Exhibit 10.01
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 6th day of November, 1998 among XXXXXX
XXXXXXX XXXX XXXXXX CHARTER XXXXXX X.X., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and XXXXXX INVESTMENT CORPORATION, a Delaware corporation
(the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement dated as of July 15, 1998 (the "Limited Partnership
Agreement"), to trade, buy, sell, spread, or otherwise acquire, hold, or dispose
of commodities (which may include foreign currencies, mortgage-backed
securities, money market instruments, financial instruments and any other
securities or items which are now, or may hereafter be, the subject of futures
contract trading), domestic and foreign commodity futures contracts, commodity
forward contracts, foreign exchange commitments, options on physical commodities
and on futures contracts, spot (cash) commodities and currencies, and any rights
pertaining thereto (hereinafter referred to collectively as "futures interests")
and securities (such as United States Treasury bills) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership is a member partnership of the Xxxxxx Xxxxxxx Xxxx
Xxxxxx Charter Series (the "Fund Group") pursuant to which units of limited
partnership interest ("Units") of such member partnerships will be sold to
investors in a common prospectus. Units of the Partnership are being offered
pursuant to a Registration Statement on Form S-1 (No. 333-60097) (as amended
from time to time, the "Registration Statement") filed under the Securities Act
of 1933, as amended (the "Securities Act"), and a final Prospectus dated
November 6, 1998, constituting a part thereof (as amended and supplemented from
time to time) (the "Prospectus"). Such Units can be exchanged by a limited
partner of a member partnership of the Fund Group for Units of other member
partnerships of the Fund Group at 100% of the respective Net Asset Value (as
defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the Trading Advisor has extensive experience trading in futures
interests and is willing to provide certain services and undertake certain
obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to act as trading
advisor for the Partnership and to make investment decisions with respect to
futures interests for the Partnership's Net Assets (as defined in Section 6(c)
hereof) and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading Advisor wish
to enter into this Management Agreement which, among other things, sets forth
certain terms and conditions upon which the Trading Advisor will conduct futures
interests trading for the Partnership;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. UNDERTAKINGS IN CONNECTION WITH THE INITIAL AND CONTINUING OFFERING OF
UNITS.
(a) The Trading Advisor agrees with respect to the initial and continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading portfolios, programs,
systems, methods, and strategies (subject to the need, in the reasonable
discretion of the Trading Advisor, to preserve the secrecy of proprietary
information, including proprietary information concerning such principals,
affiliates, portfolios, programs, systems, methods, and strategies), any client
accounts over which it has discretionary trading authority (other than the names
of any such clients), and otherwise, as the Partnership may reasonably require
to comply with any applicable federal or state law or rule or regulation,
including those of the Securities and Exchange Commission (the "SEC"), the CFTC,
the National Futures Association (the "NFA"), the National Association of
Securities Dealers, Inc. (the "NASD") or any other regulatory body, exchange, or
board; and (ii) otherwise to cooperate with the Partnership, the General
Partner, and Xxxx Xxxxxx Xxxxxxxx Inc., the selling agent for the Partnership
("DWR") by providing information regarding the Trading Advisor in connection
with the preparation and filing of the Registration Statement and Prospectus,
including any pre-or post-effective amendments or supplements thereto, with the
SEC, CFTC, NFA, NASD, and with appropriate governmental authorities as part of
making application for registration of the Units under the securities or Blue
Sky laws of such jurisdictions as the Partnership may deem appropriate. As used
herein, the term "principal" shall have the meaning as defined in Section
4.10(e) of the CFTC's Regulations and the term "affiliate" shall mean an
individual or entity that directly or indirectly controls, is controlled by, or
is under common control with, the Trading Advisor.
(b) The General Partner, in its sole discretion and at any time may (i)
withdraw the SEC registration of the Units, or (ii) discontinue the offering of
Units.
(c) If, while Units continue to be offered and sold, the Trading Advisor
becomes aware of any materially untrue or misleading statement or omission
regarding itself or any of its principals or affiliates in the Registration
Statement or Prospectus, or of the occurrence of any event or change in
circumstances which would result in there being any materially untrue or
misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees thereof
shall distribute the Prospectus or selling literature or shall engage in any
selling activities whatsoever in connection with the initial and continuing
offering of Units except as may be specifically requested by the General
Partner.
2. DUTIES OF THE TRADING ADVISOR.
(a) The Trading Advisor hereby agrees to act as Trading Advisor for the
Partnership and, as such, shall have sole authority and responsibility for
directing the investment and reinvestment of the Net Assets of the Partnership
on the terms and conditions and in accordance with the prohibitions and trading
policies set forth in this Agreement, or the Prospectus or as otherwise provided
in writing to the Trading Advisor; PROVIDED, HOWEVER, that the General Partner
may override the instructions of the Trading Advisor to the extent necessary (i)
to comply with the trading policies of the Partnership and with applicable
speculative position limits, (ii) to pay the Partnership's expenses, (iii) to
the extent the General Partner believes doing so is necessary for the protection
of the Partnership, (iv) to terminate the futures interests trading of the
Partnership, or (v) to comply with any applicable law or regulation. The General
Partner agrees not to override any such instructions for the reasons specified
in clause (ii) of the preceding sentence unless the Trading Advisor fails to
comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five calendar days of such request.
The Trading Advisor shall not be liable for the consequences of any decision by
the General Partner to override instructions of the Trading Advisor, except to
the extent that the Trading Advisor is in breach of this Agreement. In
performing services for the Partnership, the Trading Advisor may not materially
alter the trading portfolios and programs used by the Trading Advisor in
investing and reinvesting the Partnership's Net Assets in futures interests as
described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed a material alteration in the Trading Advisor's trading portfolios
and programs.
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures interests for
the account of the Partnership in accordance with the prohibitions and
trading policies of the Partnership described in the Prospectus and as
otherwise provided in writing on prior reasonable notice to the Trading
Advisor. The Trading Advisor shall trade the Partnership's Net Assets
pursuant to the specified trading portfolios and programs described in the
Prospectus (with such changes and additions to such trading portfolios and
programs as the Trading Advisor, from time to time, incorporates into its
trading portfolios and programs for accounts the size of the Partnership),
unless the Trading Advisor is instructed by the General Partner to trade
the Partnership's Net Assets pursuant to any one or more of the Trading
Advisor's other trading portfolios and programs described in the
Prospectus.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30
calendar days of a request therefor by the General Partner, with
information comparing the performance of the Partnership's account and the
performance of all other client accounts directed by the Trading Advisor
using the trading portfolios and programs used by the Trading Advisor for
the Partnership over a specified period of time. In providing such
information, the Trading Advisor may take such steps as it deems are
reasonably necessary to assure the confidentiality of the Trading Advisor's
clients' identities. The Trading Advisor shall, upon the General Partner's
request, consult with the General Partner concerning any discrepancies
between the performance of such other accounts and the Partnership's
account. The Trading Advisor shall promptly inform the General Partner of
any material discrepancies of which the Trading Advisor is aware. The
General Partner acknowledges that different trading programs, strategies or
implementation methods may be utilized for different accounts, accounts
with different trading policies, accounts experiencing differing inflows or
outflows of equity, accounts that commence trading at different times,
accounts which have different portfolios or different fiscal years and that
such differences may cause divergent trading results.
