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Exhibit 10.5
MANAGEMENT AGREEMENT
AGREEMENT made as of the 17th day of January, 1996 among XXXXX
XXXXXX FUTURES MANAGEMENT INC., a Delaware corporation ("SBFM"), XXXXX XXXXXX
DIVERSIFIED FUTURES FUND X.X. XX, a New York limited partnership (the
"Partnership") and XXXX X. XXXXX & CO., INC., a California corporation (the
"Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner of the Partnership, which
has been organized with the objective to achieve substantial capital
appreciation by engaging in speculative trading of a diversified portfolio of
commodity interests which may include futures contracts, options, forward
contracts and physicals; and
WHEREAS, the Limited Partnership Agreement establishing the
Partnership (the "Limited Partnership Agreement") permits SBFM to delegate to
one or more commodity trading advisors SBFM's authority to make trading
decisions for the Partnership; and
WHEREAS, the Advisor is registered as a commodity trading
advisor with the Commodity Futures Trading Commission ("CFTC") and is a member
of the National Futures Association ("NFA"); and
WHEREAS, SBFM is registered as a commodity pool operator with
the CFTC and is a member of the NFA; and
WHEREAS, SBFM and the Advisor wish to enter into this
Agreement in order to set forth the terms and conditions upon which the Advisor
will render and implement advisory services in connection with the conduct by
the Partnership of its commodity trading activities during the term of this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR. (a) Upon the commencement of trading
operations by the Partnership and for the period and on the terms and conditions
of this Agreement, the Advisor shall have sole authority and responsibility, as
one of the Partnership's agents and attorneys-in-fact, for directing the
investment and reinvestment of the assets and funds of the Partnership allocated
to it by SBFM in commodity interests, including commodity futures contracts,
options and forward contracts and physicals. The Advisor will not be allocated
notional funds. All such trading on behalf of the Partnership shall be in
accordance with the trading strategies and trading policies set forth in the
Partnership's Prospectus dated as of August 21, 1995 (as supplemented, the
"Prospectus"), and as such trading policies may be changed from time to time
upon receipt by the Advisor of prior written notice of such change. Any open
positions or other investments at the time of receipt of such
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notice shall not be deemed to violate the changed policy and shall be closed or
sold in the ordinary course of trading. The Advisor may not change the trading
policies set forth in the Prospectus without the prior written consent of the
Partnership given by SBFM. The Advisor makes no representation or warranty that
the trading to be directed by it for the Partnership will be profitable or will
not incur losses.
(b) SBFM acknowledges receipt of the Advisor's Disclosure
Document dated September 1, 1995, November 10, and December 27, 1995 (the
"Disclosure Document"). All trades made by the Advisor for the account of the
Partnership shall be made through such commodity broker or brokers as SBFM shall
direct, and the Advisor shall have no authority or responsibility for selecting
or supervising any such broker in connection with the clearance or confirmation
of transactions for the Partnership or for the negotiation of brokerage rates
charged therefor. SBFM shall also direct the Advisor in writing on Appendix A to
this Agreement (which may be revised by SBFM from time to time) to direct trades
in commodity futures and options to such independent floor brokers as SBFM may
determine as agent for Xxxxx Xxxxxx Inc. for execution with instructions to
give-up the trades to the broker designated by SBFM. The Partnership's initial
futures commission merchant will be Xxxxx Xxxxxx Inc. All give-up or similar
fees relating to the foregoing shall be paid by the Partnership after all
parties have executed the relevant give-up agreement. The terms of this Section
1(b) shall supersede any inconsistent terms in the give-up agreement. The
Partnership's futures commission merchant will provide copies of all brokerage
statements to the Advisor.
(c) The initial allocation of the Partnership's assets to the
Advisor will be made to the Advisor's Global Diversified Portfolio and Original
Investment Program. In the event the Advisor wishes to use a trading system or
methodology other than or in addition to the systems or methodologies outlined
in the Prospectus in connection with its trading for the Partnership, either in
whole or in part, it may not do so unless the Advisor gives SBFM prior written
notice of its intention to utilize such different trading systems or
methodologies and SBFM consents thereto in writing. In addition, the Advisor
will provide five days' prior written notice to SBFM of any change in the
trading system or methodology to be utilized for the Partnership which the
Advisor deems material. If the Advisor deems such change in system or
methodology to be material, the changed system or methodology will not be
utilized for the Partnership without the prior written consent of SBFM. Changes
in contracts traded or in the leverage employed shall not be deemed to be
material and no prior notice or consent shall be required. The Advisor also
agrees to provide SBFM, upon request, with a written report of the assets under
the Advisor's management together with all other matters deemed by the Advisor
to be material changes to its business not previously reported to SBFM.
