EXHIBIT 10.01
FORM OF
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the ___ day of ____________, 2002,
among XXXXXX XXXXXXX CHARTER XXXXXXXX X.X., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and XXXXXXXX & COMPANY, INC., a Maryland corporation (the
"Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the
Limited Partnership Agreement, dated as of _________ ___, 2002 (the "Limited
Partnership Agreement"), to trade, buy, sell, spread, or otherwise acquire,
hold, or dispose of commodities (which may include foreign currencies,
mortgage-backed securities, money market instruments, financial instruments and
any other securities or items which are now, or may hereafter be, the subject of
futures contract trading), domestic and foreign commodity futures contracts,
commodity forward contracts, foreign exchange commitments, options on physical
commodities and on futures contracts, spot (cash) commodities and currencies,
and any rights pertaining thereto (hereinafter referred to collectively as
"futures interests") and securities (such as United States Treasury bills)
approved by the Commodity Futures Trading Commission (the "CFTC") for investment
of customer funds;
WHEREAS, the Partnership is a member partnership of the Xxxxxx
Xxxxxxx Charter Series (the "Fund Group") pursuant to which units of limited
partnership interest ("Units") of such member partnerships will be sold to
investors in a common prospectus. Units of the Partnership are being offered
pursuant to a Registration Statement on Form S-1 (No. 333-______) (as amended
from time to time, the "Registration Statement") filed under the Securities Act
of 1933, as amended (the "Securities Act"), and a final Prospectus dated
_________ ___, 2002, constituting a part thereof (as amended and supplemented
from time to time) (the "Prospectus"). Such Units can be exchanged by a limited
partner of a member partnership of the Fund Group for Units of other member
partnerships of the Fund Group at 100% of the respective Net Asset Value (as
defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the Trading Advisor engages in trading in futures
interests and is willing to provide certain services and undertake certain
obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to act as
trading advisor for the Partnership and to make investment decisions with
respect to futures interests for the Partnership's Net Assets (as defined in
Section 6(c) hereof) and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Advisor will
conduct futures interests trading for the Partnership;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Initial and Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the initial and
continuing offering of Units: (i) to make all disclosures regarding itself, its
principals and affiliates, its trading performance, its trading programs,
systems, methods, and strategies (subject to the need, in the reasonable
discretion of the Trading Advisor, to preserve the secrecy of proprietary
information concerning such programs, systems, methods, and strategies), any
client accounts over which it has discretionary trading authority (other than
the names of any such clients), and otherwise, as the Partnership may reasonably
require to comply with any applicable federal or state law or rule or
regulation, including those of the Securities and Exchange Commission (the
"SEC"), the CFTC, the National Futures Association (the "NFA"), the National
Association of Securities Dealers, Inc. (the "NASD") or any other regulatory
body, exchange, or board; and (ii) otherwise to cooperate with the Partnership,
the General Partner, and Xxxxxx Xxxxxxx XX Inc., the selling agent for the
Partnership ("Xxxxxx Xxxxxxx XX") by providing information regarding the Trading
Advisor in connection with the preparation and filing of the Registration
Statement and Prospectus, including any pre-or post-effective amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) The General Partner, in its sole discretion and at any
time may (i) withdraw the SEC registration of the Units, or (ii) discontinue the
offering of Units.
(c) If, while Units continue to be offered and sold, the
Trading Advisor becomes aware of any materially untrue or misleading statement
or omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees thereof
shall distribute the Prospectus or selling literature or shall engage in any
selling activities whatsoever in connection with the continuing offering of
Units except as may be specifically requested by the General Partner.
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2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as Trading
Advisor for the Partnership and, as such, shall have sole authority and
responsibility for directing the investment and reinvestment of the Net Assets
of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement, or the Prospectus
or as otherwise provided in writing to the Trading Advisor; provided, however,
that the General Partner may override the instructions of the Trading Advisor to
the extent necessary (i) to comply with the trading policies of the Partnership
and with applicable speculative position limits, (ii) to pay the Partnership's
expenses, (iii) to the extent the General Partner believes doing so is necessary
for the protection of the Partnership, (iv) to terminate the futures interests
trading of the Partnership, or (v) to comply with any applicable law or
regulation. The General Partner agrees not to override any such instructions for
the reasons specified in clause (ii) of the preceding sentence unless the
Trading Advisor fails to comply with a request of the General Partner to make
the necessary amount of funds available to the Partnership within five calendar
days of such request. Except as otherwise provided herein, the Trading Advisor
shall not be liable for the consequences of any decision by the General Partner
to override instructions of the Trading Advisor. In performing services for the
Partnership, the Trading Advisor may not materially alter the trading program(s)
used by the Trading Advisor in investing and reinvesting the Partnership's Net
Assets in futures interests as described in the Prospectus without the prior
written consent of the General Partner, it being understood that changes in the
futures interests traded shall not be deemed an alteration in the Trading
Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the
prohibitions and trading policies of the Partnership described in the
Prospectus and as otherwise provided in writing to the Trading Advisor.
The Trading Advisor shall trade the Partnership's Net Assets pursuant
to the Diversified Portfolio described in the Prospectus (with such
changes and additions to such trading program as the Trading Advisor,
from time to time, incorporates into its Diversified Portfolio for
accounts the size of the Partnership), unless the Trading Advisor is
instructed by the General Partner to trade the Partnership's Net Assets
pursuant to any one or more of the Trading Advisor's other trading
programs described in the Prospectus.
