Exhibit 10.01
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 31st day of August 2002, among
XXXXXX XXXXXXX CHARTER XXXXXXXX X.X., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and XXXXXXXX & COMPANY, INC., a Maryland 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 March 26, 2002 (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 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. 333-85078) (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 July
29, 2002, constituting a part thereof (as amended and supplemented from time to
time) (the "Prospectus"). 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 after it has been a limited partner of a member partnership of
the Fund Group for six months at 100% of the respective Net Asset Value (as
defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the principals of the Trading Advisor have extensive
experience trading in futures interests and the Trading Advisor is willing to
provide certain services and undertake certain obligations as set forth herein;
WHEREAS, the Partnership and the General Partner desire 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 7(d) (1) of the Limited Partnership Agreement 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 programs,
systems, methods, and strategies (subject to the need, in the reasonable
discretion of the Trading Advisor, to preserve the confidentiality of
proprietary information concerning such 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 (x) to be made in the Partnership's
Prospectus required by Section 4.21 of the CFTC's Regulations, including any
amendments or supplements thereto, or (y) 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 Xxxxxx Xxxxxxx XX Inc., the selling
agent for the Partnership ("Xxxxxx Xxxxxxx XX") 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 Rule 3.1(a) 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 continuing offering of
Units except as may be specifically requested by the General Partner.
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2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a 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 Exhibit A, the Prospectus and 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.
Except as otherwise provided herein, the Trading Advisor shall not be liable for
the consequences of any decision by the General Partner to override instructions
of the Trading Advisor. In performing services for the Partnership, the Trading
Advisor may not materially alter the trading program(s) 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 an alteration in the Trading Advisor's trading
program(s).
(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 Exhibit A hereto, the
Prospectus and as otherwise provided in writing to the Trading Advisor. The
Trading Advisor shall trade the Partnership's Net Assets pursuant to the
Financial, Metal & Energy Portfolio described in the Prospectus (with such
changes and additions to such trading program as the Trading Advisor, from
time to time, incorporates into its Financial, Metal & Energy Portfolio 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 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 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 are 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
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discrepancies of which the Trading Advisor becomes 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 the reasonable request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Advisor other than proprietary information
(including, without limitation, information relating to changes in control,
personnel, trading approach, or financial condition). 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, including give-up fees at rates approved by Xxxxxx Xxxxxxx XX,
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 Xxxxxx Xxxxxxx XX, Xxxxxx
Xxxxxxx & Co. Incorporated ("MS&Co.") 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 that the Trading Advisor
reasonably believes was not executed in accordance with its instructions.
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(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(c) 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, Xxxxxx Xxxxxxx XX shall act as the non-clearing commodity broker and
MS&Co. shall act as the clearing commodity broker for the Partnership, with the
exception of trades on the London Metal Exchange which will be cleared by Xxxxxx
Xxxxxxx & Co. International Limited ("MSIL"), all of which are affiliates of the
General Partner. In addition, MS&Co. will act as the counterparty on all of the
foreign currency forward trades for the Partnership. The General Partner shall
provide the Trading Advisor with copies of brokerage statements. Notwithstanding
that MS&Co. and MSIL shall act as the clearing commodity brokers for the
Partnership, the Trading Advisor may execute trades through floor brokers other
than those employed by MS&Co. and MSIL so long as arrangements are made for such
floor brokers to "give-up" or transfer the positions to MS&Co. and MSIL and
provided that the rates charged by such floor brokers have been approved in
writing by Xxxxxx Xxxxxxx XX. Except as provided in Exhibit A, the Trading
Advisor will not be responsible for paying give-up fees at rates approved by
Xxxxxx Xxxxxxx XX.
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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 2.75% (a 2.75% annual rate) of the Partnership's "Net Assets" (as
defined in Section 7(d)(1) of the Limited Partnership Agreement) as of the
opening of business on the first day of each calendar month, 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(c)) experienced by the Partnership as of the end of
each calendar month.
(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 result of an act or
material 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 that 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 "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 and 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.
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(d) 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.
(e) 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,
from 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 August 31, 2005 (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 any person described as a
"principal" of the Trading Advisor in the Prospectus 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 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
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or otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading 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 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) in the form of one or more 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 program(s) used by the Partnership and 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 those set
forth in Section 2 and 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; or (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. In addition, the Trading Advisor may terminate this Agreement by
providing 60 days prior written notice to the General Partner if the
Partnership's Net Assets fall below $1,000,000 at any time.
