<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended: October 31, 1996
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
[No Fee Required]
Commission File Number: 0-9202
THE FUTURE FUND
(Exact name of registrant as specified in its charter)
Illinois 36-3033727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o HEINOLD ASSET MANAGEMENT, INC.
440 South LaSalle
20th Floor
Chicago, Illinois 60605
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 663-7500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The registrant is a limited partnership and, accordingly, has no voting stock
held by nonaffiliates or otherwise.
<PAGE> 2
PART I
Item 1. Business.
(a) General development of business. The Future Fund (the
"Partnership") is a limited partnership organized on November 30, 1978 pursuant
to a Limited Partnership Agreement (the "Limited Partnership Agreement") and
under the Uniform Limited Partnership Act of the State of Illinois. On July
31, 1987, the Partnership elected to be governed under the Illinois Revised
Uniform Limited Partnership Act. The Partnership engages in speculative
trading of futures and forward contracts.
Heinold Asset Management, Inc., a Delaware corporation, is the
General Partner of the Partnership and, in that capacity, performs various
administrative services. The General Partner was organized in 1982 to serve as
the general partner and pool operator for public and private commodity pools
sponsored by Heinold Commodities, Inc., an affiliate. Until March 31, 1996, the
General Partner was a wholly owned subsidiary of Geldermann, Inc., an Illinois
corporation ("Geldermann"). On March 31, 1996, the General Partner became a
wholly owned subsidiary of E.D. & F. Man Inc., a New York corporation with
headquarters in New York, New York. References herein to the "General Partner"
refer to Heinold Commodities, Inc. for the periods prior to November 1, 1988
and to Heinold Asset Management, Inc. for periods on and after November 1,
1988.
Until June 1, 1995, Geldermann acted as the Partnership's futures
commission merchant or commodity broker. On that date, E.D. & F. Man
International Inc. (the #Commodity Broker#) replaced Geldermann as the
Partnership's commodity broker. The General Partner and the Commodity Broker
perform various services related to the Partnership's trading pursuant to a
Customer Agreement.
The General Partner invested $128,000 in the Partnership at the
outset of trading and purchased additional Units for $6,500 during fiscal year
1985. The net asset value of the General Partner's interest in the
Partnership, after the redemption of 583 Unit-equivalents for $355,239 on
October 1, 1988, 379 Unit-equivalents for $248,362 on November 1, 1991 and 111
Unit-equivalents for $91,757 on October 31, 1994, was $221,393 as of October
31, 1996.
The Partnership's trading manager from the inception of trading until
August 1, 1988 had been Millburn Partners, a New Jersey partnership. On August
1, 1988, Millburn Ridgefield Corporation, a Delaware corporation whose sole
shareholders consisted of the former partners of Millburn Partners, became the
commodity trading advisor for all public commodity pools previously managed by
Millburn Partners.
Effective January 1, 1990, the General Partner replaced Millburn
Ridgefield Corporation as the Partnership's trading manager with Baldwin
Financial Corporation, a Delaware corporation. The with Baldwin Financial
Company was assigned to MC Baldwin Financial Company as of January 1, 1992.
MC Baldwin Financial Company served as trading manager for the Partnership
until December 31, 1995.
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Effective January 1, 1996, the General Partner entered into a Trading
Manager Agreement whereby it assumed the role of trading manager for the
Partnership (the "Trading Manager"). The Partnership is a multi-advisor
commodity pool and the Trading Manager allocates the assets of the Partnership
among several trading advisors to direct the Partnership's futures and forward
trading. References to the Trading Manager prior to January 1, 1996, refer to
MC Baldwin Financial Company and on and after January 1, 1996 to Heinold Asset
Management, Inc.
The Trading Manager receives a Management Fee at an annual rate of 4%
of the average month-end Net Asset Value, as defined, of the Partnership. The
Trading Manager will also receive an incentive fee equal to 20% of any New
Trading Profit attributable to each trading advisor (including interest income)
to be calculated and paid quarterly.
On April 1, 1996, the Partnership, pursuant to an exemption from
the Commodity Futures Trading Commission (the "CFTC"), ceased trading on a
stand-alone basis. Since that date, the Partnership has been trading through
participation in a series of private general partnerships ("Account
Partnerships") formed together with other pools of which the General Partner
acts as general partner. Only pools of which the General Partner acts as
general partner are permitted to participate in these Account Partnerships, and
all such pools share pro rata in the profits and losses of the Account
Partnerships based on the capital which each pool contributes to each such
Account Partnership. Because the Account Partnerships combine the assets of
numerous pools, they make it possible for even the smaller pools to have access
to a number of commodity trading advisors without need of meeting each
commodity trading advisors' minimum account size requirements. Although the
General Partner has agreed to various incremental accounting procedures, the
operation of the Account Partnerships should be effectively transparent to
the Unitholders.
The Partnership shall pay commodity brokerage commissions to the
Commodity Broker at an annual rate of 7% of average month-end Net Assets per
year, plus National Futures Association ("NFA") and give-up fees.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"), commodity
exchanges and futures trading are subject to regulation by the CFTC. The
National Futures Association, a "registered futures association" under the Act,
is the only non-exchange self-regulatory organization for futures industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers." The Act requires "commodity pool
operators," such as the General Partner, "commodity trading advisors," such as
the Trading Manager and the Trading Advisors, and commodity brokers or "futures
commission merchants," such as the Commodity Broker, to be registered and to
comply with various reporting and record keeping requirements. The General
Partner, the Trading Advisors, and the Commodity Broker are all members of the
NFA. The CFTC may suspend a commodity pool operator's or commodity trading
advisor's registration if it
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finds that its trading practices tend to disrupt orderly market conditions or
in certain other situations. In the event that the registration of the General
Partner as a commodity pool operator or the Trading Advisors' registrations as
commodity trading advisors were terminated or suspended, the General Partner
and the Trading Advisors would be unable to continue to manage the business of
the Partnership, select the Trading Advisors and direct the Partnership's
futures and forward trading, respectively. Should the General Partner's
registration be suspended, termination of the Partnership might result.
As members of the NFA, the General Partner, the Trading Manager, the
Trading Advisors and the Commodity Broker are subject to NFA standards relating
to fair trade practices, financial condition and customer protection. As the
self-regulatory body of the futures industry, the NFA promulgates rules
governing the conduct of futures industry professionals and disciplines those
professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and certain
futures exchanges have established limits on the maximum net long or net short
position which any person may hold or control in particular futures contracts.
The CFTC has adopted a rule requiring all domestic futures exchanges to submit
for approval speculative position limits for all futures contracts traded on
such exchanges. Many exchanges also limit the changes in futures contract
prices that may occur during a single trading day. The Partnership may trade
on foreign commodity exchanges which are not subject to regulation by any
United States government agency.
(b) Financial information about industry segments. The
Partnership's business constitutes only one segment, speculative trading of
futures and forward contracts for financial reporting purposes. The
Partnership does not engage in sales of goods or services. The Partnership's
revenue, operating profit and total assets for each of the five fiscal years in
the period ended October 31, 1996 are set forth under "Item 6. Selected
Financial Data."
(c) Narrative description of business.
(1) See Items 1(a) and (b) above.
(i) through (xii) -- not applicable.
(xiii) -- the Partnership has no employees.
(d) Financial information about foreign and domestic operations and
export sales. The Partnership does not engage in sales of goods or services.
See "Item 1(b). Financial information about industry segments."
Item 2. Properties.
The Partnership does not own any properties. Under the terms of the
Limited Partnership Agreement, the General Partner performs the following
services for the Partnership:
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(1) Manages the business of the Partnership. Pursuant to this
authority, the General Partner has entered into a Management Agreement with the
Partnership (under which the Trading Manager will serve as trading manager and
will retain trading advisors who will have complete discretion with respect to
determination of the Partnership's trading decisions) and a Customer Agreement
with the Commodity Broker (pursuant to which the Commodity Broker executes all
trades on behalf of the Partnership based on instructions of the trading
advisors selected by the Trading Manager).
(2) Maintains the Partnership's books and records, which Limited
Partners or their duly authorized representatives may inspect during normal
business hours for any proper purpose upon 10 days' written notice to the
General Partner.
(3) Furnishes each Limited Partner with a monthly statement
describing the performance of the Partnership which sets forth aggregate
incentive fee allocations, brokerage commissions and other expenses incurred or
accrued by the Partnership during the month.
(4) Forwards annual audited financial statements (including a
statement of financial condition and a statement of operations) to each Limited
Partner.
(5) Provides to each Limited Partner tax information necessary for
the preparation of his or her annual federal income tax return.
(6) Performs secretarial and other clerical responsibilities and
furnishes office space, equipment and supplies as may be necessary for
supervising the affairs of the Partnership.
(7) Administers the redemption of Units.
Item 3. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to
which the Partnership is a party or to which any of its assets are subject. In
addition, there are no pending material proceedings involving the General
Partner or the Commodity Broker.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. There is no trading market for the Units,
and none is likely to develop. The Units are transferable only after written
notice has been given to and approved by the General Partner. Units may be and
have been redeemed upon 10 days' notice at their Net Asset Value as of the end
of any month, as provided in the Limited Partnership Agreement. In the event
that all Units for which redemption is requested cannot be redeemed as of any
redemption date, Units of Limited Partners will be redeemed in the order that
requests for redemption have been received by the General Partner.
(b) Holders. As of November 1, 1996, there were 730 holders of
Units.
(c) Dividends. No distributions or dividends have been made on the
Units and the General Partner has no present intention to make any.
Item 6. Selected Financial Data.
The following is a summary of operations of the Partnership for each
of the five fiscal years in the period ended October 31, 1996.
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<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31, October 31,
1996 1995 1994 1993 1992
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net gain (loss) on
trading of
futures and
forward contracts $3,994,809 $2,226,647 $ 257,407 $5,680,415 $ 5,124,546
Interest income 685,594 845,122 599,540 536,710 723,436
---------- ---------- ---------- ---------- -----------
Total income 4,680,403 3,071,769 856,947 6,217,125 5,847,982
========== ========== ========== ========== ===========
Brokerage commissions 1,002,522 1,181,262 1,289,379 1,388,149 1,373,097
Management fee 622,696 675,007 736,788 793,228 776,204
Incentive fee 663,447 452,602 167,041 768,327 964,899
Other administrative
expenses 77,024 95,150 82,639 95,554 64,194
---------- ---------- ---------- ---------- -----------
Total expenses 2,365,689 2,404,021 2,275,847 3,045,258 3,178,394
========== ========== ========== ========== ===========
Net income (loss) $2,314,714 $667,748 $(1,418,900) $3,171,867 $ 2,669,588
Net income (loss)
allocated to
General Partner $ 32,898 $ 6,634 $ (21,004) $ 44,763 $ 32,950
---------- ---------- ---------- ---------- -----------
Net income (loss)
allocated to
Limited Partners $2,281,816 $661,114 $(1,397,896) $3,127,104 $ 2,636,638
---------- ---------- ---------- ---------- -----------
Increase (decrease) in
Net Asset Value for
a Unit Outstand-
ing throughout
each year $ 149.53 $ 30.16 $ (63.46) $ 135.24 $ 99.55
---------- ---------- ---------- ----------- -----------
Total assets $14,864,152 $15,244,909 $ 17,666,836 $20,201,846 $19,276,069
</TABLE>
7
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Reference is made to "Item 6. Selected Financial Data." and "Item 8.
Financial Statements and Supplementary Data." The information contained
therein is essential to, and should be read in conjunction with, the following
analysis.
Capital Resources
The Partnership does not intend to raise any additional capital
through borrowing and because it is a closed-end fund, it cannot sell any
additional Units unless it undertakes a new public offering, which would
require another registration with the Securities and Exchange Commission. Due
to the nature of the Partnership's business, it will make no significant
capital expenditures, and substantially all its assets are and will be
represented by cash, U.S. Treasury securities and investments in futures and
forward contracts.
Liquidity
Many United States commodity exchanges limit fluctuations in futures
contract prices during a single day by regulations referred to as "daily price
fluctuation limits" or "daily limits." During a single trading day, no trades
may be executed at prices beyond the daily limit. Once the price of a futures
contract has reached the daily limit for that day, positions in that contract
can neither be taken nor liquidated. Futures prices have occasionally moved
the daily limit for several consecutive days with little or no trading.
Similar occurrences could prevent the Partnership from promptly liquidating
unfavorable positions and subject the Partnership to substantial losses which
could exceed the margin initially committed to such trades. In addition, even
if futures prices have not moved the daily limit, the Partnership may not be
able to execute futures trades at favorable prices if little trading in such
contracts is taking place. Generally, forward contracts can be closed out at
the discretion of the Trading Advisor. However, if the market is not liquid,
it could prevent the timely closeout of an unfavorable position until the
delivery date, regardless of the changes in their value or the Trading
Advisors' investment strategies. Other than these limitations on liquidity,
which are inherent in the Partnership's trading operations, the Partnership's
assets are highly liquid and are expected to remain so.
Results of Operations
Operating results showed a profit for the fiscal year ended October
31, 1996 and October 31, 1995 and a loss for the fiscal year ended October 31,
1994.
The Net Asset Value per Unit as of October 31, 1996 and October 31,
1995 was $1,006.33 and $856.80, respectively.
The trading gains which occurred in fiscal year 1995 continued in
fiscal year 1996. Although losses did occur in short positions in the foreign
currency sector as well as the financial and metals markets, such losses were
more than offset by the Partnership's profitable trading. The Partnership's
gains resulted largely from profitable trades made in long U.S. and foreign
financial
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positions. These trades were profitable due to a downward trend in interest
rates. Other profits were realized in short positions in the agricultural
market and long positions in the energy market. .
The trading losses which occurred in fiscal year 1994 did not
continue in fiscal year 1995. For the fiscal year ended October 31, 1995, the
Partnership showed a gain as the Partnership's profitable trading in the
currencies, energy and financial instrument sectors more than offset its
unprofitable trading in the agricultural and metal sectors. Losses were
incurred in short metal positions and, due to the drought in the second and
third quarters, the Partnership incurred additional losses in short
agricultural positions. Despite such losses, the Partnership made significant
gains in long bond positions due to the decline in interest rates. Other
profitable trades were made in the energy markets, primarily in crude oil
positions.
The Partnership showed a loss for the fiscal year ended October 31,
1994 as the Partnership's profitable trading in the metals, energy and
agricultural sectors was more than offset by its unprofitable trading in the
currencies.
Inflation is not a significant factor in the Partnership's
profitability.
Item 8. Financial Statements and Supplementary Data.
Financial statements are listed on page F-1 of this report.
The supplementary financial information specified by Item 302 of
Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
The Partnership filed a Form 8-K on January 16, 1997 indicating a
change in accountants for the fiscal year ended December 31, 1997. Such Form
8-K is herein incorporated by reference.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. The
Partnership is managed by its General Partner. There are no "significant
employees" of the Partnership.
The General Partner is a commodity pool operator registered with the
NFA.
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Item 11. Executive Compensation.
The Partnership has no directors or officers. The General Partner
performs the services described in "Item 2. Properties." herein. Geldermann
acts as the Partnership's commodity broker pursuant to the Customer Agreement
described in "Item 1(a). General development of business."
The General Partner participates in any appreciation in the net
assets of the Partnership in proportion to its investment in it.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The Partnership knows of no person who owns beneficially more than 5%
of the Units.
