MANAGEMENT AGREEMENT
AGREEMENT made as of the __ day of July, 2002 among XXXXX XXXXXX FUTURES
MANAGEMENT LLC, a Delaware limited liability company ("SBFM"), XXXXX XXXXXX
PRINCIPAL PLUS FUTURES FUND L.P., a New York limited partnership (the
"Partnership") and POTOMAC PORTFOLIOS LLC, a Delaware limited liability company
(the "Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner of XXXXX XXXXXX PRINCIPAL PLUS FUTURES
FUND L.P., a limited partnership 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, 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) 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. All such trading on behalf of
the Partnership shall be in accordance with the trading policies set forth in
the Partnership's Prospectus dated as of July 12, 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 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
Managed Account Program to manage the Partnership's assets allocated to the
Advisor. 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. The Advisor will
have no responsibility for the management of the Partnership's assets invested
in Zero Coupon U.S. Treasury obligations.
(b) SBFM acknowledges receipt of the Advisor's Disclosure Document dated
May 1, 2002, as filed with the NFA and the CFTC (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 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).
(c) The initial allocation of not less than $500,000 of the Partnership's
assets to the Advisor will be made to the Advisor's Managed Account Program (the
"Program"). 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 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 or in markets traded to be material, the changed system
or methodology or markets traded will not be utilized on behalf of the
Partnership without the prior written consent of SBFM. In addition, the Advisor
will notify SBFM of any changes to the trading system or methodology that would
require a change in the description of the trading strategy or methods described
in the Disclosure Document. Further, Schedule A to this Agreement provides a
current list of all commodity interests that may be traded for the Partnership's
account and the Advisor 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 (including
notional and committed funds) together with all other matters deemed by the
Advisor to be material changes to its business not previously reported to SBFM.
The Advisor further agrees that it will convert foreign currency balances (not
required to margin positions denominated in a foreign currency) to U.S. dollars
no less frequently than monthly. U.S. dollar equivalents in individual foreign
currencies of more than $100,000 will be converted to U.S. dollars within one
business day after such funds are no longer needed to margin foreign positions.
(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 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.
(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.
(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 the Advisor
will be liable to the Partnership with respect to losses incurred due to errors
committed or caused by the Advisor or any of its principals or employees in
communicating incorrect trading instructions or orders to any broker on behalf
of the Partnership.
(h) SBFM and the Partnership agree that the Advisor may disclose to third
parties that the Advisor manages assets of SBFM and the Partnership and the
general level of such assets; provided, however, that no written description of
SBFM, the Partnership or any of their affiliates may be distributed by the
Advisor without the prior written consent of SBFM.
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 no
longer 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 as of the end
of each calendar quarter 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 sum
of (A) month-end Net Assets of the Partnership allocated to the Advisor, and (B)
Notional Funds traded by the Advisor on behalf of the Partnership.
(b) "Net Assets" shall have the meaning set forth in Paragraph 7(d)(1) of
the Limited Partnership Agreement dated as of June 22, 1995 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. "Notional funds" shall be the amount in excess of Net Assets that
SBFM and the Advisor have agreed will be employed in determining the level of
trading by the Advisor on behalf of the Partnership.
(c) "New Trading Profits" shall mean the excess, if any, of Net Assets
(plus any notional funds) managed by the Advisor at the end of the fiscal period
over Net Assets (plus any notional funds) managed by the Advisor at the end of
the highest previous fiscal period or Net Assets (plus any notional funds)
allocated to the Advisor at the date trading commences, whichever is higher, and
as further adjusted to eliminate the effect on Net Assets (plus any notional
funds) resulting from new capital contributions, redemptions, reallocations or
capital distributions (of actual or notional funds), 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 (plus any notional funds). Ongoing expenses will not include expenses
of litigation not involving the activities of the Advisor on behalf of the
Partnership. Ongoing expenses include offering expenses of the Partnership, if
any. The first incentive fee shall be due and paid as of the end of the first
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 operations by the Advisor on behalf of the Partnership through the end
of the such 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 (plus any notional funds) 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 for which such
fee is payable. In the event of 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 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. For the purposes
of this paragraph, the lack of trading by the Advisor under circumstances in
which the Advisor's trading system or methodology indicates that no trades
should be made shall not be construed as an inability by the Advisor to provide
the services contemplated herein.
