Escrow Agent shall be determined solely by the express provisions of this Escrow Agreement and the Escrow Agent shall not be liable except for the performance of such duties and obligations as are specifically set out in this Escrow Agreement. This Escrow Agreement shall not be deemed to create a fiduciary relationship between the parties hereto under state or federal law. (b) The Escrow Agent shall not be responsible in any manner for the validity or sufficiency of any property delivered hereunder, or for the value or collectability of any note, check or other instrument so delivered, or for any representations made or obligations assumed by any party other than the Escrow Agent. Nothing herein contained shall be deemed to obligate the Escrow Agent to deliver any cash, instruments, documents or any other property referred to herein, unless the same shall have first been received by the Escrow Agent pursuant to this Escrow Agreement. (c) Quadriga Superfund will reimburse and indemnify the Escrow Agent for, and hold it harmless against any loss, liability or expense, including but not limited to counsel fees, incurred without bad faith, gross negligence or willful misconduct on the part of the Escrow Agent arising out of or in conjunction with its acceptance of, or the performance of its duties and obligations under this Escrow Agreement as well as the costs and expenses of defending against any claim or liability arising out of or relating to this Escrow Agreement. (d) The Escrow Agent shall be fully protected in acting on and relying upon any written notice direction, request, waiver, consent, receipt or other paper or documents which the Escrow Agent in good faith believes to have been 5 signed and presented by the proper party or parties. (e) The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith or for any mistake in act or law, or for anything which it may do or refrain from doing in connection herewith, except its own willful misconduct. (f) The Escrow Agent may seek the advice of legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Escrow Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel. The parties hereto agree that should any dispute arise with respect to the payment, ownership or right of possession of the Escrow Account, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, except for its bad faith, willful misconduct or gross negligence, all or any part of the Escrow Account until such dispute shall have been settled either by mutual agreement by the parties concerned or by the final order, decree or judgment of a court or other tribunal of competent jurisdiction in the United States of America, and a notice executed by the parties to the dispute or their authorized representatives shall have been delivered to the Escrow Agent setting forth the resolution of the dispute. The Escrow Agent shall be under no duty whatsoever to institute, defend or partake in such proceedings. (g) The agreements set forth in this Section 7 shall survive the termination of this Escrow Agreement and the payment of all amounts hereunder. Section 8. Resignation of Escrow Agent. 6 The Escrow Agent shall have the right to resign upon 30 days written notice to Quadriga Superfund. In the event of such resignation, Quadriga Superfund shall appoint a successor escrow agent hereunder by delivering to the Escrow Agent a written notice of such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to the designated successor escrow agent all money and other property held hereunder and shall thereupon be released and discharged from any and all further responsibilities whatsoever under this Escrow Agreement; provided, however, that the Escrow Agent shall not be deprived of its compensation earned prior to such time If no successor escrow agent shall have been designated by the date specified in the Escrow Agent's notice, all obligations of the Escrow Agent hereunder shall nevertheless cease and terminate. Its sole responsibility thereafter shall be to keep safely all property then held by it and to deliver the same to a person designated by the other parties hereto or in accordance with the direction of a final order or judgment of a court of competent jurisdiction. Section 9. Notices. All claims, notices and other communications hereunder to be effective shall be in writing and shall be deemed to have been duly given when delivered by hand, or five days after being deposited in the mail or sent by registered or certified first class mail postage prepaid, or, in the case of facsimile transmission, when received and telephonically confirmed, in each case addressed to the parties at the addresses set forth herein and to the Escrow Agent at the address set forth opposite its name on the signature pages hereto (or to such other person or address as the parties shall have notified each other and the Escrow Agent in writing, provided that notices of a 7 change of address shall be effective only upon receipt thereof. Section 10. Binding Effect. This Escrow Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, successors and assigns. Section 11. Amendments. This Escrow Agreement may be amended or modified at any time or from time to time in writing executed by the parties to the Escrow Agreement. Section 12. Governing Law. This Escrow Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts to be performed entirely within