(b) Security ownership of management.
Under the terms of the Limited Partnership Agreement, the
Partnership's affairs are managed by the General Partner. The Trading Manager
pursuant to its Management Agreement with the Partnership, enters into s with
the Trading Advisors who have discretionary authority over the Partnership's
futures and forward contract trading. The General Partner owned 220
Unit-equivalents valued at $221,393 as of October 31, 1996, 1.54% of the
Partnership's total equity.
(c) Changes in control.
None
Item 13. Certain Relationships and Related Transactions.
See "Item 11. Executive Compensation" and "Item 12. Security
Ownership of Certain Beneficial Owners and Management."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) Financial Statements:
See Index to Financial Statements, infra.
(a)(2) Financial Statement Schedules:
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All Schedules are omitted for the reason that they are not required,
are not applicable, or because equivalent information has been included in the
financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K:
(3) Articles of Incorporation and By-Laws:
(a) Limited Partnership Agreement dated as of November 27, 1978, as
amended on February 15, 1979.
(b) Certificate of Limited Partnership of the Partnership as filed
with the Cook County Recorder of Deeds on November 30, 1978.
The above exhibits are incorporated by reference from the Form 10-K
Annual Report filed by the Partnership for the period ended October 31, 1978.
(c) Form LP-1205 of the Partnership, as filed with the Illinois
Secretary of State on July 31, 1987, electing to be governed under the Illinois
Revised Uniform Limited Partnership Act.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K for the fiscal year ended October 31, 1987.
(10) Material Contracts:
(a) Joint Venture Agreement dated as of April 1, 1987 between the
Partnership and Millburn Partners.
(b) Customer Agreement dated as of April 1, 1987 between the Joint
Venture and Geldermann.
The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K for the fiscal year ended October 31, 1987.
(c) Amendment No. 1 to the Joint Venture Agreement between the
Partnership and Millburn Partners dated December 31, 1987.
(d) Amendment No. 1 to the Customer Agreement between the Joint
Venture and Geldermann dated December 31, 1987.
(e) Amendment No. 2 to the Joint Venture Agreement between the
Partnership and Millburn Ridgefield Corporation dated December 31, 1988.
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The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K for the Fiscal Year ended October 31, 1988.
(f) Management Agreement dated December 14, 1989 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 16, 1990.
(g) Amendment No. 1 to the dated December 31, 1991 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 8-K filed on January 28, 1991.
(h) Amendment No. 2 to the dated December 31, 1992 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1993.
(i) Amendment No. 3 to the dated December 31, 1993 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1994.
(j) Amendment No. 4 to the dated December 31, 1994 between the
Partnership and the Trading Manager.
The above exhibit is incorporated by reference from the Partnership's
report on Form 10-K filed on January 31, 1995.
(k) Trading Manager Agreement dated January 1, 1996 among the
Partnership and the Trading Manager.
(l) General Partnership Agreement among various commodity pools of
which Heinold Asset Management, Inc. acts as sole general partner.
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(m) Form of Management Contract among each Account Partnership
and each trading advisor.
(n) Form of Management Contract among the Partnership and each
trading advisor.
The above exhibits are filed herewith.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during the
quarter ended October 31, 1996. The Partnership did, however, file a Form 8-K
on January 16, 1997, indicating a change in accountants for the fiscal year
ended December 31, 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago and State of Illinois on the 24th day of January, 1997.
THE FUTURE FUND
By HEINOLD ASSET MANAGEMENT, INC.
General Partner
By /s/ Daniel E. Ragen
Daniel E. Ragen
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
General Partner of the Registrant in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Lee E. Meyer Chief Financial Officer January 24, 1997
- ------------------- (principal accounting officer)
Lee E. Meyer
/s/ Ned W. Bennett Director January 24, 1997
- -------------------
Ned W. Bennett
/s/ Thomas M. Harte Director January 24, 1997
- -------------------
Thomas M. Harte
/s/ Ira Polk Director January 24, 1997
- -------------------
Ira Polk
/s/ Gary M. Rindner Director January 24, 1997
- -------------------
Gary M. Rindner
/s/ Daniel E. Ragen President January 24, 1997
- ------------------- (principal executive
Daniel E. Ragen officer) and Director
</TABLE>
(Being the principal executive officer, the principal financial and
accounting officer, and a majority of the directors of Heinold Asset
Management, Inc.)
<TABLE>
<S> <C> <C>
HEINOLD ASSET General Partner of January 24, 1997
MANAGEMENT, INC. Registrant
</TABLE>
By/s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
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The Future Fund
(An Illinois
Limited Partnership)
Financial Statements as of
October 31, 1996 and 1995 and for the
Three Years Ended October 31, 1996 and
Independent Auditors' Report
<PAGE> 16
THE FUTURE FUND
(AN ILLINOIS LIMITED PARTNERSHIP)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Statements of Financial Condition as of
October 31, 1996 and 1995 F-2
Statements of Operations for the
Years Ended October 31, 1996, 1995, and 1994 F-3
Statements of Partners' Capital for the
Years Ended October 31, 1996, 1995, and 1994 F-4
Statements of Cash Flows for the
Years Ended October 31, 1996, 1995, and 1994 F-5
Notes to Financial Statements F-6
</TABLE>
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
To the General Partner and
Limited Partners of
The Future Fund:
We have audited the financial statements of The Future Fund (an Illinois
Limited Partnership, the "Partnership") as of October 31, 1996 and 1995, and
for each of the three years in the period ended October 31, 1996 listed in the
table of contents. These financial statements are the responsibility of the
Partnership's General Partner. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of The Future Fund as of October 31, 1996 and
1995, and the results of its operations and its cash flows for each of the
three years in the period ended October 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
December 13, 1996
<PAGE> 18
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
CASH............................................................ $ -- $ --
EQUITY IN FUTURES AND FORWARD TRADING ACCOUNTS:
United States Treasury securities, at cost plus accrued
interest which approximates market value................... 44,422 13,884,966
Net unrealized appreciation on open futures and forward
contracts.................................................. 2,353,208 224,329
Amount due from E.D. & F. Man International (formerly
Geldermann)................................................ 12,466,522 1,135,614
----------- -----------
Total equity in futures and forward trading accounts....... 14,864,152 15,244,909
----------- -----------
TOTAL ASSETS.................................................... $14,864,152 $15,244,909
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued brokerage commissions payable to E.D. & F. Man
International (formerly Geldermann)........................ $ 86,669 $ 88,932
Accrued management fee........................................ 55,381 50,818
Accrued incentive fees........................................ 288,923 --
Redemptions payable........................................... 70,695 47,440
Other accrued expenses........................................ 6,578 5,421
----------- -----------
Total liabilities.......................................... 508,246 192,611
PARTNER'S CAPITAL:
Limited Partners (units outstanding: 1996 -- 14,046;
1995 -- 17,348)............................................ 14,134,513 14,863,803
General Partners (units equivalents outstanding: 1996 -- 220;
1995 -- 220)............................................... 221,393 188,495
----------- -----------
Total partners' capital.................................... 14,355,906 15,052,298
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL......................... $14,864,152 $15,244,909
=========== ===========
NET ASSET VALUE PER OUTSTANDING UNIT OF PARTNERSHIP INTEREST.... 1,006.33 $ 856.80
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 19
THE FUTURE FUND
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
REVENUES:
Net realized trading gains (losses) on closed
futures and forward contracts.................. $1,865,930 $3,087,234 $ (255,170)
Increase (decrease) in net unrealized appreciation
on open futures and forward contracts.......... 2,128,879 (860,587) 512,577
Interest income................................... 685,594 845,122 599,540
--------- --------- ----------
Total revenues............................... 4,680,403 3,071,769 856,947
EXPENSES:
Brokerage commissions............................. 1,002,522 1,181,262 1,289,379
Management fee.................................... 622,696 675,007 736,788
Incentive fees.................................... 663,447 452,602 167,041
Other administrative expenses..................... 77,024 95,150 82,639
--------- --------- ----------
Total expenses............................... 2,365,689 2,404,021 2,275,847
--------- --------- ----------
NET INCOME (LOSS)................................... $2,314,714 $ 667,748 $(1,418,900)
========= ========= ==========
NET INCOME (LOSS) ALLOCATED TO:
General Partner................................... $ 32,898 $ 6,634 $ (21,004)
========= ========= ==========
Limited Partners.................................. $2,281,816 $ 661,114 $(1,397,896)
========= ========= ==========
INCREASE (DECREASE) IN NET ASSET VALUE FOR A UNIT
OUTSTANDING THROUGHOUT EACH YEAR.................. $ 149.53 $ 30.16 $ (63.46)
========= ========= ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 20
THE FUTURE FUND
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNER'S CAPITAL
YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
TOTAL
LIMITED GENERAL PARTNERS'
PARTNERS PARTNER CAPITAL
---------- -------- ----------
<S> <C> <C> <C>
BALANCE, OCTOBER 31, 1993........................... $19,586,648 $294,622 $19,881,270
Redemption of 1,337 units of limited partnership
interest and 111 general partnership unit
equivalents.................................... (1,104,056) (91,757) (1,195,813)
Net loss.......................................... (1,397,896) (21,004) (1,418,900)
---------- -------- ----------
BALANCE, OCTOBER 31, 1994........................... 17,084,696 181,861 17,266,557
Redemption of 3,320 units of limited partnership
interest....................................... (2,882,007) -- (2,882,007)
Net income........................................ 661,114 6,634 667,748
---------- -------- ----------
BALANCE, OCTOBER 31, 1995........................... 14,863,803 188,495 15,052,298
Additions of 939 units of limited partnership
interest....................................... 797,000 -- 797,000
Redemption of 4,241 units of limited partnership
interest....................................... (3,808,106) -- (3,808,106)
Net income........................................ 2,281,816 32,898 2,314,714
---------- -------- ----------
BALANCE, OCTOBER 31, 1996........................... $14,134,513 $221,393 $14,355,906
========== ======== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 21
THE FUTURE FUND
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1995
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $2,314,714 $ 667,748 $(1,418,900)
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease in equity in futures and forward
trading accounts........................... 380,757 2,400,620 2,535,010
Increase (decrease) in liabilities........... 292,380 (28,733) (46,163)
----------- ----------- -----------
Net cash flows from operating activities... 2,987,851 3,039,635 1,069,947
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of limited and general partnership
units or unit equivalents.................... (3,784,851) (3,060,942) (1,069,947)
Addition of limited partnership units........... 979,000 -- --
----------- ----------- -----------
NET DECREASE IN CASH.............................. -- (21,207) --
CASH -- Beginning of year......................... -- 21,307 21,307
----------- ----------- -----------
CASH -- End of year............................... $ -- $ -- $ 21,307
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 22
THE FUTURE FUND
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994
1. ORGANIZATION OF THE PARTNERSHIP
The Future Fund (the "Partnership") was organized in November 1978, under
the Illinois Uniform Limited Partnership Act (the "Act"), for the purposes
of engaging in speculative trading of primarily futures and forward
contracts.
Heinold Asset Management, Inc. ("HAMI"), a wholly owned subsidiary of
Geldermann, Inc. ("Geldermann"), is the General Partner of the Partnership.
On December 12, 1994, the parent of Geldermann, ConAgra, Inc., sold all of
the common stock of Geldermann to E.D. & F. Man International ("Man"). As a
result, Geldermann and HAMI are wholly owned by Man.
The Partnership has a brokerage contract with Man, previously Geldermann,
which provides that the Partnership will pay Man brokerage commissions at an
annual rate of 7% of average month- end net assets as defined, plus
"give-up" and NFA fees.
The Partnership's funds held at Man, previously Geldermann, are in
segregated accounts, as required by the Commodity Futures Trading
Commission. These funds are used to meet minimum margin requirements for
all of the Partnership#s open positions, as set by the exchange upon which
each futures contract is traded. These requirements are adjusted, as
needed, due to daily fluctuations in the values of the underlying positions.
If necessary, certain positions may be liquidated to satisfy resulting
changes in margin requirements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition - Futures and forward contracts are recorded on trade
dates and are reflected in the accompanying Statements of Financial
Condition at the market value on the last business day of the reporting
period. The difference between the original contract amount and the market
value of the futures and forward contracts is reflected as the change in net
unrealized appreciation. Market values of futures contracts are based upon
exchange settlement prices. Market values of forward contracts are based
upon quoted rates provided by major financial institutions.
Operating Expenses - The Partnership bears all expenses incurred in
connection with its activities. These include brokerage commissions,
trading manager#s management fee, trading advisors' incentive fees,
"give-up" charges and NFA fees, and periodic legal, auditing, tax return
preparation and filing fees. The General Partner bears all other operating
expenses.
F-6
<PAGE> 23
Income Taxes - No provision for federal income taxes has been made in the
accompanying financial statements since the net income (loss) of the
Partnership is not taxable as such but is includable in the income tax
returns of the individual partners.
Statements of Cash Flows - For purposes of reporting cash flows, cash
includes only cash on deposit at financial institutions.
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades both cash and derivative financial instruments. The
Company's principal source of revenues by reporting category for 1996 is as
follows:
<TABLE>
<CAPTION>
Realized Change in
Trading Unrealized
Gains Appreciation
(Lossees) (Depreciation) Total
<S> <C> <C> <C>
Futures contracts $1,960,378 $2,178,509 $4,138,887
Forward contracts - - -
Option contracts (94,448) (49,630) (144,078)
---------- ---------- ----------
Totals $1,865,930 $2,128,879 $3,994,809
---------- ---------- ----------
</TABLE>
The Partnership was organized to engage in speculative trading of a diversified
portfolio of futures and forward contracts and commodity options. SFAS No. 119,
"Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments," defines a derivative as a future, forward, swap or collars.
Generally, these financial instruments represent future commitments to exchange
interest payment streams or currencies, or to purchase or to sell other
financial instruments, at specific terms at specified future dates. Option
contracts provide the holder with the right, but not the obligations, to
purchase or sell a financial instrument at a specific price before or on an
established date. These financial instruments may have market and/or credit
risk in excess of amounts recorded in the Statements of Financial Condition.
Market Risk - Derivative financial instruments involve varying degrees of
off-balance sheet market risk, whereby changes in the level or volatility of
interest rates, foreign currency exchange rates or market values of the
underlying financial instruments or commodities may result in changes in the
value of the financial instrument in excess of amounts currently reflected in
the Statements of Financial Condition. The Partnership's exposure to market
risk is influenced by a number of factors, including the relationships among
financial instruments with off-balance sheet risk and between financial
instruments with off-balance sheet risk and the Partnership's proprietary
commodities, as well as the volatility and liquidity in the markets in which the
financial instruments are traded.
F-7
<PAGE> 24
Fair Value - The derivative instruments used in the Partnership's trading
activities are marked to market daily with the resulting unrealized gains or
losses recorded in the Statements of Financial Condition and the related
income or loss reflected in revenues derived from these transactions. The
fair value of derivative financial instruments held or issued for trading
purposes as of October 31, 1996 and the average monthly fair value of the
instruments for the fiscal year ended October 31, 1996 are as follows:
<TABLE>
<CAPTION>
Fair Values at Year-end Average Fair Values
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Futures contracts $2,497,176 $144,343 $1,308,991 $418,459
Forward contracts - - 3,958 6,249
Option contracts 375 - 68,749 9,116
</TABLE>
4. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement (the "Agreement") provides the following:
Allocation of Profit and Loss for Partnership Accounting Purposes - The
Limited Partners and the General Partner share in the profits and losses of
the Partnership in proportion to the number of units or unit equivalents
held by each. However, no Limited Partner is liable for obligations in
excess of his capital contribution and profits, if any, and such other
amounts for which a Limited Partner may be liable pursuant to the Act.
