UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30,
2009.
|
|
|
OR
|
|
¨
|
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period
from
to .
|
Commission
File Number: 001-32834
United
States Oil Fund, LP
(Exact
name of registrant as specified in its charter)
Delaware
|
|
20-2830691
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
1320
Harbor Bay Parkway, Suite 145
Alameda,
California 94502
(Address
of principal executive offices) (Zip code)
(510)
522-9600
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x
Yes
¨
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
¨
Yes
¨
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
x
|
|
Accelerated
filer
¨
|
|
|
|
Non-accelerated
filer
¨
|
|
Smaller
reporting company
¨
|
(Do
not check if a smaller reporting company)
|
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
¨
Yes
x
No
UNITED
STATES OIL FUND, LP
Table
of Contents
|
|
Page
|
Part
I. FINANCIAL INFORMATION
|
|
|
Item
1. Condensed Financial Statements.
|
|
1
|
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations.
|
|
14
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|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
|
|
31
|
|
|
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Item
4. Controls and Procedures.
|
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32
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|
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Part
II. OTHER INFORMATION
|
|
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Item
1. Legal Proceedings.
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33
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Item
1A. Risk Factors.
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33
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|
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|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
|
|
|
|
|
|
Item
3. Defaults Upon Senior Securities.
|
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|
Item
4. Submission of Matters to a Vote of Security Holders.
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|
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|
Item
5. Other Information.
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|
|
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Item
6. Exhibits.
|
|
|
Part I.
FINANCIAL
INFORMATION
Item 1.
Condensed Financial
Statements.
Index
to Condensed Financial Statements
Documents
|
|
Page
|
|
Condensed
Statements of Financial Condition at September 30, 2009 (Unaudited) and
December 31, 2008
|
|
|
2
|
|
|
|
|
|
|
Condensed
Schedule of Investments (Unaudited) at September 30, 2009
|
|
|
3
|
|
|
|
|
|
|
Condensed
Statements of Operations (Unaudited) for the three and nine months ended
September 30, 2009 and 2008
|
|
|
4
|
|
|
|
|
|
|
Condensed
Statement of Changes in Partners’ Capital (Unaudited) for the nine months
ended September 30, 2009
|
|
|
5
|
|
|
|
|
|
|
Condensed
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 2009 and 2008
|
|
|
6
|
|
|
|
|
|
|
Notes
to Condensed Financial Statements for the period ended September 30,
2009 (Unaudited)
|
|
|
7
|
|
United
States Oil Fund, LP
Condensed
Statements of Financial Condition
At
September 30, 2009 (Unaudited) and December 31, 2008
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,865,747,446
|
|
|
$
|
1,025,376,289
|
|
Equity
in UBS Securities LLC trading accounts:
|
|
|
|
|
|
|
|
|
Cash
|
|
|
458,664,396
|
|
|
|
1,356,466,032
|
|
Unrealized
gain (loss) on open commodity futures contracts
|
|
|
(754,980
|
)
|
|
|
97,616,100
|
|
Receivable
for units sold
|
|
|
172,051,224
|
|
|
|
90,984,366
|
|
Interest
receivable
|
|
|
174,917
|
|
|
|
351,735
|
|
Other
assets
|
|
|
679,520
|
|
|
|
696,590
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,496,562,523
|
|
|
$
|
2,571,491,112
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Partners’ Capital
|
|
|
|
|
|
|
|
|
General
Partner management fees payable (Note 3)
|
|
$
|
790,739
|
|
|
$
|
513,420
|
|
Payable
for units redeemed
|
|
|
68,610,520
|
|
|
|
—
|
|
Brokerage
commission fees payable
|
|
|
119,386
|
|
|
|
180,086
|
|
Other
liabilities
|
|
|
1,512,525
|
|
|
|
1,173,675
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
71,033,170
|
|
|
|
1,867,181
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
(Notes 3, 4 and 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’
Capital
|
|
|
|
|
|
|
|
|
General
Partner
|
|
|
—
|
|
|
|
—
|
|
Limited
Partners
|
|
|
2,425,529,353
|
|
|
|
2,569,623,931
|
|
Total
Partners’ Capital
|
|
|
2,425,529,353
|
|
|
|
2,569,623,931
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and partners’ capital
|
|
$
|
2,496,562,523
|
|
|
$
|
2,571,491,112
|
|
|
|
|
|
|
|
|
|
|
Limited
Partners’ units outstanding
|
|
|
66,800,000
|
|
|
|
74,900,000
|
|
Net
asset value per unit
|
|
$
|
36.31
|
|
|
$
|
34.31
|
|
Market
value per unit
|
|
$
|
36.19
|
|
|
$
|
33.10
|
|
See
accompanying notes to condensed financial statements.
United
States Oil Fund, LP
Condensed
Schedule of Investments (Unaudited)
At
September 30, 2009
|
|
|
|
|
Gain/(Loss)
|
|
|
|
|
|
|
|
|
|
on Open
|
|
|
% of
|
|
|
|
Number of
|
|
|
Commodity
|
|
|
Partners’
|
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Capital
|
|
Open
Futures Contracts
|
|
|
|
|
|
|
|
|
|
Foreign
Contracts
|
|
|
|
|
|
|
|
|
|
ICE
WTI Crude Oil Futures contracts, expire November 2009
|
|
|
18,107
|
|
|
$
|
(11,968,680
|
)
|
|
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX
Crude Oil Financial Futures WS contracts, expire November
2009
|
|
|
4,000
|
|
|
|
(3,040,000
|
)
|
|
|
(0.13
|
)
|
NYMEX
Crude Oil Futures CL contracts, expire November 2009
|
|
|
12,245
|
|
|
|
14,253,700
|
|
|
|
0.59
|
|
|
|
|
16,245
|
|
|
|
11,213,700
|
|
|
|
0.46
|
|
Total
Open Futures Contracts
|
|
|
34,352
|
|
|
$
|
(754,980
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
|
|
|
Market Value
|
|
|
|
|
|
Cash
Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States - Money Market Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Fidelity
Institutional Government Portfolio – Class I
|
|
$
|
751,387,050
|
|
|
$
|
751,387,050
|
|
|
|
30.98
|
|
Goldman
Sachs Financial Square Funds – Government Fund – Class SL
|
|
|
612,367,706
|
|
|
|
612,367,706
|
|
|
|
25.24
|
|
Morgan
Stanley Institutional Liquidity Fund – Government
Portfolio
|
|
|
250,551,884
|
|
|
|
250,551,884
|
|
|
|
10.33
|
|
Total
Cash Equivalents
|
|
|
|
|
|
$
|
1,614,306,640
|
|
|
|
66.55
|
|
See
accompanying notes to condensed financial statements.
United
States Oil Fund, LP
Condensed
Statements of Operations (Unaudited)
For
the three and nine months ended September 30, 2009 and 2008
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
Nine months
ended
|
|
|
|
September 30,
2009
|
|
|
September 30,
2008
|
|
|
September 30,
2009
|
|
|
September 30,
2008
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on trading of commodity futures contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
gain (loss) on closed positions
|
|
$
|
(116,290,290
|
)
|
|
$
|
(348,770,180
|
)
|
|
$
|
526,557,970
|
|
|
$
|
(52,145,750
|
)
|
Change
in unrealized gain (loss) on open positions
|
|
|
54,591,010
|
|
|
|
(39,303,880
|
)
|
|
|
(98,371,080
|
)
|
|
|
(62,363,060
|
)
|
Interest
income
|
|
|
665,832
|
|
|
|
5,868,040
|
|
|
|
3,959,228
|
|
|
|
12,213,272
|
|
Other
income
|
|
|
66,000
|
|
|
|
78,000
|
|
|
|
308,000
|
|
|
|
227,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income (loss)
|
|
|
(60,967,448
|
)
|
|
|
(382,128,020
|
)
|
|
|
432,454,118
|
|
|
|
(102,068,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Partner management fees (Note 3)
|
|
|
2,444,275
|
|
|
|
1,364,008
|
|
|
|
9,135,235
|
|
|
|
2,805,644
|
|
Brokerage
commissions
|
|
|
598,751
|
|
|
|
391,467
|
|
|
|
3,313,812
|
|
|
|
891,642
|
|
Other
expenses
|
|
|
843,568
|
|
|
|
508,069
|
|
|
|
3,699,389
|
|
|
|
1,815,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
|
3,886,594
|
|
|
|
2,263,544
|
|
|
|
16,148,436
|
|
|
|
5,512,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(64,854,042
|
)
|
|
$
|
(384,391,564
|
)
|
|
$
|
416,305,682
|
|
|
$
|
(107,581,084
|
)
|
Net
income (loss) per limited partnership unit
|
|
$
|
(1.51
|
)
|
|
$
|
(32.13
|
)
|
|
$
|
2.00
|
|
|
$
|
5.36
|
|
Net
income (loss) per weighted average limited partnership
unit
|
|
$
|
(1.08
|
)
|
|
$
|
(28.35
|
)
|
|
$
|
4.86
|
|
|
$
|
(12.17
|
)
|
Weighted
average limited partnership units outstanding
|
|
|
59,920,652
|
|
|
|
13,558,696
|
|
|
|
85,688,278
|
|
|
|
8,841,606
|
|
See
accompanying notes to condensed financial statements.
United
States Oil Fund, LP
Condensed
Statement of Changes in Partners’ Capital (Unaudited)
For
the nine months ended September 30, 2009
|
|
General
Partner
|
|
|
Limited Partners
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
at December 31, 2008
|
|
$
|
—
|
|
|
$
|
2,569,623,931
|
|
|
$
|
2,569,623,931
|
|
Addition
of 160,600,000 partnership units
|
|
|
—
|
|
|
|
4,835,969,850
|
|
|
|
4,835,969,850
|
|
Redemption
of 168,700,000 partnership units
|
|
|
—
|
|
|
|
(5,396,370,110
|
)
|
|
|
(5,396,370,110
|
)
|
Net
income
|
|
|
—
|
|
|
|
416,305,682
|
|
|
|
416,305,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
at September 30, 2009
|
|
$
|
—
|
|
|
$
|
2,425,529,353
|
|
|
$
|
2,425,529,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value Per Unit
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2008
|
|
$
|
34.31
|
|
|
|
|
|
|
|
|
|
At
September 30, 2009
|
|
$
|
36.31
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed financial statements.
United
States Oil Fund, LP
Condensed
Statements of Cash Flows (Unaudited)
For
the nine months ended September 30, 2009 and 2008
|
|
Nine months
|
|
|
Nine months
|
|
|
|
ended
September 30, 2009
|
|
|
ended
September 30, 2008
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
416,305,682
|
|
|
$
|
(107,581,084
|
)
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Decrease
(increase) in commodity futures trading account – cash
|
|
|
897,801,636
|
|
|
|
(391,628,724
|
)
|
Unrealized
loss on futures contracts
|
|
|
98,371,080
|
|
|
|
62,363,060
|
|
Decrease
(increase) in interest receivable and other assets
|
|
|
193,888
|
|
|
|
(614,110
|
)
|
Increase
in management fees payable
|
|
|
277,319
|
|
|
|
268,673
|
|
Increase
(decrease) in commissions payable
|
|
|
(60,700
|
)
|
|
|
30,200
|
|
Increase
in other liabilities
|
|
|
338,850
|
|
|
|
798,014
|
|
Net
cash provided by (used in) operating activities
|
|
|
1,413,227,755
|
|
|
|
(436,363,971
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Subscription
of partnership units
|
|
|
4,754,902,992
|
|
|
|
8,840,578,043
|
|
Redemption
of partnership units
|
|
|
(5,327,759,590
|
)
|
|
|
(7,535,205,899
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(572,856,598
|
)
|
|
|
1,305,372,144
|
|
|
|
|
|
|
|
|
|
|
Net
Increase in Cash and Cash Equivalents
|
|
|
840,371,157
|
|
|
|
869,008,173
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents
, beginning of period
|
|
|
1,025,376,289
|
|
|
|
354,816,049
|
|
Cash and Cash
Equivalents
, end of period
|
|
$
|
1,865,747,446
|
|
|
$
|
1,223,824,222
|
|
See
accompanying notes to condensed financial statements.
United
States Oil Fund, LP
Notes
to Condensed Financial Statements
For
the period ended September 30, 2009 (Unaudited)
NOTE
1 - ORGANIZATION AND BUSINESS
The
United States Oil Fund, LP (“USOF”) was organized as a limited partnership under
the laws of the state of Delaware on May 12, 2005. USOF is a commodity pool that
issues limited partnership units (“units”) that may be purchased and sold on the
NYSE Arca, Inc. (the “NYSE Arca”). Prior to November 25, 2008, USOF’s units
traded on the American Stock Exchange (the “AMEX”). USOF will continue in
perpetuity, unless terminated sooner upon the occurrence of one or more events
as described in its Fifth Amended and Restated Agreement of Limited
Partnership dated as of October 13, 2008 (the “LP Agreement”). The investment
objective of USOF is for the changes in percentage terms of its units’ net asset
value to reflect the changes in percentage terms of the spot price of light,
sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in
the price of the futures contract on light, sweet crude oil as traded on the New
York Mercantile Exchange (the “NYMEX”) that is the near month contract to
expire, except when the near month contract is within two weeks of
expiration, in which case the futures contract will become, over a 4-day period,
the next month contract to expire, less USOF’s expenses. USOF accomplishes
its objective through investments in futures contracts for light, sweet
crude oil, and other types of crude oil, heating oil, gasoline, natural gas and
other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other
U.S. and foreign exchanges (collectively, “Oil Futures Contracts”) and
other oil related investments such as cash-settled options on Oil Futures
Contracts, forward contracts for oil and over-the-counter transactions that are
based on the price of crude oil, heating oil, gasoline, natural gas and other
petroleum-based fuels, Oil Futures Contracts and indices based on the foregoing
(collectively, “Other Oil Interests”). As of September 30, 2009, USOF held
16,245 Oil Futures Contracts traded on the NYMEX and 18,107 Oil Futures
Contracts traded on the ICE Futures.
USOF
commenced investment operations on April 10, 2006 and has a fiscal year ending
on December 31. United States Commodity Funds LLC (formerly known as Victoria
Bay Asset Management, LLC) (the “General Partner”) is responsible for the
management of USOF. The General Partner is a member of the National Futures
Association (the “NFA”) and became a commodity pool operator
registered with the Commodity Futures Trading Commission effective December 1,
2005. The General Partner is also the general partner of the United States
Natural Gas Fund, LP (“USNG”), the United States 12 Month Oil Fund, LP
(“US12OF”), the United States Gasoline Fund, LP (“UGA”) and the United States
Heating Oil Fund, LP (“USHO”), which listed their limited partnership units on
the AMEX under the ticker symbols “UNG” on April 18, 2007, “USL” on
December 6, 2007, “UGA” on February 26, 2008 and “UHN” on April 9, 2008,
respectively. As a result of the acquisition of the AMEX by NYSE Euronext, each
of USNG’s, US12OF’s, UGA’s and USHO’s units commenced trading on the NYSE Arca
on November 25, 2008. The General Partner is also the general partner of the
United States Short Oil Fund, LP (“USSO”), which listed its limited partnership
units on the NYSE Arca on September 24, 2009. The General Partner has also filed
registration statements to register units of the United States 12 Month Natural
Gas Fund, LP and the United States Brent Oil Fund, LP.
The
accompanying unaudited condensed financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X promulgated by the U.S. Securities
and Exchange Commission (the “SEC”) and, therefore, do not include all
information and footnote disclosure required under accounting principles
generally accepted in the United States of America. The financial
information included herein is unaudited, however, such financial information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the condensed financial statements for the interim
period.
USOF
issues units to certain authorized purchasers (“Authorized Purchasers”) by
offering baskets consisting of 100,000 units (“Creation Baskets”) through
ALPS Distributors, Inc. (the “Marketing Agent”). The purchase price for a
Creation Basket is based upon the net asset value of a unit calculated
shortly after the close of the core trading session on the NYSE Arca on the day
the order to create the basket is properly received.
In
addition, Authorized Purchasers pay USOF a $1,000 fee for each order
to create one or more Creation Baskets or redeem one or more baskets
consisting of 100,000 units (“Redemption Baskets”). Units may be purchased
or sold on a nationally recognized securities exchange in smaller increments
than a Creation Basket or Redemption Basket. Units purchased or sold on a
nationally recognized securities exchange are not purchased or sold at the net
asset value of USOF but rather at market prices quoted on such
exchange.
In April
2006, USOF initially registered 17,000,000 units on Form S-1 with the SEC. On
April 10, 2006, USOF listed its units on the AMEX under the ticker symbol “USO”.
On that day, USOF established its initial net asset value by setting the
price at $67.39 per unit and issued 200,000 units in exchange for $13,479,000.
USOF also commenced investment operations on April 10, 2006 by purchasing Oil
Futures Contracts traded on the NYMEX based on light, sweet crude
oil. As of September 30, 2009, USOF had registered a total of
1,627,000,000 units.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Recognition
Commodity
futures contracts, forward contracts, physical commodities, and related options
are recorded on the trade date. All such transactions are recorded on the
identified cost basis and marked to market daily. Unrealized gains or losses on
open contracts are reflected in the condensed statement of financial
condition and in the difference between the original contract amount and the
market value (as determined by exchange settlement prices for futures contracts
and related options and cash dealer prices at a predetermined time for forward
contracts, physical commodities, and their related options) as of the last
business day of the year or as of the last date of the condensed financial
statements. Changes in the unrealized gains or losses between periods are
reflected in the condensed statement of operations. USOF earns interest on
its assets denominated in U.S. dollars on deposit with the futures commission
merchant at the overnight Federal Funds Rate less 32 basis points. In
addition, USOF earns interest on funds held at the custodian at prevailing
market rates earned on such investments.
Brokerage
Commissions
Brokerage
commissions on all open commodity futures contracts are accrued on a full-turn
basis.
Income
Taxes
USOF is
not subject to federal income taxes; each partner reports his/her allocable
share of income, gain, loss deductions or credits on his/her own income tax
return.
Additions
and Redemptions
Authorized
Purchasers may purchase Creation Baskets or redeem Redemption Baskets only in
blocks of 100,000 units equal to the net asset value of the units calculated
shortly after the close of the core trading session on the NYSE Arca on the day
the order is placed.
USOF
receives or pays the proceeds from units sold or redeemed within three business
days after the trade date of the purchase or redemption. The amounts due from
Authorized Purchasers are reflected in USOF’s condensed statement of financial
condition as receivable for units sold, and amounts payable to Authorized
Purchasers upon redemption are reflected as payable for units
redeemed.
Partnership
Capital and Allocation of Partnership Income and Losses
Profit or
loss shall be allocated among the partners of USOF in proportion to the number
of units each partner holds as of the close of each month. The General Partner
may revise, alter or otherwise modify this method of allocation as described in
the LP Agreement.
Calculation
of Net Asset Value
USOF’s
net asset value is calculated on each NYSE Arca trading day by taking the
current market value of its total assets, subtracting any liabilities and
dividing the amount by the total number of units issued and outstanding. USOF
uses the closing price for the contracts on the relevant exchange on that
day to determine the value of contracts held on such exchange.
Net
Income (Loss) per Unit
Net
income (loss) per unit is the difference between the net asset value per
unit at the beginning of each period and at the end of each period. The
weighted average number of units outstanding was computed for purposes of
disclosing net income (loss) per weighted average unit. The weighted average
units are equal to the number of units outstanding at the end of the period,
adjusted proportionately for units redeemed based on the amount of time the
units were outstanding during such period. There were no units held by the
General Partner at September 30, 2009.
Offering
Costs
Offering
costs incurred in connection with the registration of additional units after the
initial registration of units are borne by USOF. These costs include
registration fees paid to regulatory agencies and all legal, accounting,
printing and other expenses associated with such offerings. These costs will be
accounted for as a deferred charge and thereafter amortized to expense over
twelve months on a straight-line basis or a shorter period if
warranted.
Cash
Equivalents
Cash
equivalents include money market funds and overnight deposits or time deposits
with original maturity dates of three months or less.
Use
of Estimates
The
preparation of condensed financial statements in conformity with accounting
principles generally accepted in the United States of America requires USOF’s
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the condensed financial statements, and the reported amounts of the
revenue and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
NOTE 3
- FEES PAID BY THE FUND AND RELATED PARTY TRANSACTIONS
General
Partner Management Fee
Under the
LP Agreement, the General Partner is responsible for investing the assets of
USOF in accordance with the objectives and policies of USOF. In addition, the
General Partner has arranged for one or more third parties to provide
administrative, custody, accounting, transfer agency and other necessary
services to USOF. For these services through December 31, 2008, USOF was
contractually obligated to pay the General Partner a fee, which was paid monthly
and based on average daily net assets, that was equal to 0.50% per annum on
average daily net assets of $1,000,000,000 or less and 0.20% per annum on
average daily net assets that were greater than $1,000,000,000. As of January 1,
2009, this fee changed to 0.45% per annum on all amounts of average daily net
assets.
Ongoing
Registration Fees and Other Offering Expenses
USOF pays
all costs and expenses associated with the ongoing registration of its units
subsequent to the initial offering. These costs include
registration or other fees paid to regulatory agencies in connection with the
offer and sale of units, and all legal, accounting, printing and other expenses
associated with such offer and sale. For the nine months ended September
30, 2009 and 2008, USOF incurred $1,202,600 and $393,787, respectively, in
registration fees and other offering expenses.
Directors’
Fees
USOF is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. USOF shares these fees with USNG, US12OF, UGA, USHO and
USSO based on the relative assets of each fund, computed on a daily basis. These
fees for the calendar year 2009 are estimated to be a total of $477,000 for all
funds.
Licensing
Fees
As
discussed in Note 4, USOF entered into a licensing agreement with the NYMEX
on May 30, 2007. Pursuant to the agreement, USOF and the affiliated
funds managed by the General Partner pay a licensing fee that is equal to 0.04%
for the first $1,000,000,000 of combined assets of the funds and 0.02% for
combined assets above $1,000,000,000. During the nine months ended September 30,
2009 and 2008, USOF incurred $491,498 and $194,845, respectively, under this
arrangement.
Investor
Tax Reporting Cost
The fees
and expenses associated with USOF’s audit expenses and tax accounting and
reporting requirements, with the exception of certain initial implementation
service fees and base service fees which are borne by the General Partner, are
paid by USOF.
Other
Expenses and Fees
In
addition to the fees described above, USOF pays all brokerage fees, taxes
and other expenses in connection with the operation of USOF, excluding costs and
expenses paid by the General Partner as outlined in Note 4.
NOTE
4 - CONTRACTS AND AGREEMENTS
USOF is
party to a marketing agent agreement, dated as of March 13, 2006, with the
Marketing Agent and the General Partner, whereby the Marketing Agent provides
certain marketing services for USOF as outlined in the agreement. The fees of
the Marketing Agent, which are borne by the General Partner, include a marketing
fee of $425,000 per annum plus the following incentive fee: 0.00% on USOF’s
assets from $0 - $500 million; 0.04% on USOF’s assets from $500 million - $4
billion; and 0.03% on USOF’s assets in excess of $4 billion.
The above
fees do not include the following expenses, which are also borne by the General
Partner: the cost of placing advertisements in various periodicals; web
construction and development; or the printing and production of various
marketing materials.
USOF is
also party to a custodian agreement, dated March 13, 2006, with Brown Brothers
Harriman & Co. (“BBH&Co.”) and the General Partner, whereby BBH&Co.
holds investments on behalf of USOF. The General Partner pays the fees of
the custodian, which are determined by the parties from time to time. In
addition, USOF is party to an administrative agency agreement, dated March 13,
2006, with the General Partner and BBH&Co., whereby BBH&Co. acts as the
administrative agent, transfer agent and registrar for USOF. The General Partner
also pays the fees of BBH&Co. for its services under this agreement and such
fees are determined by the parties from time to time.
Currently,
the General Partner pays BBH&Co. for its services, in the foregoing
capacities, a minimum amount of $75,000 annually for its custody, fund
accounting and fund administration services rendered to USOF and each of the
affiliated funds managed by the General Partner, as well as a $20,000 annual fee
for its transfer agency services. In addition, the General Partner pays
BBH&Co. an asset-based charge of (a) 0.06% for the first $500 million of
USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s and USSO’s combined net assets, (b)
0.0465% for USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s and USSO’s combined net
assets greater than $500 million but less than $1 billion, and (c) 0.035% once
USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s and USSO’s combined net assets exceed $1
billion. The annual minimum amount will not apply if the asset-based charge for
all accounts in the aggregate exceeds $75,000. The General Partner also pays
transaction fees ranging from $7.00 to $15.00 per transaction.
USOF has
entered into a brokerage agreement with UBS Securities LLC (“UBS Securities”).
The agreement requires UBS Securities to provide services to USOF in connection
with the purchase and sale of Oil Futures Contracts and Other Oil Interests that
may be purchased and sold by or through UBS Securities for USOF’s account. The
agreement provides that UBS Securities charge USOF commissions of approximately
$7 per round-turn trade, plus applicable exchange and NFA fees for Oil Futures
Contracts and options on Oil Futures Contracts.
On May
30, 2007, USOF and the NYMEX entered into a licensing agreement whereby USOF was
granted a non-exclusive license to use certain of the NYMEX’s settlement prices
and service marks. The agreement has an effective date of April 10,
2006. Under the licensing agreement, USOF and the affiliated funds
managed by the General Partner pay the NYMEX an asset-based fee for the license,
the terms of which are described in Note 3.
USOF
expressly disclaims any association with the NYMEX or endorsement of USOF by the
NYMEX and acknowledges that “NYMEX” and “New York Mercantile Exchange” are
registered trademarks of the NYMEX.
NOTE
5 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND
CONTINGENCIES
USOF engages
in the trading of futures contracts, options on futures contracts and cleared
swaps (collectively, “derivatives”). USOF is exposed to both market risk, which
is the risk arising from changes in the market value of the contracts, and
credit risk, which is the risk of failure by another party to perform according
to the terms of a contract.
USOF may
enter into futures contracts, options on futures contracts and cleared swaps to
gain exposure to changes in the value of an underlying commodity. A futures
contract obligates the seller to deliver (and the purchaser to accept) the
future delivery of a specified quantity and type of a commodity at a specified
time and place. Some futures contracts may call for physical delivery of the
asset, while others are settled in cash. The contractual obligations of a buyer
or seller may generally be satisfied by taking or making physical delivery of
the underlying commodity or by making an offsetting sale or purchase of an
identical futures contract on the same or linked exchange before the designated
date of delivery.
The
purchase and sale of futures contracts, options on futures contracts and cleared
swaps require margin deposits with a futures commission merchant. Additional
deposits may be necessary for any loss on contract value. The Commodity Exchange
Act requires a futures commission merchant to segregate all customer
transactions and assets from the futures commission merchant’s proprietary
activities.
Futures
contracts and cleared swaps involve, to varying degrees, elements of market risk
(specifically commodity price risk) and exposure to loss in excess of the amount
of variation margin. The face or contract amounts reflect the extent of the
total exposure USOF has in the particular classes of instruments. Additional
risks associated with the use of futures contracts are an imperfect correlation
between movements in the price of the futures contracts and the market value of
the underlying securities and the possibility of an illiquid market for a
futures contract.
All of
the futures contracts currently traded by USOF are exchange-traded. The risks
associated with exchange-traded contracts are generally perceived to be less
than those associated with over-the-counter transactions since, in
over-the-counter transactions, USOF must rely solely on the credit of its
respective individual counterparties. However, in the future, if USOF were
to enter into non-exchange traded contracts, it would be subject to the credit
risk associated with counterparty non-performance. The credit risk from
counterparty non-performance associated with such instruments is the net
unrealized gain, if any. USOF also has credit risk since the sole
counterparty to all domestic and foreign futures contracts is the exchange
on which the relevant contracts are traded. In addition, USOF bears the risk of
financial failure by the clearing broker.
USOF’s
cash and other property, such as U.S. Treasuries, deposited with a futures
commission merchant are considered commingled with all other customer funds
subject to the futures commission merchant’s segregation requirements. In the
event of a futures commission merchant’s insolvency, recovery may be limited to
a pro rata share of segregated funds available. It is possible that the
recovered amount could be less than the total of cash and other property
deposited. The insolvency of a futures commission merchant could result in the
complete loss of USOF’s assets posted with that futures commission merchant;
however, the vast majority of USOF’s assets are held in Treasuries, cash and/or
cash equivalents with USOF’s custodian and would not be impacted by the
insolvency of a futures commission merchant. Also, the failure or insolvency of
USOF’s custodian could result in a substantial loss of USOF’s
assets.
USOF
invests its cash in money market funds that seek to maintain a stable net asset
value. USOF is exposed to any risk of loss associated with an investment in
these money market funds. As of September 30, 2009 and December 31, 2008, USOF
had deposits in domestic and foreign financial institutions, including cash
investments in money market funds, in the amounts of $2,324,411,842 and
$2,381,842,321, respectively. This amount is subject to loss should these
institutions cease operations.
For
derivatives, risks arise from changes in the market value of the contracts.
Theoretically, USOF is exposed to a market risk equal to the value of futures
contracts purchased and unlimited liability on such contracts sold short. As
both a buyer and a seller of options, USOF pays or receives a premium at the
outset and then bears the risk of unfavorable changes in the price of the
contract underlying the option.
USOF’s
policy is to continuously monitor its exposure to market and counterparty risk
through the use of a variety of financial, position and credit exposure
reporting controls and procedures. In addition, USOF has a policy of requiring
review of the credit standing of each broker or counterparty with which it
conducts business.
The
financial instruments held by USOF are reported in its condensed
statement of financial condition at market or fair value, or at carrying amounts
that approximate fair value, because of their highly liquid nature and
short-term maturity.
NOTE 6
– FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective
January 1, 2008, USOF adopted Accounting Standards Codification 820 – Fair Value
Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurement. The changes to past practice resulting from the
application of ASC 820 relate to the definition of fair value, the methods used
to measure fair value, and the expanded disclosures about fair value
measurement. ASC 820 establishes a fair value hierarchy that distinguishes
between (1) market participant assumptions developed based on market data
obtained from sources independent of USOF (observable inputs) and (2) USOF’s own
assumptions about market participant assumptions developed based on the best
information available under the circumstances (unobservable
inputs). The three levels defined by the ASC 820 hierarchy are as
follows:
Level I –
Quoted prices (unadjusted) in active markets for
identical
assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level II
– Inputs other than quoted prices included within Level I that are observable
for the asset or liability, either directly or indirectly. Level II assets
include the following: quoted prices for
similar
assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability, and inputs that are derived principally
from or corroborated by observable market data by correlation or other means
(market-corroborated inputs).
Level III
– Unobservable pricing input at the measurement date for the asset or liability.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available.
In some
instances, the inputs used to measure fair value might fall in different levels
of the fair value hierarchy. The level in the fair value hierarchy within which
the fair value measurement in its entirety falls shall be determined based on
the lowest input level that is significant to the fair value measurement in its
entirety.
The following table summarizes the valuation of USOF’s securities at
September 30, 2009 using the fair value hierarchy:
At September
30, 2009
|
|
Total
|
|
Level I
|
|
Level II
|
|
Level III
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Investments
|
|
$
|
1,614,306,640
|
|
$
|
1,614,306,640
|
|
$
|
—
|
|
$
|
—
|
Exchange-Traded
Futures Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Contracts
|
|
|
(11,968,680
|
)
|
|
(11,968,680
|
)
|
|
|
|
|
|
United
States Contracts
|
|
|
11,213,700
|
|
|
11,213,700
|
|
|
|
|
|
|
NOTE 7
- FINANCIAL HIGHLIGHTS
The
following table presents per unit performance data and other supplemental
financial data for the nine months ended September 30, 2009 and 2008 for the
unitholders. This information has been derived from information presented in the
condensed financial statements.
|
|
For
the nine months
ended
|
|
|
For
the nine months
ended
|
|
|
|
September
30, 2009
|
|
|
September
30, 2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Per Unit Operating
Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
|
$
|
34.31
|
|
|
$
|
75.82
|
|
Total
income
|
|
|
2.19
|
|
|
|
5.98
|
|
Total
expenses
|
|
|
(0.19
|
)
|
|
|
(0.62
|
)
|
Net
increase in net asset value
|
|
|
2.00
|
|
|
|
5.36
|
|
Net
asset value, end of period
|
|
$
|
36.31
|
|
|
$
|
81.18
|
|
|
|
|
|
|
|
|
|
|
Total
Return
|
|
|
5.83
|
%
|
|
|
7.07
|
%
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets
|
|
|
|
|
|
|
|
|
Total
income (loss)
|
|
|
15.93
|
%
|
|
|
(12.59
|
)
%
|
Expenses
excluding management fees*
|
|
|
0.35
|
%
|
|
|
0.45
|
%
|
Management
fees*
|
|
|
0.45
|
%
|
|
|
0.46
|
%
|
Net
income (loss)
|
|
|
15.34
|
%
|
|
|
(13.27
|
)
%
|
|
|
|
|
|
|
|
|
|
*Annualized
|
|
|
|
|
|
|
|
|
Total
returns are calculated based on the change in value during the period. An
individual unitholder’s total return and ratio may vary from the above total
returns and ratios based on the timing of contributions to and withdrawals from
USOF.
NOTE
8 – RECENTLY ADOPTED ACCOUNTING STANDARDS
In March
2008, the Financial Accounting Standards Board released Accounting Standards
Codification 815 – Derivatives and Hedging (“ASC 815”). ASC 815 requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of, and gains and losses on,
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements. USOF adopted ASC 815 on January 1,
2009.
NOTE
9 – SUBSEQUENT EVENTS
USOF has
performed an evaluation of subsequent events through November 9, 2009, which is
the date the financial statements were issued. This evaluation did not result in
any subsequent events that necessitated disclosures and/or
adjustments.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion should be read in conjunction with the condensed financial
statements and the notes thereto of the United States Oil Fund, LP (“USOF”)
included elsewhere in this quarterly report on Form 10-Q.
Forward-Looking
Information
This
quarterly report on Form 10-Q, including this “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” contains
forward-looking statements regarding the plans and objectives of management for
future operations. This information may involve known and unknown risks,
uncertainties and other factors that may cause USOF’s actual results,
performance or achievements to be materially different from future results,
performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
USOF’s future plans, strategies and expectations, are generally identifiable by
use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend” or “project,” the negative of these words, other
variations on these words or comparable terminology. These forward-looking
statements are based on assumptions that may be incorrect, and USOF cannot
assure investors that the projections included in these forward-looking
statements will come to pass. USOF’s actual results could differ materially from
those expressed or implied by the forward-looking statements as a result of
various factors.
USOF has
based the forward-looking statements included in this quarterly report on Form
10-Q on information available to it on the date of this quarterly report on Form
10-Q, and USOF assumes no obligation to update any such forward-looking
statements. Although USOF undertakes no obligation to revise or update any
forward-looking statements, whether as a result of new information, future
events or otherwise, investors are advised to consult any additional disclosures
that USOF may make directly to them or through reports that USOF in the
future files with the U.S. Securities and Exchange Commission (the “SEC”),
including annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K.
Introduction
USOF, a
Delaware limited partnership, is a commodity pool that issues units that
may be purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). The
investment objective of USOF is to have the changes in percentage terms of its
units’ net asset value (“NAV”) reflect the changes in percentage terms of the
spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured
by the changes in the price of the futures contract on light, sweet crude oil as
traded on the New York Mercantile Exchange (the “NYMEX”) that is the near
month contract to expire, except when the near month contract is within two
weeks of expiration, in which case it will become, over a 4-day period, the
futures contract that is the next month contract to expire (the “Benchmark Oil
Futures Contract”), less USOF’s expenses.
USOF
seeks to achieve its investment objective by investing in a combination of oil
futures contracts and other oil interests such that changes in its NAV, measured
in percentage terms, will closely track the changes in the price of the
Benchmark Oil Futures Contract, also measured in percentage terms. USOF’s
general partner believes the Benchmark Oil Futures Contract historically
has exhibited a close correlation with the spot price of light, sweet crude
oil. It is not the intent of USOF to be operated in a fashion such that the NAV
will equal, in dollar terms, the spot price of light, sweet crude oil or any
particular futures contract based on light, sweet crude oil. Management believes
that it is not practical to manage the portfolio to achieve such an investment
goal when investing in listed crude oil futures contracts and other oil
interests.
On any
valuation day, the Benchmark Oil Futures Contract is the near month futures
contract for light, sweet crude oil traded on the NYMEX unless the near
month contract will expire within two weeks of the valuation day, in which case
the Benchmark Oil Futures Contract becomes, over a 4-day period, the next month
contract for light, sweet crude oil traded on the NYMEX. “Near month contract”
means the next contract traded on the NYMEX due to expire. “Next month contract”
means the first contract traded on the NYMEX due to expire after the near month
contract.
USOF
invests in futures contracts for light, sweet crude oil, other types of crude
oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are
traded on the NYMEX, ICE Futures or other U.S. and foreign exchanges
(collectively, “Oil Futures Contracts”) and other oil interests such as
cash-settled options on Oil Futures Contracts, forward contracts for oil and
over-the-counter transactions that are based on the price of crude oil, other
petroleum-based fuels, Oil Futures Contracts and indices based on the foregoing
(collectively, “Other Oil Interests”). For convenience and unless otherwise
specified, Oil Futures Contracts and Other Oil Interests collectively are
referred to as “Oil Interests” in this quarterly report on Form
10-Q.
The
regulation of Oil Interests in the United States is a rapidly changing area of
law and is subject to ongoing modification by governmental and judicial
action. As stated in the section “What are the Risk Factors Involved
with an Investment in USOF?” of USOF’s prospectus as filed with the SEC,
regulation of the commodity interests and energy markets is extensive and
constantly changing; future regulatory developments in the commodity interests
and energy markets are impossible to predict but may significantly and adversely
affect USOF.
Currently,
a number of proposals to alter the regulation of Oil Interests are being
considered by federal regulators and legislators. These proposals include the
imposition of hard position limits on energy-based commodity futures contracts,
the extension of position and accountability limits to futures contracts on
non-U.S. exchanges previously exempt from such limits, and the forced use of
clearinghouse mechanisms for all over-the-counter transactions. An additional
proposal would aggregate and limit all positions in energy futures held by a
single entity, whether such positions exist on U.S. futures exchanges, non-U.S.
futures exchanges, or in over-the-counter contracts. If any of the
aforementioned proposals is implemented, USOF’s ability to meet its
investment objective may be negatively impacted.
The
general partner of USOF, United States Commodity Funds LLC (formerly, Victoria
Bay Asset Management, LLC) (the “General Partner”), which is registered as
a commodity pool operator (“CPO”) with the U.S. Commodity Futures Trading
Commission (the “CFTC”), is authorized by the Fifth Amended and Restated
Agreement of Limited Partnership of USOF (the “LP Agreement”) to manage
USOF. The General Partner is authorized by USOF in its sole judgment to employ
and establish the terms of employment for, and termination of, commodity trading
advisors or futures commission merchants.
Crude oil
futures prices were volatile during the nine months ended September 30, 2009 and
exhibited wide daily swings along with an uneven upward trend from late February
2009 to late March 2009. The price of the Benchmark Oil Futures Contract started
the period at the $44.60 per barrel level. The low of the period was on February
18, 2009 when prices dropped to $37.41 per barrel. Prices rose over the course
of the period and hit a peak on August 24, 2009 of $74.97 per barrel. The period
ended with the Benchmark Oil Futures Contract at $70.61 per barrel, up
approximately 58.32% over the period. USOF’s NAV rose during the period from a
starting level of $34.31 per unit and reached its high for the period on June
11, 2009 at $39.78 per unit. USOF’s NAV reached its low for the period on
February 18, 2009 at $22.88 per unit. USOF’s NAV on September 30, 2009 was
$36.31, up approximately 5.83% over the period. The Benchmark Oil Futures
Contract prices listed above begin with the February 2009 contract and end with
the November 2009 contract. The return of approximately 58.32% on the Benchmark
Oil Futures Contract listed above is a hypothetical return only and could not
actually be achieved by an investor holding futures contracts. An investment in
oil futures contracts would need to be rolled forward during the time period
described in order to achieve such a result.
For the
first half of 2008, the crude oil futures market remained in a state of
backwardation, meaning that the price of the near month crude oil futures
contract was typically higher than the price of the next month crude oil futures
contract, or contracts further away from expiration. For much of the third
quarter of 2008, the crude oil futures market moved back and forth between a
mild backwardation market and a mild contango market. A contango market is one
in which the price of the near month crude oil futures contract is less than the
price of the next month crude oil futures contract, or contracts further away
from expiration. From late November 2008 to the end of 2008, the market moved
into a much steeper contango market. During the first three quarters of
2009, the crude oil market remained in contango. During parts of January and
February 2009, the level of contango was unusually steep reflecting that the
cost of oil futures contracts further from expiration were significantly higher
than the near month oil futures contract. Crude oil inventories, which reached
historic levels in January 2009 and February 2009 and which appear to be the
primary cause of the steep level of contango, began to drop in March 2009 and
for the balance of the first half of 2009. The Crude Oil futures
market remained in contango through the quarter ended September 30, 2009. For a
discussion of the impact of backwardation and contango on total returns, see
“Term Structure of Crude Oil Prices and the Impact on Total
Returns”.
Valuation
of Oil Futures Contracts and the Computation of the NAV
The NAV
of USOF units is calculated once each NYSE Arca trading day. The NAV
for a particular trading day is released after 4:00 p.m. New York
time. Trading during the core trading session on the NYSE Arca
typically closes at 4:00 p.m. New York time. USOF’s administrator
uses the NYMEX closing price (determined at the earlier of the close of the
NYMEX or 2:30 p.m. New York time) for the contracts held on the NYMEX, but
calculates or determines the value of all other USOF investments, including ICE
Futures contracts or other futures contracts, as of the earlier of the close of
the New York Stock Exchange or 4:00 p.m. New York time.
Results
of Operations and the Crude Oil Market
Results of
Operations.
On April 10, 2006, USOF listed its units on the
American Stock Exchange (the “AMEX”) under the ticker symbol “USO.” On that day,
USOF established its initial offering price at $67.39 per unit and issued
200,000 units to the initial authorized purchaser, KV Execution Services LLC, in
exchange for $13,479,000 in cash. As a result of the acquisition of the
AMEX by NYSE Euronext, USOF’s units no longer trade on the AMEX and commenced
trading on the NYSE Arca on November 25, 2008.
Since its
initial offering of 17,000,000 units, USOF has made seven subsequent offerings
of its units: 30,000,000 units which were registered with the SEC on
October 18, 2006, 50,000,000 units which were registered with the SEC on
January 30, 2007, 30,000,000 units which were registered with the SEC
on December 4, 2007, 100,000,000 units which were registered with the SEC on
February 7, 2008, 100,000,000 units which were registered with the SEC on
September 29, 2008, 300,000,000 units which were registered with the SEC on
January 16, 2009 and 1,000,000,000 units which were registered with the SEC on
June 29, 2009. Units offered by USOF in the subsequent offerings were sold by it
for cash at the units’ NAV as described in the applicable prospectus. As of
September 30, 2009, USOF had issued 438,100,000 units, 66,800,000 of
which were outstanding. As of September 30, 2009, there were
1,188,900,000 units registered but not yet issued.
More
units may have been issued by USOF than are outstanding due to the redemption of
units. Unlike funds that are registered under the Investment Company Act of
1940, as amended, units that have been redeemed by USOF cannot be resold by
USOF. As a result, USOF contemplates that additional offerings of its units will
be registered with the SEC in the future in anticipation of additional issuances
and redemptions.
For the Nine Months Ended
September 30, 2009 Compared to the Nine Months Ended September 30,
2008
As of
September 30, 2009, the total unrealized loss on Oil Futures Contracts owned or
held on that day was $754,980 and USOF established cash deposits, including cash
investments in money market funds, that were equal to $2,324,411,842. USOF held
80.27% of its cash assets in overnight deposits and money market funds at its
custodian bank, while 19.73% of the cash balance was held with the futures
commission merchant as margin deposits for the Oil Futures Contracts purchased.
The ending per unit NAV on September 30, 2009 was $36.31.
By
comparison, as of September 30, 2008, the total unrealized loss on Oil Futures
Contracts owned or held on that day was $26,658,040 and USOF established cash
deposits, including cash investments in money market funds, that were equal to
$1,701,783,696. USOF held 71.91% of its cash assets in overnight deposits and
money market funds at its custodian bank, while 28.09% of the cash balance was
held with the futures commission merchant as margin deposits for the Oil Futures
Contracts purchased. The ending per unit NAV on September 30, 2008 was $81.18.
The decrease in the per unit NAV from September 30, 2008 compared to September
30, 2009 was primarily a result of sharply lower prices for crude oil and the
related decline in the value of the Oil Futures Contracts that USOF had invested
in between the period ended September 30, 2008 and the period ended September
30, 2009.
Portfolio Expenses
. USOF’s
expenses consist of investment management fees, brokerage
fees and commissions, certain offering costs, licensing fees and the fees
and expenses of the independent directors of the General Partner. The
management fee that USOF pays to the General Partner is calculated as a
percentage of the total net assets of USOF. USOF pays the General
Partner a management fee of 0.45% of NAV on its average net assets. The fee is
accrued daily. Prior to January 1, 2009, the management fee was 0.50% for
total net assets of up to $1 billion and the management fee was 0.20% on the
incremental amount of total net assets over $1 billion, and was accrued
daily.
During
the nine months ended September 30, 2009, the daily average total net assets of
USOF were $2,714,172,313. The management fee paid by USOF during the period
amounted to $9,135,235. Management fees as a percentage of total net assets
averaged 0.45% over the course of this nine month period. By comparison, during
the nine months ended September 30, 2008, the daily average total net assets
of USOF were $810,780,060. During the nine months ended September 30,
2008, the total net assets of USOF exceeded $1 billion. The management fee
paid by USOF for this nine month period amounted to $2,805,644, which was
calculated at the 0.50% rate for total net assets up to and including $1 billion
and at the rate of 0.20% on average net assets over $1 billion, and accrued
daily. Management fees as a percentage of total net assets averaged 0.46% over
the course of this nine month period. USOF’s management fees as a percentage of
total net assets were lower for the nine months ended September 30, 2009
compared to the nine months ended September 30, 2008 due to USOF’s reduced
expense ratio schedule.
In
addition to the management fee, USOF pays all brokerage fees, taxes and
other expenses, including certain tax reporting costs, licensing fees for the
use of intellectual property, ongoing registration or other fees paid to the
SEC, the Financial Industry Regulatory Authority (“FINRA”) and any
other regulatory agency in connection with offers and sales of its units
subsequent to the initial offering and all legal, accounting, printing and other
expenses associated therewith. The total of these fees, taxes and expenses for
the nine months ended September 30, 2009 was $7,013,201, as compared to
$2,706,902 for the nine months ended September 30, 2008. The increase in
expenses from the nine months ended September 30, 2008 as compared to the nine
months ended September 30, 2009 was primarily due to the relative size of USOF
and activity that resulted from its increased size, including the registration
and the offering of additional units, increased brokerage fees, increased
licensing fees and increased tax reporting costs due to the greater number of
unitholders during the nine months ended September 30, 2009. For the nine
months ended September 30, 2009, USOF incurred $1,202,600 in ongoing
registration fees and other expenses relating to the registration and offering
of additional units. By comparison, for the nine months ended September 30,
2008, USOF incurred $393,787 in ongoing registration fees and other expenses
relating to the registration and offering of additional units.
USOF is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. USOF shares these fees with the United States
Natural Gas Fund, LP (“USNG”), the United States 12 Month Oil Fund, LP
(“US12OF”), the United States Gasoline Fund, LP (“UGA”), the United States
Heating Oil Fund, LP (“USHO”) and the United States Short Oil Fund, LP (“USSO”)
based on the relative assets of each fund computed on a daily basis. These fees
for calendar year 2009 are estimated to be a total of $477,000 for all funds. By
comparison, for the year ended December 31, 2008, these fees amounted to a total
of $282,000 for all funds, and USOF’s portion of such fees was $145,602.
Directors’ expenses are
expected to increase in 2009 due to payment for directors’ and officers’
liability insurance and an increase in the compensation awarded to the
independent directors of the General Partner. Effective as of March 3, 2009, the
General Partner has obtained directors’ and officers’ liability insurance
covering all of the directors and officers of the General Partner. Previously,
the General Partner did not have liability insurance for its directors and
officers; instead, the independent directors received a payment in lieu of
directors’ and officers’ liability insurance coverage.
USOF also
incurs commissions to brokers for the purchase and sale of Oil Futures
Contracts, Other Oil Interests or short-term obligations of the United
States of two years or less (“Treasuries”). During the nine months ended
September 30, 2009, total commissions paid to brokers amounted to $3,313,812. By
comparison, during the nine months ended September 30, 2008, total commissions
paid to brokers amounted to $891,642. The increase in the total commissions paid
to brokers from the nine months ended September 30, 2008 to the nine months
ended September 30, 2009 was primarily a function of increased brokerage fees
due to a higher number of futures contracts being held and traded as a result of
the increase in USOF’s average total net assets, the decrease in the price of
Oil Futures Contracts and the increase in redemptions and creations of units
during the nine months ended September 30, 2009. The increase in assets required
USOF to purchase a greater number of Oil Futures Contracts and incur a larger
amount of commissions. As an annualized percentage of total net assets,
the figure for the nine months ended September 30, 2009 represents
approximately 0.16% of total net assets. By comparison, the figure for the nine
months ended September 30, 2008 represented approximately 0.15% of total net
assets. However, there can be no assurance that commission costs and portfolio
turnover will not cause commission expenses to rise in future
quarters.
Interest Income
. USOF seeks
to invest its assets such that it holds Oil Futures Contracts and Other Oil
Interests in an amount equal to the total net assets of its portfolio.
Typically, such investments do not require USOF to pay the full amount of the
contract value at the time of purchase, but rather require USOF to post an
amount as a margin deposit against the eventual settlement of the contract. As a
result, USOF retains an amount that is approximately equal to its total net
assets, which USOF invests in Treasuries, cash and/or cash equivalents.