the State of New York, without reference to or application of rules or principles of conflicts of law. Section 13. Interpretation. The headings of the sections contained in this Escrow Agreement are solely for convenience or reference and shall not affect the meaning or interpretation of this Escrow Agreement. Section 14. Counterparts. This Escrow Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 15. Consent to Jurisdiction. Each of the parties hereto hereby irrevocably agrees that any action, suit or proceedings against any of them by any of the other aforementioned parties with respect to this Agreement shall be brought before the exclusive jurisdiction of the federal or state courts located in the Borough of Manhattan 8 in the State of New York, unless all the parties hereto agree in writing to any other jurisdiction. Each of the parties hereto hereby submits to such exclusive jurisdiction. Section 16. Severability. If any provisions of this Agreement shall be declared by any court of competent jurisdiction illegal, void or unenforceable, the other provisions shall not be affected, but shall remain in full force and effect. Section 17. Exhibits. The terms and conditions of Exhibit A and Exhibit B attached hereto are incorporated herein and form a part hereof. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date and the year first above written. 9 Quadriga Superfund, L.P. Series A Quadriga Superfund, L.P. Le Marquis Complex, Unit 5 By: Quadriga Capital P.O. Box 1479 Management, Inc. Grand Anse General Partner St. George's, Grenada West Indies By:______________________ Christian Baha Title President HSBC Bank USA HSBC BANK USA, Issuer Services AS ESCROW AGENT 10 East 40th Street, 14th Floor New York, NY 10018-2706 By: Deirdra N. Ross Title: Assistant Vice President 10 HSBC BANK USA QUADRIGA SUPERFUND, L.P. ESCROW AGREEMENT dated as of September 30, 2002 EXHIBIT A Section 1. For each payment from the Escrow Account, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a letter of direction (a "Certificate"), which Certificate shall specify (i), the dollar amount of the funds in the Escrow Account to be paid to Series B of Quadriga Superfund and (ii) the date on which such payment shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. Section 2. In the event Series B of Quadriga Superfund has not received an aggregate of $1,000,000 in subscriptions on or before April 30, 2003, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a Certificate stating that all funds in the associated Escrow Account shall be returned to the persons from whom such amounts were received, together with any interest earned thereon. Section 3. Escrow Agent shall make any payment to the person or persons designated in Section 1. or Section 2. above by wire or other transfer or as otherwise directed by Quadriga Superfund. 11 HSBC BANK USA QUADRIGA SUPERFUND, L.P. ESCROW AGREEMENT dated as of September 30, 2002 EXHIBIT B Section 1. There is hereby created within each account maintained by Escrow Agent pursuant to the Escrow Agreement a sub-account (a "Sub-Account") which shall be designated "Quadriga Superfund, L.P. Pennsylvania Escrow Sub-Account." Funds to be deposited into a Sub-Account shall be identified as such by Quadriga Superfund and shall be invested and reinvested by the Escrow Agent in accordance with the terms of the Escrow Agreement. Section 2. For each payment from a Sub-Account, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a letter of direction (a "Certificate"), which Certificate shall specify (i), the dollar amount of the funds in the Sub-Account to be paid to the respective series of Quadriga Superfund; and (ii) the date on which such payment shall be made by Escrow Agent. The Certificate must be delivered to Escrow Agent at least five (5) calendar days prior to the date on which any payment is to be made by Escrow Agent. Section 3. In the event Series B of Quadriga Superfund has not received an aggregate of $10,000,000 in subscriptions on or before April 30, 2003, Quadriga Superfund shall deliver, by facsimile to Escrow Agent, a Certificate stating that all funds in the associated Sub-Account shall be returned to the persons from whom such amounts were received, together with any interest earned thereon. Section 4. Escrow Agent shall make any payment to the person or persons designated in Section 2. or Section 3. above by wire or other transfer or as otherwise directed by Quadriga Superfund. 12 EX-23.02 15 c90749exv23w02.txt CONSENT OF KPMG LLP EXHIBIT NO. 23.02 INDEPENDENT AUDITORS' CONSENT To the Partners of Quadriga Superfund, L.P. - Series A and B: We consent to the inclusion in the Registration Statement of our report dated March 9, 2004, with respect to the financial statements of Quadriga Superfund, L.P. - Series A and B as of December 31, 2003 and 2002 and for the year ended December 31, 2003 and the period from November 5, 2002 (commencement of operations) through December 31, 2002 and our report dated March 18, 2004 with respect to the financial statements of Quadriga Capital Management, Inc. as of December 31, 2003 and the related statements of income, changes in stockholder's equity, and cash flows for the year then ended. We also consent to the references to our firm under the heading "Experts" in the Prospectus. New York, New York January 21, 2005 -----END PRIVACY-ENHANCED MESSAGE-----