Exhibit 1.07
XXXXXXXX & COMPANY, LLC
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT ("Agreement") is made and entered into this 24th
day of October, 2001 by and between XXXXXXXX & COMPANY, INC., a registered
commodity trading advisor, ("Advisor") and THE PRICE FUND I, L.P., an Illinois
limited partnership ("Client").
In consideration of the mutual promises contained in this Agreement, the
parties hereby agree as follows:
1. Account with Broker. Client shall open an account with MAN FINANCIAL, a
registered futures commission merchant ("Broker"), and deposit with Broker funds
or securities for an account whose level of trading risk and management fees
shall be based on the "Nominal Account Size", as defined in paragraph 4 below.
As of the date of this Agreement, the Nominal Account Size shall be $5 million,
which shall initially include $0 of notional funds and $5 million of actual
funds; the ratio of such notional funds to such actual funds being: 0/1.
2. Give-Up Arrangements. The client authorizes the Advisor to execute
orders for the account through floor brokers and execution desks, which may be
unrelated to the Broker. Executed trades will then be "given up" to the Broker
for the benefit of the account. Orders executed in this manner will result in
"give-up" fees that will be charged to the account in addition to the brokerage
commissions charged by the Broker. The client hereby authorizes the Advisor to
enter into execution or give-up agreements on behalf of the client with the
Broker and executing brokers, and agrees to be bound by such agreements.
The client understands that Advisor will not be responsible for the
execution or clearance of the client's trades once complete orders have been
transmitted to the executing brokers.
3. Change in Nominal Account Size. Effective as of the first business day
of any calendar month, Client may increase the Nominal Account Size by
depositing additional funds with Broker, or increasing the notional fund
allocation in such amount as Client shall determine with concurrence of the
Advisor, and with written notice to such effect received by Advisor on or before
the last business day prior to the effective date of such increase. Client may
decrease the Nominal Account Size, either through the reduction of actual funds
or notional funds (in each case, a "withdrawal"), effective as of the last
business day of any calendar month, upon written notice to Advisor at least two
business days prior to the effective date of such withdrawal; other than with
respect to the termination of this Agreement, as set forth in paragraph 14
below.
4. Limited Power of Attorney. Client hereby constitutes and appoints
Advisor, as Client's agent and attorney-in-fact, with full power and authority,
to buy, sell (including short sales) and trade in, commodity futures contracts,
options on futures contracts, and cash transactions (collectively referred to as
"futures contracts"), on margin or otherwise, for Client's account and risk.
Such transactions may be of any nature and shall relate to all such futures
contracts that are now traded, or that may be traded in the future, on United
States and international commodity exchanges and in the over-the-counter spot
and forward markets. Accordingly, the Broker is authorized and empowered to
follow the instructions of Advisor, as agent and attorney-in-fact for Client, in
every respect with regard to any such trades, purchases or sales, on margin or
otherwise, and Client hereby, ratifies and confirms any and all transactions,
trades or dealings effected for Client by Advisor.
5. Fees.
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(a) Management Fee. Client agrees to pay to Advisor a management
fee, which shall be 2% per annum of the Nominal Account Size, calculated and
paid as follows. The management fee will accrue at the close of the last
business day of each calendar month from the date of this Agreement (and as of
the day this Agreement terminates) and shall be an amount equal to 100% of the
Nominal Account Size as at the close of the last business day of the month
immediately preceding. Such fees will accumulate in arrears and shall be made
payable upon the close of each calendar quarter (being the months of March,
June, September and December). Client understands that, since the Nominal
Account Size includes notional funds, Client may be paying a management fee not
only on an amount equal to actual funds and securities held in the account, but
also on notional funds to the extent that actual funds held in the account is
less than the Nominal Account Size. The management fee shall accrue and shall
be paid to the Advisor regardless of whether the account has realized or
unrealized profits.
(b) Incentive Fee. Client agrees to pay Advisor a quarterly
incentive fee consisting of 20% of New High Trading Profits, if any, for each
calendar quarter. This incentive fee accrues and shall be made payable upon the
close of each calendar quarter (and as of the day this Agreement terminates).
Incentive fees accrued on funds withdrawn from Client's account are deemed due
and payable at the time of withdrawal.
(c) Definitions. For purposes of this paragraph 4, the following
definitions shall apply:
(i) Nominal Account Size shall be the sum of all cash and
marketable securities; plus outstanding gains/losses on open positions
marked to market as at end-of-day; less accrued fees, if any; plus any
dollar amount that Client has stated is subject to Advisor's trading
discretion but is not deposited in the trading account.