(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 in all respects, in any manner, and with respect to
any security, commodity or market whatsoever 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 basic trading strategies and
will not materially 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 different trading strategies, investments
or methods may be utilized for differing sizes of accounts, accounts with
different trading policies, accounts experiencing differing inflows or outflows
of equity, accounts that commence trading at different times, accounts that 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. 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 February 15,
2003. 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 immediately to terminate this Agreement if (i) the Net Assets allocated to
the Advisor (adjusted for redemptions, distributions, withdrawals or
reallocations, if any) decline by 15% or more as of the end of a trading day
from such Net Assets previous highest value; (ii) the Advisor fails to comply
with the terms of this Agreement; (iii) 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;
(iv) SBFM reasonably believes that the application of speculative position
limits will substantially affect the performance of the Partnership; (v) the
Advisor merges, consolidates with another entity, sells a substantial portion of
its assets, or becomes bankrupt or insolvent; (vi) Xxxxxx Xxxx dies, becomes
incapacitated, leaves the employ of the Advisor or is otherwise not managing the
trading programs or systems of the Advisor; or (vii) 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' prior written 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; or (ii) 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.
(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, 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 material
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.
(i) 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.
(ii) Any indemnification under subparagraph (i) above, unless ordered by a
court or administrative forum, shall be made by SBFM on behalf of the
Partnership 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.
(iii) 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.
(iv) 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 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, 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.
(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 Advisor's
Disclosure Document are accurate in all material respects and as to them the
Disclosure Document 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.
(ii) The information with respect to the Advisor set forth in the actual
performance tables in the Disclosure Document is based on a fully-funded subset
of all 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 limited liability company 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 reasonably 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 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.
(ii) It is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full 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) SBFM is duly registered with the CFTC as a commodity trading advisor,
commodity pool operator, 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.
(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.
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,
systematic, 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 $10,000 or more (due to differences in the positions, prices or equity
in the account) between its records and the information reported on the
account's daily and monthly broker statements.
(iv) [The Advisor will maintain a net worth of not less than [$_______]
during the term of this Agreement. [or principal(s) will provide promissory
note]]
(v) The Advisor currently estimates the total capacity of the Program to be
$30,000,000 and agrees to inform SBFM and the Partnership (A) of any increases
or decreases in capacity that may, in the sole opinion of the Advisor, occur
under future market conditions, and (B) monthly of the aggregate funds under
management in the Program in order that SBFM and the Partnership may be
periodically apprised of the Advisor's progress toward achieving Program
capacity. SBFM shall have the opportunity to allocate additional funds to the
Advisor for the account of the Partnership or any affiliate of SBFM, under terms
negotiated and mutually agreeable to all parties, and the Advisor shall accept
such funds prior to accepting funds to manage from persons or entities other
than (A) SBFM and its affiliates, (B) the Advisor, its principals and
affiliates, and (C) such other persons or entities for which commitments have
already been made.
(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.
(iii) The information given to the Advisor in connection with the opening
of the account (including but not limited to the information provided herein) is
full, true, complete and accurate.
(iv) The Advisor may rely on such information until it receives written
notice from the Partnership of any changes.
(v) No description of the Advisor or the trading system or methodology used
by the Advisor may be distributed by the Partnership or its agents without the
prior written consent of 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 LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
If to the Advisor:
Potomac Portfolios LLC
0000 XxxXxxxxx Xxxx.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx Xxxx
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxxx
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. NO THIRD PARTY BENEFICIARIES. There are no third party beneficiaries to
this Agreement.
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 LLC
By /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
XXXXX XXXXXX
PRINCIPAL PLUS FUTURES FUND L.P.
By: Xxxxx Xxxxxx
Futures Management LLC
(General Partner)
By /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President and Director
POTOMAC PORTFOLIOS LLC
By
Name:
Title:
Schedule A
Tradable Commodity Interests
Metals Food
Gold Coffee
Silver Sugar
Copper Cocoa
Platinum Orange Juice
Palladium
Petroleum
Currencies Crude Oil
Swiss Franc Heating Oil
Euro Currency Unleaded Gas
Japanese Yen Natural Gas
Canadian Dollar Fiber
British Pound Cotton
US Dollar Index Lumber
Australian Dollar
Livestock
Interest Rates Feeder Cattle
30-Year Bond Live Cattle
10-Year Note Lean Hogs
5-Year Note Pork Bellies
2-Year Note
Eurodollar Grains
Corn
Indexes Wheat
SP500 Oats
Nasdaq 100 Soybeans
Xxxxxxx 2000 Soybean Meal
Dow Xxxxx Soybean Oil
Midcap 400
CRB Index
GI Index