Distributions - Distributions (other than redemptions of units) are made on
a prorata basis at the sole discretion of the General Partner in accordance
with the respective capital accounts of the partners. The General Partner
has made no distributions from the Partnership to date.
Redemptions - A Limited Partner (or any assignee thereof) may cause any or
all of his units to be redeemed as of the first day of any month following
10 days' written request for redemption, subject to certain other
conditions, as described in the Agreement. Redemption is at net asset value
as of the previous month-end.
Dissolution - The Partnership will be dissolved on July 1, 1998, or upon the
occurrence of certain future events, as specified in the Agreement.
5. ADVISORY AGREEMENT
The Partnership enters into various advisory agreements (the "Advisory
Agreements"). As of October 31, 1996, the Partnership's trading advisors
are Willowbridge, Marathon, Eckhardt, and SJO.
In addition, effective April 1, 1996, the Fund began trading through
participating in a series of private general partnerships ("Account
Partnerships") formed together with other Heinold pools. The Fund shares
pro rata in profits and losses of such Account Partnerships, based on
capital that the Fund contributes to each partnership. A separate Account
Partnership was formed for each Commodity Trading Advisor ("Trading
Advisor") that the General Partner selected to trade assets of the pools.
Under the terms of the Advisory Agreements and Account Partnership
contracts, the Trading Advisors have sole responsibility for determining the
Partnership's trades. As compensation for these services, the Trading
Advisors receive a monthly management fee, based on a percentage of the
Partnership's month-end net assets, as defined in the agreements.
F-8
<PAGE> 25
The Trading Advisors also receive either a quarterly or annual incentive fee
of 20 percent of new trading profits, as defined. The incentive fee is
retained by the Trading Advisors even when "trading losses," as defined,
occur in subsequent periods; however, no further incentive fees are payable
until such trading losses are recouped by the Partnership.
******
F-9
<PAGE> 26
To the best of my knowledge and belief, the information in this statement is
accurate and complete.
Heinold Asset Management, Inc.
(Pool Operator)
/s/ Lee E. Meyers
Lee E. Meyers
Executive Vice-President and Chief Financial Officer
F-10
<PAGE> 1
TRADING MANAGER AGREEMENT
This Agreement made as of the 1st day of January, 1996 by and between THE
FUTURE FUND L.P. (the "Fund") and HEINOLD ASSET MANAGEMENT, INC. (the "Trading
Manager").
W I T N E S S E T H:
WHEREAS, the Fund is a limited partnership engaging in the speculative
trading of Commodity Interests (as hereinafter defined), implementing a
multi-advisor strategy under the direction of the Trading Manager;
WHEREAS, E.D. & F. Man International, Inc. (the "Broker") has been
selected as the commodity broker, and an affiliate as forward dealer, for the
Fund;
WHEREAS, prior to January 1, 1996 another entity has acted as trading
manager for the Fund, which role the Trading Manager will assume as of January
1, 1996, upon the resignation of such other entity; and
WHEREAS, the parties hereto wish to enter into this Agreement to, among
other things, set forth the terms and conditions upon which the Trading Manager,
which is also the Fund's general partner, will manage the Fund's trading through
retaining, and allocating and reallocating, on a discretionary basis, the assets
of the Fund among various trading advisors (the "Trading Advisors").
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Duties and Status of the Trading Manager.
The Trading Manager shall perform trading management services for the Fund
as follows:
(a) The Trading Manager shall act as a manager of the Fund's trading in
Commodity Interests (as defined in Section 18 hereof), subject to the terms and
conditions of this Agreement, and shall have the duty and responsibility to
select, hire, monitor, replace and compensate the Trading Advisors, which will
have limited powers of attorney to trade Commodity Interests on behalf of the
Fund. The Trading Manager shall allocate and reallocate assets among the
Trading Advisors, terminate Trading Advisors and engage additional or
replacement Trading Advisors, as the Trading Manager may deem to be in the best
interests of the Fund. The Trading Advisors shall all be unaffiliated with the
Trading
-1-
<PAGE> 2
Manager, but this requirement shall not prevent the Trading Manager from
selecting Trading Advisors for the Fund which also trade for other accounts
sponsored by the Trading Manager.
(b) The Trading Manager will, through opening managed accounts with
Trading Advisors, invest the Fund's assets from time to time with the Trading
Advisors. The Trading Manager need not keep all the Fund's assets so invested
at all times.
(c) The Trading Manager shall monitor the speculative position limits
applicable to the Fund so as to prevent the Fund from exceeding such limits as a
result of trades ordered by the Trading Advisors.
(d) The Trading Manager shall instruct all or certain Trading Advisors to
liquidate open positions in order to provide funds for withdrawals and payment
of the Fund's expenses, including without limitation the compensation specified
in Section 9 hereof. The decisions as to which positions are to be liquidated,
however, shall be made by each Trading Advisor so instructed.
(e) The Trading Manager shall not itself trade any assets of the Fund
directly, but shall instead retain professional Trading Advisors to do so.
(f) The Trading Manager shall monitor the performance of each Trading
Advisor selected on behalf of the Fund.
2. Standard of Liability; Trading Manager's Limited Responsibility
Regarding Trading Advisors.
Except as otherwise provided in this Agreement, the Trading Manager shall
bear no liability to the Fund or to any related party for any loss suffered by
any of them relating to this Agreement and the transactions contemplated hereby,
provided such loss did not arise out of any action or inaction of the Trading
Manager which would subject the Trading Manger, as the Fund's general partner,
to liability pursuant to the terms of the Fund's Limited Partnership Agreement.
The Fund acknowledges and agrees that the Trading Manager's responsibility
in terms of investigating Trading Advisors being considered for the Fund shall
be limited by the foregoing standard of liability and to reviewing the
information and material furnished to the Trading Manager by such Trading
Advisors. The Trading Manager shall in no respects be responsible for the
accuracy of such information or material or obligated to undertake any "due
diligence" examination or review of any Trading Advisor additional to that
effected pursuant to the Trading Manager's standard practice. The Fund
specifically recognizes that while the Trading Manager will use reasonable
efforts to select the best available Trading Advisors (having in mind the fee
structure of the Fund), the Trading Manager is in no position to
-2-
<PAGE> 3
assume, and does not assume, any responsibility or liability for the actions or
omissions of the Trading Advisors so selected or for the accuracy of the
disclosures furnished by them.
3. Status of the Trading Manager, the Fund
and the Trading Advisors.
The Fund and the Trading Manager each acknowledges that the trading
instructions, methods and systems of the Trading Manager and Trading Advisors
are the sole and exclusive property of the Trading Manager and the Trading
Advisors, respectively; the Fund further agrees that it will keep confidential
and will not disseminate such instructions, methods or systems.
4. Custody of the Fund's Assets.
The Fund's assets shall be maintained, subject to applicable regulatory
requirements, in such form, and with such depositories, as may be agreed to by
the Fund and the Trading Manager. The Trading Manager agrees and acknowledges
that it is intended that the assets of the Fund shall be held to the maximum
practicable extent at the Broker, one or more of its affiliates or in bank
accounts established by them.
5. Clearing of Futures Trades.
The Trading Manager agrees that all futures trading transactions for the
Fund hereunder shall be both executed and cleared to the maximum practicable
extent through the Broker.
6. Placement of Forward Trades.
The Trading Manager agrees that the Fund will execute its forward trades
hereunder to the maximum practicable extent through affiliates of the Broker,
provided that the contract prices so obtained are generally competitive.
The Fund acknowledges that, as is customary in the industry, "bid-ask"
spreads will be included in the prices quoted to the Fund on forward contracts,
in which an affiliate of the Trading Manager shall deal with the Fund on a
principal-to-principal basis.
7. Contracts with the Trading Advisors.
Attached hereto as Exhibit A is the standard form of Management Contract
which the Trading Manager proposes to use as the basis for negotiating final
agreements with the Trading Advisors. The Fund hereby specifically authorizes
the Trading Manager to enter into Management Contracts in the general form of
such Management Contract, with such changes as the Trading Manager may deem
necessary or advisable.
-3-
<PAGE> 4
8. Contracts with Commodity Brokers and Forward Dealers.
In the event that a Trading Advisor wishes to maintain a futures or forward
trading account for the Fund at a brokerage house or forward dealer other than
the Broker or one of its affiliates, such request must receive the prior written
approval of the Trading Manager.
9. Compensation.
The Fund will compensate the Trading Manager for its services to the Fund.
The Trading Manager in turn, and not the Fund, will compensate each Trading
Advisor at the rates negotiated at arm's-length on behalf of the Fund by the
Trading Manager.
(a) Management Fee. The Trading Manager shall receive a monthly
management fee equal to 0.333 of 1% of the Fund's net asset value (a 4% annual
rate). For purposes of calculating the management fee, Net Asset Value shall be
determined before reduction for the management fees or incentive fees, if any,
accrued or payable with respect to the net assets of the Fund as of such
month-end, and before giving effect to any distributions and redemptions paid or
payable at such month-end.
(b) Incentive Fee. The Trading Manager shall receive a quarterly
incentive fee equal to 20% of any new trading profit recognized with respect to
the assets of the Fund allocated to each Trading Advisor as of the end of each
calendar quarter-end (including partial quarters). Trading Profit equals the net
realized gains and losses from closed futures transactions during a calendar
quarter, plus or minus the change from the beginning to the end of such calendar
quarter in unrealized profit or loss on open futures positions, minus the
Trading Advisor's share of the brokerage commissions paid or accrued by the
Fund, minus the Trading Manager's management fee payable as of the end of such
quarter. New Trading Profit equals cumulative Trading Profit in excess of the
highest cumulative level of Trading Profit as of the most recent calendar
quarter-end as of which there existed an all-time quarter-end high in Trading
Profit (the "High Water Mark of Profit"), or if New Trading Profit had never
existed as of a calendar quarter-end, from the commencement of each Trading
Advisor's management of assets for the Fund. Redemption of Units or
reallocations of assets from each Trading Advisor will result in a proportional
reduction in any short-fall between the High Water Mark of Profit and the
current level of cumulative Trading Profit as of the date of redemption. If any
redemption or reallocation of the Fund's assets allocated to each Trading
Advisor occurs as of any date which is not the end of a calendar quarter, a
proportional incentive fee, if accrued, will be charged as if such redemption or
reallocation occurred as of the end of a quarter and the incentive fee will be
paid to the Trading Manager.
In the event that redemptions are made from the Fund, the Trading Manager
shall be free to allocate the amounts to be paid out as redemptions (but not as
distributions or
-4-
<PAGE> 5
expense payments which will be allocated pro rata among the Trading Advisors)
among the Trading Advisors in such manner as the Trading Manager may deem
appropriate. The Fund acknowledges that the manner in which the Trading Manager
allocates such redemptions will affect the incentive fees payable by the Fund.
The Fund also acknowledges that, irrespective of any redemptions, the Trading
Manager may allocate assets away from any one or more Trading Advisors to the
management of other Trading Advisors and that such allocations and reallocations
may affect the incentive fees payable by the Fund.
When Fund assets are allocated to an additional or replacement Trading
Advisor, any loss carryforwards applicable to the trading of the Trading Advisor
from which assets are allocated will be proportionally reduced and any accrued
incentive fees proportionately paid, and the additional or replacement Trading
Advisor will calculate trading profit for purposes of determining its incentive
fee from the date on which it begins managing assets for the Fund, irrespective
of prior losses.
(c) Payment of Fees. All fees shall be paid within ten (10) business
days after the end of each period for which they are payable.
The Trading Manager is herewith expressly authorized to deduct any amounts
due to Broker or its affiliates or a Trading Advisor directly from the Fund.
(d) Interest Income. All interest income actually earned on the Fund's
assets will be paid to it.
10. Net Asset Value.
The Fund's Net Asset Value shall be determined in accordance with the
Trading Manager's standard practice. The Trading Manager may determine, in its
good faith judgment, not to value contracts which could not be liquidated or
whose value is uncertain on the date of determination. In addition, the Trading
Manager may, in its good faith judgment, establish reserves for accrued or
contingent liabilities.
The Trading Manager makes no representation concerning the accuracy of the
information furnished to the Trading Manager by persons other than the Trading
Manager's affiliates concerning the value of the Fund's outstanding positions.
The Trading Manager assumes no responsibility or liability concerning the
valuation of the assets of the Fund held at brokers or dealers other than the
Trading Manager's affiliates, other than to make such valuations in good faith.
The Trading Manager shall monitor the Net Asset Value of the Fund on a
daily basis based on the information reasonably available to the Trading
Manager.
-5-
<PAGE> 6
The Trading Manager makes no guarantee as to the maximum loss which the
Fund may incur.
11. Multi-Advisor Strategy.
The Trading Manager acknowledges and agrees that it intends for the Fund's
assets to be managed pursuant to a multi-advisor strategy. Accordingly, the
Trading Manager undertakes that there shall at all times be three or more
Trading Advisors managing assets for the Fund.
12. Reports.
The Trading Manager will use best efforts to ensure that the information
furnished in the reports given to the Fund is accurate in all material respects,
but shall not be responsible for the accuracy of any such information unless an
inaccuracy arises through action or inaction by the Trading Manager which would
subject the Trading Manager to liability pursuant to the terms of the Fund's
Limited Partnership Agreement.
The Trading Manager will make its senior officers available to discuss the
Fund's performance at such time or times as the Fund may reasonably request.
13. Conflicts of Interest.
The Fund hereby acknowledges and consents to the following potential and
actual conflicts of interest relating to the services to be performed for the
Fund hereunder.
(a) Different clients of the Trading Manager pay different prices for the
Trading Manager's services.
(b) The Trading Manager is involved in selecting Trading Advisors for a
large number of different funds, including funds in which officers of the
Trading Manager and its affiliates have a personal investment. Consequently, the
Trading Manager may have a conflict of interest in recommending the Trading
Advisors for the Fund.
(c) The Trading Manager is also general partner of the Fund, and this
Agreement has not been negotiated at arm's-length.
The Fund hereby agrees to and acknowledges the foregoing conflicts of
interest; and the Fund hereby gives informed consent to each of such conflicts.
-6-
<PAGE> 7
14. Term.
This Agreement shall expire as of January 1, 1997.
15. Termination.
Either the Fund or the Trading Manager may, in its discretion, terminate
this Agreement upon thirty (30) calendar days' notice to the other party.
16. Representations and Warranties of the Trading Manager.
The Trading Manager represents and warrants to the Fund, as follows:
(a) The Trading Manager is a corporation duly organized and validly
existing under the laws of the State of Delaware, and is qualified to do
business and in good standing in the State of Illinois, the only 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 Manager. The Trading Manager has full corporate power and authority
to conduct its business and perform its obligations under this Agreement.
(b) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Trading Manager and is a valid and binding agreement
of the Trading Manager enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement, the incurrence of the
obligations set forth in this Agreement and the consummation of the transactions
contemplated herein will not violate, or constitute a breach of, or default
under, the Certificate of Incorporation or By-Laws of the Trading Manager or of
any order, rule, law or regulation binding on the Trading Manager of any court
or any governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over the Trading Manager or any agreement or
instrument binding upon the Trading Manager.