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 role in the futures interests trading of the Partnership's assets,
none of the Trading Advisor, or its controlling persons, its affiliates, and
their respective directors, officers, shareholders, employees or controlling
persons 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 incurred in connection with, and any amounts paid in, any
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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
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
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 and the General Partner shall indemnify, defend, and hold harmless
the Trading Advisor, its 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 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 (other than those incurred as a result of claims brought by or in the
right of an indemnified party) relating to the futures interests trading
activities of the Partnership undertaken by the Trading Advisor; provided that a
court of competent jurisdiction upon entry of a final judgment finds (or, if no
final judgment is entered, an 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 Xxxxxx Xxxxxxx XX, MS&Co.,
MSIL, 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 and all losses, claims, damages,
liabilities, costs and expenses, 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 or any certificate
delivered pursuant to this Agreement or the failure by the Trading Advisor to
perform any covenant made by the Trading Advisor herein; (ii) a breach of the
disclosure requirements under the CEAct or NFA Rules that relate to the Trading
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Advisor and the Trading Advisor Principals (as defined below); or (iii) 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, and such
statement or omission relates specifically 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 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).
(e) Partnership Indemnity in Respect of Sale of Units. The Partnership
and the General Partner agree to indemnify, defend and hold harmless the Trading
Advisor and each of its 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 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 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 or the failure
by the Partnership or the General Partner to perform any covenant made by them
herein; 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 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 or any certificate delivered pursuant to this
Agreement or the failure by the Trading Advisor to materially perform any
covenant made in this Agreement.
(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.
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(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 preceding 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 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
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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 programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies that 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 that 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 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
programs on behalf of the Partnership that are described in the Prospectus
(as modified and provided from time to time by the Trading Advisor) or any
other trading programs agreed to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the trading
policies of the Partnership (as described in the Prospectus and as set forth
in Exhibit A hereto) and as amended in writing and furnished to the Trading
Advisor from time to time.
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(iii) The Trading Advisor shall trade: (A) the Partnership's Net Assets
pursuant to the Financial, Metal & Energy Portfolio trading program
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 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 MS&Co.
(which may include forward contracts initially executed with financial
institutions other than MS& Co.), 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 3.1(a) 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 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 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 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 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 4.10(e)(2)(ii) 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.
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(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 material 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. Neither the Trading Advisor nor 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.
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(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 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 condition, financial or otherwise, business or
prospects of the Trading Advisor. The Trading Advisor shall also inform the
General Partner immediately if the Trading Advisor or any of its officers
become 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 Partnership and
the General Partner.
(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
the 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 to be taken by the General
-15-
Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each monthly 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,
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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 relating
to the Trading Advisor, or its Trading Advisor Principals or its trading
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 that 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
"trading principals" is defined under Rule 4.10(e)(i) 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.
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(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.
(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 condition, financial or otherwise,
business or prospects 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 programs, systems or methods, or its
goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such 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.
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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 Xxxxxx Xxxxxxx XX, 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 Xxxxxx Xxxxxxx XX, 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 its incorporation and is qualified
to do business and in good standing in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect the Trading
Advisor's ability to perform its obligations under this Agreement. The
Trading
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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, 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 investigation, 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 legal, valid and
binding agreement of the Trading Advisor, enforceable against the Trading
Advisor in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, receivership
or other laws relating to or affecting creditors' rights generally, and to
general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity), and except that the enforcement of rights
with respect to indemnification and contribution obligations and provisions
(a) purporting to waive or limit rights to trial by jury, oral amendments to
written agreements or rights of set off or (b) relating to submission to
jurisdiction, venue or service of process, may be limited by applicable law
or considerations of public policy.