(ii) Subject to reasonable assurances of confidentiality by
the General Partner and the Partnership, provide the General Partner,
within 30 calendar days of a request therefor by the General Partner,
with information comparing the performance of the Partnership's account
and the performance of all other client accounts directed by the
Trading Advisor using the trading programs used by the Trading Advisor
for the Partnership over a specified period of time. In providing such
information, the Trading Advisor may take such steps as are necessary
to assure the confidentiality of the Trading Advisor's clients'
identities. The Trading Advisor shall, upon the General Partner's
request, consult with the General Partner concerning any discrepancies
between the performance of such other accounts and thePartnership's
account. The Trading Advisor shall promptly inform the General Partner
of any material discrepancies, as reasonably determined by the Trading
Advisor, of which the Trading Advisor becomes aware. The
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General Partner acknowledges that different trading programs,
strategies or implementation methods may be utilized for different
accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity (including
notional funds), accounts that commence trading at different times,
accounts which have different portfolios or different fiscal years and
that such differences may cause divergent trading results.
(iii) Upon the reasonable request of the General Partner and
subject to reasonable assurances of confidentiality by the General
Partner and the Partnership, provide the General Partner with all
material information concerning the Trading Advisor other than
proprietary information (including, without limitation, information
relating to changes in control, personnel, trading approach, or
financial condition). The General Partner acknowledges that all trading
instructions made by the Trading Advisor will be held in confidence by
the General Partner, except to the extent necessary to conduct the
business of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's
open positions maintained by the Trading Advisor exceed the Trading
Advisor's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees, including give-up fees at rates approved by Xxxxxx Xxxxxxx XX,
arising from trading by the Trading Advisor shall be for the account of the
Partnership. The Trading Advisor makes no representations as to whether its
trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the
contrary, the Trading Advisor shall assume financial responsibility for any
errors committed or caused by it in transmitting orders for the purchase or sale
of futures interests for the Partnership's account, including, but not limited
to, payment of the floor brokerage commissions, exchange and NFA fees, and other
transaction charges and give-up charges incurred on such trades. The Trading
Advisor's errors shall include, but not be limited to, inputting improper
trading signals or communicating incorrect orders for execution. The Trading
Advisor shall not be responsible for errors committed or caused by Xxxxxx
Xxxxxxx XX, Xxxxxx Xxxxxxx & Co. Incorporated ("MS&Co.") or any other floor
broker or futures commission merchant executing trades. The Trading Advisor
shall have an affirmative obligation promptly to notify the General Partner of
its own errors, and the Trading Advisor shall use its best efforts to identify
and promptly notify the General Partner of any order or trade which the Trading
Advisor reasonably believes was not executed in accordance with its
instructions.
(e) Prior to the commencement of trading, the General Partner
on behalf of the Partnership shall deliver to the Trading Advisor a trading
authorization appointing the Trading Advisor the Partnership's attorney-in-fact
for such purpose.
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3. Designation of Additional Trading Advisors and
Reallocation of Net Assets.
If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets as
the General Partner shall determine in its absolute discretion. The designation
of an additional trading advisor or advisors and the apportionment of Net Assets
to any such trading advisor(s) pursuant to this Section 3 shall neither
terminate this Agreement nor modify in any regard the respective rights and
obligations of the Partnership, the General Partner and the Trading Advisor
hereunder. In the event that an additional trading advisor is so designated, the
Trading Advisor shall thereafter receive management and incentive fees based,
respectively, on that portion of the Net Assets managed by the Trading Advisor
and that portion of the Trading Profits (as defined in Section 6(d) hereof)
properly attributable to the trading done by the Trading Advisor.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor as a member of any partnership, joint venture, association,
syndicate or other entity with the Partnership or the General Partner, or be
deemed to confer on any of them any express, implied, or apparent authority to
incur any obligation or liability on behalf of any other. It is expressly agreed
that the Trading Advisor is neither a promoter, sponsor, nor issuer with respect
to the Partnership.
5. Commodity Brokers.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Xxxxxx Xxxxxxx XX shall act as the non-clearing commodity
broker and MS&Co. shall act as the clearing commodity broker for the
Partnership, with the exception of trades on the London Metal Exchange which
will be cleared by Xxxxxx Xxxxxxx & Co. International Limited ("MSIL"), also an
affiliate of the General Partner. In addition, MS&Co. will act as the
counterparty on all of the foreign currency forward trades for the Partnership.
The General Partner shall provide the Trading Advisor with copies of brokerage
statements. Notwithstanding that MS&Co. and MSIL shall act as the clearing
commodity broker for the Partnership, the Trading Advisor may execute trades
through floor brokers other than those employed by MS&Co. and MSIL so long as
arrangements are made for such floor brokers to "give-up" or transfer the
positions to MS&Co. and MSIL and provided that the rates charged by such floor
brokers have been approved in writing by Xxxxxx Xxxxxxx XX. The Trading Advisor
will not be responsible for paying give-up fees at rates approved by Xxxxxx
Xxxxxxx XX.
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6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's
account, equal to 1/12 of 2.75% (a 2.75% annual rate) of the
Partnership's "Net Assets" (as defined in Section 6(c)) as of the
opening of business on the first day of each calendar month, commencing
with the month in which the Partnership begins to receive trading
advice from the Trading Advisor pursuant to this Agreement.
(ii) A monthly incentive fee equal to 20% of the "Trading
Profits" (as defined in Section 6(d)) experienced by the Partnership as
of the end of each calendar month.
(b) If this Agreement is terminated on a date other than the
last day of a month, the incentive fee described above shall be determined as if
such date were the end of a month. If this Agreement is terminated on a date
other than the end of a month, the management fee described above shall be
prorated based on the ratio of the number of trading days in the month through
the date of termination to the total number of trading days in the month. If,
during any month after the Partnership commences trading operations (including
the month in which the Partnership commences such operations), the Partnership
does not conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall have the same
meaning ascribed thereto in Section 7(d)(1) of the Limited Partnership
Agreement.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets, decreased by the monthly management fees, brokerage
fees and any transaction fees and costs, if any, not included in the brokerage
fees; with such trading profits and items of decrease determined from the end of
the last calendar month in which an incentive fee was earned by the Trading
Advisor or, if no incentive fee has been earned previously by the Trading
Advisor, from the date that the Partnership commenced trading to the end of the
month as of which such incentive fee calculation is being made. Extraordinary
expenses of the Partnership, if any, will not be deducted in determining Trading
Profits. No incentive fee will be paid on interest income earned by the
Partnership.