-7-
<PAGE> 8
(d) The Trading Manager has all federal and state governmental, regulatory
and exchange licenses and approvals and has effected all filings and
registrations with federal and state governmental and regulatory agencies
required to conduct its business and to perform its obligations under this
Agreement.
17. Indemnification.
The Fund shall, under this Agreement, indemnify, defend and hold harmless
the Trading Manager, its respective affiliates and its directors, shareholders,
employees, officers, agents and controlling persons to the same extent as the
Fund agrees to indemnify, defend and hold harmless the Trading Manager, as the
general partner of the Fund, under the terms of the Fund's Limited Partnership
Agreement.
The Trading Manager agrees to indemnify, defend and hold harmless the Fund
from and against all losses suffered by any of them relating to this Agreement
and the transactions contemplated hereby, arising out of (i) any representation
or warranty of the Trading Manager made herein being untrue or (ii)the action
or inaction of the Trading Manager constituting negligence, bad faith,
misconduct or a material breach of this Agreement.
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 party.
18. "Commodity Interests" Defined.
The Trading Manager has been authorized hereby (among other things) to
manage the Fund's trading in "commodity interests." The Fund agrees and
acknowledges that this term is intended to be broadly construed so as to give
the Trading Manager maximum flexibility in selecting Trading Advisors and
strategies. "Commodity interests" shall include, without limitation, futures
contracts, forward contracts, options on futures and forward contracts, "hybrid"
instruments, swaps, exchange-for-physical transactions, arbitrage strategies,
spot and cash market trading and over-the-counter transactions in all manner of
commodities, currencies, and interest-rate instruments. A Trading Advisor may
take delivery of commodities under commodity interest contracts held for the
Fund, in the Trading Advisor's sole discretion.
19. Amendment.
This Agreement may not be amended except by the written consent of both of
the parties hereto.
-8-
<PAGE> 9
20. Notices.
All notices required or permitted to be delivered pursuant to this
Agreement shall be in writing (including telegraphic communication) or by
telephone confirmed in writing, all such writings to be delivered personally or
sent by courier service or by registered or certified mail, postage prepaid and
return receipt requested, as follows:
if to the Fund to:
THE FUTURE FUND L.P.
c/o Heinold Asset Management, Inc.
440 S. LaSalle Street, 20th Floor
Chicago, Illinois 60605
Attention: Mr. Daniel E. Ragen
if to the Trading Manager to:
HEINOLD ASSET MANAGEMENT, INC.
440 S. LaSalle Street, 20th Floor
Chicago, Illinois 60605
Attention: Mr. Daniel E. Ragen
21. No Assignment.
No party hereto may assign any of its rights hereunder without the prior
written consent of each other party. This Agreement shall not be construed to
confer any benefit on any person other than the parties hereto and their
respective successors and assigns.
22. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois, without regard to principles of conflicts of
laws. The parties hereto consent to the jurisdiction of the Federal courts of
the Northern District of Illinois in respect of all matters arising hereunder.
23. Entire Agreement; Counterparts.
This Agreement sets forth the entire agreement of the parties relating to
the subject matter hereof except as otherwise set forth herein. This Agreement
may be executed in one or more counterparts each of which shall, however,
together constitute one and the same document.
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<PAGE> 10
24. No Waiver.
No failure or delay on the part of any party hereto in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. Any waiver granted hereunder must be in writing and shall be valid only
in the specific instance in which given.
25. Arbitration.
The parties agree that any dispute or controversy arising out of or
relating to this Agreement or the interpretation thereof, shall be settled by
arbitration in accordance with the rules, then in effect, of the National
Futures Association; provided, however, that the power of the arbitrator shall
be limited to interpreting this Agreement as written and the arbitrator shall
state his reasons for his award; and provided, further, that disputes relating
to forward contracts shall also be arbitrable irrespective of whether the
National Futures Association rules then provide for the arbitration of forward
contract disputes. Judgment upon any award made by the arbitrator may be
entered in any court of competent jurisdiction.
26. Survival.
Section 17 shall survive the termination or expiration of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
THE FUTURE FUND L.P.
By: Heinold Asset Management, Inc.
General Partner
By:/s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
HEINOLD ASSET MANAGEMENT, INC.
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
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<PAGE> 11
TRADING MANAGER AGREEMENT
BY AND BETWEEN
THE FUTURE FUND L.P.
AND
HEINOLD ASSET MANAGEMENT, INC.
dated as of the 1st day of January, 1996
11
<PAGE> 12
TRADING MANAGER AGREEMENT
by and between
THE FUTURE FUND L.P.
and
HEINOLD ASSET MANAGEMENT, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Duties and Status of the Trading Manager . . . . . . . . . . . . . . . . . . . . . 1
2. Standard of Liability; Trading Manager's
Limited Responsibility Regarding
Trading Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Status of the Trading Manager, the Fund
and the Trading Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Custody of the Fund's Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Clearing of Futures Trades . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Placement of Forward Trades . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Contracts with the Trading Advisors . . . . . . . . . . . . . . . . . . . . . . . 3
8. Contracts with Commodity Brokers and
Forward Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Incentive Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<PAGE> 13
<TABLE>
<S> <C> <C>
(d) Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
11. Multi-Advisor Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
12. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
13. Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
14. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
15. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
16. Representations and Warranties of the Trading
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
17. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
18. "Commodity Interests" Defined . . . . . . . . . . . . . . . . . . . . . . . . . . 8
19. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
21. No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
22. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
23. Entire Agreement; Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 9
24. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
25. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
26. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
Exhibit A
Form of Management Contract
-13-
<PAGE> 14
EXHIBIT A
FORM OF
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into effective
as of ____________, 1995, by and between Heinold Asset Management, Inc. (the
"Trading Manager" or "General Partner"), The Future Fund, an Illinois limited
partnership (the "Partnership"), and ________________________ (the "Trading
Advisor").
W I T N E S S E T H:
WHEREAS, pursuant to a Trading Manager Agreement (the "Trading Manager
Agreement"), the Trading Manager, which is also the General Partner of the
Partnership, has agreed with the Partnership to act as the trading manager for
the Partnership, selecting advisors to direct its trading;
WHEREAS, under the Trading Manager Agreement the Partnership has
authorized the Trading Manager to allocate a portion of the Partnership's assets
to the Trading Advisor to provide commodity interest advisory services to the
Fund;
WHEREAS, the Trading Advisor has agreed with the Trading Manager to act as
a Trading Advisor for the Partnership;
WHEREAS, the purpose and business of the Partnership is to seek capital
appreciation by trading speculatively in futures contracts, commodities and
commodity options and forward contracts, and any other items which are
currently, or may later become, the subject of futures, forward or options
trading, and other related investments (sometimes hereinafter referred to as
"Contracts") on United States and non-United States exchanges and markets; and
WHEREAS, the Partnership has heretofore offered units of limited
partnership interest in the Partnership for sale to investors; and
WHEREAS, the Trading Advisor is engaged in the business of making trading
decisions on behalf of itself and others regarding the purchase and sale of
Contracts; and
NOW, THEREFORE, in consideration of the mutual premises and agreements set
forth herein, the parties hereto do agree as follows:
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<PAGE> 15
1. DUTIES OF THE TRADING ADVISOR.
(a) The Trading Manager hereby appoints the Trading Advisor, and the
Trading Advisor hereby accepts appointment, as a trading advisor of the
Partnership in connection with the trading activities of the Partnership.
(b) Upon the Trading Advisor's commencing of trading operations for the
Partnership and for the period and on the terms and conditions set forth in this
Agreement, the Trading Advisor shall have sole authority and responsibility, as
the Partnership's agent and attorney-in-fact, for trading the assets of the
Partnership allocated to it (the "Allocated Assets") in Contracts and in
accordance with the Trading Advisor's ________________ System ("Trading
Approach"; which term, for purposes of this Agreement, shall include trading
approaches, systems, instructions, methods, models, strategies, methodologies
and formulas) as described in the Trading Advisor's Disclosure Document dated
________________________ (the "Disclosure Document") relating to the appointment
of the Trading Advisor as a commodity trading advisor of the Partnership,
subject to the trading policies of the Partnership furnished to the Trading
Advisor in writing ("Trading Policies"). The parties hereto acknowledge that the
Trading Advisor will trade Contracts for the Partnership independently of any
other trading advisor retained by the Partnership. For purposes of this
Agreement, the term "Contracts" shall not include securities and options
thereon.
(c) The Trading Advisor agrees to describe to the Trading Manager its
practices with respect to the leverage used by the Trading Advisor in managing
the Partnership's account relative to other accounts managed by the Trading
Advisor using the Trading Approach to enable the Trading Manager to determine
whether the "trading level" at which the Trading Advisor is currently managing
the Partnership's account is the level currently designated by the Trading
Manager.
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<PAGE> 16
(d) The Trading Manager and the Partnership acknowledge receipt of the
Trading Advisor's Disclosure Document. The Trading Advisor shall promptly
furnish the Partnership with a copy of each amended, supplemented or updated
Disclosure Document of the Trading Advisor filed with the Commodity Futures
Trading Commission (the "CFTC") and the National Futures Association ("NFA")
upon acceptance thereof by the CFTC. Prior to the commencement of trading on
behalf of the Partnership, the Partnership shall deliver to the Trading Advisor,
and renew when necessary, a Commodity Trading Authorization, in the form
attached hereto as Exhibit 1, appointing the Trading Advisor as the
Partnership's agent and attorney-in-fact for such purpose. All trades for the
account of the Partnership shall be made through such banks, brokers and dealers
as the General Partner shall direct, and the Trading Advisor shall have no
authority or responsibility for selecting any such banks, brokers or dealers in
connection with the execution of transactions for the Partnership or for the
negotiation of commission rates charged therefor; provided, however, that the
General Partner shall notify the Trading Advisor of any applicable changes in
the commission rates charged by the Partnership's banks, brokers and dealers
with respect to transactions entered into with respect to the Allocated Assets.
(e) In the event the Trading Advisor and its principals [as that term is
defined in Regulation Section 4.10(e) promulgated by the CFTC under the
Commodity Exchange Act, as amended (the "Act")], shareholders, partners,
employees and affiliates or any person who controls the foregoing (collectively,
"Principals and Affiliates"), wish to use trading programs, systems or
strategies other than or in addition to the Trading Approach in connection with
its trading for the Partnership, either in whole or in part, it may not do so
unless the Trading Advisor gives the General Partner 15 days' prior written
notice of its intention to utilize such different trading programs, systems or
strategies and the General Partner consents thereto in writing. Non-material
changes in the Trading Approach may be instituted without prior written
approval.
(f) The Trading Advisor agrees to make all material disclosures to the
Partnership regarding itself and its Principals and Affiliates, their trading
performance and general trading methods, their accounts (but not the identities
of customers) and otherwise as are required in the reasonable judgment of the
General Partner or the Partnership to be made in any filings required by any
governmental body or by any applicable law, regulation, rule or order. Nothing
contained in this Agreement shall be construed or deemed to require the Trading
Advisor to disclose the confidential or proprietary details of its trading
strategies.
(g) The Trading Advisor understands and agrees that the General Partner
intends to designate other trading advisors and to apportion from time to time
to such other trading advisors the management of such portion of the
Partnership's assets as the General Partner shall determine in its absolute
discretion. The designation of other trading advisors and apportionment and
reapportionment of a portion of the Partnership's assets to such trading
advisors shall neither terminate this Agreement nor modify in any regard the
respective rights and obligations of the parties hereto.
(h) The General Partner shall have the right to make additions to, or
withdrawals from, the Allocated Assets (including any "notional" funds
comprising part of the
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<PAGE> 17
Allocated Assets) at any time. The General Partner shall, however, use its best
efforts to make such additions or withdrawals at month-end. The General Partner
agrees that the Trading Advisor may refuse any additional allocation of funds
for any reason. The General Partner, in its sole discretion, may at any time
remove all assets from the management of the Trading Advisor and may require the
Trading Advisor to liquidate existing positions.
(i) Upon receipt of instructions from the General Partner, the Trading
Advisor shall immediately cease its trading activities with respect to the
Allocated Assets, close out all existing positions in an orderly manner and not
initiate any new positions unless otherwise instructed by the General Partner or
the Partnership.
(j) The Trading Advisor shall review on a daily basis the positions held
by the Allocated Assets and shall immediately notify the General Partner of any
errors committed by the Trading Advisor or of any trade not executed in
accordance with the Trading Advisor's instructions.
2. OTHER ACCOUNTS AND ACTIVITIES OF THE TRADING ADVISOR.
(a) The services provided by the Trading Advisor hereunder are not to be
deemed exclusive. Subject to the terms of this Agreement, the Trading Advisor
and its Principals and Affiliates shall be free to trade for their own accounts
and to advise other persons and manage other accounts during the term of this
Agreement and to use the same or different degrees of leverage, information,
computer programs and trading strategies or formulas which they obtain, produce
or utilize in the performance of services for the Partnership. However, the
Trading Advisor represents, warrants and agrees that the rendering of such
consulting, advisory and management services to others will not require any
material change in the Trading Approach and will not materially adversely affect
the capacity of the Trading Advisor to continue to render services to the
Partnership of the quality and nature contemplated by this Agreement.
(b) If, at any time during the term of this Agreement, the Trading
Advisor is required to aggregate the Partnership's Contract positions with the
positions of any other person or entity for purposes of applying CFTC- or
exchange-imposed position limits, the Trading Advisor agrees that it will
promptly notify the General Partner if the Partnership's positions are included
in an aggregate amount which equals or exceeds ninety percent (90%) of the
applicable limit. The Trading Advisor agrees that, if its trading
recommendations are altered because of the application of any position limit, it
will not modify the trading instructions with respect to the Partnership's
account in such manner as to affect the Partnership substantially
disproportionately as compared with the Trading Advisor's other accounts. The
Trading Advisor presently believes and represents that existing speculative
position limits will not materially adversely affect its ability to manage the
Partnership's account given the potential size of the Partnership's account and
the Trading Advisor's and its Principals' and Affiliates' current accounts and
all proposed accounts for which they have contracted to act as trading advisor.
The Trading Advisor further represents, warrants and agrees that under no
circumstances will it knowingly or deliberately use trading strategies or
systems for the Partnership that are inferior to trading strategies or systems
employed for any other
-17-
<PAGE> 18
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account, it being
acknowledged, however, that different trading strategies, methods or degrees of
leverage may be utilized for differing sizes of accounts, accounts with
different trading policies, accounts experiencing differing inflows or outflows
of equity, accounts which commence trading at different times, accounts which
have different portfolios or different fiscal years and accounts with other
differences, and that such differences may cause divergent trading results.
(c) The Partnership and the General Partner acknowledge and agree that
the Trading Advisor and/or its Principals and Affiliates presently act and that
they may continue to act as advisors for other accounts managed by them and may
continue to receive compensation with respect to services for such accounts in
amounts which may be more or less than the amounts received from the
Partnership. The Trading Advisor agrees that in the management of such other
accounts by it and its Principals and Affiliates, it will act in good faith to
seek to achieve an equitable treatment of all accounts under management
including the Partnership's account with respect to, among other things,
priorities of order entry and position limits.