(iii) Upon request of the General Partner and subject to reasonable
assurances of confidentiality by the General Partner and the Partnership,
provide the General Partner within a reasonable time of such request with
all material information (including, without limitation, information
relating to changes in control, personnel, trading approach, or financial
condition) concerning the Trading Advisor other than proprietary
information. The General Partner acknowledges that all trading instructions
made by the Trading Advisor will be held in confidence by the General
Partner, except to the extent necessary to conduct the business of the
Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's open
positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this Agreement
shall be for the account, and at the risk, of the Partnership and not for the
account, or at the risk, of the Trading Advisor or any of its stockholders,
directors, officers, or employees, or any other person, if any, who controls the
Trading Advisor within the meaning of the Securities Act. All brokerage fees
arising from trading by the Trading Advisor shall be for the account of the
Partnership. The Trading Advisor makes no representations as to whether its
trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the Trading
Advisor shall assume financial responsibility for any errors committed or caused
by it in transmitting orders for the purchase or sale of futures interests for
the Partnership's account, including, but not limited to, payment of the floor
brokerage commissions, exchange and NFA fees, and other transaction charges and
give-up charges incurred on such trades. The Trading Advisor's errors shall
include, but not be limited to, inputting improper trading signals or
communicating incorrect orders for execution. The Trading Advisor shall not be
responsible for errors committed or caused by DWR, Xxxx Futures, Inc. ("CFI") or
any other floor broker or futures commission merchant executing trades. The
Trading Advisor shall have an affirmative obligation promptly to notify the
General Partner of its own errors, and the Trading Advisor shall use its best
efforts to identify and promptly notify the General Partner of any order or
trade which the Trading Advisor reasonably believes was not executed in
accordance with its instructions.
(e) Prior to the commencement of trading, the General Partner on behalf of
the Partnership shall deliver to the Trading Advisor a trading authorization
appointing the Trading Advisor the Partnership's attorney-in-fact for such
purpose.
3. DESIGNATION OF ADDITIONAL TRADING ADVISORS AND REALLOCATION OF NET
ASSETS.
If the General Partner at any time deems it to be in the best interests of
the Partnership, the General Partner may designate an additional trading advisor
or advisors for the Partnership and may apportion to such additional trading
advisor(s) the management of such amounts of Net Assets as the General Partner
shall determine in its absolute discretion. The designation of an additional
trading advisor or advisors and the apportionment of Net Assets to any such
trading advisor(s) pursuant to this Section 3 shall neither terminate this
Agreement nor modify in any regard the respective rights and obligations of the
Partnership, the General Partner and the Trading Advisor hereunder. In the event
that an additional trading advisor is so designated, the Trading Advisor shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Advisor and that portion of the
Trading Profits (as defined in Section 6(d) hereof) properly attributable to the
trading done by the Trading Advisor.
4. TRADING ADVISOR INDEPENDENT.
For all purposes of this Agreement, the Trading Advisor shall be deemed to
be an independent contractor and shall, unless otherwise expressly provided
herein or authorized, have no authority to act for or represent the Partnership
in any way or otherwise be deemed an agent of the Partnership. Nothing contained
herein shall be deemed to require the Partnership to take any action contrary to
the Limited Partnership Agreement, the Certificate of Limited Partnership of the
Partnership as from time to time in effect (the "Certificate of Limited
Partnership"), or any applicable law or rule or regulation of any regulatory
body, exchange, or board. Nothing herein contained shall constitute the Trading
Advisor as a member of any partnership, joint venture, association, syndicate or
other entity with the Partnership or the General Partner, or be deemed to confer
on any of them any express, implied, or apparent authority to incur any
obligation or liability on behalf of any other. It is expressly agreed that the
Trading Advisor is neither a promoter, sponsor, nor issuer with respect to the
Partnership.
5. COMMODITY BROKERS.
The Trading Advisor shall effect all transactions in futures interests for
the Partnership through, and shall maintain a separate account with, such
commodity broker or brokers as the General Partner shall direct. At the present
time, DWR shall act as the non-clearing commodity broker and CFI shall act as
the clearing commodity broker for the Partnership. The General Partner shall
provide the Trading Advisor with copies of brokerage statements. Notwithstanding
that CFI shall act as the clearing commodity broker for the Partnership, the
Trading Advisor may execute trades through floor brokers other than those
employed by CFI so long as arrangements are made for such floor brokers to
"give-up" or transfer the positions to CFI and provided that the rates charged
by such floor brokers have been approved in writing by DWR. The Trading Advisor
will not be responsible for paying give-up fees at rates approved by DWR.
6. FEES.
(a) For the services to be rendered to the Partnership by the Trading
Advisor under this Agreement, the Partnership shall pay the Trading Advisor the
following fees:
(i) A monthly management fee, without regard to the profitability of
the Trading Advisor's trading for the Partnership's account, equal to 1/12
of 2% (a 2% annual rate) of the Partnership's "Net Assets" (as defined in
Section 6(c)) as of the opening of business on the first day of each
calendar month (and payable pursuant to Section 6 (f) below), commencing
with the month in which the Partnership begins to receive trading advice
from the Trading Advisor pursuant to this Agreement.
(ii) A monthly incentive fee equal to 20% of the "Trading Profits" (as
defined in Section 6(d)) experienced by the Partnership as of the end of
each calendar month (and payable pursuant to Section 6(f) below).
(b) If this Agreement is terminated on a date other than the last day of a
month, the incentive fee described above shall be determined as if such date
were the end of a month. If this Agreement is terminated on a date other than
the end of a month, the management fee described above shall be prorated based
on the ratio of the number of trading days in the month through the date of
termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a direct result of a material
act or failure to act by the Trading Advisor, is otherwise unable to utilize the
trading advice of the Trading Advisor on any of the trading days of that period
for any reason, the management fee described above shall be prorated based on
the ratio of the number of trading days in the month which the Partnership
account managed by the Trading Advisor engaged in trading operations or utilized
the trading advice of the Trading Advisor to the total number of trading days in
the month.
(c) As used herein, the term "Net Assets" shall have the same meaning
ascribed thereto in Section 7(d)(1) of the Limited Partnership Agreement.