This includes both the amount on deposit with the futures commission merchant as
margin, as well as unrestricted cash and cash equivalents held with USOF’s
custodian bank. The Treasuries, cash and/or cash equivalents earn interest that
accrues on a daily basis. For the nine months ended September 30, 2009, USOF
earned $3,959,228 in interest income on such cash holdings. Based on USOF’s
average daily total net assets, this was equivalent to an annualized yield of
0.20%. USOF did not purchase Treasuries during the nine months ended
September 30, 2009 and held all of its funds in cash and/or cash equivalents
during this time period. By comparison, for the nine months ended September 30,
2008, USOF earned $12,213,272 in interest income on such cash holdings. Based on
USOF’s average daily total net assets, this was equivalent to an annualized
yield of 2.01%. USOF did not purchase Treasuries during the nine months
ended September 30, 2008 and held all of its funds in cash and/or cash
equivalents during this time period. Interest rates on short-term investments in
the United States, including cash, cash equivalents, and short-term Treasuries,
were sharply lower during the nine months ended September 30, 2009 compared to
the same time period in 2008. As a result, the amount of interest earned by USOF
as a percentage of total net assets was lower during the nine months ended
September 30, 2009 compared to the nine months ended September 30,
2008.
For the Three Months Ended
September 30, 2009 Compared to the Three Months Ended September 30,
2008
During
the three months ended September 30, 2009, the daily average total net assets of
USOF were $2,154,976,239. The management fee paid by USOF during the period
amounted to $2,444,275. Management fees as a percentage of total net assets were
0.45% over the course of this three month period. By comparison, during the
three months ended September 30, 2008, the daily average total net assets
of USOF were $1,259,368,628. The management fee paid by
USOF for the three months ended September 30, 2008 amounted to $1,364,008, which
was calculated at the 0.50% rate for total net assets up to and including $1
billion and at the rate of 0.20% on average net assets over $1 billion, and
accrued daily. Management fees as a percentage of total net assets averaged
0.43% over the course of the three months ended September 30, 2008. USOF’s
management fees as a percentage of total net assets were higher for the three
months ended September 30, 2009 compared to the three months ended September 30,
2008 due to USOF’s reduced expense ratio schedule and due to the fact that the
period ended September 30, 2008 had a limited number of days in which total net
assets exceeded $1 billion and therefore the majority of total net assets over
this three month period were charged the higher daily rate of
0.50%.
In
addition to the management fee, USOF pays all brokerage fees, taxes and
other expenses, including certain tax reporting costs, licensing fees for the
use of intellectual property, ongoing registration or other fees paid to the
SEC, FINRA and any other regulatory agency in connection
with offers and sales of its units subsequent to the initial offering and
all legal, accounting, printing and other expenses associated therewith. The
total of these fees, taxes and expenses for the three months ended September 30,
2009 was $1,442,319, as compared to $899,536 for the three months ended
September 30, 2008. The increase in expenses from the three months ended
September 30, 2008 to the three months ended September 30, 2009 was primarily
due to the relative size of USOF and activity that resulted from its increased
size, including the registration and the offering of additional units, increased
brokerage fees, increased licensing fees and increased tax reporting costs due
to the greater number of unitholders during the period. For the three
months ended September 30, 2009, USOF incurred $221,600 in ongoing
registration fees and other expenses relating to the registration and offering
of additional units. By comparison, for the three months ended September 30,
2008, USOF incurred $141,482 in ongoing registration fees and other expenses
relating to the registration and offering of additional units.
USOF is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. USOF shares these fees with USNG, US12OF, UGA, USHO
and USSO based on the relative assets of each fund computed on a daily basis.
These fees for the three months ended September 30, 2009 amounted to a total of
$80,648 for all funds, and USOF’s portion of such fees was $27,778. By
comparison, for the three months ended September 30, 2008, these fees amounted
to a total of $72,126 for all funds, and USOF’s portion of such fees was
$40,218.
Directors’
expenses increased f
rom the three months ended September 30, 2008 to the
three months ended September 30, 2009
due to payment for
directors’ and officers’ liability insurance and an increase in the compensation
awarded to the independent directors of the General Partner. Effective as of
March 3, 2009, the General Partner has obtained directors’ and officers’
liability insurance covering all of the directors and officers of the General
Partner. Previously, the General Partner did not have liability insurance for
its directors and officers; instead, the independent directors received a
payment in lieu of directors’ and officers’ liability insurance
coverage.
USOF also
incurs commissions to brokers for the purchase and sale of Oil Futures
Contracts, Other Oil Interests or Treasuries. During the three months ended
September 30, 2009, total commissions paid to brokers amounted to $598,751. By
comparison, during the three months ended September 30, 2008, total commissions
paid to brokers amounted to $391,467. The increase in the total commissions paid
to brokers from the three months ended September 30, 2008 to the three months
ended September 30, 2009 was primarily a function of increased brokerage fees
due to a higher number of futures contracts being held and traded as a result of
the increase in USOF’s average total net assets, the decrease in the price of
Oil Futures Contracts and the increase in redemptions and creations of units
during the three months ended September 30, 2009. The increase in assets
required USOF to purchase a greater number of Oil Futures Contracts and incur a
larger amount of commissions. As an annualized percentage of total net assets,
the figure for the three months ended September 30, 2009 represents
approximately 0.11% of total net assets. By comparison, the figure for the three
months ended September 30, 2008 represented approximately 0.12% of total net
assets. However, there can be no assurance that commission costs and portfolio
turnover will not cause commission expenses to rise in future
quarters.
Interest Income
. USOF seeks
to invest its assets such that it holds Oil Futures Contracts and Other Oil
Interests in an amount equal to the total net assets of its portfolio.
Typically, such investments do not require USOF to pay the full amount of the
contract value at the time of purchase, but rather require USOF to post an
amount as a margin deposit against the eventual settlement of the contract. As a
result, USOF retains an amount that is approximately equal to its total net
assets, which USOF invests in Treasuries, cash and/or cash equivalents.
This includes both the amount on deposit with the futures commission merchant as
margin, as well as unrestricted cash and cash equivalents held with USOF’s
custodian bank. The Treasuries, cash and/or cash equivalents earn interest that
accrues on a daily basis. For the three months ended September 30, 2009, USOF
earned $665,832 in interest income on such cash holdings. Based on USOF’s
average daily total net assets, this was equivalent to an annualized yield of
0.12%. USOF did not purchase Treasuries during the three months ended
September 30, 2009 and held all of its funds in cash and/or cash equivalents
during this time period. By comparison, for the three months ended September 30,
2008, USOF earned $5,868,040 in interest income on such cash holdings. Based on
USOF’s average daily total net assets, this was equivalent to an annualized
yield of 1.85%. USOF did not purchase Treasuries during the three months
ended September 30, 2008 and held all of its funds in cash and/or cash
equivalents during this time period. Interest rates on short-term investments in
the United States, including cash, cash equivalents, and short-term Treasuries,
were sharply lower during the three months ended September 30, 2009 compared to
the same time period in 2008. As a result, the amount of interest earned by USOF
as a percentage of total net assets was lower during the three months ended
September 30, 2009 compared to the three months ended September 30,
2008.
Tracking
USOF’s Benchmark
USOF
seeks to manage its portfolio such that changes in its average daily NAV, on a
percentage basis, closely track the changes in the average daily price of the
Benchmark Oil Futures Contract, also on a percentage basis. Specifically, USOF
seeks to manage the portfolio such that over any rolling period of 30 valuation
days, the average daily change in the NAV is within a range of 90% to 110% (0.9
to 1.1) of the average daily change in the price of the Benchmark Oil Futures
Contract. As an example, if the average daily movement of the price of the
Benchmark Oil Futures Contract for a particular 30-day time period was 0.5% per
day, USOF management would attempt to manage the portfolio such that the average
daily movement of the NAV during that same time period fell between 0.45% and
0.55% (
i.e
., between
0.9 and 1.1 of the benchmark’s results). USOF’s portfolio management goals do
not include trying to make the nominal price of USOF’s NAV equal to the nominal
price of the current Benchmark Oil Futures Contract or the spot price for light,
sweet crude oil. Management believes that it is not practical to manage the
portfolio to achieve such an investment goal when investing in listed Oil
Futures Contracts.
For the
30 valuation days ended September 30, 2009, the simple average daily change in
the Benchmark Oil Futures Contract was -0.011%, while the simple average daily
change in the NAV of USOF over the same time period was -0.014%. The average
daily difference was -0.002% (or 0.2 basis points, where 1 basis point equals
1/100 of 1%). As a percentage of the daily movement of the Benchmark Oil Futures
Contract, the average error in daily tracking by the NAV was -1.018%, meaning
that over this time period USOF’s tracking error was within the plus or minus
10% range established as its benchmark tracking goal. The first chart below
shows the daily movement of USOF’s NAV versus the daily movement of the
Benchmark Oil Futures Contract for the 30-day period ended September 30,
2009.
*PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS
*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
Since the
offering of USOF’s units to the public on April 10, 2006 to September 30,
2009, the simple average daily change in the Benchmark Oil Futures Contract was
-0.039%, while the simple average daily change in the NAV of USOF over the same
time period was -0.033%. The average daily difference was 0.007% (or 0.7 basis
points, where 1 basis point equals 1/100 of 1%). As a percentage of the daily
movement of the Benchmark Oil Futures Contract, the average error in daily
tracking by the NAV was 1.759%, meaning that over this time period USOF’s
tracking error was within the plus or minus 10% range established as its
benchmark tracking goal.
An
alternative tracking measurement of the return performance of USOF versus the
return of its Benchmark Oil Futures Contract can be calculated by comparing the
actual return of USOF, measured by changes in its NAV, versus the
expected
changes in its NAV
under the assumption that USOF’s returns had been exactly the same as the daily
changes in its Benchmark Oil Futures Contract.
For the
nine months ended September 30, 2009, the actual total return of USOF as
measured by changes in its NAV was 5.83%. This is based on an initial
NAV of $34.31 on December 31, 2008 and an ending NAV as of September
30, 2009 of $36.31. During this time period, USOF made no distributions to its
unitholders. However, if USOF’s daily changes in its NAV had instead exactly
tracked the changes in the daily return of the Benchmark Oil Futures Contract,
USOF would have ended the third quarter of 2009 with an estimated NAV of $36.47,
for a total return over the relevant time period of 6.30%. The difference
between the actual NAV total return of USOF of 5.83% and the expected total
return based on the Benchmark Oil Futures Contract of 6.30% was an error over
the time period of 0.47%, which is to say that USOF’s actual total return
trailed the benchmark result by that percentage. Management believes that a
portion of the difference between the actual return and the expected
benchmark return can be attributed to the net impact of the expenses and the
interest that USOF collects on its cash and cash equivalent holdings. During the
nine months ended September 30, 2009, USOF received interest income of
$3,959,228, which is equivalent to a weighted average interest rate of 0.20% for
the nine months ended September 30, 2009. In addition, during the nine months
ended September 30, 2009, USOF also collected $308,000 from its authorized
purchasers (“Authorized Purchasers”) creating or redeeming baskets of units.
This income also contributed to USOF’s actual return. However, if the total
assets of USOF continue to increase, management believes that the impact on
total returns of these fees from creations and redemptions will diminish as a
percentage of the total return. During the nine months ended September 30, 2009,
USOF incurred total expenses of $16,148,436. Income from interest and Authorized
Purchaser collections net of expenses was $(11,881,208) which is equivalent to a
weighted average net interest rate of -0.59% for the nine months ended September
30, 2009.
By
comparison, for the nine months ended September 30, 2008, the actual total
return of USOF as measured by changes in its NAV was 7.07%. This was based on an
initial NAV of $75.82 on December 31, 2007 and an ending NAV as of
September 30, 2008 of $81.18. During this time period, USOF made no
distributions to its unitholders. However, if USOF’s daily changes in its NAV
had instead exactly tracked the changes in the daily return of the Benchmark Oil
Futures Contract, USOF would have ended the third quarter of 2008 with an
estimated NAV of $80.46, for a total return over the relevant time period of
6.13%. The difference between the actual NAV total return of USOF of 7.07% and
the expected total return based on the Benchmark Oil Futures Contract of 6.13%
was an error over the time period of 0.94%, which is to say that USOF’s actual
total return exceeded the benchmark result by that percentage. Management
believes that a portion of the difference between the actual return and the
expected benchmark return can be attributed to the impact of the interest that
USOF collected on its cash and cash equivalent holdings. During the nine months
ended September 30, 2008, USOF received interest income of $12,213,272, which is
equivalent to a weighted average interest rate of 2.01% for the nine months
ended September 30, 2008. In addition, during the nine months ended September
30, 2008, USOF also collected $227,000 from Authorized Purchasers creating or
redeeming baskets of units. During the nine months ended September 30, 2008,
USOF incurred total expenses of $5,512,546. Income from interest and Authorized
Purchaser collections net of expenses was $6,927,726, which is equivalent to a
weighted average net interest rate of 1.14% for the nine months ended September
30, 2008. This income also contributed to USOF’s actual return exceeding the
benchmark results.
There are
currently three factors that have impacted or are most likely to impact, USOF’s
ability to accurately track its Benchmark Oil Futures Contract.
First,
USOF may buy or sell its holdings in the then current Benchmark Oil Futures
Contract at a price other than the closing settlement price of that contract on
the day during which USOF executes the trade. In that case, USOF may pay a price
that is higher, or lower, than that of the Benchmark Oil Futures Contract,
which could cause the changes in the daily NAV of USOF to either be too
high or too low relative to the changes in the Benchmark Oil Futures Contract.
During the nine months ended September 30, 2009, management attempted to
minimize the effect of these transactions by seeking to execute its purchase or
sale of the Benchmark Oil Futures Contract at, or as close as possible to, the
end of the day settlement price. However, it may not always be possible for USOF
to obtain the closing settlement price and there is no assurance that failure to
obtain the closing settlement price in the future will not adversely impact
USOF’s attempt to track the Benchmark Oil Futures Contract over
time.
Second,
USOF earns interest on its cash, cash equivalents and Treasury
holdings. USOF is not required to distribute any portion of its income to its
unitholders and did not make any distributions to unitholders during the nine
months ended September 30, 2009. Interest payments, and any other income, were
retained within the portfolio and added to USOF’s NAV. When this income exceeds
the level of USOF’s expenses for its management fee, brokerage commissions and
other expenses (including ongoing registration fees, licensing fees and
the fees and expenses of the independent directors of the General Partner),
USOF will realize a net yield that will tend to cause daily changes in the NAV
of USOF to track slightly higher than daily changes in the Benchmark Oil Futures
Contract. During the nine months ended September 30, 2009, USOF earned, on an
annualized basis, approximately 0.20% on its cash holdings. It also incurred
cash expenses on an annualized basis of 0.45% for management fees and
approximately 0.16% in brokerage commission costs related to the purchase and
sale of futures contracts, and 0.19% for other expenses. The foregoing fees and
expenses resulted in a net yield on an annualized basis of approximately -0.60%
and affected USOF’s ability to track its benchmark. If short-term interest rates
rise above the current levels, the level of deviation created by the yield would
decrease. Conversely, if short-term interest rates were to decline, the amount
of error created by the yield would increase. When short-term yields drop to a
level lower than the combined expenses of the management fee and the brokerage
commissions, then the tracking error becomes a negative number and would tend to
cause the daily returns of the NAV to underperform the daily returns of the
Benchmark Oil Futures Contract.
Third,
USOF may hold Other Oil Interests in its portfolio that may fail to closely
track the Benchmark Oil Futures Contract’s total return movements. In that case,
the error in tracking the Benchmark Oil Futures Contract could result in daily
changes in the NAV of USOF that are either too high, or too low, relative to the
daily changes in the Benchmark Oil Futures Contract. During the nine months
ended September 30, 2009, USOF did not hold any Other Oil Interests. Due,
in part, to the increased size of USOF over the last several quarters and its
obligations to comply with regulatory limits, USOF is likely to invest in Other
Oil Interests which may have the effect of increasing transaction related
expenses and result in increased tracking error.
Term Structure of Crude Oil Futures
Prices and the Impact on Total Returns.
Several factors determine the
total return from investing in a futures contract position. One factor that
impacts the total return that will result from investing in near month
crude oil futures contracts and “rolling” those contracts forward each month is
the price relationship between the current near month contract and the next
month contract. For example, if the price of the near month contract is higher
than the next month contract (a situation referred to as “backwardation” in the
futures market), then absent any other change there is a tendency for the price
of a next month contract to rise in value as it becomes the near month contract
and approaches expiration. Conversely, if the price of a near month contract is
lower than the next month contract (a situation referred to as “contango” in the
futures market), then absent any other change there is a tendency for the price
of a next month contract to decline in value as it becomes the near month
contract and approaches expiration.
As an
example, assume that the price of crude oil for immediate delivery (the “spot”
price), was $50 per barrel, and the value of a position in the near month
futures contract was also $50. Over time, the price of the barrel of crude oil
will fluctuate based on a number of market factors, including demand for
oil relative to its supply. The value of the near month contract will likewise
fluctuate in reaction to a number of market factors. If investors seek to
maintain their position in a near month contract and not take delivery of the
oil, every month they must sell their current near month contract as it
approaches expiration and invest in the next month contract.
If the
futures market is in backwardation,
e.g.
, when the expected price
of crude oil in the future would be less, the investor would be buying a next
month contract for a lower price than the current near month contract.
Hypothetically, and assuming no other changes to either prevailing crude oil
prices or the price relationship between the spot price, the near month contract
and the next month contract (and ignoring the impact of commission costs and the
interest earned on Treasuries, cash and/or cash equivalents), the value of the
next month contract would rise as it approaches expiration and becomes the new
near month contract. In this example, the value of the $50 investment would tend
to rise faster than the spot price of crude oil, or fall slower. As a result, it
would be possible in this hypothetical example for the price of spot crude oil
to have risen to $60 after some period of time, while the value of the
investment in the futures contract would have risen to $65, assuming
backwardation is large enough or enough time has elapsed. Similarly, the spot
price of crude oil could have fallen to $40 while the value of an investment in
the futures contract could have fallen to only $45. Over time, if backwardation
remained constant, the difference would continue to increase.
If the
futures market is in contango, the investor would be buying a next month
contract for a higher price than the current near month contract.
Hypothetically, and assuming no other changes to either prevailing crude oil
prices or the price relationship between the spot price, the near month contract
and the next month contract (and ignoring the impact of commission costs and the
interest earned on cash), the value of the next month contract would fall as it
approaches expiration and becomes the new near month contract. In this example,
it would mean that the value of the $50 investment would tend to rise slower
than the spot price of crude oil, or fall faster. As a result, it would be
possible in this hypothetical example for the spot price of crude oil to
have risen to $60 after some period of time, while the value of the investment
in the futures contract will have risen to only $55, assuming contango is large
enough or enough time has elapsed. Similarly, the spot price of crude oil could
have fallen to $45 while the value of an investment in the futures contract
could have fallen to $40. Over time, if contango remained constant, the
difference would continue to increase.
The chart
below compares the price of the near month contract to the average price of the
near 12 months over the last 10 years (1999-2008) for light, sweet crude oil.
When the price of the near month contract is higher than the average price of
the near 12 month contracts, the market would be described as being in
backwardation. When the price of the near month contract is lower than the
average price of the near 12 month contracts, the market would be described as
being in contango. Although the prices of the near month contract and the
average price of the near 12 month contracts do tend to move up or down
together, it can be seen that at times the near month prices are clearly higher
than the average price of the near 12 month contracts (backwardation), and other
times they are below the average price of the near 12 month contracts
(contango).
Near
Month Price ("CL1") vs Average Price of the Near 12 Months ("12M Strip")
*
(10
years between 1999-2008)
*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
An
alternative way to view the same data is to subtract the dollar price of the
average dollar price of the near 12 month contracts for light, sweet crude oil
from the dollar price of the near month contract for light, sweet crude oil. If
the resulting number is a positive number, then the near month price is higher
than the average price of the near 12 months and the market could be described
as being in backwardation. If the resulting number is a negative number, then
the near month price is lower than the average price of the near 12 months and
the market could be described as being in contango. The chart below shows the
results from subtracting the average dollar price of the near 12 month contracts
from the near month price for the 10 year period between 1999 and
2008.
Near
Month Price minus Average Price of Near 12 Months *
(1999-2008)
*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
An
investment in a portfolio that involved owning only the near month contract
would likely produce a different result than an investment in a portfolio that
owned an equal number of each of the near 12 months’ worth of contracts.
Generally speaking, when the crude oil futures market is in backwardation, the
near month only portfolio would tend to have a higher total return than the 12
month portfolio. Conversely, if the crude oil futures market was in contango,
the portfolio containing 12 months’ worth of contracts would tend to outperform
the near month only portfolio. The chart below shows the annual results of
owning a portfolio consisting of the near month contract and a portfolio
containing the near 12 months’ worth of contracts. In addition, the chart shows
the annual change in the spot price of light, sweet crude oil. In this example,
each month, the near month only portfolio would sell the near month contract at
expiration and buy the next month out contract. The portfolio holding an equal
number of the near 12 months’ worth of contracts would sell the near month
contract at expiration and replace it with the contract that becomes the new
twelfth month contract.
*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
As seen
in the chart above, there have been periods of both positive and negative annual
total returns for both hypothetical portfolios over the last 10 years. In
addition, there have been periods during which the near month only approach had
higher returns, and periods where the 12 month approach had higher total
returns. The above chart does not represent the performance history of USOF or
any affiliated funds.
Historically,
the crude oil futures markets have experienced periods of contango and
backwardation, with backwardation being in place more often than contango.
During 2006 and the first half of 2007, these markets have experienced contango.
However, starting early in the third quarter of 2007, the crude oil futures
market moved into backwardation. The crude oil markets remained in backwardation
until late in the second quarter of 2008 when they moved into contango. The
crude oil markets remained in contango until late in the third quarter of 2008,
when the markets moved into backwardation. Early in the fourth quarter of 2008,
the crude oil market moved back into contango and remained in contango for the
balance of 2008. Throughout the first nine months of 2009, the crude
oil market remained in contango. During parts of January and February
2009, the level of contango was unusually steep. Crude oil inventories, which
reached historic levels in January and February 2009 and which appear to be the
primary cause of the steep level of contango, began to drop in March 2009 and
for the balance of the first half of 2009. The crude oil future market remained
in contango through September 30, 2009.
Periods
of contango or backwardation do not materially impact USOF’s investment
objective of having the percentage changes in its per unit NAV track the
percentage changes in the price of the Benchmark Oil Futures Contract since the
impact of backwardation and contango tended to equally impact the percentage
changes in price of both USOF’s units and the Benchmark Oil Futures
Contract. It is impossible to predict with any degree of certainty whether
backwardation or contango will occur in the future. It is likely that both
conditions will occur during different periods.
Crude Oil Market
. During the
nine months ended September 30, 2009, crude oil prices were impacted by several
factors. On the consumption side, demand remained weak inside and outside the
United States as global economic growth, including emerging economies such as
China and India, remained weak to negative for the first quarter of the year. On
the supply side, efforts to reduce production by the Organization of the
Petroleum Exporting Countries to more closely match global consumption were only
partially successful. This divergence between production and consumption has led
to large build-ups in crude oil inventories and contributed to weak oil prices.
However, crude oil prices did finish the third quarter of 2009
approximately 58.32% higher than at the beginning of the year, as investors
looked forward to improvements in the global economy. Management believes,
however, that should the global economic situation remain weak, there is a
meaningful possibility that crude oil prices could retreat from their current
levels.
Crude Oil Price Movements in
Comparison to other Energy Commodities and Investment Categories.
The
General Partner believes that investors frequently measure the degree to which
prices or total returns of one investment or asset class move up or down in
value in concert with another investment or asset class. Statistically, such a
measure is usually done by measuring the correlation of the price movements of
the two different investments or asset classes over some period of time. The
correlation is scaled between 1 and -1, where 1 indicates that the two
investment options move up or down in price or value together, known as
“positive correlation,” and -1 indicating that they move in completely opposite
directions, known as “negative correlation.” A correlation of 0 would mean that
the movements of the two are neither positively or negatively correlated, known
as “non-correlation.” That is, the investment options sometimes move up and down
together and other times move in opposite directions.
For the
ten year time period between 1998 and 2008, the chart below compares the monthly
movements of crude oil prices versus the monthly movements of the prices of
several other energy commodities, such as natural gas, heating oil, and unleaded
gasoline, as well as several major non-commodity investment asset classes, such
as large cap U.S. equities, U.S. government bonds and global equities. It can be
seen that over this particular time period, the movement of crude oil on a
monthly basis was not strongly correlated, positively or negatively, with the
movements of large cap U.S. equities, U.S. government bonds or global equities.
However, movements in crude oil had a strong positive correlation to movements
in heating oil and unleaded gasoline. Finally, crude oil had a positive, but
weaker, correlation with natural gas.
10 Year Correlation
Matrix 1998-2008
|
|
Large
Cap
U.S.
Equities
(S&P
500)
|
|
|
U.S. Govt.
Bonds
(EFFAS
U.S.
Government
Bond Index)
|
|
|
Global
Equities
(FTSE
World
Index)
|
|
|
Unleaded
Gasoline
|
|
|
Natural
Gas
|
|
|
Heating
Oil
|
|
|
Crude
Oil
|
|
Large
Cap U.S. Equities (S&P 500)
|
|
|
1.000
|
|
|
|
-0.223
|
|
|
|
0.936
|
|
|
|
0.266
|
|
|
|
0.045
|
|
|
|
0.003
|
|
|
|
0.063
|
|
U.S.
Govt. Bonds (EFFAS U.S. Government Bond Index)
|
|
|
|
|
|
|
1.000
|
|
|
|
-0.214
|
|
|
|
-0.134
|
|
|
|
0.054
|
|
|
|
0.037
|
|
|
|
-0.29
|
|
Global
Equities (FTSE World Index)
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.384
|
|
|
|
0.072
|
|
|
|
0.084
|
|
|
|
0.155
|
|
Unleaded
Gasoline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.254
|
|
|
|
0.787
|
|
|
|
0.747
|
|
Natural
Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.394
|
|
|
|
0.292
|
|
Heating
Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.738
|
|
Crude
Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
source:
Bloomberg, NYMEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS
The chart
below covers a more recent, but much shorter, range of dates than the above
chart. Over the one year period ended September 30, 2009, crude oil continued to
have a strong positive correlation with heating oil and unleaded gasoline.
During this period, it also had a slightly weaker correlation with the
movements of natural gas than it had displayed over the ten year period ended
December 31, 2008. Notably, the correlation between crude oil and both large cap
U.S. equities and global equities, which had been essentially non-correlated
over the ten year period ended December 31, 2008, displayed results that
indicated that they had a mildly positive correlation over this shorter time
period, particularly due to the recent downturn in the U.S. economy. Finally,
the results showed that crude oil and U.S. government bonds, which had
essentially been non-correlated for the ten year period ended December 31, 2008,
were weakly negatively correlated over this more recent time
period.
Correlation Matrix –
12 months ended
September 30, 2009
|
|
Large
Cap
U.S.
Equities
(S&P
500)
|
|
|
U.S. Govt.
Bonds
(EFFAS
U.S.
Government
Bond Index)
|
|
|
Global
Equities
(FTSE
World
Index)
|
|
|
Unleaded
Gasoline
|
|
|
Heating
Oil
|
|
|
Natural
Gas
|
|
|
Crude
Oil
|
|
Large
Cap U.S. Equities (S&P 500)
|
|
|
1.000
|
|
|
|
0.088
|
|
|
|
0.988
|
|
|
|
0.522
|
|
|
|
0.694
|
|
|
|
0.205
|
|
|
|
0.706
|
|
U.S.
Govt. Bonds (EFFAS U.S. Government Bond Index)
|
|
|
|
|
|
|
1.000
|
|
|
|
0.102
|
|
|
|
-0.423
|
|
|
|
-0.303
|
|
|
|
0.082
|
|
|
|
-0.313
|
|
Global
Equities (FTSE World Index)
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.552
|
|
|
|
0.697
|
|
|
|
0.205
|
|
|
|
0.705
|
|
Unleaded
Gasoline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.865
|
|
|
|
-0.089
|
|
|
|
0.768
|
|
Heating
Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.252
|
|
|
|
0.810
|
|
Natural
Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
0.193
|
|
Crude
Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
source:
Bloomberg, NYMEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
Investors
are cautioned that the historical price relationships between crude oil and
various other energy commodities, as well as other investment asset classes, as
measured by correlation may not be reliable predictors of future price movements
and correlation results. The results pictured above would have been different if
a different range of dates had been selected. The General Partner believes that
crude oil has historically not demonstrated a strong correlation with equities
or bonds over long periods of time. However, the General Partner also believes
that in the future it is possible that crude oil could have long term
correlation results that indicate prices of crude oil more closely track the
movements of equities or bonds. In addition, the General Partner believes that,
when measured over time periods shorter than ten years, there will always be
some periods where the correlation of crude oil to equities and bonds will be
either more strongly positively correlated or more strongly negatively
correlated than the long term historical results suggest.
The correlations between
crude oil, natural gas, heating oil and gasoline are relevant because the
General Partner endeavors to invest USOF’s assets in Oil Futures Contracts and
Other Crude Oil-Related Investments so that daily changes in percentage terms in
USOF’s NAV correlate as closely as possible with daily changes in percentage
terms in the price of the Benchmark Oil Futures Contract. If certain other
fuel-based commodity futures contracts do not closely correlate with the
Oil Futures Contract, then their use could lead to greater tracking error. As
noted, the General Partner also believes that the changes in percentage terms in
the price of the Benchmark Oil Futures Contract will closely correlate with
changes in percentage terms in the spot price of light, sweet crude
oil.
Critical
Accounting Policies
Preparation
of the condensed financial statements and related disclosures in compliance with
accounting principles generally accepted in the United States of America
requires the application of appropriate accounting rules and guidance, as well
as the use of estimates. USOF’s application of these policies involves judgments
and actual results may differ from the estimates used.
The
General Partner has evaluated the nature and types of estimates that
it makes in preparing USOF’s condensed financial statements and related
disclosures and has determined that the valuation of its investments which
are not traded on a United States or internationally recognized futures exchange
(such as forward contracts and over-the-counter contracts) involves a critical
accounting policy. The values which are used by USOF for its forward
contracts are provided by its commodity broker who uses market prices when
available, while over-the-counter contracts are valued based on the present
value of estimated future cash flows that would be received from or paid to a
third party in settlement of these derivative contracts prior to their delivery
date and valued on a daily basis. In addition, USOF estimates interest income on
a daily basis using prevailing interest rates earned on its cash and cash
equivalents. These estimates are adjusted to the actual amount received on
a monthly basis and the difference, if any, is not considered
material.
Liquidity
and Capital Resources
USOF has
not made, and does not anticipate making, use of borrowings or other lines of
credit to meet its obligations. USOF has met, and it is anticipated that USOF
will continue to meet, its liquidity needs in the normal course of business from
the proceeds of the sale of its investments, or from the Treasuries, cash
and/or cash equivalents that it intends to hold at all times. USOF’s
liquidity needs include: redeeming units, providing margin deposits for its
existing Oil Futures Contracts or the purchase of additional Oil Futures
Contracts and posting collateral for its over-the-counter contracts and payment
of its expenses, summarized below under “Contractual Obligations.”
USOF
currently generates cash primarily from (i) the sale of baskets consisting of
100,000 units (“Creation Baskets”) and (ii) interest earned on Treasuries,
cash and/or cash equivalents. USOF has allocated substantially all of its net
assets to trading in Oil Interests. USOF invests in Oil Interests to the fullest
extent possible without being leveraged or unable to satisfy its current or
potential margin or collateral obligations with respect to its investments in
Oil Futures Contracts and Other Oil Interests. A significant portion of the NAV
is held in cash and cash equivalents that are used as margin and as
collateral for USOF’s trading in Oil Interests. The balance of the net assets is
held in USOF’s account at its custodian bank. Interest earned on USOF’s
interest-bearing funds is paid to USOF. In prior periods, the amount of cash
earned by USOF from the sale of Creation Baskets and from interest earned has
exceeded the amount of cash required to pay USOF’s expenses.
However, during the nine months ended September 30, 2009, USOF’s expenses
exceeded the interest income USOF earned and the cash earned by the sale of
Creation Baskets. During the nine months ended September 30, 2009,
USOF was forced to use other assets to pay cash expenses, which could cause
a drop in USOF’s NAV over time.
USOF’s
investment in Oil Interests may be subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
most commodity exchanges limit the fluctuations in futures contracts prices
during a single day by regulations referred to as “daily limits.” During a
single day, no trades may be executed at prices beyond the daily limit. Once the
price of a futures contract has increased or decreased by an amount equal to the
daily limit, positions in the contracts can neither be taken nor liquidated
unless the traders are willing to effect trades at or within the specified daily
limit. Such market conditions could prevent USOF from promptly liquidating its
positions in Oil Futures Contracts. During the nine months ended September 30,
2009, USOF was not forced to purchase or liquidate any of its positions while
daily limits were in effect; however, USOF cannot predict whether such an event
may occur in the future.
Since
March 23, 2007, USOF has been responsible for expenses relating to
(i) management fees, (ii) brokerage fees and commissions, (iii)
licensing fees for the use of intellectual property, (iv) ongoing registration
expenses in connection with offers and sales of its units subsequent to the
initial offering, (v) taxes and other expenses, including certain tax reporting
costs, (vi) fees and expenses of the independent directors of the General
Partner and (vii) other extraordinary expenses not in the ordinary course of
business, while the General Partner has been responsible for expenses relating
to the fees of USOF’s marketing agent, administrator and custodian and
registration expenses relating to the initial offering of units. If the
General Partner and USOF are unsuccessful in raising sufficient funds to cover
these respective expenses or in locating any other source of funding, USOF will
terminate and investors may lose all or part of their investment.
Market
Risk
Trading
in Oil Futures Contracts and Other Oil Interests, such as
forwards, involves USOF entering into contractual commitments to purchase
or sell oil at a specified date in the future. The aggregate market value of
the contracts will significantly exceed USOF’s future cash requirements
since USOF intends to close out its open positions prior to settlement. As a
result, USOF is generally only subject to the risk of loss arising
from the change in value of the contracts. USOF considers the “fair value” of
its derivative instruments to be the unrealized gain or loss on the contracts.
The market risk associated with USOF’s commitments to purchase oil is limited to
the aggregate market value of the contracts held. However, should USOF enter
into a contractual commitment to sell oil, it would be required to make delivery
of the oil at the contract price, repurchase the contract at prevailing prices
or settle in cash. Since there are no limits on the future price of oil, the
market risk to USOF could be unlimited.
USOF’s
exposure to market risk depends on a number of factors, including the
markets for oil, the volatility of interest rates and foreign exchange rates,
the liquidity of the Oil Futures Contracts and Other Oil Interests markets and
the relationships among the contracts held by USOF. Drastic market occurrences
could ultimately lead to the loss of all or substantially all of an investor’s
capital.
Credit
Risk
When USOF
enters into Oil Futures Contracts and Other Oil Interests, it is exposed to the
credit risk that the counterparty will not be able to meet its obligations. The
counterparty for the Oil Futures Contracts traded on the NYMEX and on most
other futures exchanges is the clearinghouse associated with the particular
exchange. In general, clearinghouses are backed by their members who may be
required to share in the financial burden resulting from the nonperformance of
one of their members and, therefore, this additional member support should
significantly reduce credit risk. Some foreign exchanges are not backed by their
clearinghouse members but may be backed by a consortium of banks or other
financial institutions. There can be no assurance that any counterparty,
clearinghouse, or their members or their financial backers will satisfy their
obligations to USOF in such circumstances.
The
General Partner attempts to manage the credit risk of USOF by following
various trading limitations and policies. In particular, USOF generally posts
margin and/or holds liquid assets that are approximately equal to the market
value of its obligations to counterparties under the Oil Futures Contracts and
Other Oil Interests it holds. The General Partner has implemented procedures
that include, but are not limited to, executing and clearing trades only with
creditworthy parties and/or requiring the posting of collateral or margin by
such parties for the benefit of USOF to limit its credit exposure. UBS
Securities LLC, USOF’s commodity broker, or any other broker that may be
retained by USOF in the future, when acting as USOF’s futures commission
merchant in accepting orders to purchase or sell Oil Futures Contracts on United
States exchanges, is required by CFTC regulations to separately account for
and segregate as belonging to USOF, all assets of USOF relating to domestic Oil
Futures Contracts trading. These futures commission merchants are not allowed to
commingle USOF’s assets with its other assets. In addition, the CFTC requires
commodity brokers to hold in a secure account USOF’s assets related to foreign
Oil Futures Contracts trading. During the nine months ended September 30, 2009,
the only foreign exchange on which USOF made investments was the ICE Futures,
which is a London based futures exchange. Those crude oil contracts are
denominated in U.S. dollars.
In the
future, USOF may purchase over-the-counter contracts. See “Item 3. Quantitative
and Qualitative Disclosures About Market Risk” of this quarterly report on Form
10-Q for a discussion of over-the-counter contracts.
As of September 30, 2009, USOF had
deposits in domestic and foreign financial institutions, including cash
investments in money market funds, in the amount of $2,324,411,842. This amount
is subject to loss should these institutions cease
operations.
Off
Balance Sheet Financing
As of
September 30, 2009, USOF has no loan guarantee, credit support or other
off-balance sheet arrangements of any kind other than agreements entered into in
the normal course of business, which may include indemnification provisions
relating to certain risks that service providers undertake in performing
services which are in the best interests of USOF. While USOF’s exposure under
these indemnification provisions cannot be estimated, they are not expected to
have a material impact on USOF’s financial position.
Redemption
Basket Obligation
In order
to meet its investment objective and pay its contractual obligations described
below, USOF requires liquidity to redeem units, which redemptions must be
in blocks of 100,000 units called “Redemption Baskets”. USOF has to date
satisfied this obligation by paying from the cash or cash equivalents it holds
or through the sale of its Treasuries in an amount proportionate to the number
of units being redeemed.
Contractual
Obligations
USOF’s
primary contractual obligations are with the General Partner. In return for its
services, the General Partner is entitled to a management fee calculated monthly
as a fixed percentage of USOF’s NAV, currently 0.45% of NAV on its average daily
net assets.
The
General Partner agreed to pay the start-up costs associated with the
formation of USOF, primarily its legal, accounting and other costs in connection
with the General Partner’s registration with the CFTC as a CPO and the
registration and listing of USOF and its units with the SEC, FINRA and the
AMEX, respectively. However, following USOF’s initial offering of units,
offering costs incurred in connection with registering and listing additional
units of USOF are directly borne on an ongoing basis by USOF, and not by the
General Partner.
The
General Partner pays the fees of USOF’s marketing agent, ALPS Distributors,
Inc., and the fees of the custodian and transfer agent, Brown Brothers Harriman
& Co. (“BBH&Co.”), as well as BBH&Co.’s fees for performing
administrative services, including those in connection with the preparation of
USOF’s condensed financial statements and its SEC and CFTC reports. The General
Partner and USOF have also entered into a licensing agreement with the
NYMEX pursuant to which USOF and the affiliated funds managed by the General
Partner pay a licensing fee to the NYMEX. USOF also pays the fees and expenses
associated with its tax accounting and reporting requirements with the exception
of certain initial implementation service fees and base service fees which are
paid by the General Partner.
In
addition to the General Partner’s management fee, USOF pays its brokerage fees
(including fees to a futures commission merchant), over-the-counter dealer
spreads, any licensing fees for the use of intellectual property, and,
subsequent to the initial offering, registration and other fees paid to the SEC,
FINRA, or other regulatory agencies in connection with the offer and sale of
units, as well as legal, printing, accounting and other expenses associated
therewith, and extraordinary expenses. The latter are expenses not incurred
in the ordinary course of USOF’s business, including expenses relating to
the indemnification of any person against liabilities and obligations to the
extent permitted by law and under the LP Agreement, the bringing or defending of
actions in law or in equity or otherwise conducting litigation and incurring
legal expenses and the settlement of claims and litigation. Commission
payments to a futures commission merchant are on a contract-by-contract, or
round turn, basis. USOF also pays a portion of the fees and expenses of the
independent directors of the General Partner. See Note 3 to the Notes to
Condensed Financial Statements (Unaudited).
The
parties cannot anticipate the amount of payments that will be required under
these arrangements for future periods, as USOF’s NAVs and trading levels to meet
its investment objectives will not be known until a future date. These
agreements are effective for a specific term agreed upon by the parties with an
option to renew, or, in some cases, are in effect for the duration of USOF’s
existence. Either party may terminate these agreements earlier for certain
reasons described in the agreements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
Over-the-Counter
Derivatives
In the
future, USOF may purchase over-the-counter contracts. Unlike most of the
exchange-traded Oil Futures Contracts or exchange-traded options on such
futures, each party to an over-the-counter contract bears the credit risk
that the other party may not be able to perform its obligations under its
contract.
Some
crude oil-based derivatives transactions contain fairly generic terms and
conditions and are available from a wide range of participants. Other crude
oil-based derivatives have highly customized terms and conditions and are not as
widely available. Many of these over-the-counter contracts are cash-settled
forwards for the future delivery of crude oil- or petroleum-based fuels that
have terms similar to the Oil Futures Contracts. Others take the form of “swaps”
in which the two parties exchange cash flows based on pre-determined formulas
tied to the spot price of crude oil, forward crude oil prices or crude oil
futures prices. For example, USOF may enter into over-the-counter derivative
contracts whose value will be tied to changes in the difference between
the spot price of light, sweet crude oil, the price of Oil Futures
Contracts traded on the NYMEX and the prices of other Oil Futures Contracts in
which USOF may invest.
To
protect itself from the credit risk that arises in connection with such
contracts, USOF may enter into agreements with each counterparty that provide
for the netting of its overall exposure to such counterparty, such as the
agreements published by the International Swaps and Derivatives Association,
Inc. USOF also may require that the counterparty be highly rated and/or
provide collateral or other credit support to address USOF’s exposure to the
counterparty. In addition, it is also possible for USOF and its counterparty to
agree to clear their agreement through an established futures clearinghouse such
as those connected to the NYMEX or the ICE Futures. In that event, USOF would no
longer have credit risk of its original counterparty, as the clearinghouse would
now be USOF’s counterparty. USOF would still retain any price risk associated
with its transaction.
The
creditworthiness of each potential counterparty is assessed by the General
Partner. The General Partner assesses or reviews, as appropriate, the
creditworthiness of each potential or existing counterparty to an
over-the-counter contract pursuant to guidelines approved by the General
Partner’s board of directors (the “Board”). Furthermore, the General Partner on
behalf of USOF only enters into over-the-counter contracts with counterparties
who are, or are affiliates of, (a) banks regulated by a United States federal
bank regulator, (b) broker-dealers regulated by the SEC, (c) insurance companies
domiciled in the United States, and (d) producers, users or traders of energy,
whether or not regulated by the CFTC. Any entity acting as a counterparty shall
be regulated in either the United States or the United Kingdom unless otherwise
approved by the Board after consultation with its legal counsel. Existing
counterparties are also reviewed periodically by the General
Partner.
USOF
anticipates that the use of Other Oil Interests together with its investments in
Oil Futures Contracts will produce price and total return results that closely
track the investment goals of USOF. However, there can be no assurance of this.
Over-the-counter contracts may result in higher transaction-related expenses
than the brokerage commissions paid in connection with the purchase of Futures
Contracts, which may impact USOF’s ability to successfully track the Benchmark
Futures Contract.
USOF may
employ spreads or straddles in its trading to mitigate the differences in its
investment portfolio and its goal of tracking the price of the Benchmark Oil
Futures Contract. USOF would use a spread when it chooses to take simultaneous
long and short positions in futures written on the same underlying asset, but
with different delivery months. The effect of holding such combined positions is
to adjust the sensitivity of USOF to changes in the price relationship between
futures contracts which will expire sooner and those that will expire later.
USOF would use such a spread if the General Partner felt that taking such long
and short positions, when combined with the rest of its holdings, would more
closely track the investment goals of USOF, or if the General Partner felt it
would lead to an overall lower cost of trading to achieve a given level of
economic exposure to movements in oil prices. USOF would enter into a straddle
when it chooses to take an option position consisting of a long (or short)
position in both a call option and put option. The economic effect of holding
certain combinations of put options and call options can be very similar to that
of owning the underlying futures contracts. USOF would make use of such a
straddle approach if, in the opinion of the General Partner, the resulting
combination would more closely track the investment goals of USOF or if it would
lead to an overall lower cost of trading to achieve a given level of economic
exposure to movements in oil prices.
During
the nine months ended September 30, 2009, USOF did not employ any hedging
methods such as those described above since all of its investments were made
over an exchange. Therefore, during the nine months ended September 30, 2009,
USOF was not exposed to counterparty risk.
Item 4. Controls
and Procedures.
Disclosure
Controls and Procedures
USOF
maintains disclosure controls and procedures that are designed to ensure that
material information required to be disclosed in USOF’s periodic reports filed
or submitted under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time period specified in the SEC’s
rules and forms.
The duly
appointed officers of the General Partner, including its chief executive officer
and chief financial officer, who perform functions equivalent to those
of a principal executive officer and principal financial officer of USOF if
USOF had any officers, have evaluated the effectiveness of USOF’s
disclosure controls and procedures and have concluded that the
disclosure controls and procedures of USOF have been effective as of the end of
the period covered by this quarterly report on Form 10-Q.
Change
in Internal Control Over Financial Reporting
There
were no changes in USOF’s internal control over financial reporting during
USOF’s last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, USOF’s internal control over financial
reporting.
Part
II. OTHER INFORMATION
Item
1. Legal Proceedings.
Not
applicable.
Item
1A. Risk Factors.
Except as
noted below, there has not been a material change from the risk factors
previously disclosed in USOF’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.
Regulation
of the commodity interests and energy markets is extensive and constantly
changing; future regulatory developments are impossible to predict but may
significantly and adversely affect USOF.
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 transactions in the United States is a
rapidly changing area of law and is subject to modification by government and
judicial action.
The
regulation of commodity interest transactions in the United States is a rapidly
changing area of law and is subject to ongoing modification by governmental and
judicial action. Considerable regulatory attention has been focused on
non-traditional investment pools which are publicly distributed in the United
States. There is a possibility of future regulatory changes altering, perhaps to
a material extent, the nature of an investment in USOF or the ability of USOF to
continue to implement its investment strategy. In addition, various national
governments have expressed concern regarding the disruptive effects of
speculative trading in the energy markets and the need to regulate the
derivatives markets in general. The effect of any future regulatory change on
USOF is impossible to predict, but could be substantial and
adverse.
In the
wake of the economic crisis last year, the Administration, federal regulators
and Congress are revisiting the regulation of the financial sector, including
securities and commodities markets. These efforts are likely to result in
significant changes in the regulation of these markets.
Currently,
a number of proposals that would alter the regulation of Oil Interests are being
considered by federal regulators and Congress. These proposals include the
imposition of fixed position limits on energy-based commodity futures contracts,
extension of position and accountability limits to futures contracts on non-U.S.
exchanges previously exempt from such limits, and the forced use of
clearinghouse mechanisms for all over-the-counter transactions. Certain
proposals would aggregate and limit all positions in energy futures held by a
single entity, whether such positions exist on U.S. futures exchanges, non-U.S.
futures exchanges, or in over-the-counter contracts. While it cannot be
predicted at this time what reforms will eventually be made or how they will
impact USOF, if any of the aforementioned proposals are implemented, USOF’s
ability to meet its investment objective may be negatively impacted and
investors could be adversely affected.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Not applicable.
Item
3. Defaults Upon Senior Securities.
Not applicable.
Item
4. Submission of Matters to a Vote of Security
Holders.
Not
applicable.
Item 5. Other
Information.
Monthly
Account Statements
Pursuant
to the requirement under Rule 4.22 under the Commodity Exchange Act, each month
USOF publishes an account statement for its unitholders, which includes a
Statement of Income (Loss) and a Statement of Changes in NAV. The account
statement is furnished to the SEC on a current report on Form 8-K pursuant
to Section 13 or 15(d) of the Exchange Act and posted each month on USOF’s
website at www.unitedstatesoilfund.com.
Item 6. Exhibits.
Listed
below are the exhibits which are filed as part of this quarterly report on Form
10-Q (according to the number assigned to them in Item 601 of Regulation
S-K):
Exhibit
|
|
|
Number
|
|
Description of Document
|
3.1*
|
|
Fifth
Amended and Restated Agreement of Limited Partnership.
|
3.4*
|
|
Fourth
Amended and Restated Limited Liability Company Agreement of the General
Partner.
|
10.2*
|
|
Marketing
Agent Agreement.
|
10.4*
|
|
Custodian
Agreement.
|
10.5*
|
|
Amendment
Agreement to Custodian Agreement.
|
10.6*
|
|
Administrative
Agency Agreement.
|
10.7*
|
|
Amendment
Agreement to the Administrative Agency Agreement.
|
10.8*
|
|
Amendment
Agreement to the Marketing Agent Agreement.
|
31.1*
|
|
Certification
by Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2*
|
|
Certification
by Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1*
|
|
Certification
by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2*
|
|
Certification
by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
*
Filed herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
United
States Oil Fund, LP (Registrant)
|
By: United
States Commodity Funds LLC, its general partner
|
|
|
By:
|
/s/
Nicholas D. Gerber
|
Nicholas
D. Gerber
|
Chief
Executive Officer
|
|
Date: November
9, 2009
|
|
|
By:
|
/s/
Howard Mah
|
Howard
Mah
|
Chief
Financial Officer
|
|
Date: November
9, 2009
|
Exhibit
3.1
UNITED
STATES OIL FUND, LP
FIFTH
AMENDED AND RESTATED
AGREEMENT
OF LIMITED PARTNERSHIP
This
Fifth Amended and Restated Agreement of Limited Partnership (this
“Agreement”
), effective as of
October 13, 2008, is entered into by and among United States Commodity Funds
LLC, formerly Victoria Bay Asset Management, LLC, a Delaware limited liability
company, as General Partner and Kellogg Capital Group, LLC, as a Limited
Partner, together with any Persons who shall hereafter be admitted as Partners
in accordance with this Agreement.