(d) The Trading Advisor agrees that it shall make such information
available to the General Partner respecting the performance of the Partnership's
account as compared to the performance of all other accounts managed by the
Trading Advisor and its Principals and Affiliates as shall be reasonably
requested by the General Partner or the Partnership. The Trading Advisor shall
not be required to disclose the identity of its clients.
3. ALLOCATION OF ASSETS TO THE TRADING ADVISOR. The Trading Advisor's
Allocated Assets initially shall be a total of approximately $_________ of which
$__ is notional funding.
4. FEES.
(a) Commencing with the commencement of trading by the Trading Advisor
for the Partnership, the Trading Manager agrees to pay to the Trading Advisor as
follows:
(i) Management Fee. A monthly management fee equal to ________% of the
Net Asset Value of the Allocated Assets as of the close of business on the last
business day of each calendar month (an approximate __% annual rate).
(ii) For purposes of calculating the management fee, Net Asset Value of
the Allocated Assets shall be determined before reduction for the management
fees or incentive fees, if any, accrued or payable with respect to the Allocated
Assets as of such month-end, and before giving effect to any distributions and
redemptions paid or payable at such month-end. In the event that (A) the
Trading Advisor commences trading as of any day other than the first day of a
calendar month, (B) this Agreement is terminated as of any date other than the
last day of a calendar month, or (C) the Partnership reallocates assets to or
from the Trading Advisor as of any day other than the first or last day of any
calendar month, the amount of the management fee shall be prorated on the
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<PAGE> 19
basis of the number of business days during such month that the Allocated Assets
(as adjusted in the case of reallocation of assets) were traded by the Trading
Advisor as compared to the total number of business days in such calendar month.
To the extent that the Partnership instructs the Trading Advisor to trade the
Allocated Assets at a "nominal account size" in excess of the actual assets
comprising Allocated Assets, the Trading Advisor's management fee shall be
calculated based upon the "nominal account size" of the Allocated Assets.
(iii) Incentive Fee. A quarterly incentive fee equal to __% of any New
Trading Profits (as defined below) achieved during each fiscal quarter. New
Trading Profits during a quarter shall mean the sum of (A) the net of any
profits and losses realized on trades closed out during the period, plus or
minus (B) the change in the net of any unrealized profits and losses on trades
which remained open as of the end of the period (net of accrued brokerage
commissions and other allocated expenses) from the net of any unrealized profits
and losses on trades initiated by the Trading Advisor which remained open as of
the end of the immediately preceding period (net of accrued brokerage
commissions and other allocated expenses), (C) any Trading Advisor management
fees paid or accrued through the end of the period, and (D) the Trading
Advisor's carryforward loss (as hereinafter defined) from the immediately
preceding period. If the sum of subparagraphs (A) through (D) for any period is
negative, such amount shall be the Trading Advisor's carryforward loss for the
next period. For purposes of calculating incentive fees, interest income earned
on the Allocated Assets will be disregarded. In the event of a withdrawal from
the Allocated Assets at a time when the Trading Advisor has a carryforward loss
in effect, the amount thereof shall be reduced by an amount determined by
multiplying the carryforward loss by a fraction, the numerator of which shall be
the amount of the withdrawal and the denominator of which shall be the Net Asset
Value of the Allocated Assets immediately prior to giving effect to the
withdrawal. In the event that an addition is made to the Allocated Assets
subsequent to a reduction in the Trading Advisor's carryforward loss by reason
of a withdrawal, the Trading Advisor's carryforward loss shall be increased by
or created in an amount (up to the aggregate amount of prior carryforward loss
reductions) determined by multiplying the aggregate amount of prior carryforward
loss reductions by a fraction, the numerator of which shall be the amount of the
addition and the denominator of which shall be the sum of the previous
withdrawals which resulted in carryforward loss reductions. The incentive fee
charged to the Partnership with respect to the Allocated Assets will be
dependent upon the performance of the Trading Advisor and will not be affected
by the performance of any other trading advisor appointed by the Partnership or
the Partnership as a whole. The initial incentive period shall commence on the
date the Trading Advisor commences trading activity for the Partnership and
shall end at the immediate following quarter-end (even though such period may
not be a full quarter). Subsequent incentive periods shall commence on the
first day of the next succeeding fiscal quarter and end on the last day of such
fiscal quarter. In the event this Agreement is terminated as of any date which
is not the end of an incentive period, an incentive fee will be paid by the
Partnership, if earned, with respect to the Allocated Assets as though such
termination date were the last day of the incentive period.
(b) Payment of Fees. The management fees and incentive fees due to the
Trading Advisor shall be paid by the Trading Manager within thirty (30) days of
the end of the
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<PAGE> 20
calendar period to which they relate. The Trading Manager expressly agrees that
any such fees due the Trading Advisor shall survive the termination or other
expiration of this Agreement.
5. TRADING ADVISOR INDEPENDENT. The Trading Advisor shall for all
purposes herein be deemed to be an independent contractor to the Partnership and
the General Partner and shall, except as otherwise expressly provided herein,
have no authority to act for or represent the Partnership or the General Partner
in any way or otherwise be deemed a sponsor of the Partnership or an agent,
joint venturer or partner of the Partnership, the General Partner or of any
other trading advisor retained by the Partnership.
6. BROKER.
(a) The Trading Advisor agrees to enter all Contract orders through
E.D. & F. Man International Inc. ("Man"), or such other brokers and forward
contract dealers as may be designated, from time to time, in writing by the
Partnership. The Partnership must consent in writing to the use of other floor
brokers who will give up such trades to Man in accordance with exchange rules
and the give-up procedures established by the Partnership from time to time.
The Trading Advisor shall be responsible for any errors committed by any
executing broker who gives-up to Man on behalf of the Partnership. In placing
trades for the Partnership's account, the Trading Advisor agrees that it shall
use its standard procedures for allocating orders among the Trading Advisor's
various accounts and not knowingly favor any other such account over the
Partnership's account.
(b) All forward contract and other trades for the Partnership will be
executed through the forward trading and other facilities of such affiliates of
Man or other entities as the Partnership may designate from time to time.
7. STANDARD OF LIABILITY; INDEMNIFICATIONS.
(a) Standard of Liability. Neither the Trading Advisor nor any of its
Principals and Affiliates shall be liable to the Partnership, the General
Partner or any of their respective successors or assigns under this Agreement
except by reason of (i) acts or omissions to act which constitute bad faith,
negligence or misconduct or (ii) a breach of any of the representations,
warranties, covenants or agreements of the Trading Advisor set forth in this
Agreement.
(b) Indemnity. (i) The Partnership agrees to indemnify and hold
harmless the Trading Advisor and each of its Principals and Affiliates from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, attorneys' and accountants' fees and
disbursements), judgments and amounts paid in settlement (collectively,
"Losses") to which an indemnified person may become subject arising out of this
Agreement, the transactions contemplated hereby or the fact the Trading Advisor
is or was a trading advisor to the Partnership, unless any such Losses arise out
of, relate to, or are based upon the Trading Advisor's failure to meet the
standard of liability applicable to it under SECTION 7(a).
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<PAGE> 21
(ii) The Trading Advisor agrees to indemnify and hold harmless the
Partnership, the General Partner and each of their respective Principals and
Affiliates from and against any and all Losses to which they may become subject,
if any such Losses arise out of, relate to, or are based upon the Trading
Advisor's failure to meet the standard of liability applicable to it under
SECTION 7(a).
(c) Promptly after receipt by a party to be indemnified under SECTION
7(b), above, of any notice of the commencement of any action or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnified party under such subsection, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. The requirement
that an indemnifying party be given written notice of the commencement of any
action shall be deemed to be satisfied if such indemnifying party shall have
actual knowledge thereof or shall have been given written notice of the
commencement of any action or proceeding within a reasonable time after the
commencement thereof. If any such action shall be brought against any
indemnified party and the indemnified party notifies the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to such indemnified party, and shall have the
right to negotiate and consent to a settlement thereof, provided that the
indemnified party shall have consented to the settlement. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that the indemnified
party shall have the right to employ counsel to represent it, if, in the
indemnified party's reasonable judgment, it is advisable for such party to be
represented by separate counsel, in which event the fees and expenses of such
separate counsel shall be borne by the indemnified party. No indemnifying party
shall be liable for any settlement of any such action effected without its
consent, but if any such action or proceeding is settled with the consent of any
indemnifying party or if there be a final judgment for the plaintiff in any such
action or proceeding (of which an indemnifying party shall have been notified),
such indemnifying party shall indemnify and hold harmless each indemnified party
from and against any Losses incurred or suffered by reason of such settlement or
judgment.
(d) Any indemnification required by this SECTION 7, unless ordered or
expressly permitted by a court, shall be made by the indemnifying party only
upon a determination by independent legal counsel in a written opinion that the
conduct which is the subject of the claim, demand, lawsuit, action or proceeding
with respect to which indemnification is sought meets the applicable standard
set forth in this SECTION 7.
(e) The provisions of this SECTION 7 shall survive the termination or
other expiration of this Agreement.
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<PAGE> 22
8. THE TRADING ADVISOR'S REPRESENTATIONS AND WARRANTIES. The Trading
Advisor represents and warrants to the Partnership and the General Partner as
follows:
(a) The Trading Advisor is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has full
power and authority to enter into and perform its obligations under this
Agreement and to conduct its business as described in this Agreement and the
Disclosure Notice, and the Trading Advisor is qualified to conduct its business
and is in good standing in every jurisdiction in which the nature or conduct of
its business requires such qualification and failure to so qualify would have a
materially adverse effect on its ability to comply with, or perform its
obligations under, this Agreement, it being understood that any decision as to
the jurisdiction or jurisdictions in which the Trading Advisor shall conduct its
business is within the sole discretion of the Trading Advisor.
(b) This Agreement has been duly and validly authorized, executed and
delivered by the Trading Advisor and is a valid and binding agreement of the
Trading Advisor enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the performance of
the obligations and the consummation of the transactions contemplated in this
Agreement and in the Disclosure Notice will not conflict with, violate, breach
or constitute a default under, any term or provision of the Trading Advisor's
certificate of incorporation, by-laws, or other charter documents, or any
indenture, mortgage, deed of trust, loan agreement, or other agreement or
instrument to which the Trading Advisor or any of its Principals and Affiliates
is a party or by which any of them are bound, or to which any of the property
(including, but not limited to, its Trading Approach) or assets of the Trading
Advisor or its Principals and Affiliates are subject, or any order, rule, law,
statute, regulation, or other legal requirement applicable to the Trading
Advisor or any of its Principals or to the property or assets of the Trading
Advisor or its Principals and Affiliates of any court or any governmental or
administrative body or agency or panel or any regulatory or self-regulatory
organization or exchange having jurisdiction over the Trading Advisor or any of
its Principals and Affiliates.
(d) The Trading Advisor is registered as a commodity trading advisor
under the Act, its Principals are identified on the Trading Advisor's most
recent CFTC Form 7-R filed with the NFA pursuant to the Act, and it is a member
of the NFA in such capacity and such registration and membership has not expired
or been revoked, lapsed, suspended, terminated, or not renewed or limited or
qualified in any respect.
(e) The Trading Advisor is not bankrupt or insolvent.
(f) The Disclosure Document is complete and accurate in all material
respects, does not contain any misstatement of any material fact, does not omit
to state any material fact necessary to be stated therein in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading, and complies in all material respects with the applicable
requirements of the Act and the rules promulgated thereunder and may be relied
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<PAGE> 23
upon by the Partnership and the General Partner in preparing the Disclosure
Notice and allocating assets of the Partnership to the Trading Advisor and there
has not been, since the date of the Disclosure Document's issuance, any material
adverse change in the condition, financial or otherwise, business or prospects
of the Trading Advisor or any of its Principals and Affiliates, whether or not
arising in the ordinary course of business, or relating to the historical
performance and operations of the Trading Advisor.
(g) The Trading Advisor and each Principal has complied and will continue
to comply with all orders, rules, laws, statutes, regulations or other legal
requirements applicable to the Trading Advisor or any of its Principals and
Affiliates or to their respective businesses, properties, or assets, including
the Act and the rules promulgated by the CFTC and the NFA, the violation of
which would materially and adversely affect its or their ability to comply with,
and perform its or their obligations under this Agreement, and there are no
actions, suits, proceedings, or notices of investigations or investigations
pending or threatened against the Trading Advisor, or any of its Principals or
Affiliates, by the NFA, the CFTC or any governmental, regulatory or
self-regulatory agency regarding noncompliance by the Trading Advisor or any of
its Principals or Affiliates with any law, statute, rule or regulation, or at
law or in equity or before or by any court, any federal, state, municipal or
other governmental department commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect its
or their ability to comply with or to perform its or their obligations under
this Agreement or that would be required to be disclosed in the Disclosure
Notice, which is not so disclosed, would result in a material adverse change in
the condition, financial or otherwise, business or prospects of the Trading
Advisor.
(h) The Trading Advisor and each Principal has all governmental,
regulatory, self-regulatory and exchange licenses and approvals and has effected
all filings and registrations with all governmental, regulatory and
self-regulatory agencies required to conduct their respective businesses and to
act as described in the Disclosure Notice and to perform its or their respective
obligations under this Agreement.
(i) With respect to information contained in the Disclosure Notice
relating to the Trading Advisor, including, without limitation, the tables and
notes thereto, the Disclosure Notice does not contain any untrue statement of
material fact or omit to state therein a material fact required to be stated
therein or necessary to be stated therein in order to prevent the statements
made therein, in light of the circumstances under which they are made, from
being misleading.
(j) In the placement of orders and the allocation of executed trades for
the Partnership and for the accounts of any other client, the Trading Advisor
shall utilize a fair and reasonable order entry system and trade allocation
system, which shall be no less favorable to the Partnership than to any other
account managed by the Trading Advisor.
(k) The Trading Advisor shall promptly notify the other parties hereto of
the commencement of any suit, action or proceeding involving it or its
Principals and Affiliates, whether or not any such suit, action or proceeding
also involves any of the other parties hereto.
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<PAGE> 24
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not true
or incomplete, the Trading Advisor shall promptly notify the Partnership and the
General Partner of the occurrence of such event.
9. THE PARTNERSHIP'S REPRESENTATIONS AND WARRANTIES. The Partnership
represents and warrants to the Trading Advisor as follows:
(a) The Partnership is duly organized, validly existing and in good
standing as a limited partnership under the laws of Illinois. The Partnership
has full power and authority to perform its obligations under this Agreement and
to conduct its business and to act as described in the Disclosure Notice.
(b) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Partnership and is a valid and binding agreement of
it enforceable in accordance with its terms.
(c) The Partnership has complied and will continue to comply with all
orders, rules, laws, statutes, regulations or other legal requirements
applicable to it, to its business, properties, and assets, including the Act and
the rules promulgated by the CFTC and the NFA, the violation of which would
materially and adversely affect its ability to comply with, and perform its
obligations under this Agreement, and there are no actions, suits, proceedings,
or notices of investigations or investigations pending or threatened against it,
by the NFA, the CFTC or any governmental, regulatory or self-regulatory agency
regarding noncompliance by it with any law, statute, rule or regulation, or at
law or in equity or before or by any court, any federal, state, municipal or
other governmental department, commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect its
ability to comply with or to perform its obligations under this Agreement or
that would be required to be disclosed in the Disclosure Notice, which is not
so disclosed, or would result in a material adverse change in the condition,
financial or otherwise, business or prospects of the Partnership.