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(e) If any payment of incentive fees is made to the Trading
Advisor on account of Trading Profits and the Trading Advisor thereafter fails
to earn Trading Profits or experiences losses for any subsequent incentive
period, the Trading Advisor shall be entitled to retain such amounts of
incentive fees previously paid to the Trading Advisor in respect of such Trading
Profits. However, no subsequent incentive fees shall be payable to the Trading
Advisor until the Partnership has again earned Trading Profits; provided,
however, that if the Partnership's Net Assets are reduced or increased because
of redemptions or additions that occur at the end of, or subsequent to, an
incentive period in which the Trading Advisor experiences a futures interests
trading loss, the trading loss for that incentive period which must be recovered
before the Trading Advisor will be deemed to experience Trading Profits will be
equal to the amount determined by (x) dividing the Partnership's Net Assets
after such increase or decrease by the Partnership's Net Assets immediately
before such increase or decrease and (y) multiplying that fraction by the amount
of the unrecovered futures interests trading loss experienced in the month prior
to such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month without the payment of an
intervening incentive fee and the Partnership's Net Assets are increased or
reduced in more than one such month because of redemptions or additions, then
the trading loss for each such month shall be adjusted in accordance with the
formula described above and such increased or reduced amount of futures
interests trading loss shall be carried forward and used to offset subsequent
futures interests trading profits.
7. Term.
This Agreement shall continue in effect until _________ ___,
2005 (the "Initial Termination Date"). If this Agreement is not terminated on
the Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least 30 calendar days prior to the
expiration of the Initial Termination Date or any subsequent one-year period, as
the case may be, the Trading Advisor may terminate this Agreement at the end of
the current period by providing written notice to the Partnership indicating
that the Trading Advisor desires to terminate this Agreement at the end of such
period. This Agreement shall also terminate if the Partnership terminates. The
Partnership shall have the right to terminate this Agreement at its discretion
(a) at any month-end upon 5 calendar days' prior written notice to the Trading
Advisor or (b) at any time upon written notice to the Trading Advisor upon the
occurrence of any of the following events: (i) if a majority of the persons
described as "principals" of the Trading Advisor in the Prospectus cease for any
reason to be active executive officers of the Trading Advisor; (ii) if the
Trading Advisor becomes bankrupt or insolvent; (iii) if the Trading Advisor is
unable to use its trading programs, systems or methods as in effect on the date
hereof and as refined and modified in the future for the benefit of the
Partnership; (iv) if the registration, as a commodity trading advisor, of the
Trading Advisor with the CFTC or its membership in the NFA is revoked,
suspended, terminated, or not renewed, or limited or qualified in any respect;
(v) except as provided in Section 12 hereof, if the Trading Advisor merges or
consolidates with, or sells or otherwise transfers its advisory business, or all
or a substantial portion of its assets, any portion of its futures interests
trading programs, systems or methods, or its goodwill, to any individual or
entity; (vi) if the Net Asset value of a Unit, after adjusting for
distributions, if any, shall be less than $5.00; (vii) if, at any time, the
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Trading Advisor materially violates any trading or administrative policy
described in the Prospectus or otherwise provided in writing to the Trading
Advisor by the General Partner, except with the prior express written consent of
the General Partner; or (viii) if the Trading Advisor fails in a material manner
to perform any of its obligations under this Agreement. The Trading Advisor may
terminate this Agreement at any time, upon written notice to the Partnership, in
the event: (i) that the General Partner imposes additional trading limitation(s)
(not in effect on the date hereof) in the form of one or more trading policies
or administrative policies which the Trading Advisor does not agree to follow in
its management of the Partnership's Net Assets; (ii) the General Partner objects
to the Trading Advisor implementing a proposed material change in the Trading
Advisor's trading program(s) used by the Partnership and Trading Advisor
certifies to the General Partner in writing that it believes such change is in
the best interests of the Partnership; (iii) the General Partner overrides a
trading instruction of the Trading Advisor for reasons unrelated to a
determination by the General Partner that the Trading Advisor has violated the
Partnership's trading policies and the Trading Advisor certifies to the General
Partner in writing that as a result the Trading Advisor believes the performance
results of the Trading Advisor relating to the Partnership will be materially
adversely affected; (iv) the Partnership materially breaches this Agreement and
does not correct the breach within 10 business days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, or, if such consent is given, does not make arrangements to facilitate
such trading within 90 calendar days of such notice; or (vi) the Partnership's
Net Assets fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management
Activities. The Trading Advisor shall indemnify, defend and hold harmless the
Partnership and the General Partner, their controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
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investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Trading Advisor shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading by the Trading Advisor, or
any of its controlling persons or affiliates or their respective directors,
officers, partners, shareholders, or employees; provided that such liability
arises from an act or omission of the Trading Advisor, or any of its controlling
persons or affiliates or their respective directors, officers, partners,
shareholders, or employees which is found by a court of competent jurisdiction
upon entry of a final judgment (or, if no final judgment is entered, by an
opinion rendered by counsel who is approved by the Partnership and the Trading
Advisor, such approval not to be unreasonably withheld) to be a breach of this
Agreement or a representation, warranty or covenant herein, or the result of
misconduct or negligence or conduct not done in good faith in the reasonable
belief that it was in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities.