WHEREAS,
the General Partner, Wainwright Holdings, Inc., a Delaware corporation, as the
Organizational Limited Partner, and KV Execution Services, LLC, as the Initial
Limited Partner, were parties to that certain second amended and restated
agreement of limited partnership entered into on October 15, 2006, pursuant to
which the Organizational Limited Partner withdrew from the
Partnership;
WHEREAS,
the General Partner and the Initial Limited Partner are parties to the that
certain fourth amended and restated agreement of limited partnership executed on
November 13, 2007 (the
“LP
Agreement”
), regarding the operation of the Partnership and their rights
and obligations thereunder; and
WHEREAS,
the Kellogg Capital Group, LLC was admitted as a Limited Partner of the
Partnership on August 28, 2008 and the Initial Limited Partner has withdrawn
from the Partnership, in each case in accordance with this
Agreement;
WHEREAS,
the Kellogg Capital Group, LLC is currently the sole Limited
Partner;
WHEREAS,
the General Partner and the Limited Partner now desire to amend and restate the
LP Agreement regarding the operation of the Partnership;
NOW
THEREFORE, in consideration of the mutual promises and agreements herein made
and intending to be legally bound, the Partners hereby agree to amend and
restate the LP Agreement in its entirety as follows:
ARTICLE
1
Definitions
As used
in this Agreement, the following terms shall have the following
meanings:
1.1
“Accounting Period”
shall
mean the following periods: the initial accounting period which shall commence
upon the commencement of operations of the Partnership. Each subsequent
Accounting Period shall commence immediately after the close of the preceding
Accounting Period. Each Accounting Period hereunder shall close on the earliest
of (i) the last Business Day of a month, (ii) the effective date of dissolution
of the Partnership, and (iii) such other day or days in addition thereto or in
substitution therefore as may from time to time be determined by the General
Partner in its discretion either in any particular case or
generally.
1.2
“Act”
shall mean the Revised
Uniform Limited Partnership Act of the State of Delaware, as amended from time
to time.
1.3
“Additional Limited Partner”
shall mean a Person admitted to the Partnership as a Limited Partner pursuant to
this Agreement and who is shown as such on the books and records of the
Partnership.
1.4
“Affiliate”
shall mean, when
used with reference to a specified Person, (i) any Person who directly or
indirectly through one or more intermediaries controls or is controlled by or is
under common control with the specified Person or (ii) any Person that is an
officer of, partner in, or trustee of, or serves in a similar capacity with
respect to, the specified Person or of which the specified Person is an officer,
partner or trustee, or with respect to which the specified Person serves in a
similar capacity.
1.5
“Assignee”
shall mean a
Record Holder that has not been admitted to the Partnership as a Substituted
Limited Partner.
1.6
“Agreement”
shall mean this
Fifth Amended and Restated Agreement of Limited Partnership, as may be amended,
modified, supplemented or restated from time to time.
1.7
“Authorized Purchaser
Agreement”
shall mean an agreement among the Partnership, the General
Partner and a Participant, as may be amended or supplemented from time to time
in accordance with its terms.
1.8
“Business Day”
shall mean any
day other than a day on which the New York Mercantile Exchange, the New York
Stock Exchange or NYSE Arca is closed for regular trading.
1.9
“Beneficial Owner”
shall mean
the ultimate beneficial owner of Units held by a nominee which has furnished the
identity of the Beneficial Owner in accordance with Section 6031(c) of the Code
(or any other method acceptable to the General Partner in its sole discretion)
and with Section 9.2.2 of this Agreement.
1.10
“Capital Account”
shall have
the meaning assigned to such term in Section 4.1.
1.11
“Capital Contribution”
shall
mean the total amount of money or agreed-upon value of property contributed to
the Partnership by all the Partners or any class of Partners or any one Partner,
as the case may be (or the predecessor holders of the interests of such Partner
or Partners).
1.12
“Capital Transaction”
shall
mean a sale of all or substantially all of the assets of the Partnership not in
the ordinary course of business.
1.13
“Certificate”
shall mean a
certificate issued by the Partnership evidencing ownership of one or more
Units.
1.14
“Close of Business”
shall
mean 5:00 PM New York time.
1.15
“Creation Basket”
shall mean
100,000 Units, or such other number of Units as may be determined by the General
Partner from time to time, purchased by a Participant.
1.16
“Code”
shall mean the
Internal Revenue Code of 1986, as amended.
1.17
“Departing Partner”
shall
mean a former General Partner, from and after the effective date of any
withdrawal or removal of such former General Partner.
1.18
“Depository”
or
“DTC”
shall mean The
Depository Trust Company, New York, New York, or such other depository of Units
as may be selected by the General Partner as specified herein.
1.19
“Depository Agreement”
shall
mean the Letter of Representations from the General Partner to the Depository,
dated as of February 3, 2006, as may be amended or supplemented from
time to time.
1.20
“Distributable Cash”
shall
mean, with respect to any period, all cash revenues of the Partnership (not
including (i) Capital Contributions, (ii) funds received by the Partnership in
respect of indebtedness incurred by the Partnership, (iii) interest or other
income earned on temporary investments of Partnership funds pending utilization,
and (iv) proceeds from any Capital Transaction), less the sum of the following:
(x) all amounts expended by the Partnership pursuant to this Agreement in such
period and (y) such working capital or reserves or other amounts as the General
Partner reasonably deems to be necessary or appropriate for the proper operation
of the Partnership’s business or its winding up and liquidation. The General
Partner in its sole discretion may from time to time declare other funds of the
Partnership to be Distributable Cash.
1.21
“DTC Participants”
shall have
the meaning assigned to such term in Section 9.2.2.
1.22
“General Partner”
shall mean
United States Commodity Funds LLC, formerly Victoria Bay Asset Management, LLC,
a Delaware limited liability company, or any Person who, at the time of
reference thereto, serves as a general partner of the Partnership.
1.23
“Global Certificates”
shall
mean the global certificate or certificates issued to the Depository as provided
in the Depository Agreement, each of which shall be in substantially the form
attached hereto as Exhibit A.
1.24
“Indirect Participants”
shall
have the meaning assigned to such term in Section 9.2.2.
1.25
“Initial Limited Partner”
shall have the meaning assigned to such term in Section 3.3.
1.26
“Initial Offering Period”
shall mean the period commencing with the initial effective date of the
Prospectus and terminating no later than the ninetieth (90th) day following such
date unless extended for up to an additional 90 days at the sole discretion of
the General Partner.
1.27
“Limited Partner”
shall mean
any Person who is a limited partner (whether the Initial Limited Partner, a
Limited Partner admitted pursuant to this Agreement or an assignee who is
admitted as a Limited Partner) at the time of reference thereto, in such
Person’s capacity as a limited partner of the Partnership.
1.28
“Management Fee”
shall mean
the management fee paid to the General Partner pursuant to this
Agreement.
1.29
“Net Asset Value”
or
“NAV”
shall mean the current
market value of the Partnership’s total assets, less any liabilities, as
reasonably determined by the General Partner or its designee.
1.30
“Opinion of Counsel”
shall
mean a written opinion of counsel (who may be regular counsel to the Partnership
or the General Partner) acceptable to the General Partner.
1.31
“Organizational Limited
Partner”
shall mean Wainwright Holdings, Inc., a Delaware corporation, in
its capacity as the organizational limited partner of the
Partnership.
1.32
“Outstanding”
shall mean,
with respect to the Units or other Partnership Securities, as the case may be,
all Units or other Partnership Securities that are issued by the Partnership and
reflected as outstanding on the Partnership’s books and records as of the date
of determination.
1.33
“Participant”
shall mean a
Person that is a DTC Participant and has entered into an Authorized Purchaser
Agreement which, at the relevant time, is in full force and effect.
1.34
“Partner”
shall mean the
General Partner or any Limited Partner.
“Partners”
shall mean the
General Partner and all Limited Partners (unless otherwise
indicated).
1.35
“Partnership”
shall mean the
limited partnership hereby formed, as such limited partnership may from time to
time be constituted.
1.36
“Partnership Securities”
shall mean any additional Units, options, rights, warrants or appreciation
rights relating thereto, or any other type of equity security that the
Partnership may lawfully issue, any unsecured or secured debt obligations of the
Partnership or debt obligations of the Partnership convertible into any class or
series of equity securities of the Partnership.
1.37
“Person”
shall mean any
natural person, partnership, limited partnership, limited liability company,
trust, estate, corporation, association, custodian, nominee or any other
individual or entity in its own or any representative capacity.
1.38
“Profit or Loss”
with respect
to any Accounting Period shall mean the excess (if any) of:
(a) the
Net Asset Value as of the Valuation Time on the Valuation Date,
less
(b) the
Net Asset Value as of the Valuation Time on the Valuation Date immediately
preceding the commencement of such Accounting Period,
adjusted
as deemed appropriate by the General Partner to reflect any Capital
Contributions, redemptions, withdrawals, distributions, or other events
occurring or accounted for during such Accounting Period (including any
allocation of Profit or Loss to a redeeming partner pursuant to Article 4.3.2
with respect to such Accounting Period).
If the
amount determined pursuant to the preceding sentence is a positive number, such
amount shall be the
“Profit”
for the Accounting
Period and if such amount is a negative number, such amount shall be the
“Loss”
for the Accounting
Period.
1.39
“Prospectus”
shall mean the
United States Oil Fund, LP prospectus, dated April 25, 2006, as the
same may have been amended or supplemented, used in connection with the offer
and sale of Units in the Partnership.
1.40
“Record Date”
shall mean the
date established by the General Partner for determining (a) the identity of
Limited Partners (or Assignees if applicable) entitled to notice of, or to vote
at any meeting of Limited Partners or entitled to vote by ballot or give
approval of any Partnership action in writing without a meeting or entitled to
exercise rights in respect of any action of Limited Partners or (b) the identity
of Record Holders entitled to receive any report or distribution.
1.41
“Record Holder”
shall mean
the Person in whose name such Unit is registered on the books of the Transfer
Agent as of the open of business on a particular Business Day.
1.42
“Redeemable Units”
shall mean
any Units for which a redemption notice has been given.
1.43
“Redemption Basket”
shall
mean 100,000 Units, or such other number of Units as may be determined by the
General Partner from time to time, redeemed by a Participant.
1.44
“Revolving Credit Facility”
shall mean a revolving credit facility that the Partnership may enter into on
behalf of the Partnership with one or more commercial banks or other lenders for
liquidity or other purposes for the benefit of the Partnership.
1.45
“Substituted Limited Partner”
shall mean a Person who is admitted as a Limited Partner to the Partnership
pursuant to Article 11.2 in place of and with all the rights of a Limited
Partner and who is shown as a Limited Partner on the books and records of the
Partnership.
1.46
“Tax Certificate”
shall mean
an Internal Revenue Service Form W-9 (or the substantial equivalent thereof) in
the case of a Limited Partner that is a U.S. person within the meaning of the
Code, or an Internal Revenue Service Form W-8BEN or other applicable form in the
case of a Limited Partner that is not a U.S. person.
1.47
“Transfer Agent”
shall mean
Brown Brothers Harriman & Co. or such bank, trust company or other Person
(including, without limitation, the General Partner or one of its Affiliates) as
shall be appointed from time to time by the Partnership to act as registrar and
transfer agent for the Units or any applicable Partnership
Securities.
1.48
“Transfer Application”
shall
mean an application and agreement for transfer of Units, which shall be
substantially in the form attached hereto as Exhibit C.
1.49
“Unit”
shall mean an interest
of a Limited Partner or an assignee of the Partnership representing such
fractional part of the interests of all Limited Partners and assignees as shall
be determined by the General Partner pursuant to this Agreement.
1.50
“Unit Register”
shall have
the meaning assigned to such term in Article 9.2.1.
1.51
“Unitholders”
shall mean the
General Partner and all holders of Units, where no distinction is required by
the context in which the term is used.
1.52
“Valuation Date”
shall mean
the last Business Day of any Accounting Period.
1.53
“Valuation Time”
shall mean
(i) Close of Business on a Valuation Date or (ii) such other time or day as the
General Partner in its discretion may determine from time to time either in any
particular case or generally.
ARTICLE
2
General
Provisions
2.1 This
Agreement shall become effective on the date set forth in the preamble of this
Agreement. The rights and liabilities of the Partners shall be as set
forth in the Act, except as herein otherwise expressly provided. The Partnership
shall continue without interruption as a limited partnership pursuant to the
provisions of the Act.
2.2 The
name of the Partnership shall be United States Oil Fund, LP; however, the
business of the Partnership may be conducted, upon compliance with all
applicable laws, under any other name designated in writing by the General
Partner to the Limited Partners.
2.3 The
Partnership’s principal place of business shall be located at 1320 Harbor Bay
Parkway, Suite 145, Alameda, California 94502 or such other place as the General
Partner may designate from time to time. The registered agent for the
Partnership is Corporation Service Company and the registered office is located
at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New
Castle. The Partnership may maintain such other offices at such other places as
the General Partner deems advisable.
2.4 The
investment objective of the Partnership is for changes in percentage terms of
the Units’ Net Asset Value to reflect the changes in percentage terms of the
spot price of West Texas Intermediate light, sweet crude oil delivered to
Cushing, Oklahoma (
“WTI light,
sweet crude oil”
), less the Partnership’s expenses. The Partnership will
invest in futures contracts for WTI light, sweet crude oil and other
petroleum-based fuels that are traded on the New York Mercantile Exchange or
other U.S. and foreign exchanges (collectively,
“Oil Futures Contracts”
) and
other oil interests such as cash-settled options on Oil Futures Contracts,
forward contracts for oil, and over-the-counter transactions that are based on
the price of oil, other petroleum-based fuels, Oil Futures Contracts and indices
based on the foregoing (collectively,
“Other Oil Interests”
‘). The
Partnership seeks to achieve its investment objective by investing in a mix of
Oil Futures Contracts and Other Oil Interests such that the Partnership’s NAV
will closely track the price of an Oil Futures Contract (the
“Benchmark Oil Futures
Contract”
) that the General Partner believes has historically exhibited a
close price correlation with the spot price of WTI light, sweet crude
oil.
2.5 The
term of the Partnership shall be from the date of its formation in perpetuity,
unless earlier terminated in accordance with the terms of this
Agreement.
2.6 The
General Partner shall execute, file and publish all such certificates, notices,
statements or other instruments required by law for the formation or operation
of a limited partnership in all jurisdictions where the Partnership may elect to
do business. The General Partner shall not be required to deliver or mail to the
Limited Partners a copy of the certificate of limited partnership of the
Partnership or any certificate of amendment thereto.
2.7 The
Partnership shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes, business, protection and benefit of the
Partnership.
2.8 The
business and affairs of the Partnership shall be managed by the General Partner
in accordance with Article 7 hereof. The General Partner has seven
directors, a majority of whom may also be executive officers of the General
Partner. The General Partner shall establish and maintain an audit committee of
its board of directors for the Partnership (the “
Audit Committee
”) in
compliance with, and granted the requisite authority and funding pursuant to,
any applicable (1) federal securities laws and regulations, including the
Sarbanes-Oxley Act of 2002, and (2) rules, policies and procedures of any
national securities exchange on which the securities issued by the Partnership
are listed and traded.
ARTICLE
3
Partners
and Capital Contributions
3.1
General Partner.
3.1.1 The
name of the General Partner is United States Commodity Funds LLC, which
maintains its principal business office at 1320 Harbor Bay Parkway, Suite 145,
Alameda, California 94502.
3.1.2 In
consideration of management and administrative services rendered by the General
Partner, the Partnership shall pay the Management Fee to the General Partner (or
such other person or entity designated by the General Partner) including the
payment of expenses in the ordinary course of business. Expenses in the
“ordinary course of business” shall not include the payment of (i) brokerage
fees, (ii) licensing fees for the use of intellectual property used by the
Partnership, or (iii) registration or other fees paid to the Securities and
Exchange Commission (
“SEC”
), the Financial
Industry Regulatory Authority (“FINRA”), or any other regulatory agency in
connection with the offer and sale of the Units and all legal, accounting,
printing and other expenses associated therewith; provided, however, that the
fees and expenses incurred under (iii) in connection with the initial public
offering of the Units shall be paid by the General Partner. The
Partnership also pays (i) the fees and expenses, including directors and
officers’ liability insurance, of the independent directors, and (ii) the fees
and expenses associated with its tax accounting and reporting requirements, with
the exception of any fees for implementation of services and base service fees
charged by the accounting firm responsible for preparing the Partnership’s tax
reporting forms, as such fees will be paid by the General Partner. The
Management Fee is currently 0.50% of NAV on the first $1,000,000,000 in assets
and 0.20% of NAV after the first $1,000,000,000 in assets. Effective
as of January 1, 2009, the Management Fee shall be 0.45% of NAV. Fees
and expenses, including the Management Fee, are calculated on a daily basis and
paid on a monthly basis (accrued at 1/365 of applicable percentage of NAV on
that day). The General Partner may, in its sole discretion, waive all or part of
the Management Fee. The Partnership shall be responsible for all extraordinary
expenses (
i.e
.,
expenses not in the ordinary course of business, including, without limitation,
the items listed above in this Section 3.1.2, the indemnification of any Person
against liabilities and obligations to the extent permitted by law and required
under this Agreement, and the bringing and defending of actions at law or in
equity and otherwise engaging in the conduct of litigation and the incurring of
legal expense and the settlement of claims and litigation).
3.1.3 In
connection with the formation of the Partnership under the Act, the General
Partner acquired a 2% interest in the profits and losses of the Partnership and
made an initial capital contribution to the Partnership in the amount of $20.00,
and the Organizational Limited Partner acquired a 98% interest in the profits
and losses of the Partnership and made an initial capital contribution to the
Partnership in the amount of $980.00. As of the date of the initial offering of
Units to the public, the interest of the Organizational Limited Partner and the
General Partner was redeemed, the initial capital contribution of the
Organizational Limited Partner and the General Partner was refunded, and the
Organizational Limited Partner thereupon withdrew and ceased to be a Limited
Partner. Ninety-eight percent of any interest or other profit that may have
resulted from the investment or other use of such initial capital contribution
was allocated and distributed to the Organizational Limited Partner, and the
balance thereof was allocated and distributed to the General Partner. The
General Partner may but shall not be required to make Capital Contributions to
the Partnership on or after the date hereof. If the General Partner does make a
Capital Contribution to the Partnership on or after the date hereof, it shall be
issued Units based on the same terms and conditions applicable to the purchase
of a Creation Basket under Article 16 hereof.
3.1.4 The
General Partner may not, without written approval by all of the Limited Partners
or by other written instrument executed and delivered by all of the Limited
Partners subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including, without limitation, (i) any act that
would make it impossible to carry on the ordinary business of the Partnership,
except as otherwise provided in this Agreement; (ii) possess Partnership
property, or assign any rights in specific Partnership property, for other than
a Partnership purpose; (iii) admit a Person as a Partner, except as otherwise
provided in this Agreement; (iv) amend this Agreement in any manner, except as
otherwise provided in this Agreement or under applicable law; or (v) transfer
its interest as general partner of the Partnership, except as otherwise provided
in this Agreement.
3.1.5 Except
as otherwise provided herein, the General Partner may not sell, exchange or
otherwise dispose of all or substantially all of the Partnership’s assets in a
single transaction or a series of related transactions (including by way of
merger, consolidation or other combination with any other Person) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Partnership, taken as a whole, without
the approval of at least a majority of the Limited Partners; provided, however,
that this provision shall not preclude or limit the General Partner’s ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the Partnership’s assets and shall not apply to any forced
sale of any or all of the Partnership’s assets pursuant to the foreclosure of,
or other realization upon, any such encumbrance.
3.1.6 Unless
approved by a majority of the Limited Partners, the General Partner shall not
take any action or refuse to take any reasonable action the effect of which, if
taken or not taken, as the case may be, would be to cause the Partnership, to
the extent it would materially and adversely affect the Limited Partners, to be
taxable as a corporation for federal income tax purposes.
3.1.7 Notwithstanding
any other provision of this Agreement, the General Partner is not authorized to
institute or initiate on behalf of, or otherwise cause the Partnership
to:
(a) make
a general assignment for the benefit of creditors;
(b) file
a voluntary bankruptcy petition; or
(c) file
a petition seeking for the Partnership a reorganization, arrangement,
composition, readjustment liquidation, dissolution or similar relief under any
law.
3.2
Issuance of
Units.
Units in the Partnership will only be issued in a
Creation Basket or whole number multiples thereof.
3.3
Initial Limited
Partner.
The name of the initial Limited Partner is KV
Execution Services, LLC (
“Initial Limited Partner”
).
The business address of the Initial Limited Partner is KV Execution Services
LLC, 1041 Highway 36, Suite 301, Atlantic Highlands, NJ 07716. The
initial Capital Contribution of the Initial Limited Partner was
$13,478,000. The Initial Limited Partner purchased the initial
Creation Basket at an initial offering price per Unit equal to the closing price
of near-month oil futures contracts for WTI light, sweet crude oil as listed on
the New York Mercantile Exchange on the last Business Day prior to the effective
date of the registration statement relating to the Prospectus.
3.4
Capital Contribution
. Except
as otherwise provided in this Agreement, no Partner shall have any right to
demand or receive the return of its Capital Contribution to the Partnership. No
Partner shall be entitled to interest on any Capital Contribution to the
Partnership or on such Partner’s Capital Account.
ARTICLE
4
Capital
Accounts of Partners and Operation Thereof
4.1
Capital
Accounts.
There shall be established on the books and records
of the Partnership for each Partner (or Beneficial Owner in the case of Units
held by a nominee) a capital account (a
“Capital Account”
). It is
intended that each Partner’s Capital Account shall be maintained at all times in
a manner consistent with Section 704 of the Code and applicable Treasury
regulations thereunder, and that the provisions hereof relating to the Capital
Accounts shall be interpreted in a manner consistent therewith. For each
Accounting Period, the Capital Account of each Partner shall be:
(i) credited
with the amount of any Capital Contributions made by such Partner during such
Accounting Period;
(ii) credited
with any allocation of Profit made to such Partner for such Accounting
Period;
(iii) debited
with any allocation of Loss made to such Partners for such Accounting Period;
and
(iv) debited
with the amount of cash paid to such Partner as an amount withdrawn or
distributed to such Partner during such Accounting Period, or, in the case of
any payment of a withdrawal or distribution in kind, the fair value of the
property paid or distributed during such Accounting Period.
4.1.1 For
any Accounting Period in which Units are issued or redeemed for cash or other
property, the General Partner shall, in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(f), adjust the Capital Accounts of all Partners and
the carrying value of each Partnership asset upward or downward to reflect any
unrealized gain or unrealized loss attributable to each such Partnership asset,
as if such unrealized gain or unrealized loss had been recognized on an actual
sale of the asset and had been allocated to the Partners at such time pursuant
to Article 4.2 of this Agreement in the same manner as any item of gain or loss
actually recognized during such period would have been
allocated.
4.1.2 To
the extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis), and such
item of gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Treasury regulations.
4.2
Allocation of Profit or
Loss.
Profit or Loss for an Accounting Period shall be
allocated among the Partners in proportion to the number of Units each Partner
holds as of the Close of Business on the last Business Day of such Accounting
Period. The General Partner may revise, alter or otherwise modify this method of
allocation to the extent it deems necessary to comply with the requirements of
Section 704 or Section 706 of the Code and Treasury regulations or
administrative rulings thereunder.
4.3
Allocations for Tax
Purposes
4.3.1 Except
as otherwise provided in this Agreement, for each fiscal year of the
Partnership, items of income, deduction, gain, loss, and credit recognized by
the Partnership for federal income tax purposes shall be allocated among the
Partners in a manner that equitably reflects the amounts credited or debited to
each Partner’s Capital Account for each Accounting Period during such fiscal
year. Allocations under this Article 4.3 shall be made by the General Partner in
accordance with the principles of Sections 704(b) and 704(c) of the Code and in
conformity with applicable Treasury regulations promulgated thereunder
(including, without limitation, Treasury regulations Sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(4)(i), and 1.704-3(e)).
4.3.2 Notwithstanding
anything else contained in this Article 4, if any Partner has a deficit Capital
Account for any Accounting Period as a result of any adjustment of the type
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), then the Partnership’s income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate such deficit as quickly as possible. Any special allocation of items
of income or gain pursuant to this Article 4.3.2 shall be taken into account in
computing subsequent allocations pursuant to this Article 4 so that the
cumulative net amount of all items allocated to each Partner shall, to the
extent possible, be equal to the amount that would have been allocated to such
Partner if there had never been any allocation pursuant to the first sentence of
this Article 4.3.2.
4.3.3 Allocations
that would otherwise be made to a Limited Partner under the provisions of this
Article 4 shall instead be made to the Beneficial Owner of Units held by a
nominee.
4.4
Compliance
. In
applying the provisions of this Article 4, the General Partner is authorized to
utilize such reasonable accounting conventions, valuation methods and
assumptions as the General Partner shall determine to be appropriate and in
compliance with the Code and applicable Treasury regulations. The General
Partner may amend the provisions of this Agreement to the extent it determines
to be necessary to comply with the Code and Treasury
regulations.
ARTICLE
5
Records
and Accounting; Reports
5.1
Records and
Accounting.
The Partnership will keep proper books of record
and account of the Partnership at its office located in 1320 Harbor Bay Parkway,
Suite 145, Alameda, California 94502 or such office, including that of an
administrative agent, as it may subsequently designate upon notice to the
Limited Partners. These books and records are open to inspection by any person
who establishes to the Partnership’s satisfaction that such person is a Limited
Partner upon reasonable advance notice at all reasonable times during the usual
business hours of the Partnership.
5.2
Annual
Reports.
Within 90 days after the end of each fiscal year, the
General Partner shall cause to be delivered to each Person who was a Partner at
any time during the fiscal year, an annual report containing the
following:
(i) financial
statements of the Partnership, including, without limitation, a balance sheet as
of the end of the Partnership’s fiscal year and statements of income, Partners’
equity and changes in financial position, for such fiscal year, which shall be
prepared in accordance with generally accepted accounting principles
consistently applied and shall be audited by a firm of independent certified
public accountants registered with the Public Company Accounting Oversight
Board,
(ii) a
general description of the activities of the Partnership during the period
covered by the report, and
(iii) a
report of any material transactions between the Partnership and the General
Partner or any of its Affiliates, including fees or compensation paid by the
Partnership and the services performed by the General Partner or any such
Affiliate for such fees or compensation.
5.3
Quarterly
Reports.
Within 45 days after the end of each quarter of each
fiscal year, the General Partner shall cause to be delivered to each Person who
was a Partner at any time during the quarter then ended, a quarterly report
containing a balance sheet and statement of income for the period covered by the
report, each of which may be unaudited but shall be certified by the General
Partner as fairly presenting the financial position and results of operations of
the Partnership during the period covered by the report. The report shall also
contain a description of any material event regarding the business of the
Partnership during the period covered by the report.
5.4
Monthly
Reports.
Within 30 days after the end of each month, the
General Partner shall cause to be delivered to each Person who was a Partner at
any time during the month then ended, a monthly report containing an account
statement, which will include a statement of income (or loss) and a statement of
changes in NAV, for the prescribed period. In addition, the account statement
will disclose any material business dealings between the Partnership, General
Partner, commodity trading advisor (if any), futures commission merchant, or the
principals thereof that previously have not been disclosed in the Partnership’s
Prospectus or any amendment thereto, other account statements or annual
reports.
5.5
Tax
Information.
The General Partner shall use its best efforts to
prepare and to transmit a U.S. federal income tax form K-1 for each Partner,
Assignee, or Beneficial Owner or a report setting forth in sufficient detail
such transactions effected by the Partnership during each fiscal year as shall
enable each Partner, Assignee, or Beneficial Owner to prepare its U.S. federal
income tax return, if any, within a reasonable period after the end of such
fiscal year.
5.6
Tax Returns.
The
General Partner shall cause income tax returns of the Partnership to be prepared
and timely filed with the appropriate authorities.
5.7
Tax Matters
Partner.
The General Partner is hereby designated as the
Partnership’s
“Tax Matters
Partner,”
as defined under Section 6231(a)(7) of the Code. The General
Partner is specifically directed and authorized to take whatever steps the
General Partner, in its discretion, deems necessary or desirable to perfect such
designation, including filing any forms or documents with the U.S. Internal
Revenue Service and taking such other action as may from time to time be
required under U.S. Treasury regulations. Any Partner shall have the right to
participate in any administrative proceedings relating to the determination of
Partnership items at the Partnership level. Expenses of such administrative
proceedings undertaken by the Tax Matters Partner shall be expenses of the
Partnership. Each Partner who elects to participate in such proceedings shall be
responsible for any expenses incurred by such Partner in connection with such
participation. The cost of any resulting audits or adjustments of a Partner’s
tax return shall be borne solely by the affected Partner. In the event of any
audit, investigation, settlement or review, for which the General Partner is
carrying out the responsibilities of Tax Matters Partner, the General Partner
shall keep the Partners reasonably apprised of the status and course of such
audit, investigation, settlement or review and shall forward copies of all
written communications from or to any regulatory, investigative or judicial
authority with regard thereto.
ARTICLE
6
Fiscal
Affairs
6.1
Fiscal Year.
The
fiscal year of the Partnership shall be the calendar year. The General Partner
may select an alternate fiscal year.
6.2
Partnership
Funds.
Pending application or distribution, the funds of the
Partnership shall be deposited in such bank account or accounts, or invested in
such interest-bearing or non-interest bearing investment, including, without
limitation, checking and savings accounts, certificates of deposit and time or
demand deposits in commercial banks, U.S. government securities and securities
guaranteed by U.S. government agencies as shall be designed by the General
Partner. Such funds shall not be commingled with funds of any other Person.
Withdrawals therefrom shall be made upon such signatures as the General Partner
may designate.
6.3
Accounting
Decisions.
All decisions as to accounting principles, except
as specifically provided to the contrary herein, shall be made by the General
Partner.
6.4
Tax Elections.
The
General Partner shall, from time to time, make such tax elections as it deems
necessary or desirable in its sole discretion to carry out the business of the
Partnership or the purposes of this Agreement. Notwithstanding the foregoing,
the General Partner shall make a timely election under Section 754 of the
Code.
6.5
Partnership
Interests.
Title to the Partnership assets shall be deemed to
be owned by the Partnership as an entity, and no Partner or Assignee,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner shall be held by
the General Partner for the exclusive use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided, that prior to the withdrawal or
removal of the General Partner or as soon thereafter as practicable, the General
Partner will use reasonable efforts to effect the transfer of record title to
the Partnership and, prior to any such transfer, will provide for the use of
such assets in a manner satisfactory to the Partnership. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets are
held.
ARTICLE
7
Rights
and Duties of the General Partner
7.1
Management
Power.
The General Partner shall have exclusive management and
control of the business and affairs of the Partnership, and all decisions
regarding the management and affairs of the Partnership shall be made by the
General Partner. The General Partner shall have all the rights and powers of
general partner as provided in the Act and as otherwise provided by law. Except
as otherwise expressly provided in this Agreement, the General Partner is hereby
granted the right, power and authority to do on behalf of the Partnership all
things which, in its sole judgment, are necessary, proper or desirable to carry
out the aforementioned duties and responsibilities, including but not limited
to, the right, power and authority from time to time to do the
following:
(a) the
making of any expenditures, the lending or borrowing of money, the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness and the incurring of any other obligations
and the securing of same by mortgage, deed of trust or other lien or
encumbrance;
(b) the
making of tax, regulatory and other filings, or rendering of periodic or other
reports to governmental or other agencies having jurisdiction over the business
or assets of the Partnership;
(c) the
acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or
exchange of any or all of the assets of the Partnership, or the merger or other
combination of the Partnership with or into another Person (the matters
described in this clause (c) being subject, however, to any prior approval that
may be required in accordance with this Agreement);
(d) the
use of the assets of the Partnership (including, without limitation, cash on
hand) for any purpose consistent with the terms of this Agreement including,
without limitation, the financing of the conduct of the operations of the
Partnership, the lending of funds to other Persons, and the repayment of
obligations of the Partnership;
(e) the
negotiation, execution and performance of any contracts, conveyances or other
instruments (including, without limitation, instruments that limit the liability
of the Partnership under contractual arrangements to all or particular assets of
the Partnership with the other party to the contract to have no recourse against
the General Partner or its assets other than its interest in the Partnership,
even if same results in the terms of the transaction being less favorable to the
Partnership than would otherwise be the case);
(f) the
distribution of Distributable Cash;
(g) the
selection and dismissal of employees (including, without limitation, employees
having titles such as
“president,” “vice president,”
“secretary”
and
“treasurer”
), agents, outside
attorneys, accountants, consultants and contractors and the determination of
their compensation and other terms of employment or hiring;
(h) the
maintenance of insurance for the benefit of the Partners and the Partnership
(including, without limitation, the assets and operations of the
Partnership);
(i) the
formation of, or acquisition of an interest in, and the contribution of property
to, any further limited or general partnerships, joint ventures or other
relationships;
(j) the
control of any matters affecting the rights and obligations of the Partnership,
including, without limitation, the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the incurring
of legal expense and the settlement of claims and litigation;
(k) the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(l) the
entering into of listing agreements with the NYSE Arca, Inc. and any other
securities exchange and the delisting of some or all of the Units from, or
requesting that trading be suspended on, any such exchange; and
(m) the
purchase, sale or other acquisition or disposition of Units.
7.2
Best Efforts
. The
General Partner will use its best efforts to cause the Partnership to be formed,
reformed, qualified or registered under assumed or fictitious name statutes or
similar laws in any state in which the Partnership owns property or transacts
business if such formation, reformation, qualification or registration is
necessary in order to protect the limited liability of the Limited Partners or
to permit the Partnership lawfully to own property or transact
business.
7.3
Right of Public to Rely on Authority
of a General Partner.
No person shall be required to determine
the General Partner’s authority to make any undertaking on behalf of the
Partnership.
7.4
Obligation of the General
Partner.
The General Partner shall:
(a) devote
to the Partnership and apply to the accomplishment of the Partnership purposes
so much of its time and attention as is necessary or advisable to manage
properly the affairs of the Partnership;
(b) maintain
the Capital Account for each Partner; and
(c) cause
the Partnership to enter into and carry out the obligations of the Partnership
contained in the agreements with Affiliates of the General Partner as described
in the Prospectus and cause the Partnership not to take any action in violation
of such agreements.
7.5
Good Faith.
The
General Partner has a responsibility to the Limited Partners to exercise good
faith and fairness in all dealings. In the event that a Limited Partner believes
that the General Partner has violated its fiduciary duty to the Limited
Partners, he may seek legal relief individually or on behalf of the Partnership
under applicable laws, including under the Act and under securities and
commodities laws, to recover damages from or require an accounting by the
General Partner. Limited Partners should be aware that performance by the
General Partner of its fiduciary duty is measured by the terms of this Agreement
as well as applicable law. 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 the General Partner where the losses result
from a violation by the General Partner of the federal securities laws. State
securities laws may also provide certain remedies to limited partners. 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 Commodity Futures Trading Commission
(“CFTC”)
by the General
Partner.
7.6
Indemnification
7.6.1 Notwithstanding
any other provision of this Agreement, neither a General Partner nor any
employee or other agent of the Partnership nor any officer, director,
stockholder, partner, employee or agent of a General Partner (a
“Protected Person”
) shall be
liable to any Partner or the Partnership for any mistake of judgment or for any
action or inaction taken, nor for any losses due to any mistake of judgment or
to any action or inaction or to the negligence, dishonesty or bad faith of any
officer, director, stockholder, partner, employee or agent of the Partnership or
any officer, director, stockholder, partner, employee or agent of such General
Partner, provided that such officer, director, stockholder, partner, employee or
agent of the Partner or officer, director, stockholder, partner, employee or
agent of such General Partner was selected, engaged or retained by such General
Partner with reasonable care, except with respect to any matter as to which such
General Partner shall have been finally adjudicated in any action, suit or other
proceeding not to have acted in good faith in the reasonable belief that such
Protected Person’s action was in the best interests of the Partnership and
except that no Protected Person shall be relieved of any liability to which such
Protected Person would otherwise be subject by reason of willful misfeasance,
gross negligence or reckless disregard of the duties involved in the conduct of
the Protected Person’s office. A General Partner and its officers, directors,
employees or partners may consult with counsel and accountants (except for the
Partnership’s independent auditors) in respect of Partnership affairs and be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel or accountants (except for
the Partnership’s independent auditors), provided that they shall have been
selected with reasonable care.
Notwithstanding any of the foregoing to
the contrary, the provisions of this Article 7.6.1 and of Article 7.6.2 hereof
shall not be construed so as to relieve (or attempt to relieve) a General
Partner (or any officer, director, stockholder, partner, employee or agent of
such General Partner) of any liability to the extent (but only to the extent)
that such liability may not be waived, modified or limited under applicable law,
but shall be construed so as to effectuate the provisions of this Article 7.6.1
and of Article 7.6.2 hereof to the fullest extent permitted by law.
7.6.2 The
Partnership shall, to the fullest extent permitted by law, but only out of
Partnership assets, indemnify and hold harmless a General Partner and each
officer, director, stockholder, partner, employee or agent thereof (including
persons who serve at the Partnership’s request as directors, officers or
trustees of another organization in which the Partnership has an interest as a
Unitholder, creditor or otherwise) and their respective legal representatives
and successors (hereinafter referred to as a
“Covered Person”
) against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceedings, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such Covered Person may be or may have been threatened, while in office or
thereafter, by reason of an alleged act or omission as a General Partner or
director or officer thereof, or by reason of its being or having been such a
General Partner, director or officer, except with respect to any matter as to
which such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding not to have acted in good faith in the
reasonable belief that such Covered Person’s action was in the best interest of
the Partnership, and except that no Covered Person shall be indemnified against
any liability to the Partnership or Limited Partners to which such Covered
Person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Covered Person’s office. Expenses, including counsel fees so incurred by
any such Covered Person, may be paid from time to time by the Partnership in
advance of the final disposition of any such action, suit or proceeding on the
condition that the amounts so paid shall be repaid to the Partnership if it is
ultimately determined that the indemnification of such expenses is not
authorized hereunder.
6.1 As
to any matter disposed of by a compromise payment by any such Covered Person,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such compromise
shall be approved as in the best interests of the Partnership, after notice that
it involved such indemnification by any disinterested person or persons to whom
the questions may be referred by the General Partner, provided that there has
been obtained an opinion in writing of independent legal counsel to the effect
that such Covered Person appears to have acted in good faith in the reasonable
belief that his or her action was in the best interests of the Partnership and
that such indemnification would not protect such persons against any liability
to the Partnership or its Limited Partners to which such person would otherwise
by subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office. Approval by
any disinterested person or persons shall not prevent the recovery from persons
of indemnification if such Covered Person is subsequently adjudicated by a court
of competent jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person’s action was in the best interests of the
Partnership or to have been liable to the Partnership or its Limited Partners by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person’s
office.
6.2 The
right of indemnification hereby provided shall not be exclusive of or affect any
other rights to which any such Covered Person may be entitled. As used in this
Article 7.6.2, an
“interested
Covered Person”
is one against whom the action, suit or other proceeding
on the same or similar grounds is then or has been pending and a
“disinterested person”
is a
person against whom no actions, suits or other proceedings or another action,
suit or other proceeding on the same or similar grounds is then or has been
pending. Nothing contained in this Article 7.6.2 shall affect any rights to
indemnification to which personnel of a General Partner, other than directors
and officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Partnership to purchase and maintain liability
insurance on behalf of any such person.
6.3 Nothing
in this Article 7.6.2 shall be construed to subject any Covered Person to any
liability to which he or she is not already liable under this Agreement or
applicable law.
7.6.3 Each
Limited Partner agrees that it will not hold any Affiliate or any officer,
director, stockholder, partner, employee or agent of any Affiliate of the
General Partner liable for any actions of such General Partner or any
obligations arising under or in connection with this Agreement or the
transactions contemplated hereby.
7.7 Resolutions
of Conflicts of Interest; Standard of Care.
7.7.1 Unless
otherwise expressly provided in this Agreement or any other agreement
contemplated hereby, whenever a conflict of interest exists or arises between
the General Partner on the one hand, and the Partnership or any Limited Partner,
on the other hand, any resolution or course of action by the General Partner in
respect of such conflict of interest shall be permitted and deemed approved by
all Partners and shall not constitute a breach of this Agreement or of any
agreement contemplated hereby or of a duty stated or implied by law or equity,
if the resolution or course of action is, or by operation of this Agreement is
deemed to be, fair and reasonable to the Partnership. If a dispute arises, it
will be resolved through negotiations with the General Partner or by a court
located in the State of Delaware. Any resolution of a dispute is deemed to be
fair and reasonable to the Partnership if the resolution is:
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approved
by the Audit Committee, although no party is obligated to seek such
approval and the General Partner may adopt a resolution or course of
action that has not received such
approval;
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·
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on
terms no less favorable to the Limited Partners than those generally being
provided to or available from unrelated third parties;
or
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·
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fair
to the Limited Partners, taking into account the totality of the
relationships of the parties involved including other transactions that
may be particularly favorable or advantageous to the Limited
Partners.
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7.7.2 Whenever
this Agreement or any other agreement contemplated hereby provides that the
General Partner is permitted or required to make a decision (i) in its
discretion or under a grant of similar authority or latitude, the General
Partner shall be entitled to the extent permitted by applicable law, to consider
only such interest and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of or factors affecting the
partnership or the Limited Partners, or (ii) in its good faith or under another
express standard, the General Partner shall act under such express standard and
except as required by applicable law, shall not be subject to any other
different standards imposed by this Agreement, any other agreement contemplated
hereby or applicable law.
7.8 Other
Matters Concerning the General Partner.
7.8.1 The
General Partner (including the Audit Committee) may rely on and shall be
protected in acting or refraining from acting upon any certificate, document or
other instrument believed by it to be genuine and to have been signed or
presented by the proper party or parties.
7.8.2 The
General Partner (including the Audit Committee) may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors selected by it and any opinion or advice of any such
person as to matters which the General Partner (including the Audit Committee)
believes to be within such person’s professional or expert competence shall be
the basis for full and complete authorization of indemnification and provide
legal protection with respect to any action taken or suffered or omitted by the
General Partner (including the Audit Committee) hereunder in good faith and in
accordance with such opinion or advice.
7.8.3 The
General Partner (including the Audit Committee) may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
(including the Audit Committee) shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by the General Partner in
good faith.
7.9
Other Business
Ventures.
Any Partner, director, employee, Affiliate or other
person holding a legal or beneficial interest in any entity which is a Partner,
may engage in or possess an interest in other business ventures of every nature
and description, independently or with others, whether such ventures are
competitive with the Partnership or otherwise; and, neither the Partnership nor
the Partners shall have any right by virtue of this Agreement in or to such
independent ventures or to the income or profits derived there
from.
7.10
Contracts with the General Partner
or its Affiliates.
The General Partner may, on behalf of the
Partnership, enter into contracts with any Affiliate. The validity of any
transaction, agreement or payment involving the Partnership and any General
Partner or any Affiliate of a General Partner otherwise permitted by the terms
of this Agreement shall not be affected by reason of (i) the relationship
between the Partnership and the Affiliate of the General Partner, or (ii) the
approval of said transaction agreement or payment by officers or directors of
the General Partner.
7.11
Additional General
Partners.
Additional general partners may be admitted with the
consent of the General Partner.
ARTICLE
8
Rights
and Obligations of Limited Partners
8.1
No Participation in
Management.
No Limited Partner (other than a General Partner
if it has acquired an interest of a Limited Partner) shall take part in the
management of the Partnership’s business, transact any business in the
Partnership’s name or have the power to sign documents for or otherwise bind the
Partnership.
8.2
Limitation of
Liability.
Except as provided in the Act, the debts,
obligations, and liabilities of the Partnership, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Partnership. A Limited Partner will not be liable for assessments in addition to
its initial capital investment in any capital securities representing limited
partnership interests. However, a Limited Partner may be required to repay to
the Partnership any amounts wrongfully returned or distributed to it under some
circumstances.
8.3
Indemnification and Terms of
Admission.
Each Limited Partner shall indemnify and hold
harmless the Partnership, the General Partner and every Limited Partner who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceedings, whether civil, criminal, administrative
or investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to state facts made (or
omitted to be made) by such Limited Partner in connection with any assignment,
transfer, encumbrance or other disposition of all or any part of an interest, or
the admission of a Limited Partner to the Partnership, against expenses for
which the Partnership or such other Person has not otherwise been reimbursed
(including attorneys’ fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by him in connection with such action, suit or
proceeding.
8.4
Effective
Date.
The effective date of admission of a Limited Partner
shall be the date designated by the General Partner in writing to such assignee
or transferee.
8.5
Death or Incapacity of Limited
Partner.
The death or legal incapacity of a Limited Partner
shall not cause dissolution of the Partnership.
8.6 Rights
of Limited Partner Relating to the Partnership.
(a) In
addition to other rights provided by this Agreement or by applicable law, and
except as otherwise limited under this Agreement, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner’s
interest as a Limited Partner in the Partnership, upon reasonable demand and at
such Limited Partner’s own expense:
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(i)
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to
obtain true and full information regarding the status of the business and
financial condition of the
Partnership;
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(ii)
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promptly
after becoming available, to obtain a copy of the Partnership’s federal,
state and local tax returns for each
year;
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(iii)
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to
have furnished to it, upon notification to the General Partner, a current
list of the name and last known business, residence or mailing address of
each Partner;
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(iv)
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to
have furnished to it, upon notification to the General Partner, a copy of
this Agreement and the Certificate of Limited Partnership and all
amendments thereto;
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(v)
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to
obtain true and full information regarding the amount of cash contributed
by and a description and statement of the value of any other Capital
Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner;
and
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(vi)
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to
obtain such other information regarding the affairs of the Partnership as
is just and reasonable.
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(b) Notwithstanding
any other provision of this Agreement, the General Partner may keep confidential
from the Limited Partners and Assignees for such period of time as the General
Partner deems reasonable, any information that the General Partner reasonably
believes to be in the nature of trade secrets or other information, the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or could damage the Partnership or that the
Partnership is required by law or by agreements with third parties to keep
confidential (other than agreements with Affiliates the primary purpose of which
is to circumvent the obligations set forth in this Article 8.6).
ARTICLE
9
Unit
Certificates
9.1
Unit
Certificates.
Certificates shall be executed on behalf of the
Partnership by any officer either of the General Partner or, if any, of the
Partnership.
9.2
Registration Form, Registration of
Transfer and Exchange.
9.2.1 The
General Partner shall cause to be kept on behalf of the Partnership a register
(the
“Unit Register”
)
in which, subject to such reasonable regulations as it may prescribe, the
General Partner will provide for the registration and the transfer of Units. The
Transfer Agent has been appointed registrar and transfer agent for the purpose
of registering and transferring Units as herein provided. The Partnership shall
not recognize transfers of Certificates representing Units unless same are
effected in the manner described in this Article 9.2. Upon surrender for
registration of transfer of any Units evidenced by a Certificate, the General
Partner on behalf of the Partnership will execute, and the Transfer Agent will
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder’s instructions, one or more
new Certificates evidencing the same aggregate number of Units as was evidenced
by the Certificate so surrendered.
9.2.2
Book-Entry-Only
System.
(a)
Global Certificate
Only.
Unless otherwise authorized by the General Partner,
Certificates for Units will not be issued, other than the one or more Global
Certificates issued to the Depository. So long as the Depository Agreement is in
effect, Creation Baskets will be issued and redeemed and Units will be
transferable solely through the book-entry systems of the Depository and the DTC
Participants and their Indirect Participants as more fully described
below.
(1)
Global
Certificate.
The Partnership and the General Partner will
enter into the Depository Agreement pursuant to which the Depository will act as
securities depository for the Units. Units will be represented by the Global
Certificate (which may consist of one or more certificates as required by the
Depository), which will be registered, as the Depository shall direct, in the
name of Cede & Co., as nominee for the Depository and deposited with, or on
behalf of, the Depository. No other certificates evidencing Units will be
issued. The Global Certificate shall be in the form attached hereto as Exhibit A
and shall represent such Units as shall be specified therein, and may provide
that it shall represent the aggregate amount of outstanding Units from time to
time endorsed thereon and that the aggregate amount of outstanding Units
represented thereby may from time to time be increased or decreased to reflect
creations or redemptions of Baskets (as defined in Section 16.1). Any
endorsement of a Global Certificate to reflect the amount, or any increase or
decrease in the amount, of outstanding Units represented thereby shall be made
in such manner and upon instructions given by the General Partner on behalf of
the Partnership as specified in the Depository Agreement.
(2)
Legend.
Any Global
Certificate issued to the Depository or its nominee shall bear a legend
substantially to the following effect: “UNLESS THIS CERTIFICATE IS PRESENTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION
(“DTC”)
, TO
THE FUND OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”
(3)
The
Depository.
The Depository has advised the Partnership and the
General Partner as follows: the Depository is a limited-purpose trust company
organized under the laws of the State of New York, a member of the U.S. Federal
Reserve System, a
“clearing
corporation”
within the meaning of the New York Uniform Commercial Code,
and a
“clearing agency”
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depository was created to hold securities of DTC
Participants and to facilitate the clearance and settlement of securities
transactions among the DTC Participants in such securities through electronic
book-entry changes in accounts of the DTC Participants, thereby eliminating the
need for physical movement of securities certificates. “
DTC Participants”
include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives) own
the Depository. Access to the Depository’s system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly
(“Indirect
Participants”)
. The Depository may determine to discontinue providing its
service with respect to Creation Baskets and Units by giving notice to the
General Partner pursuant to and in conformity with the provisions of the
Depository Agreement and discharging its responsibilities with respect thereto
under applicable law. Under such circumstances, the General Partner shall take
action either to find a replacement for the Depository to perform its functions
at a comparable cost and on terms acceptable to the General Partner or, if such
a replacement is unavailable, to terminate the Partnership.
(4)
Beneficial
Owners.