(d) The Partnership has all federal and state governmental, regulatory,
self-regulatory and exchange licenses and approvals and has effected all filings
and registrations with all federal and state governmental and regulatory and
self-regulatory agencies required to conduct its business and to act as
described in the Disclosure Notice and to perform its obligations under this
Agreement.
(e) Except with respect to information contained in the Disclosure Notice
relating to the Trading Advisor or any other advisor, the Disclosure Notice does
not contain any untrue statement of material fact or omit to state therein a
material fact required to be stated therein
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<PAGE> 25
or necessary to be stated therein in order to prevent the statements made
therein, in light of the circumstances under which they are made, from being
misleading.
(f) The General Partner is registered as a commodity pool operator
under the Act and is a member of the NFA in such capacity and such registration
and membership has not expired or been revoked, lapsed, suspended, terminated,
or not renewed or limited or qualified in any respect.
(g) The General Partner has all federal and state governmental,
regulatory, self-regulatory and exchange licenses and approvals and has effected
all filings and registrations with all federal and state governmental and
regulatory and self-regulatory agencies required to conduct its business and to
act as described in the Disclosure Notice and to perform its obligations under
this Agreement.
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not true
or incomplete, the General Partner will promptly notify the Trading Advisor
thereof.
10. TERM AND TERMINATION.
(a) Unless terminated earlier as provided below, the term of this
Agreement shall be until the end of the twelfth full calendar month after the
Trading Advisor commences trading activity and is automatically renewable
thereafter for successive one-year periods unless (i) the Partnership terminates
this Agreement during the initial one-year term thereof by giving thirty days'
prior written notice to the Trading Advisor, or (ii) either the Trading Advisor
or the Partnership terminates the Agreement at the end of the initial one-year
term or at any time thereafter by giving thirty days' prior written notice to
such other party.
(b) Notwithstanding the foregoing, this Agreement may be terminated by the
Partnership immediately upon written notice to the Trading Advisor if (i) the
Trading Advisor, if other than a natural person, merges, consolidates with or
sells a substantial portion of its assets to any individual or entity, or there
is a material adverse change relating to the Trading Advisor or a material
adverse change in control, organizational structure, financial condition,
regulatory compliance or personnel of the Trading Advisor, (ii) any of the
Trading Advisor's registrations under the Act or otherwise are suspended,
terminated, lapsed or not renewed, (iii) the Trading Advisor's membership in the
NFA or other self-regulatory organization is suspended, terminated, lapsed or
not renewed, (iv) the Trading Advisor otherwise becomes unable to serve as a
trading advisor to the full extent contemplated by this Agreement, (v) the
Trading Advisor breaches any of its representations, warranties, covenants or
agreements contained in this Agreement, or (vi) the General Partner determines
doing so is in the best `interests of the Partnership.
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<PAGE> 26
9. NOTICES. Except as otherwise provided herein, all notices, demands or
requests required to be made or delivered under this Agreement shall be
effective only if in writing and delivered personally or by facsimile or mail,
postage prepaid (airmail if the addressee is in another country), to the
respective addresses below or to such other addresses as may be designated by
the party entitled to receive the same by notice similarly given and shall be
deemed given by the party required to provide notice when received by the party
to whom notice is required to be given.
If to the Partnership or the Trading Manager to:
Heinold Asset Management, Inc.
One Financial Place
440 South LaSalle Street, 20th Floor
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
---------------------------------
---------------------------------
---------------------------------
----------------------------------
12. ASSIGNMENT. No party hereto may transfer, sell, encumber, appoint
agents or assign any of its rights or obligations hereunder in whole or in part
without the express written consent of each of the other parties hereto.
13. AMENDMENT; MODIFICATION. This Agreement may not be amended or
modified, nor any of the provisions hereof waived, except by the written consent
of all of the parties hereto.
14. COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject hereof and supersedes all
prior agreements written or oral, and no other agreement, verbal or otherwise,
shall be binding as between the parties hereto unless in writing and signed by
the party against whom enforcement is sought.
15. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns. No other
person other than the persons indemnified under SECTION 7 hereof for matters
relating to that Section shall have any right or obligation under this
Agreement.
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<PAGE> 27
16. HEADINGS. Headings to sections herein are for the convenience of the
parties only, and are not intended to be a part of or to affect the meanings or
interpretation of this Agreement.
17. GOVERNING LAW: CONSENT TO JURISDICTION. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Illinois
without giving effect to principles of conflicts of laws.
18. ARBITRATION. The parties agree that all controversies which may
arise in connection with any transaction contemplated by this Agreement or the
construction, performance or breach of this Agreement shall be determined by
arbitration, to be held in the City of Chicago, State of Illinois unless
otherwise agreed to by the parties hereto, and in accordance with the rules then
obtaining of the NFA, or if no such rules are then in effect or if jurisdiction
is declined, then the rules then obtaining of the American Arbitration
Association; provided, however, that (a) the arbitrator(s) shall be
knowledgeable in industry standards and practices and the matters giving rise to
the dispute, (b) the arbitrator(s) shall not have the power and authority to
award punitive damages, (c) the authority of the arbitrator(s) shall be limited
to construing and enforcing the terms and conditions of this Agreement as
expressly set forth herein, and (d) the arbitrator(s) shall state the reasons
for their award and their legal and factual conclusions underlying the award in
a written opinion. The award of the arbitrator(s), or a majority of them, shall
be final, and judgment upon the award may be confirmed and entered in any court,
state or federal, having jurisdiction.
19. CONSENT TO JURISDICTION. Each party hereto expressly and irrevocably
agrees (a) that it waives any objection, and specifically consents, to venue in
the United States federal or state courts located in the City of Chicago, State
of Illinois, United States of America, so that any action at law or in equity
may be brought and maintained in any such court, and (b) that service of process
in any such action may be effected against such party by certified or registered
mail or in any other manner permitted by applicable United States Federal Rules
of Civil Procedure or Rules of the Courts of the State of Illinois. In
addition, each party hereto expressly and irrevocably waives, in respect of any
action brought in any United States federal or state court located in the City
of Chicago, State of Illinois or any resulting judgment, any objection, and
hereby specifically consents, to the jurisdiction of any such court, and agrees
not to seek to change the situs of such action or to assert that any other court
in any other jurisdiction is a more suitable forum for the hearing and
adjudication of any claim or dispute raised in such action.
20. SURVIVAL. The indemnity provisions of this Agreement shall survive
the termination or expiration of this Agreement with respect to any matter
existing prior to such termination; the payment obligations under this Agreement
shall continue until satisfied; and the other provisions of the Agreement shall
survive the termination of this Agreement with respect to any matter arising
while this Agreement was in effect.
21. WAIVER OF BREACH. The waiver by a party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by a party.
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<PAGE> 28
The failure of a party to insist upon strict adherence to any provision of this
Agreement shall not constitute a waiver or thereafter deprive such party of the
right to insist upon a strict adherence.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
THE FUTURE FUND
By: Heinold Asset Management, Inc.,
General Partner
By: ___________________________
Daniel E. Ragen
President
HEINOLD ASSET MANAGEMENT, INC.
By: ____________________________
Daniel E. Ragen
President
______________________________
By: ____________________________
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<PAGE> 30
EXHIBIT 1
__________________, 1995
____________________
____________________
____________________
____________________
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund, an Illinois limited partnership (the "Partnership"), does
hereby make, constitute, and appoint you as its Attorney-in-Fact to purchase and
sell futures contracts, commodities and commodity options and forward contracts,
and any other items which are currently, or may later become, the subject of
futures, forward or options trading, and other related investments on domestic
and international exchanges, through Geldermann, Inc., or such other brokers and
forward contract dealers as may be designated, from time to time, in writing by
the Partnership, as brokers, in accordance with the Management Contract between
us dated ________, 1995.
Very truly yours,
THE FUTURE FUND
By: Heinold Asset Management, Inc.,
General Partner
By: ______________________________
Daniel E. Ragen
President
<PAGE> 31
ACKNOWLEDGEMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of
___________________________'s Disclosure Document dated __________________,
1995.
The Futures Fund
By: Heinold Asset Management, Inc.
By: _____________________________
Daniel E. Ragen
President
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<PAGE> 1
FORM OF
GENERAL PARTNERSHIP AGREEMENT
GENERAL PARTNERSHIP AGREEMENT dated as of ________, 199_, by and
among the commodity pools (each, a "Partner" and, collectively, the "Partners")
signatory from time to time hereto, each of which has as its sole general
partner Heinold Asset Management, Inc. ("HAMI"), a "commodity pool operator"
registered with the Commodity Futures Trading Commission (the "CFTC").
General
1. Name. The name of the partnership shall be Heinold General
Partnership Account __ ("the Partnership").
2. Principal Place of Business. The principal place of business
of the Partnership shall be at 440 South LaSalle Street, 20th Floor, Chicago,
Illinois 60605, the principal place of business of Heinold Asset Management,
Inc., the general partner of each Partner.
3. Objective. The objective of the General Partnership is to
permit the Partners to participate pro rata in the trading management -
exclusively in the futures and forward markets - of a single "commodity trading
advisor" (the "Advisor") implementing a single trading strategy (the "Trading
Approach"). The Partners, by unanimous consent, may change the Advisor and/or
the Trading Approach used by the Partnership, but the Partnership must at all
times retain a single Advisor implementing a single Trading Approach.
At any time any Partner may call for a vote of all Partners on
whether to continue to retain the Advisor to manage the Partnership's assets.
Unless a majority of the Partners (by number, not by interest based on relative
capital account balances) affirmatively vote to continue to retain the Advisor,
the Advisor will be replaced by such other advisor as may be selected by the
unanimous vote of the Partners.
4. Admission of Partners. Only an entity which: (i) is
organized in the United States; (ii) constitutes a "commodity pool" within the
meaning of the rules and regulations of the CFTC and is operated in full
compliance with such rules and regulations; (iii) of which HAMI is the sole
general partner (and of which one of HAMI, Heinold Commodities, Inc. or
Geldermann Futures Management Corp. has at all times been the sole general
partner); (iv) is organized in the United States and has been in continuous
operation since January 1, 1991 (with the exception of New Century Currency and
Financial Fund L.P.); and (v) has a net asset value (with the exception of The
Future Fund), as of the date hereof, of less than $6,000,000, shall be eligible
to be admitted as a Partner.
Only the qualified commodity pools described above may be
admitted to the Partnership. No third party (including HAMI acting for its own
account) may contribute capital to, or share in the profits or losses of, the
Partnership.
Partners may only be admitted to the Partnership, and make an
initial capital contribution thereto, with the unanimous consent of all current
Partners.
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<PAGE> 2
Upon admission, each Partner will execute a counterpart of this
Agreement, thereby agreeing to be bound by all the provisions hereof.
5. Capital Contributions and Withdrawals. Upon admission to the
Partnership as provided in Section 4 above, each Partner shall make the initial
capital contribution approved by the unanimous consent of the current Partners
as therein provided. Subsequent capital contributions may be made by Partners
at any time, but only with the unanimous consent of all then current Partners.
Any Partner may withdraw from the Partnership, in whole or in
part, at any time, and from time to time, upon notice to each other Partner,
but without need of obtaining any Partner's consent. A Partner may also be
required to withdraw by unanimous vote of the other Partners and shall be
deemed to have been mandatorily withdrawn in the event that such Partner no
longer meets the eligibility criteria for admission to the Partnership set
forth in Section 4 hereof.
All capital contributions must be fully-funded, either in cash
or by "committed funds" letters. Furthermore, if "committed funds" letters are
used, all Partners' capital contributions must be in the same proportion of
actual funds and committed funds. No "notional" funding of any capital account
will be permitted.
6. Authority of Partners; Access to Information. Nothing herein
contained shall be construed to require any person to inquire as to the
authority of any of the Partners to act on behalf of, or bind, the Partnership
within the scope of this Agreement and the purposes of the Partnership. Each
Partner has full authority to bind and obligate the Partnership in all matters
within the scope of the activities herein contemplated.
Each Partner will be permitted full access to all information
relating to the Partnership's trading under the direction of the Advisor as if
each Partner had an individual managed account with the Advisor, in order to
enable each Partner to manage and control its participation in the Partnership
in an informed manner.
Each Partner may request information from the Advisor concerning
the performance of the Partnership, without need of seeking the consent or
approval of any other Partner.
The Partnership shall only enter into brokerage arrangements
with commodity brokers which agree that they will, upon request by any Partner,
furnish directly to each Partner copies of the confirmations of all trades
executed on behalf of the Partnership.
7. Interest in Other Transactions. Nothing in this Agreement
shall prohibit any Partner from: (i) participating in other partnerships or
entities engaged in trading commodity interests under the direction of a
manager other than the Advisor; (ii) buying or selling commodity interests for
its own account, including the same or different such interests as those held
by the Partnership; or (iii) engaging in any other commercial trading or
investing activity whether or not competitive with the activities of the
Partnership, and neither the Partnership nor any other Partner shall have any
interest therein or in the profits therefrom.
8. Exclusivity. Notwithstanding the provisions of Section 7
hereof, each Partner agrees that during the term of this Agreement, such
Partner will not place any assets under the management of the visor other than
through participating in the Partnership.
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<PAGE> 3
9. Time Commitment. The Partners shall not be required to devote
any more of their business time to the activities of the Partnership than they
shall deem necessary or advisable.
10. Personal Property; Partnership Property. Each Partner's
interest in the Partnership shall be personal property for all purposes. All
property owned by the Partnership shall be deemed to be owned by the
Partnership as an entity, and no Partner individually shall have any direct
ownership right in such property.
The assets and liabilities of the Partnership, including,
without limitation, the futures and forward market positions held by the
Partnership, shall constitute Partnership property, and no Partner shall have
any interest in such Partnership property, but rather an interest in the
Partnership, which shall itself be the owner of such futures and forward market
positions and other assets and liabilities.
Partners' Representatives
11. Designation of Representatives. Each of the Partners shall,
by notice to all other Partners, designate, which designation may be changed by
each Partner at any time by notice to all other Partners, a natural person to
act as such Partner's representative ("Representative") which shall act on
behalf of such Partner in all matters relating to the Partnership; provided
that at no time may the Partners, collectively, have fewer than four different
individual Representatives.
12. Meetings of Representatives. Any Partner may, by notice to
the other Partners, convene a meeting of the Representatives at any time during
normal business hours upon no less than five (5) business days' notice;
provided that all Representatives must be in attendance at any such meeting.
At a meeting of Representatives, any matters relating to the
operation of the Partnership may be resolved by majority vote of the Partners
(with the Representatives acting as the Partners' proxies); provided that no
Partner's right to share pro rata in the profits and losses of the Partnership
based on the cash balance in such Partner's capital account or its voting
rights as provided herein shall be abridged or amended in any respect without
the consent of such Partner (through its Representative).
The Representatives, as a group, shall liaise with the Advisor
concerning the management of the Partnership's trading and provide the Advisor
with information concerning capital contributions and withdrawals from the
Partnership, and the timing thereof.
The Representatives shall serve only as proxies for and
representatives of the Partners. No Partner shall in any respect be deemed to
have contracted with any Representative to provide any management to such
Partner in respect of its participation in the Partnership.