The Partnership shall indemnify, defend, and hold harmless the Trading Advisor,
its controlling persons, their affiliates and their respective directors,
officers, shareholders, employees, and controlling persons, from and against any
and all losses, claims, damages, liabilities (joint and several), costs, and
expenses (including any reasonable investigatory, legal, and other expenses
incurred in connection with, and any amounts paid in, any settlement; provided
that the Partnership shall have approved such settlement) resulting from a
demand, claim, lawsuit, action, or proceeding (other than those incurred as a
result of claims brought by or in the right of an indemnified party) relating to
the futures interests trading activities of the Partnership undertaken by the
Trading Advisor; provided that a court of competent jurisdiction upon entry of a
final judgment finds (or, if no final judgment is entered, an opinion is
rendered to the Partnership by independent counsel reasonably acceptable to both
parties) to the effect that the action or inaction of such indemnified party
that was the subject of the demand, claim, lawsuit, action, or proceeding did
not constitute negligence, misconduct, or a breach of this Agreement or a
representation, warranty or covenant of the Trading Advisor herein and was done
in good faith and in a manner such indemnified party reasonably believed to be
in, or not opposed to, the best interests of the Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless Xxxxxx Xxxxxxx XX,
MS&Co., the Partnership, the General Partner, any additional seller, and their
affiliates and each of their officers, directors, principals, shareholders, and
controlling persons from and against any loss, claim, damage, liability, cost,
and expense, joint and several, to which any indemnified person may become
subject under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Commodity Exchange Act, as amended, and rules
promulgated thereunder (the "CEAct"), the securities or Blue Sky law of any
jurisdiction, or otherwise (including any reasonable investigatory, legal, and
other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Trading Advisor shall have approved such
settlement, and in connection with any administrative proceedings), in respect
of the offer or sale of Units, insofar as such loss, claim, damage, liability,
cost, or expense (or action in respect thereof) arises out of, or is based upon:
(i) a breach by the Trading Advisor of any representation, warranty, or
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agreement in this Agreement relating to the offering of Units or any certificate
delivered pursuant to this Agreement at a Closing (as such term is defined in
the Prospectus); or (ii) a misleading or untrue statement or alleged misleading
or untrue statement of a material fact made in the Registration Statement, the
Prospectus, or any related selling material or an omission or alleged omission
to state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus and any
selling material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined below) (including the
historical performance capsules, but excluding the pro forma performance
information except to the extent the pro forma performance information was based
on information furnished by the Trading Advisor) or was made in reliance upon,
and in conformity with, written information or instructions furnished by the
Trading Advisor (provided, however, that with respect to any related selling
material only such related selling material as shall have been approved in
writing by the Trading Advisor).
(e) Partnership and General Partner Indemnity in Respect of
Sale of Units. The Partnership and the General Partner agree, jointly and
severally, to indemnify, defend and hold harmless the Trading Advisor and each
of its officers, directors, principals, shareholders, and controlling persons
from and against any loss, claim, damage, liability, cost, and expense, joint
and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership and the General Partner shall have
approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Partnership or the General Partner
of any representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered by the Partnership or the General
Partner pursuant to this Agreement at a Closing; or (ii) a misleading or untrue
statement or alleged misleading or untrue statement of a material fact made in
the Registration Statement, the Prospectus, or any related selling material or
an omission or alleged omission to state a material fact therein which is
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or the selling material, in light of the
circumstances under which they were made) not misleading, provided that such
materially misleading or untrue statement or alleged materially misleading or
untrue statement or omission or alleged omission does not specifically relate to
the Trading Advisor or its Trading Advisor Principals (including the historical
performance capsules, but excluding the pro forma performance information except
to the extent the pro forma performance information was based on information
furnished by the Trading Advisor) or was not made in reliance upon, and in
conformity with, written information or instructions furnished by the Trading
Advisor (provided, however, that with respect to any related selling material,
only such related selling material as shall have been approved in writing by the
Trading Advisor), or does not result from a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered pursuant to this Agreement at a
Closing.
(f) The foregoing agreements of indemnity shall be in addition
to, and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
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(g) Promptly after receipt by an indemnified person of notice
of the commencement of any action, claim, or proceeding to which any of the
indemnities may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available
hereunder, an indemnified person reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified person which are
inconsistent with the defenses available to the indemnifying party, the
indemnified person may retain its own counsel in connection with such action,
claim, or proceeding and will be indemnified by the indemnifying party for any
legal and other expenses reasonably incurred in connection with investigating or
defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees
and expenses of more than one counsel for all indemnified persons in connection
with any one action, claim, or proceeding or in connection with separate but
similar or related actions, claims, or proceedings in the same jurisdiction
arising out of the same general allegations. The indemnifying party will not be
liable for any settlement of any action, claim, or proceeding effected without
the indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. Right to Advise Others and Uniformity of Acts and
Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
-11-
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the
number or nature of its clients, except that: (i) so long as the Trading Advisor
acts as a trading advisor for the Partnership, neither the Trading Advisor nor
any of its principals or affiliates shall hold knowingly any position or control
any other account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different trading programs, degrees
of leverage and "notional" equity) to the extent necessary to comply with the
applicable position limits.
10. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations, Warranties, and Agreements of the Trading
Advisor. The Trading Advisor with respect to itself and each of its principals
represents and warrants to and agrees with the General Partner and the
Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading
programs agreed to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus) or
otherwise as furnished to the Trading Advisor in writing from time to
time.