As provided in the Depository Agreement, upon the
settlement date of any creation, transfer or redemption of Units, the Depository
will credit or debit, on its book-entry registration and transfer system, the
number of Units so created, transferred or redeemed to the accounts of the
appropriate DTC Participants. The accounts to be credited and charged shall be
designated by the General Partner on behalf of the Partnership and each
Participant, in the case of a creation or redemption of Baskets. Ownership of
beneficial interest in Units will be limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Beneficial Owners will be shown on, and the transfer of beneficial
ownership by Beneficial Owners will be effected only through, in the case of DTC
Participants, records maintained by the Depository and, in the case of Indirect
Participants and Beneficial Owners holding through a DTC Participant or an
Indirect Participant, through those records or the records of the relevant DTC
Participants. Beneficial Owners are expected to receive, from or through the
broker or bank that maintains the account through which the Beneficial Owner has
purchased Units, a written confirmation relating to their purchase of
Units.
(5)
Reliance on
Procedures.
Except for those who have provided Transfer
Applications to the General Partner, so long as Cede & Co., as nominee of
the Depository, is the registered owner of Units, references herein to the
registered or record owners of Units shall mean Cede & Co. and shall not
mean the Beneficial Owners of Units. Beneficial Owners of Units will not be
entitled to have Units registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and
will not be considered the record or registered holder of Units under this
Agreement. Accordingly, to exercise any rights of a holder of Units under the
Agreement, a Beneficial Owner must rely on the procedures of the Depository and,
if such Beneficial Owner is not a DTC Participant, on the procedures of each DTC
Participant or Indirect Participant through which such Beneficial Owner holds
its interests. The Partnership and the General Partner understand that under
existing industry practice, if the Partnership requests any action of a
Beneficial Owner, or a Beneficial Owner desires to take any action that the
Depository, as the record owner of all outstanding Units, is entitled to take,
the Depository will notify the DTC Participants regarding such request, such DTC
Participants will in turn notify each Indirect Participant holding Units through
it, with each successive Indirect Participant continuing to notify each person
holding Units through it until the request has reached the Beneficial Owner, and
in the case of a request or authorization to act that is being sought or given
by a Beneficial Owner, such request or authorization is given by the Beneficial
Owner and relayed back to the Partnership through each Indirect Participant and
DTC Participant through which the Beneficial Owner’s interest in the Units is
held.
(6)
Communication between the
Partnership and the Beneficial Owners.
As described above, the
Partnership will recognize the Depository or its nominee as the owner of all
Units for all purposes except as expressly set forth in this Agreement.
Conveyance of all notices, statements and other communications to Beneficial
Owners will be effected in accordance with this paragraph. Pursuant
to the Depository Agreement, the Depository is required to make available to the
Partnership, upon request and for a fee to be charged to the Partnership, a
listing of the Unit holdings of each DTC Participant. The Partnership shall
inquire of each such DTC Participant as to the number of Beneficial Owners
holding Units, directly or indirectly, through such DTC Participant. The
Partnership shall provide each such DTC Participant with sufficient copies of
such notice, statement or other communication, in such form, number and at such
place as such DTC Participant may reasonably request, in order that such notice,
statement or communication may be transmitted by such DTC Participant, directly
or indirectly, to such Beneficial Owners. In addition, the Partnership shall pay
to each such DTC Participant an amount as reimbursement for the expenses
attendant to such transmittal, all subject to applicable statutory and
regulatory requirements.
(7)
Distributions.
Distributions
on Units pursuant to this Agreement shall be made to the Depository or its
nominee, Cede & Co., as the registered owner of all Units. The Partnership
and the General Partner expect that the Depository or its nominee, upon receipt
of any payment of distributions in respect of Units, shall credit immediately
DTC Participants’ accounts with payments in amounts proportionate to their
respective beneficial interests in Units as shown on the records of the
Depository or its nominee. The Partnership and the General Partner also expect
that payments by DTC Participants to Indirect Participants and Beneficial Owners
held through such DTC Participants and Indirect Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in a
“street name,”
and will
be the responsibility of such DTC Participants and Indirect Participants.
Neither the Partnership nor the General Partner will have any responsibility or
liability for any aspects of the records relating to or notices to Beneficial
Owners, or payments made on account of beneficial ownership interests in Units,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between the Depository and the DTC Participants or the relationship between such
DTC Participants and the Indirect Participants and Beneficial Owners owning
through such DTC Participants or Indirect Participants or between or among the
Depository, any Beneficial Owner and any person by or through which such
Beneficial Owner is considered to own Units.
(8)
Limitation of
Liability.
The Global Certificate to be issued hereunder is
executed and delivered solely on behalf of the Partnership by the General
Partner in its capacity as such and in the exercise of the powers and authority
conferred and vested in it by this Agreement. The representations, undertakings
and agreements made on the part of the Partnership in the Global Certificate are
made and intended not as personal representations, undertakings and agreements
by the General Partner, but are made and intended for the purpose of binding
only the Partnership. Nothing in the Global Certificate shall be construed as
creating any liability on the General Partner, individually or personally, to
fulfill any representation, undertaking or agreement other than as provided in
this Agreement.
(9)
Successor
Depository.
If a successor to the Depository shall be employed
as Depository hereunder, the Partnership and the General Partner shall establish
procedures acceptable to such successor with respect to the matters addressed in
this Section 9.2.2.
(10)
Transfer of
Units.
Beneficial Owners that are not DTC Participants may
transfer Units by instructing the DTC Participant or Indirect Participant
holding the Units for such Beneficial Owner in accordance with standard
securities industry practice. Beneficial Owners that are DTC Participants may
transfer Units by instructing the Depository in accordance with the rules of the
Depository and standard securities industry practice.
9.2.3 Except
as otherwise provided in this Agreement, the Partnership shall not recognize any
transfer of Units until the Certificates (if applicable) and a Transfer
Application have been provided to the General Partner evidencing such Units are
surrendered for registration of transfer. Such Certificates must be
accompanied by a Transfer Application duly executed by the transferee (or the
transferee’s attorney-in-fact duly authorized in writing). No charge shall be
imposed by the Partnership for such transfer, provided, that, as a condition to
the issuance of any new Certificate under this Article 9.2, the General Partner
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed with respect thereto.
9.3
Mutilated, Destroyed, Lost or Stolen
Certificates.
9.3.1 If
any mutilated Certificate is surrendered to the Transfer Agent, the General
Partner on behalf of the Partnership, shall execute, and upon its request, the
Transfer Agent shall countersign and deliver in exchange therefore, a new
Certificate evidencing the same number of Units as the Certificate so
surrendered.
9.3.2 The
General Partner, on behalf of the Partnership, shall execute, and upon its
request, the Transfer Agent shall countersign and deliver a new Certificate in
place of any Certificate previously issued if the Record Holder of the
Certificate:
(a) makes
proof by affidavit, in form and substance satisfactory to the General Partner,
that a previously issued Certificate has been lost, destroyed or
stolen;
(b)
requests the issuance of a new Certificate before the Partnership has received
notice that the Certificate has been acquired by a purchaser for value in good
faith and without notice of an adverse claim;
(c) if
requested by the General Partner, delivers to the Partnership a bond or such
other form of security or indemnity as may be required by the General Partner,
in form and substance satisfactory to the General Partner, with surety or
sureties and with fixed or open penalty as the General Partner may direct, in
its sole discretion, to indemnify the Partnership, the General Partner and the
Transfer Agent against any claim that may be made on account of the alleged
loss, destruction or theft of the Certificate; and
(d)
satisfies any other reasonable requirements imposed by the General
Partner.
If a
Limited Partner or Assignee fails to notify the Partnership within a reasonable
time after it has notice of the loss, destruction or theft of a Certificate, and
a transfer of the Units represented by the Certificate is registered before the
Partnership, the General Partner or the Transfer Agent receives such
notification, the Limited Partner or Assignee shall be precluded from making any
claim against the Partnership, the General Partner or the Transfer Agent for
such transfer or for a new Certificate.
9.3.3 As
a condition to the issuance of any new Certificate under this Article 9.3, the
General Partner may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including, without limitation, the fees and expenses of the Transfer
Agent) connected therewith.
9.4
Record Holder.
The
Partnership shall be entitled to recognize the Record Holder as the Limited
Partner or Assignee with respect to any Units and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such Units on
the part of any other Person, whether or not the Partnership shall have actual
or other notice thereof, except as otherwise provided by law or any applicable
rule, regulation, guideline or requirement of any national securities exchange
on which the Units are listed for trading. Without limiting the foregoing, when
a Person (such as a broker, dealer, bank trust company or clearing corporation
or an agent of any of the foregoing) is acting as nominee, agent or in some
other representative capacity for another Person in acquiring and/or holding
Units, as between the Partnership on the one hand and such other Persons on the
other hand such representative Person (a) shall be the Limited Partner or
Assignee (as the case may be) of record and beneficially, (b) must execute and
deliver a Transfer Application and (c) shall be bound by this Agreement and
shall have the rights and obligations of a Limited Partner or Assignee (as the
case may be) hereunder and as provided for herein.
9.5
Partnership
Securities.
The General Partner is hereby authorized to cause
the Partnership to issue Partnership Securities, for any Partnership purpose, at
any time or from time to time, to the Partners or to other Persons for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole discretion, all without the approval of any Limited
Partners. The General Partner shall have sole discretion, subject to the
requirements of the Act, in determining the consideration and terms and
conditions with respect to any future issuance of Partnership
Securities.
9.5.1 The
General Partner shall do all things necessary to comply with the Act and is
authorized and directed to do all things it deems to be necessary or advisable
in connection with any future issuance of Partnership Securities, including,
without limitation, compliance with any statute, rule, regulation or guideline
of any federal, state or other governmental agency or any national securities
exchange on which the Units or other Partnership Securities are listed for
trading.
ARTICLE
10
Transfer
of Interests
10.1
Transfer.
10.1.1 The
term
“transfer,”
when
used in this Article 10 with respect to an interest, shall be deemed to refer to
an appropriate transaction by which the General Partner assigns its interest as
General Partner to another Person or by which the holder of a Unit assigns such
Unit to another Person who is or becomes an Assignee and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
10.1.2 No
interest shall be transferred in whole or in part, except in accordance with the
terms and conditions set forth in this Article 10. Any transfer or purported
transfer of an interest not made in accordance with this Article 10 shall be
null and void.
10.2
Transfer of General Partner’s
Interest.
10.2.1 Except
as set forth in this Article 10.2.1, the General Partner may transfer all, but
not less than all, of its interest as the general partner to a single transferee
if, but only if, (i) at least a majority of the Limited Partners approve of such
transfer and of the admission of such transferee as general partner, (ii) the
transferee agrees to assume the rights and duties of the General Partner and be
bound by the provisions of this Agreement and other applicable agreements, and
(iii) the Partnership receives an Opinion of Counsel that such transfer would
not result in the loss of limited liability of any Limited Partner or of the
Partnership or cause the Partnership to be taxable as a corporation or otherwise
taxed as an entity for federal income tax purposes. The foregoing
notwithstanding, the General Partner is expressly permitted to pledge its
interest as General Partner to secure the obligations of the Partnership under a
Revolving Credit Facility, as the same may be amended, supplemented, replaced,
refinanced or restated from time to time, or any successor or subsequent loan
agreement.
10.2.2 Neither
Article 10.2.1 nor any other provision of this Agreement shall be construed to
prevent (and all Partners do hereby consent to) (i) the transfer by the General
Partner of all of its interest as a general partner to an Affiliate or (ii) the
transfer by the General Partner of all its interest as a general partner upon
its merger or consolidation with or other combination into any other Person or
the transfer by it of all or substantially all of its assets to another Person
if, in the case of a transfer described in either clause (i) or (ii) of this
sentence, the rights and duties of the General Partner with respect to the
interest so transferred are assumed by the transferee and the transferee agrees
to be bound by the provisions of this Agreement; provided, that in either such
case, such transferee furnishes to the Partnership an Opinion of Counsel that
such merger, consolidation, combination, transfer or assumption will not result
in a loss of limited liability of any Limited Partner or of the Partnership or
cause the Partnership to be taxable as a corporation or otherwise taxed as an
entity for federal income tax purpose. In the case of a transfer pursuant to
this Article 10.2.2, the transferee or successor (as the case may be) shall be
admitted to the Partnership as the General Partner immediately prior to the
transfer of the interest, and the business of the Partnership shall continue
without dissolution.
10.3
Transfer of
Units.
10.3.1 Units
may be transferred only in the manner described in Article 9.2. The transfer of
any Units and the admission of any new Partner shall not constitute an amendment
to this Agreement.
10.3.2 Until
admitted as a Substituted Limited Partner pursuant to Article 11, the Record
Holder of a Unit shall be an Assignee in respect of such Unit. Limited Partners
may include custodians, nominees or any other individual or entity in its own or
any representative capacity.
10.3.3 Each
distribution in respect of Units shall be paid by the Partnership, directly or
through the Transfer Agent or through any other Person or agent, only to the
Record Holders thereof as of the Record Date set for the distribution. Such
payment shall constitute full payment and satisfaction of the Partnership’s
liability in respect of such payment, regardless of any claim of any Person who
may have an interest in such payment by reason of an assignment or
otherwise.
10.3.4 A
transferee who has completed and delivered a Transfer Application provided by
the seller of the Units (or if purchased on an exchange directly from the
Partnership), shall be deemed to have (i) requested admission as a Substituted
Limited Partner, (ii) agreed to comply with and be bound by and to have executed
this Agreement, (iii) represented and warranted that such transferee has the
capacity and authority to enter into this Agreement, (iv) made the powers of
attorney set forth in this Agreement, and (v) given the consents and made the
waivers contained in this Agreement.
10.4
Restrictions on
Transfers.
Notwithstanding the other provisions of this
Article 10, no transfer of any Unit or interest therein of any Limited Partner
or Assignee shall be made if such transfer would (a) violate the then applicable
federal or state securities laws or rules and regulations of the SEC, any state
securities commission, the CFTC, or any other governmental authorities with
jurisdiction over such transfer, (b) cause the Partnership to be taxable as a
corporation or (c) affect the Partnership’s existence or qualification as a
limited partnership under the Act. The General Partner may request each Record
Holder to furnish certain information, including that holder’s nationality,
citizenship or other related status. A transferee who is not a U.S. resident may
not be eligible to become a Record Holder or a Limited Partner if such ownership
would subject the Partnership to the risk of cancellation or forfeiture of any
of its assets under any federal, state or local law or regulation. If the Record
Holder fails to furnish the information or if the General Partner determines, on
the basis of the information furnished by the holder in response to the request,
that such holder is not qualified to become a Limited Partner, the General
Partner may be substituted as a holder for the Record Holder, who will then be
treated as a non-citizen assignee, and the Partnership will have the right to
redeem those securities held by the Record Holder.
10.5
Tax
Certificates.
10.5.1 All
Limited Partners or Assignees (or, if the Limited Partner or Assignee is a
nominee holding for the account of a Beneficial Owner, the Beneficial Owner) are
required to provide the Partnership with a properly completed Tax
Certificate.
10.5.2 If
a Limited Partner or Assignee (or, if the Limited Partner or Assignee is a
nominee holding for the account of a Beneficial Owner, the Beneficial Owner)
fails to provide the Partnership with a properly completed Tax Certificate, the
General Partner may request at any time and from time to time, that such Limited
Partner or Assignee (or Beneficial Owner) shall, within 15 days after request
(whether oral or written) therefore by the General Partner, furnish to the
Partnership, a properly completed Tax Certificate. If a Limited Partner or
Assignee fails to furnish to the General Partner within the aforementioned
15-day period such Tax Certificate, the Units owned by such Limited Partner or
Assignee (or in the case of a Limited Partner or Assignee that holds Units on
behalf of a Beneficial Owner, the Units held on behalf of the Beneficial Owner)
shall be subject to redemption in accordance with the provisions of Article
10.6.
10.6
Redemption of Units for
Failure to Provide Tax Certificate.
10.6.1 If
at any time a Limited Partner or Assignee fails to furnish a properly completed
Tax Certificate within the 15-day period specified in Article 10.5.2, the
Partnership may redeem the Units of such Limited Partner or Assignee as
follows:
(a) The
General Partner shall not later than the 10th Business Day before the date fixed
for redemption, give notice of redemption to the Limited Partner or Assignee, at
its last address designated on the records of the Partnership or the Transfer
Agent, by registered or certified mail, postage prepaid. The notice shall be
deemed to have been given when so mailed (the
“Notice Date”
). The notice
shall specify the Redeemable Units, the date fixed for redemption, the place of
payment, and that payment of the redemption price will be made upon surrender of
the certification evidencing the Redeemable Units.
(b) The
aggregate redemption price for Redeemable Units shall be an amount equal to the
market price as of the Close of Business on the Business Day immediately prior
to the date fixed for redemption of Units to be so redeemed multiplied by the
number of Units included among the Redeemable Units. The redemption price shall
be paid in the sole discretion of the General Partner, in cash or by delivery of
a promissory note of the Partnership in the principal amount of the redemption
price, bearing interest at the Prime Rate (as established by the Federal Reserve
Board) and payable in three equal annual installments of principal together with
accrued interest commencing one year after the redemption date.
(c) Upon
surrender by or on behalf of the Limited Partner or Assignee, at the place
specified in the notice of redemption, of the certification evidencing the
Redeemable Units, duly endorsed in blank or accompanied by an assignment duly
executed in blank, the Limited Partner or Assignee or its duly authorized
representative shall be entitled to receive the payment therefore.
(d) In
the event the Partnership is required to pay withholding tax or otherwise
withhold any amount on behalf of, or with respect to, a Limited Partner or
Assignee (or Beneficial Owner) who has failed to provide a properly completed
Tax Certificate, such amounts paid or withheld by the Partnership shall be
deemed to have been paid to such Limited Partner or Assignee (or Beneficial
Owner) as part of the redemption price for the Redeemable Units and the
Partnership shall reduce the amount of the payment made to such Limited Partner
or Assignee (or Beneficial owner) in redemption of such Redeemable Units by any
amounts so withheld.
10.6.2 After
the Notice Date, Redeemable Units shall no longer constitute issued and
Outstanding Units and no allocations or distributions shall be made with respect
to such Redeemable Units. In addition, after the Notice Date, the Redeemable
Units shall not be transferable.
10.6.3 The
provisions of this Article 10.6 shall also be applicable to Units held by a
Limited Partner or Assignee as nominee of a Beneficial Owner.
ARTICLE
11
Admission
of Partners
11.1
Admission of Initial Limited
Partners and Other Creation Basket Purchases.
Subject to the
requirements of this Article11, upon the issuance by the Partnership of Units to
the Initial Limited Partner and any other purchasers of a Creation Basket, the
General Partner shall admit the Initial Limited Partner and such other
purchasers of the Creation Basket to the Partnership as Limited Partners in
respect of the Units purchased.
11.2
Admission of Substituted Limited
Partners.
By transfer of a Unit in accordance with Article 10,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate shall,
however, only have the authority to convey to a purchaser or other transferee
who does not execute and deliver a Transfer Application (i) the right to
negotiate such Certificate to a purchaser or other transferee, and (ii) the
right to transfer the right to request admission as a Substituted Limited
Partner to such purchaser or other transferee in respect of the transferred
Units. Each transferee of a Unit (including, without limitation, any nominee
holder or an agent acquiring such Unit for the account of another Person) who
executes and delivers a Transfer Application shall, by virtue of such execution
and delivery, be an Assignee and be deemed to have applied to become a
Substituted Limited Partner with respect to the Units so transferred to such
Person. Such Assignee shall become a Substituted Limited Partner (i) at such
time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner’s sole discretion, and (ii) when any such
admission is shown on the books and records of the Partnership, following the
consent of the General Partner to such admission. If such consent is
withheld, such transferee shall be an Assignee. An Assignee shall have an
interest in the Partnership equivalent to that of a Limited Partner with respect
to allocations and distributions, including, without limitation, liquidating
distributions, of the Partnership. With respect to voting rights attributable to
Units that are held by Assignees, the General Partner shall be deemed to be the
Limited Partner with respect thereto and shall, in exercising the voting rights
in respect of such Units on any matter, vote such Units at the written direction
of the Assignee who is the Record Holder of such Units. If no such written
direction is received, such Units will not be voted. An Assignee shall have none
of the other rights of a Limited Partner.
11.3
Admission of Successor General
Partner.
A successor General Partner approved pursuant to this
Article 11.3 or the transferee of or successor to all of the General Partner’s
interest pursuant to Article 10.2 who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective immediately prior to the withdrawal or removal of the General Partner
pursuant to Article 12 or the transfer of the General Partner’s interest
pursuant to Article 10.2; provided, however, that no such successor shall be
admitted to the Partnership until compliance with the terms of Article 10.2 has
occurred. Any such successor shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the
admission.
11.4 Admission
of Additional Limited Partners.
11.4.1 A
Person (other than the General Partner, an Initial Limited Partner or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in this Agreement, and (ii) such other documents or
instruments as may be required in the discretion of the General Partner to
effect such Person’s admission as an Additional Limited Partner.
11.4.2 Notwithstanding
anything to the contrary in this Article 11.4, no Person shall be admitted as an
Additional Limited Partner without the consent of the General Partner, which
consent may be given or withheld in the General Partner’s sole discretion. The
admission of any Person as an Additional Limited Partner shall become effective
on the date upon which the name of such Person is recorded on the books and
records of the Partnership, following the consent of the General Partner to such
admission.
11.5
Amendment of Agreement and
Certificate of Limited Partnership.
To effect the admission to
the Partnership of any Partner, the General Partner shall take all steps
necessary and appropriate under the Act to amend the records of the Partnership
and if necessary, to prepare as soon as practical an amendment of this Agreement
and if required by law, to prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose, among others, exercise the power
of attorney granted pursuant to Article 15.
ARTICLE
12
Withdrawal
or Removal of Partners
12.1
Withdrawal of the General
Partner.
12.1.1 The
General Partner shall be deemed to have withdrawn from the Partnership upon the
occurrence of any one of the following events (each such event herein referred
to as an
“Event of
Withdrawal”
):
(a) the
General Partner voluntarily withdraws from the Partnership by giving written
notice to the other Partners;
(b) the
General Partner transfers all of its rights as general partner pursuant to this
Agreement;
(c) the
General Partner is removed;
(d) the
General Partner (1) makes a general assignment for the benefit of creditors; (2)
files a voluntary bankruptcy petition; (3) files a petition or answer seeking
for itself a reorganization, arrangement, composition, readjustment liquidation,
dissolution or similar relief under any law; (4) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the General Partner in a proceeding of the type described in
clauses (1) — (3) of this sentence; or (5) seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of the General Partner or
of all or any substantial part of its properties;
(e) a
final and non-appealable judgment is entered by a court with appropriate
jurisdiction ruling that the General Partner is bankrupt or insolvent or a final
and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect;
or
(f) a
certificate of dissolution or its equivalent is filed for the General Partner,
or 90 days expire after the date of notice to the General Partner of revocation
of its charter without a reinstatement of its charter, under the laws of its
state of incorporation.
If an
Event of Withdrawal specified in this Article 12.1.1(d), (e) or (f) occurs, the
withdrawing General Partner shall give written notice to the Limited Partners
within 30 days after such occurrence. The Partners hereby agree that only the
Events of Withdrawal described in this Article 12.1 shall result in the
withdrawal of the General Partner from the Partnership.
12.1.2 Withdrawal
of the General Partner from the Partnership upon the occurrence of an Event of
Withdrawal will not constitute a breach of this Agreement under the following
circumstances: (i) the General Partner voluntarily withdraws by giving at least
90 days’ advance notice to the Limited Partners, such withdrawal to take effect
on the date specified in such notice; or (ii) at any time that the General
Partner ceases to be a General Partner pursuant to Article 12.1.1(b) or is
removed pursuant to Article 12.2. If the General Partner gives a
notice of withdrawal pursuant to Article 12.1.1(a), holders of at least a
majority of such Outstanding Units (excluding for purposes of such determination
any Units owned by the General Partner and its Affiliates) may, prior to the
effective date of such withdrawal, elect a successor General Partner. If, prior
to the effective date of the General Partner’s withdrawal, a successor is not
selected by the Unitholders as provided herein, the Partnership shall be
dissolved in accordance with Article 13. If a successor General Partner is
elected, such successor shall be admitted immediately prior to the effective
time of the withdrawal or removal of the Departing Partner and shall continue
the business of the Partnership without dissolution.
12.2
Removal of the General
Partner.
The General Partner may be removed only if such
removal is approved by the Unitholders holding at least 66 2/3% of the
Outstanding Units (excluding for this purpose any Units held by the General
Partner and its Affiliates). Any such action by such holders for removal of the
General Partner must also provide for the election of a successor General
Partner by the Unitholders holding a majority of the Outstanding Units
(excluding for this purpose any Units held by the General Partner and its
Affiliates). Such removal shall be effective immediately following the admission
of a successor General Partner.
12.3
Withdrawal of a Limited Partner
other than the Organizational Limited Partner.
In addition to
withdrawal of a Limited Partner due to its redemption of Units constituting a
Redemption Basket under this Agreement, the General Partner may, at any time, in
its sole discretion, require any Limited Partner to withdraw entirely from the
Partnership or to withdraw a portion of its Partner Capital Account, by giving
not less than 15 days’ advance written notice to the Limited Partner thus
designated. In addition, the General Partner without notice may require at any
time, or retroactively, withdrawal of all or any portion of the Capital Account
of any Limited Partner: (i) that made a misrepresentation to the General Partner
in connection with its purchase of Units; or (ii) whose ownership of Units would
result in the violation of any law or regulations applicable to the Partnership
or a Partner. The Limited Partner thus designated shall withdraw from the
Partnership or withdraw that portion of its Partner Capital Account specified in
such notice, as the case may be, as of the Close of Business on such date as
determined by the General Partner. The Limited Partner thus designated shall be
deemed to have withdrawn from the Partnership or to have made a partial
withdrawal from its Partner Capital Account, as the case may be, without further
action on the part of said Limited Partner and the provisions of Article 17.6
shall apply.
ARTICLE
13
Termination
and Distribution
13.1
Termination.
The
Partnership shall continue in effect from the date of its formation in
perpetuity, unless sooner terminated upon the occurrence of any one or more of
the following events:
(a) The
death, adjudication of incompetence, bankruptcy, dissolution, withdrawal, or
removal of a General Partner who is the sole remaining General Partner, unless a
majority in interest of the Limited Partners within 90 days after such event
elects to continue the Partnership and appoints a successor General Partner;
or
(b) The
affirmative vote of a majority in interest of the Limited Partners; provided,
however, that any such termination shall be subject to the conditions set forth
in this Agreement.
13.2
Assumption of
Agreements.
No vote by the Limited Partners to terminate the
Partnership pursuant to Section 13.1(b) shall be effective unless, prior to or
concurrently with such vote, there shall have been established procedures for
the assumption of the Partnership’s obligations arising under any agreement to
which the Partnership is a party and which is still in force immediately prior
to such vote regarding termination, and there shall have been an irrevocable
appointment of an agent who shall be empowered to give and receive notices,
reports and payments under such agreements, and hold and exercise such other
powers as are necessary to permit all other parties to such agreements to deal
with such agent as if the agent were the sole owner of the Partnership’s
interest, which procedures are agreed to in writing by each of the other parties
to such agreements.
13.3
Distribution
13.3.1 Upon
termination of the Partnership, the affairs of the Partnership shall be wound up
and all of its debts and liabilities discharged or otherwise provided for in the
order of priority as provided by law. The fair market value of the remaining
assets of the Partnership shall then be determined by the General Partner.
Thereupon, the assets of the Partnership shall be distributed to the Partners
pro rata in accordance with their Units. Each Partner shall receive its share of
the assets in cash or in kind, and the proportion of such share that is received
in cash may vary from Partner to Partner, all as the General Partner in its sole
discretion may decide. If such distributions are insufficient to return to any
Partner the full amount of its Capital Contributions, such Partner shall have no
recourse against any other Partner.
13.3.2 The
winding up of the affairs of the Partnership and the distribution of its assets
shall be conducted exclusively by the General Partner or its successor, which is
hereby authorized to do all acts authorized by law for these purposes. Without
limiting the generality of the foregoing, the General Partner, in carrying out
such winding up and distribution, shall have full power and authority to sell
all or any of the Partnership’s assets or to distribute the same in kind to the
Partners.
ARTICLE
14
Meetings
14.1
Meeting of Limited
Partners.
Upon the written request of 20% or more in interest
of the Limited Partners, the General Partner may, but is not required to, call a
meeting of the Limited Partners. Notice of such meeting shall be given within 30
days after, and the meeting shall be held within 60 days after, receipt of such
request. The General Partner may also call a meeting not less than 20 and not
more than 60 days prior to the meeting. Any such notice shall state briefly the
purpose of the meeting, which shall be held at a reasonable time and
place.
ARTICLE
15
Power of
Attorney
15.1
Appointment.
Each
Limited Partner and each Assignee hereby constitutes and appoints each of the
General Partner and, if a liquidator shall have been selected, the liquidator
severally (and any successor to either thereof by merger, transfer, assignment,
election or otherwise) and each of their respective authorized officers and
attorneys-in-fact with full power of substitution, as its true and lawful agent
and attorney-in-fact with full power and authority in its name, place and stead
to:
(a)
execute, swear to, acknowledge, deliver, file and record in the appropriate
public offices (i) all certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate of Limited Partnership
and all amendments or restatements thereof) that the General Partner or the
liquidator deems necessary or appropriate to form, qualify or continue the
existence or qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and in all other jurisdictions in which the Partnership may conduct
business or own property, (ii) all certificates, documents and other instruments
that the General Partner or the liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change, modification or
restatement of this Agreement, (iii) all certificates, documents and other
instruments (including, without limitation, conveyances and a certificate of
cancellation) that the General Partner or the liquidator deems necessary or
appropriate to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, (iv) all certificates, documents and
other instruments relating to the admission, withdrawal, removal or substitution
of any Partner or the Capital Contribution of any Partner, (v) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Units issued, and (vi) all certificates documents
and other instruments (including, without limitation, agreements and a
certificate of merger) relating to a merger or consolidation of the
Partnership;
(b)
execute, swear to, acknowledge, deliver, file and record all ballots, consents,
approval waivers, certificates and other instruments necessary or appropriate,
in the sole discretion of the General Partner or the liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval, agreement or
other action that is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or is necessary or appropriate, in the sole
discretion of the General Partner or the liquidator, to effectuate the terms or
intent of this Agreement, provided, that when required by this Agreement that
establishes a percentage of the Limited Partners or of the Limited Partners of
any class or series required to take any action, the General Partner or the
liquidator may exercise the power of attorney made in this Article 15 only after
the necessary vote, consent or approval of the Limited Partners or of the
Limited Partners of such class or series;
15.2
Survival.
The
foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest and it shall survive and not be affected by the
subsequent death, incompetence, disability, incapacity, dissolution, bankruptcy
or termination of any Limited Partner or Assignee and the transfer of all or any
portion of such Limited Partner’s or Assignee’s Partnership interest and shall
extend to such Limited Partners or Assignee’s heirs, successors, assigns and
personal representatives. Each such Limited Partner or Assignee hereby agrees to
be bound by any representation made by the General Partner or the liquidator
acting in good faith pursuant to such power of attorney; and each such Limited
Partner or Assignee hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner or the liquidator
taken in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the liquidator,
within 15 days after receipt of the General Partner’s or the liquidator’s
request therefor, such further designations, powers of attorney and other
instruments as the General Partner or the liquidator deems necessary to
effectuate this Agreement and the purposes of the Partnership.
ARTICLE
16
Creation
of Units
16.1
General.
The
Partnership will create and redeem Units from time to time, but only in one or
more Creation Baskets or Redemption Baskets (a block of 100,000 Units shall be
referred to as a
“Basket”
). The creation and
redemption of Baskets will only be made in exchange for delivery to the
Partnership or the distribution by the Partnership of the amount of United
States government securities with maturities of 2 years or less
(“Treasuries”)
and any cash
represented by the Baskets being created or redeemed, the amount of which will
be based on the combined NAV of the number of Units included in the Baskets
being created or redeemed determined on the day the order to create or redeem
Baskets is properly received.
16.2
Creation
Procedures.
On any Business Day, a Participant, may place an
order with the Partnership’s marketing agent to create one or more Baskets.
Purchase orders must be placed by 12:00 PM New York time or the close of regular
trading on the New York Stock Exchange, whichever is earlier. The day on which
the marketing agent receives a valid purchase order is the purchase order date.
By placing a purchase order, the Participant agrees to deposit Treasuries with
the Partnership, or a combination of Treasuries and cash. Prior to the delivery
of Baskets for a purchase order, the Participant must also have wired to the
custodian the non-refundable creation transaction fee described in this Article
16.
16.3
Determination of Required
Deposits.
The total deposit required to create each Basket
(“Creation Basket
Deposit”)
is an amount of Treasuries and cash with a value that is in the
same proportion to the total assets of the Partnership (net of estimated accrued
but unpaid fees, expenses and other liabilities) on the date the order to
purchase is properly received as the number of Units to be created under the
purchase order is in proportion to the total number of Units outstanding on the
date the order is received. The General Partner determines, in its sole
discretion or in consultation with the administrator of the Partnership, the
requirements for Treasuries that may be included in deposits to create Baskets
and publishes, or its agent publishes on its behalf, such requirements at the
beginning of each Business Day. The amount of cash deposit required is the
difference between (i) the aggregate market value of the Treasuries included in
a Creation Basket Deposit as of 4:00 PM on the date the order to purchase
properly was made and (ii) the total required deposit.
16.4
Delivery of Required
Deposits.
A Participant who places a purchase order is
responsible for transferring to the Partnership’s account with the custodian the
required amount of Treasuries and cash by the end of the third Business Day
following the purchase order date. Upon receipt of the deposit amount, the
administrator will direct DTC to credit the number of Baskets ordered to the
Participant’s DTC account on the third Business Day following the purchase order
date. The expense and risk of delivery and ownership of Treasuries until such
Treasuries have been received by the custodian on behalf of the Partnership
shall be borne solely by the Participant.
16.5
Rejection of Purchase
Orders.
The General Partner, or its marketing agent on its
behalf, may reject a purchase order or a Creation Basket Deposit if: (1) it
determines that the purchase order or the Creation Basket Deposit is not in
proper form; (2) the General Partner believes that the purchase order or the
Creation Basket Deposit would have adverse tax consequences to the Partnership
or Limited Partners; (3) the acceptance or receipt of the Creation Basket
Deposit would, in the opinion of counsel to the General Partner, be unlawful; or
(4) circumstances outside the control of the General Partner, marketing agent or
custodian make it, for all practical purposes, not feasible to process creations
of Baskets. None of the General Partner, marketing agent or custodian will be
liable for the rejection of any purchase order or Creation Basket
Deposit.
16.6
Creation Transaction
Fee.
To compensate the Partnership for its expenses in
connection with the creation of Baskets, a Participant is required to pay a
transaction fee to the Partnership of $1,000 per order to create Baskets. An
order may include multiple Baskets. The transaction fee may be reduced,
increased or otherwise changed by the General Partner. The General Partner shall
notify DTC in advance of any change in the transaction fee and will not
implement any increase in the fee for the creation of Baskets until 30 days
after the date of the notice.
ARTICLE
17
Redemption
of Units
17.1
General.
The
procedures by which a Participant can redeem one or more Baskets mirror the
procedures for the creation of Baskets. On any Business Day, a Participant may
place an order with the marketing agent to redeem one or more Baskets.
Redemption orders must be placed by 12:00 PM New York time or the close of
regular trading on the New York Stock Exchange, whichever is earlier. A
redemption order so received is effective on the date it is received in
satisfactory form by the marketing agent. The day on which the marketing agent
receives a valid redemption order is the redemption order date. By placing a
redemption order, a Participant agrees to deliver the Baskets to be redeemed
through DTC’s book-entry system to the Partnership not later than 3:00 PM New
York time on the third Business Day following the effective date of the
redemption order. Prior to the delivery of the redemption distribution for a
redemption order, the Participant must also have wired to the Partnership’s
account with the custodian the non-refundable redemption transaction fee
described in this Article 17.
17.2
Determination of Redemption
Distribution.
The redemption distribution from the Partnership
consists of a transfer to the redeeming Participant of an amount of Treasuries
and/or cash with a value that is in the same proportion to the total assets of
the Partnership (net of estimated accrued but unpaid fees, expenses and other
liabilities) on the date the order to redeem is properly received as the number
of Units to be redeemed under the redemption order is in proportion to the total
number of Units outstanding on the date the order to redeem is received. The
General Partner, directly or through its agent, will determine the requirements
for Treasuries and the amount of cash, including the maximum permitted remaining
maturity of a Treasury, and the proportions of Treasuries and cash, that may be
included in distributions to redeem Baskets. The marketing agent will publish
such requirements as of 4:00 PM New York time on the redemption order
date.
17.3
Delivery of Redemption
Distribution.
The redemption distribution due from the
Partnership is delivered to the Participant by 3:00 PM New York time on the
third Business Day following the redemption order date if, by 3:00 PM New York
time on such third Business Day, the Partnership’ s DTC account has been
credited with the Baskets to be redeemed. If the Partnership’s DTC account has
not been credited with all of the Baskets to be redeemed by such time, the
redemption distribution is delivered to the extent of whole Baskets received.
Any remainder of the redemption distribution is delivered on the next Business
Day to the extent of remaining whole Baskets received if the Partnership (1)
receives the fee applicable to the extension of the redemption distribution date
which the General Partner may, from time to time, determine and (2) the
remaining Baskets to be redeemed are credited to the Partnership’s DTC account
by 3:00 PM New York time on such next Business Day. Any further remaining amount
of the redemption order shall be cancelled and the Participant will indemnify
the Partnership for any losses, if any, due to such cancellation, including but
not limited to the difference in the price of investments sold as a result of
the redemption order and investments made to reflect that such order has been
cancelled. The custodian is also authorized to deliver the redemption
distribution notwithstanding that the Baskets to be redeemed are not credited to
the Partnership’s DTC account by 3:00 PM New York time on the third Business Day
following the redemption order date if the Participant has collateralized its
obligation to deliver the Baskets through DTC’s book-entry system on such terms
as the General Partner may from time to time determine.
17.4
Suspension or Rejection of
Redemption orders.
The General Partner may, in its discretion,
suspend the right of redemption, or postpone the redemption settlement date, (1)
for any period during which any of the New York Mercantile Exchange, NYSE Arca
or the New York Stock Exchange is closed other than customary weekend or holiday
closings, or trading on NYSE Arca is suspended or restricted, (2) for any period
during which an emergency exists as a result of which delivery, disposal or
evaluation of Treasuries is not reasonably practicable, or (3) for such other
period as the General Partner determines to be necessary for the protection of
the Limited Partners. None of the General Partner, the marketing agent or the
custodian will be liable to any person or in any way for any loss or damages
that may result from any such suspension or postponement. The General Partner
will reject a redemption order if the order is not in proper form or if the
fulfillment of the order, in the opinion of its counsel, might be
unlawful.
17.5
Redemption Transaction
Fee.
To compensate the Partnership for its expenses in
connection with the redemption of Baskets, a Participant is required to pay a
transaction fee to the Partnership of $1,000 per order to redeem Baskets. An
order may include multiple Baskets. The transaction fee may be reduced,
increased or otherwise changed by the General Partner. The General Partner shall
notify DTC in advance of any change in the transaction fee and will not
implement any increase in the fee for the redemption of Baskets until 30 days
after the date of the notice.
17.6
Required
Redemption.
The General Partner may, at any time, in its sole
discretion, require any Limited Partner to withdraw entirely from the
Partnership or to withdraw a portion of its Partner Capital Account, by giving
not less than 15 days advance written notice to the Limited Partner thus
designated. In addition, the General Partner without notice may require at any
time, or retroactively, withdrawal of all or any portion of the Capital Account
of any Limited Partner: (i) that the General Partner determines is a benefit
plan investor (within the meaning of the Department of Labor Regulation (s)
2510.3-101(f)(2)) in order for the assets of the Partnership not to be treated
as plan assets under ERISA; (ii) that made a misrepresentation to the General
Partner in connection with its purchase of Units; or (iii) whose ownership of
Units would result in the violation of any law or regulations applicable to the
Partnership or a Partner. The Limited Partner thus designated shall withdraw
from the Partnership or withdraw that portion of its Partner Capital Account
specified in such notice, as the case may be, as of the Close of Business on
such date as determined by the General Partner. The Limited Partner thus
designated shall be deemed to have withdrawn from the Partnership or to have
made a partial withdrawal from its Partner Capital Account, as the case may be,
without further action on the part of said Limited Partner.
ARTICLE
18
Miscellaneous
18.1
Notices.
Any
notice, offer, consent or other communication required or permitted to be given
or made hereunder shall be in writing and shall be deemed to have been
sufficiently given or made when delivered personally to the party (or an officer
of the party) to whom the same is directed, or (except in the event of a mail
strike) 5 Business Days after being mailed by first-class mail, postage prepaid,
if to the Partnership or to a General Partner, or if to a Limited Partner, to
the address set forth on Exhibit B hereof. Any Partner may change its address
for the purpose of this Article by giving notice of such change to the
Partnership, such change to become effective on the 10th Business Day after such
notice is given.
18.2
Waiver of
Partition.
Each Partner hereby irrevocably waives during the
term of the Partnership any right that it may have to maintain any action for
partition with respect to any Partnership property.
18.3
Governing Law, Successors,
Severability.
This Agreement shall be governed by the laws of
the State of Delaware, as such laws are applied by Delaware courts to agreements
entered into and to be performed in Delaware by and between residents of
Delaware and shall, subject to the restrictions on transferability set forth
herein, bind and inure to the benefit of the heirs, executors, personal
representatives, successors and assigns of the parties hereto. If any provision
of this Agreement shall be held to be invalid, the remainder of this Agreement
shall not be affected thereby.
18.4
Consent to
Jurisdiction.
The General Partner and the Limited Partners
hereby (i) irrevocably submit to the non-exclusive jurisdiction of any Delaware
state court or federal court sitting in Wilmington, Delaware in any action
arising out of or relating to this Agreement, and (ii) consent to the service of
process by mail. Nothing herein shall affect the right of any party to serve
legal process in any manner permitted by law or affect its right to bring any
action in any other court. Each party agrees that, in the event that any dispute
arising from or relating to this Agreement becomes subject to any judicial
proceeding, such party, to the fullest extent permitted by applicable law,
waives any right it may otherwise have to (a) seek punitive or consequential
damages, or (b) request a trial by jury.
18.5
Entire
Agreement.
This Agreement constitutes the entire agreement
among the parties; it supercedes any prior agreement or understanding among
them, oral or written, all of which are hereby canceled. This Agreement may not
be modified or amended other than pursuant to Articles 3 and 15.
18.6
Headings.
The
headings in this Agreement are inserted for convenience of reference only and
shall not affect interpretation of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural and pronouns stated in either the masculine
or the neuter gender shall include the masculine, the feminine and the
neuter.
18.7
No Waiver.
The
failure of any Partner to seek redress for violation, or to insist on strict
performance, of any covenant or condition of this Agreement shall not prevent a
subsequent act which would have constituted a violation from having the effect
of an original violation.
18.8
Legends.
If
certificates for any interest or interests are issued evidencing a Limited
Partner’s interest in the Partnerships, each such certificate shall bear such
legends as may be required by applicable federal and state laws, or as may be
deemed necessary or appropriate by the General Partner to reflect restrictions
upon transfer contemplated herein.
18.9
Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same
instrument.
18.10
Relationship between the Agreement
and the Act.
Regardless of whether any provisions of this
Agreement specifically refer to particular Default Rules (as defined below), (a)
if any provision of this Agreement conflicts with a Default Rule, the provision
of this Agreement controls and the Default Rule is modified or negated
accordingly, and (b) if it is necessary to construe a Default Rule as modified
or negated in order to effectuate any provision of this Agreement, the Default
Rule is modified or negated accordingly. For purposes of this Article 18.10,
“Default Rule”
shall
mean a rule stated in the Act that applies except to the extent it is negated or
modified through the provisions of the Partnership’s certificate of limited
partnership or this Agreement.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first appearing above.
General
Partner
|
United
States Commodity Funds LLC
|
|
By:
|
/s/ Howard Mah
|
|
Name:
Howard Mah
|
|
Title:
Management Director
|
|
Limited
Partner
|
Kellogg
Capital Group, LLC
|
|
By:
|
/s/ Steve O’Grady
|
|
Name:
Steve O’Grady
|
|
Title:
Partner
|
EXHIBIT
A
FORM
OF GLOBAL CERTIFICATE
Evidencing
Units Representing Limited Partner Interests
in
United States Oil Fund, LP
UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE FUND OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
This is
to certify that Cede & Co. is the owner and registered holder of this
Certificate evidencing the ownership of issued and outstanding Limited Partner
Units
(“Units”)
, each
of which represents a fractional undivided unit of a beneficial interest in
United States Oil Fund (the
“Fund”
), a Delaware limited
partnership. Capitalized terms used not defined herein have the
meaning given to such terms in the Fifth Amended and Restated Agreement of
Limited Partnership, as amended, supplemented or restated to the date hereof
(the
“Limited Partnership
Agreement”
).
At any
given time, this Certificate shall represent the limited units of beneficial
interest in the Fund purchased by a particular authorized Participant on the
date of this Certificate. The Limited Partnership Agreement of the Fund provides
for the deposit of cash with the Fund from time to time and the issuance by the
Fund of additional Creation Baskets representing the undivided units of
beneficial interest in the assets of the Fund. At the request of the registered
holder, this Certificate may be exchanged for one or more Certificates issued to
the registered holder in such denominations as the registered holder may
request; provided, however, that in the aggregate, the Certificates issued to
the registered holder hereof shall represent all Units outstanding at any given
time.
Each
authorized Participant hereby grants and conveys all of its rights, title and
interest in and to the Fund to the extent of the undivided interest represented
hereby to the registered holder of this Certificate subject to and in pursuance
of the Limited Partnership Agreement, all the terms, conditions and covenants of
which are incorporated herein as if fully set forth at length.
The
registered holder of this Certificate is entitled at any time upon tender of
this Certificate to the Fund, endorsed in blank or accompanied by all necessary
instruments of assignment and transfer in proper form, at its principal office
in the State of California and, upon payment of any tax or other governmental
charges, to receive at the time and in the manner provided in the Limited
Partnership Agreement, such holder’s ratable portion of the assets of the Fund
for each Redemption Basket tendered and evidenced by this
Certificate.
The
holder of this Certificate, by virtue of the purchase and acceptance hereof,
assents to and shall be bound by the terms of the Limited Partnership Agreement,
copies of which are on file and available for inspection at reasonable times
during business hours at the principal business office of the General
Partner.
The Fund
may deem and treat the person in whose name this Certificate is registered upon
the books of the Fund as the owner hereof for all purposes and the Fund shall
not be affected by any notice to the contrary.
The
Limited Partnership Agreement and this Certificate are executed and delivered by
United States Commodity Funds LLC as General Partner of the Fund, in the
exercise of the powers and authority conferred and vested in it by the Limited
Partnership Agreement. The representations, undertakings and agreements made on
the part of the Fund in the Limited Partnership Agreement or this Certificate
are made and intended not as personal representations, undertakings and
agreements by the General Partner, other than acting in its capacity as such,
but are made and intended for the purpose of binding only the Fund. Nothing in
the Limited Partnership Agreement or this Certificate shall be construed as
imposing any liability on the General Partner, individually or personally, to
fulfill any representation, undertaking or agreement other than as provided in
the Limited Partnership Agreement or this Certificate.
THE
HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF UNITED STATES OIL FUND,
LP THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED IF SUCH TRANSFER WOULD (a) VIOLATE THE THEN APPLICABLE FEDERAL OR
STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY
WITH JURISDICTION OVER SUCH TRANSFER, (b) TERMINATE THE EXISTENCE OR
QUALIFICATION OF UNITED STATES OIL FUND, LP UNDER THE LAWS OF THE STATE OF
DELAWARE, OR (c) CAUSE UNITED STATES OIL FUND, LP TO BE TREATED AS AN
ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR
FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED).
UNITED STATES COMMODITY FUNDS LLC, THE GENERAL PARTNER OF UNITED STATES OIL
FUND, LP, MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF
IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO AVOID
A SIGNIFICANT RISK OF UNITED STATES OIL FUND, LP BECOMING TAXABLE AS A
CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX
PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF
ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF
ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO
TRADING.
This
Certificate shall not become valid or binding for any purpose until properly
executed by the General Partner.
IN
WITNESS WHEREOF, the General Partner of the Fund has caused this Certificate to
be executed in its name by the manual or facsimile signature of one of its
Authorized Persons.
United
States Commodity Funds LLC,
|
as
General Partner
|
|
By:
|
|
|
Date:
|
EXHIBIT
B
ADDRESSES
FOR NOTICE
United
States Commodity Funds LLC
1320
Harbor Bay Parkway, Suite 145
Alameda,
California 9450
with a
copy to:
Brown
Brothers Harriman & Co.
40 Water
Street
Boston,
MA 02109
Attention:
Manager, Fund Administration Department
EXHIBIT
C
APPLICATION
FOR TRANSFER OF UNITS
Transferees
of Units must execute and deliver this application to
United States Oil Fund, LP, c/o
United States Commodity Funds LLC, 1320 Harbor Bay Parkway, Suite 145, Alameda,
California 94502,
to be admitted as limited partners to United States Oil
Fund, LP.
The
undersigned (
“Assignee”
) hereby applies
for transfer to the name of the Assignee of the Units evidenced hereby and
hereby certifies to United States Oil Fund, LP (the
“Partnership”
) that the
Assignee (including to the best of Assignee’s knowledge, any person for whom the
Assignee will hold the Units) is an Eligible Holder.*
The
Assignee (a) requests admission as a Limited Partner and agrees to comply with
and be bound by, and hereby executes, the Fifth Amended and Restated Agreement
of Limited Partnership of the Partnership, as amended, supplemented or restated
to the date hereof (the
“Limited Partnership
Agreement”
), (b) represents and warrants that the Assignee has all right,
power and authority and, if an individual, the capacity necessary to enter into
the Limited Partnership Agreement, (c) appoints the General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee’s attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Limited Partnership
Agreement and any amendment thereto and the Certificate of Limited Partnership
of the Partnership and any amendment thereto, necessary or appropriate for the
Assignee’s admission as a Substituted Limited Partner and as a party to the
Limited Partnership Agreement, (d) gives the powers of attorney provided for in
the Limited Partnership Agreement, and (e) makes the waivers and gives the
consents and approvals contained in the Limited Partnership Agreement.