(d) As used herein, the term "Trading Profits" shall mean net futures
interests trading profits (realized and unrealized) earned on the Partnership's
Net Assets, decreased by the monthly management fees, brokerage fees and any
transaction fees and costs, if any, not included in the brokerage fees; with
such trading profits and items of decrease determined from the end of the last
calendar month in which an incentive fee was earned by the Trading Advisor or,
if no incentive fee has been earned previously by the Trading Advisor, from the
date that the Partnership commenced trading to the end of the month as of which
such incentive fee calculation is being made. Extraordinary expenses of the
Partnership, if any, will not be deducted in determining Trading Profits. No
incentive fee will be paid on interest income earned by the Partnership.
(e) If any payment of incentive fees is made to the Trading Advisor on
account of Trading Profits and the Trading Advisor thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period, the
Trading Advisor shall be entitled to retain such amounts of incentive fees
previously paid to the Trading Advisor in respect of such Trading Profits.
However, no subsequent incentive fees shall be payable to the Trading Advisor
until the Partnership has again earned Trading Profits; PROVIDED, HOWEVER, that
if the Partnership's Net Assets are reduced or increased because of redemptions
or additions that occur at the end of, or subsequent to, an incentive period in
which the Trading Advisor experiences a futures interests trading loss, the
trading loss for that incentive period which must be recovered before the
Trading Advisor will be deemed to experience Trading Profits will be equal to
the amount determined by (x) dividing the Partnership's Net Assets after such
increase or decrease by the Partnership's Net Assets immediately before such
increase or decrease and (y) multiplying that fraction by the amount of the
unrecovered futures interests trading loss experienced in the month prior to
such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month without the payment of an
intervening incentive fee and the Partnership's Net Assets are increased or
reduced in more than one such month because of redemptions or additions, then
the trading loss for each such month shall be adjusted in accordance with the
formula described above and such increased or reduced amount of futures
interests trading loss shall be carried forward and used to offset subsequent
futures interests trading profits.
(f) The Partnership will remit the management and incentive fees to the
Trading Advisor as soon as practicable, but in no event later than 30 days, in
the case of the management fee, or 45 days, in the case of the incentive fee,
after the month-end as of which they are due, together with an itemized
statement showing the calculations.
7. TERM.
This Agreement shall continue in effect until December 31, 2001 (the
"Initial Termination Date"). If this Agreement is not terminated on the Initial
Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein.
At least 30 calendar days prior to the expiration of the Initial
Termination Date or any subsequent one-year period, as the case may be, the
Trading Advisor may terminate this Agreement at the end of the current period by
providing written notice to the Partnership indicating that the Trading Advisor
desires to terminate this Agreement at the end of such period. This Agreement
shall also terminate if the Partnership terminates. The Partnership shall have
the right to terminate this Agreement at its discretion (a) at any month-end
upon 5 calendar days' prior written notice to the Trading Advisor or (b) at any
time upon written notice to the Trading Advisor upon the occurrence of any of
the following events: (i) if Xxxxxxx Xxxxxx ceases for any reason to be an
active executive officer of the Trading Advisor; (ii) if the Trading Advisor
becomes bankrupt or insolvent; (iii) if the Trading Advisor is unable to use its
trading portfolios, programs, systems or methods as in effect on the date hereof
and as refined and modified in the future for the benefit of the Partnership;
(iv) if the registration, as a commodity trading advisor, of the Trading Advisor
with the CFTC or its membership in the NFA is revoked, suspended, terminated, or
not renewed, or limited or qualified in any respect; (v) except as provided in
Section 12 hereof, if the Trading Advisor merges or consolidates with, or sells
or otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading portfolios, programs,
systems or methods, or its goodwill, to any individual or entity; (vi) if the
Net Asset value of a Unit, after adjusting for distributions, if any, shall be
less than $5.00; (vii) if, at any time, the Trading Advisor materially violates
any trading or administrative policy described in the Prospectus or otherwise
provided in writing to the Trading Advisor by the General Partner, except with
the prior express written consent of the General Partner; or (viii) if the
Trading Advisor fails in a material manner to perform any of its obligations
under this Agreement.
The Trading Advisor may terminate this Agreement at any time, upon written
notice to the Partnership, in the event: (i) that the General Partner imposes
additional trading limitation(s) (not in effect on the date hereof) in the form
of one or more prohibitions, trading policies or administrative policies which
the Trading Advisor does not agree to follow in its management of the
Partnership's Net Assets; (ii) the General Partner objects to the Trading
Advisor implementing a proposed material change in the Trading Advisor's trading
portfolios and programs used by the Partnership and the Trading Advisor
certifies to the General Partner in writing that it believes such change is in
the best interests of the Partnership; (iii) the General Partner overrides a
trading instruction of the Trading Advisor for reasons unrelated to a
determination by the General Partner that the Trading Advisor has violated the
Partnership's trading policies and the Trading Advisor certifies to the General
Partner in writing that as a result the Trading Advisor believes the performance
results of the Trading Advisor relating to the Partnership will be materially
adversely affected; (iv) the Partnership materially breaches this Agreement and
does not correct the breach within 10 business days of receipt of a written
notice of such breach from the Trading Advisor; (v) the Trading Advisor has
amended its trading portfolios and programs to include a foreign futures or
option contract which may lawfully be traded by the Partnership under CFTC
regulations and counsel, mutually acceptable to the parties, has not opined that
such inclusion would cause adverse tax consequences to Limited Partners and the
General Partner does not consent to the Trading Advisor's trading such contract
for the Partnership within 5 business days of a written request by the Trading
Advisor to do so, or, if such consent is given, does not make arrangements to
facilitate such trading within 90 calendar days of such notice; (vi) the
Partnership's Net Assets fall below $1,000,000 at any time; or (vii) the General
Partner designates an additional trading advisor or advisors for the
Partnership.
The indemnities set forth in Section 8 hereof shall survive any termination
of this Agreement.
8. STANDARD OF LIABILITY; INDEMNIFICATIONS.
(a) LIMITATION OF TRADING ADVISOR LIABILITY. In respect of the Trading
Advisor's activities and obligations as set forth herein, none of the Trading
Advisor, and its controlling persons, its affiliates, and all of their
respective directors, officers, shareholders, employees and controlling persons
(collectively, the "Affiliates") shall be liable to the Partnership or the
General Partner or their partners, officers, shareholders, directors or
controlling persons except that the Trading Advisor shall be liable for acts or
omissions of any such person provided that such act or omission constitutes a
breach of this Agreement or a representation, warranty or covenant herein,
misconduct or negligence or is the result of any such person not having acted in
good faith and in the reasonable belief that such actions or omissions were in,
or not opposed to, the best interests of the Partnership.