(iii) The Trading Advisor shall trade: (A) the Partnership's
Net Assets pursuant to the Financial, Metal & Energy Portfolio trading
program described in the Prospectus unless the Trading Advisor is
instructed by the General Partner to trade the Partnership's Net Assets
pursuant to any one or more of the Trading Advisor's other trading
-12-
programs described in the Prospectus; and (B) only in futures and
option contracts traded on U.S. contract markets, foreign currency
forward contracts traded with MS&Co., and such other futures interests
that are approved in writing by the General Partner and have been
approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing
and in good standing as a corporation under the laws of the state of
its incorporation and is qualified to do business as a foreign
corporation and in good standing in each other jurisdiction in which
the nature or conduct of its business requires such qualification and
the failure to so qualify would materially adversely affect the Trading
Advisor's ability to perform its duties under this Agreement. The
Trading Advisor has full corporate power and authority to perform its
obligations under this Agreement, and as described in the Registration
Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in
the Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs,
approaches, systems and performance, in the Registration Statement and
the Prospectus, and in any supplemental selling material which has been
approved in writing by the Trading Advisor, are accurate and complete
in all material respects. With respect to the information relating to
the Trading Advisor and each Trading Advisor Principal, including the
Trading Advisor's and the Trading Advisor Principals' trading programs,
approaches, systems, and performance information, as applicable, (i)
the Registration Statement and Prospectus contain all statements and
information required to be included therein under the CEAct, (ii) the
Registration Statement as of its effective date will not contain any
misleading or untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or necessary to
make the statements therein not misleading and (iii) the Prospectus at
its date of issue and as of each monthly closing will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid
and binding agreement of the Trading Advisor enforceable in accordance
with its terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all
federal and state governmental, regulatory and exchange licenses,
registrations and approvals and has effected all filings with federal
and state governmental and regulatory agencies required to conduct its
or his business and to act as described in the Registration Statement
and Prospectus or required to perform its or his obligations under this
Agreement. The Trading Advisor is registered as a commodity trading
advisor under the CEAct and is a member of the NFA in such capacity.
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(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment
of the fees hereunder will not violate, or constitute a breach of, or
default under, the certificate of incorporation or bylaws of the
Trading Advisor or any agreement or instrument by which it is bound or
of any order, rule, law or regulation binding on it of any court or any
governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over it.
(ix) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in
the condition, financial or otherwise, business or prospects of the
Trading Advisor or any Trading Advisor Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of
the Prospectus and there is not pending, or to the best of the Trading
Advisor's knowledge threatened, any action, suit or proceeding at law
or in equity before or by any court or by any federal, state, municipal
or other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the Trading Advisor or any
Trading Advisor Principal is or was a party, or to which any of the
assets of the Trading Advisor or any Trading Advisor Principal is or
was subject and which resulted in or might reasonably be expected to
result in any materially adverse change in the condition, financial or
otherwise, of the Trading Advisor or which is required under the
Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any
notice of an investigation by the NFA or the CFTC regarding
noncompliance by the Trading Advisor or any of the Trading Advisor
Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or
indirectly, any commission, finder's fee, similar fee, or rebate from
any person in connection with the organization or operation of the
Partnership, other than as described in the Prospectus.
(xii) The actual performance of each discretionary account of
a client directed by the Trading Advisor and the Trading Advisor
Principals since at least the later of (i) the date of commencement of
trading for each such account or (ii) a date five years prior to the
effective date of the Registration Statement, is disclosed in the
Prospectus (other than such discretionary accounts the performance of
which are exempt from the CEAct disclosure requirements); all of the
information regarding the actual performance of the accounts of the
Trading Advisor and the Trading Advisor Principals set forth in the
Prospectus is complete and accurate in all material respects and is in
accordance with and in compliance with the disclosure requirements
under the CEAct and the Securities Act, including the Division of
Trading and Markets "notional equity" advisories and interpretations
and the rules and regulations of the NFA.
-14-
(b) Covenants of the Trading Advisor. The Trading Advisor
covenants and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Advisor to
continue to act as described herein and to at all times comply in all
material respects with all applicable laws, rules, and regulations, to
the extent that the failure to so comply would have a materially
adverse effect on the Trading Advisor's ability to act as described
herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals
becomes the subject of any investigation, claim or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
Trading Advisor. The Trading Advisor shall also inform the General
Partner immediately if the Trading Advisor or any of its officers
becomes aware of any material breach of this Agreement by the Trading
Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the
preparation of any amendments or supplements to the Registration
Statement and the Prospectus.
(iv) The Trading Advisor agrees to participate, to the extent
that the General Partner may reasonably request, in "road shows" and
other promotional activities relating to the marketing of the Units,
provided that such participation shall not in the reasonable judgment
of the Trading Advisor require the registration of the Trading Advisor
or any of its principals or agents as a broker-dealer or salesman or
interfere materially with the trading activities of the Trading
Advisor. The Trading Advisor shall pay the costs of its reasonably
requested participation in such road shows.
11. Representations, Warranties, and Covenants of the General
Partner and the Partnership.
(a) Representations of the Partnership and the General
Partner. The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and
filed with SEC, the Registration Statement and has filed copies thereof
with: (i) the CFTC under the CEAct; (ii) the NASD pursuant to its
Conduct Rules; and (iii) the NFA in accordance with NFA Compliance Rule
2-13. The Partnership will not file any amendment to the Registration
Statement or any amendment or supplement to the Prospectus unless the
Trading Advisor has received reasonable prior notice of and a copy of
such amendments or supplements and has not reasonably objected thereto
in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required under
applicable law to be taken by the General Partner and the Partnership
as a condition to the sale of the Units to qualified subscribers
therefor has been, or prior to each Closing will have been, taken; and,
upon payment of the consideration therefor specified in each accepted
Subscription and Exchange Agreement and Power of Attorney, in such form
as attached to the Prospectus, the Units will constitute valid limited
partnership interests in the Partnership.