Capitalized terms used but not defined herein have the meanings given to such
terms in the Limited Partnership Agreement.
Date:
_______________________
|
|
|
Social
Security or other identifying
|
|
Signature
of Assignee
|
number
of Assignee
|
|
|
|
|
|
|
|
|
Purchase
Price including commissions, if any
|
|
Name
and Address of Assignee
|
Type of
Entity (check one):
¨
Individual
|
¨
Partnership
|
¨
Corporation
|
¨
Trust
|
¨
Other (specify)
|
|
If not an
Individual (check one):
¨
|
the
entity is subject to United States federal income taxation on the income
generated by the
Partnership;
|
¨
|
the
entity is not subject to United States federal income taxation, but it is
a pass-through entity and all of its beneficial owners are subject to
United States federal income taxation on the income generated by the
Partnership;
|
¨
|
the
entity is not subject to United States federal income taxation and it is
(a) not a pass-through entity or (b) a pass-through entity, but not all of
its beneficial owners are subject to United States federal income taxation
on the income generated by the Partnership.
Important Note
— by
checking this box, the Assignee is contradicting its certification that it
is an Eligible Holder.
|
*
|
The
Term “Eligible Holder” means (a) an individual or entity subject to United
States federal income taxation on the income generated by the Partnership;
or (b) an entity not subject to United States federal income taxation on
the income generated by the Partnership, so long as all of the entity’s
owners are subject to United States federal income taxation on the income
generated by the Partnership. Individuals or entities are subject to
taxation, in the context of defining an Eligible Holder, to the extent
they are taxable on the items of income and gain allocated by the
Partnership. Schedule I hereto contains a list of various types of
investors that are categorized and identified as either “Eligible Holders”
or “Non-Eligible Holders.”
|
¨
U.S. Citizen, Resident or Domestic
Entity**
¨
Non-resident Alien**
¨
Foreign Corporation**
** As
those terms are defined in the Code.
If the
U.S. Citizen, Resident or Domestic Entity box is checked, the following
certification must be completed.
Under
Section 1445(e) of the Internal Revenue Code of 1986, as amended (the “Code”),
the Partnership must withhold tax with respect to certain transfers of property
if a holder of an interest in the Partnership is a foreign person. To inform the
Partnership that no withholding is required with respect to the undersigned
interestholder’s interest in it, the undersigned hereby certifies the following
(or, if applicable, certifies the following on behalf of the
interestholder).
Complete
Either A or B:
A.
|
Individual
Interestholder
|
1.
|
I
am not a non-resident alien for purposes of U.S. income
taxation.
|
2.
|
My
U.S. taxpayer identification number (Social Security Number) is
____________
|
3.
|
My
home address is __________________
|
B.
|
Partnership,
Corporation or Other Interestholder
|
1. The
interestholder is not a foreign corporation, foreign partnership, foreign trust
or foreign estate (as those terms are defined in the Code and Treasury
regulations).
2.
|
The
interestholder’s U.S. employer identification number is
__________________
|
3.
|
The
interestholder’s office address and place of incorporation (if applicable)
is __________________
|
The
interestholder agrees to notify the Partnership within sixty (60) days of the
date the interestholder becomes a foreign person.
The
interestholder understands that this certificate may be disclosed to the
Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under
penalties of perjury, I declare that I have examined this certification and, to
the best of my knowledge and belief, it is true, correct and complete and, if
applicable, I further declare that I have authority to sign this document on
behalf of:
Name of
Interestholder
Signature
and Date
Title (if
applicable)
Note: If
the Assignee is a broker, dealer, bank, trust company, clearing corporation,
other nominee holder or an agent of any of the foregoing, and is holding for the
account of any other person, this application should be completed by an officer
thereof or, in the case of a broker or dealer, by a registered representative
who is a member of a registered national securities exchange or a member of
FINRA or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Units shall
be made to the best of the Assignee’s knowledge.
Exhibit 3.4
FOURTH
AMENDED AND RESTATED
LIMITED
LIABILITY COMPANY AGREEMENT
OF
UNITED
STATES COMMODITY FUNDS LLC
Dated
as of June 12, 2008
CONTENTS
|
Page
|
|
|
ARTICLE
I DEFINITIONS
|
2
|
|
|
ARTICLE
II ORGANIZATIONAL MATTERS
|
3
|
|
|
Section
2.1
|
Formation
and Continuation
|
3
|
Section
2.2
|
Name
|
3
|
Section
2.3
|
Purposes
|
3
|
Section
2.4
|
Powers
|
3
|
Section
2.5
|
Offices:
Statutory Agent
|
3
|
|
|
|
ARTICLE
III MEMBER
|
4
|
|
|
Section
3.1
|
Membership
Interest
|
4
|
Section
3.2
|
Capital
Contribution
|
4
|
Section
3.3
|
Uncertificated
Membership Interest
|
4
|
Section
3.4
|
Rights
of the Member
|
4
|
|
|
|
ARTICLE
IV DIRECTORS
|
4
|
|
|
Section
4.1
|
Number
and Qualification
|
4
|
Section
4.2
|
Election
and Term of Office
|
4
|
Section
4.3
|
Resignation
|
4
|
Section
4.4
|
Removal
|
5
|
Section
4.5
|
Vacancies
|
5
|
Section
4.6
|
General
Powers
|
5
|
Section
4.7
|
Compensation
|
5
|
|
|
|
ARTICLE
V MEETINGS OF DIRECTORS
|
5
|
|
|
Section
5.1
|
Place
of Meeting
|
5
|
Section
5.2
|
Annual
Meeting
|
5
|
Section
5.3
|
Regular
Meetings
|
5
|
Section
5.4
|
Special
Meetings
|
5
|
Section
5.5
|
Quorum
and Action
|
6
|
Section
5.6
|
Presumption
of Assent to Action
|
6
|
Section
5.7
|
Telephonic
Meetings
|
6
|
Section
5.8
|
Action
Without Meeting
|
6
|
Section
5.9
|
Waiver
of Notice
|
6
|
|
|
|
ARTICLE
VI COMMITTEES OF THE DIRECTORS
|
7
|
|
|
Section
6.1
|
Company
and Authorities
|
7
|
Section
6.2
|
Audit
Committee
|
7
|
Section
6.3
|
Minutes
and Rules of Procedure
|
7
|
Section
6.4
|
Vacancies
|
7
|
Section
6.5
|
Telephonic
Meetings
|
7
|
Section
6.6
|
Action
Without Meeting
|
8
|
|
|
|
ARTICLE
VII OFFICERS
|
8
|
|
|
Section
7.1
|
Positions
and Powers
|
8
|
Section
7.2
|
Election,
Term of Office and Qualification
|
8
|
Section
7.3
|
Resignation
|
8
|
Section
7.4
|
Removal
|
8
|
Section
7.5
|
Vacancies
|
8
|
Section
7.6
|
The
President
|
8
|
Section
7.7
|
The
Vice Presidents
|
9
|
Section
7.8
|
The
Secretary
|
9
|
Section
7.9
|
Assistant
Secretaries
|
9
|
Section
7.10
|
The
Treasurer
|
9
|
Section
7.11
|
Assistant
Treasurers
|
9
|
Section
7.12
|
Treasurer’s
Bond
|
9
|
Section
7.13
|
Other
Officers
|
10
|
Section
7.14
|
Salaries
|
10
|
|
|
|
ARTICLE
VIII CAPITAL ACCOUNT
|
10
|
|
|
Section
8.1
|
Capital
Account
|
10
|
|
|
|
ARTICLE
IX DISTRIBUTIONS
|
10
|
|
|
Section
9.1
|
Distributions
During Term of Company
|
10
|
Section
9.2
|
Distributions
Upon Liquidation
|
10
|
Section
9.3
|
Limitation
on Distributions
|
10
|
|
|
|
ARTICLE
X INDEMNIFICATION
|
10
|
|
|
Section
10.1
|
Definitions
|
10
|
Section
10.2
|
Indemnification
|
11
|
Section
10.3
|
Successful
Defense
|
11
|
Section
10.4
|
Determinations
|
11
|
Section
10.5
|
Advancement
of Expenses
|
12
|
Section
10.6
|
Other
Indemnification and Insurance
|
12
|
Section
10.7
|
Construction
|
12
|
Section
10.8
|
Continuing
Offer, Reliance, etc
|
12
|
Section
10.9
|
Effect
of Amendment
|
13
|
|
|
|
ARTICLE
XI DISSOLUTION AND FINAL LIQUIDATION
|
13
|
|
|
Section
11.1
|
Dissolution
|
13
|
Section
11.2
|
Winding
Up
|
13
|
Section
11.3
|
Distribution
of Assets
|
13
|
Section
11.4
|
Revocation
of Voluntary Dissolution Proceedings
|
13
|
ARTICLE
XII AMENDMENT
|
13
|
|
|
Section
12.1
|
Amendment
of Agreement.
|
13
|
|
|
|
ARTICLE
XIII GENERAL PROVISIONS
|
13
|
|
|
Section
13.1
|
Liability
to Third Parties.
|
13
|
Section
13.2
|
Waiver
of Notice.
|
14
|
Section
13.3
|
Seal.
|
14
|
Section
13.4
|
Fiscal
Year.
|
14
|
Section
13.5
|
Checks,
Notes, Etc.
|
14
|
Section
13.6
|
Voting
Upon Securities by the Company.
|
14
|
Section
13.7
|
Titles
and Captions.
|
14
|
Section
13.8
|
Pronouns
and Plurals.
|
14
|
Section
13.9
|
Subject
to All Laws.
|
14
|
Section
13.10
|
Allocation
of Profits and Losses; Tax Status.
|
14
|
FOURTH
AMENDED AND RESTATED
LIMITED
LIABILITY COMPANY AGREEMENT
OF
UNITED
STATES COMMODITY FUNDS LLC
THIS FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT of UNITED STATES COMMODITY FUNDS LLC, is
entered into as of the 12
th
day of
June, 2008, by Wainwright Holdings, Inc., as the sole member of the limited
liability company.
Recitals
:
A. The
Company was formed as a Delaware limited liability company under the name
“Standard Asset Management, LLC” by filing a certificate of formation pursuant
to the Delaware Limited Liability Company Act (as amended from time to time, and
together with any successor statute, the “Act”) that was accepted for filing by
the Secretary of State on May 10, 2005 and amended on June 10, 2005 to rename
the Company “Victoria Bay Asset Management, LLC”; and
B. The
Member entered into a limited liability company agreement dated as of May 10,
2005 as amended and restated by the First Amended and Restated Limited Liability
Company Agreement dated as of September 30, 2005, regarding the operation of the
Company and its rights and obligations therein, as further amended and restated
by the Second Amended and Restated Limited Liability Company Agreement dated as
of September 8, 2006, and as further amended and restated by the Third Amended
and Restated Limited Liability Company Agreement dated as of December 12, 2006
(the “LLC Agreement”);
C. The
Company has filed an amendment to the certificate of formation to rename the
Company “United States Commodity Funds LLC”; and
D. The
Member desires to amend and restate the LLC Agreement to reflect the new name of
the Company;
NOW, THEREFORE,
the Member,
intending to be legally bound hereby, agrees as follows:
ARTICLE
I
DEFINITIONS
When used
in this Fourth Amended and Restated Limited Liability Company Agreement, the
following terms shall have the respective meanings assigned to them in this
Article I or in the Sections referenced below:
“
Act
” shall have the
meaning specified in the recitals to this Agreement.
“
Agreement
” means this
Fourth Amended and Restated Limited Liability Company Agreement, as amended from
time to time.
“
Board of Directors
”
means the board of directors of the Company provided for in Article IV of this
Agreement.
“
Certificate
” means
the Certificate of Formation of the Company filed in the office of the Secretary
of State on May 10, 2005, as amended from time to time.
“
Code
” means the
Internal Revenue Code of 1986, as amended.
“
Company
” the Delaware
limited liability company known as “United States Commodity Funds LLC”, as such
limited liability company may be constituted from time to time.
“
Indemnitee
” shall
have the meaning specified in Section 10.1(a).
“
Management Director
”
shall mean a Person selected in accordance with Article IV of this Agreement who
shall have the powers and duties to manage the business and affairs of the
Company and exercise its powers to the extent set forth in this Agreement, the
Certificate and the Act. Each Management Director shall be a
“manager” of the Company within the meaning of the Act.
“
Member
” means
Wainwright Holding, Inc., a Delaware corporation, and its
successors.
“
Non-Management
Director
” shall mean any Person selected in accordance with Article IV of
this Agreement who is not a Management Director.
“
Official Capacity
”
shall have the meaning specified in Section 10.1(b).
“
Person
” means any
individual, corporation, limited liability company, partnership, trust, estate
or other entity.
“
Proceeding
” shall
have the meaning specified in Section 10.1(c).
“
Property
” means any
Company property, real or personal, tangible or intangible, including but not
limited to any legal or equitable interest in such property, ownership interests
in entities owning real or personal property, and money.
“
Regulations
” means,
except where the context indicates otherwise, the final, temporary, or proposed
regulations of the Department of the Treasury under the Code as such regulations
may be lawfully changed from time to time.
“
Secretary of State
”
means the Secretary of State of the State of Delaware.
“
U.S.
” means the
United States of America.
ARTICLE
II
ORGANIZATIONAL
MATTERS
Section
2.1
Formation and
Continuation.
(a) The
Company was formed upon the issuance by the Secretary of State of the
Certificate for the Company. This Agreement shall be effective at the
time of such filing. Nicholas D. Gerber is hereby designated as an
authorized person, within the meaning of the Act, to execute, deliver and file
such certificate of formation, and any action taken prior to the execution of
this Agreement in connection therewith by any such person is hereby ratified and
confirmed. In addition, Howard Mah is designated as an authorized
person within the meaning of the Act. The Management Directors may
designate any person to be an authorized person, within the meaning of the
Act.
(b) The
Company shall continue in existence from the date of its formation in
perpetuity, unless earlier dissolved pursuant to Article XI of this
Agreement.
(c) The
parties hereto intend that this Agreement shall constitute a “limited liability
company agreement” within the meaning of Section 18-101(7) of the
Act.
Section
2.2
Name.
The name
of the Company is “United States Commodity Funds LLC”. The name of
the Company may be changed from time to time by amendment of the
Certificate. The Company may transact business under an assumed name
by filing an assumed name certificate in the manner prescribed by applicable
law.
Section
2.3
Purposes.
The
Company may engage in any lawful business unless a more limited purpose is
stated in the Certificate.
Section
2.4
Powers.
The
Company shall have the powers provided for a limited liability company under the
Act and any powers otherwise allowed under any applicable law.
Section
2.5
Offices: Statutory
Agent.
(a) The
Company’s principal office and the address thereof may be established and
changed from time to time by the Management Directors.
(b) The
registered office of the Company in Delaware shall be the office of the
statutory agent of the Company in Delaware. The statutory agent of
the Company in Delaware is the Corporation Service Company and its address in
the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware
19808, County of New Castle. The Company’s registered office,
registered agent and the addresses thereof may be changed from time to time by
the Management Directors in accordance with the Act.
(c) The
Company may also have offices at such other places, both within and without the
State of Delaware, as the Management Directors
may from time to time
determine or the business of the Company may require.
ARTICLE
III
MEMBER
Section
3.1
Membership
Interest.
The
Member is admitted as a member of the Company upon the execution and delivery of
this Agreement, and is the only member of the Company. The Member has
a one hundred percent (100%) interest in the Company and in the profits and
losses thereof.
Section
3.2
Capital
Contribution
The
Member made an initial contribution to the capital of the Company, in cash, the
amount of $1,000.00 at time the Company was formed. The Member is not
obligated to make any additional capital contributions to the
Company.
Section
3.3
Uncertificated
Membership Interest.
No
certificates shall be issued evidencing the membership interest in the
Company.
Section
3.4
Rights of the
Member.
The
Member, in its capacity as such, shall take no part in the management or control
of the Company’s business and shall have no right to act for or bind the Company
or to vote on matters other than the matters specified in this Agreement or
required by any non-waivable provision of the Act.
ARTICLE
IV
DIRECTORS
Section
4.1
Number and
Qualification.
There
shall be seven Directors, four of which shall be Management Directors and three
of which shall be Non-Management Directors. The Management Directors
may change the number of Management Directors and Non-Management Directors from
time to time by written consent of the Management
Directors. Directors need not be residents of the State of
Delaware. The Member shall elect the Management Directors
and the Non-Management
Directors.
Section
4.2
Election and Term of
Office.
The
Directors shall be elected by written consent of the Member (except as provided
in Section 4.8). Each Director elected shall hold office until his
successor shall be chosen by written consent of the Member and shall qualify, or
until his death or his resignation or removal in the manner hereinafter
provided.
Section
4.3
Resignation.
Any
Director may resign at any time by giving written notice to the President or
Secretary of the Company. Such resignation shall take effect at the
time specified therein, and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
Section
4.4
Removal.
By
written consent of the Member, any Director or Directors, including all of the
Directors, may be removed, either with or without cause.
Section
4.5
Vacancies.
Any
vacancy occurring in the Directors (including a vacancy resulting from an
increase in the authorized number of Directors) may be filled by the written
consent of the Member. A Director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.
Section
4.6
General
Powers.
The
powers of the Company shall be exercised by or under the authority of, and the
business and affairs of the Company shall be managed under the direction of, the
Management Directors, subject to the terms of this Agreement. The
Non-Management Directors shall only have such authority as the Management
Directors expressly confer upon them. Notwithstanding the foregoing
provisions of this Section 4.6, each of
Nicholas D. Gerber and
Howard Mah, so long as he shall remain a Manager and in his capacity as such,
shall have the right to act for and bind the Company, but no other individual
Manager, in his capacity as such, shall have the right to act for or bind the
Company.
Section
4.7
Compensation.
Management
Directors as such shall not receive any stated salary for their service, but
expenses of attendance, if any, may be allowed for attendance at any regular or
special meeting of the Directors or a committee thereof, provided that nothing
herein contained shall be construed to preclude any Management Director from
serving the Company in any other capacity and receiving compensation
therefore.
Non-Management
Directors may receive compensation for their services together with expenses of
attendance, if any, for attendance at any regular or special meeting of the
Directors or a committee thereof, as such compensation and expenses may be
determined from time to time by the Management Directors.
ARTICLE
V
MEETINGS
OF DIRECTORS
Section
5.1
Place of
Meeting.
The
Directors of the Company may hold their meetings, both regular and special,
either within or without the State of Delaware.
Section
5.2
Annual
Meeting.
An
annual meeting of the Directors shall be held at such time and place as shall be
fixed by the consent in writing of a majority of the Directors, and no notice to
the newly elected Directors of such meeting shall be necessary in order legally
to constitute the meeting, provided a quorum shall be present.
Section
5.3
Regular
Meetings
Regular
meetings of the Directors, in addition to the annual meetings referred to in
Section 5.2, may be held without notice at such time and place as shall from
time to time be determined by the Directors.
Section
5.4
Special Meetings
.
Special
meetings of the Directors may be called by the Chairman, if one shall be
elected, the Vice Chairman, if one shall be elected, or by the President, on one
(1) day’s notice (oral or written) to each Director. Special meetings
shall be called by the President or the Secretary on like notice on the written
request of any Director. Neither the purpose of, nor the business to
be transacted at, any special meeting of the Directors need be specified in the
notice or waiver of notice of such meeting.
Section
5.5
Quorum and
Action.
At all
meetings of the Directors, the presence of a majority of the number of
Management Directors fixed by or in accordance with this Agreement shall be
necessary and sufficient to constitute a quorum for the transaction of
business. Subject to the preceding sentence, the act of a majority of
the Management Directors at any meeting at which a quorum is present shall be
the act of the Directors unless the act of a greater number is required by law,
the Certificate or this Agreement. If a quorum shall not be present
at any meeting of the Directors, the Directors present may adjourn the meeting
from time to time without notice other than announcement at the meeting until a
quorum shall be present.
Section
5.6
Presumption of Assent to
Action.
A
Director who is present at a meeting of the Directors at which action on any
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director who
votes in favor of such action.
Section
5.7
Telephonic
Meetings.
Directors
may participate in and hold a meeting of the Directors by means of conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting, except where a Director participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section
5.8
Action Without
Meeting
Any
action required or permitted to be taken at a meeting of the Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the Management Directors, or members of the committee,
as the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting.
Section
5.9
Waiver of
Notice.
Attendance
of a Director at a meeting shall constitute a waiver of notice of such meeting
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business on the grounds that the meeting is not
lawfully called or convened.
ARTICLE
VI
COMMITTEES
OF THE DIRECTORS
Section
6.1
Company and
Authorities.
Subject
to Section 6.2, the Management Directors, by written consent, may designate from
among the Directors one or more committees, each of which shall be comprised of
one or more Directors, and may designate one or more Directors as alternate
members of any committee, who may, subject to any limitations imposed by the
Management Directors, replace absent or disqualified Directors at any meeting of
that committee. Any such committee, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Directors in
the business and affairs of the Company, subject to the limitations set forth in
the Act or this Agreement and Section 6.2. The members of each such
committee shall serve at the pleasure of the Management Directors, subject to
the limitations set forth in Section 6.2.
Section
6.2
Audit
Committee.
(a) The
audit committee shall consist of all of the Non-Management
Directors.
(b) Notwithstanding
anything in this Agreement to the contrary, the Management Directors shall
establish and maintain an audit committee in compliance with, and granted the
requisite authority and funding pursuant to, any applicable (1) federal
securities laws and regulations, including the Sarbanes-Oxley Act of 2002, and
(2) rules, policies and procedures of any national securities exchange on which
the securities issued by any of United States Oil Fund, LP, United States
Natural Gas Fund, LP, United States 12 Month Oil Fund, LP, United States
Gasoline Fund, LP, United States Heating Oil Fund, LP or any other fund for
which the Company acts as general partner, are listed and traded.
Section
6.3
Minutes and Rules of
Procedure.
Each
committee designated by the Management Directors shall keep regular minutes of
its proceedings and report the same to the Management Directors when
required. Subject to the provisions of this Agreement, the members of
any committee may fix such committee’s own rules of procedure.
Section
6.4
Vacancies.
The
Management Directors shall have the power at any time to fill vacancies in, to
change the membership of, or to dissolve, any committee, provided that with
respect to the audit committee, the Management Directors shall only have the
power to fill vacancies and change the membership of such committee to the
extent permitted by Section 6.2.
Section
6.5
Telephonic
Meetings.
Members
of any committee designated by the Management Directors may participate in or
hold a meeting by use of conference telephone or similar communications
equipment by means of which all committee members participating in the meeting
can hear each other. Participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting, except where a
committee member participates in the meeting for the express purpose of
objecting to the transaction of any business on the grounds that the meeting is
not lawfully called or convened.
Section
6.6
Action Without
Meeting.
Any
action required or permitted to be taken at a meeting of any committee
designated by the Management Directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the committee, and such consent shall have the same force and effect
as a unanimous vote at a meeting.
ARTICLE
VII
OFFICERS
Section
7.1
Positions and
Powers.
(a) The
Management Directors may, by written consent, appoint a President, one or more
Vice Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries,
one or more Assistant Treasurers and other officers. One individual
may hold any two or more of these offices.
(b) Every
officer is an agent of the Company for the purpose of its
business. The act of an officer, including the execution in the name
of the Company of any instrument for apparently carrying on in the usual way the
business of the Company, binds the Company unless the officer so acting
otherwise lacks authority to act for the Company and the Person with whom the
officer is dealing has knowledge of the fact that the officer has no such
authority.
Section
7.2
Election, Term of Office and
Qualification.
Any
officer duly appointed by the Management Directors shall hold office until his
successor shall have been duly appointed and qualified or until his death or his
resignation or removal in the manner hereinafter provided.
Section
7.3
Resignation.
Any
officer may resign at any time by giving written notice thereof to the
Management Directors or to the President or Secretary of the
Company. Any such resignation shall take effect at the time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section
7.4
Removal.
Any
officer may be removed at any time with or without cause by written consent of
the Management Directors. The removal of any officer shall be without
prejudice to the contract rights, if any, of the individual so
removed. Appointment of an officer or agent shall not of itself
create any contract rights.
Section
7.5
Vacancies.
A
vacancy in any office may be filled for the unexpired portion of the term by the
Management Directors by written consent.
Section
7.6
The
President.
The
President shall be the chief executive officer of the Company. He
shall have general and active management of the business of the Company, shall
have the general supervision and direction of all other officers of the Company
with full power to see that their duties are properly performed and shall see
that all orders and resolutions of the Management Directors are carried into
effect. Without limiting the authority of the Management Directors to
sign deeds, bonds, mortgages, contracts and other documents on behalf of the
Company, the President may sign, with any other proper officer, any deeds,
bonds, mortgages, contracts and other documents which the Management Directors
have authorized to be executed, except where required by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Management Directors or this Agreement to some other
officer or agent of the Company. In addition, the President shall
perform whatever duties and shall exercise all the powers that are given to him
by the Management Directors.
Section
7.7
The Vice
Presidents.
The
Vice Presidents shall perform the duties as are given to them by this Agreement
and as may from time to time be assigned to them by the Management Directors or
by the President. At the request of the President, or in his absence
or disability, the Vice President designated by the President (or in the absence
of such designation, the senior Vice President), shall perform the duties and
exercise the powers of the President.
Section
7.8
The
Secretary.
The
Secretary shall be custodian of the limited liability company records and shall
perform such other duties as may be prescribed by the Management Directors or by
the President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Company and, when authorized by the Management
Directors, affix the same to any instrument requiring it, and when so affixed,
it may be attested by his signature or by the signature of the Treasurer or an
Assistant Secretary.
Section
7.9
Assistant
Secretaries.
The
Assistant Secretaries shall perform the duties as are given to them by this
Agreement or as may from time to time be assigned to them by the Management
Directors or by the Secretary. At the request of the Secretary, or in
his absence or disability, the Assistant Secretary designated by the Secretary
(or in the absence of such designation the senior Assistant Secretary), shall
perform the duties and exercise the powers of the Secretary.
Section
7.10
The
Treasurer.
The
Treasurer shall have custody of and be responsible for all funds and securities
of the Company, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall deposit all monies and
other valuable effects in the name and to the credit of the Company in such
depositories as may be designated by the Management Directors. He
shall disburse the funds of the Company as may be ordered by the Management
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Management Directors, whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Company.
Section
7.11
Assistant
Treasurers.
The
Assistant Treasurers shall perform the duties as are given to them by this
Agreement or as may from time to time be assigned to them by the Management
Directors or by the Treasurer. At the request of the Treasurer, or in
his absence or disability, the Assistant Treasurer, designated by the Treasurer
(or in the absence of such designation, the senior Assistant Treasurer), shall
perform the duties and exercise the powers of the Treasurer.
Section
7.12
Treasurer’s
Bond.
If
required by the Management Directors, the Treasurer and any Assistant Treasurer
shall give the Company a bond in such sum and with such surety or sureties as
shall be satisfactory to the Management Directors for the faithful performance
of the duties of his office and for the restoration to the Company, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Company.
Section
7.13
Other
Officers.
The
Management Directors may appoint by written consent such other officers and
agents as the Management Directors shall deem necessary who shall hold their
offices for such terms, have such authority and perform such duties as the
Management Directors may from time to time determine.
Section
7.14
Salaries.
The
salary or other compensation of officers may be fixed from time to time by the
Management Directors.
ARTICLE
VIII
CAPITAL
ACCOUNT
Section
8.1
Capital
Account.
A
capital account shall be maintained for the Member in accordance with § 704 (b)
of the Code and the Regulations thereunder.
ARTICLE
IX
DISTRIBUTIONS
Section
9.1
Distributions During Term of
Company.
The
Management Directors in their sole discretion prior to dissolution of the
Company may, but shall not be obligated to, distribute such Property of the
Company, whether in cash or in kind, as the Management Directors may from time
to time deem advisable, after the Management Directors have established such
reserves as the Management Directors consider appropriate.
Section
9.2
Distributions Upon
Liquidation.
On
the winding up of the Company pursuant to Section 11.2 hereof, all assets of the
Company shall be distributed in accordance with Section 11.3.
Section
9.3
Limitation on
Distributions.
Notwithstanding
anything in this Agreement to the contrary, no distribution shall be made if it
would not be permitted by the Act.
ARTICLE
X
INDEMNIFICATION
Section
10.1
Definitions.
In
this Article:
(a) “Indemnitee”
means (i) any present or former director or officer of the Company, and (ii) any
person who while serving in any of the capacities referred to in clause (i) of
this sentence served at the Company’s request as a director or officer of any
other entity.
(b) “Official
Capacity” means the elective or appointive office of the Company held by such
Person or the employment or agency relationship undertaken by such Person on
behalf of the Company, but in each case does not include service for any other
foreign or domestic limited liability company, corporation or any partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise.
(c) “Proceeding”
means any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative, any appeal in
such an action, suit or proceeding, and any inquiry or investigation that could
lead to such an action, suit or proceeding.
Section
10.2
Indemnification.
The
Company shall indemnify every Indemnitee against all judgments, penalties
(including excise and similar taxes), fines, amounts paid in settlement and
reasonable expenses actually incurred by the Indemnitee in connection with any
Proceeding in which he was, or is threatened to be, named as a defendant or
respondent, or in which he was or is a witness without being named as a
defendant or respondent, by reason, in whole or in part, of his serving or
having served, or having been nominated or designated to serve, in any of the
capacities referred to in Section 10.1, if it is determined in accordance with
Section 10.4 that the Indemnitee (a) conducted himself in good faith, (b)
reasonably believed, in the case of conduct in his Official Capacity, that his
conduct was in the Company’s best interests and, in all other cases, that his
conduct was at least not opposed to the Company’s best interests, and (c) in the
case of any criminal proceeding, had no reasonable cause to believe that his
conduct was unlawful; provided, however, that in the event that an Indemnitee is
found liable to the Company or is found liable on the basis that personal
benefit was improperly received by the Indemnitee, the indemnification (i) is
limited to reasonable expenses actually incurred by the Indemnitee in connection
with the Proceeding and (ii) shall not be made in respect of any Proceeding in
which the Indemnitee shall have been found liable for willful or intentional
misconduct in the performance of his duty to the Company. Except as
provided in the proviso to the first sentence of this Section 10.2, no
indemnification shall be made under this Section 10.2 in respect of any
Proceeding in which such Indemnitee shall have been (x) found liable on the
basis that personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the Indemnitee’s Official Capacity, or
(y) found liable to the Company. The termination of any Proceeding by
judgment, order, settlement or conviction, or on a plea of
nolo contendere
or its
equivalent, is not of itself determinative that the Indemnitee did not meet the
requirements set forth in clauses (a), (b) or (c) in the first sentence of this
Section 10.2. An Indemnitee shall be deemed to have been found liable
in respect of any claim, issue or matter only after the Indemnitee shall have
been so adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom. Reasonable expenses shall include, but not be
limited to, all court costs and all fees and disbursements of attorneys for the
Indemnitee. The indemnification provided herein shall be applicable
whether or not negligence or gross negligence of the Indemnitee is alleged or
proven.
Section
10.3
Successful
Defense.
Without
limiting the generality of Section 10.2 and in addition to the indemnification
provided for in Section 10.2, the Company shall indemnify every Indemnitee
against reasonable expenses incurred by such Indemnitee in connection with any
Proceeding in which he is a witness or a named defendant or respondent because
he served in any of the capacities referred to in Section 10.1, if such
Indemnitee has been wholly successful, on the merits or otherwise, in defense of
the Proceeding.
Section
10.4
Determinations.
Any
indemnification under Section 10.2 (unless ordered by a court of competent
jurisdiction) shall be made by the Company only upon a determination that
indemnification of the Indemnitee is proper in the circumstances because he has
met the applicable standard of conduct. Such determination shall be
made by written consent of the Management Directors. Determination as
to reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. In the event a
determination is made under this Section that the Indemnitee has met the
applicable standard of conduct as to some matters but not as to others, amounts
to be indemnified may be reasonably prorated.
Section
10.5
Advancement of
Expenses.
Reasonable
expenses (including court costs and attorneys’ fees) incurred by an Indemnitee
who was or is threatened to be made a named defendant or respondent in a
Proceeding shall be paid by the Company at reasonable intervals in advance of
the final disposition of such Proceeding, and without making any of the
determinations specified in Section 10.4, after receipt by the Company of (a) a
written affirmation by such Indemnitee of his good faith belief that he has met
the standard of conduct necessary for indemnification by the Company under this
Article and (b) a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in this Article. Such written undertaking shall be an unlimited
obligation of the Indemnitee but need not be secured, and it may be accepted
without reference to financial ability to make
repayment. Notwithstanding any other provision of this Article, the
Company may pay or reimburse expenses incurred by an Indemnitee in connection
with his appearance as a witness or other participation in a Proceeding at a
time when he has not been named as a defendant or respondent in the
Proceeding.
Section
10.6
Other Indemnification and
Insurance.
The
indemnification provided by this Article shall (a) not be deemed exclusive of,
or to preclude, any other right to which those seeking indemnification may at
any time be entitled under the Certificate, any law, agreement or written
consent of the Management Directors, or otherwise, or under any policy or
policies of insurance purchased and maintained by the Company on behalf of any
Indemnitee, both as to action in an Official Capacity and as to action in any
other capacity, (b) continue as to a Person who has ceased to be in the capacity
by reason of which he was an Indemnitee with respect to matters arising during
the period he was in such capacity, (c) inure to the benefit of the heirs,
executors and administrators of such a Person, and (d) not be required if and to
the extent that the Person otherwise entitled to payment of such amounts
hereunder has actually received payment herefore under any insurance policy,
contract or otherwise.
Section
10.7
Construction.
The
indemnification provided by this Article shall be subject to all valid and
applicable laws, and in the event this Article or any of the provisions hereof
or the indemnification contemplated hereby are found to be inconsistent with or
contrary to any such valid laws, the latter shall be deemed to control and this
Article shall be regarded as modified accordingly and, as so modified, to
continue in full force and effect.
Section
10.8
Continuing Offer, Reliance,
etc.
The
provisions of this Article (a) are for the benefit of, and may be enforced by,
each Indemnitee of the Company, as if set forth in their entirety in a written
instrument duly executed and delivered by the Company and such Indemnitee and
(b) constitute a continuing offer to all present and future
Indemnitees.
Section
10.9
Effect of
Amendment.
No
amendment, modification or repeal of this Article or any provision hereof shall
in any manner terminate, reduce or impair the right of any past, present or
future Indemnitees to be indemnified by the Company, nor the obligation of the
Company to indemnify any such Indemnitees, under and in accordance with the
provisions of the Article as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
ARTICLE
XI
DISSOLUTION
AND FINAL LIQUIDATION
Section
11.1
Dissolution.
Notwithstanding
the retirement, resignation, expulsion, bankruptcy or dissolution of the Member,
or the occurrence of any other event that terminates the continued membership of
the Member in the Company, the term of the Company shall continue from the date
of its formation in perpetuity, unless earlier dissolved on the earliest to
occur of:
(a) An
election to dissolve the Company made by written consent of the Member;
or
(b) The
entry of a decree of judicial dissolution under the Act.
Section
11.2
Winding
Up.
On
the dissolution of the Company, the Company’s affairs shall be wound up as soon
as reasonably practicable. The winding up shall be accomplished by
the Management Directors.
Section
11.3
Distribution of
Assets.
On
the winding up of the Company, its assets shall be applied in the manner, and in
the order of priority, provided for in the Act.
Section
11.4
Revocation of Voluntary
Dissolution Proceedings.
At
any time before the filing of a certificate of cancellation with the Secretary
of State, the Company may revoke voluntary dissolution proceedings by the
written consent of the Member.
ARTICLE
XII
AMENDMENT
Section
12.1
Amendment of
Agreement.
This
Agreement may not be amended, supplemented or repealed except by the Member in
writing.
ARTICLE
XIII
GENERAL
PROVISIONS
Section
13.1
Liability to Third
Parties.
Except
as otherwise expressly provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be the debts, obligations and liabilities solely of the Company, and
neither the Member or any Director shall be obligated personally for any such
debt, obligation or liability of the Company by reason of being the Member or a
Director of the Company.
Section
13.2
Waiver of
Notice.
(a) Whenever,
under applicable law, the Certificate or this Agreement, any notice is required
to be given to the Member or any Director, a waiver thereof in writing signed by
the Person or Persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
Section
13.3
Seal.
If
one be adopted, the Company seal shall have inscribed thereon the name of the
Company and shall be in such form as may be approved by the Management
Directors. Such seal may be used by causing it or a facsimile of it
to be impressed or affixed or in any manner reproduced.
Section
13.4
Fiscal
Year.
The
fiscal year of the Company shall be the calendar year, or as the Member may
designate by resolution, subject to the provisions of Code § 706.
Section
13.5
Checks, Notes,
Etc.
All
checks or demands for money and notes of the Company shall be signed by such
officer or officers or such other Person or Persons as the Management Directors
may from time to time designate by written consent. The Management
Directors may authorize by written consent any officer or officers or such other
Person or Persons to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Company, and such authority may
be general or confined to specific instances.
Section
13.6
Voting Upon Securities by
the Company.
Unless
otherwise ordered by the Management Directors, the President, acting on behalf
of the Company, shall have full power and authority to attend and to act and to
vote at any meeting of security holders of any corporation, partnership, limited
liability company or other entity in which the Company may hold interests and,
at any such meeting, shall posses and may exercise any and all of the rights and
powers incident to the ownership of such interests which, as the owner thereof,
the Company might have possessed and exercised, if present. The
Management Directors by written consent from time to time may confer like powers
upon any other individual or individuals.
Section
13.7
Titles and
Captions.
All
article or section titles or captions in this Agreement are for convenience
only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions
hereof.
Section
13.8
Pronouns and
Plurals.
Whenever
the context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa.
Section
13.9
Subject to All
Laws.
The
provisions of this Agreement shall be subject to all valid and applicable laws,
including but not limited to the Act as now or hereafter amended, and in the
event that any of the provisions of this Agreement are found to be inconsistent
with or contrary to any such valid laws, the latter shall be deemed to control
and this Agreement shall be deemed modified accordingly and, as so modified, to
continue in full force and effect.
Section
13.10
Allocation of Profits and
Losses; Tax Status.
The
Company’s profits and losses shall be allocated to the Member. At all
times that the Company has only one member (who owns 100% of the membership
interests in the Company), it is the intention of the Member that the Company be
disregarded for federal income tax purposes. No Person shall take any
action that would be inconsistent with such treatment.
IN WITNESS WHEREOF
, the Member
has executed this Agreement as of the day and year first above
written.
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Wainwright
Holdings, Inc.
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By:
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/s/ Nicholas Gerber
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Nicholas
D. Gerber
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President
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Exhibit
10.2
UNITED
STATES OIL FUND, LP
MARKETING
AGENT AGREEMENT
MARKETING
AGENT AGREEMENT (the “Agreement”) made as of March 13, 2006, by and between
United States Oil Fund, LP, a Delaware limited partnership (the “Fund”),
Victoria Bay Asset Management, LLC, a Delaware limited liability company, as
General Partner of the Fund (the “General Partner”) and ALPS Distributors, Inc.,
a Colorado corporation (the “Marketing Agent”).
WITNESSETH:
WHEREAS,
the Fund is governed by the Limited Partnership Agreement dated May 12, 2005, to
be amended as of the date on which the first Creation Basket (as defined below)
is purchased (such agreement as it will be amended, the “Partnership Agreement”)
between the General Partner and the limited partners of the Fund;
WHEREAS,
the General Partner, on behalf of the Fund, has filed with the U.S. Securities
and Exchange Commission (the “Commission” or “SEC”) a registration statement on
Form S-1 (Registration No. 333-124950) and amendments thereto, including as part
thereof a prospectus (the “Prospectus”), under the Securities Act of 1933, as
amended (the “1933 Act”), the forms of which have heretofore been delivered to
the Marketing Agent;
WHEREAS,
as described in the Fund’s Prospectus and the authorized purchaser agreements to
be entered into by the General Partner and certain broker dealers from time to
time including the agreement with KV Execution Specialists, LLC dated March 13,
2006, in the form attached hereto as Exhibit A (each such agreement, an
“Authorized Purchaser Agreement”), units of fractional undivided beneficial
interest in and ownership of the limited partnership (the “Units”) may be
created or redeemed by the Authorized Purchaser in aggregations of one hundred
thousand (100,000) Units (each aggregation, a “Creation Basket” or “Redemption
Basket,” respectively; collectively, “Baskets”); and
WHEREAS,
pursuant to the Partnership Agreement, the General Partner wishes to retain the
Marketing Agent to provide certain assistance with respect to the marketing of
the Units and in connection with the creation or redemption of the
Baskets;
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
the General Partner and the Marketing Agent hereby agree as
follows:
SECTION
1
DEFINITIONS
1.1 Definitions.
In addition to the other terms which are defined in this Agreement, the
following terms shall have the following meanings assigned to them. All other
capitalized terms used herein, but not otherwise defined herein, shall have the
meanings assigned to such terms in the Partnership Agreement.
“Authorized Purchaser” means the
broker-dealer who enters into an Authorized Purchaser Agreement with the General
Partner, including the initial Authorized Purchaser, KV Execution Services,
LLC.
“Business Day” means any day other than
a day on which the American Stock Exchange, the New York Mercantile Exchange or
the New York Stock Exchange is closed for regular trading.
“Control” means, with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Governmental Entity” means any
supranational, national, state, local, foreign, political subdivision, court,
administrative agency, commission or department or other governmental authority
or instrumentality.
“Law” means any law, statute, treaty,
rule, directive, regulation or guideline or Order of any Governmental
Entity.
“Orders” means judgments, writs,
decrees, compliance agreements, injunctions or orders of any Governmental Entity
or arbitrator.
“Person” shall be construed broadly and
shall include an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or another entity, including a Governmental Entity
(or any department, agency or political subdivision thereof).
“Preliminary Prospectus” means the
preliminary prospectus dated April __, 2006 relating to the Units and any other
prospectus dated prior to effectiveness of the Registration Statement relating
to the Units.
“Prospectus” means, except when
otherwise specified, the prospectus, in the form filed by the General Partner on
behalf of the Fund with the Commission on or before the second business day
after the date hereof (or such earlier time as may be required under the 1933
Act) or, if no such filing is required, the form of final prospectus included in
the Registration Statement at the time it became effective.
“Representative” means officers,
directors, employees, agents, attorneys, accountants and financial advisors of a
Person, as the case may be.
“Registration Statement” means, except
when otherwise specified, the Fund’s registration statement on Form S-1 (File
No. 333-124950) filed by the General Partner with the Commission as amended when
it becomes effective under the 1933 Act, including all documents filed as a part
thereof.
SECTION
2
REPRESENTATIONS
AND WARRANTIES
OF THE
GENERAL PARTNER
2.1 Representations
and Warranties of the General Partner. The General Partner, on its own behalf
and in its capacity as General Partner of the Fund, represents and warrants to,
and agrees with, the Marketing Agent that:
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(a)
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At
the time of purchase of a Creation Basket by an Authorized Purchaser under
the Authorized Purchaser Agreement, the Registration Statement shall have
become effective and no stop order of the SEC with respect thereto has
been issued and no proceedings for such purpose has been instituted or, to
the General Partner’s knowledge after due inquiry, is contemplated by the
SEC; any Preliminary Prospectus provided to prospective investors, at the
time of filing thereof, complied in all material respects to the
requirements of the 1933 Act and the last Prospectus distributed in
connection with the offering of the Units purchased by the Authorized
Purchaser did not, as of its date, and 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; the
Registration Statement complies and will comply when it becomes effective
and at the time of purchase of a Creation Basket by an Authorized
Purchaser, in all material respects with the requirements of the 1933 Act
and the Prospectus will comply, as of its date and at the time of purchase
of a Creation Basket by an Authorized Purchaser, in all material respects
with the requirements of the 1933 Act and any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been and will be so described or filed; the
conditions to the use of Form S-1 have been satisfied; the Registration
Statement does not and will not when it becomes effective and at the time
of purchase of a Creation Basket by an Authorized Purchaser 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
not misleading and the Prospectus will not, as of its date and at the time
of purchase of the Creation Baskets by the Authorized Purchaser, 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;
provided, however, that the General Partner makes no warranty or
representation with respect to any statement contained in any Preliminary
Prospectus, the Registration Statement or any Prospectus in reliance upon
and in conformity with information concerning the Marketing Agent and
furnished in writing by or on behalf of the Marketing Agent to the General
Partner expressly for use in the Registration Statement or such
Prospectus; and the General Partner has not distributed nor will
distribute any offering material in connection with the offering or
creation of the Baskets by the Authorized Purchaser other than any
Preliminary Prospectus provided to prospective investors, the Registration
Statement or the Prospectus;
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(b)
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as
of the date of this Agreement, and as of the time of purchase of a
Creation Basket by an Authorized Purchaser, respectively, the statement of
financial position as set forth in the section of the Registration
Statement and the Prospectus entitled “Financial Condition of USOF”
accurately reflects the financial condition of the Fund as of the date
specified in such statement of financial
position;
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(c)
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at
the time of purchase of a Creation Basket by an Authorized Purchaser, the
Fund has been duly formed and is validly existing as a limited partnership
under the laws of the State of Delaware, as described in the Registration
Statement and the Prospectus;
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(d)
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the
General Partner has been duly organized and is validly existing as a
limited liability company in good standing under the laws of the State of
Delaware, with full power and authority to conduct its business as
described in the Registration Statement and the Prospectus, and has all
requisite power and authority to execute and deliver this
Agreement;
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(e)
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each
of the Fund and the General Partner is duly qualified and is in good
standing in each jurisdiction where the conduct of its business requires
such qualification;
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(f)
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at
the time of purchase of a Creation Basket by an Authorized Purchaser, the
Units in a Creation Basket will have been duly and validly authorized and,
when issued and delivered against payment therefor, will be duly and
validly issued, fully paid and non-assessable and free of statutory and
contractual preemptive rights, rights of first refusal and similar
rights;
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(g)
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at
the time of purchase of a Creation Basket by an Authorized Purchaser, the
Units will conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus and the holders
of the Units will not be subject to personal liability by reason of being
such holders, except as set forth in the Partnership Agreement as in
effect at that time;
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(h)
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this
Agreement has been duly authorized, executed and delivered by the General
Partner and constitutes the valid and binding obligations of the General
Partner, enforceable against the General Partner in accordance with its
terms;
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(i)
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the
General Partner is not in breach or violation of or in default under (nor
has any event occurred which with notice, lapse of time or both would
result in any breach or violation of, constitute a default under or give
the holder of any indebtedness (or a person acting on such holder’s
behalf) the right to require the repurchase, redemption or repayment of
all or a part of such indebtedness under) its respective constitutive
documents, or any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which the General Partner is
a party or by which any of them or any of their properties may be bound or
affected, and the execution, delivery and performance of this Agreement,
the issuance and sale of Units in Creation Baskets to the Authorized
Purchaser and the consummation of the transactions contemplated hereby
will not conflict with, result in any breach or violation of or constitute
a default under (nor constitute any event which with notice, lapse of time
or both would result in any breach or violation of or constitute a default
under), respectively, the amended and restated limited liability company
agreement of the General Partner, or any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or
any license, lease, contract or other agreement or instrument to which the
General Partner is a party or by which, respectively, the General Partner
or any of its properties may be bound or affected, or any federal, state,
local or foreign law, regulation or rule or any decree, judgment or order
applicable to the General Partner;
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(j)
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no
approval, authorization, consent or order of or filing with any federal,
state, local or foreign governmental or regulatory commission, board,
body, authority or agency is required in connection with the issuance and
sale of the Units other than registration of the Units under the 1933 Act
and the registration of the General Partner as a Commodity Pool Operator
with the National Futures Association (“NFA”) under the Commodities
Exchange Act (“CEA”) and the filing of the Prospectus with the NFA, which
has been or will be effected, and any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Units are being offered or any requirements for listing under the rules
and regulations of the American Stock Exchange
(“AMEX”);
|
|
(k)
|
except
as set forth in the Registration Statement and the Prospectus (i) no
person has the right, contractual or otherwise, to cause the Fund to issue
or sell to it any Units or other equity interests of the Fund, and (ii) no
person has the right to act as an underwriter or as a financial advisor to
the Fund in connection with the offer and sale of the Units, in the case
of each of the foregoing clauses (i), and (ii), whether as a result of the
filing or effectiveness of the Registration Statement or the sale of the
Units as contemplated thereby or otherwise; no person has the right,
contractual or otherwise, to cause the General Partner on behalf of the
Fund or the Fund to register under the 1933 Act any other equity interests
of the Fund, or to include any such units or interests in the Registration
Statement or the offering contemplated thereby, whether as a result of the
filing or effectiveness of the Registration Statement or the sale of the
Units as contemplated thereby or
otherwise;
|
|
(l)
|
the
General Partner has all necessary licenses, authorizations, consents and
approvals and has made all necessary filings required under any federal,
state, local or foreign law, regulation or rule, and has obtained all
necessary authorizations, consents and approvals from other persons, in
order to conduct its respective business; the General Partner is not in
violation of, or in default under, or has received notice of any
proceedings relating to revocation or modification of, any such license,
authorization, consent or approval or any federal, state, local or foreign
law, regulation or rule or any decree, order or judgment applicable to the
General Partner;
|
|
(m)
|
all
legal or governmental proceedings, affiliate transactions, off-balance
sheet transactions, contracts, licenses, agreements, leases or documents
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration Statement
have been so described or filed as
required;
|
|
(n)
|
except
as set forth in the Registration Statement and the Prospectus, there are
no actions, suits, claims, investigations or proceedings pending or
threatened or, to the General Partner’s knowledge after due inquiry,
contemplated to which the General Partner, or (to the extent that is or
could be material in the context of the offering and sale of the Baskets
to the Authorized Purchaser) any of the General Partner’s directors or
officers, is or would be a party or of which any of their respective
properties are or would be subject at law or in equity, before or by any
federal, state, local or foreign governmental or regulatory commission,
board, body, authority or agency;
|
|
(o)
|
Eisner,
LLC, whose report on the audited financial statements of the Fund is filed
with the Commission as part of the Registration Statement and the
Prospectus, are independent public accountants as required by the 1933
Act;
|
|
(p)
|
the
audited financial statement included in the Prospectus, together with the
related notes and schedules, presents fairly the financial position of the
Fund as of the date indicated and has been prepared in compliance with the
requirements of the 1933 Act and in conformity with generally accepted
accounting principles; there are no financial statements (historical or
pro forma) that are required to be included in the Registration Statement
and the Prospectus that are not included as required; and the Fund does
not have any material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations), not disclosed in the
Registration Statement and the
Prospectus;
|
|
(q)
|
Subsequent
to the respective dates as of which information is given in the
Registration Statement and the Prospectus, and prior to the purchase by
the Authorized Purchaser of the Baskets, there has not been (i) any
material adverse change, (ii) any transaction which is material to the
General Partner or the Fund taken as a whole, (iii) any obligation, direct
or contingent (including any off-balance sheet obligations), incurred by
the General Partner, which is material to the Fund, (iv) any change in the
outstanding indebtedness of the General Partner or the Fund or (v) any
dividend or distribution of any kind declared, paid or made on the
Units;
|
|
(r)
|
the
Fund is not and, after giving effect to the offering and sale of the
Baskets, will not be an “investment company” or an entity “controlled” by
an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended (the “Investment Company
Act”);
|
|
(s)
|
except
as set forth in the Registration Statement and the Prospectus, the General
Partner and the Fund own, or have obtained valid and enforceable licenses
for, or other rights to use, the inventions, patent applications, patents,
trademarks (both registered and unregistered), tradenames, copyrights,
trade secrets and other proprietary information described in the
Registration Statement and the Prospectus as being owned or licensed by
them or which are necessary for the conduct of their respective
businesses, (collectively, “Intellectual Property”); (i) except as set
forth in the Registration Statement and the Prospectus, to the knowledge
of the General Partner or the Fund, there are no third parties who have or
will be able to establish rights to any Intellectual Property, except for
the ownership rights of the owners of the Intellectual Property which is
licensed to the General Partner or the Fund; (ii) to the knowledge of the
General Partner or the Fund, there is no infringement by third parties of
any Intellectual Property; (iii) there is no pending or, to the knowledge
of the General Partner or the Fund, threatened action, suit, proceeding or
claim by others challenging the General Partner’s or the Fund’s rights in
or to any Intellectual Property, and the General Partner and the Fund are
unaware of any facts which could form a reasonable basis for any such
claim; (iv) there is no pending or, to the knowledge of the General
Partner or the Fund, threatened action, suit, proceeding or claim by
others challenging the validity or scope of any Intellectual Property; (v)
there is no pending or, to the knowledge of the General Partner or the
Fund, threatened action, suit, proceeding or claim by others that the
General Partner or the Fund infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of others,
and the General Partner and the Fund are unaware of any facts which could
form a reasonable basis for any such claim; (vi) to the knowledge of the
General Partner or the Fund, there is no patent or patent application that
contains claims that interfere with the issued or pending claims of any of
the Intellectual Property; and (vii) to the knowledge of the General
Partner or the Fund, there is no prior art that may render any patent
application licensed to the General Partner
unpatentable;
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|
(t)
|
all
tax returns required to be filed by the General Partner have been filed,
and all taxes and other assessments of a similar nature (whether imposed
directly or through withholding) including any interest, additions to tax
or penalties applicable thereto due or claimed to be due from such
entities have been paid; and no tax returns or tax payments are due with
respect to the Fund as of the date of this
Agreement;
|
|
(u)
|
the
General Partner has not sent or received any communication regarding
termination of, or intent not to renew, any of the contracts or agreements
referred to or described in, or filed as an exhibit to, the Registration
Statement, and no such termination or non-renewal has been threatened by
the General Partner or any other party to any such contract or
agreement;
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|
(v)
|
on
behalf of the Fund, the General Partner has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14
and 15d-14 under the Exchange Act of 1934, as amended (the “Exchange
Act”), giving effect to the rules and regulations, and SEC staff
interpretations thereunder)); such disclosure controls and procedures are
designed to ensure that material information relating to the Fund, is made
known to the General Partner, and such disclosure controls and procedures
are effective to perform the functions for which they were established; on
behalf of the Fund, the General Partner has been advised of: (i) any
significant deficiencies in the design or operation of internal controls
which could adversely affect the Fund’s ability to record, process,
summarize, and report financial data; and (ii) any fraud, whether or not
material, that involves management or other employees who have a role in
the Fund’s internal controls; and any material weaknesses in internal
Controls have been identified for the Fund’s
auditors;
|
|
(w)
|
any
statistical and market-related data included in the Registration Statement
and the Prospectus are based on or derived from sources that the General
Partner believes to be reliable and accurate, and the General Partner has
obtained the written consent to the use of such data from such sources to
the extent required; and
|
|
(x)
|
neither
the General Partner, nor any of the General Partner’s directors, members,
officers, affiliates or controlling persons has taken, directly or
indirectly, any action designed, or which has constituted or might
reasonably be expected to cause or result in, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of any security
or asset of the Fund to facilitate the sale or resale of the Units; and to
the General Partner’s knowledge after due inquiry, there are no
affiliations or associations between any member of the AMEX and any of the
General Partner’s officers, directors or 5% or greater securityholders,
except as may be set forth in the Registration Statement and the
Prospectus.
|
In
addition, any certificate signed by any officer of the General Partner and
delivered to the Marketing Agent or counsel for the Marketing Agent in
connection with the offering of the Units shall be deemed to be a representation
and warranty by the General Partner as to matters covered thereby, to the
Marketing Agent.