13. Reports of Representatives. Each Representative shall report,
in the monthly reports transmitted by HAMI to each of the investors in the
respective Partners, pursuant to applicable CFTC regulations, any information
which such Representative deems appropriate to the investors in such Partner,
and shall be available to answer any questions raised by such investors.
3
<PAGE> 4
Financial and Tax Matters
14. Allocation of Profits and Losses for Financial and Tax
Purposes. The gross profits and losses of the Partnership (including interest
income) shall be allocated, for financial purposes, among the Partners, i.e.,
pro rata, based on the cash balances in their respective capital accounts.
Each Partner's pro rata interest in the Partnership shall be determined at the
time of each capital contribution or withdrawal, giving effect thereto, and
otherwise as of the beginning of each calendar month. Items of profit and loss
for tax purposes shall be allocated, for tax purposes, on the same basis as
they are allocated for financial purposes, in a manner consistent with Section
704 of the Internal Revenue Code (including, without limitation, a "Qualified
Income Offset").
Each Partner, by becoming a Partner, agrees to contribute all
such amounts to the Partnership as may be necessary to ensure that all
Partners' capital accounts are reduced pro rata in the event that the
Partnership incurs losses.
In no event will the capital account of any Partner be allocated
Partnership profits and losses on a basis other than such Partner's pro rata
share of such profits and losses, based on the fully-funded level of such
Partner's capital account.
The accounting period for the Partnership shall be each business
day. As of the end of each business day, the value of each Partner's capital
account will be calculated (by the accountants retained by the Partners), and
the aggregate of such values compared to the value of the Partnership's
accounts at E.D. & F. Man International, Inc. and its affiliates ("E.D. & F.
Man"). Any discrepancy between the two calculations which cannot be explained
or rectified shall be resolved to the benefit of the Partnership.
15. Partnership Taxation. The Partners intend that the
Partnership shall be treated as a "general partnership" for federal, state and
local income and franchise tax purposes and the Partners agree to take all
action, including the amendment of this Agreement and the execution of other
documents as may be required, to qualify for and receive such tax treatment.
Furthermore, each Partner agrees that it shall not, in its own tax reporting
and returns, take any position inconsistent with the Partnership being taxed as
a "general partnership."
16. Expenses. The Partnership shall pay no expenses. HAMI shall
pay all expenses of establishing the Partnership and admitting the Partners to
it, and, on an ongoing basis, shall ensure that no Partner incurs any expense
as a result of participating in the Partnership which such Partner would not
have incurred trading independently. Each Partner shall pay the expenses
incurred by it (including, without limitation, brokerage and advisory fees)
attributable to the Advisor's trading as provided in negotiations between each
such Partner and the Advisor. Different Partners will have different financial
arrangements regarding their trading, which they shall pay for individually,
not through the Partnership (although they may withdraw capital from their
capital account in order to pay such expenses).
Any expenses (for example, annual audit costs) borne by the
Partnership shall, like gross profits and losses, be allocated pro rata among
the Partners based on their respective cash capital account balances as of the
beginning of the respective accounting periods during which such expenses
4
<PAGE> 5
accrued; provided that HAMI will pay any expense otherwise incurred by a
Partner which such Partner would not have incurred trading independently.
17. Investment of Partnership Assets. All of the Partnership's
assets shall be held in the 91-day Treasury bills or cash, except to the
extent such assets are invested in short-term foreign sovereign debt
instruments in order to margin futures positions held on foreign exchanges.
18. Borrowings Prohibited. The Partnership may not incur any
indebtedness for money borrowed or guaranty, endorse or become contingently
liable upon the obligation of any other person without the affirmative vote of
a majority of the Partners.
No Partner may borrow from the Partnership.
19. Tax Elections, Etc. All tax elections and determinations on
behalf of the Partnership will be made by majority vote of the Partners, and
each Partner agrees that it shall not, in its own tax reporting and returns,
take any position inconsistent with that determined upon by such majority vote.
20. Tax Matters Partner. The "tax matters partner" of the
Partnership, as required by the Internal Revenue Code, shall be designated as
of the beginning of each year by majority vote of the Partners.
21. Books; Reports. The Partnership shall maintain its books in
accordance with the accrual method of accounting. Such books shall be
maintained at the office of the Partnership in Chicago, Illinois under the
direction of HAMI, the general partner of each of the Partners.
HAMI will provide each Partner monthly account statements,
quarterly unaudited financial statements and annual reports (containing
information at least the equivalent of that required by the CFTC-mandated
audited financial statements).
22. Brokers; Bank Accounts, Etc. All futures and futures option
transactions entered into by the Partnership shall be cleared through E.D. & F.
Man and all forward trades executed for the Partnership shall be executed
through E.D. & F. Man, as the sole counterparty to which the Partnership is
financially liable.
The Partners shall mutually be responsible for maintaining all
books, records, bank accounts, etc., of the Partnership. The Partnership's
accounts shall be maintained in the name of the Partnership.
23. Accounting Principles; Accountants. The Partners, in forming
the Partnership, intend that doing so shall have no effect on the investors in
any of such Partners. To that end, the basic principle of the Partnership's
accounting will be that each Partner, in participating in the Partnership,
shall have the same economic result as such Partner would trading
independently.
The financial statements of the Partnership shall be audited
each year by independent certified public accountants selected, as of the
beginning of each fiscal year, by a majority vote of the Partners.
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<PAGE> 6
HAMI, which is not and is ineligible to become a Partner, but
which is party to this Agreement for the limited purposes set forth herein,
hereby agrees that HAMI, as sole general partner of each of the Partners, shall
instruct the independent public accountants of the Partners to perform a
"surprise audit" of the Partnership (in the manner contemplated by Rule
206(4)-2(a)(5) of the Investment Advisers Act of 1940) at least twice during
each fiscal year (including fiscal 1996, which is not a complete year). HAMI,
itself, not any of the Partners, shall bear the costs of these surprise audits,
the purpose of which shall be confirming compliance with the conditions set
forth in the CFTC Exemptive Letter attached hereto as Exhibit A.
24. Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
General Liability of the Partners
25. Liability of the Partners. Each Partner shall be severally
liable to all third parties for all debts and obligations of the Partnership
and shall, as among the Partners themselves, be obligated promptly to restore
any deficit balance in such Partner's capital account.
Partners which have withdrawn from the Partnership shall
nevertheless remain liable both to third parties and to the Partnership, as
provided above, in respect of liabilities arising due to events which occurred
while they were Partners.
Confidentiality
26. Confidentiality. During the term of this Agreement, all
information relating to the Partnership's activities shall constitute the
proprietary assets of the Partnership. No Partner, while still a Partner, may
use such information for its individual advantage.
27. No Solicitation. Each of the Partners agrees that they will
not solicit, for any purpose, any employees or associates of any other Partner
during the term hereof.
Regulatory Matters
28. Compliance with Laws. Each Partner agrees to comply with all
applicable laws and regulations to the extent that not doing so might have a
material and adverse effect on the Partnership.
29. Regulatory Status. It is the intention of the Partners that
the Partnership be treated as a general partnership for all regulatory
purposes. All Partners agree that, to that end, they will take such actions --
including voting to amend this Agreement -- and in such manner as they may be
advised by independent legal counsel may be necessary or advisable to achieve
such result.
30. "Commodity Pool" Status. Each Partner, severally, shall be
responsible for ensuring that the Partnership complies with such rules and
regulations as the CFTC and the Securities and Exchange Commission (the "SEC")
may determine from time to time should be applicable to the Partnership. The
Partnership is formed and operated pursuant to exemptive relief obtained from
the
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<PAGE> 7
Division of Trading and Markets of the CFTC, which relief has been explicitly
been conditioned on the satisfaction of certain requirements, and each Partner
shall severally be responsible for ensuring the ongoing satisfaction of such
requirements.
By becoming a member of the Partnership, each Partner agrees
that it shall be individually responsible to the CFTC for the regulatory
compliance of the Partnership, and that the CFTC may require such Partner to
deal with the CFTC in respect of all matters relating to the Partnership
without need of involving any other Partner.
Term and Termination
31. Term. This Agreement shall terminate: (i) December 31, 1996;
(ii) in the event that HAMI is no longer registered as a "commodity pool
operator" with the CFTC; (iii) if, as of the close of business on any trading
day, the Partnership's cumulative returns (adjusted for additions and
withdrawals) represent a loss of 50% or more from the date of the formation of
the Partnership; (iv) in the event that any Partner is advised that there is a
reasonable possibility of the SEC regarding the general partnership interests
in the Partnership as constituting "securities" within the meaning of the
Investment Company Act of 1940 or the Investment Advisers Act of 1940; (v) upon
the admission of any entity not qualified to be a Partner pursuant to Section 4
hereof; or (vi) on March 4, 1997 if the CFTC exemptive relief granted to HAMI
on a "pilot program" basis and which is necessary to permit the operation of
the Partnership is not extended (or obviated) by such date.
32. Termination. This Agreement may be terminated at any time by
majority vote of the Partners.
33. Accounting Upon Dissolution. The Partners, acting together,
shall wind up the affairs of the Partnership upon dissolution in accordance
with all applicable law.
34. Effect of Bankruptcy or Dissolution. The bankruptcy or
dissolution of a Partner shall constitute the withdrawal of such Partner from
the Partnership, but shall not dissolve the Partnership.
Partners' Representations
35. Representations and Warranties. Each of the Partners
represents, warrants and agrees with each other Partner that:
(i) it is duly organized and validly existing;
(ii) the execution, delivery and performance of this Agreement
have been duly authorized, and this Agreement, when executed and delivered,
will be valid and binding on it;
(iii) the execution, delivery and performance of this Agreement
do not contravene any provision of, or constitute a default under, any material
agreement binding on it or any of its affiliates or any order of any court,
commission or governmental agency to which it or any of its affiliates are
subject; and
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<PAGE> 8
(iv) it is operated by HAMI, a "commodity pool operator" duly
registered with the CFTC in full compliance with all applicable rules and
regulations of the CFTC.
Miscellaneous
36. HAMI Undertaking. HAMI is not, and is ineligible to become, a
Partner. However, HAMI is party to this Agreement for the limited purposes set
forth herein. One of such purposes is for HAMI hereby to agree unconditionally
and without defense or set-off, to indemnify and hold harmless each Partner
from any and all losses, expenses, costs, claims or liabilities incurred by
such Partner (i) as a result of participating in the Advisor's futures and
forward trading as a general partner of the Partnership as opposed to directly
through an individual managed account, or (ii) as a result of the Partnership
not being operated as set forth in the CFTC Exemptive Letter attached hereto as
Exhibit A (whether due to HAMI's negligence or otherwise).
37. Undertaking of E.D. & F. Man. E.D. & F. Man is not, and is
ineligible to become, a Partner. However. E.D. & F. Man is party to this
Agreement for the limited purposes set forth herein. In particular, E.D. & F.
Man hereby agrees that in the event that there arises a deficit in the
Partnership's trading accounts at E.D. & F. Man, E.D. & F. Man will collect
such deficit pro rata from the Partners according to their respective
participation in the Partnership, and that to the extent that such deficit is
not satisfied by such pro rata collection, E.D. & F. Man shall collect the
balance of such deficit from HAMI before attempting to collect any of such
balance from any of the Partners.
38. Securities Prohibited. In no event may the Partnership trade
or invest in any securities, except to the extent of investing its funds in
91-day Treasury bills held to maturity or short-term foreign sovereign debt for
use in margining foreign futures and forward trading.
39. Notices. All notices required or permitted to be given to any
Partner in connection with this Agreement shall be given in writing, shall be
transmitted by personal delivery, by registered or certified mail, return
receipt requested, postage prepaid, or by facsimile or other electronic means
and shall be addressed as follows:
[Partner]
c/o Heinold Asset Management, Inc.,
General Partner
440 South LaSalle Street
20th Floor
Chicago, Illinois 60605
Attention: Mr. Daniel E. Ragen
40. Waivers and Amendments. This Agreement may be amended,
superseded, canceled, terminated, renewed or extended, and the terms hereof may
be waived, only by a written instrument signed by all Partners or, in the case
of a waiver, by the Partner waiving compliance; provided that no amendment may
be made hereto which is in any respect inconsistent with the applicable rules
and regulations of the CFTC or the SEC.
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<PAGE> 9
41. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Partners and their respective successors.
42. No Assignment. None of the Partners may assign or transfer
their interests herein.
43. Survival. All obligations to settle accounts hereunder shall
survive until such settlement is effected.
44. Further Assurances. The Partners shall execute, deliver and
acknowledge such documents and take such actions as may be reasonably required
to consummate the transactions contemplated hereby.
45. Headings. The headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.
46. Entire Agreement. This Agreement is the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes any prior agreement of the parties with respect thereto.
47. Counterparts. This Agreement may be executed by the Partners
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by any one, but together signed by both, of the parties hereto.
48. Governing Law and Forum.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
(b) Any legal action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
instituted in a federal court of the Northern District of Illinois and each
party agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that it is not subject personally to
the jurisdiction of such court, that the action, suit or proceeding is brought
in an inconvenient forum, that the venue of the action, suit or proceeding is
improper or that this Agreement or the subject matter hereof may not be
enforced in or by such court. Each party further irrevocably submits to the
jurisdiction of such court in any such action, suit or proceeding. Any and all
service of process and any other notice in any such action, suit or proceeding
shall be effective against any party if given personally or by registered or
certified mail, return receipt requested, or by any other means of mail that
requires a signed receipt, postage prepaid, mailed to such party as herein
provided. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law.
(c) All agreements entered into by the Partnership, unless a
majority of the Partners shall otherwise agree, shall include the preceding two
paragraphs or other provisions to the same effect.
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
POOLS ON THE ATTACHED LIST, AS
AMENDED AND SUPPLEMENTED FROM
TIME TO TIME
By: HEINOLD ASSET MANAGEMENT, INC.
General Partner
By:
Daniel E. Ragen
President
HEINOLD ASSET MANAGEMENT, INC.,
not as a Partner, but for the limited
purposes set forth herein
By:
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<PAGE> 11
LIST OF PARTICIPATING POOLS
The Future Fund
The Future Fund II
The Futures Advantage Fund
The Futures Dimension Fund
The Horizon Futures Fund
The Horizon World Futures Fund
The Jefferson Futures Fund
Landmark Fund I, A Limited Partnership
Landmark Fund II, A Limited Partnership
New Century Currency & Financial Fund L.P.