(b) TRADING ADVISOR INDEMNITY IN RESPECT OF MANAGEMENT ACTIVITIES. The
Trading Advisor shall indemnify, defend and hold harmless the Partnership and
the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses, including expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Trading Advisor shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading by the Trading Advisor, or
any of its Affiliates; PROVIDED that such liability arises from an act or
omission of the Trading Advisor, or any of its Affiliates which is found by a
court of competent jurisdiction upon entry of a final judgment (or, if no final
judgment is entered, by a written opinion rendered by independent counsel who is
approved by the Partnership and the Trading Advisor, such approval not to be
unreasonably withheld) to be a breach of this Agreement or a representation,
warranty or covenant herein, or the result of misconduct or negligence or
conduct not done in good faith in the reasonable belief that it was in, or not
opposed to, the best interests of the Partnership.
(c) PARTNERSHIP INDEMNITY IN RESPECT OF MANAGEMENT ACTIVITIES. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor and
its Affiliates, from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses, including expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding relating to the futures interests trading
activities of the Partnership undertaken by the Trading Advisor or any of its
other activities or obligations provided for in this Agreement; PROVIDED that a
court of competent jurisdiction upon entry of a final judgment finds (or, if no
final judgment is entered, a written opinion is rendered to the Partnership by
independent counsel reasonably acceptable to both parties) to the effect that
the action or inaction of such indemnified party that was the subject of the
demand, claim, lawsuit, action, or proceeding did not constitute negligence,
misconduct, or a breach of this Agreement or a representation, warranty or
covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership.
(d) TRADING ADVISOR INDEMNITY IN RESPECT OF SALE OF UNITS. The Trading
Advisor shall indemnify, defend and hold harmless DWR, Xxxxxx Xxxxxxx & Co.,
Incorporated ("MS&Co."), CFI, the Partnership, the General Partner, any
additional seller, and their affiliates and each of their officers, directors,
principals, shareholders, and controlling persons from and against any loss,
claim, damage, liability, cost, and expense, joint and several, to which any
indemnified person may become subject under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Commodity Exchange
Act, as amended, and rules promulgated thereunder (the "CEAct"), the securities
or Blue Sky law of any jurisdiction, or otherwise (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement, provided that the Trading Advisor shall have
approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered by the Trading Advisor pursuant
to this Agreement at a Closing (as such term is defined in the Prospectus); or
(ii) a misleading or untrue statement or alleged misleading or untrue statement
of a material fact made in the Registration Statement, the Prospectus, or any
related selling material or an omission or alleged omission to state a material
fact therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus and any selling material, in
light of the circumstances under which they were made) not misleading, provided
such statement or omission relates specifically to the Trading Advisor or its
Trading Advisor Principals (as defined below) (including the historical
performance capsules, but excluding the pro forma performance information except
to the extent the pro forma performance information was based on information
furnished by the Trading Advisor) or was made in reliance upon, and in
conformity with, written information or instructions furnished by the Trading
Advisor (PROVIDED, HOWEVER, that with respect to any related selling material
only such related selling material as shall have been approved in writing by the
Trading Advisor); provided, further, that, unless a court of competent
jurisdiction has entered a final judgment finding (or, if no final judgment is
entered, a written opinion is rendered by independent counsel reasonably
acceptable to both parties) to the effect that there was a misleading or untrue
statement of material fact or omission to state a material fact relating
specifically to the Trading Advisor or its Trading Advisor Principals, the
Trading Advisor's indemnification liability under Section 8(d)(ii) shall be
limited to the amount of the management and incentive fees received by the
Trading Advisor pursuant to this Agreement.
(e) PARTNERSHIP AND GENERAL PARTNER INDEMNITY IN RESPECT OF SALE OF UNITS.
The Partnership and the General Partner agree, jointly and severally, to
indemnify, defend and hold harmless the Trading Advisor and its Affiliates from
and against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified person may become subject under the Securities
Act, the Exchange Act, the CEAct, the securities or Blue Sky law of any
jurisdiction, or otherwise (including any reasonable investigatory, legal, and
other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership and the General Partner shall have
approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Partnership or the General Partner
of any representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered by the Partnership or the General
Partner pursuant to this Agreement at a Closing; or (ii) a misleading or untrue
statement or alleged misleading or untrue statement of a material fact made in
the Registration Statement, the Prospectus, or any related selling material or
an omission or alleged omission to state a material fact therein which is
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or the selling material, in light of the
circumstances under which they were made) not misleading, provided that such
materially misleading or untrue statement or alleged materially misleading or
untrue statement or omission or alleged omission does not specifically relate to
the Trading Advisor or its Trading Advisor Principals (including the historical
performance capsules, but excluding the pro forma performance information except
to the extent the pro forma performance information was based on information
furnished by the Trading Advisor) or was not made in reliance upon, and in
conformity with, written information or instructions furnished by the Trading
Advisor (PROVIDED, HOWEVER, that with respect to any related selling material,
only such related selling material as shall have been approved in writing by the
Trading Advisor), or does not result from a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered by the Trading Advisor pursuant
to this Agreement at a Closing.
(f) The foregoing agreements of indemnity shall be in addition to, and
shall in no respect limit or restrict, any other remedies which may be available
to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim, or
proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and expenses
of more than one counsel for all indemnified persons in connection with any one
action, claim, or proceeding or in connection with separate but similar or
related actions, claims, or proceedings in the same jurisdiction arising out of
the same general allegations. The indemnifying party will not be liable for any
settlement of any action, claim, or proceeding effected without the indemnifying
party's express written consent, but if any action, claim, or proceeding is
settled with the indemnifying party's express written consent, the indemnifying
party will indemnify, defend, and hold harmless an indemnified person as
provided in this Section 8.
9. RIGHT TO ADVISE OTHERS AND UNIFORMITY OF ACTS AND PRACTICES.
(a) The Trading Advisor is engaged in the business of advising investors as
to the purchase and sale of futures interests. During the term of this
Agreement, the Trading Advisor, its principals and affiliates, will be advising
other investors (including affiliates and the stockholders, officers, directors,
and employees of the Trading Advisor and its affiliates and their families) and
trading for their own accounts. However, under no circumstances shall the
Trading Advisor by any act or omission intentionally or materially favor any
account advised or managed by the Trading Advisor over the account of the
Partnership in any way or manner (other than by charging different management
and/or incentive fees). The Trading Advisor agrees to treat the Partnership in a
fiduciary capacity to the extent recognized by applicable law, but, subject to
that standard, the Trading Advisor or any of its principals or affiliates shall
be free to advise and manage accounts for other investors and shall be free to
trade on the basis of the same trading portfolios, programs, systems, methods,
or strategies employed by the Trading Advisor for the account of the
Partnership, or trading portfolios, programs, systems, methods, or strategies
which are entirely independent of, or materially different from, those employed
for the account of the Partnership, and shall be free to compete for the same
futures interests as the Partnership or to take positions opposite to the
Partnership, where such actions do not knowingly or deliberately prefer any of
such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or nature
of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading portfolios, programs,
systems, methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE TRADING ADVISOR.