SECTION
3
REPRESENTATIONS
OF THE MARKETING AGENT
The
Marketing Agent represents and warrants and covenants the
following:
3.1. The
Marketing Agent (a) is either (i) registered as a broker-dealer under the
Exchange Act, and is a member in good standing of the National Association of
Securities Dealers, Inc. (the “NASD”), or (ii) exempt from being, or otherwise
is not required to be, licensed as a broker-dealer or a member of the NASD, and
in either case is qualified to act as a broker or dealer in the states or other
jurisdictions where the nature of its business so requires; and (b) has all
other necessary licenses, authorizations, consents and approvals and has made
all necessary filings required under any federal, state, local or foreign law,
regulation or rule, and has obtained all necessary authorizations, consents and
approvals from other persons, in order to conduct its activities as contemplated
by this Agreement. The Marketing Agent will maintain any such registrations,
qualifications and membership in good standing and in full force and effect
throughout the term of this Agreement. The Marketing Agent will comply with all
applicable federal laws including but not limited to federal securities and
commodities laws, the laws of the states or other jurisdictions concerned, and
the rules and regulations promulgated thereunder, and with the Constitution,
By-Laws and Conduct Rules of the NASD (if it is a NASD member) and, to the
extent applicable, the rules and regulations of the NFA, and is solely
responsible for determining the application of any such laws or regulations in
all cases at its own expense. The Marketing Agent will not directly
or indirectly offer, sell or deliver Baskets in or from any state or
jurisdiction where they may not lawfully be offered, sold and/or
delivered;
3.2. If
the Marketing Agent is offering or selling Units in jurisdictions outside the
several states, territories and possessions of the United States and is not
otherwise required to be registered, qualified or a member of the NASD as set
forth in Section 3.1 above, the Marketing Agent will (i) observe the applicable
laws of the jurisdiction in which such offer and/or sale is made, (ii) comply
with the full disclosure requirements of the 1933 Act, and the rules and
regulations promulgated thereunder, and (iii) conduct its business in accordance
with the spirit of the NASD Conduct Rules;
3.3. The
Marketing Agent is in compliance with the money laundering and related
provisions of the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “PATRIOT
Act”), and the regulations promulgated thereunder, if the Marketing Agent is
subject to the requirements of the PATRIOT Act;
3.4. The
Marketing Agent agrees to comply with the prospectus delivery and disclosure
requirements of the 1933 Act, as well as the disclosure delivery requirements
under the CEA;
3.5. The
Marketing Agent (i) has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Colorado, with full
power and authority to conduct its business and has all requisite power and
authority to execute and deliver this Agreement and (ii) is duly qualified and
is in good standing in each jurisdiction where the conduct of its business
requires such qualification; and
3.6. This
Agreement has been duly authorized, executed and delivered by the Marketing
Agent and constitutes the valid and binding obligations of the Marketing Agent,
enforceable against the Marketing Agent in accordance with its
terms.
SECTION
4
EXCLUSIVE
MARKETING AGENT AND STRUCTURE OF THE FUND
4.1 Appointment.
The General Partner hereby appoints the Marketing Agent as the exclusive
marketing agent for Units on the terms and for the periods set forth in this
Agreement, and as set forth in the Authorized Purchaser Agreements as may be
entered into from time to time. The Marketing Agent hereby accepts
such appointment and agrees to act in such capacity hereunder.
4.2 Name
of the Fund; License. For the term of this Agreement, the General Partner shall
cause the name of the Fund to be “United States Oil Fund, LP”
4.3
Marketing Agent Fee. The Marketing Agent shall be paid by the
General Partner for the services of the Marketing Agent as marketing agent to
the Fund hereunder, a fee for its services hereunder, calculated daily and
payable monthly, as follows:
Fee of $425,000 per annum plus an
incentive fee as follows:
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·
|
Zero
basis points on Fund assets from $0 - $500
million
|
|
·
|
4
basis points on Fund assets from $500 million - $4
billion
|
|
·
|
3
basis points on Fund assets in excess of $4
billion
|
The
Marketing Agent will provide an annual marketing budget equal to 33% of the
incentive fee for purposes of marketing the Fund’s Units. The above
fees do not include the following expenses, which will be billed back to the
General Partner: cost of placing advertisements in various periodicals; web
construction and development; or the printing and production of various
marketing materials.
4.4 Expenses.
Except as otherwise expressly provided in this Agreement or agreed to in writing
by the parties, each party hereto shall bear its own fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby and
thereby (including, without limitation, the legal, accounting and due diligence
fees, costs and expenses incurred by such party).
SECTION
4
COVENANTS
OF THE GENERAL PARTNER
5.1 Certain
Covenants of the General Partner. The General Partner, on its own behalf and in
its capacity as General Partner of the Fund, covenants and agrees:
|
(a)
|
to
furnish such information as may be required and otherwise to cooperate in
qualifying the Units for offering and sale under the securities or blue
sky laws of such states and foreign jurisdictions as the Marketing Agent
may reasonably designate and to maintain such qualifications in effect so
long as the Marketing Agent may request during the term of this Agreement;
provided that the Fund shall not be required to qualify as a foreign
corporation or to consent to the service of process under the laws of any
such jurisdiction (except service of process with respect to the offering
and sale of the Units); and to promptly advise the Marketing Agent of the
receipt by the General Partner or the Fund of any notification with
respect to the suspension of the qualification of the Units for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose;
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|
(b)
|
to
take all necessary action to register the Units under the 1933 Act in
order to sell the initial Creation Baskets and take, from time to time,
such steps, including payment of the related filing fees, as may be
necessary to register additional Units under the 1933 Act to the end that
all Units sold in additional Creation Baskets will be properly registered
under the 1933 Act and to keep the Registration Statement effective and
current during the term of this
Agreement;
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|
(c)
|
to
make available to the Marketing Agent, as soon as practicable after the
Registration Statement becomes effective, and thereafter from time to
time, furnish to the Marketing Agent, as many copies of the Prospectus (or
of the Prospectus as amended or supplemented if any amendments or
supplements have been made thereto after the effective date of the
Registration Statement) as the Marketing Agent may request for the
purposes contemplated by the 1933
Act;
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|
(d)
|
to
advise the Marketing Agent promptly and, if requested by the Marketing
Agent, to confirm such advice in writing when the Registration Statement
and any post-effective amendment thereto has become effective, and upon
receipt of request from the Marketing Agent therefore, to file a
post-effective amendment removing any reference to the Marketing Agent
thereunder;
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|
(e)
|
to
prepare, at the expense of the Fund, such amendments or supplements to the
Registration Statement or the Prospectus and to file such amendments or
supplements with the Commission, when and as required, by the 1933 Act,
the Exchange Act, and the rules and regulations of the Commission
thereunder, including if requested by the Marketing Agent; to advise the
Marketing Agent promptly of any proposal to amend or supplement the
Registration Statement or the Prospectus and to provide the Marketing
Agent and the Marketing Agent’s counsel copies of any such documents for
review and comment within a reasonable amount of time prior to any
proposed filing and to file no such amendment or supplement to which the
Marketing Agent or its counsel shall reasonably object in writing; and to
advise the Marketing Agent promptly, confirming such advice in writing, of
any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information
with respect thereto, or of notice of institution of proceedings for, or
the entry of a stop order suspending the effectiveness of the Registration
Statement and, if the Commission should enter a stop order suspending the
effectiveness of the Registration Statement, to use its best efforts to
obtain the lifting or removal of such order as soon as
possible;
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|
(f)
|
to
file promptly all reports and any information statement required to be
filed by the Fund with the Commission in order to comply with the Exchange
Act and the CEA subsequent to the date of the Prospectus and for so long
as the term of this Agreement; and to provide the Marketing Agent and the
Marketing Agent’s counsel with a copy of such reports and statements and
other documents to be filed by the Fund pursuant to Section 13, 14 or
15(d) of the Exchange Act (excluding filings under Rule 12b-25) and under
17 C.F.R. §4.22 during such period for review and comment within a
reasonable amount of time prior to any proposed filing and to file no such
amendment or supplement to which the Marketing Agent or its counsel shall
reasonably object in writing;
|
|
(g)
|
if
necessary or appropriate, to file a registration statement pursuant to
Rule 462(b) under the 1933 Act;
|
|
(h)
|
to
advise the Marketing Agent promptly of the happening of any event during
the term of this Agreement which could require the making of any change in
the Prospectus then being used so that such Prospectus would not include
an untrue statement of material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading, and, during such
time, subject to Section 4.1(d) hereof, to prepare and furnish, at the
expense of the Fund, to the Marketing Agent promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such
change;
|
|
(i)
|
to
furnish to the Fund’s Unitholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and
statements of income and cash flow of the Fund for such fiscal year,
accompanied by a copy of the certificate or report thereon of nationally
recognized independent certified public
accountants);
|
|
(j)
|
to
furnish to the Marketing Agent a copy the Registration Statement, as
initially filed with the Commission, and of all amendments thereto
(including all exhibits thereto);
|
|
(k)
|
to
(1) furnish to the Marketing Agent promptly during the term of this
Agreement (i) copies of any reports, proxy statements, or other
communications which are sent to the Fund’s Unitholders or shall from time
to time publish or publicly disseminate, (ii) copies of all annual,
quarterly and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, (iii) copies of documents or reports filed with AMEX, (iv)
copies of documents or reports filed with the NFA and with the Commodity
Futures Trading Commission, and (v) such other information as the
Marketing Agent may reasonably request regarding the Fund; and (2) make
available for inspection by the Marketing Agent, its attorneys,
accountants and other advisors or agents, all financial and other records,
pertinent corporate documents and properties, and cause the officers,
directors and employees of the General Partner and independent accountants
to supply all information reasonably requested by the Marketing Agent, its
attorneys, accounts and other advisors and
agents;
|
|
(l)
|
to
use its best efforts to cause the Units to be listed on the
AMEX;
|
|
(m)
|
to
furnish to the Marketing Agent (i) at the time of the purchase of the
initial Creation Basket by the Initial Authorized Purchaser and
(ii) at such other times as the Marketing Agent reasonably
requests, which may include when the Registration Statement or the
Prospectus is amended or supplemented, and an opinion of Sutherland,
Asbill & Brennan LLP, counsel for the General Partner, addressed to
the Marketing Agent and substantially in the form attached hereto as
Exhibit B;
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|
(n)
|
to
cause Eisner, LLC to deliver to the Marketing Agent (i) at the time of the
effectiveness of the purchase of the Baskets by the Authorized Purchaser
and (ii) at each time (A) the Registration Statement or the Prospectus is
amended or supplemented by the filing of a post-effective amendment, (B) a
new Registration Statement is filed to register additional Units in
reliance on Rule 429, and there is financial information incorporated by
reference into the Registration Statement or the Prospectus, letters dated
such dates and addressed to the Marketing Agent, containing statements and
information of the type ordinarily included in accountants’ letters to
underwriters with respect to the financial statements and other financial
information contained in or incorporated by reference into the
Registration Statement and the
Prospectus;
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|
(o)
|
to
deliver to the Marketing Agent (i) at the time of the effectiveness of the
purchase of a Creation Basket by an Authorized Purchaser , (ii) at each
time the Registration Statement or the Prospectus is amended or
supplemented, (iii) at the time of the effectiveness of the purchase of a
Basket by an Authorized Purchaser, (iv) at each time the Registration
Statement or the Prospectus files any report, statement or other document
pursuant to Section 13, 14 or 15(d) of the Exchange Act (excluding filings
required by Rule 12b-25), and (iv) at such other times as the Marketing
Agent reasonably requests, an officer’s certificate in the form attached
as Exhibit D hereto;
|
|
(p)
|
to
furnish to the Marketing Agent (i) at the time of the effectiveness of the
purchase of a Creation Basket by an Authorized Purchaser and (ii) at each
time (A) the Registration Statement or the Prospectus is amended or
supplemented, (iii) at each time the Fund files any report, statement or
other document pursuant to Section 13, 14 or 15(d) of the Exchange Act
(excluding filings required by Rule 12b-25), and (iv) at such other times
as the Marketing Agent reasonably requests, such other documents and
certificates as of such dates as the Marketing Agent may reasonably
request; and
|
|
(q)
|
to
cause the Fund to file a post-effective amendment to the Registration
Statement no less frequently than once per calendar quarter on or about
the same time that the Fund files a quarterly or annual report pursuant to
Section 13 or 15(d) of the Exchange Act (including the information
contained in such report), until such time as the Fund’s reports filed
pursuant to Section 13 or 15(d) of the Exchange Act are incorporated by
reference in the Registration
Statement.
|
For the purposes of this Section 4.1,
the term “Registration Statement” shall mean the Registration Statement as
amended or supplemented from time to time to and including the date as of which
the relevant representation is made, and the term “Prospectus” shall mean the
Prospectus as amended or supplemented from time to time to and including the
date as of which the relevant covenant is made.
SECTION
5
MARKETING
PLAN DEVELOPMENT
AND
MARKETING AGENT COVENANTS
5.1 Pre-Launch
Development.
|
(a)
|
The
General Partner and the Marketing Agent will develop the Fund and its
marketing plan prior to the effective date of the Registration Statement
in accordance with the provisions of this Section 5.1 and the marketing
strategy as described in Exhibit C.
|
|
(b)
|
The
General Partner and the Marketing Agent will use their commercially
reasonable efforts to commit sufficient resources to finalize the
Registration Statement and the governing documents of the Fund and the
Fund’s service providers, communicate with the Commission to obtain
approval of the Registration Statement and communicate with the AMEX to
obtain approval of the listing of the Units on the
AMEX.
|
5.2 Post-Launch
Activities.
|
(a)
|
The
General Partner and the Marketing Agent will market the Fund and the Units
on an ongoing basis after the Registration Statement is declared effective
and the Units have been listed on the AMEX in accordance with the
provisions of this Section 5.2.
|
|
(b)
|
Subject
to necessary regulatory approvals and compliance with all applicable legal
and regulatory requirements, the Marketing Agent
shall:
|
|
(i)
|
in
good faith, and subject to existing market conditions, use
commercially-reasonable efforts to market the Fund;
and
|
|
(ii)
|
include
oil in strategic and tactical research of the Marketing
Agent.
|
|
(c)
|
The
Marketing Agent shall provide the General Partner with copies of all
written marketing materials distributed by it connected with the
Fund.
|
|
(d)
|
The
Marketing Agent shall process orders for Baskets as set forth in the
Authorized Purchaser Agreement.
|
5.3 Joint
Reviews.
|
(a)
|
In
order to oversee the pre-launch development and post-launch performance of
the Fund on a regular basis, the parties
shall:
|
|
(i)
|
conduct
at least once each calendar quarter in which the annual review described
in clause (ii) below is not conducted, a review of the performance of the
Fund, with such review to include the senior management of the General
Partner and the senior management of the Marketing Agent and to cover such
topics as asset growth/decline, sales strategy, new business efforts, new
product initiatives and stock exchange trading activity;
and
|
|
(ii)
|
conduct
at least once each calendar year, a review of the overall performance of
the Fund, which will include a review of the most recent quarterly period,
with such review to include the chief executive officer of the General
Partner and senior management of the Marketing Agent and to cover such
topics as strategic direction and new business
initiatives.
|
|
(b)
|
Prior
to each of the quarterly and annual reviews which will take place pursuant
to this Section 5.3, the General Partner and the Marketing Agent will
jointly prepare and circulate among the parties, a report covering the
quarterly or annual period which is the subject of each review, with such
report to cover such topics described
above.
|
5.4 Information
Provided to Marketing Agent. In performing its duties hereunder, the Marketing
Agent shall be entitled to rely on and shall not be responsible in any way for
information provided to it by the General Partner and its service providers and
shall not be liable or responsible for the errors and omissions of such service
providers, provided that the foregoing shall not be construed to protect the
Marketing Agent against any liability to the General Partner or the Fund to
which the Marketing Agent would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
5.5 Conditions
to Marketing Agent’s Obligations. The obligations of the Marketing Agent
hereunder are subject in the Marketing Agent’s discretion, to the condition that
(i) all representations and warranties and other statements of the General
Partner herein or delivered pursuant hereto be true and correct (a) at and as of
the date made, (b) at the time of the purchase of the Baskets by the Authorized
Purchaser, (c) at each time the Registration Statement or the Prospectus is
amended or supplemented, (d) at each time the Fund files any report, statement
or other document pursuant to Section 13, 14 or 15(d) of the Exchange Act
(excluding filings under Rule 12b-25), (e) at each time the Fund issues any
Baskets and (f) at such other times the Marketing Agent reasonably requests, in
each case as though made at and as of such dates, and the General Partner agrees
that all such representations, warranties and other statements are expressly
made on and as of such dates (except, in all cases, that such representations,
warranties and statements relating to the Registration Statement and the
Prospectus shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to such date) and (ii) the General
Partner shall have performed all of its covenants, agreements and obligations
hereunder theretofore to be performed in all respects. The respective
indemnities, agreements, representations, warranties and other statements by the
General Partner set forth in or made pursuant to this Agreement shall 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 Marketing Agent or any
controlling person of the Marketing Agent, or the General Partner, or any
officer or director or any controlling person thereof, and shall survive the
execution, delivery, performance and termination of this
Agreement.
SECTION
6
INDEMNIFICATION
6.1 Indemnification
of Marketing Agent. The General Partner agrees to indemnify, defend and hold
harmless the Marketing Agent, its partners, stockholders, members, directors,
officers and employees of the foregoing, and the successors and assigns of all
of the foregoing persons, from and against any loss, damage, expense, liability
or claim (including the reasonable cost of investigation) which the Marketing
Agent or any such person may incur under the 1933 Act, the Exchange Act, the
common law or otherwise, insofar as such loss, damage, expense, liability or
claim arises out of or is based upon:
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(a)
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any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or in the Registration Statement as amended
or supplement) or in a Prospectus (the term Prospectus for the purpose of
this Section 6 being deemed to include the Prospectus and the Prospectus
as amended or supplemented), or arises out of or is based upon any
omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or such Prospectus or
necessary to make the statements made therein not misleading, except
insofar as any such loss, damage, expense, liability or claim arises out
of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in and in conformity with information concerning
the Marketing Agent furnished in writing by or on behalf of the Marketing
Agent to the General Partner expressly for use in such Registration
Statement;
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(b)
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any
untrue statement or alleged untrue statement of a material fact or breach
by the General Partner of any representation or warranty contained in
Section 2 hereof or in any certificate delivered by the General Partner
pursuant to paragraph (o) of Section 4.1
hereof;
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(c)
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the
failure by the General Partner to perform when and as required any
agreement or covenant contained
herein;
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(d)
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any
untrue statement of any material fact contained in any audio or visual
materials provided by the General Partner or based upon written
information furnished by or on behalf of the General Partner including,
without limitation, slides, videos, films or tape recordings used in
connection with the marketing of the
Units;
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(e)
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the
Marketing Agent’s performance of its duties under this Agreement except in
the case of this clause (e), for any loss, damage, expense, liability or
claim resulting from the gross negligence or willful misconduct of the
Marketing Agent; provided, however, that the indemnity agreement contained
in clause (a) above with respect to any amended Preliminary Prospectus
shall not inure to the benefit of the Marketing Agent (or to the benefit
of any person controlling the Marketing Agent) from whom the person
asserting any such loss, damage, expense, liability or claim purchased the
Units which is the subject thereof if the Prospectus corrected any such
alleged untrue statement or omission in any case where the Marketing Agent
was required to send or give a copy of the Prospectus to such person by
the 1933 Act, the General Partner had notified the Marketing Agent of the
amendment or supplement prior to the sending of the written confirmation
of sale and the Marketing Agent failed to send or give a copy of the
Prospectus to such person, unless the failure is the result of
noncompliance by the General Partner with paragraph (c) of Section 4.1
hereof.
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In no
case is the indemnity of the General Partner in favor of the Marketing Agent and
such other persons as are specified in this Section 6.1 to be deemed to protect
the Marketing Agent and such persons against any liability to the General
Partner or the Fund to which the Marketing Agent would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
If any
action, suit or proceeding (each, a “Proceeding”) is brought against the
Marketing Agent or any such person in respect of which indemnity may be sought
against the General Partner pursuant to the foregoing paragraph, the Marketing
Agent or such person shall promptly notify the General Partner in writing of the
institution of such Proceeding and the General Partner shall assume the defense
of such Proceeding, including the employment of counsel reasonably satisfactory
to such indemnified party and payment of all fees and expenses; provided,
however, that the omission to so notify the General Partner shall not relieve
the General Partner from any liability which it may have to the Marketing Agent
or any such person except to the extent that it has been materially prejudiced
by such failure and has not otherwise learned of such Proceeding. The Marketing
Agent or such person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the Marketing Agent or of such person unless the employment of such counsel
shall have been authorized in writing by the General Partner in connection with
the defense of such Proceeding or the General Partner shall not have, within a
reasonable period of time in light of the circumstances, employed counsel to
have charge of the defense of such Proceeding or such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from, additional to or in conflict with those
available to the General Partner (in which case the General Partner shall not
have the right to direct the defense of such Proceeding on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the General Partner and paid as incurred (it being understood,
however, that the General Partner shall not be liable for the expenses of more
than one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding).
The
General Partner shall not be liable for any settlement of any Proceeding
effected without the General Partner’s written consent but if settled with the
General Partner’s written consent, the General Partner agrees to indemnify and
hold harmless the Marketing Agent and any such person from and against any loss
or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such settlement is
entered into more than 60 Business Days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have fully
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement and (iii) such indemnified party shall have given the
indemnifying party at least 30 Business Days’ prior notice of its intention to
settle. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened Proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such Proceeding and does
not include an admission of fault, culpability or a failure to act, by or on
behalf of such indemnified party.
6.2 The
Marketing Agent agrees to indemnify, defend and hold harmless each of the Fund,
the General Partner and its partners, Unitholders, members, directors, officers,
employees and any person who controls the General Partner within the meaning of
Section 15 of the 1933 Act or Section 20 of the Exchange Act, and the successors
and assigns of all of the foregoing persons, from and against any loss, damage,
expense, liability or claim (including the reasonable cost of investigation)
which the General Partner any such person may incur under the 1933 Act, the
Exchange Act, the common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in and in conformity
with information furnished in writing by or on behalf of the Marketing Agent to
the General Partner expressly for use in the Registration Statement (or in the
Registration Statement as amended or supplemented by any post-effective
amendment thereof) or in a Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact in connection with such
information required to be stated in such Registration Statement or such
Prospectus or necessary to make such information not misleading.
The
Marketing Agent will also indemnify the General Partner as stated above insofar
as such loss, damage, expense, liability or claim arises out of or is based upon
the Marketing Agent’s performance of its duties under this Agreement, except in
the case of any loss, damage, expense, liability or claim resulting from the
gross negligence or willful misconduct of the General Partner. In no
case is the indemnity of the Marketing Agent in favor of the General Partner to
be deemed to protect the General Partner and such persons against any liability
to the Marketing Agent to which the General Partner would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
If any
Proceeding is brought against the General Partner or any person referred to in
the preceding paragraph in respect of which indemnity may be sought against the
Marketing Agent pursuant to the foregoing paragraph, the General Partner or such
person shall promptly notify the Marketing Agent in writing of the institution
of such Proceeding and the Marketing Agent shall assume the defense of such
Proceeding, including the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses; provided, however, that
the omission to so notify the Marketing Agent shall not relieve the Marketing
Agent from any liability which it may have to the General Partner or any such
person except to the extent that it has been materially prejudiced by such
failure and has not otherwise learned of such Proceeding. The General
Partner or such person shall have the right to employ their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the General Partner or such person unless the employment of such counsel shall
have been authorized in writing by the Marketing Agent in connection with the
defense of such Proceeding or the Marketing Agent shall not have, within a
reasonable period of time in light of the circumstances, employed counsel to
defend such Proceeding or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to or in conflict with those available to the
Marketing Agent (in which case the Marketing Agent shall not have the right to
direct the defense of such Proceeding on behalf of the indemnified party or
parties, but the Marketing Agent may employ counsel and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of the Marketing Agent), in any of which events such fees and expenses
shall be borne by the Marketing Agent and paid as incurred (it being understood,
however, that the Marketing Agent shall not be liable for the expenses of more
than one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding).
The
Marketing Agent shall not be liable for any settlement of any such Proceeding
effected without the written consent of the Marketing Agent but if settled with
the written consent of the Marketing Agent, the Marketing Agent agrees to
indemnify and hold harmless the General Partner and any such person from and
against any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such settlement is
entered into more than 60 Business Days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 Business Days’ prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened Proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such Proceeding.
6.3 The
indemnity agreements contained in this Section 6 and the covenants, warranties
and representations of the General Partner contained in this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Marketing Agent, its partners, stockholders, members, directors,
officers, employees and or any person (including each partner, stockholder,
member, director, officer or employee of such person) who controls the Marketing
Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the
Exchange Act, or by or on behalf of each of the General Partner, the Fund, their
partners, stockholders, members, directors, officers, employees or any person
who controls the General Partner or the Fund within the meaning of Section 15 of
the 1933 Act or Section 20 of the Exchange Act, and shall survive any
termination of this Agreement or the initial issuance and delivery of the Units.
The General Partner and the Marketing Agent agree promptly to notify each other
of the commencement of any Proceeding against it and, in the case of the General
Partner, against any of the General Partner’s officers or directors in
connection with the issuance and sale of the Units, or in connection with the
Registration Statement or the Prospectus.
SECTION
7
DURATION
7.1 Duration.
This Agreement shall become effective on the date hereof and continue for an
initial term of one (1) year from the date of this Agreement and will include
any renewal term of this Agreement and will last until the expiration of this
Agreement or the earlier termination of this Agreement in accordance with its
terms (the “Term”). This Agreement will automatically be renewed for successive
one (1) year periods unless, no later than thirty (30) calendar days prior to
the end of the then-current Term, either the Marketing Agent, on the one hand,
or the General Partner, on the other hand, elects to terminate this Agreement by
delivering written notice thereof to the other party. Notwithstanding
the foregoing, this Agreement may be terminated by any party upon written notice
to the other parties if (a) the Fund is terminated, (b) any other party becomes
insolvent or bankrupt or files a voluntary petition, or is subject to an
involuntary petition, in bankruptcy or attempts to or makes an assignment for
the benefit of its creditors or consents to the appointment of a trustee or
receiver, provided that the General Partner may not terminate this Agreement
pursuant to this provision if the event relates to the General Partner or the
Fund or (c) any other party willfully and materially breaches its obligations
under this Agreement and such breach has not been cured to the reasonable
satisfaction of the non-breaching party prior to the expiration of ninety (90)
days after notice by the non-breaching party to the breaching party of such
breach.
SECTION
8
CONFIDENTIALITY
8.1 Confidentiality.
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(a)
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The
General Partner and the Marketing Agent shall during the Term and for one
(1) year thereafter maintain in confidence, use only for the purposes
provided for in this Agreement, and not disclose to any third party,
without first obtaining the other party’s consent in writing, any and all
Confidential Information (as defined below) such party receives from the
other party; provided, however, that either party may disclose
Confidential Information received from the other party to those of its
Representatives as may be necessary for such party to carry out its
obligations under this
Agreement.
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“Confidential
Information” shall mean all information or data of a party that is
disclosed to or received by the other party, whether orally, visually or
in writing, in any form, including, without limitation, information or
data which relates to such party’s business or operations, research and
development, marketing plans or activities, or actual or potential
products.
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(b)
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Notwithstanding
the provisions of this Agreement to the contrary, a party shall have no
liability to the other party for the disclosure or use of any Confidential
Information of the other party if the Confidential
Information:
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(i)
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is
known to such party at the time of disclosure other than as the result of
a breach of this Section 8 by such
party;
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(ii)
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has
been or becomes publicly known, other than as the result of a breach of
this Section 8 by such party, or has been or is publicly disclosed by the
other party;
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(iii)
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is
received by such party after the date of this Agreement from a third party
(unless such third party breaches an obligation of confidentiality to the
other party); or
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(iv)
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is
required to be disclosed by Law or similar compulsion or in connection
with any legal proceeding, provided that such party shall promptly inform
the other party in writing of such requirement and that such disclosure
shall be limited to the extent so required and, except to the extent
prohibited by Law, such party shall reasonably cooperate with the other
party (at the expense of the other party) in seeking a protective order or
other suitable confidentiality
protections.
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(c)
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The
parties recognize and acknowledge that a breach or threatened breach by a
party of the provisions of this Section 8 may cause irreparable and
material loss and damage to the other party which cannot be adequately
remedied at law and that, accordingly, in addition to, and not in lieu of,
any damages or other remedy to which the non-breaching party may be
entitled, the issuance of an injunction or other equitable remedy (without
the requirement that a bond or other security be posted) is an appropriate
remedy for the non-breaching party for any breach or threatened breach of
the obligations set forth in this Section
8.
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(d)
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Each
party agrees that it will use the same degree of care, but no less than a
reasonable degree of care, in safeguarding the Confidential Information of
the other party as it uses for its own Confidential Information of a
similar nature. Each party shall promptly notify the other party in
writing of any misuse, misappropriation or unauthorized disclosure of the
Confidential Information of the other party which may come to such party’s
attention.
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(e)
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Upon
the termination of this Agreement, if requested in writing by the other
party, each party shall, at such party’s option, promptly destroy or
return to the other party all Confidential Information received from the
other party, all copies and extracts of such Confidential Information and
all documents or other media containing any such Confidential
Information.
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SECTION
9
MISCELLANEOUS
9.1 No
Third Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any Person other than the parties hereto, the indemnities referred
to in this Agreement and their respective successors and assigns.
9.2 Entire
Agreement. This Agreement (including any schedules and exhibits attached hereto
and thereto) contain all of the agreements among the parties hereto and thereto
with respect to the transactions contemplated hereby and thereby and supersede
all prior agreements or understandings, whether written or oral, among the
parties with respect thereto.
9.3 Amendment
and Modification. This Agreement may be amended, modified or supplemented only
by a written instrument executed by all the parties.
9.4 Successors
and Assigns; Assignment. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. This Agreement shall not be assigned by any
party without the prior written consent of the other parties and any assignment
without such consent shall be null and void.
9.5 Waiver
of Compliance. Except as otherwise provided in this Agreement, any failure of
any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but any
such waiver, or the failure to insist upon strict compliance with any
obligation, covenant, agreement or condition herein, shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure or
breach.
9.6 Severability.
The parties hereto desire that the provisions of this Agreement be enforced to
the fullest extent permissible under the Law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event that any
provision of this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
9.7 Notices.
All notices, waivers, or other communications pursuant to this Agreement shall
be in writing and shall be deemed to be sufficient if delivered personally, by
facsimile (and, if sent by facsimile, followed by delivery by
nationally-recognized express courier), sent by nationally-recognized express
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to
General Partner, to:
Victoria Bay Asset Management,
LLC
c/o Nicholas D. Gerber
P.O. Box 6919
Moraga,
CA 94570
(b) if to
the Marketing Agent, to:
ALPS Distributors, Inc.
1625 Broadway, Suite 2200
Denver, CO 80202
Attention: General Counsel
All such notices and other
communications shall be deemed to have been delivered and received (i) in the
case of personal delivery or delivery by facsimile or e-mail, on the date of
such delivery if delivered during business hours on a Business Day or, if not
delivered during business hours on a Business Day, the first Business Day
thereafter, (ii) in the case of delivery by nationally-recognized express
courier, on the first Business Day following dispatch, and (iii) in the case of
mailing, on the third Business Day following such mailing.
9.8 Governing
Law; Jurisdiction.
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(a)
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All
questions concerning the construction, interpretation and validity of this
Agreement shall be governed by and construed and enforced in accordance
with the domestic laws of the State of New York, without giving effect to
any choice or conflict of law provision or rule (whether in the State of
New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. In
furtherance of the foregoing, the internal law of the State of New York
will control the interpretation and construction of this Agreement, even
if under such jurisdiction’s choice of law or conflict of law analysis,
the substantive law of some other jurisdiction would ordinarily or
necessarily apply.
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(b)
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Each
party irrevocably consents and agrees, for the benefit of the other
parties, that any legal action, suit or proceeding against it with respect
to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement or any related agreement may be brought in
the courts of the State of New York and hereby irrevocably consents and
submits to the non-exclusive jurisdiction of each such court in personam,
generally and unconditionally with respect to any action, suit or
proceeding for itself and in respect of its properties, assets and
revenues. Each party irrevocably waives any immunity to jurisdiction to
which it may otherwise be entitled or become entitled (including sovereign
immunity, immunity to pre-judgment attachment and execution) in any legal
suit, action or proceeding against it arising out of or based on this
Agreement or any related agreement or the transactions contemplated hereby
or thereby which is instituted in any court of the State of New
York.
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The
provisions of this Section 9.8 shall survive any termination of this Agreement,
in whole or in part.
9.9 No
Partnership. Nothing in this Agreement is intended to, or will be construed to
constitute the General Partner or the Fund, on the one hand, and the Marketing
Agent, on the other hand, as partners or joint venturers; it being intended that
the relationship between them will at all times be that of independent
contractors.
9.10 Force
Majeure. Neither party will be liable to any other party for any delay or
failure to perform its obligations under this Agreement (except for the payment
of money) if such delay or failure arises from or is due to any cause or causes
beyond the reasonable control of the party affected which impedes, delays or
aggravates any obligation under this Agreement, including, without limitation,
acts of God, acts of any Governmental Entity, labor disturbances, act of
terrorism or act of public enemy due to war, the outbreak or escalation of
hostilities, riot, fire, flood, civil commotion, insurrection, severe or adverse
weather conditions, power failure or computer or communications line
failure.
9.11 Interpretation.
The article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall not
in any way affect the meaning or interpretation of this Agreement.
9.12 No
Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party.
9.13 Counterparts;
Facsimile Signatures. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Facsimile
counterpart signatures to this Agreement shall be acceptable and
binding.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the
day and year first written above.
VICTORIA
BAY ASSET MANAGEMENT, LLC
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By:
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/s/ Howard Mah
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Name:
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Howard
Mah
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Title:
|
Management
Director
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UNITED
STATES OIL FUND, LP
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By:
Victoria Bay Asset Management, LLC, as General Partner
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By:
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/s/ Howard Mah
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Name:
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Howard
Mah
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Title:
|
Management
Director
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ALPS
DISTRIBUTORS, INC.
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By:
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/s/ Edmond J. Burke
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Name:
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Edmond
J. Burke
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Title:
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President
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Exhibit
10.4
CUSTODIAN
AGREEMENT
THIS
AGREEMENT
, dated as of March 13, 2006, among
UNITED STATES OIL FUND, LP
, a
limited partnership organized under the laws of the State of Delaware (the
Fund
),
VICTORIA BAY ASSET MANAGEMENT,
LLC
, a Delaware limited liability company and General Partner of the Fund
(the
General Partner
),
and
BROWN BROTHERS HARRIMAN
& CO.
, a limited partnership formed under the laws of the State of
New York (
BBH&Co.
or
the
Custodian
),
WITNESSETH:
WHEREAS
,
the General Partner has exclusive responsibility for the management and control
of the business and affairs of the Fund; and
WHEREAS
,
the General Partner wishes to employ BBH&Co. to act as custodian for the
Fund’s Investments and to provide related services, all as provided herein, and
BBH&Co. is willing to accept such employment, subject to the terms and
conditions herein set forth;
NOW,
THEREFORE
, in consideration of the mutual covenants and agreements herein
contained, the Fund and BBH&Co. hereby agree, as follows:
1.
Appointment of
Custodian.
The Fund and the General Partner hereby
appoint BBH&Co. as the Fund's custodian for its Investments, and BBH&Co.
hereby accepts such appointment. All Investments of the Fund
delivered to the Custodian or its agents or Subcustodians shall be dealt with as
provided in this Agreement. The duties of the Custodian with respect
to the Fund's Investments shall be only as set forth expressly in this
Agreement, which duties are generally comprised of safekeeping and various
administrative duties that will be performed in accordance with Instructions and
as reasonably required to effect Instructions.
2.
Representations,
Warranties and Covenants of the Fund.
The Fund and the
General Partner each hereby represents, warrants and covenants each of the
following:
2.1 This
Agreement has been, and at the time of delivery of each Instruction such
Instruction will have been, duly authorized, executed and delivered by the Fund
and the General Partner. This Agreement does not violate any
Applicable Law or conflict with or constitute a default under the Fund's
prospectus or other organic document, agreement, judgment, order or decree to
which the Fund or the General Partner is a party or by which it or
its Investments is bound.
2.2 By
providing an Instruction with respect to the first acquisition of an Investment
in a jurisdiction other than the United States of America, the Fund and the
General Partner shall be deemed to have confirmed to the Custodian that the Fund
has (a) made all determinations required to be made by the Fund under Applicable
Law, and (b) appropriately and adequately disclosed to its unitholders and all
persons who have rights in or to such Investments, all material investment
risks, including those relating to the custody and settlement infrastructure or
the servicing of securities in such jurisdiction.
2.3 The
Fund and the General Partner shall safeguard and shall solely be responsible for
the safekeeping of any testkeys, identification codes, passwords, other security
devices or statements of account with which the Custodian provides
it. In furtherance and not limitation of the foregoing, in the event
the Fund and/or the General Partner utilizes any on-line service offered by the
Custodian, the Fund, the General Partner and the Custodian shall be fully
responsible for the security of each party’s respective connecting terminal,
access thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards in respect
thereof. Additionally, if the Fund and/or the General Partner uses
any on-line or similar communications service made available by the Custodian,
the Fund and the General Partner shall be solely responsible for ensuring the
security of its access to the service and for the use of the service, and shall
only attempt to access the service and the Custodian’s computer systems as
directed by the Custodian. If the Custodian provides any computer
software to the Fund and/or the General Partner relating to the services
described in this Agreement, the Fund and/or the General Partner will only use
the software for the purposes for which the Custodian provided the software to
the Fund and/or the General Partner, and will abide by the license agreement
accompanying the software and any other security policies which the Custodian
provides to the Fund and the General Partner.
3.
Representation
and Warranty of BBH&Co.
BBH&Co. hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered by
BBH&Co. and does not and will not violate any Applicable Law or conflict
with or constitute a default under BBH&Co.'s limited partnership agreement
or any agreement, instrument, judgment, order or decree to which BBH&Co. is
a party or by which it is bound.
4.
Instructions.
Unless
otherwise explicitly indicated herein, the Custodian shall perform its duties
pursuant to Instructions. As used herein, the term
Instruction
shall mean a
directive initiated by the Fund and/or the General Partner, acting directly or
through its board of directors, officers or other Authorized Persons, which
directive shall conform to the requirements of this Section 4.
4.1
Authorized
Persons.
For purposes hereof, an
Authorized Person
shall be a
person or entity authorized to give Instructions for or on behalf of the Fund
and/or the General Partner by written notices to the Custodian or otherwise
in accordance with procedures delivered to and acknowledged by the
Custodian, including without limitation the Fund’s Investment
Adviser. The Custodian may treat any Authorized Person as having full
authority of the Fund and/or the General Partner to issue Instructions hereunder
unless the notice of authorization contains explicit limitations as to said
authority. The Custodian shall be entitled to rely upon the authority
of Authorized Persons until it receives appropriate written notice from the Fund
to the contrary.
The Fund hereby designates the
Marketing Agent (as such term is defined under an Authorized Purchaser Agreement
entered into by the General Partner on behalf of the Fund, as approved by the
Custodian (the
Authorized
Purchaser Agreement
)) as an Authorized Person from whom the Custodian is
hereby authorized to receive Instructions to accept deposits of cash and
securities in connection with the purchase of Units (as such term is defined
under the Authorized Purchaser Agreement) and the distribution of cash and
securities in connection with the redemption of Units.
4.2
Form of
Instruction.
Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund and/or the General
Partner shall elect to transmit such Instruction in accordance with Subsections
4.2.1 through 4.2.3 of this Section.
4.2.1
Fund
Designated Secured-Transmission Method.
Instructions may be transmitted
through a secured or tested electro-mechanical means identified by the Fund, the
General Partner or by an Authorized Person entitled to give Instruction and
acknowledged and accepted by the Custodian; it being understood that such
acknowledgment shall authorize the Custodian to receive and process such means
of delivery but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2
Written
Instructions.
Instructions may be transmitted in a writing
that bears the manual signature of Authorized Persons.
4.2.3
Other Forms
of Instruction.
Instructions may also be transmitted by
another means determined by the Fund, the General Partner or Authorized Persons
and acknowledged and accepted by the Custodian (subject to the same limits as to
acknowledgements as is contained in Subsection 4.2.1, above) including
Instructions given orally or by SWIFT, telex or telefax (whether tested or
untested).
When an
Instruction is given by means established under Subsections 4.2.1 through 4.2.3,
it shall be the responsibility of the Custodian to use reasonable care to adhere
to any security or other procedures established in writing between the Custodian
and the Authorized Person with respect to such means of Instruction, but such
Authorized Person shall be solely responsible for determining that the
particular means chosen is reasonable under the circumstances. Oral Instructions
shall be binding upon the Custodian only if and when the Custodian takes action
with respect thereto. With respect to telefax instructions, the
parties agree and acknowledge that receipt of legible instructions cannot be
assured, that the Custodian cannot verify that authorized signatures on telefax
instructions are original or properly affixed, and that the Custodian shall not
be liable for losses or expenses incurred through actions taken in reliance on
inaccurately stated, illegible or unauthorized telefax
instructions. The provisions of Section 4A of the Uniform Commercial
Code as currently in effect in the State of New York shall apply to the Fund’s
Transfers performed in accordance with Instructions. The Funds
Transfer Services Schedule and the Electronic and Online Services Schedule to
this Agreement shall each comprise a designation of form of a means of
delivering Instructions for purposes of this Section 4.2.
4.3
Completeness and
Contents of Instructions.
The Authorized Person shall be responsible for
assuring the adequacy and accuracy of Instructions. Particularly,
upon any acquisition or disposition or other dealing in the Fund's Investments
and upon any delivery and transfer of any Investment or moneys, the person
initiating such Instruction shall give the Custodian an Instruction with
appropriate detail, including, without limitation:
4.3.1 The
transaction date and the date and location of settlement;
4.3.2 The
specification of the type of transaction;
4.3.3 A
description of the Investments or moneys in question, including, as
appropriate, quantity, price per unit, amount of money to be received or
delivered and currency information. Where an Instruction is
communicated by electronic means, or otherwise where an Instruction contains an
identifying number such as a CUSIP, SEDOL or ISIN number, the Custodian shall be
entitled to rely on such number as controlling notwithstanding any inconsistency
contained in such Instruction, particularly with respect to Investment
description; and
4.3.4 The
name of the broker or similar entity concerned with execution of the
transaction.
If the Custodian shall determine that
an Instruction is either unclear or incomplete, the Custodian may give prompt
notice of such determination to the Fund and/or the General Partner, and the
Fund and/or the General Partner shall thereupon amend or otherwise reform such
Instruction. In such event, the Custodian shall have no obligation to
take any action in response to the Instruction initially delivered until the
redelivery of an amended or reformed Instruction.
4.4
Timeliness of
Instructions.
In giving an Instruction, the Fund and/or the
General Partner shall take into consideration delays which may occur due to the
involvement of a Subcustodian or agent, differences in time zones, and other
factors particular to a given market, exchange or issuer. When the
Custodian has established specific timing requirements or deadlines with respect
to particular classes of Instruction, or when an Instruction is received by the
Custodian at such a time that it could not reasonably be expected to have acted
on such instruction due to time zone differences or other factors beyond its
reasonable control, the execution of any Instruction received by the Custodian
after such deadline or at such time (including any modification or revocation of
a previous Instruction) shall be at the risk of the Fund.
5.
Safekeeping of
Fund Assets.
The Custodian shall hold Investments delivered to
it or Subcustodians for the Fund in accordance with the provisions of this
Section. The Custodian shall not be responsible for (a) the
safekeeping of Investments not delivered or that are not caused to be issued to
it or its Subcustodians; (b) pre-existing faults or defects in Investments that
are delivered to the Custodian, or its Subcustodians; or (c) the safekeeping of
Oil Interests and Oil Forward Contracts. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the
Custodian, any Subcustodian or their respective agents pursuant to an
Instruction or in consequence of any corporate action. The Custodian
shall hold Investments for the account of the Fund and shall segregate
Investments from assets belonging to the Custodian and shall cause its
Subcustodians to segregate Investments from assets belonging to the Subcustodian
in an account held for the Fund or in an account maintained by the Subcustodian
generally for non-proprietary assets of the Custodian.