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(d) The Advisor agrees to make all material disclosures to the
Partnership regarding itself and its principals as defined in Part 4 of the
CFTC's regulations ("principals"), shareholders, directors, officers and
employees, their trading performance and general trading methods, its customer
accounts (but not the identities of or identifying information with respect to
its customers) and otherwise as are required in the reasonable judgment of SBFM
to be made in any filings required by Federal or state law or NFA rule or order.
Notwithstanding Sections 1(d) and 4(d) of this Agreement, the Advisor is not
required to disclose the actual trading results of proprietary accounts of the
Advisor or its principals unless SBFM determines that such disclosure is
required in order to fulfill its fiduciary obligations to the Partnership or the
reporting, filing or other obligations imposed on it by Federal or state law or
NFA rule or order. The Partnership and SBFM acknowledge that the trading advice
to be provided by the Advisor is a property right belonging to the Advisor and
that they will keep all such advice confidential. Further, SBFM agrees to treat
as confidential any results of proprietary accounts and/or proprietary
information with respect to trading systems obtained from the Advisor. Nothing
contained in this Agreement shall be deemed or construed to require the Advisor
to disclose any confidential or proprietary details of the Advisor's trading
strategies or the names or identities of the Advisor's clients.
(e) The Advisor understands and agrees that SBFM intends to
designate other trading advisors for the Partnership and to apportion or
reapportion to such other trading advisors the management of an amount of Net
Assets (as defined in Section 3(b) hereof) as it shall determine in its absolute
discretion, provided that the Partnership's Net Assets will initially be
allocated as provided in the Prospectus. The designation of other trading
advisors and the apportionment or reapportionment of Net Assets to any such
trading advisors pursuant to this Section 1 shall neither terminate this
Agreement nor modify in any regard the respective rights and obligations of the
parties hereunder. SBFM intends to allocate not less than 33.33% of the
Partnership's initial assets allocated to trading to the Advisor.
(f) SBFM may, from time to time, in its absolute discretion,
select additional trading advisors and reapportion funds among the trading
advisors for the Partnership as it deems appropriate. SBFM shall use its best
efforts to make reapportionments, if any, as of the first day of a month. The
Advisor agrees that it may be called upon at any time promptly to liquidate
positions in SBFM's sole discretion so that SBFM may reallocate the
Partnership's assets, meet margin calls on the Partnership's account, fund
redemptions, or for any other reason, except that SBFM will not require the
liquidation of specific positions by the Advisor. The Advisor shall not be
responsible for the effects of such liquidations ordered by SBFM. SBFM will use
its best efforts to give three days' prior notice to the Advisor of any
reallocations or liquidations and will use its
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best efforts to effect such reallocation or liquidation only at month-end.
(g) The Advisor will not be liable for trading losses in the
Partnership's account including losses caused by errors; provided, however, that
the Advisor will be liable to the Partnership with respect to losses incurred
due to errors committed or caused by it or any of its principals or employees in
communicating improper trading instructions or orders to any broker on behalf of
the Partnership.
2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the
Advisor shall be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Partnership in any way and shall not be deemed an agent, promoter
or sponsor of the Partnership, SBFM, or any other trading advisor or to be
establishing a partnership or joint venture with any of the foregoing. The
Advisor shall not be responsible to the Partnership, its general partner or any
limited partners for any acts or omissions of any other trading advisor acting
or previously acting as an advisor to the Partnership.
3. COMPENSATION. (a) In consideration of and as compensation
for all of the services to be rendered by the Advisor to the Partnership under
this Agreement, the Partnership shall pay the Advisor (i) an incentive fee
payable quarterly equal to 15% of New Trading Profits (as such term is defined
below) earned by the Advisor for the Partnership and (ii) a monthly fee for
professional management services equal to 1/3 of 1% (4% per year) of the
month-end Net Assets of the Partnership allocated to the Advisor.
(b) "Net Assets" shall have the meaning set forth in Paragraph
7(d)(1) of the Limited Partnership Agreement dated as of May 19, 1994, amended
as of August 8, 1994 and amended and restated as of July 31, 1995 and without
regard to amendments thereto (and as set forth in Appendix A hereto), provided
that in determining the Net Assets of the Partnership on any date, no adjustment
shall be made to reflect any distributions, redemptions or incentive fees
payable as of the date of such determination.
(c) "New Trading Profits" shall mean the excess, if any, of
Net Assets managed by the Advisor at the end of the fiscal period over Net
Assets managed by the Advisor at the end of the highest previous fiscal period
or Net Assets allocated to the Advisor at the date trading commences, whichever
is higher, and as further adjusted to eliminate the effect on Net Assets
resulting from new capital contributions, redemptions, reallocations or capital
distributions, if any, made during the fiscal period decreased by interest or
other income, not directly related to trading activity, earned on the
Partnership's assets during the fiscal period, whether the assets are held
separately
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or in margin accounts. Ongoing expenses will be attributed to the Advisor based
pro rata on the Advisor's proportionate share of Net Assets and shall not
include management fees of the Partnership's other advisors. Ongoing expenses
above will not include expenses of litigation not involving the activities of
the Advisor on behalf of the Partnership. No incentive fee shall be paid until
the end of the first full calendar quarter of trading, which fee shall be based
on New Trading Profits earned from the commencement of trading operations by the
Partnership through the end of the first full calendar quarter. Interest income
earned, if any, will not be taken into account in computing Trading Profits
earned by the Advisor. If Net Assets allocated to the Advisor are reduced due to
redemptions, distributions or reallocations, there will be a corresponding
proportional reduction in the related loss carryforward amount that must be
recouped before the Advisor is eligible to receive another incentive fee.
(d) Quarterly incentive fees and monthly management fees shall
be paid within twenty (20) business days following the end of the period, as the
case may be, for which such fee is payable. In the event of a redemption,
reallocation, distribution or the termination of this Agreement as of any date
which shall not be the end of a calendar quarter or a calendar month, as the
case may be, the quarterly incentive fee shall be computed as if the effective
date of the redemption, reallocation, distribution or termination were the last
day of the then current quarter and the monthly management fee shall be prorated
to the effective date of termination. If, during any month, the Partnership does
not conduct business operations or the Advisor is unable to provide the services
contemplated herein for more than two successive business days, the monthly
management fee shall be prorated by the ratio which the number of business days
during which SBFM conducted the Partnership's business operations or utilized
the Advisor's services bears in the month to the total number of business days
in such month, it being acknowledged that under the Advisor's trading programs
there will be periods when no open positions will be maintained for the
Partnership.
(e) The provisions of this Paragraph 3 shall survive the
termination of this Agreement.
4. RIGHT TO ENGAGE IN OTHER ACTIVITIES. (a) The services
provided by the Advisor hereunder are not to be deemed exclusive. SBFM on its
own behalf and on behalf of the Partnership acknowledges that, subject to the
terms of this Agreement, the Advisor and its officers, directors, employees and
shareholder(s), may render advisory, consulting and management services to other
clients and accounts. The Advisor and its officers, directors, employees and
shareholder(s) shall be free to trade for their own accounts and to advise other
investors and manage other commodity accounts during the term of this Agreement
and to use the same or different information, computer programs
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and trading strategies, programs or formulas which they obtain, produce or
utilize in the performance of services to SBFM for the Partnership. However, the
Advisor represents, warrants and agrees that it believes that the rendering of
such consulting, advisory and management services to other accounts and entities
will not require any material change in the Advisor's basic trading strategies
and will not affect the capacity of the Advisor to continue to render services
to SBFM for the Partnership of the quality and nature contemplated by this
Agreement.
(b) If, at any time during the term of this Agreement, the
Advisor is required to aggregate the Partnership's commodity positions with the
positions of any other person for purposes of applying CFTC- or exchange-imposed
speculative position limits, the Advisor agrees that it will promptly notify
SBFM if the Partnership's positions are included in an aggregate amount which
exceeds the applicable speculative position limit. The Advisor agrees that, if
its trading recommendations are altered because of the application of any
speculative position limits, it will not modify the trading instructions with
respect to the Partnership's account in such manner as to affect the Partnership
substantially disproportionately as compared with the Advisor's other accounts.
The Advisor further represents, warrants and agrees that under no circumstances
will it knowingly or deliberately use trading strategies or methods for the
Partnership that are inferior to strategies or methods employed for any other
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account in any manner,
it being acknowledged, however, that the Advisor offers ten different trading
programs, and that different trading strategies or methods may be utilized for
differing sizes of accounts, accounts with different trading policies, fees,
commissions or levels of diversification, accounts experiencing differing
inflows or outflows of equity, accounts which commence trading at different
times, accounts which have different portfolios or different fiscal years,
accounts utilizing different executing brokers and accounts with other
differences, and that such differences may cause divergent trading results.
(c) It is acknowledged that the Advisor and/or its officers,
employees, directors and shareholder(s) presently act, and it is agreed that
they may continue to act, as advisor for other accounts managed by them, and may
continue to receive compensation with respect to services for such accounts in
amounts which may be more or less than the amounts received from the
Partnership.
(d) The Advisor agrees that it shall make such information
available to SBFM respecting the performance of the Partnership's account as
compared to the performance of other accounts managed by the Advisor or its
principals as shall be reasonably requested by SBFM, provided that in no event
shall the
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Advisor be required to disclose the identity of its customers. The Advisor
presently believes and represents that existing speculative position limits will
not materially adversely affect its ability to manage the Partnership's account
given the potential size of the Partnership's account and the Advisor's and its
principals' current accounts and all proposed accounts for which they have
contracted to act as trading manager.
5. TERM. (a) This Agreement shall continue in effect until
June 30, 1996. SBFM may, in its sole discretion, renew this Agreement for
additional one-year periods upon notice to the Advisor not less than 30 days
prior to the expiration of the previous period. At any time during the term of
this Agreement, SBFM may terminate this Agreement at any month-end upon 30 days'
notice to the Advisor. At any time during the term of this Agreement, SBFM may
elect to immediately terminate this Agreement if (i) the Net Asset Value per
Unit (as that term is defined in Section 7(d)(2) of the Limited Partnership
Agreement) shall decline as of the close of business on any day to $400 or less;
(ii) the Net Assets allocated to the Advisor (adjusted for redemptions,
distributions, withdrawals or reallocations, if any) decline by 50% or more as
of the end of a trading day from such Net Assets' previous highest value; (iii)
limited partners owning more than 50% of the outstanding Units shall vote to
require SBFM to terminate this Agreement; (iv) the Advisor fails to comply with
the terms of this Agreement as to any material term; (v) SBFM, in good faith,
upon due consideration by its board of directors, reasonably determines that the
performance of the Advisor has been such that SBFM's fiduciary duties to the
Partnership require SBFM to terminate this Agreement; or (vi) SBFM reasonably
believes that the application of speculative position limits will substantially
affect the performance of the Partnership. At any time during the term of this
Agreement, SBFM may elect immediately to terminate this Agreement if (i) the
Advisor merges, consolidates with another entity not controlled by Xxxx X.
Xxxxx, sells a substantial portion of its assets to an entity not controlled by
Xxxx X. Xxxxx, or becomes bankrupt or insolvent, (ii) Xx. Xxxx X. Xxxxx dies,
becomes incapacitated, leaves the employ of the Advisor, ceases to control the
Advisor or is otherwise not managing the trading programs or systems of the
Advisor, or (iii) the Advisor's registration as a commodity trading advisor with
the CFTC or its membership in the NFA or any other regulatory authority, is
terminated or suspended. This Agreement will immediately terminate upon
dissolution of the Partnership or upon cessation of trading prior to
dissolution.
(b) The Advisor may terminate this Agreement by giving not
less than 30 days' notice to SBFM in the event that (i) the trading policies of
the Partnership as set forth in the Prospectus are changed in such manner that
the Advisor reasonably believes will adversely affect the performance of its
trading strategies; (ii) after June 30, 1996; (iii) SBFM or the Partnership
fails to comply with the terms of this Agreement. The Advisor may immediately
terminate this Agreement if SBFM's
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registration as a commodity pool operator or its membership in the NFA is
terminated or suspended; (iv) if SBFM withholds its consent to a change in the
Advisor's program specified in Section 1(c) of this Agreement; or (v) if SBFM
requires the Advisor to liquidate positions pursuant to section 1(f) hereof. In
addition, the Advisor may terminate this Agreement at any month-end after the
termination of the Initial Offering Period (as that term is defined in the
Prospectus) upon 60 days' prior written notice to SBFM.
(c) Except as otherwise provided in this Agreement, any
termination of this Agreement in accordance with this Paragraph 5 shall be
without penalty or liability to any party.
6. INDEMNIFICATION. (a)(i) In any threatened, pending or
completed action, suit, or proceeding to which the Advisor was or is a party or
is threatened to be made a party arising out of or in connection with this
Agreement or the management of the Partnership's assets, SBFM shall, subject to
subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the
Advisor against any loss, liability, damage, cost, expense (including, without
limitation, attorneys' and accountants' fees), judgments and amounts paid in
settlement actually and reasonably incurred by it in connection with such
action, suit, or proceeding if the Advisor acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Partnership, and provided that its conduct did not constitute negligence,
intentional misconduct, or a breach of its fiduciary obligations to the
Partnership as a commodity trading advisor in accordance with applicable law,
unless and only to the extent that the court or administrative forum in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, the
Advisor is fairly and reasonably entitled to indemnity for such expenses which
such court or administrative forum shall deem proper; and further provided that
no indemnification shall be available from the Partnership if such
indemnification is prohibited by Section 16 of the Partnership Agreement. The
termination of any action, suit or proceeding by judgment, order or settlement
shall not, of itself, create a presumption that the Advisor did not act in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Partnership.
(ii) To the extent that the Advisor has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subparagraph (i) above, or in defense of any claim, issue or matter therein,
SBFM shall indemnify it against the expenses (including, without limitation,
attorneys' and accountants' fees) actually and reasonably incurred by it in
connection therewith.
(iii) Any indemnification under subparagraph (i) above, unless
ordered by a court or administrative forum, shall be made
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by SBFM only as authorized in the specific case and only upon a determination by
independent legal counsel in a written opinion that such indemnification is
proper in the circumstances because the Advisor has met the applicable standard
of conduct set forth in subparagraph (i) above. Such independent legal counsel
shall be selected by SBFM in a timely manner, subject to the Advisor's approval,
which approval shall not be unreasonably withheld. The Advisor will be deemed to
have approved SBFM's selection unless the Advisor notifies SBFM in writing,
received by SBFM within five days of SBFM's telecopying to the Advisor of the
notice of SBFM's selection, that the Advisor does not approve the selection.
(iv) In the event the Advisor is made a party to any claim,
dispute or litigation or otherwise incurs any loss or expense as a result of, or
in connection with, the Partnership's or SBFM's activities or claimed activities
unrelated to the Advisor, SBFM shall indemnify, defend and hold harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.
(v) As used in this Paragraph 6(a), the terms "Advisor" shall
include the Advisor, its principals, officers, directors, stockholders and
employees and the term "SBFM" shall include the Partnership.
(b)(i) The Advisor agrees to indemnify, defend and hold
harmless SBFM, the Partnership and their affiliates against any loss, liability,
damage, cost or expense (including, without limitation, attorneys' and
accountants' fees), judgments and amounts paid in settlement actually and
reasonably incurred by them (A) as a result of the breach of any representations
and warranties made by the Advisor in this Agreement, or (B) as a result of any
act or omission of the Advisor relating to the Partnership if there has been a
final judicial or regulatory determination or, in the event of a settlement of
any action or proceeding with the prior written consent of the Advisor, a
written opinion of an arbitrator pursuant to Paragraph 14 hereof, to the effect
that such acts or omissions violated the terms of this Agreement or involved
negligence, bad faith, recklessness or intentional misconduct on the part of the
Advisor.
(ii) In the event SBFM, the Partnership or any of their
affiliates is made a party to any claim, dispute or litigation or otherwise
incurs any loss or expense as a result of, or in connection with, the activities
or claimed activities of the Advisor or its principals, officers, directors,
shareholder(s) or employees unrelated to SBFM's or the Partnership's business,
the Advisor shall indemnify, defend and hold harmless SBFM, the Partnership or
any of their affiliates against any loss, liability, damage, cost or expense
(including, without limitation, attorneys' and accountants' fees) incurred in
connection therewith.
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(c) In the event that a person entitled to indemnification
under this Paragraph 6 is made a party to an action, suit or proceeding alleging
both matters for which indemnification can be made hereunder and matters for
which indemnification may not be made hereunder, such person shall be
indemnified only for that portion of the loss, liability, damage, cost or
expense incurred in such action, suit or proceeding which relates to the matters
for which indemnification can be made.
(d) None of the indemnifications contained in this Paragraph 6
shall be applicable with respect to default judgments, confessions of judgment
or settlements entered into by the party claiming indemnification without the
prior written consent, which shall not be unreasonably withheld, of the party
obligated to indemnify such party.
(e) The provisions of this Paragraph 6 shall survive the
termination of this Agreement.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The Advisor represents and warrants that:
(i) All references to the Advisor and its principals in the
Prospectus are accurate in all material respects and as to them the Prospectus
does not contain any untrue statement of a material fact or omit to state a
material fact which is necessary to make the statements therein not misleading,
except that with respect to the Individual and Composite Pro Forma Performance
of the Advisors' tables, this representation and warranty extends only to
underlying data made available by the Advisor for the preparation thereof. All
references to the Advisor and its principals in the Prospectus will, after
review and approval of such references by the Advisor prior to the use of such
Prospectus in connection with the offering of the Partnership's units, be
accurate in all material respects.
(ii) The information with respect to the Advisor set forth in
the actual performance tables in the Prospectus is based on all of the customer
accounts managed on a discretionary basis by the Advisor's principals and/or the
Advisor during the period covered by such tables and required to be disclosed
therein.
(iii) The Advisor will be acting as a commodity trading
advisor with respect to the Partnership and not as a securities investment
adviser and is duly registered with the CFTC as a commodity trading advisor, is
a member of the NFA, and is in compliance with such other registration and
licensing requirements as shall be necessary to enable it to perform its
obligations hereunder, and agrees to maintain and renew such registrations and
licenses during the term of this Agreement.
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(iv) The Advisor is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
full power and authority to enter into this Agreement and to provide the
services required of it hereunder.
(v) The Advisor will not, by acting as a commodity trading
advisor to the Partnership, breach or cause to be breached any undertaking,
agreement, contract, statute, rule or regulation to which it is a party or by
which it is bound.
(vi) This Agreement has been duly and validly authorized,
executed and delivered by the Advisor and is a valid and binding agreement
enforceable in accordance with its terms.
(vii) At any time during the term of this Agreement that a
prospectus relating to the Units is required to be delivered in connection with
the offer and sale thereof, the Advisor agrees upon the request of SBFM to
provide the Partnership with such information as shall be necessary so that, as
to the Advisor and its principals, such prospectus is accurate.
(b) SBFM represents and warrants for itself and the
Partnership that:
(i) The Prospectus (as from time to time amended or
supplemented, which amendment or supplement is approved by the Advisor as to
descriptions of itself and its actual performance) does not contain any untrue
statement of a material fact or omit to state a material fact which is necessary
to make the statements therein not misleading, except that the foregoing
representation does not apply to any statement or omission concerning the
Advisor in the Prospectus, made in reliance upon, and in conformity with,
information furnished to SBFM by or on behalf of the Advisor expressly for use
in the Prospectus.
(ii) SBFM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to perform its obligations under this Agreement.
(iii) SBFM and the Partnership have the capacity and authority
to enter into this Agreement on behalf of the Partnership.
(iv) This Agreement has been duly and validly authorized,
executed and delivered on SBFM's and the Partnership's behalf and is a valid and
binding agreement of SBFM and the Partnership enforceable in accordance with its
terms.
(v) SBFM will not, by acting as General Partner to the
Partnership and the Partnership will not, breach or cause to be breached any
undertaking, agreement, contract, statute, rule or regulation to which it is a
party or by which it is bound which
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would materially limit or affect the performance of its duties under this
Agreement.
(vi) It is registered as a commodity pool operator and is a
member of the NFA, and it will maintain and renew such registration and
membership during the term of this Agreement.
(vii) The Partnership is a limited partnership duly organized
and validly existing under the laws of the State of New York and has full power
and authority to enter into this Agreement and to perform its obligations under
this Agreement.
(viii) SBFM and the Partnership agree that Xxxx X. Xxxxx shall
have no liability to the Partnership or SBFM under this Agreement or in
connection with the transactions contemplated herein except for fraud and
willful misconduct by Xxxx X. Xxxxx.
8. COVENANTS OF THE ADVISOR, SBFM AND THE PARTNERSHIP. (a) The
Advisor agrees as follows:
(i) In connection with its activities on behalf of the
Partnership, the Advisor will comply with all applicable rules and regulations
of the CFTC and/or the commodity exchange on which any particular transaction is
executed.
(ii) The Advisor will promptly notify SBFM of the commencement
of any material suit, action or proceeding involving it, whether or not any such
suit, action or proceeding also involves SBFM.
(iii) In the placement of orders for the Partnership's account
and for the accounts of any other client, the Advisor will utilize a fair and
reasonable order entry system, which shall, on an overall basis, be no less
favorable to the Partnership than to any other account managed by the Advisor.
The Advisor acknowledges its obligation to review the Partnership's positions in
the account managed by the Advisor daily and promptly to notify the broker and
SBFM and the Partnership's broker of (i) any error committed by the Advisor or
its principals or employees or (ii) any trade which the Advisor believes was not
executed in accordance with its instructions.
(iv) The Advisor shall, upon written demand of SBFM related to
a possible claim arising under Section 6(b)(i) or (ii) hereof, maintain a net
worth of not less than $2,000,000.
(b) SBFM agrees for itself and the Partnership that:
(i) SBFM and the Partnership will comply with all applicable
rules and regulations of the CFTC and/or the commodity exchange on which any
particular transaction is executed.
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(ii) SBFM will promptly notify the Advisor of the commencement
of any material suit, action or proceeding involving it or the Partnership,
whether or not such suit, action or proceeding also involves the Advisor.
9. COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof.
10. ASSIGNMENT. This Agreement may not be assigned by any
party without the express written consent of the other parties.
11. AMENDMENT. This Agreement may not be amended except by the
written consent of the parties.
12. NOTICES. All notices, demands or requests required to be
made or delivered under this Agreement shall be in writing and delivered
personally or by registered or certified mail or expedited courier, return
receipt requested, postage prepaid, to the addresses below or to such other
addresses as may be designated by the party entitled to receive the same by
notice similarly given:
If to SBFM:
Xxxxx Xxxxxx Futures Management Inc.
000 Xxxxxxxxx Xxxxxx - 1st Floor
New York, New York 10013
Attention: Xxxxxxxxx X. Xxxxxx
If to the Advisor:
Ms. Xxxxxxxxx A. M. Xxxxxx
Xxxx X. Xxxxx & Co., Inc.
Xxx Xxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. ARBITRATION. The parties agree that any dispute or
controversy arising out of or relating to this Agreement or the interpretation
thereof, shall be settled by arbitration in accordance with the rules, then in
effect, of the National Futures Association or, if the National Futures
Association shall refuse jurisdiction, then in accordance with the rules, then
in effect, of the American Arbitration Association; provided, however, that the
power of the arbitrator shall be limited to interpreting this Agreement as
written and the arbitrator shall state in writing his reasons for his award.
Judgment upon any award made by the arbitrator may be entered in any court of
competent jurisdiction.
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15. NO THIRD PARTY BENEFICIARIES. There are no third party
beneficiaries to this Agreement.
16. SALES MATERIALS. SBFM will provide a copy of all sales
materials referring to the Advisor and used in connection with the offering to
the Advisor for its review and approval prior to SBFM's public use of the sales
materials.
IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXXX XXXXXX
FUTURES MANAGEMENT INC.
By /s/ Xxxxxxxxx X. Xxxxxx
---------------------------
Xxxxxxxxx X. Xxxxxx
President and Director
XXXXX XXXXXX
DIVERSIFIED FUTURES FUND X.X. XX
By: Xxxxx Xxxxxx
Futures Management Inc.
(General Partner)
By /s/ Xxxxxxxxx X. Xxxxxx
---------------------------
Xxxxxxxxx X. Xxxxxx
President and Director
XXXX X. XXXXX & CO., INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Managing Director
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APPENDIX A
1. GIVE-UP BROKERS: The initial give-up brokers shall be Xxxx Xxxxxx, Barclays
de Zoete Wedd Futures and E. D. & F. Man.
2. NET ASSETS of the Partnership shall mean the total assets of the Partnership
including all cash, plus Treasury Bills at market, accrued interest, and the
market value of all open commodity positions maintained by the Partnership, less
brokerage charges accrued and less all other liabilities of the Partnership,
determined in accordance with generally accepted accounting principles under the
accrual basis of accounting.
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