(a) REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE TRADING ADVISOR. The
Trading Advisor with respect to itself and each of its principals represents and
warrants to and agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the trading
portfolios and programs on behalf of the Partnership that are described in
the Prospectus (as modified from time to time) or any other trading
portfolios and programs agreed to by the General Partner and the Trading
Advisor.
(ii) The Trading Advisor shall follow, at all times, the trading
policies of the Partnership (as described in the Prospectus) or otherwise
as furnished to the Trading Advisor in writing from time to time on prior
reasonable notice.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the specified trading portfolios and programs described
in the Prospectus unless the Trading Advisor is instructed by the General
Partner to trade the Partnership's Net Assets pursuant to any one or more
of the Trading Advisor's other trading portfolios and programs described in
the Prospectus; and (B) only in futures and option contracts traded on U.S.
contract markets, foreign currency forward contracts traded with CFI, and
such other futures interests that are approved in writing by the General
Partner and have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and
in good standing in each other jurisdiction in which the nature or conduct
of its business requires such qualification and the failure to so qualify
would materially adversely affect the Trading Advisor's ability to perform
its duties under this Agreement. The Trading Advisor has full corporate
power and authority to perform its obligations under this Agreement, and as
described in the Registration Statement and Prospectus. The only principals
(as defined in Rule 4.10(e) under the CEAct) of the Trading Advisor are
those set forth in the Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's trading portfolios, programs,
approaches, systems and performance, in the Registration Statement and the
Prospectus, and in any supplemental selling material which has been
approved in writing by the Trading Advisor, are accurate and complete in
all material respects. With respect to the information relating to the
Trading Advisor and each Trading Advisor Principal, including the Trading
Advisor's and the Trading Advisor Principals' trading portfolios, programs,
approaches, systems, and performance information, as applicable, (i) the
Registration Statement and Prospectus contain all statements and
information required to be included therein under the CEAct, (ii) the
Registration Statement as of its effective date will not contain any
misleading or untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or necessary to make
the statements therein not misleading and (iii) the Prospectus at its date
of issue and as of each monthly closing will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which such
statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Trading Advisor and is a valid and binding
agreement of the Trading Advisor enforceable in accordance with its terms.
(vii) Each of the Trading Advisor and each "principal" of the Trading
Advisor, as defined in Rule 3.1 under the CEAct, has all federal and state
governmental, regulatory and exchange licenses, registrations and approvals
and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to
perform its or his obligations under this Agreement. The Trading Advisor is
registered as a commodity trading advisor under the CEAct and is a member
of the NFA in such capacity.
(viii) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein, the consummation of the transactions
contemplated herein and in the Prospectus and the payment of the fees
hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over it.
(ix) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial
or otherwise, business or prospects of the Trading Advisor or any Trading
Advisor Principal.
(x) Except as set forth in the Registration Statement or Prospectus
there has not been in the five years preceding the date of the Prospectus
and there is not pending, or to the best of the Trading Advisor's knowledge
threatened, any action, suit or proceeding at law or in equity before or by
any court or by any federal, state, municipal or other governmental body or
any administrative, self-regulatory or commodity exchange organization to
which the Trading Advisor or any Trading Advisor Principal is or was a
party, or to which any of the assets of the Trading Advisor or any Trading
Advisor Principal is or was subject and which resulted in or might
reasonably be expected to result in any materially adverse change in the
condition, financial or otherwise, of the Trading Advisor or which is
required under the Securities Act or CEAct to be disclosed in the
Prospectus. None of the Trading Advisor or any Trading Advisor Principal
has received any notice of an investigation by the NFA or the CFTC
regarding noncompliance by the Trading Advisor or any of the Trading
Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor Principal has
received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in
connection with the organization or operation of the Partnership, other
than as described in the Prospectus.
(xii) The actual performance of each discretionary account of a client
directed by the Trading Advisor and the Trading Advisor Principals since at
least the later of (i) the date of commencement of trading for each such
account or (ii) a date five years prior to the effective date of the
Registration Statement, is disclosed in the Prospectus (other than such
discretionary accounts the performance of which are exempt from the CEAct
disclosure requirements); all of the information regarding the actual
performance of the accounts of the Trading Advisor and the Trading Advisor
Principals set forth in the Prospectus is complete and accurate in all
material respects and is in accordance with and in compliance with the
disclosure requirements under the CEAct and the Securities Act, including
the Division of Trading and Markets "notional equity" advisories and
interpretations and the rules and regulations of the NFA.
(xiii) The Trading Advisor conducts its primary business activity,
including the performance of its duties and obligations under this
Agreement, in the State of California.
(b) COVENANTS OF THE TRADING ADVISOR. The Trading Advisor covenants and
agrees that:
(i) The Trading Advisor shall use its best efforts to maintain all
registrations and memberships necessary for the Trading Advisor to continue
to act as described herein and to at all times comply in all material
respects with all applicable laws, rules, and regulations, to the extent
that the failure to so comply would have a materially adverse effect on the
Trading Advisor's ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner immediately
as soon as the Trading Advisor or any of its principals (as defined in Rule
3.1 under the CEAct) becomes the subject of any investigation, claim or
proceeding of any regulatory authority having jurisdiction over such person
or becomes a named party to any litigation materially affecting the
business of the Trading Advisor. The Trading Advisor shall also inform the
General Partner immediately if the Trading Advisor or any of its officers
becomes aware of any breach of this Agreement by the Trading Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by providing
information regarding itself and its performance in the preparation of any
amendments or supplements to the Registration Statement and the Prospectus.
(iv) The Trading Advisor agrees to participate, to the extent that the
General Partner may reasonably request, in "road shows" and other
promotional activities relating to the marketing of the Units, provided
that such participation shall not in the reasonable judgment of the Trading
Advisor require the registration of the Trading Advisor or any of its
principals or agents as a broker-dealer or salesman or interfere materially
with the trading activities of the Trading Advisor. The Trading Advisor
shall pay the costs of its reasonably requested participation in such road
shows.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE GENERAL PARTNER AND
THE PARTNERSHIP.
(a) REPRESENTATIONS OF THE PARTNERSHIP AND THE GENERAL Partner. The General
Partner and the Partnership represent and warrant to the Trading Advisor, as
follows:
(i) The Partnership has provided to the Trading Advisor, and filed
with SEC, the Registration Statement and has filed copies thereof with: (i)
the CFTC under the CEAct; (ii) the NASD pursuant to its Conduct Rules; and
(iii) the NFA in accordance with NFA Compliance Rule 2-13. The Partnership
will not file any amendment to the Registration Statement or any amendment
or supplement to the Prospectus unless the Trading Advisor has received
reasonable prior notice of and a copy of such amendments or supplements and
has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required under applicable law to be
taken by the General Partner and the Partnership as a condition to the sale
of the Units to qualified subscribers therefor has been, or prior to each
Closing will have been, taken; and, upon payment of the consideration
therefor specified in each accepted Subscription and Exchange Agreement and
Power of Attorney, in such form as attached to the Prospectus, the Units
will constitute valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized pursuant
to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act
("DRULPA") and is validly existing under the laws of the State of Delaware
with full power and authority to engage in the trading of futures interests
and to engage in its other contemplated activities as described in the
Prospectus; the Partnership has received a certificate of authority to do
business in the State of New York as provided by Article 8-A of the New
York Revised Limited Partnership Act and is qualified to do business in
each jurisdiction in which the nature or conduct of its business requires
such qualification and where failure to be so qualified could materially
adversely affect the Partnership's ability to perform its obligations
hereunder.