5.1
Use of Securities
Depositories.
The Custodian may deposit and maintain Investments in any
Securities Depository, either directly or through one or more Subcustodians
appointed by the Custodian. Investments held in a Securities
Depository shall be held (a) subject to the agreement, rules, statement of terms
and conditions or other document or conditions effective between the Securities
Depository and the Custodian or the Subcustodian, as the case may be, and (b) in
an account for the Fund or in bulk segregation in an account maintained for the
non-proprietary assets of the entity holding such Investments in the
Depository. If market practice or the rules and regulations of the
Securities Depository prevent the Custodian, the Subcustodian or (any agent of
either) from holding its client assets in such a separate account, the
Custodian, the Subcustodian or other agent shall as appropriate segregate such
Investments for benefit of the Fund or for the benefit of clients of the
Custodian generally on its own books.
5.2
Certificated
Assets.
Investments which are certificated may be held in
registered or bearer form: (a) in the Custodian's vault; (b) in the vault of a
Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3
Registered
Assets
.
Investments which
are registered may be registered in the name of the Custodian, a Subcustodian,
or in the name of the Fund or a nominee for any of the foregoing, and may be
held in any manner set forth in paragraph 5.2 above with or without any
identification of fiduciary capacity in such registration.
5.4
Book Entry
Assets.
Investments which are represented by book-entry may be
so held in an account maintained by the Book-entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5
Replacement of
Lost Investments.
In the event of a loss of Investments for
which the Custodian is responsible under the terms of this Agreement, the
Custodian shall replace such Investment, or in the event that such replacement
cannot be effected, the Custodian shall pay to the Fund the fair market value of
such Investment based on the last available price as of the close of business in
the relevant market on the date that a claim was first made to the Custodian
with respect to such loss, or, if less, such other amount as shall be agreed
by the parties as the date for settlement.
6.
Administrative
Duties of the Custodian.
The Custodian shall perform the following
administrative duties with respect to Investments of the Fund.
6.1
Purchase of
Investments.
Pursuant to Instruction, Investments purchased for the
account of the Fund shall be paid for (a) against delivery thereof to the
Custodian or a Subcustodian, as the case may be, either directly or through a
Clearing Corporation or a Securities Depository (in accordance with the rules of
such Securities Depository or such Clearing Corporation), or (b) otherwise in
accordance with an Instruction, Applicable Law, generally accepted trade
practices, or the terms of the instrument representing such
Investment.
6.2
Sale of
Investments.
Pursuant to Instruction, Investments sold for the
account of the Fund shall be delivered (a) against payment therefor in cash, by
check or by bank wire transfer, (b) by credit to the account of the Custodian or
the applicable Subcustodian, as the case may be, with a Clearing Corporation or
a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
6.3
Delivery and
Receipt in Connection with Borrowings of the Fund or other Collateral and Margin
Requirements.
Pursuant to Instruction and subject to the last
sentence in Section 6.4 below, the Custodian may deliver or receive Investments
or cash of the Fund in connection with borrowings or loans by the Fund and other
collateral and margin requirements.
6.4
Futures and
Over-the-Counter (OTC) Contracts.
If, pursuant to an
Instruction, the Custodian shall become a party to an agreement with the Fund
and a futures commission merchant regarding margin or a counterparty to an OTC
contract (
Tri-Party
Agreement
), the Custodian shall (a) receive and retain, to the extent the
same is provided to the Custodian, confirmations or other documents evidencing
the purchase or sale by the Fund of exchange-traded futures contracts or the
entering into of an option, forward or other derivatives transaction by the
Fund, (b) when required by such Tri-Party Agreement, deposit and maintain in an
account opened pursuant to such Agreement (
Margin Account
) segregated
either physically or by book-entry in a Securities Depository for the benefit of
any futures commission merchant, such Investments as the Fund shall have
designated as initial, maintenance or variation "margin" deposits or other
collateral intended to secure the Fund's performance of its obligations under
the terms of any exchange-traded futures contracts and commodity options; and
(c) thereafter pay, release or transfer Investments into or out of the Margin
Account in accordance with the provisions of such Agreement. Alternatively, the
Custodian may deliver Investments, in accordance with an Instruction, to a
futures commission merchant for margin purposes or to the counterparty or its
custodian. The Custodian shall in no event be responsible for the
acts and omissions of any futures commission merchant or the counterparty or its
custodian, to whom Investments are delivered pursuant to this Section; for the
sufficiency of Investments held in any Margin Account; for funding margin
deposits or otherwise providing Advances for the purpose of margin or other
collateral in any Margin Account; or, for the performance of any terms of any
exchange-traded futures contracts, commodity options, forward contracts and
other derivative transactions. In addition, the Custodian shall not
be required to transfer margin or any other assets of the Fund to a Margin
Account if at the time of such request, such transfer would reduce the aggregate
market value of all unencumbered securities, cash, cash equivalents and other
unencumbered liquid assets of the Fund in the custody of the Custodian to less
than ten (10) percent of the then current net asset value of the
Fund.
6.5
Contractual
Obligations and Similar Investments.
From time to time, the
Fund's Investments may include Investments that are not ownership interests as
may be represented by certificate (whether registered or bearer), by entry in a
Securities Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If the Fund
shall at any time acquire such Investments, including without limitation deposit
obligations, loan participations, repurchase agreements and derivative
arrangements, the Custodian shall (a) receive and retain, to the extent the same
are provided to the Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Fund's account in accordance with the terms
of the applicable arrangement, but only to the extent directed to do so by
Instruction. The Custodian shall have no responsibility for
agreements running to the Fund as to which it is not a party other than to
retain, to the extent the same are provided to the Custodian, documents or
copies of documents evidencing the arrangement and, in accordance with
Instruction, to include such arrangements in reports made to the
Fund.
6.6
Exchange of
Securities.
Unless otherwise directed by Instruction, the
Custodian shall: (a) exchange securities held for the account of the
Fund for other securities in connection with any reorganization,
recapitalization, conversion, split-up, change of par value of shares or similar
event, and (b) deposit any such securities in accordance with the terms of any
reorganization or protective plan.
6.7
Surrender of
Securities.
Unless otherwise directed by Instruction, the
Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3; and (c) for a different number of certificates or instruments representing
the same number of shares or the same principal amount of
indebtedness.
6.8
Rights, Warrants,
Etc.
Pursuant to Instruction, the Custodian shall (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or trustee
thereof, or to any agent of such issuer or trustee, for purposes of exercising
such rights or selling such securities, and (b) deposit securities in response
to any invitation for the tender thereof.
6.9
Mandatory
Corporate Actions.
Unless otherwise directed by Instruction,
the Custodian shall: (a) comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions or similar rights of securities ownership
affecting securities held on the Fund’s account and promptly notify the Fund of
such action, and (b) collect all stock dividends, rights and other items of like
nature with respect to such securities.
6.10
Income
Collection.
Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for: (a)
the collection of amounts due and payable with respect to Investments that are
in default, or (b) the collection of cash or share entitlements with respect to
Investments that are not registered in the name of the Custodian or
its Subcustodians. The Custodian is hereby authorized to endorse and
deliver any instrument required to be so endorsed and delivered to effect
collection of any amount due and payable to the Fund with respect to
Investments.
6.11
Ownership
Certificates and Disclosure of the Fund's Interest
.
The Custodian is
hereby authorized to execute on behalf of the Fund ownership certificates,
affidavits or other disclosure required under Applicable Law or established
market practice in connection with the receipt of income, capital gains or other
payments by the Fund with respect to Investments, or in connection with the
sale, purchase or ownership of Investments.
With
respect to securities issued in the United States of America, the Custodian
o
may
x
may not release the
identity of the Fund to an issuer which requests such information pursuant to
the Shareholder Communications Act of 1985 for the specific purpose of direct
communications between such issuer and the Fund. IF NO BOX IS
CHECKED, THE CUSTODIAN
SHALL RELEASE
SUCH
INFORMATION UNTIL IT RECEIVES CONTRARY INSTRUCTIONS FROM THE
FUND. With respect to securities issued outside of the United States
of America, information shall be released in accordance with law or custom of
the particular country in which such security is located.
6.12
Proxy Materials.
The Custodian shall deliver, or cause to be delivered, to the Fund proxy
forms, notices of meeting, and any other notices or announcements materially
affecting or relating to Investments received by the Custodian or any
nominee.
6.13
Taxes.
The
Custodian shall, where applicable, assist the Fund in the reclamation of taxes
withheld on dividends and interest payments received by the Fund. In
the performance of its duties with respect to tax withholding and reclamation,
the Custodian shall be entitled to rely on the advice of counsel and upon
information and advice regarding the Fund’s tax status that is received from or
on behalf of the Fund without duty of separate inquiry.
6.14
Other
Dealings.
The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all
nondiscretionary details in connection with the sale or purchase or other
administration of Investments, except as otherwise directed by an Instruction,
and may make payments to itself or others for minor expenses of administering
Investments under this Agreement; provided that the Fund shall have the right to
request an accounting with respect to such expenses.
In fulfilling the duties set forth in
Sections 6.6 through 6.10 above, the Custodian shall provide to the Fund all
material information pertaining to a corporate action which the Custodian
actually receives; provided that the Custodian shall not be responsible for the
completeness or accuracy of such information. Information relative to any
pending corporate action made available to the Fund via any of the services
described in the Electronic and Online Services Schedule shall constitute the
delivery of such information by the Custodian hereunder. Any advance
credit of cash or shares expected to be received as a result of any corporate
action shall be subject to actual collection and may, when the Custodian deems
collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times
in its discretion appoint (and may at any time remove) agents (other than
Subcustodians) to carry out some or all of the administrative provisions of this
Agreement (
Agents
),
provided, however, that the appointment of such agent shall not relieve the
Custodian of its administrative obligations under this
Agreement.
7.
Cash
Accounts, Deposits and Money Movements.
Subject to the terms
and conditions set forth in this Section 7, the Fund and the General Partner
each hereby authorizes the Custodian to open and maintain, with itself or with
Subcustodians, cash accounts in United States Dollars, in such other currencies
as are the currencies of the countries in which the Fund maintains Investments
or in such other currencies as the Fund shall from time to time request by
Instruction.
7.1
Types of Cash
Accounts
.
Cash accounts
opened on the books of the Custodian (
Principal Accounts
) shall be
opened in the name of the Fund. Such accounts collectively shall be a
deposit obligation of the Custodian and shall be subject to the terms of this
Section 7 and the general liability provisions contained in Section
9. Cash accounts opened on the books of a Subcustodian may be opened
in the name of the Fund or the Custodian or in the name of the Custodian for its
customers generally (
Agency
Accounts
). Such deposits shall be obligations of the Subcustodian and
shall be treated as an Investment of the Fund. Accordingly, the
Custodian shall be responsible for exercising reasonable care in the
administration of such accounts but shall not be liable for their repayment in
the event such Subcustodian, by reason of its bankruptcy, insolvency or
otherwise, fails to make repayment.
7.2
Payments and
Credits with Respect to the Cash Accounts
.
The Custodian
shall make payments from or deposits to any of said accounts in the course of
carrying out its administrative duties, including but not limited to income
collection with respect to the Fund's Investments, and otherwise in accordance
with Instructions. The Custodian and its Subcustodians shall be
required to credit amounts to the cash accounts only when moneys are actually
received in cleared funds in accordance with banking practice in the country and
currency of deposit. Any credit made to any Principal or Agency
Account before actual receipt of cleared funds shall be provisional and may be
reversed by the Custodian in the event such payment is not actually collected.
Unless otherwise specifically agreed in writing by the Custodian or any
Subcustodian, all deposits shall be payable only at the branch of the Custodian
or Subcustodian where the deposit is made or carried.
7.3
Currency and
Related Risks.
The Fund and the General Partner each bears
risks of holding or transacting in any currency, including any mark to market
exposure associated with a foreign exchange transaction undertaken with the
Custodian. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of
the foregoing, neither the Custodian nor any Subcustodian shall be required to
repay any deposit made at a foreign branch of either the Custodian or
Subcustodian if such branch cannot repay the deposit due to a cause for which
the Custodian would not be responsible in accordance with the terms of Section 9
of this Agreement unless the Custodian or such Subcustodian expressly agrees in
writing to repay the deposit under such circumstances. All currency
transactions in any account opened pursuant to this Agreement are subject to
exchange control regulations of the United States and of the country where such
currency is the lawful currency or where the account is maintained. Any taxes,
costs, charges or fees imposed on the convertibility of a currency held by the
Fund shall be for the account of the Fund.
7.4
Foreign Exchange
Transactions
.
The
Custodian shall, subject to the terms of this Section, settle foreign exchange
transactions (including contracts, futures, options and options on futures) on
behalf and for the account of the Fund with such currency brokers or banking
institutions, including Subcustodians, as the Fund may direct pursuant to
Instructions. The Custodian may act as principal in any
foreign exchange transaction with the Fund in accordance with Section 7.4.2 of
this Agreement. The obligations of the Custodian in respect of
all foreign exchange transactions (whether or not the Custodian shall act as
principal in such transaction) shall be contingent on the free, unencumbered
transferability of the currency transacted on the actual settlement date of the
transaction.
7.4.1
Third Party
Foreign Exchange Transactions
.
The Custodian
shall process foreign exchange transactions (including without limitation
contracts, futures, options, and options on futures), where any third party acts
as principal counterparty to the Fund on the same basis it performs duties as
agent for the Fund with respect to any other of the Fund's Investments.
Accordingly, the Custodian shall only be responsible for delivering or receiving
currency on behalf of the Fund in respect of such contracts pursuant to
Instructions. The Custodian shall not be responsible for the failure of any
counterparty (including any Subcustodian) in such agency transaction to perform
its obligations thereunder. The Custodian (a) shall transmit cash and
Instructions to and from the currency broker or banking institution with which a
foreign exchange contract or option has been executed pursuant hereto, (b) may
make free outgoing payments of cash in the form of Dollars or foreign currency
without receiving confirmation of a foreign exchange contract or option or
confirmation that the countervalue currency completing the foreign exchange
contract has been delivered or received or that the option has been delivered or
received, and (c) shall hold all confirmations, certificates and other documents
and agreements received by the Custodian and evidencing or relating to such
foreign exchange transactions in safekeeping. The Fund accepts full
responsibility for its use of third-party foreign exchange dealers and for
execution of said foreign exchange contracts and options and understands that
the Fund shall be responsible for any and all costs and interest charges which
may be incurred by the Fund or the Custodian as a result of the failure or delay
of third parties to deliver foreign exchange.
7.4.2
Foreign Exchange
with the Custodian as Principal
.
The Custodian may as
principal undertake foreign exchange transactions with the Fund as the Custodian
and the Fund may agree from time to time. In such event, the foreign
exchange transaction will be performed in accordance with the particular
agreement of the parties, or in the event a principal foreign exchange
transaction is initiated by Instruction in the absence of specific agreement,
such transaction will be performed in accordance with the usual commercial terms
of the Custodian. In the event that the Fund defaults on the settlement of
any such foreign exchange transaction with the Custodian, the Fund shall be
liable for contracted currency of the transaction together with any mark to
market exposure associated with the replacement purchase of the contracted
currency undertaken with the Custodian.
7.5
Delays
.
If no event
of Force Majeure shall have occurred and be continuing and in the
event that a delay shall have been caused by the negligence or willful
misconduct of the Custodian in carrying out an Instruction to credit or transfer
cash, the Custodian shall be liable to the Fund: (a) with respect to
Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. The
Custodian shall not be liable for delays in carrying out such Instructions to
transfer cash which are not due to the Custodian's own negligence or willful
misconduct.
7.6
Advances.
If, for any reason in connection with this Agreement the Custodian or any
Subcustodian makes an Advance to facilitate settlement or otherwise for the
benefit of the Fund (whether or not any Principal or Agency Account shall be
overdrawn either during, or at the end of, any Business Day (defined as any day
other than a day on which the American Stock Exchange, the New York Mercantile
Exchange or the New York Stock Exchange is closed for regular trading)), the
Fund and the General Partner each hereby does:
7.6.1 acknowledge
that the Fund shall have no right, title or interest in or to any Investments
purchased with such Advance or proceeds of such Investments, and that any credit
to an account of Fund shall be provisional, until: (a) the debit of the
Principal or Agency Account by Custodian for an amount equal to Advance Costs;
and/or (b) if such debit produces an overdraft in such account, reimbursement to
the Custodian or Subcustodian for the amount of such
overdraft;
7.6.2 acknowledge
that the Custodian has an automatically perfected statutory security interest in
Investments purchased with any such Advance pursuant to Section 9-206 of
the Uniform Commercial Code as in effect in the State of New York from time to
time;
7.6.3 in
addition, in order to secure the obligations of the Fund to pay or perform any
and all obligations of the Fund pursuant to this Agreement, including without
limitation to repay any Advance made pursuant to this Agreement, grant to the
Custodian a security interest in all Investments and proceeds thereof (as
defined in the Uniform Commercial Code as currently in effect in the State of
New York); and agree to take, and agree that the Custodian may take, in respect
of the security interest referenced above, any further actions that the
Custodian may reasonably require.
7.7
Custodian’s
Rights
Neither the Custodian nor any Subcustodian shall be
obligated to make any Advance or to allow an Advance to occur to the Fund, and
in the event that the Custodian or any Subcustodian does make or allow an
Advance, any such Advance and any transaction giving rise to such Advance shall
be for the account and risk of the Fund and shall not be deemed to be a
transaction undertaken by the Custodian for its own account and
risk. If such Advance shall have been made or allowed by a
Subcustodian or any other person, the Custodian may assign all or part of its
security interest referenced above and any other rights granted to the Custodian
hereunder to such Subcustodian or other person. If the Fund shall
fail to repay the Advance Costs when due, the Custodian or its assignee, as the
case may be, shall be entitled to a portion of the available cash balance in any
Agency or Principal Account equal to such Advance Costs, and the Fund authorizes
the Custodian, on behalf of the Fund, to pay an amount equal to such Advance
Costs irrevocably to such Subcustodian or other person, and to dispose of any
property in such Account to the extent necessary to make such
payment. Any Investments and funds credited to accounts subject to
this Agreement created pursuant hereto shall be treated as financial assets
credited to securities accounts under Articles 8 and 9 of the Uniform Commercial
Code as in effect in the State of New York from time to
time. Accordingly, the Custodian and any Subcustodian shall have the
rights and benefits of a secured creditor that is a securities intermediary
under such Articles 8 and 9.
7.8
Integrated
Account
.
For purposes
hereof, deposits maintained in all Principal Accounts (whether or not
denominated in Dollars) shall collectively constitute a single and indivisible
current account with respect to the Fund's obligations to the Custodian or its
assignee, and balances in the Principal Accounts shall be available for
satisfaction of the Fund's obligations under this Section 7. The
Custodian shall further have a right of offset against the balances in any
Agency Account maintained hereunder to the extent that the aggregate of all
Principal Accounts is overdrawn.
8.
Subcustodians and
Securities Depositories.
Subject to the provisions hereinafter
set forth in this Section 8, the Fund and the General Partner each hereby
authorizes the Custodian to utilize Securities Depositories to act on behalf of
the Fund and to appoint from time to time and to utilize Subcustodians. With
respect to securities and funds held by a Subcustodian, either directly or
indirectly (including by a Securities Depository or Clearing Corporation),
notwithstanding any provisions of this Agreement to the contrary, payment for
securities purchased and delivery of securities sold may be made prior to
receipt of securities or payment, respectively, and securities or payment may be
received in a form, in accordance with (a) governmental regulations, (b) rules
of Securities Depositories and clearing agencies, (c) generally accepted trade
practice in the applicable local market, (d) the terms and characteristics of
the particular Investment, or (e) the terms of Instructions.
8.1
Domestic
Subcustodians and Securities Depositories
.
The Custodian may
deposit and/or maintain, either directly or through one or more agents appointed
by the Custodian, Investments of the Fund in any Securities Depository in the
United States of America, including The Depository Trust Company, provided such
Depository meets applicable requirements of the Federal Reserve Bank or of the
Securities and Exchange Commission. The Custodian may, at any time and from time
to time, appoint any bank meeting the requirements of a custodian and the rules
and regulations thereunder, to act on behalf of the Fund as a Subcustodian for
purposes of holding Investments of the Fund in the United
States.
8.2
Responsibility
for Subcustodians
.
The Custodian
shall be liable to the Fund for any loss or damage to the Fund caused by or
resulting from the acts or omissions of any domestic Subcustodian to the extent
that such acts or omissions would be deemed to be negligence, gross negligence
or willful misconduct in accordance with the terms of the relevant subcustodian
agreement under the laws, circumstances and practices prevailing in the place
where the act or omission occurred.
9.
Responsibility of
the Custodian.
In performing its duties and obligations
hereunder, the Custodian shall use reasonable care under the facts and
circumstances prevailing in the market where performance is
effected. Subject to the specific provisions of this Section, the
Custodian shall be liable for any direct damage incurred by the Fund in
consequence of the Custodian's negligence, bad faith or willful
misconduct. In no event shall the Custodian be liable hereunder for
any special, indirect, punitive or consequential damages arising out of,
pursuant to or in connection with this Agreement even if the Custodian has been
advised of the possibility of such damages. It is agreed that the
Custodian shall have no duty to assess the risks inherent in the Fund's
Investments or to provide investment advice with respect to such Investments and
that the Fund as principal shall bear any risks attendant to particular
Investments such as failure of counterparty or issuer.
9.1
Limitations of
Performance
.
The Custodian
shall not be responsible under this Agreement for any failure to perform its
duties, and shall not be liable hereunder for any loss or damage in association
with such failure to perform, for or in consequence of the following
causes:
9.1.1
Force
Majeure.
Force
Majeure
shall mean any circumstance or event which is beyond the
reasonable control of the Custodian, a Subcustodian or any agent of the
Custodian or a Subcustodian and which adversely affects the performance by the
Custodian of its obligations hereunder, by the Subcustodian of its obligations
under its Subcustody Agreement or by any other agent of the Custodian or the
Subcustodian, including any event caused by, arising out of or involving (a) an
act of God, (b) accident, fire, water damage or explosion, (c) any computer,
system or other equipment failure or malfunction caused by any computer virus or
the malfunction or failure of any communications medium, (d) any interruption of
the power supply or other utility service, (e) any strike or other work
stoppage, whether partial or total, (f) any delay or disruption resulting from
or reflecting the occurrence of any Sovereign Risk, (g) any disruption of, or
suspension of trading in, the securities, commodities or foreign exchange
markets, whether or not resulting from or reflecting the occurrence of any
Sovereign Risk, (h) any encumbrance on the transferability of a currency or a
currency position on the actual settlement date of a foreign exchange
transaction, whether or not resulting from or reflecting the occurrence of any
Sovereign Risk, or (i) any other cause similarly beyond the reasonable control
of the Custodian.
9.1.2
Sovereign
Risk.
Sovereign
Risk
shall mean, in respect of any jurisdiction, including the United
States of America, where Investments are acquired or held hereunder or under a
Subcustody Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or exchange
control restrictions by any Governmental Authority, (c) the confiscation,
expropriation or nationalization of any Investments by any Governmental
Authority, whether de facto or de jure, (iv) any devaluation or revaluation of
the currency, (d) the imposition of taxes, levies or other charges affecting
Investments, (vi) any change in the Applicable Law, or (e) any other economic or
political risk incurred or experienced.
9.2
Limitations on
Liability.
The Custodian shall not be liable for any loss,
claim, damage or other liability arising from the following causes:
9.2.1
Failure of Third
Parties.
The failure of any third party
including: (a) the General Partner; (b) any futures commission
merchant(s); (c) any issuer of Investments or book-entry or other agent of and
issuer; (d) any counterparty with respect to any Investment, including any
issuer of exchange-traded or other futures, option, derivative or commodities
contract; (e) failure of an Investment Advisor or other agent of the Fund; or
(f) failure of other third parties similarly beyond the control or choice of the
Custodian.
9.2.2
Information
Sources.
The Custodian may rely upon information received from
issuers of Investments or agents of such issuers, information received from
Subcustodians and from other commercially reasonable sources such as commercial
data bases and the like, but shall not be responsible for specific inaccuracies
in such information, provided that the Custodian has relied upon such
information in good faith, or for the failure of any commercially
reasonable information provider. To the extent that the Custodian
receives any information from a futures commission merchant(s) with respect to
other the Fund’s investment in Oil Interests and Oil Forward Contracts, the
Custodian may conclusively rely on all such information.
9.2.3
Reliance on
Instruction
.
Action by the
Custodian or the Subcustodian in accordance with an Instruction, even when such
action conflicts with, or is contrary to any provision of, the Fund's or the
General Partner’s limited partnership agreement, certificate of incorporation or
by-laws, Applicable Law, or actions by the directors or unitholders of the Fund
or the General Partner.
9.2.4
Restricted
Securities.
The limitations inherent in the rights,
transferability or similar investment characteristics of a given Investment of
the Fund.
10.
Indemnification.
10.1 The
Fund and the General Partner each hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees and the partners, employees,
officers and directors, and agrees to hold each of them harmless from and
against all claims and liabilities, including counsel fees and taxes, reasonably
incurred or assessed against any of them in connection with the performance of
this Agreement and any Instruction.
10.2 The
Custodian hereby indemnifies the Fund and the General Partner, and their
respective agents, nominees and the partners, employees, officers and directors,
and agrees to hold each of them harmless from and against all claims and
liabilities, including counsel fees and taxes, reasonably incurred or assessed
against any of them as a direct result of the Custodian’s negligence, willful
misconduct or bad faith in its performance of this Agreement and any
Instruction.
11.
Reports and
Records.
The Custodian shall:
11.1 create
and maintain records relating to the performance of its obligations under this
Agreement;
11.2
make available to the Fund and/or the General
Partner, its auditors, agents and employees, upon reasonable request and during
normal business hours of the Custodian, all records maintained by the Custodian
pursuant to Section 11.1 above, subject, however, to all reasonable security
requirements of the Custodian then applicable to the records of its custody
customers generally; and
11.3 make
available to the Fund all Electronic Reports; it being understood that the
Custodian shall not be liable hereunder for the inaccuracy or incompleteness
thereof or for errors in any information included therein.
The Fund and the General Partner shall
examine all records, howsoever produced or transmitted, promptly upon receipt
thereof and notify the Custodian promptly of any discrepancy or error
therein. Unless the Fund or the General Partner delivers written
notice of any such discrepancy or error within a reasonable time after its
receipt thereof, such records shall be deemed to be true and
accurate. It is understood that the Custodian now obtains and
will in the future obtain information on the value of assets from outside
sources which may be utilized in certain reports made available to the Fund and
the General Partner. The Custodian deems such sources to be reliable but it is
acknowledged and agreed that the Custodian does not verify nor represent nor
warrant as to the accuracy or completeness of such information and accordingly
shall be without liability in selecting and using such sources and furnishing
such information.
12.
Miscellaneous.
12.1
Proxies,
etc.
The Fund and/or the General Partner will promptly execute
and deliver, upon request, such proxies, powers of attorney or other instruments
as may be necessary or desirable for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2
Entire
Agreement.
This Agreement (including any schedules and exhibits
attached hereto and thereto) contains all of the agreements among the parties
hereto and thereto with respect to the transactions contemplated hereby and
thereby and supersedes all prior agreements or understandings, whether written
or oral, among the parties with respect thereto.
12.3
Amendment and
Modification
. This Agreement may be amended, modified or supplemented
only by a written instrument executed by all parties hereto.
12.4
Successors and
Assigns; Assignment.
All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. This Agreement shall not be assigned by any
party without the prior written consent of the other parties and any assignment
without such consent shall be null and void.
12.5
Waiver of
Compliance.
Except as otherwise provided in this Agreement, any failure
of any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but any
such waiver, or the failure to insist upon strict compliance with any
obligation, covenant, agreement or condition herein, shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure or
breach.
12.6
Severability
.
The parties hereto desire that the provisions of this Agreement be enforced to
the fullest extent permissible under the Law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event that any
provision of this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12.7
Notices
.
All notices, waivers, or other communications pursuant to this Agreement shall
be in writing and shall be deemed to be sufficient if delivered personally, by
facsimile (and, if sent by facsimile, followed by delivery by
nationally-recognized express courier), sent by nationally-recognized express
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(1) if
to General Partner, to:
Victoria Bay Asset Management,
LLC
c/o Nicholas D. Gerber
P.O. Box 6919
Moraga,
CA 94570
(2) if
to the Custodian, to:
Brown Brothers Harriman &
Co.
40 Water Street
Boston, Massachusetts
02109
Attn: Manager, Securities
Department
Telephone: (617)
772-1818
Facsimile: (617)
772-2263
or such
other address as the Fund or the Custodian may have designated in writing to the
other.
All such
notices and other communications shall be deemed to have been delivered and
received (i) in the case of personal delivery or delivery by a
nationally-recognized express courier, on the date of such delivery if delivered
during business hours on a Business Day or, if not delivered during business
hours on a Business Day, the first Business Day thereafter, and (ii) in the case
of mailing or delivery by facsimile, upon receipt by the intended
party.
12.8
Governing Law;
Jurisdiction.
12.8.1 All
questions concerning the construction, interpretation and validity of this
Agreement shall be governed by and construed and enforced in accordance with the
domestic laws of the State of New York, without giving effect to any choice or
conflict of law provision or rule (whether in the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York. In furtherance of the foregoing, the internal
law of the State of New York will control the interpretation and construction of
this Agreement, even if under such jurisdiction's choice of law or conflict of
law analysis, the substantive law of some other jurisdiction would ordinarily or
necessarily apply.
12.8.2 Each party
irrevocably consents and agrees, for the benefit of the other parties, that any
legal action, suit or proceeding against it with respect to its obligations,
liabilities or any other matter arising out of or in connection with this
Agreement or any related agreement may be brought in the courts of the State of
New York and hereby irrevocably consents and submits to the non-exclusive
jurisdiction of each such court in personam, generally and unconditionally with
respect to any action, suit or proceeding for itself and in respect of its
properties, assets and revenues. Each party irrevocably waives any immunity to
jurisdiction to which it may otherwise be entitled or become entitled (including
sovereign immunity, immunity to pre-judgment attachment and execution) in any
legal suit, action or proceeding against it arising out of or based on this
Agreement or any related agreement or the transactions contemplated hereby or
thereby which is instituted in any court of the State of New York.
The
provisions of this Section 12.8 shall survive any termination of this Agreement,
in whole or in part.
12.9
No
Partnership
. The Custodian acts as an independent contractor
with respect to the services provided under this Agreement. The terms
and conditions of this Agreement do not create a partnership relationship
between the Custodian and the General Partner or between the Custodian and the
Fund. Each of the General Partner and the Fund acknowledges that the
Custodian may enter into similar agreements with others without the consent of
the General Partner or the Fund.
12.10
Interpretation
.
The article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall not
in any way affect the meaning or interpretation of this Agreement.
12.11
No Strict
Construction
. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party.
12.12
Counterparts;
Facsimile Signatures
. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Facsimile
counterpart signatures to this Agreement shall be acceptable and
binding.
12.13
Other
Usages
. The following usages shall apply in interpreting this Agreement:
(i) references to a governmental or quasi-governmental agency, authority or
instrumentality shall also refer to a regulatory body that succeeds to the
functions of such agency, authority or instrumentality; and (ii) “including”
means “including, but not limited to.”
12.14
Confidentiality
. The
parties hereto agree that each shall treat confidentially the terms and
conditions of this Agreement and all information provided by each party to the
other regarding its business and operations. All confidential
information provided by a party hereto shall be used by the other party hereto
solely for the purpose of rendering or obtaining services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not apply to any information that is
publicly available when provided or thereafter becomes publicly available other
than through a breach of this Agreement, or that is required to be disclosed by
or to any bank examiner of the Custodian or any Subcustodian, any Regulatory
Authority, any auditor of the parties hereto, or by judicial or administrative
process or otherwise by Applicable Law.
12.15
Counsel
. In
fulfilling its duties hereunder, the Custodian shall be entitled to receive and
act upon the advice of (i) counsel regularly retained by the Custodian in
respect of such matters, (ii) counsel for the Fund or (iii) such counsel as the
Fund, the General Partner and the Custodian may agree upon, with respect to all
matters. The Custodian shall not be considered to have engaged in any
misconduct or to have acted negligently when soliciting and following such
advice.
12.16
Conflict
. Nothing
contained in this Agreement shall prevent the Custodian and its associates from
(i) dealing as a principal or an intermediary in the sale, purchase or loan of
the Fund’s Investments to, or from the Custodian or its associates; (ii) acting
as a custodian, a subcustodian, a trustee, an agent, securities dealer, an
investment manager or in any other capacity for any other client; or (iii)
buying, holding, lending, and dealing in any way in any assets for the benefit
of its own account, for the account of any other client, or for the account of
the Fund.
12.17
Privacy
. In
the course of carrying out its obligations under this Agreement, each party
shall maintain physical, procedural and/or electronic safeguards reasonably
designed to protect information regarding the Fund and its investors that such
party has obtained or to which such party has gained access.
13.
Definitions.
The
following defined terms will have the respective meanings set forth
below.
13.1
Advance(s)
shall mean any extension of credit by or through the Custodian or by or through
any Subcustodian and shall include, without limitation, amounts due to the
Custodian as the principal counterparty to any foreign exchange transaction with
the Fund as described in Section 7.4.2 hereof, or paid to third parties for
account of the Fund or in discharge of any expense, tax or other item payable by
the Fund.
13.2
Advance Costs
shall mean any Advance, interest on the Advance and any related expenses,
including without limitation any mark to market loss of the Custodian or
Subcustodian on any Investment to which Section 7.6.1 applies.
13.3
Agency
Account(s)
shall mean any deposit account opened on the books of a
Subcustodian or other banking institution in accordance with Section
7.1.
13.4
Agent(s)
shall have the meaning set forth in the last sentence of Section 6.
13.5
Applicable
Law
shall mean with respect to each jurisdiction, all (a) laws, statutes,
treaties, regulations, guidelines (or their equivalents); (b) orders,
interpretations, licenses and permits; and (c) judgments, decrees, injunctions,
writs, orders and similar actions by a court of competent jurisdiction;
compliance with which is required or customarily observed in such
jurisdiction.
13.6
Authorized
Person(s)
shall mean any person or entity authorized to give Instructions
on behalf of the Fund in accordance with Section 4.1.
13.7
Book-entry
Agent
shall mean an entity acting as agent for the issuer of Investments
for purposes of recording ownership or similar entitlement to Investments,
including without limitation a transfer agent or registrar.
13.8
Clearing
Corporation
shall mean any entity or system established for purposes of
providing securities settlement and movement and associated functions
for a given market.
13.9
Electronic and
Online Services Schedule
shall mean any separate agreement entered into
among the Custodian, the General Partner and the Fund or its authorized
representative with respect to certain matters concerning certain electronic and
online services as described therein and as may be made available from time to
time by the Custodian to the Fund.
13.10
Electronic
Reports
shall mean any reports prepared by the Custodian and remitted to
the Fund, the General Partner or its authorized representative via the internet
or electronic mail.
13.11
Funds Transfer
Services Schedule
shall mean any separate agreement entered into among
the Custodian, the General Partner and the Fund or its authorized representative
with respect to certain matters concerning the processing of payment orders from
Principal Accounts of the Fund.
13.12
Instruction(s)
shall have the meaning assigned in Section 4.
13.13
Investment
Advisor
shall mean any person or entity who is an Authorized Person to
give Instructions with respect to the investment and reinvestment of the Fund's
Investments.
13.14
Investment(s)
shall mean any investment asset of the Fund issued in the United States of
America, including without limitation: securities, bonds, notes, and debentures
as well as receivables, derivatives, contractual rights or entitlements and
other intangible assets, but excluding Oil Forwards Contracts and Oil Interests
(each as defined in the Fund’s prospectus).
13.15
Margin Account
shall have the meaning set forth in Section 6.4 hereof.
13.16
Principal
Account(s)
shall mean deposit accounts of the Fund carried on
the books of BBH&Co. as principal in accordance with Section 7.
13.17
Safekeeping
Account
shall mean an account established on the books of the Custodian
or any Subcustodian for purposes of segregating the interests of the Fund (or
clients of the Custodian or Subcustodian) from the assets of the Custodian or
any Subcustodian.
13.18
Securities
Depository
shall mean a central or book entry system or agency
established under Applicable Law for purposes of recording the ownership and/or
entitlement to investment securities for a given market.
13.19
Subcustodian(s)
shall mean each bank appointed by the Custodian pursuant to Section 8 hereof,
but shall not include Securities Depositories.
13.20
Tri-Party
Agreement
shall have the meaning set forth in Section 6.4
hereof.
14.
Compensation.
The
Fund and the General Partner agree to pay to the Custodian (a) a fee in an
amount set forth in the fee letter among the Fund, the General Partner and the
Custodian in effect on the date hereof or as amended from time to time, and (b)
all reasonable out-of-pocket expenses incurred by the Custodian, including the
fees and expenses of all Subcustodians, and payable from time to
time. Amounts payable by the Fund under and pursuant to this Section
14 shall be payable by wire transfer to the Custodian at BBH&Co. in New
York, New York.
15.
Termination.
This
Agreement may be terminated by either party in accordance with the provisions of
this Section. The provisions of this Agreement and any other rights
or obligations incurred or accrued by any party hereto prior to termination of
this Agreement shall survive any termination of this Agreement.
15.1
Term, Notice and
Effect
. This Agreement shall have an initial term of two (2)
years from the date hereof. Thereafter, this Agreement shall
automatically renew for successive one (1) year periods unless either party
terminates this Agreement by written notice effective no sooner than
seventy-five (75) days following the date that notice to such effect shall be
delivered to the other party at its address set forth in Section 12.5
hereof. Notwithstanding the foregoing provisions, either party may
terminate this Agreement at any time upon thirty (30) days written notice to the
other party in the event that the either party is adjudged bankrupt or
insolvent, or there shall be commenced against such party a case under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect.
15.2
Successor
Custodian
.
In the event of
the appointment of a successor custodian, it is agreed that the Investments of
the fund held by the Custodian or any Subcustodian shall be delivered to the
successor custodian in accordance with reasonable Instructions. The
Custodian agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to facilitate the
succession of the new custodian. If no successor custodian shall be
appointed, the Custodian shall in like manner transfer the Fund's Investments in
accordance with Instructions.
15.3
Delayed
Succession.
If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after such
termination date and upon ten (10) consecutive calendar days written notice to
the Fund and the General Partner either (a) deliver the Investments of the Fund
held hereunder to the Fund at the address designated for receipt of notices
hereunder; or (b) deliver any investments held hereunder to a bank or trust
company having a capitalization of $50,000,000 equivalent and operating under
the Applicable law of the jurisdiction where such Investments are located, such
delivery to be at the risk of the Fund. In the event that Investments
or moneys of the Fund remain in the custody of the Custodian or its
Subcustodians after the date of termination owing to the failure of the Fund to
issue Instructions with respect to their disposition or owing to the fact that
such disposition could not be accomplished in accordance with such Instructions
despite diligent efforts of the Custodian, the Custodian shall be entitled to
compensation for its services with respect to such Investments and moneys during
such period as the Custodian or its Subcustodians retain possession of such
items and the provisions of this Agreement shall remain in full force
and effect until disposition in accordance with this Section is
accomplished.
The
undersigned acknowledges that (I/we) have received a copy of this
document.
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly
executed as of the date first above written.
BROWN
BROTHERS HARRIMAN & CO.
|
|
|
|
By:
|
/s/ James R. Kent
|
|
|
Name:
James R. Kent
|
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Title:
Managing Director
|
|
Date:
March 29, 2006
|
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UNITED
STATES OIL FUND, LP
|
|
By: Victoria
Bay Asset Management, LLC, as General Partner
|
|
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By:
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/s/ Nicholas Gerber
|
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Name:
Nicholas Gerber
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|
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Title:
Director
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Date:
April 3, 2006
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VICTORIA
BAY ASSET MANAGEMENT, LLC
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By:
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/s/ Nicholas Gerber
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Name:
Nicholas Gerber
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Title:
Director
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Date:
April 3, 2006
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FUNDS
TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1.
Execution of Payment
Orders
. Brown Brothers Harriman & Co. (the Custodian) is
hereby instructed by United States Oil Fund, LP (the Fund) and Victoria Bay
Asset Management, LLC (the General Partner) to execute each payment order,
whether denominated in United States dollars or other applicable currencies,
received by the Custodian in the Fund’s name as sender and authorized and
confirmed by an Authorized Person as defined in a Custodian Agreement dated as
of March 13, 2006 by and among the Custodian, the General Partner and the Fund,
as amended or restated from time thereafter (the Agreement), provided that the
Fund has sufficient available funds on deposit in a Principal Account as defined
in the Agreement and provided that the order (i) is received by the Custodian in
the manner specified in this Funds Transfer Services Schedule or any amendment
hereafter; (ii) complies with any written instructions and restrictions of the
Fund as set forth in this Funds Transfer Services Schedule or any amendment
hereafter; (iii) is authorized by the Fund or is verified by the Custodian in
compliance with a security procedure set forth in Paragraph 2 below for
verifying the authenticity of a funds transfer communication sent to the
Custodian in the name of the Fund or for the detection of errors set forth in
any such communication; and (iv) contains sufficient data to enable the
Custodian to process such transfer.
2.
Security
Procedure
. The Fund and the General Partner hereby elects to
use the procedure selected below as its security procedure (the Security
Procedure). The Security Procedure will be used by the Custodian to verify the
authenticity of a payment order or a communication amending or canceling a
payment order. The Custodian will act on instructions received provided the
instruction is authenticated by the Security Procedure. The Fund and the General
Partner agree and acknowledge in connection with (i) the size, type and
frequency of payment orders normally issued or expected to be issued by the Fund
to the Custodian, (ii) all of the security procedures offered to the Fund and
the General Partner by the Custodian, and (iii) the usual security procedures
used by customers and receiving banks similarly situated, that authentication
through the Security Procedure shall be deemed commercially reasonable for the
authentication of all payment orders submitted to the
Custodian. The Fund and the General Partner hereby elects
(please choose one)
the
following Security Procedure as described below:
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¨
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BIDS and BIDS
Worldview Payment Products
. BIDS and BIDS Worldview
Payment Products, are on-line payment order authorization facilities with
built-in authentication procedures. The Custodian, the General Partner and
the Fund shall each be responsible for maintaining the confidentiality of
passwords or other codes to be used by them in connection with BIDS. The
Custodian will act on instructions received through BIDS without duty of
further confirmation unless the Fund and/or the General Partner notifies
the Custodian that its password is not
secure.
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x
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SWIFT
. The
Custodian, the General Partner and the Fund shall comply with SWIFT’s
authentication procedures. The Custodian will act on instructions received
via SWIFT provided the instruction is authenticated by the SWIFT
system.
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¨
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Tested
Telex
. The Custodian will accept payment orders sent by
tested telex, provided the test key matches the algorithmic key the
Custodian, the General Partner and Fund have agreed to
use.
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¨
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C
omputer
Transmission
. The Custodian is able to accept
transmissions sent from the Fund’s and/or the General Partner’s computer
facilities to the Custodian’s computer facilities provided such
transmissions are encrypted and digitally certified or are otherwise
authenticated in a reasonable manner based on available
technology. Such procedures shall be established in an
operating protocol among the Custodian, the General Partner and the
Fund.
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¨
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Telefax
Instructions
. A payment order transmitted to the Custodian by
telefax transmission shall transmitted by the Fund and/or the General
Partner to a telephone number specified from time to time by the Custodian
for such purposes. If it detects no discrepancies, the
Custodian will then either:
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1.
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If
the telefax requests a repetitive payment order, the Custodian may call
the Fund and/or the General Partner at its last known telephone number,
request to speak to the Fund, the General Partner or Authorized Person,
and confirm the authorization and details of the payment order (a
Callback); or
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2.
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If
the telefax requests a non-repetitive order, the Custodian will perform a
Callback.
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All faxes
must be accompanied by a fax cover sheet which indicates the sender’s name, Fund
name, telephone number, fax number, number of pages, and number of transactions
or instructions attached.
¨
Telephonic
. A
telephonic payment order shall be called into the Custodian at the telephone
number designated from time to time by the Custodian for that purpose. The
caller shall identify herself/himself as an Authorized Person. The
Custodian shall obtain the payment order data from the caller. The
Custodian shall then:
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1.
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If
a telephonic repetitive payment order, the Custodian may perform a
Callback; or
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2.
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If
a telephonic non-repetitive payment order, the Custodian will perform a
Callback.
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In the
event the Fund and the General Partner chooses a procedure which is not a
Security Procedure as described above, the Fund and the General Partner agree to
be bound by any payment order (whether or not authorized) issued in its name and
accepted by the Custodian in compliance with the procedure selected by the Fund
and the General Partner.
3.
Rejection of Payment
Orders
. The Custodian shall give the Fund and the General
Partner timely notice of the Custodian’s rejection of a payment order. Such
notice may be given in writing or orally by telephone, each of which is hereby
deemed commercially reasonable. In the event the Custodian fails to
execute a properly executable payment order and fails to give the Fund and/or
the General Partner notice of the Custodian’s non-execution, the Custodian shall
be liable only for the Fund’s actual damages and only to the extent that such
damages are recoverable under UCC 4A (as defined in Paragraph 7
below). Notwithstanding anything in this Funds Transfer Services
Schedule and the Agreement to the contrary, the Custodian shall in no event be
liable for any consequential or special damages under this Funds Transfer
Services Schedule, whether or not such damages relate to services covered by UCC
4A, even if the Custodian has been advised of the possibility of such damages.
Whenever compensation in the form of interest is payable by the Custodian to the
Fund pursuant to this Funds Transfer Services Schedule, such compensation will
be payable in accordance with UCC 4A.
4.
Cancellation of Payment
Orders
. The Fund or the General Partner may cancel a payment
order but the Custodian shall have no liability for the Custodian’s failure to
act on a cancellation instruction unless the Custodian has received such
cancellation instruction at a time and in a manner affording the Custodian
reasonable opportunity to act prior to the Custodian’s execution of the
order. Any cancellation shall be sent and confirmed in the manner set
forth in Paragraph 2 above.
5.
Responsibility for the
Detection of Errors and Unauthorized Payment Orders
. Except as
may be provided, the Custodian is not responsible for detecting any Fund or
General Partner error contained in any payment order sent by the Fund or the
General Partner to the Custodian. In the event that the Fund’s or the General
Partner’s payment order to the Custodian either (i) identifies the beneficiary
by both a name and an identifying or bank account number and the name and number
identify different persons or entities, or (ii) identifies any bank by both a
name and an identifying number and the number identifies a person or entity
different from the bank identified by name, execution of the payment order,
payment to the beneficiary, cancellation of the payment order or actions taken
by any bank in respect of such payment order may be made solely on the basis of
the number. The Custodian shall not be liable for interest on the amount of any
payment order that was not authorized or was erroneously executed unless the
Fund and/or the General Partner so notifies the Custodian within thirty (30)
Business Days following the Fund’s and/or the General Partner’s receipt of
notice that such payment order had been processed. If a payment order
in the name of the Fund and accepted by the Custodian was not authorized by the
Fund or the General Partner, the liability of the parties will be governed by
the applicable provisions of UCC 4A.
6.
Laws and
Regulations
. The rights and obligations of the
Custodian, the General Partner and the Fund with respect to any payment order
executed pursuant to this Funds Transfer Services Schedule will be governed by
any applicable laws, regulations, circulars and funds transfer system rules, the
laws and regulations of the United States of America and of other relevant
countries including exchange control regulations and limitations on dealings or
other sanctions, and including without limitation those sanctions imposed under
the law of the United States of America by the Office of Foreign Assets
Control. Any taxes, fines, costs, charges or fees imposed by relevant
authorities on such transactions shall be for the account of the
Fund.
7.
Miscellaneous
. All
accounts opened by the Fund, the General Partner or its authorized agents at the
Custodian subsequent to the date hereof shall be governed by this Funds Transfer
Schedule. All terms used in this Funds Transfer Services Schedule
shall have the meaning set forth in Article 4A of the Uniform Commercial Code as
currently in effect in the State of New York (UCC 4A) unless otherwise set forth
herein. The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties
hereto.
8.
Indemnification
. The
Custodian does not recommend the sending of instructions by telefax or
telephonic means as provided in Paragraph 2.
BY ELECTING TO SEND INSTRUCTIONS BY
TELEFAX OR TELEPHONIC MEANS, THE FUND AND THE GENERAL PARTNER AGREE TO INDEMNIFY
THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR LOSSES
THEREFROM
.
_____________________________________________
OPTIONAL
: The
Custodian will perform a Callback if instructions are sent by
telefax
or telephonic means as provided in Paragraph 2.
THE FUND AND/OR
THE
GENERAL PARTNER MAY, AT ITS OWN RISK
AND BY HEREBY
AGREEING TO INDEMNIFY THE CUSTODIAN
AND ITS PARTNERS,
OFFICERS AND EMPLOYEES FOR ALL LOSSES
THEREFROM,
ELECT TO
WAIVE A
CALLBACK BY THE CUSTODIAN BY INITIALING HERE:____
_____________________________________________
The
undersigned acknowledges that (I/we) have received a copy of this
document.
BROWN
BROTHERS HARRIMAN & CO.
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By:
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/s/ James R. Kent
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Name:
James R. Kent
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Title:
Managing Director
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Date:
March 29, 2006
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UNITED
STATES OIL FUND, LP
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By: Victoria
Bay Asset Management, LLC, as General Partner
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By:
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/s/ Nicholas Gerber
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Name:
Nicholas Gerber
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Title:
Director
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Date:
April 3, 2006
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VICTORIA
BAY ASSET MANAGEMENT, LLC
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By:
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/s/ Nicholas Gerber
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Name:
Nicholas Gerber
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Title:
Director
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Date:
April 3, 2006
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ELECTRONIC
AND ON-LINE SERVICES SCHEDULE
This
Electronic and On-Line Services Schedule (this
Schedule
) to a Custodian
Agreement dated as of March 13, 2006 (as amended from time to time hereafter,
the
Agreement
) by and
among Brown Brothers Harriman & Co. (
we, us our
), Victoria Bay
Asset Management, LLC (the
General
Partner
) and United States Oil Fund, LP (the
Fund
) (the General Partner and
the Fund collectively,
you,
your
), provides general provisions governing your use of and access to
the Services (as hereinafter defined) provided to you by us via the Internet (at
www.bbhco.com
or such other
URL as we may instruct you to use to access our products
) and via a
direct dial-up connection between your computer and our computers, as of
March 13, 2006 (the
Effective
Date).