-15-
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the Delaware Revised Uniform Limited
Partnership Act ("DRULPA") and is validly existing under the laws of
the State of Delaware with full power and authority to engage in the
trading of futures interests and to engage in its other contemplated
activities as described in the Prospectus; the Partnership has received
a certificate of authority to do business in the State of New York as
provided by Article 8-A of the New York Revised Limited Partnership Act
and is qualified to do business in each jurisdiction in which the
nature or conduct of its business requires such qualification and where
failure to be so qualified could materially adversely affect the
Partnership's ability to perform its obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the
State of Delaware and in good standing and qualified to do business as
a foreign corporation under the laws of the State of New York and is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature or conduct of its
business requires such qualification and where the failure to be so
qualified could materially adversely affect the General Partner's
ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to
conduct their business and to perform their respective obligations
under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the
CEAct. When the Registration Statement becomes effective under the
Securities Act and at all times subsequent thereto up to and including
the Initial Closing and each Monthly Closing, the Registration
Statement and Prospectus will comply in all material respects with the
requirements of the Securities Act, the rules and regulations
promulgated thereunder (the "SEC Regulations"), the rules of the NFA
and the CEAct. The Registration Statement as of its effective date will
not contain any misleading or 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. The Prospectus
as of its date of issue and at the Initial Closing and each Monthly
Closing will not contain any misleading or untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
The supplemental selling material will comply with the CEAct and the
regulations and rules of the NFA and NASD. The representation and
warranties in this clause (vi) shall not, however, apply to any
statement or omission in the Registration Statement, Prospectus or
supplemental selling material (which selling material has been reviewed
-16-
by the Trading Advisor) specifically relating to the Trading Advisor,
or its Trading Advisor Principals or its trading programs (other than
the pro forma performance information except to the extent such
information was based on information furnished by the Trading Advisor)
or made in reliance upon and in conformity with information furnished
by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition, financial or
otherwise, business or prospects of the General Partner or the
Partnership, whether or not arising in the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner for itself and on behalf
of the Partnership and constitutes a valid, binding and enforceable
agreement of the Partnership and the General Partner in accordance with
its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of
the transactions contemplated herein and in the Registration Statement
and Prospectus will not violate, or constitute a breach of, or default
under, the General Partner's certificate of incorporation or bylaws,
the Certificate of Limited Partnership, the Limited Partnership
Agreement, or any agreement or instrument by which either the General
Partner or the Partnership, as the case may be, is bound or any order,
rule, law or regulation applicable to the General Partner or the
Partnership of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction
over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of
the Prospectus and there is not pending or, to the best of the General
Partner's knowledge, threatened, any action, suit or proceeding at law
or in equity before or by any court or by any federal, state, municipal
or other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the General Partner or the
Partnership is or was a party, or to which any of the assets of the
General Partner or the Partnership is or was subject and which resulted
in or might reasonably be expected to result in any materially adverse
change in the condition, financial or otherwise, of the General Partner
or the Partnership or which is required under the Securities Act or the
CEAct to be disclosed in the Prospectus; and neither the General
Partner nor any of the principals of the General Partner, as
"principals" is defined under Rule 4.10 under the CEAct ("General
Partner Principals") has received any notice of an investigation by the
NFA, NASD, SEC or CFTC regarding non-compliance by the General Partner
or the General Partner Principals or the Partnership with the
Securities Act or the CEAct which is required under the Securities Act
or the CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and
state governmental, regulatory and exchange approvals, registrations,
-17-
and licenses, and have effected all filings with federal and state
governmental agencies and regulatory agencies required to conduct their
business and to act as described in the Registration Statement and
Prospectus or required to perform their obligations under this
Agreement (including, without limitation, registration as a commodity
pool operator under the CEAct and membership in the NFA as a commodity
pool operator) and will maintain all such required approvals, licenses,
filings and registrations for the term of this Agreement. The General
Partner's principals identified in the Registration Statement are all
of the General Partner Principals.
(b) Covenants of the General Partner and the Partnership. The
General Partner for itself and the Partnership covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to
continue to act as described herein and in the Prospectus and to all
times comply in all material respects with all applicable laws, rules,
and regulations, to the extent that the failure to so comply would have
a materially adverse effect on the General Partner's ability to act as
described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals
becomes the subject of any investigation, claim, or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
General Partner. The General Partner shall also inform the Trading
Advisor immediately if the General Partner or any of its officers
become aware of any breach of this Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Advisor
copies of the Registration Statement, the Prospectus, and all
amendments and supplements thereto, in each case as soon as available.
(iv) The General Partner shall change the name of the
Partnership so as to exclude the name of the Trading Advisor if the
Trading Advisor ceases to be the sole Trading Advisor for the
Partnership, unless otherwise agreed to by the General Partner and the
Trading Advisor.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
-18-
13. Complete Agreement.
This Agreement constitutes the entire agreement between the
parties with respect to the matters referred to herein, and no other agreement,
verbal or otherwise, shall be binding as between the parties unless in writing
and signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without
the express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written
consent of the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable. 17.
Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Initial Closing and at
the request of the General Partner at any Monthly Closing, provide the
following:
(a) To Xxxxxx Xxxxxxx XX, the General Partner and the
Partnership a certificate, dated the date of any such closing and in form and
substance satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading Advisor
in this Agreement are true, accurate, and complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its obligations
and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such
closing.
(b) To Xxxxxx Xxxxxxx XX, the General Partner and the
Partnership an opinion of counsel to the Trading Advisor, in form and
substance satisfactory to such parties, to the effect that:
(i) The Trading Advisor is a corporation duly organized and
validly existing under the laws of the state of its incorporation and
is qualified to do business and in good standing in each other
-19-
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to be duly qualified would
materially adversely affect the Trading Advisor's ability to perform
its obligations under this Agreement. The Trading Advisor has full
corporate power and authority to conduct its business as described in
the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses, registrations,
and memberships required by law, and the Trading Advisor (including the
Trading Advisor Principals) has made all filings necessary to perform
its obligations under this Agreement and to conduct its business as
described in the Registration Statement and Prospectus, except for such
licenses, memberships, filings and registrations, the absence of which
would not have a material adverse effect on its ability to act as
described in the Registration Statement and Prospectus or to perform
its obligations under this Agreement, and, to the best of such
counsel's knowledge, after due investigations, none of such licenses,
memberships or registrations have been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trading Advisor and constitutes a
valid and binding agreement of the Trading Advisor enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), and except as
enforceability of the indemnification and exculpation provisions
contained in this Agreement may be limited by applicable law or public
policy.