(iv) The General Partner is duly organized and validly existing and in
good standing as a corporation under the laws of the State of Delaware and
in good standing and qualified to do business as a foreign corporation
under the laws of the State of New York and is qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which
the nature or conduct of its business requires such qualification and where
the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full partnership or
corporate power and authority under applicable law to conduct their
business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all statements
and information required to be included therein by the CEAct. When the
Registration Statement becomes effective under the Securities Act and at
all times subsequent thereto up to and including the Initial Closing and
each Monthly Closing, the Registration Statement and Prospectus will comply
in all material respects with the requirements of the Securities Act, the
rules and regulations promulgated thereunder (the "SEC Regulations"), the
rules of the NFA and the CEAct. The Registration Statement as of its
effective date will not contain any misleading or untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus as of its date of issue and at the Initial Closing and each
Monthly Closing will not contain any misleading or untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material,
when read in conjunction with the Prospectus, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material
will comply with the CEAct and the regulations and rules of the NFA and
NASD. The representation and warranties in this clause (vi) shall not,
however, apply to any statement or omission in the Registration Statement,
Prospectus or supplemental selling material (which selling material has
been reviewed by the Trading Advisor) specifically relating to the Trading
Advisor, or its Trading Advisor Principals or its trading portfolios and
programs (other than the pro forma performance information except to the
extent such information was based on information furnished by the Trading
Advisor) or made in reliance upon and in conformity with information
furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business
or prospects of the General Partner or the Partnership, whether or not
arising in the ordinary course of business.
(viii) This Agreement has been duly and validly authorized, executed
and delivered by the General Partner for itself and on behalf of the
Partnership and constitutes a valid, binding and enforceable agreement of
the Partnership and the General Partner in accordance with its terms.
(ix) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein and the consummation of the transactions
contemplated herein and in the Registration Statement and Prospectus will
not violate, or constitute a breach of, or default under, the General
Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, the Limited Partnership Agreement, or any agreement or
instrument by which either the General Partner or the Partnership, as the
case may be, is bound or any order, rule, law or regulation applicable to
the General Partner or the Partnership of any court or any governmental
body or administrative agency or panel or self-regulatory organization
having jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or Prospectus,
there has not been in the five years preceding the date of the Prospectus
and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity
before or by any court or by any federal, state, municipal or other
governmental body or any administrative, self-regulatory or commodity
exchange organization to which the General Partner or the Partnership is or
was a party, or to which any of the assets of the General Partner or the
Partnership is or was subject and which resulted in or might reasonably be
expected to result in any materially adverse change in the condition,
financial or otherwise, of the General Partner or the Partnership or which
is required under the Securities Act or the CEAct to be disclosed in the
Prospectus; and neither the General Partner nor any of the principals of
the General Partner, as "principals" is defined under Rule 4.10 under the
CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with
the Securities Act or the CEAct which is required under the Securities Act
or the CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General Partner, as
defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and
licenses, and have effected all filings with federal and state governmental
agencies and regulatory agencies required to conduct their business and to
act as described in the Registration Statement and Prospectus or required
to perform their obligations under this Agreement (including, without
limitation, registration as a commodity pool operator under the CEAct and
membership in the NFA as a commodity pool operator) and will maintain all
such required approvals, licenses, filings and registrations for the term
of this Agreement. The General Partner's principals identified in the
Registration Statement are all of the General Partner Principals.
(xii) The offer and sale of Units will comply fully at all times with
all applicable federal and state securities and commodities laws including,
without limitation, the Securities Act, the Exchange Act, the CEAct, and
the securities ("Blue Sky") laws of the states in which Units are offered
and sold.
(b) COVENANTS OF THE GENERAL PARTNER AND THE PARTNERSHIP. The General
Partner for itself and the Partnership covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain all
registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in
all material respects with all applicable laws, rules, and regulations, to
the extent that the failure to so comply would have a materially adverse
effect on the General Partner's ability to act as described herein and in
the Prospectus.
(ii) The General Partner shall inform the Trading Advisor immediately
as soon as the General Partner or any of its principals becomes the subject
of any investigation, claim, or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any
litigation materially affecting the business of the General Partner. The
General Partner shall also inform the Trading Advisor immediately if the
General Partner or any of its officers become aware of any breach of this
Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Advisor copies of
the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
(iv) The General Partner shall change the name of the Partnership so
as to exclude the name of the Trading Advisor if the Trading Advisor ceases
to be the sole Trading Advisor for the Partnership, unless otherwise agreed
to by the General Partner and the Trading Advisor.
12. MERGER OR TRANSFER OF ASSETS OF TRADING ADVISOR.
The Trading Advisor may merge or consolidate with, or sell or otherwise
transfer its advisory business, or all or a substantial portion of its assets,
any portion of its commodity trading portfolios, programs, systems or methods,
or its goodwill, to any person or entity that is directly or indirectly
controlled by, controlling, or under common control with, the Trading Advisor,
provided that such person or entity expressly assumes all obligations of the
Trading Advisor under this Agreement and agrees to continue to operate the
business of the Trading Advisor, substantially as such business is being
conducted on the date hereof.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the matters referred to herein, and no other agreement, verbal or
otherwise, shall be binding as between the parties unless in writing and signed
by the party against whom enforcement is sought.
14. ASSIGNMENT.
This Agreement may not be assigned by any party hereto without the express
written consent of the other parties hereto.
15. AMENDMENT.
This Agreement may not be amended except by the written consent of the
parties hereto.
16. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement or
any covenant herein contained shall not affect the validity or enforceability of
any other provision or covenant hereof or herein contained and any such invalid
provision or covenant shall be deemed to be severable.
17. CLOSING CERTIFICATES AND OPINIONS.
(1) The Trading Advisor shall, at the Initial Closing and at the request of
the General Partner at any Monthly Closing, provide the following:
(a) To DWR, the General Partner and the Partnership a certificate, dated
the date of any such closing and in form and substance satisfactory to such
parties, to the effect that:
(i) The representations and warranties by the Trading Advisor in this
Agreement are true, accurate, and complete on and as of the date of the
closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its obligations and
satisfied all of the conditions on its part to be performed or satisfied
under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion of counsel
to the Trading Advisor, in form and substance satisfactory to such parties, to
the effect that:
(i) The Trading Advisor is a corporation duly organized and validly
existing under the laws of the State of Delaware and is qualified to do
business and in good standing in the State of California. The Trading
Advisor has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor Principals)
has all governmental, regulatory, self-regulatory and commodity exchange
and clearing association licenses, registrations, and memberships required
by law in order for the Trading Advisor to perform its duties and
obligations under this Agreement, and the Trading Advisor (including the
Trading Advisor Principals) has made all filings necessary to perform its
obligations under this Agreement and to conduct its business as described
in the Registration Statement and Prospectus, except for such licenses,
memberships, filings and registrations, the absence of which would not have
a material adverse effect on its ability to act as described in the
Registration Statement and Prospectus or to perform its obligations under
this Agreement, and, to the best of such counsel's knowledge, after due
investigations, none of such licenses, memberships or registrations have
been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Trading Advisor and constitutes a valid and binding
agreement of the Trading Advisor enforceable in accordance with its terms,
subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally
of rights of creditors and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), and except as enforceability of the indemnification and exculpation
provisions contained in this Agreement may be limited by applicable law or
public policy.
(iv) To such counsel's knowledge, after due inquiry of a senior
officer of the Trading Advisor (consisting solely of a certificate of such
officer), except as disclosed in the Prospectus, there are no actions,
suits or proceedings at law or in equity pending or threatened before or by
any court, governmental body, administrative agency, panel or
self-regulatory organization, nor have there been any such actions, suits
or proceedings within the five years preceding the date of the Prospectus
against the Trading Advisor or any Trading Advisor Principal which are
required to be disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the incurrence of
the obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of
any of the provisions of the certificate of incorporation or bylaws of the
Trading Advisor and, based upon due inquiry of certain officers of the
Trading Advisor, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument
or agreement known to such counsel by which the Trading Advisor is bound
and will not violate any order, law, rule or regulation applicable to the
Trading Advisor of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over
the Trading Advisor with respect to the performance of its duties
hereunder.
(vi) Based upon reliance of certain SEC "no-action" letters, as of the
closing, the performance by the Trading Advisor of the transactions
contemplated by this Agreement and as described in the Prospectus will not
require the Trading Advisor to be registered as an "investment adviser" as
that term is defined in the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that would lead
them to believe that, (A) the Registration Statement at the time it became
effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (B) the
Prospectus at the time it was issued or at the closing contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein relating to the Trading Advisor or
the Trading Advisor Principals, in light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that such counsel need
express no opinion or belief as to the performance data and notes or
descriptions thereto set forth in the Registration Statement and
Prospectus.
(viii) Without rendering any opinion as to the accuracy of the
information in the performance capsules and related notes or descriptions
thereto set forth in the Trading Advisor's disclosure document dated March
31, 1998, counsel shall opine that such performance information complies as
to form in all material respects with applicable CFTC rules and all CFTC
and NFA interpretations thereof, except as specifically disclosed in such
disclosure document.
In giving the foregoing opinion, counsel may rely on information obtained
from public officials, officers of the Trading Advisor, and other sources
believed by it to be responsible and may assume that signatures on all documents
examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a report dated the
date of the closing which shall present, for the period from the date after the
last day covered by the historical performance capsules in the Prospectus to the
latest practicable day before closing, updated performance information, and
which shall certify that such information is, to the best of such Trading
Advisor's knowledge, accurate in all material respects.
(2) The General Partner shall, at the Initial Closing following the
effective date of the Registration Statement and at any Monthly Closing in which
the General Partner makes a similar request of the Trading Advisor, provide the
following requested information:
(a) To the Trading Advisor a certificate, dated the date of such closing
and in form and substance satisfactory to the Trading Advisor, to the effect
that:
(i) The representations and warranties by the Partnership and the
General Partner in this Agreement are true, accurate, and complete on and
as of the date of the closing as if made on the date of the closing.
(ii) No stop order or other order or action suspending the
effectiveness of the Registration Statement has been issued by the SEC and
no proceedings for that purpose have been instituted or are pending or, to
the knowledge of the General Partner, are contemplated or threatened under
the Securities Act. No order preventing or suspending the use of the
Prospectus has been issued by the SEC, NASD, CFTC, or NFA and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the General Partner, are contemplated or threatened under the
Securities Act, the CEAct or other applicable law.
(iii) The Partnership and the General Partner have performed all of
their obligations and satisfied all of the conditions on their part to be
performed or satisfied under this Agreement at or prior to the date of the
closing.
(b) To the parties hereto, an opinion of Cadwalader, Xxxxxxxxxx & Xxxx,
counsel to the General Partner and the Partnership, in form and substance
satisfactory to such parties, to the effect that:
(i) The Partnership is a limited partnership duly formed pursuant to
the Certificate of Limited Partnership, the Limited Partnership Agreement
and the DRULPA and is validly existing under the laws of the State of
Delaware with full partnership power and authority to conduct the business
in which it proposes to engage as described in the Registration Statement
and Prospectus and to perform its obligations under this Agreement; the
Partnership has received a Certificate of Authority as contemplated under
the New York Revised Limited Partnership Act and is qualified to do
business in New York and need not affect any other filings or
qualifications under the laws of any other jurisdictions to conduct its
business as described in the Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly existing and in
good standing as a corporation under the laws of the State of Delaware and
is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in
which the nature or conduct of its business requires such qualification and
the failure to so qualify might reasonably be expected to result in
material adverse consequences to the Partnership or the General Partner's
ability to perform its obligations as described in the Registration
Statement and Prospectus. The General Partner has full corporate power and
authority to conduct its business as described in the Registration
Statement and Prospectus and to perform its obligations under this
Agreement.
(iii) The General Partner, each of its principals as defined in Rule
3.1 under the CEAct, and the Partnership have all federal and state
governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the
General Partner and the Partnership to perform their obligations under this
Agreement to conduct their business as described in the Registration
Statement and Prospectus, except for such licenses, memberships, filings,
and registrations, the absence of which would not have a material adverse
effect on the ability of the Partnership or the General Partner to act as
described in the Registration Statement and Prospectus, or to perform their
obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships
or registrations have been rescinded, revoked or suspended.