Use of the Services constitutes acceptance of the terms
and conditions of this Schedule, any Appendices hereto, the Terms and Conditions
posted on our web site, and any terms and conditions specifically governing a
particular Service or our other products, which may be set forth in the
Agreement or in a separate related agreement (collectively, the
Related
Agreements
).
You will
be granted access to our suite of online products, which may include, but shall
not be limited to the following services via the Internet or dial-up connection
(each separate service is a
Service
; collectively referred
to as the
Services
):
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1.1.
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BIDS®
and BIDS WorldView, a system for effectuating securities and fund trade
instruction and execution, processing and handling instructions, and for
the input and retrieval of other
information;
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1.2.
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F/X
WorldView, a system for executing foreign exchange
trades;
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1.3.
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Fund
WorldView, a system for receiving fund and prospectus
information;
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1.4.
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BBHCOnnect,
a system for placing securities trade instructions and following the
status and detail of trades;
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1.5.
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ActionView
SM
,
a system for receiving certain corporate action
information;
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1.6.
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Risk
View, an interactive portfolio risk analysis tool;
and
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1.7.
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Such
other services as we shall from time to time
offer.
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2.1.
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A
digital certificate and/or an encryption key may be required to access
certain Services. You may apply for a digital certificate
and/or an encryption key by following the procedures set forth at
http://www.bbh.com/certs/
.
You also will need
an identification code (
ID
) and password(s)
(
Password
) to
access the Services.
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2.2.
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You
agree to safeguard your digital certificate and/or encryption key, ID, and
Password and not to give or make available, intentionally or otherwise,
your digital certificate, ID, and/or Password to any unauthorized
person. You must immediately notify us in writing if you
believe that your digital certificate and/or encryption key, Password, or
ID has been compromised or if you suspect unauthorized access to your
account by means of the Services or otherwise, or when a person to whom a
digital certificate and/or an encryption key, Password, or ID has been
assigned leaves or is no longer permitted to access the
Services.
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2.3.
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We
will not be responsible for any breach of security, or for any
unauthorized trading or theft by any third party, caused by your failure
(be it intentional, unintentional, or negligent) to maintain the
confidentiality of your ID and/or Password and/or the security of your
digital certificate and/or encryption
key.
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3.1.
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Proper
instructions under this Schedule shall be provided as designated in the
Related Agreements (
Instructions
).
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3.2.
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The
following additional provisions apply to Instructions provided via the
Services:
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a.
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Instructions
sent by electronic mail will not be accepted or acted
upon.
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b.
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You
authorize us to act upon Instructions received through the Services
utilizing your digital certificate, ID, and/or Password as though they
were duly authorized written instructions, without any duty of
verification or inquiry on our part, and agree to hold us harmless for any
losses you experience as a result.
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c.
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From
time to time, the temporary unavailability of third party
telecommunications or computer systems required by the Services may result
in a delay in processing Instructions. In such an event, we
shall not be liable to you or any third party for any liabilities, losses,
claims, costs, damages, penalties, fines, obligations, or expenses of any
kind (including without limitation, reasonable attorneys', accountants',
consultants', or experts' fees and disbursements) that you experience due
to such a delay.
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We may
make periodic statements, disclosures, notices, and other documents available to
you electronically, and, subject to any delivery and receipt verification
procedures required by law, you agree to receive such documents electronically
and to check the statements for accuracy. If you believe any such
statement contains incorrect information, you must follow the procedures set
forth in the Related Agreement(s).
You
understand and agree that you will be responsible for the introduction (by you,
your employees, agents, or representatives) into the Services, whether
intentional or unintentional, of (i) any virus or other code, program, or
sub-program that damages or interferes with the operation of the computer system
containing the code, program or sub-program, or halts, disables, or interferes
with the operation of the Services themselves; or (ii) any device, method, or
token whose knowing or intended purpose is to permit any person to circumvent
the normal security of the Services or the system containing the software code
for the Services (
Malicious
Code
). You agree to take all necessary actions and precautions
to prevent the introduction and proliferation of any Malicious Code into those
systems that interact with the Services.
For
avoidance of doubt, you hereby agree that the provisions in the Related
Agreement(s) related to your indemnification of us and any limitations on our
liability and responsibilities to you shall be applicable to this Agreement, and
are hereby expressly incorporated herein. You agree that the Services are
comprised of telecommunications and computer systems, and that it is possible
that Instructions, information, transactions, or account reports might be added
to, changed, or omitted by electronic or programming malfunction, unauthorized
access, or other failure of the systems which comprise the Services, despite the
security features that have been designed into the Services. You agree that we
will not be liable for any action taken or not taken in complying with the terms
of this Schedule, except for our willful misconduct or gross
negligence. The provisions of this paragraph shall survive the
termination of this Schedule and the Related Agreements.
You may
be charged for services hereunder as set forth in a fee schedule from time to
time agreed by us.
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8.1.
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This
Schedule is effective as of the date you sign it or first use the
Services, whichever is first, and continues in effect until such time as
either you or we terminate the Schedule in accordance with this Section 8
and/or until your off-line use of the Services is
terminated.
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8.2.
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We
may terminate your access to the Services at any time, for any reason,
with five (5) Business Days prior notice; provided that we may terminate
your access to the Services with no prior notice (i) if your account with
us is closed, (ii) if you fail to comply with any of the terms of this
Agreement, (iii) if we believe that your continued access to the Services
poses a security risk, or (iv) if we believe that you are violating or
have violated applicable laws, and we will not be liable for any loss you
may experience as a result of such termination. You may
terminate your access to the Services at any time by giving us ten (10)
Business Days notice. Upon termination, we will cancel all your
Passwords and IDs and any in-process or pending Instructions will be
carried out or cancelled, at our sole
discretion.
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9.1.
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Notices.
All
notices, requests, and demands (other than routine operational
communications, such as Instructions) shall be in such form and effect as
provided in the Related
Agreement(s).
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9.2.
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Inconsistent
Provisions.
Each Service may be governed by separate
terms and conditions in addition to this Schedule and the Related
Agreement(s). Except where specifically provided to the
contrary in this Schedule, in the event that such separate terms and
conditions conflict with this Schedule and the Related Agreement(s), the
provisions of this Schedule shall prevail to the extent this Schedule
applies to the transaction in
question.
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9.3.
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Binding Effect; Assignment;
Severability.
This Schedule shall be binding on you,
your employees, officers and agents. We may assign or delegate
our rights and duties under this Schedule at any time without notice to
you. Your rights under this Schedule may not be assigned
without our prior written consent. In the event that any provision of this
Schedule conflicts with the law under which this Schedule is to be
construed or if any such provision is held invalid or unenforceable by a
court with jurisdiction over you and us, such provision shall be deemed to
be restated to effectuate as nearly as possible the purposes of the
Schedule in accordance with applicable law. The remaining
provisions of this Schedule and the application of the challenged
provision to persons or circumstances other than those as to which it is
invalid or unenforceable shall not be affected thereby, and each such
provision shall be valid and enforceable to the full extent permitted by
law.
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9.4.
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Choice of Law; Jury
Trial.
This Schedule shall be governed by and construed, and the
legal relations between the parties shall be determined, in accordance
with the laws of the State of New York, without giving effect to the
principles of conflicts of laws. Each party agrees to waive its right to
trial by jury in any action or proceeding based upon or related to this
Agreement. The parties agree that all actions and proceedings
based upon or relating to this Schedule shall be litigated exclusively in
the federal and state courts located within New York City, New
York.
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9.5.
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Confidentiality.
The parties hereto agree that each shall treat confidentially the
terms and conditions of this Agreement and all information provided by
each party to the other regarding its business and
operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose of
rendering or obtaining services pursuant to this Agreement and, except as
may be required in carrying out this Agreement, shall not be disclosed to
any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information
that is publicly available when provided or thereafter becomes publicly
available other than through a breach of this Agreement, or that is
required to be disclosed by or to any bank examiner of the Custodian or
any Subcustodian, any Regulatory Authority, any auditor of the parties
hereto, or by judicial or administrative process or otherwise by
Applicable Law.
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The
undersigned acknowledges that (I/we) have received a copy of this
document.
BROWN
BROTHERS HARRIMAN & CO.
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By:
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/s/ James R. Kent
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Name:
James R. Kent
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Title:
Managing Director
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Date:
March 29, 2006
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UNITED
STATES OIL FUND, LP
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By: Victoria
Bay Asset Management, LLC, as General Partner
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By:
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/s/ Nicholas Gerber
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Name:
Nicholas Gerber
|
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Title:
Director
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Date:
April 3, 2006
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VICTORIA
BAY ASSET MANAGEMENT, LLC
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By:
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/s/ Nicholas Gerber
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Name:
Nicholas Gerber
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Title:
Director
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Date:
April 3, 2006
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Exhibit
10.5
AMENDMENT
AGREEMENT
DATED
AS OF OCTOBER 27, 2008
TO
THE CUSTODIAN AGREEMENT
DATED
AS OF MARCH 13, 2006
AMENDMENT AGREEMENT
(the
“Amendment”) dated as of October 27, 2008 among
BROWN BROTHERS HARRIMAN &
CO.
(“BBH”)
,
UNITED STATES COMMODITY FUNDS LLC
(“USCF”), formerly known as Victoria
Bay Asset Management, LLC, and
UNITED STATES OIL FUND, LP
(“USO”).
WITNESSETH
The
parties have previously entered into that certain Custodian Agreement dated as
of March 13, 2006 (the “Agreement”). The parties have agreed to amend
the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, BBH, USCF and USO hereby acknowledge and
agree as follows:
1.
Amendment of the
Agreement.
Upon execution of this Amendment by BBH, USCF and
USO, the Agreement shall be hereby amended as follows:
Section 15.1 of the Agreement shall be
deleted in its entirety and replaced with the following:
15.1
Term, Notice and
Effect.
This Agreement shall have an initial term of two (2)
years from the date hereof. Thereafter, this Agreement shall automatically renew
for successive one (1) year periods unless any party terminates this Agreement
by providing written notice no later than seventy-five (75) days prior to the
expiration of the applicable term to the other parties at their address set
forth herein. Upon the completion of the initial term, either the
Custodian, on the one hand, or the General Partner, on the other hand, may elect
to terminate this Agreement at any time by delivering ninety (90) days notice
thereof to the other party.
2.
Representations.
Each
party represents to the other party that:-
(a)
Status.
It is duly
organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing;
(b)
Powers.
It has the power to
execute and deliver this Amendment and has taken all necessary action to
authorize such execution, delivery and performance;
(c)
No Violation or Conflict.
Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets;
(d)
Consents.
All
governmental and other consents that are required to
have been
obtained by it with respect to this Amendment have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(e)
Obligations
Binding.
Its obligations under this Amendment constitute
its
legal, valid and binding obligations, enforceable in accordance with its
respective terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors’ rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at
law)).
3. Miscellaneous.
(a)
Entire
Agreement.
The Amendment and the Agreement constitute the
entire agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communication and prior writings (except as other
wise provided herein) with respect thereto.
(b)
Counterparts.
This
Amendment may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if signatures thereto and hereto were upon the
same instrument.
(c)
Headings.
The
headings used in this Amendment are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in
interpreting this Amendment.
(d)
Governing Law.
This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York (without reference to choice of law doctrine).
(e)
Terms
.
Terms used in this
Amendment, unless otherwise defined herein, shall have the meanings ascribed to
them in the Agreement.
IN
WITNESS WHEREOF, the parties have caused this Amendment to be executed by their
respective officers or authorized representatives as of the day and year first
above written.
BROWN
BROTHERS HARRIMAN & CO.
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UNITED
STATES COMMODITY FUNDS LLC
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By:
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/s/ James R. Kent
|
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By:
|
/s/ Howard Mah
|
Name:
James R. Kent
|
|
Name:
Howard Mah
|
Title:
Managing Director
|
|
Title:
Management Director
|
Date:
October 29, 2008
|
|
Date:
October 31,
2008
|
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UNITED
STATES OIL FUND, LP
|
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By:
United States Commodity Funds
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LLC,
as General Partner
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By:
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/s/ Howard Mah
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Name:
Howard Mah
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Title:
Management Director
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Date:
October 31, 2008
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Exhibit
10.6
EXECUTION
COPY
ADMINISTRATIVE
AGENCY AGREEMENT
THIS AGREEMENT
is made as of
March 13, 2006 by and among
BROWN BROTHERS HARRIMAN &
CO
., a limited partnership organized under the laws of the State of New
York (the “
Administrator
”),
VICTORIA BAY ASSET MANAGEMENT,
LLC
, a Delaware
limited liability company (the “
General Partner
”) and
UNITED STATES OIL FUND, LP
, a
limited partnership organized under the laws of the State of Delaware (the
“
Fund
”).
WITNESSETH:
WHEREAS
,
the Fund is a limited partnership that is registered as a commodity
pool;
WHEREAS
,
the General Partner has exclusive responsibility for the management and control
of the business and affairs of the Fund; and
WHEREAS
,
the Fund and the General Partner desire to retain the Administrator to render
certain services to the Fund and/or the General Partner, as the case may be, and
the Administrator is willing to render such services.
NOW,
THEREFORE
, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
1.
Appointment of
Administrator
. The Fund and the General Partner hereby employ
and appoint the Administrator to act as administrative agent on the terms set
forth in this Agreement, and the Administrator accepts such
appointment.
2.
Delivery of
Documents
. The Fund and the General Partner will on a
continuing basis provide the Administrator with:
2.1 properly
certified or authenticated copies of resolutions of the General Partner’s Board
of Directors (including Mr. Nicholas D. Gerber) authorizing the appointment of
the Administrator as administrative agent of the Fund and approving this
Agreement;
2.2 a
copy of the Fund’s most recent registration statement under the Securities Act
of 1933, as amended;
2.3 copies
of all agreements between the Fund and its service providers, including without
limitation, advisory, distribution and administration agreements and
distribution and/or unitholder;
2.4 a
copy of the Fund’s valuation procedures;
2.5 a
copy of the Fund’s Limited Partnership Agreement, as may be amended from time to
time;
2.6 a
copy of the General Partner’s First Amended and Restated Limited Liability
Company Agreement, as may be amended from time to time;
2.7 any
other documents or resolutions (including, but not limited to directions or
resolutions of the General Partner’s Board of Directors, Management Directors,
and/or Audit Committee) which relate to or affect the Administrator’s
performance of its duties hereunder or which the Administrator may at any time
reasonably request; and
2.8 copies
of any and all amendments or supplements to the foregoing.
3.
Duties as
Administrator.
Subject to the supervision and direction of the
General Partner’s Board of Directors, Management Directors and Audit Committee,
the Administrator will perform the administrative services described in Appendix
A hereto. Additional services may be provided by the Administrator
upon the request of the Fund as mutually agreed from time to time. In
performing its duties and obligations hereunder, the Administrator will act in
accordance with the General Partner’s instructions as defined in Section 5
(“Instructions”). It is agreed and understood that the Administrator
shall not be responsible for the Fund’s or the General Partner’s compliance with
any applicable documents, laws or regulations, or for losses, costs or expenses
arising out of the Fund’s or the General Partner’s failure to comply with said
documents, laws or regulations or the Fund’s or the General Partner’s failure or
inability to correct any non-compliance therewith. The Administrator
shall in no event be required to take any action, which is in contravention of
any applicable law, rule or regulation or any order or judgment of any court of
competent jurisdiction.
3.1
Records.
The
Administrator will maintain and retain such records as required by the
Securities Exchange Act of 1934, as amended, the Rules of the American Stock
Exchange, 17 C.F.R 4.23, and other applicable federal securities laws and
created pursuant to the performance of the Administrator’s obligations under
this Agreement. The Administrator will maintain such other records as
requested by the Fund or the General Partner and received by the
Administrator. The Administrator shall not be responsible for the
accuracy and completeness of any records not created by the
Administrator. The Administrator acknowledges that the records
maintained and preserved by the Administrator pursuant to this Agreement are the
property of the Fund and will be, at the Fund’s expense, surrendered promptly
upon reasonable request. In performing its obligations under this
Section, the Administrator may utilize micrographic and electronic storage media
as well as independent third party storage facilities.
4.
Duties of the
Fund and the General Partner
. The Fund and the General Partner
shall notify the Administrator promptly of any matter affecting the performance
by the Administrator of its services under this Agreement. Where the
Administrator is providing fund accounting services pursuant to this Agreement,
the Fund and the General Partner shall promptly notify the Administrator as to
the accrual of liabilities of the Fund and of liabilities of the Fund not
appearing on the books of account kept by the Administrator, as well as to the
existence, status and proper treatment of reserves, if any, authorized by the
Fund or the General Partner. The Fund and the General Partner agree
to provide such information to the Administrator as may be requested under the
banking and securities laws of the United States or other jurisdictions relating
to “Know Your Customer” and money laundering prevention rules and regulations
(collectively, the “KYC Requirements”). For purposes of this
subsection, and in connection with all applicable KYC Requirements, the
Fund is the “client” or “customer” of the Administrator.
The Fund and the General
Partner further represent that each will perform all obligations required under
applicable KYC Requirements with respect to its “customers” (as defined in the
KYC Requirements) and that, because these customers do not constitute
“customers” or “clients” of the Administrator under such applicable rules and
regulations, the Administrator is under no such similar
obligations.
5.1 The
Administrator shall not be liable for, and shall be indemnified by the Fund
against any and all losses, costs, damages or expenses arising from or as a
result of, any action taken or omitted in reliance upon Instructions or upon any
other written notice, request, direction, instruction, certificate or other
instrument believed by it to be genuine and signed or authorized by the proper
party or parties. A list of persons so authorized by the General
Partner (“Authorized Persons”) is attached hereto as Appendix B and upon which
the Administrator may rely until its receipt of notification to the contrary by
the General Partner.
5.2 Instructions
shall include a written request, direction, instruction or certification signed
or initialed on behalf of the Fund by one or more persons as the General Partner
shall have from time to time authorized in writing. Those persons
authorized to give Instructions may be identified by the General Partner by
name, title or position and will include at least one officer empowered by the
General Partner to name other individuals who are authorized to give
Instructions on behalf of the Fund.
5.3 Telephonic
or other oral instructions or instructions given by telefax transmission may be
given by any one of the above persons and will also be considered Instructions
if the Administrator believes them to have been given by a person authorized to
give such Instructions with respect to the transaction
involved.
5.4 With
respect to telefax transmissions, the Fund and the General Partner hereby
acknowledge that (i) receipt of legible instructions cannot be assured, (ii) the
Administrator cannot verify that authorized signatures on telefax instructions
are original, and (iii) the Administrator shall not be responsible for losses or
expenses incurred through actions taken in reliance on such telefax
instructions. The Fund and the General Partner agree that such
telefax instructions shall be conclusive evidence of the Fund’s/General
Partner’s Instruction to the Administrator to act or to omit to
act.
5.5 Instructions
given orally will not be confirmed in writing and the lack of such confirmation
shall in no way affect any action taken by the Administrator in reliance upon
such oral Instructions. The Fund and the General Partner authorize
the Administrator to tape record any and all telephonic or other oral
Instructions given to the Administrator by or on behalf of the Fund (including
any of the Fund’s or the General Partner’s officers, directors, trustees,
employees or agents or any investment manager or adviser or person or entity
with similar responsibilities which is authorized to give Instructions on behalf
of the Fund to the Administrator.)
6.
Expenses and
Compensation
. For the services to be rendered and the
facilities to be furnished by the Administrator as provided for in this
Agreement, the Fund shall pay the Administrator for its services rendered
pursuant to this Agreement a fee based on such fee schedule as may from time to
time be agreed upon in writing among the General Partner, Fund and the
Administrator. Additional services performed by the Administrator as
requested by the Fund shall be subject to additional fees as mutually agreed
from time to time. In addition to any such fees, the Administrator
shall bill the Fund separately for any out-of-pocket disbursements of the
Administrator based on an out-of-pocket disbursement schedule as may from time
to time be agreed upon in writing among the General Partner, the Fund and the
Administrator. The initial fee schedule and out of pocket
disbursement schedule are attached as Appendix D-1 and D-2 to this
Agreement. The foregoing fees and disbursements shall be billed to
the Fund by the Administrator and shall be paid promptly by wire transfer or
other appropriate means to the Administrator.
7.
Standard of
Care
.
The Administrator
shall be held to the exercise of reasonable care and diligence in carrying out
the provisions of this Agreement, provided that the Administrator shall not
thereby be required to take any action which is in contravention of any
applicable law, rule or regulation or any order or judgment of any court of
competent jurisdiction.
8.
General
Limitations on Liability
. The Administrator shall incur no
liability with respect to any telecommunications, equipment or power failures,
or any failures to perform or delays in performance by postal or courier
services or third-party information providers (including, without limitation
those listed on Appendix C).
8.1
The
Administrator shall also incur no liability under this Agreement if the
Administrator or any agent or entity utilized by the Administrator shall be
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of causes or events beyond its control, including but not
limited to:
8.1.1
any
Sovereign Event. A “Sovereign Event” shall mean any nationalization;
expropriation; devaluation; revaluation; confiscation; seizure; cancellation;
destruction; strike; act of war, terrorism, insurrection or revolution; or any
other act or event beyond the Administrator’s control;
8.1.2
any
provision of any present or future law, regulation or order of the United States
or any state thereof, or of any foreign country or political subdivision
thereof, or of any securities depository or clearing agency;
and
8.1.3
any
provision of any order or judgment of any court of competent
jurisdiction.
8.2
The Administrator shall not be held accountable or liable for any losses,
damages or expenses the General Partner, the Fund or any unitholder or former
unitholder of the Fund or any other person may suffer or incur arising from
acts, omissions, errors or delays of the Administrator in the performance of its
obligations and duties as provided in Section 3 hereof, including without
limitation any error of judgment or mistake of law, except a damage, loss or
expense directly resulting from the Administrator’s willful malfeasance, bad
faith or negligence in the performance of such Administrator’s obligations and
duties.
9.
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Specific
Limitations on Liability.
In addition to,
and without limiting the application of the general limitations on
liability contained in Section 8, above, the following specific
limitations on the Administrator’s liability shall apply to the particular
administrative services set forth on Appendix A
hereto.
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9.1
Liability for
Fund Accounting Services.
Without limiting the provisions in
Section 8 hereof, the Administrator’s liability for acts, omissions, errors or
delays relating to its fund accounting obligations and duties shall be limited
to the amount of any expenses associated with a required recalculation of net
asset value per unit (“NAV”) or any direct damages suffered by unitholders in
connection with such recalculation. The Administrator’s liability or
accountability for such acts, omissions, errors or delays shall be further
subject to clauses 9.1.1 through 9.1.4 below.
9.1.1
The
parties hereto acknowledge that the Administrator’s causing an error or delay in
the determination of NAV may, but does not in and of itself, constitute
negligence or reckless or willful misconduct. The parties further
acknowledge that in accordance with industry practice the liability of the
Administrator for fund accounting services shall accrue and the recalculation of
NAV shall be performed in accordance with this Section 9.1 only with regard to
errors in the calculation of the NAV that are (i) greater than or equal to $.01
per unit of the Fund and (ii) greater than or equal to ½% of the total net
assets of the Fund.
9.1.2
In no
event shall the Administrator be liable or responsible to the General Partner,
the Fund, any present or former unitholder of the Fund, or any other person for
any error or delay that continued or was undetected after the date of an audit
performed by the certified public accountants employed by or on behalf of the
Fund if, in the exercise of reasonable care in accordance with generally
accepted accounting standards, such accountants should have become aware of such
error or delay in the course of performing such audit.
9.1.3
The
Administrator shall not be held accountable or liable to the General Partner,
the Fund, any unitholder or former unitholder thereof or any other person for
any delays or losses, damages or expenses any of them may suffer or incur
resulting from (i) the Administrator’s usage of a third party service provider
for the purpose of storing records delivered to the Administrator by or on
behalf of the Fund and which the Administrator did not create in the performance
of its obligations hereunder; (ii) the Administrator’s failure to receive timely
and suitable notification concerning quotations or corporate actions relating to
or affecting portfolio securities of the Fund; or (iii) any errors in the
computation of NAV based upon or arising out of quotations or information as to
corporate actions if received by the Administrator either (a) from a source
which the Administrator was authorized to rely upon (including those sources
listed on Appendix C), or (b) from a source which in the Administrator’s
reasonable judgment was as reliable a source for such quotations or information
as such authorized sources; or (iv) any errors in the computation of NAV as a
result of relevant information known to the General Partner, the Fund, a futures
commission merchant, securities brokers or dealers, or any of the
Fund’s other service providers including futures commission merchants
in contract with the Fund, which would impact the calculation of NAV, but was
not communicated to the Administrator. To the extent that Fund assets
are not in the custody of the Administrator, the Administrator may conclusively
rely on any reporting in connection with such assets provided to the
Administrator by a third party on behalf of the Fund, including, without
limitation any futures commission merchant.
9.1.4
In
the event of any error or delay in the determination of such NAV for which the
Administrator may be liable, the General Partner, the Fund and the Administrator
will consult and make good faith efforts to reach agreement on what actions
should be taken in order to mitigate any loss suffered by the Fund or its
present or former unitholders, in order that the Administrator’s exposure to
liability shall be reduced to the extent possible after taking into account all
relevant factors and alternatives. It is understood that in
attempting to reach agreement on the actions to be taken or the amount of the
loss which should appropriately be borne by the Administrator, the General
Partner, the Fund and the Administrator will consider such relevant factors as
the amount of the loss involved, the Fund’s/General Partner’s desire to avoid
loss of unitholder goodwill,
the fact that other
persons or entities could have been reasonably expected to have detected the
error sooner than the time it was actually discovered, the appropriateness of
limiting or eliminating the benefit which unitholders or former unitholders
might have obtained by reason of the error, and the possibility that other
parties providing services to the Fund might be induced to absorb a portion of
the loss incurred.
10.1 The
General Partner and the Fund hereby agree to indemnify and hold harmless the
Administrator, its partners, stockholders, members, directors, officers and
employees and any subsidiary or affiliate of the foregoing (“Affiliate”), and
the successors and assigns of all of the foregoing persons, against any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any act, omission, error or delay or any
claim, demand, action or suit, in connection with or arising out of performance
of its obligations and duties under this Agreement, not resulting from the
willful malfeasance, bad faith or negligence of the Administrator in the
performance of such obligations and duties. The provisions of this
Section 10 shall survive the termination of this Agreement.
10.1.1 If any action, suit
or proceeding (each, a “Proceeding”) is brought against the Administrator or any
such person in respect of which indemnity may be sought against the General
Partner pursuant to the foregoing paragraph, the Administrator or such person
shall promptly notify the General Partner in writing of the institution of such
Proceeding and the General Partner shall assume the defense of such Proceeding,
including the employment of counsel reasonably satisfactory to such indemnified
party and payment of all fees and expenses; provided, however, that the omission
to so notify the General Partner shall not relieve the General Partner from any
liability which they may have to the Administrator or any such person except to
the extent that it has been materially prejudiced by such failure and has not
otherwise learned of such Proceeding. The Administrator or such person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Administrator or of
such person unless the employment of such counsel shall have been authorized in
writing by the General Partner in connection with the defense of such Proceeding
or the General Partner shall not have, within a reasonable period of time in
light of the circumstances, employed counsel to have charge of the defense of
such Proceeding or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from, additional to or in conflict with those available to the General Partner
(in which case the General Partner shall not have the right to direct the
defense of such Proceeding on behalf of the indemnified party or parties), in
any of which events such fees and expenses shall be borne by the General Partner
and paid as incurred (it being understood, however, that the General Partner
shall not be liable for the expenses of more than one separate counsel (in
addition to any local counsel) in any one Proceeding or series of related
Proceedings in the same jurisdiction representing the indemnified parties who
are parties to such Proceeding).
10.1.2 The General Partner
shall not be liable for any settlement of any Proceeding effected without the
General Partner’s written consent but if settled with the General Partner’s
written consent, the General Partner agrees to indemnify and hold harmless the
Administrator and any such person from and against any loss or liability by
reason of such settlement. Notwithstanding the foregoing sentence, if
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second sentence of this paragraph, then the indemnifying party agrees
that it shall be liable for any settlement of any Proceeding effected without
its written consent if (i) such settlement is entered into more than 60 Business
Days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall not have fully reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and (iii) such
indemnified party shall have given the indemnifying party at least 30 Business
Days’ prior notice of its intention to settle. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such indemnified
party.
10.2 Subject
to Sections 7, 8 and 9 of this Agreement, the Administrator agrees to indemnify
and hold harmless the General Partner and the Fund, its partners, stockholders,
members, directors, officers and employees and any Affiliate of the foregoing,
and the successors and assigns of all of the foregoing persons, against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any act, omission, error or delay or
any claim, demand, action or suit, in connection with or arising out of
performance of its obligations and duties under this Agreement, resulting from
the willful malfeasance, bad faith or negligence of the Administrator in the
performance of such obligations and duties. The provisions of this
Section 10 shall survive the termination of this Agreement.
10.2.1 If any
Proceeding is brought against the General Partner or any such person in respect
of which indemnity may be sought against the Administrator pursuant to the
foregoing paragraph, the General Partner or such person shall promptly notify
the Administrator in writing of the institution of such Proceeding and the
Administrator shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; provided, however, that the omission to so
notify the Administrator shall not relieve the Administrator from any liability
which they may have to the General Partner or any such person except to the
extent that it has been materially prejudiced by such failure and has not
otherwise learned of such Proceeding. The General Partner or such person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the General Partner or
of such person unless the employment of such counsel shall have been authorized
in writing by the Administrator in connection with the defense of such
Proceeding or the Administrator shall not have, within a reasonable period of
time in light of the circumstances, employed counsel to have charge of the
defense of such Proceeding or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from, additional to or in conflict with those available to the
Administrator (in which case the General Partner shall not have the right to
direct the defense of such Proceeding on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
Administrator and paid as incurred (it being understood, however, that the
Administrator shall not be liable for the expenses of more than one separate
counsel (in addition to any local counsel) in any one Proceeding or series of
related Proceedings in the same jurisdiction representing the indemnified
parties who are parties to such Proceeding).
10.2.2 The Administrator
shall not be liable for any settlement of any Proceeding effected without the
Administrator’s written consent but if settled with the Administrator’s written
consent, the Administrator agrees to indemnify and hold harmless the General
Partner and any such person from and against any loss or liability by reason of
such settlement. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second sentence of this paragraph, then the indemnifying party agrees
that it shall be liable for any settlement of any Proceeding effected without
its written consent if (i) such settlement is entered into more than 60 Business
Days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall not have fully reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and (iii) such
indemnified party shall have given the indemnifying party at least 30 Business
Days’ prior notice of its intention to settle. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such indemnified
party.
11.
Reliance by the
Administrator on Opinions of Counsel and Opinions of Certified Public
Accountants
.
The Administrator may consult with its
counsel or the Fund’s/the General Partner’s counsel in any case where so doing
appears to the Administrator to be necessary or desirable. The
Administrator shall not be considered to have engaged in any misconduct or to
have acted negligently and shall be without liability in acting upon the advice
of its counsel or of the Fund’s/General Partner’s counsel.
The Administrator may consult with a
certified public accountant or the Fund’s Treasurer (or persons performing such
function) in any case where so doing appears to the Administrator to be
necessary or desirable. The Administrator shall not be considered to
have engaged in any misconduct or to have acted negligently and shall be without
liability in acting upon the advice of such certified public accountant or of
the Fund’s Treasurer or persons performing such function.
12.
Termination of
Agreement
.
This Agreement may be
terminated by either party in accordance with the provisions of this Section
12.
12.1 This
Agreement shall have an initial term of two (2) years from the date
hereof. Thereafter, this Agreement shall automatically renew for
successive one (1) year periods unless any party terminates this Agreement by
written notice effective no sooner than seventy-five (75) days following the
date that notice to such effect shall be delivered to the other parties at its
address set forth herein. Notwithstanding the foregoing provisions,
any party may terminate this Agreement at any time (a) for cause, which is a
material breach of the Agreement not cured within sixty (60) days, in which case
termination shall be effective upon written receipt of notice by the
non-terminating parties, or (b) upon thirty (30) days written notice to the
other parties in the event that a party is adjudged bankrupt or insolvent, or
there shall be commenced against such party a case under any applicable
bankruptcy, insolvency, or other similar law now or hereafter in effect. In the
event a termination notice is given by a party hereto, all expenses associated
with the movement of records and materials and the conversion thereof shall be
paid by the Fund for which services shall cease to be performed
hereunder. The Administrator shall be responsible for completing all
actions in progress when such termination notice is given unless otherwise
agreed.
12.2. Upon
termination of the Agreement in accordance with this Section 12, the Fund may
request the Administrator to promptly deliver to the Fund or to any designated
third party all records created and maintained by the Administrator pursuant to
Section 3.1 of this Agreement, as well as any Fund records maintained but not
created by the Administrator. If such request is provided in writing
by the Fund to the Administrator within seventy-five (75) days of the date of
termination of the Agreement, the Administrator shall provide to the Fund a
certification that all records created by the Administrator pursuant to its
obligations under Section 3.1 of this Agreement are accurate and
complete. After seventy-five (75) days of the date of termination of
this Agreement, no such certification will be provided to the Fund by the
Administrator and the Administrator is under no further obligation to ensure
that records created by the Administrator pursuant to Section 3.1 of this
Agreement are maintained in a form that is accurate or complete.
13.
Confidentiality
and Privacy.
13.1 The
parties hereto agree that each shall treat confidentially the terms and
conditions of this Agreement and all information provided by each party to the
other regarding its business and operations. All confidential
information provided by a party hereto shall be used by any other party hereto
solely for the purpose of rendering or obtaining services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that
is publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by or to any Regulatory Authority, any auditor of the parties hereto,
or by judicial or administrative process or otherwise by Applicable
Law.
13.2 In
the course of carrying out its obligations under this Agreement, Custodian shall
maintain physical, procedural and electronic safeguards to protect information
regarding the Fund and its investors that Custodian has obtained or to which the
Custodian has gained access.
14.
Tape-recording
.
The parties
consent to recording of any and all telephonic or other oral
instructions. This authorization will remain in effect until and
unless revoked by the Fund, the General Partner or the Administrator in
writing. The parties further agree to solicit valid written or other
consent from any of its employees, officers, directors or agents with respect to
telephone communications to the extent such consent is required by applicable
law.
15.
Procedures.
Procedures
applicable to the Administrator services to be performed hereunder may be
established from time to time by agreement between the Fund, the General Partner
and the Administrator. The Administrator shall have the right to
utilize any unitholder accounting and recordkeeping systems that, in its
opinion, enables it to perform any services to be performed
hereunder.
16.
Entire
Agreement;
Amendment.
This
Agreement constitutes the entire understanding and agreement of the parties
hereto and supersedes any other oral or written agreements heretofore in effect
between the parties with respect to the subject matter hereof. No
provision of this Agreement may be amended or terminated except by a statement
in writing signed by the party against which enforcement of the amendment or
termination is sought.
17.
Severability.
In
the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
18.
Headings.
The
section headings in this Agreement are for the convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions
thereof.
19.
Governing
Law
.
This Agreement
shall be governed by and construed according to the laws of the State of New
York without giving effect to conflicts of law provisions thereof and each of
the parties hereto irrevocably consents to the exclusive jurisdiction of the
United States District Court for the Southern District of New York or if that
court lacks or declines to exercise subject matter jurisdiction, the Supreme
Court of the State of New York, New York County. The General Partner
and Fund irrevocably waive any objection each may now or hereafter have to the
laying of venue of any action or proceeding in any of the aforesaid courts and
any claim that any such action or proceeding has been brought in an inconvenient
forum. Furthermore, each party hereto irrevocably waives any right
that it may have to trial by jury in any action, proceeding or counterclaim
arising out of or related to this Agreement or the services contemplated
hereby.
20.
Notices.
Notices
and other writings delivered or mailed postage prepaid to the General Partner
and Fund shall be addressed to the Fund/General Partner at Victoria Bay Asset
Management, LLC, c/o Nicholas D. Gerber, P.O. Box 6919, Moraga,
CA 94570, or such other address as the General Partner or Fund may
have designated to the Administrator in writing, or to the Administrator at 40
Water Street, Boston, MA 02109, Attention: Manager, Fund
Administration Department, or to such other address as the Administrator may
have designated to the General Partner and Fund in writing, shall be deemed to
have been properly delivered or given hereunder to the respective
addressee.
21.
Binding
Effect;
Assignment.
This
Agreement shall be binding upon and inure to the benefit of the General Partner,
Fund and the Administrator and their respective successors and assigns, provided
that no party hereto may assign this Agreement or any of its rights or
obligations hereunder without the written consent of the other
parties. Each party agrees that only the parties to this Agreement
and/or their successors in interest shall have a right to enforce the terms of
this Agreement. Accordingly, no client of the General Partner,
unitholder of the Fund or other third party shall have any rights under this
Agreement and such rights are explicitly disclaimed by the parties.
22.
Counterparts
.
This Agreement
may be executed in any number of counterparts each of which shall be deemed to
be an original. This Agreement shall become effective when one or more
counterparts have been signed and delivered by each of the parties. A
photocopy or telefax of the Agreement shall be acceptable evidence of the
existence of the Agreement and the Administrator shall be protected in relying
on the photocopy or telefax until the Administrator has received the original of
the Agreement.
23.
Exclusivity
.
The services
furnished by the Administrator hereunder are not to be deemed exclusive, and the
Administrator shall be free to furnish similar services to others.
24.
Authorization.
The
General Partner hereby represents and warrants that the Management Directors of
its Board of Directors including Mr. Nicholas D. Gerber have authorized the
execution and delivery of this Agreement and that authorized persons of the
General Partner and the Fund have signed this Agreement, Appendices A, B and C
and the fee schedule hereto.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed and delivered by their duly
authorized officers as of the date first written above.
The
undersigned acknowledges that (I/we) have received a copy of this
document.
BROWN
BROTHERS HARRIMAN & CO.
|
|
|
|
By:
|
/s/ James R. Kent
|
|
Name:
James R. Kent
|
|
Title:
Managing Director
|
|
Date:
March 29, 2006
|
|
|
|
UNITED
STATES OIL FUND, LP
|
|
By:Victoria
Bay Asset Management, LLC, as General Partner
|
|
|
|
|
By:
|
/s/ Nicholas Gerber
|
|
|
Name: Nicholas
Gerber
|
|
|
Title:
Director
|
|
|
Date:
April 3, 2006
|
|
|
|
VICTORIA
BAY ASSET MANAGEMENT, LLC
|
|
|
|
|
By:
|
/s/ Nicholas Gerber
|
|
|
Name: Nicholas
Gerber
|
|
|
Title:
Manager and Management Director
|
|
|
Date:
April 3,
2006
|
Exhibit
10.7
AMENDMENT
AGREEMENT
DATED
AS OF OCTOBER 27, 2008
TO
THE ADMINISTRATIVE AGENCY AGREEMENT
DATED
AS OF MARCH 13, 2006
AMENDMENT AGREEMENT
(the
“Amendment”) dated as of October 27, 2008 among
BROWN BROTHERS HARRIMAN &
CO.
(“BBH”)
,
UNITED STATES COMMODITY FUNDS LLC
(“USCF”), formerly known as Victoria
Bay Asset Management, LLC, and
UNITED STATES OIL FUND, LP
(“USOF”).
WITNESSETH
The
parties have previously entered into that certain Administrative Agency
Agreement dated as of March 13, 2006 (the “Agreement”). The parties
have agreed to amend the Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, BBH, USCF and USOF hereby acknowledge and
agree as follows:
1.
Amendment of the
Agreement.
Upon execution of this Amendment by BBH, USCF and
USOF, the Agreement shall be hereby amended as follows:
Section
12.1 of the Agreement shall be deleted in its entirety and replaced with the
following:
12.1 This
Agreement shall have an initial term of two (2) years from the date hereof.
Thereafter, this Agreement shall automatically renew for successive one (1) year
periods unless any party terminates this Agreement by providing written notice
no later than seventy-five (75) days prior to the expiration of the applicable
term to the other parties at their address set forth herein. Upon the
completion of the initial term, either the Administrator, on the one hand, or
the General Partner, on the other hand, may elect to terminate this Agreement at
any time by delivering ninety (90) days notice thereof to the other party.
Notwithstanding the foregoing provisions, any party may terminate this Agreement
at any time (a) for cause, which is a material breach of the Agreement not cured
within sixty (60) days of written notice of such breach, in which case
termination shall be effective upon receipt of written notice by the
non-terminating parties, or (b) upon thirty (30) days’ written notice to
the other parties in the event that a party is adjudged bankrupt or insolvent,
or there shall be commenced against such party a case under any applicable
bankruptcy, insolvency, or other similar law now or hereafter in effect. In the
event a termination notice is given by a party hereto, all expenses associated
with the movement of records and materials and the conversion thereof shall be
paid by the Fund for which services shall cease to be performed
hereunder. The Administrator shall be responsible for completing all
actions in progress when such termination notice is given unless otherwise
agreed.
2.
Representations.
Each
party represents to the other party that:-
(a)
Status.
It is duly
organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing;
(b)
Powers.
It has the power to
execute and deliver this Amendment and has taken all necessary action to
authorize such execution, delivery and performance;
(c)
No Violation or Conflict.
Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets;
(d)
Consents.
All
governmental and other consents that are required to
have been
obtained by it with respect to this Amendment have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(e)
Obligations
Binding.
Its obligations under this Amendment constitute
its
legal, valid and binding obligations, enforceable in accordance with its
respective terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors’ rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at
law)).
3. Miscellaneous.
(a)
Entire
Agreement.
The Amendment and the Agreement constitute the
entire agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communication and prior writings (except as other
wise provided herein) with respect thereto.
(b)
Counterparts.
This
Amendment may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if signatures thereto and hereto were upon the
same instrument.
(c)
Headings.
The
headings used in this Amendment are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in
interpreting this Amendment.
(d)
Governing Law.
This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York (without reference to choice of law doctrine).
(e)
Terms
.
Terms used in this
Amendment, unless otherwise defined herein, shall have the meanings ascribed to
them in the Agreement.
IN
WITNESS WHEREOF, the parties have caused this Amendment to be executed by their
respective officers or authorized representatives as of the day and year first
above written.
BROWN
BROTHERS HARRIMAN & CO.
|
|
UNITED
STATES COMMODITY FUNDS LLC
|
|
|
|
By:
|
/s/ James R. Kent
|
|
By:
|
/s/ Howard Mah
|
Name:
James R. Kent
|
|
Name:
Howard Mah
|
Title:
Managing Director
|
|
Title:
Management Director
|
Date:
October 29, 2008
|
|
Date:
October 31,
2008
|
|
|
UNITED
STATES OIL FUND, LP
|
|
|
By:
United States Commodity Funds
|
|
|
LLC,
as General Partner
|
|
|
|
|
|
By:
|
/s/ Howard Mah
|
|
|
Name:
Howard Mah
|
|
|
Title:
Management Director
|
|
|
Date:
October 31, 2008
|
Exhibit
10.8
SECOND
AMENDMENT AGREEMENT
DATED
AS OF MARCH 24, 2008
TO
THE MARKETING AGENT AGREEMENT
DATED
AS OF MARCH 13, 2006
AMENDMENT AGREEMENT
(the
“Amendment”) dated as of March 24, 2008 between
ALPS DISTRIBUTORS, INC.
(“ALPS”)
, VICTORIA BAY ASSET
MANAGEMENT, LLC
(“VBAM”), and
UNITED STATES OIL FUND, LP
(“USOF”).
WITNESSETH
The
parties have previously entered into that certain Marketing Agent Agreement
dated as of March 13, 2006 (the “Agreement”). The parties have agreed
to amend the Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, ALPS, VBAM and USOF hereby acknowledge and
agree as follows:
1.
Amendment of the
Agreement.
Upon execution of this Amendment by ALPS, VBAM and
USOF, the Agreement shall be hereby amended as follows:
(a) Section
7 of the Agreement, “Duration,” shall be deleted in its entirety andreplaced
with the following:
7.1. Duration. This
Agreement shall become effective on the date hereof and continue for an initial
term of one (1) year from the date of this Agreement and will include any
renewal term of this Agreement and will last until the expiration of this
Agreement or the earlier termination of this Agreement in accordance with its
terms (the “Term”). This Agreement will automatically be renewed for successive
one (1) year periods unless, no later than thirty (30) calendar days prior to
the end of the then-current Term, either the Marketing Agent, on the one hand,
or the General Partner, on the other hand, elects to terminate this Agreement by
delivering written notice thereof to the other party. Upon the
completion of the initial term, either the Marketing Agent, on the one hand, or
the General Partner, on the other hand, may elect to terminate this Agreement by
delivering 90 days notice thereof to the other party. Notwithstanding
the foregoing, this Agreement may be terminated by any party upon written notice
to the other parties if (a) the Fund is terminated, (b) any other party becomes
insolvent or bankrupt or files a voluntary petition, or is subject to an
involuntary petition, in bankruptcy or attempts to or makes an assignment for
the benefit of its creditors or consents to the appointment of a trustee or
receiver, provided that the General Partner may not terminate this Agreement
pursuant to this provision if the event relates to the General Partner or the
Fund or (c) any other party willfully and materially breaches its obligations
under this Agreement and such breach has not been cured to the reasonable
satisfaction of the non-breaching party prior to the expiration of ninety (90)
days after notice by the non-breaching party to the breaching party of such
breach.
(b) All
references in the Agreement to the “National Association of Securities Dealers,
Inc.” shall be replaced with the “Financial Industry Regulatory Authority” and
all references to the “NASD” shall be replaced with “FINRA.”
2.
Representations.
Each
party represents to the other party that:-
(a)
Status.
It is duly
organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing;
(b)
Powers.
It has the power to
execute and deliver this Amendment and has taken all necessary action to
authorize such execution, delivery and performance;
(c)
No Violation or Conflict.
Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets;
(d)
Consents.
All
governmental and other consents that are required to
have been
obtained by it with respect to this Amendment have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(e)
Obligations
Binding.
Its obligations under this Amendment constitute
its
legal, valid and binding obligations, enforceable in accordance with its
respective terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors’ rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at
law)).
3. Miscellaneous.
(a)
Entire
Agreement.
The Amendment constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings (except as other wise provided herein)
with respect thereto.
(b)
Counterparts.
This
Amendment may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if signatures thereto and hereto were upon the
same instrument.
(c)
Headings.
The
headings used in this Amendment are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in
interpreting this Amendment.
(d)
Governing Law.
This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York (without reference to choice of law doctrine).
(e)
Terms
.
Terms used in this
Amendment, unless otherwise defined herein, shall have the meanings ascribed to
them in the Agreement.
IN
WITNESS WHEREOF, the parties have caused this Amendment to be executed by their
respective officers or authorized representatives as of the day and year first
above written.
ALPS
DISTRIBUTORS, INC.
|
|
VICTORIA
BAY ASSET
MANAGEMENT,
LLC
|
|
|
|
By:
|
/s/ Thomas A. Carter
|
|
By:
|
/s/ Howard Mah
|
Name: Thomas
A Carter
|
|
Name:
Howard Mah
|
Title:
Managing Director
Business Development
|
|
Title:
Managing Director
|
|
|
Date:
April 29,
2008
|
|
|
UNITED
STATES OIL FUND, LP
|
|
|
|
|
|
By:
|
/s/ Howard Mah
|
|
|
Name:
Howard Mah
|
|
|
Title:
Managing Director
|
|
|
Date:
April 29, 2008
|
Exhibit
31.1
Certification
of Principal Executive Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I,
Nicholas D. Gerber, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of United States Oil Fund,
LP;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s Board of
Directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial
reporting.
|
|
|
|
|
|
/s/
Nicholas D. Gerber
|
|
|
Name:
|
Nicholas
D. Gerber
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
United
States Commodity Funds LLC,
General
Partner of United States Oil Fund, LP
|
|
Exhibit
31.2
Certification
of Principal Financial Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Howard
Mah, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of United States Oil Fund,
LP;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s Board of
Directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial
reporting.
|
|
|
|
Date:
November
9, 2009
|
|
/s/ Howard Mah
|
|
|
Name:
|
Howard
Mah
|
|
|
Title:
|
Chief
Financial Officer
|
|
|
|
United
States Commodity Funds LLC,
General
Partner of United States Oil Fund, LP
|
|
Exhibit
32.1
Certification
of Principal Executive Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009 (the “Report”) of United States Oil Fund, LP (the
“Registrant”), as filed with the Securities and Exchange Commission on the date
hereof, I, Nicholas D. Gerber, the Chief Executive Officer of United States
Commodity Funds LLC, General Partner of the Registrant, hereby certify, to the
best of my knowledge, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Registrant.
|
|
|
|
|
|
/s/ Nicholas D. Gerber
|
|
|
Name:
|
Nicholas
D. Gerber
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
United
States Commodity Funds LLC,
General
Partner of United States Oil Fund, LP
|
|
Exhibit
32.2
Certification
of Principal Financial Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009 (the “Report”) of United States Oil Fund, LP (the
“Registrant”), as filed with the Securities and Exchange Commission on the date
hereof, I, Howard Mah, the Chief Financial Officer of United States Commodity
Funds LLC, General Partner of the Registrant, hereby certify, to the best of my
knowledge, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Registrant.
|
|
|
|
Date:
November
9, 2009
|
|
/s/ Howard Mah
|
|
|
Name:
|
Howard
Mah
|
|
|
Title:
|
Chief
Financial Officer
|
|
|
|
United
States Commodity Funds LLC,
General
Partner of United States Oil Fund, LP
|
|