(iv) To such counsel's knowledge, based upon due inquiry of
certain officers of the Trading Advisor, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in
equity pending or threatened before or by any court, governmental body,
administrative agency, panel or self-regulatory organization, nor have
there been any such actions, suits or proceedings within the five years
preceding the date of the Prospectus against the Trading Advisor or any
Trading Advisor Principal which are required to be disclosed in the
Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of
the transactions contemplated herein and in the Prospectus will not be
in contravention of any of the provisions of the certificate of
incorporation or bylaws of the Trading Advisor and, based upon due
inquiry of certain officers of the Trading Advisor, to the best of such
counsel's knowledge, will not constitute a breach of, or default under,
or a violation of any instrument or agreement known to such counsel by
which the Trading Advisor is bound and will not violate any order, law,
rule or regulation applicable to the Trading Advisor of any court or
any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading
Advisor.
-20-
(vi) Based upon reliance of certain SEC "no-action" letters,
as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the
Prospectus will not require the Trading Advisor to be registered as an
"investment adviser" as that term is defined in the Investment Advisers
Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that would
lead them to believe that, (A) the Registration Statement at the time
it became effective, insofar as the Trading Advisor and the Trading
Advisor Principals are concerned, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
(B) the Prospectus at the time it was issued or at the closing
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein
relating to the Trading Advisor or the Trading Advisor Principals, in
light of the circumstances under which they were made, not misleading;
provided, however, that such counsel need express no opinion or belief
as to the performance data and notes or descriptions thereto set forth
in the Registration Statement and Prospectus, except that such counsel
shall opine, without rendering any opinion as to the accuracy of the
information in such tables, that the actual performance tables of the
Trading Advisor set forth in the Prospectus comply as to form in all
material respects with applicable CFTC rules and all CFTC and NFA
interpretations thereof, except as disclosed in the Prospectus or as
otherwise permitted by the CFTC staff.
In giving the foregoing opinion, counsel may rely on
information obtained from public officials, officers of the Trading Advisor, and
other sources believed by it to be responsible and may assume that signatures on
all documents examined by it are genuine.
(c) To Xxxxxx Xxxxxxx XX, the General Partner and the
Partnership, a report dated the date of the closing which shall present, for the
period from the date after the last day covered by the historical performance
capsules in the Prospectus to the latest practicable day before closing, updated
performance information, and which shall certify that such information is, to
the best of such Trading Advisor's knowledge, accurate in all material respects.
(2) The General Partner shall, at the Initial Closing
following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(i) The representations and warranties by the Partnership and
the General Partner in this Agreement are true, accurate, and complete
on and as of the date of the closing as if made on the date of the
closing.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings
for that purpose have been instituted or are pending or, to the
knowledge of the General Partner, are contemplated or threatened under
the Securities Act. No order preventing or suspending the use of the
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Prospectus has been issued by the SEC, NASD, CFTC, or NFA and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the General Partner, are contemplated or threatened
under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have performed
all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to
the date of the closing.
(b) To the parties hereto, an opinion of Cadwalader,
Xxxxxxxxxx & Xxxx, counsel to the General Partner and the Partnership, in form
and substance satisfactory to such parties, to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the
laws of the State of Delaware with partnership power and authority to
conduct the business in which it proposes to engage as described in the
Registration Statement and Prospectus and to perform its obligations
under this Agreement; the Partnership has received a Certificate of
Authority as contemplated under the New York Revised Limited
Partnership Act and is qualified to do business in New York.
(ii) The General Partner is a corporation validly existing and
in good standing as a corporation under the laws of the State of
Delaware and is duly qualified as a foreign corporation to do business
and is in good standing in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to so qualify might reasonably be
expected to result in material adverse consequences to the Partnership
or the General Partner's ability to perform its obligations as
described in the Registration Statement and Prospectus. The General
Partner has corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform
its obligations under this Agreement.
(iii) The General Partner, each of its principals as defined
in Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and
memberships required by law and have made all filings necessary in
order for the General Partner and the Partnership to perform their
obligations under this Agreement and conduct their business as
described in the Registration Statement and Prospectus, except for such
licenses, memberships, filings, and registrations, the absence of which
would not have a material adverse effect on the ability of the
Partnership or the General Partner to act as described in the
Registration Statement and Prospectus, or to perform their obligations
under this Agreement, and, to the best of such counsel's knowledge,
after due investigation, none of such licenses and memberships or
registrations have been rescinded, revoked or suspended.
(iv) This Agreement and the Limited Partnership Agreement have
been duly authorized, executed and delivered by or on behalf of the
General Partner and this Agreement has been duly authorized, executed
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and delivered by or on behalf of the Partnership, and each constitutes
a legal, valid and binding agreement of the General Partner and/or the
Partnership, as applicable, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, receivership or other laws relating to or
affecting creditors' rights generally, and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity), and except as enforcement of rights with respect to
indemnification and contribution obligations and provisions may be
limited by applicable law or considerations of public policy.