(iv) This Agreement and the Limited Partnership Agreement have been
duly authorized, executed and delivered by or on behalf of the General
Partner and this Agreement has been duly authorized, executed and delivered
by or on behalf of the Partnership, and each constitutes a valid and
binding agreement of the General Partner and/or the Partnership, as
applicable, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws at the
time in effect affecting the enforceability generally of rights of
creditors and by general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification and exculpation provisions
contained in this Agreement and the Limited Partnership Agreement may be
limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and the offer and
sale of the Units by the Partnership and the incurrence of the obligations
herein set forth and the consummation of the transactions contemplated
herein and in the Prospectus will not be in contravention of the General
Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership and the Limited Partnership Agreement, and the
execution and delivery of the Limited Partnership Agreement will not be in
contravention of the General Partner's certificate of incorporation or
bylaws or the Certificate of Limited Partnership, and, to the best of such
counsel's knowledge based upon due inquiry of certain officers of the
General Partner, none of the foregoing will constitute a breach of, or
default under, or a violation of any agreement or instrument known to such
counsel by which the General Partner or the Partnership is bound or violate
any order known to such counsel or any law, rule or regulation applicable
to the General Partner or the Partnership of any court, governmental body,
administrative agency, panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(vi) To such counsel's knowledge, based upon due inquiry of certain
officers of the General Partner, except as disclosed in the Prospectus,
there are no actions, suits or proceedings at law or in equity pending or
threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
actions, suits or proceedings within the five years preceding the date of
the Prospectus against the General Partner or the Partnership which are
required to be disclosed in the Registration Statement or Prospectus.
(vii) The Registration Statement is effective under the Securities Act
and, to the best of such counsel's knowledge, no proceedings for a stop
order are pending or threatened under Section 8(d) of the Securities Act or
any similar state securities laws.
(viii) At the time the Registration Statement became effective, the
Registration Statement, and at the time the Prospectus was issued and as of
the closing, the Prospectus, complied as to form in all material respects
with the requirements of the Securities Act, the Securities Regulations,
the CEAct and the regulations of the NFA and NASD.
(ix) Based upon reliance on certain SEC "no-action" letters, as of the
closing, the performance by the Partnership of the transactions
contemplated by this Agreement and as described in the Prospectus will not
require the Partnership to register as an "investment company" under the
Investment Company Act of 1940, as amended.
(x) Nothing has come to such counsel's attention that would lead them
to believe that the Registration Statement at the time it became effective
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they where made, not
misleading; provided, however, that Cadwalader, Xxxxxxxxxx & Xxxx need
express no opinion or belief (a) as to information in the Registration
Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions
thereto set forth in the Registration Statement and Prospectus.
(xi) The General Partner and its "principals," as defined in CFTC Rule
3.1(a), have all federal and state governmental, regulatory,
self-regulatory and exchange approvals, licenses, registrations, and
memberships, and have effected all filings with federal and state
governmental regulators, self-regulatory organizations and exchanges
required to conduct their business and to act as described in the
Prospectus, or required to perform their obligations under this Agreement
and the Limited Partnership Agreement, except for such approvals, licenses,
registrations, memberships, and filings the absence of which would not have
a material adverse effect on their ability to act as described in the
Prospectus, or to perform their obligations under such agreements, and, to
the best of such counsel's knowledge, after due investigation, none of such
approvals, licenses, registrations, memberships, or filings has been
rescinded, revoked, or suspended.
(xii) The information in the Prospectus under the captions "Summary of
the Prospectus--Tax Considerations," "Risk Factors--Taxation and Regulatory
Risks," "Purchases by Employee Benefit Plans--ERISA Considerations,"
"Material Federal Income Tax Considerations," "State and Local Income Tax
Aspects," and "The Limited Partnership Agreements," to the extent that such
information constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct.
(xiii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required to be taken by the General
Partner and the Partnership as a condition to the subscription for and sale
of the Units to qualified subscribers therefor has been taken; and, upon
payment of the consideration therefor specified in the accepted
Subscription and Exchange Agreement and Power of Attorney, the Units will
constitute valid limited partnership interests in the Partnership and each
subscriber who purchases Units will become a Limited Partner, subject to
the requirement that each such purchaser shall have duly completed,
executed and delivered to the Partnership a Subscription and Exchange
Agreement and Power of Attorney relating to the Units purchased by such
purchaser, that such purchaser meets all applicable suitability standards
and that the representations and warranties of such purchaser in the
Subscription and Exchange Agreement and Power of Attorney are true and
correct and that such purchaser is included as a Limited Partner in the
Partnership's records.
In rendering its opinion, such counsel may rely on information obtained
from public officials, officers of the General Partner and other sources
believed by it to be responsible and may assume that signatures on all documents
examined by it are genuine, and that a Subscription and Exchange Agreement and
Power of Attorney in the form attached to the Prospectus has been duly
authorized, completed, dated, executed, and delivered and funds representing the
full subscription price for the Units purchased have been delivered by each
purchaser of Units in accordance with the requirements set forth in the
Prospectus.
18. INCONSISTENT FILINGS.
The Trading Advisor agrees not to file, participate in the filing of, or
publish any description of the Trading Advisor, or of its respective principals
or trading approaches that is materially inconsistent with those in the
Registration Statement and Prospectus, without so informing the General Partner
and furnishing to it copies of all such filings within a reasonable period prior
to the date of filing or publication.
19. DISCLOSURE DOCUMENT.
During the term of this Agreement, the Trading Advisor shall furnish to the
General Partner promptly copies of all disclosure documents filed with the CFTC
or NFA by the Trading Advisor. The General Partner acknowledges receipt of the
Trading Advisor's disclosure document dated March 31, 1998.
20. NOTICES.
All notices required to be delivered under this Agreement shall be in
writing and shall be effective when delivered personally on the day delivered,
or when given by registered or certified mail, postage prepaid, return receipt
requested, on the day actually received, addressed as follows (or to such other
address as the party entitled to notice shall hereafter designate in accordance
with the terms hereof):
if to the Partnership:
Xxxxxx Xxxxxxx Xxxx Xxxxxx Charter Xxxxxx X.X.
c/o Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
if to the General Partner:
Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the Trading Advisor:
Xxxxxx Investment Corporation
The Eastwood Building
San Xxxxxx between 5th and 6th
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx Xxxxxx
With a copy to:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
21. SURVIVAL.
The provisions of this Agreement shall survive the termination of this
Agreement with respect to any matter arising while this Agreement was in effect.
22. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE BROUGHT BY A
PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS AGREEMENT,
EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY, CITY
AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS
AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY RELIEF WHATSOEVER
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH PARTY EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY,
CITY AND STATE OF NEW YORK.
23. REMEDIES.
In any action or proceeding arising out of any of the provisions of this
Agreement, the Trading Advisor agrees not to seek any prejudgment equitable or
ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. HEADINGS.
Headings to sections herein are for the convenience of the parties only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
XXXXXX XXXXXXX XXXX XXXXXX CHARTER
XXXXXX X.X.
by Demeter Management Corporation,
General Partner
By: /s/ XXXX X. XXXXXX
------------------
DEMETER MANAGEMENT CORPORATION
By: /s/ XXXX X. XXXXXX
------------------
XXXXXX INVESTMENT CORPORATION
By: /s/ XXXXXXX XXXXXX
-------------------------
Xxxxxxx Xxxxxx, President