(ii) Trading Profits shall be computed in accordance with
generally accepted accounting principles and shall be the sum of all
realized gains or losses on positions the change in unrealized gains
or losses on open positions, less brokerage commissions, exchange fees
and the Advisor's monthly management fee and any other expenses
not to exceed 0.5% for this computation but exclusive of the incentive
fee allocation to the Advisor.
(iii) New High Trading Profits shall mean the total of Trading
Profits as calculated above; less the total of Trading Profits for
which fees have previously accrued according to this Agreement. During
a calendar quarter in which the account has incurred a loss, New High
Trading Profits calculated in this manner shall be negative and such
amount will constitute a "Carry-forward Loss." Consequently, no
incentive fee will accrue in that quarter; and such loss shall be
carried forward and fully deducted from the Trading Profits of
subsequent quarters for the purpose of the calculation of fees. If
there is a Carry-forward Loss at the time Client effects a withdrawal
(as set out in paragraph 2 above), the Carry-forward Loss shall be
adjusted proportionately.
6. Payment of Fees. After the close of business of each calendar
month, Advisor shall calculate and record all fees that may be due and payable
according to this Agreement. Within a reasonable time after the end of each
quarter (and the day this Agreement terminates), Advisor will prepare an invoice
setting forth the amount of management and incentive fees, if any, payable and
shall furnish such invoice to the Broker, which will be directed to deduct and
pay such fees to Advisor directly
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from Client's account. Client agrees that management and incentive fees are due
and payable within five business days of the date of an invoice. Payment shall
be made by check.
7. Reduction of Positions. In the event that the amount of funds required
by Broker as margin in support of outstanding trading positions for the account
exceeds 50% of the Nominal Account Size at the close of any day, Advisor will
effect the orderly reduction of outstanding positions upon the first opportunity
thereafter so that such margin will be reduced to an amount that is less than
such percentage of the Nominal Account Size.
8. Transactions Subject Applicable Law and Rules. All transactions executed
for Client's account shall be subject to the provisions of the Commodity
Exchange Act and the regulations promulgated thereunder by the Commodity Futures
Trading Commission ("CFTC"), the constitution, laws, rules, regulations and
customs, as they may be amended, of the National Futures Association ("NFA"),
the commodity exchanges or contract markets on which such transactions are
executed, their clearing houses, and any other applicable laws or regulations.
If any provision of this Agreement is or at any time becomes inconsistent with
any present or future law, rule, or regulation of any exchange, NFA or the CFTC,
or of any other sovereign government agency or a self-regulatory body thereof,
such provision shall be deemed to be superseded or modified to conform to such
law, rule, or regulation, but in all other respects this Agreement shall
continue and remain in full force and effect.
9. Representations and Warranties.
(a) Client represents and warrants that it understands fully the
fundamental aspects and the speculative nature of the trading of futures
contracts by virtue of education level achieved; employment experience;
independent investment, legal, accounting and tax advice; and/or previous
experience with investments of a similar nature.
(b) Client acknowledges that it may suffer losses significantly
greater than the amount held in the account due to conditions beyond the
control of Advisor. Client further acknowledges that it may be required to
deposit additional capital into the account and confirms that the loss of
funds pursuant to activities contemplated in this Agreement will not cause
undue financial hardship upon Client nor impinge upon Client's ability to
meet its current and future financial obligations.
(c) Client represents that, to the best of its knowledge, it is in
compliance with all laws applicable to its operation. It further represents
and warrants that it has full right, power and authority to enter into this
Agreement, given the actions contemplated to be taken herein, and the
performance hereof will not cause Client to be in non-compliance with any
laws applicable to its operation.
(d) Client acknowledges that no warranty is expressed or implied by
Advisor as to the returns to Client pursuant to trading decisions of
Advisor and its officers. Client releases Advisor, its directors, officers,
shareholders, associates and employees from all liability for losses
whatsoever incurred, monetary or otherwise, whether such actions are
initiated by Client or a result of the actions of Advisor in accordance
with the terms of this Agreement.
(e) Client acknowledges that it has received, read, and understood the
Advisor's Disclosure Document dated February 1, 2001, and has carefully
considered the matters discussed therein in determining to open a commodity
trading account advised by Advisor.
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10. Services Not Exclusive. The services described in this Agreement are
not exclusive and Client acknowledges that Advisor presently renders advisory
and consulting services to other clients. Advisor, its principals, employees and
affiliates may trade futures contracts or securities for their own account.
11. Confidentiality. Client acknowledges that Advisor's trading methods are
proprietary and agrees not to disclose any of Advisor's trading recommendations
to any third party.
12. Indemnifications.
(a) Client hereby agrees to indemnify and hold harmless Advisor, its
employees and affiliates from any and all trading losses, claims, damages
costs, expenses (including reasonable attorneys fees), indebtedness and
liabilities arising therefrom, including any acts, omissions or errors of
Broker in executing orders in Client's account, unless a court of competent
jurisdiction has found that Advisor has committed gross negligence, willful
misconduct or wanton recklessness in connection with the activities arising
from Client's account.
(b) Client further agrees to indemnify Advisor, its employees and
affiliates against any and all losses, claims, damages, liabilities, costs
and expenses, arising under the federal securities laws, the Commodity
Exchange Act, or the securities or Blue Sky law of any jurisdiction, in
respect of the offer or sale of units. This indemnification shall be made
for liabilities resulting from a breach of any representation, warranty or
agreement in this Agreement relating to the offering, or an actual or
alleged misleading or untrue statement of a material fact, or an actual or
alleged omission of a material fact, made in the registration statement,
prospectus or related selling material, provided, the statement or omission
does not relate to the Advisor or its principals, was not made in reliance
upon, and in conformity with, information or instructions furnished by the
trading advisor, and does not result from a breach by the Advisor of any
representation, warranty or agreement relating to the offering.
(c) Advisor agrees to indemnify Client, its general partner, their
respective employees, agents and affiliates against any and all losses,
claims, damages, liabilities, costs and expenses, arising under the federal
securities laws, the Commodity Exchange Act, or the securities or Blue Sky
law of any jurisdiction, in respect of the offer or sale of units. This
indemnification shall be made for liabilities resulting from a breach of
any representation, warranty or agreement in this Agreement or an actual or
alleged misleading or untrue statement of a material fact, or an actual or
alleged omission of a material fact, made in the registration statement,
prospectus or related selling material, provided, the statement or omission
does relates to the Advisor or its principals, was made in reliance upon,
and in conformity with, information or instructions furnished by the
Advisor, and results from a breach by the Advisor of any representation,
warranty or agreement relating to the offering.
13. Term.
(a) This Agreement shall have an initial term of one year commencing
on the date that Advisor first begins to direct trading on Client's behalf
and shall be renewable automatically thereafter for additional one year
terms, unless earlier terminated in accordance with this Agreement.
(b) Client may terminate this Agreement as of any month-end upon five
(5) days' prior written notice to Advisor. All outstanding management and
incentive fees incurred prior to
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the effective date of termination shall remain due and payable and shall
be calculated and billed as if such termination were the end of the current
quarter.
(c) Client may terminate this Agreement at any time upon written
notice to Advisor, if Client, in its sole discretion, determines that
Advisor's trading activities are contrary to the trading policies set forth
in the registration statement. Advisor may terminate this Agreement at any
time upon written notice to Client, if Advisor, in its sole discretion,
determines that subsequent changes in Client trading policies would
adversely affect Advisor's ability to direct trading on Client's behalf.
14. Assignment. This Agreement shall be binding upon the parties hereto,
their heirs and successors and may not be assigned without the written consent
of both parties.
15. Notices. Communications may be sent to Client at the address given
below, or at such other address as Client may hereafter give to Advisor in
writing, and all communications so sent, whether by mail, telegraph, messenger,
or otherwise, shall be deemed given to Client personally, whether actually
received or not.
16. Governing Law. This Agreement and its validity, construction and
enforcement shall be governed by the laws of the State of Illinois and its
provisions shall be continuous, shall cover individually and collectively all
account(s) that Client may open or re-open with Advisor and shall inure to the
benefit of Advisor, his successors, and assigns by merger, consolidation or
otherwise.
17. Waiver. No waiver of any provision of this Agreement shall be
deemed a waiver of any other provision, nor a continuing waiver of the provision
or provisions so waived.
18. Authorization to Pay Incentive Fees. Client hereby authorizes
Broker to pay Advisor the management fees and incentive fees owing to Advisor
upon presentation of a statement by Advisor to Broker.
19. Complete Agreement. This Agreement contains the final and
complete Agreement between the parties hereto and may not be altered or modified
without the signed written consent of both parties.
In Witness Whereof, the parties have caused this agreement to be duly
executed as of the date set forth above.
12th October 2001 The Price Fund I, L.P.
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Date
(312) 648-2883 000 X. Xxxxxxx Xxxx., Xxxxx 0000X
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Telephone Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
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By: Price Asset Management, Inc.
Its General Partner
/S/ Xxxxxx Xxxxxxxxx
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(Authorized Officer)
Xxxxxx Xxxxxxxxx
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(Print Name)
Chief Operating Officer
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Title
XXXXXXXX & COMPANY, INC.
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By: Xxxxxxx X. Xxxxx
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Chief Financial Officer
XXXXXXXX & COMPANY, INC.
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