(iv) To such counsel's knowledge, based upon due inquiry of certain
officers of the Trading Advisor, 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 by the Trading Advisor of this
Agreement, and the performance by the Trading Advisor of its obligations
hereunder and in the Prospectus (a) do not require any Governmental Approval
(as defined below) to be obtained on the part of the Trading Advisor, except
those that have been obtained and, to such counsel's knowledge, are in
effect, (b) do not result in a violation of any provision of the certificate
of incorporation or bylaws of the Trading Advisor or any Applicable Laws (as
defined below) applicable to the Trading Advisor, and (c) do not breach or
result in a violation of, or default under, (i) any indenture, mortgage,
deed of trust, agreement or instrument known by us to which the Trading
Advisor or any of its subsidiaries is a party or by which the Trading
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Advisor or any of its subsidiaries is bound or to which any of the property
or assets of the Trading Advisor or any of its subsidiaries is subject, or
(ii) any judgment, decree or order known to such counsel which is applicable
to the Trading Advisor and, pursuant to any Applicable Laws, is issued by
any Governmental Authority (as defined below) having jurisdiction over the
Trading Advisor or its properties. "Applicable Laws" means those laws, rules
and regulations of the State of New York and of the United States of America
which, in such counsel's experience, are normally applicable to transactions
of the type contemplated by this Agreement. "Governmental Authorities" means
executive, legislative, judicial, administrative or regulatory bodies of the
State of New York or the United States of America. "Governmental Approval"
means any consent, approval, license, authorization or validation of, or
filing, recording or registration with, any Governmental Authority pursuant
to Applicable Laws.
(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, except that such counsel
shall opine, without rendering any opinion as to the accuracy of the
information in such tables, that the actual performance tables of the
Trading Advisor set forth in the Prospectus comply as to form in all
material respects with applicable CFTC rules and all CFTC and NFA
interpretations thereof, except as disclosed in the Prospectus or as
otherwise permitted by the CFTC staff.
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 Xxxxxx Xxxxxxx XX, the General Partner and the Partnership, a
report dated the date of the closing that 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.
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(2) The General Partner shall, at the initial closing following the
effective date of the Registration Statement, provide the following:
(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 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 or the CEAct.
(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 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.
(ii) The General Partner is a corporation validly existing and in good
standing as a corporation under the laws of the State of Delaware and is
duly qualified as a foreign corporation to do business and is in good
standing 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 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
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by law and have made all filings necessary in order for the General Partner
and the Partnership to perform their obligations under this Agreement and
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 legal, valid and
binding agreement of the General Partner and/or the Partnership, as
applicable, enforceable against the General Partner and/or the Partnership,
as applicable, in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
receivership or other laws relating to or affecting creditors' rights
generally, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and except that
the enforcement of rights with respect to indemnification and contribution
obligations and provisions (a) purporting to waive or limit rights to trial
by jury, oral amendments to written agreements or rights of set off or (b)
relating to submission to jurisdiction, venue or service of process, may be
limited by applicable law or considerations of public policy.
(v) The execution and delivery by each of the General Partner and the
Partnership of this Agreement, the offer and sale of the Units by the
Partnership and the performance by the General Partner and the Partnership
of its respective obligations hereunder and in the Prospectus (a) do not
require any Governmental Approval to be obtained on the part of the General
Partner or the Partnership, except those that have been obtained and, to
such counsel's knowledge, are in effect, (b) do not result in a violation of
any provision of the General Partner's certificate of incorporation or
bylaws, the Certificate of Limited Partnership or the Limited Partnership
Agreement of the Partnership or any Applicable Laws applicable to the
General Partner and the Partnership, and (c) do not breach or result in a
violation of, or default under, (i) any indenture, mortgage, deed of trust,
agreement or instrument known by us to which it or any of its subsidiaries
is a party or by which it or any of its subsidiaries is bound or to which
any of the property or assets of it or any of its subsidiaries is subject,
or (ii) any judgment, decree or order known to such counsel which is
applicable to the General Partner or the Partnership and, pursuant to any
Applicable Laws, is issued by any Governmental Authority having jurisdiction
over it or its properties.
(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.
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(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
4.10(e)(i), and the Partnership 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
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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 August 1, 2002.
20. Notices.
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All notices required to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally or by
telecopy 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 Charter Xxxxxxxx X.X.
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
if to the General Partner:
Demeter Management Corporation
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the Trading Advisor:
Xxxxxxxx & Company, Inc.
Court Towers Building
000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx with a copy to Xxxxx Xxxx
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
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PARTY EXCLUSIVELY IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX XX 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.
25. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute the
same agreement.
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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 CHARTER XXXXXXXX X.X.
by Demeter Management Corporation,
General Partner
By: /s/ Xxxxxx X Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
DEMETER MANAGEMENT CORPORATION
By: /s/ Xxxxxx X Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