(v) The execution and delivery of this Agreement and the offer
and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention
of the General Partner's certificate of incorporation or bylaws the
Certificate of Limited Partnership, and the Limited Partnership
Agreement, and the execution and delivery of the Limited Partnership
Agreement (a) will not require any governmental approval to be obtained
on the part of the General Partner and the Partnership, except those
that have been obtained and, to such counsel's knowledge, are in
effect, (b) will not result in a violation of any provision of the
General Partner's certificate of incorporation or bylaws, the
Certificate of Limited Partnership, or the Limited Partnership
Agreement or any applicable laws applicable to the General Partner and
the Partnership, and (c) will not breach or result in a violation of,
or default under, (i) any instrument or agreement known to such counsel
which the General Partner and the Partnership is bound or to which any
of the property or assets of the General Partner and the Partnership is
subject, or (ii) any judgment, decree or order known to such counsel
which is applicable to the General Partner and the Partnership and,
pursuant to any applicable laws, is issued by any governmental
authority having jurisdiction over the General Partner and the
Partnership having jurisdiction over the General Partner and the
Partnership or their properties.
(vi) To such counsel's knowledge, based upon due inquiry of
certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in
equity pending or threatened before or by any court, governmental body,
administrative agency, panel or self-regulatory organization, nor have
there been any such actions, suits or proceedings within the five years
preceding the date of the Prospectus against the General Partner or the
Partnership which are required to be disclosed in the Registration
Statement or Prospectus.
(vii) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no
proceedings for a stop order are pending or threatened under Section
8(d) of the Securities Act or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus
was issued and as of the closing, the Prospectus, complied as to form
in all material respects with the requirements of the Securities Act,
the Securities Regulations, the CEAct and the regulations of the NFA
and NASD.
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(ix) Based upon reliance on certain SEC "no-action" letters,
as of the closing, the performance by the Partnership of the
transactions contemplated by this Agreement and as described in the
Prospectus will not require the Partnership to register as an
"investment company" under the Investment Company Act of 1940, as
amended.
(x) Nothing has come to such counsel's attention that would
lead them to believe that the Registration Statement at the time it
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they where made, not misleading; provided, however, that
Cadwalader, Xxxxxxxxxx & Xxxx need express no opinion or belief (a) as
to information in the Registration Statement or the Prospectus
regarding any Trading Advisor or its principals, or (b) as to the
financial statements, notes thereto and other financial or statistical
data set forth in the Registration Statement and Prospectus, or (c) as
to the performance data and notes or descriptions thereto set forth in
the Registration Statement and Prospectus.
(xi) The General Partner and its "principals," as defined in
CFTC Rule 3.1(a), and the Partnership have all federal and state
governmental, regulatory, self-regulatory and exchange approvals,
licenses, registrations, and memberships, and have effected all filings
with federal and state governmental regulators, self-regulatory
organizations and exchanges required to conduct their business and to
act as described in the Prospectus, or required to perform their
obligations under this Agreement and the Limited Partnership Agreement,
except for such approvals, licenses, registrations, memberships, and
filings the absence of which would not have a material adverse effect
on their ability to act as described in the Prospectus, or to perform
their obligations under such agreements, and, to the best of such
counsel's knowledge, after due investigation, none of such approvals,
licenses, registrations, memberships, or filings has been rescinded,
revoked, or suspended.
(xii) The information in the Prospectus under the captions
"Summary of the Prospectus--Tax Considerations," "Risk
Factors--Taxation and Regulatory Risks," "Purchases by Employee Benefit
Plans--ERISA Considerations," "Material Federal Income Tax
Considerations," "State and Local Income Tax Aspects," and "The Limited
Partnership Agreements," to the extent that such information
constitutes matters of law or legal conclusions, has been reviewed by
such counsel and is correct.
(xiii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken
by the General Partner and the Partnership as a condition to the
subscription for and sale of the Units to qualified subscribers
therefor has been taken; and, upon payment of the consideration
therefor specified in the accepted Subscription and Exchange Agreement
and Power of Attorney, the Units will constitute valid limited
partnership interests in the Partnership and each subscriber who
purchases Units will become a Limited Partner, subject to the
requirement that each such purchaser shall have duly completed,
executed and delivered to the Partnership a Subscription and Exchange
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Agreement and Power of Attorney relating to the Units purchased by such
purchaser, that such purchaser meets all applicable suitability
standards and that the representations and warranties of such purchaser
in the Subscription and Exchange Agreement and Power of Attorney are
true and correct and that such purchaser is included as a Limited
Partner in the Partnership's records.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the
filing of, or publish any description of the Trading Advisor, or of its
respective principals or trading approaches that is materially inconsistent with
those in the Registration Statement and Prospectus, without so informing the
General Partner and furnishing to it copies of all such filings within a
reasonable period prior to the date of filing or publication.
19. Disclosure Document.
During the term of this Agreement, the Trading Advisor shall
furnish to the General Partner promptly copies of all disclosure documents filed
with the CFTC or NFA by the Trading Advisor. The General Partner acknowledges
receipt of the Trading Advisor's disclosure document dated November 1, 2001.
20. Notices.
All notices required to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
if to the Partnership:
Xxxxxx Xxxxxxx Charter Xxxxxxxx X.X.
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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if to the General Partner:
Demeter Management Corporation
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the Trading Advisor:
Xxxxxxxx & Company, Inc.
Court Towers Building
000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxx
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING
SHALL BE BROUGHT BY A PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY
UNDER THIS AGREEMENT, EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE COUNTY, CITY AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY
ANY PARTY TO THIS AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY
RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.
23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading Advisor agrees not to seek any
prejudgment equitable or ancillary relief. The Trading Advisor agrees that its
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXXXX XXXXXXX CHARTER XXXXXXXX X.X.
by Demeter Management Corporation,
General Partner
By: ___________________________________
Name:
Title:
DEMETER MANAGEMENT CORPORATION
By: ___________________________________
Name:
Title:
XXXXXXXX & COMPANY, INC.
By: ___________________________________
Name:
Title:
