MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of April, 1997 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 WILLOWBRIDGE ASSOCIATES INC., a Delaware corporation (the
"Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner of XXXXX XXXXXX DIVERSIFIED
FUTURES FUND X.X. XX, a limited partnership organized for the purpose of
speculative trading of commodity interests, including futures contracts, options
and forward contracts with the objective of achieving substantial capital
appreciation; 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, the Partnership 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 by
the Advisor on behalf of 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 the General Partner in commodity interests,
including commodity futures contracts, options and forward contracts. All such
trading on behalf of the Partnership shall be in accordance with the trading
strategies set forth in the Advisor's Disclosure Document dated October 29, 1996
and in accordance with the trading policies set forth in the Partnership's
Prospectus dated as of May 31, 1996 (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 and pursuant to the trading
strategy selected by SBFM to be utilized by the Advisor in managing the
Partnership's assets. SBFM has initially selected the Advisor's Select
Investment Program using the Argo Trading System to manage the Partnership's
assets allocated to it. Any open positions or other investments at the time of
receipt of such notice of a change in trading policy 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 deviate from 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. SBFM and
the Partnership each acknowledge that the Advisor may utilize exchange for
physicals transactions in its trading for the Partnership.
(b) SBFM acknowledges receipt of the Advisor's Disclosure Document
dated October 29, 1996 as filed with the CFTC. 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 execution, clearance or confirmation of transactions for the Partnership or
for the negotiation of brokerage rates charged therefor. However, the Advisor,
with the prior written permission (by either original or fax copy) of SBFM, may
direct all trades in commodity futures and options to a futures commission
merchant or independent floor broker it chooses for execution with instructions
to give-up the trades to the broker designated by SBFM, provided that the
futures commission merchant or independent floor broker and any give-up or floor
brokerage fees are approved in advance by SBFM. 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 agreements (by either original or fax copy)
and the Advisor shall have no responsibility for such payment. SBFM will cause
the Partnership's commodity brokers to provide the Advisor with copies of all
confirmation, purchase and sale, monthly and similar statements at the time such
statements are available to SBFM.
(c) The initial allocation of the Partnership's assets to the
Advisor will be approximately U. S. $6,000,000 (all of which shall be actual
funds) made to the Advisor's Select Investment Program using the Argo Trading
System (the "Program"). The Advisor will not be allocated any notional funds.
The parties acknowledge that if assets of the Partnership under the Advisor's
management fall below $1,000,000, the Advisor may not be able to trade the full
Argo portfolio. In the event the Advisor wishes to use a trading system or
methodology other than or in addition to the Program 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 system or methodology and SBFM consents thereto in writing. In
addition, the Advisor will provide five days' prior written notice to SBFM of
any change in the Program to be utilized for the Partnership which the Advisor
deems material. If the Advisor deems such change in the Program or in markets
traded to be material, the changed Program or markets traded will not be
utilized for the Partnership without the prior written consent of SBFM. In
addition, the Advisor will notify SBFM of any changes to the Program that would
require a change in the description of the trading strategy or methods described
in any prospectus of the Partnership. Non-material changes in the trading
systems utilized on behalf of the Partnership may be instituted without prior
written approval. Further, the Advisor will provide the Partnership with a
current list of all commodity interests to be traded for the Partnership's
account and will not trade any additional commodity interests for such account
without providing notice thereof to SBFM and receiving SBFM's written approval.
The Advisor also agrees to provide SBFM, on a monthly basis, 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.
(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 or other information deemed by the Advisor to be proprietary or
confidential) 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 reasonably 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. SBFM and the Partnership shall not distribute any description of the
Advisor, its principals, or its or their trading performance without the prior
written consent of the Advisor.
(e) The Advisor understands and agrees that SBFM may designate
other trading advisors for the Partnership and 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. 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. The Advisor may terminate this
Agreement immediately if the Net Assets of the Partnership managed by the
Advisor fall below $180,000.
(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. SBFM will use its best efforts to give two days' prior notice to
the Advisor of any reallocations or liquidations.
(g) The Advisor will not be liable for trading losses in the
Partnership's account including losses caused by errors; provided, however, that
(i) 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 and (ii) the Advisor will be liable to the
Partnership with respect to losses incurred due to errors committed or caused by
any executing broker (other than any SBFM affiliate) selected by the Advisor,
(it also being understood that SBFM, with the assistance of the Advisor, will
first attempt to recover such losses from the executing broker).
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. The Advisor shall not be
responsible to the Partnership, the General Partner, any trading advisor or any
limited partners for any acts or omissions of any other trading advisor.
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 20% 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 1/6 of 1% (2% per year) of the
month-end Net Assets of the Partnership allocated to the Advisor (which shall
include any committed funds).
(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 and
without regard to further amendments thereto, 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 (which shall include any committed funds) at the
end of the fiscal period over Net Assets managed by the Advisor (which shall
include any committed funds) 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 or in margin accounts. Ongoing expenses will be attributed to the
Advisor based on the Advisor's proportionate share of Net Assets. Ongoing
expenses above will not include expenses of litigation not involving the
activities of the Advisor on behalf of the Partnership. Ongoing expenses include
offering and organizational expenses of the Partnership. No incentive fee shall
be paid until the end of the first full calendar quarter of trading by the
Advisor on behalf of the Partnership, which fee shall be based on New Trading
Profits earned from the commencement of trading by the Advisor through the end
of the first full calendar quarter. Interest income earned, if any, will not be
taken into account in computing New Trading Profits earned by the Advisor. If
Net Assets allocated to the Advisor are reduced due to redemptions,
distributions or reallocations (net of additions), 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 fiscal 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 the redemption, reallocation, distribution or 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.
(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 information, computer programs 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 the rendering of such consulting, advisory and
management services to other accounts and entities will not require any material
change in the Advisor's Program 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 whose assets are traded pursuant to the Program and that it
will not knowingly or deliberately favor any such client or account managed by
it over any other client or account whose assets are traded pursuant to the
Program in any manner, it being acknowledged, however, that different trading
strategies or methods may be utilized for differing sizes of accounts, accounts
traded with different degrees of leverage, accounts with different trading
policies, 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 nothing
contained herein shall be deemed to require the Advisor to disclose the names of
other customers or information that the Advisor deems to be proprietary or
confidential. 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,
1997. 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 terminate this Agreement upon 30 days' notice to the Advisor if (i) the
Net Asset Value per Unit 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 at least 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; (v) SBFM, in good faith, 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, sells a
substantial portion of its assets, or becomes bankrupt or insolvent, except as
provided in Section 10 hereof, (ii) Xxxxxx Xxxx and Xxxxxxx Xxx both die, become
incapacitated, leave the employ of the Advisor, cease to control the Advisor or
are 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 or if the Advisor's license agreement with Caxton Corporation is
terminated. 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 (i) in the event that 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, 1997; or (iii) in the event that the General
Partner or Partnership fails to comply with the terms of this Agreement. The
Advisor may immediately terminate this Agreement if SBFM's registration as a
commodity pool operator or its membership in the NFA is terminated or suspended
or if the Advisor's license agreement with Caxton Corporation is terminated.
(c) Except as otherwise provided in this Agreement, any termination
of this Agreement in accordance with this Paragraph 5 or Paragraph 1(e) shall be
without penalty or liability to any party, except for any fees due to the
Advisor pursuant to Section 3 hereof.
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 by the Advisor or the
offering and sale of units in the Partnership, 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, 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) Without limiting sub-paragraph (i) above, 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, arbitrator or administrative forum, shall be made 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 principals, officers, directors and employees
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
material breach of any material 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 in any material respect or
involved negligence, bad faith or intentional misconduct on the part of the
Advisor (except as otherwise provided in Section 1(g)).
(ii) In the event SBFM, the Partnership or any of their principals,
officers, directors and employees 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 principals, officers, directors
and employees against any loss, liability, damage, cost or expense (including,
without limitation, attorneys' and accountants' fees) actually and reasonably
incurred in connection therewith.
(iii) Neither Xxxxxx Xxxx nor Xxxxxxx Xxx shall have any liability
to the Partnership or SBFM or any of their respective officers, directors,
employees, partners or affiliates under this Agreement or in connection with the
transactions contemplated by this Agreement except in the case of his own fraud
or willful misconduct.
(iv) Any indemnification under subparagraph (b)(i) above, unless
ordered by a court, arbitrator or administrative forum, shall be made by the
Advisor 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. Such independent legal counsel shall be selected by
the Advisor in a timely manner, subject to SBFM's approval, which approval shall
not be unreasonably withheld. SBFM will be deemed to have approved the Advisor's
selection unless SBFM notifies the Advisor in writing, received by the Advisor
within five days of the Advisor's facsimile to SBFM of the notice of the
Advisor's selection, that SBFM does not approve the selection.
(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 Table B, if any is presented for the Advisor in the
Prospectus, this representation and warranty extends only to the underlying data
made available by the Advisor for the preparation thereof and not to any
hypothetical or pro forma adjustments. Subject to such exception, 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 Advisor's Disclosure Document 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.
(iv) The Advisor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware 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 (it being
understood that any hypothetical or pro forma adjustments in Table B were not
furnished by the Advisor). All authorizations, consents or orders of any court,
or of any federal, state or other governmental or regulatory agency or body
required for the valid authorization, issuance, offer and sale of the
Partnership's Units were obtained, and, to the best of its knowledge, after due
inquiry no order preventing or suspending the use of the Prospectus with respect
to the Units was issued by the Securities and Exchange Commission (the "SEC"),
the CFTC or the NFA. The Partnership's Registration Statement and Prospectus
contained all material statements which were required to be made therein,
conformed in all material respects to the requirements of the Securities Act of
1933 and the Commodity Exchange Act, and the rules and regulations of the SEC
and the CFTC, respectively, thereunder, and with the rules of the NFA.
(ii) It 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 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 will comply with all laws, rules,
regulations and orders applicable to the offer and sale of Units in all
jurisdictions in which Units are offered or sold.
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 pre-determined,
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, prices and equity in the account managed by the Advisor daily and
within two business days to notify, in writing, the broker and SBFM and the
Partnership's brokers of (i) any error committed by the Advisor or its
principals or employees; (ii) any trade which the Advisor believes was not
executed in accordance with its instructions; and (iii) any discrepancy with a
value of $10,000 or more (due to differences in the positions, prices or equity
in the account) between its records and the information reported on the
account's daily and monthly broker statements.
(iv) The Advisor will maintain a net worth of not less than
$250,000 during the term of this Agreement.
(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.
(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 effective upon actual receipt and shall
be in writing and delivered personally or by facsimile 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
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
If to the Advisor:
Willowbridge Associates Inc.
000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
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.
15. CONFIDENTIALITY. Nothing in this Agreement shall require the
Advisor to disclose the details of its trading system, methods, models,
strategies and formulas. SBFM and the Partnership acknowledge that the trading
systems, methods, models, strategies and formulas of the Advisor are the sole
and exclusive property of the Advisor; SBFM and the Partnership further agree
that it will keep confidential and will not disseminate information regarding
such systems, methods, models, strategies and formulas to any person.
16. NO THIRD PARTY BENEFICIARIES. There are no third party
beneficiaries to this Agreement, except that certain persons not parties to
this Agreement have rights under Section 6 hereof.
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/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
XXXXX XXXXXX DIVERSIFIED FUTURES FUND X.
X. XX
By: Xxxxx Xxxxxx
Futures Management Inc.
(General Partner)
By: /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
WILLOWBRIDGE ASSOCIATES INC.
By: /s/ Xxxxxxx X.Xxxxxx
Xxxxxxx X. Xxxxxx
Senior Vice President