Patriot Futures Fund I
Patriot Futures Fund II
Renaissance Futures Fund
The Resource Fund
Sycamore Futures Fund
<PAGE> 12
FORM OF
GENERAL PARTNERSHIP
AGREEMENT
BY AND AMONG
THE VARIOUS COMMODITY POOLS
SIGNATORY HERETO
dated as of ______
12
<PAGE> 13
FORM OF
GENERAL PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
General Page
1. Name 1
2. Principal Place of Business 1
3. Objective 1
4. Admission of Partners 1
5. Capital Contributions and Withdrawals 1
6. Authority of Partners; Access to Information 2
7. Interest in Other Transactions 2
8. Exclusivity 2
9. Time Commitment 2
10. Personal Property; Partnership Property 2
Partners' Representatives
11. Designation of Representatives 3
12. Meetings of Representatives 3
13. Reports of Representatives 3
Financial and Tax Matters
14. Allocation of Profits and Losses
for Financial and Tax Purposes 3
15. Partnership Taxation 4
16. Expenses 4
17. Investment of Partnership Assets 4
18. Borrowings Prohibited 4
</TABLE>
i
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C>
19. Tax Elections, Etc. 5
20. Tax Matters Partner 5
21. Books; Reports 5
22. Brokers; Bank Accounts, Etc. 5
23. Accounting Principles; Accountants 5
24. Fiscal Year 5
General Liability of the Partners
25. Liability of the Partners 6
Confidentiality
26. Confidentiality 6
27. No Solicitation 6
Regulatory Matters
28. Compliance with Laws 6
29. Regulatory Status 6
30. "Commodity Pool" Status 6
Term and Termination
31. Term 7
32. Termination 7
33. Accounting Upon Dissolution 7
34. Effect of Bankruptcy or Dissolution 7
</TABLE>
ii
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
Partners' Representations
35. Representations and Warranties 7
Miscellaneous
36. HAMI Undertaking 7
37. Undertaking of E.D. & F. Man 8
38. Securities Prohibited 8
39. Notices 8
40. Waivers and Amendments 8
41. Binding Effect 8
42. No Assignment 8
43. Survival 8
44. Further Assurances 8
45. Headings 8
46. Entire Agreement 9
47. Counterparts 9
48. Governing Law and Forum 9
</TABLE>
Exhibit A -- CFTC Exemptive Letter
Testimonium
Signatures
iii
<PAGE> 1
FORM OF
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of ___________, 199__, by and between Heinold General Partnership
Account __, an Illinois general partnership (the "Partnership"), and __________
(the "Trading Advisor").
WITNESSETH:
-----------
WHEREAS, the Partnership is one of a series of general partnerships
(the "Account Partnership") whose terms are identical other than in respect of
their trading being managed by different "commodity trading advisors" ("CTAs"),
and which have been formed in order to permit various commodity pools (the
"General Partners"), of each of which Heinold Asset Management, Inc. ("HAMI")
is the sole general partner, to commingle their assets for management by
various different CTAs. Each Account Partnership is to be managed by a single
CTA implementing a single trading program, and all General Partners capital
accounts in the Partnership will trade on a fully-funded (actual committed
funds) equally leveraged basis.
WHEREAS, the objective of the Partnership is to seek capital
appreciation by trading speculatively in futures contracts, commodities and
commodity options and forward contracts, and any other items which are
currently, or may later become, the subject of futures, forward or options
trading, and other related investments (sometimes hereinafter referred to as
"Contracts") on United States and non-United States exchanges and markets, under
the direction of a single CTA, initially the Trading Advisor, implementing a
single trading program; and
WHEREAS, the Partnership and the Trading Advisor each desire the
Trading Advisor to make all trading decisions for the Partnership pursuant to
the Trading Advisor's ___________ trading program (the "Trading Approach") on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
agreements set forth herein, the parties hereto do agree as follows:
1. Duties of the Trading Advisor.
(a) The Partnership hereby appoints the Trading Advisor, and the
Trading Advisor hereby accepts appointment, as the sole CTA of the Partnership
utilizing the Trading Approach.
(b) Upon the Trading Advisor's commencing trading operations for the
Partnership and for the period and on the terms and conditions set forth in
this Agreement, the Trading Advisor shall have sole authority and
responsibility, as the Partnership's agent and attorney-in-fact, for trading
the Partnership assets in Contracts and in accordance with the Trading Approach
as described in the disclosure notice dated April 1996 relating to the
appointment of the Trading Advisor as a commodity trading advisor of the
Partnership (the #Disclosure Notice#), subject to the trading policies of the
Partnership furnished to the Trading
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<PAGE> 2
Advisor in writing ("Trading Policies"). For purposes of this Agreement, the
term "Contracts" shall not include securities and options thereon, which the
Partnership is prohibited from trading.
(c) The Trading Advisor agrees to describe to any General Partner,
upon request, the Trading Advisor's practices with respect to the leverage used
by the Trading Advisor in managing the Partnership's account relative to other
accounts managed by the Trading Advisor using the Trading Approach so as to
enable such General Partner to determine whether the "trading level" at which
the Trading Advisor is currently managing the Partnership's account is the
level currently designated by the General Partners.
(d) The General Partners and the Partnership acknowledge receipt of
the Trading Advisor's Disclosure Document dated ________________, 1996 (the
"Disclosure Document"). The Trading Advisor shall promptly furnish the
Partnership with a copy of each amended, supplemented or updated Disclosure
Document of the Trading Advisor filed with the Commodity Futures Trading
Commission (the "CFTC") and the National Futures Association ("NFA") upon
acceptance thereof by the CFTC. Prior to the commencement of trading on behalf
of the Partnership, the Partnership shall deliver to the Trading Advisor, and
renew when necessary, a Commodity Trading Authorization, in the form attached
hereto as Exhibit 1 and executed by each of the General Partners, appointing
the Trading Advisor as the Partnership's agent and attorney-in-fact for such
purpose. All trades for the account of the Partnership shall be made through
such banks, brokers and dealers as the General Partners shall direct by
unanimous consent, and the Trading Advisor shall have no authority or
responsibility for selecting any such banks, brokers or dealers in connection
with the execution of transactions for the Partnership or for the negotiation
of commission rates charged therefor; provided, however, that the Partnership
shall notify the Trading Advisor of any applicable changes in the commission
rates charged by the Partnership's banks, brokers and dealers with respect to
transactions entered into with respect to the Partnership.
(e) In the event the Trading Advisor and its principals (as that
term is defined in Regulation 4.10(e) promulgated by the CFTC under the
Commodity Exchange Act, as amended (the "Act")), shareholders, partners,
employees and affiliates or any person who controls the foregoing
(collectively, "Principals and Affiliates"), wish to use trading programs,
systems or strategies other than the Trading Approach in connection with its
trading for the Partnership, it may not do so unless the Trading Advisor gives
the Partnership 15 days' prior written notice of its intention to utilize such
different trading programs, systems or strategies and the Partnership consents
thereto, by unanimous consent of the General Partners in writing. Non-material
changes in the Trading Approach may be instituted without prior written
approval.
(f) The Trading Advisor agrees to make all material disclosures to
the Partnership regarding itself and its Principals and Affiliates, their
trading performance and general trading methods, their accounts (but not the
identities of customers) and otherwise as are required in the reasonable
judgment of any General Partner or the Partnership to be made in any filings
required by any governmental body or by any applicable law, regulation, rule or
order. Nothing contained in this Agreement shall be construed or deemed to
require the Trading Advisor to disclose the confidential or proprietary details
of its trading strategies.
(g) The General Partners shall have the right to make additions to,
or withdrawals from, their capital accounts in the Partnership (including any
"notional" funds comprising part of the Partnership Assets) at any time. Each
General Partner shall, however, use
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<PAGE> 3
its best efforts to make such additions or withdrawals at month-end. Each
General Partner agrees that the Trading Advisor may refuse any additional
allocation of funds for any reason. The Partnership, acting by direction of
the unanimous instructions of the General Partners, in its sole discretion, may
at any time remove some or all of its assets from the management of the Trading
Advisor and may require the Trading Advisor to liquidate existing positions.
(h) Upon receipt of instructions from the Partnership, the Trading
Advisor shall immediately cease its trading activities with respect to the
Partnership Assets, close out all existing positions in an orderly manner and
not initiate any new positions unless otherwise instructed by the Partnership.
(i) The Trading Advisor shall review on a daily basis the positions
held by the Partnership Assets and shall immediately notify the Partnership of
any errors committed by the Trading Advisor or of any trade not executed in
accordance with the Trading Advisor's instructions.
2. Other Accounts and Activities of the Trading Advisor.
(a) The services provided by the Trading Advisor hereunder are not
to be deemed exclusive. Subject to the terms of this Agreement, the Trading
Advisor and its Principals and Affiliates shall be free to trade for their own
accounts and to advise other persons and manage other accounts during the term
of this Agreement and to use the same or different degrees of leverage,
information, computer programs and trading strategies or formulas which they
obtain, produce or utilize in the performance of services for the Partnership.
However, the Trading Advisor represents, warrants and agrees that the rendering
of such consulting, advisory and management services to others will not require
any material change in the Trading Approach and will not materially adversely
affect the capacity of the Trading Advisor to continue to render services to
the Partnership of the quality and nature contemplated by this Agreement.
(b) If, at any time during the term of this Agreement, the Trading
Advisor is required to aggregate the Partnership's Contract positions with the
positions of any other person or entity for purposes of applying CFTC- or
exchange-imposed position limits, the Trading Advisor agrees that it will
promptly notify the Partnership if the Partnership's positions are included in
an aggregate amount which equals or exceeds ninety percent (90%) of the
applicable limit. The Trading Advisor agrees that, if its trading
recommendations are altered because of the application of any position limit,
it will not modify the trading instructions with respect to the Partnership's
account in such manner as to affect the Partnership substantially
disproportionately as compared with the Trading Advisor's other accounts. The
Trading Advisor presently believes and represents that existing speculative
position limits will not materially adversely affect its ability to manage the
Partnership's account given the potential size of the Partnership's account and
the Trading Advisor's and its Principals' and Affiliates' current accounts and
all proposed accounts for which they have contracted to act as trading advisor.
The Trading Advisor further represents, warrants and agrees that under no
circumstances will it knowingly or deliberately use trading strategies or
systems for the Partnership that are inferior to trading strategies or systems
employed for any other client or account and that it will not knowingly or
deliberately favor any client or account managed by it over any other client or
account, it being acknowledged, however, that different trading strategies,
methods or degrees of leverage may be utilized for differing sizes of accounts,
accounts with different trading policies, accounts experiencing differing
inflows or outflows of equity, accounts which commence trading at different
times, accounts which have
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<PAGE> 4
different portfolios or different fiscal years and accounts with other
differences, and that such differences may cause divergent trading results.
(c) The Partnership and the General Partners each acknowledge and
agree that the Trading Advisor and/or its Principals and Affiliates presently
act and that they may continue to act as advisors for other accounts managed by
them and may continue to receive compensation with respect to services for such
accounts in amounts which may be more or less than the amounts received from
the Partnership. The Trading Advisor agrees that in the management of such
other accounts by it and its Principals and Affiliates, it will act in good
faith to seek to achieve an equitable treatment of all accounts under
management including the Partnership's account with respect to, among other
things, priorities of order entry and position limits.
(d) The Trading Advisor agrees that it shall make such information
available to any General Partner concerning the performance of the Partnership
as compared to the performance of all other accounts managed by the Trading
Advisor and its Principals and Affiliates as shall be reasonably requested by
such General Partner; provided that the Trading Advisor shall not be required
to disclose the identity of its clients.
3. Trading Assets. The Partnership's initial trading account shall
be a total of approximately $_______ of which $______ shall be "committed" (not
"notional") funding. Notional funding of the Partnership's account is
prohibited.
4. Fees. The Partnership will pay no fees to the Advisor; rather
each General Partner shall pay such fees to the Advisor as have been negotiated
between such General Partner and the Advisor.
5. Trading Advisor Independent. The Trading Advisor shall for all
purposes herein be deemed to be an independent contractor to the Partnership
and the General Partners and shall, except as otherwise expressly provided
herein, have no authority to act for or represent the Partnership or any
General Partner in any way or otherwise be deemed a sponsor of the Partnership
or an agent, joint venturer or partner of the Partnership, or any General
Partner.
6. Broker.
(a) The Trading Advisor agrees to enter all Contract orders through
E.D. & F. Man International Inc. ("Man"). The Partnership must consent in
writing to the use of other floor brokers who will give up such trades to Man
in accordance with exchange rules and the give-up procedures established by the
Partnership from time to time. The Trading Advisor shall be responsible for
any errors committed by any executing broker who gives-up to Man on behalf of
the Partnership. In placing trades for the Partnership's account, the Trading
Advisor agrees that it shall use its standard procedures for allocating orders
among the Trading Advisor's various accounts and not knowingly favor any other
such account over the Partnership's account.
(b) All forward contract and other trades for the Partnership will
be executed through the forward trading and other facilities of such affiliates
of Man or other entities as the Partnership may designate from time to time.
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<PAGE> 5
(c) The Partnership will pay no brokerage commissions or fees. All
such charges will be paid by the respective General Partners pursuant to their
individual negotiations with Man.
7. Standard of Liability; Indemnifications.
(a) Standard of Liability. Neither the Trading Advisor nor any of
its Principals and Affiliates shall be liable to the Partnership, any General
Partner or any of their respective successors or assigns under this Agreement
except by reason of (i) acts or omissions to act which constitute bad faith,
negligence or misconduct or (ii) a breach of any of the representations,
warranties, covenants or agreements of the Trading Advisor set forth in this
Agreement.
(b) Indemnity. (i) The Partnership agrees to indemnify and hold
harmless the Trading Advisor and each of its Principals and Affiliates from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, attorneys' and accountants' fees and
disbursements), judgments and amounts paid in settlement (collectively,
"Losses") to which an indemnified person may become subject arising out of this
Agreement, the transactions contemplated hereby or the fact that the Trading
Advisor is or was a trading advisor to the Partnership, unless any such Losses
arise out of, relate to, or are based upon the Trading Advisor's failure to
meet the standard of liability applicable to it under Section 7(a). The
Partnership, the General Partner and the Trading Advisor agree that any
indemnity payments due hereunder shall be deducted pro rata from the capital
account of the respective General Partners in proportion to the balance in each
such capital account.
(ii) The Trading Advisor agrees to indemnify and hold harmless the
Partnership, each General Partner and each of such General Partner's Principals
and Affiliates from and against any and all Losses to which they may become
subject, if any such Losses arise out of, relate to, or are based upon the
Trading Advisor's failure to meet the standard of liability applicable to it
under Section 7(a).
(c) Promptly after receipt by a party to be indemnified under
Section 7(b), above, of any notice of the commencement of any action or
proceeding, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnified party under such subsection, notify the
indemnifying party in writing of the commencement thereof, but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such subsection. The
requirement that an indemnifying party be given written notice of the
commencement of any action shall be deemed to be satisfied if such indemnifying
party shall have actual knowledge thereof or shall have been given written
notice of the commencement of any action or proceeding within a reasonable time
after the commencement thereof. If any such action shall be brought against
any indemnified party and the indemnified party notifies the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to such indemnified party, and shall have the
right to negotiate and consent to a settlement thereof, provided that the
indemnified party shall have consented to the settlement. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable
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<PAGE> 6
costs of investigation; provided, however, that the indemnified party shall
have the right to employ counsel to represent it, if, in the indemnified
party's reasonable judgment, it is advisable for such party to be represented
by separate counsel, in which event the fees and expenses of such separate
counsel shall be borne by the indemnified party. No indemnifying party shall
be liable for any settlement of any such action effected without its consent,
but if any such action or proceeding is settled with the consent of any
indemnifying party or if there be a final judgment for the plaintiff in any
such action or proceeding (of which an indemnifying party shall have been
notified), such indemnifying party shall indemnify and hold harmless each
indemnified party from and against any Losses incurred or suffered by reason of
such settlement or judgment.
(d) Any indemnification required by this Section 7, unless ordered
or expressly permitted by a court, shall be made by the indemnifying party only
upon a determination by independent legal counsel in a written opinion that the
conduct which is the subject of the claim, demand, lawsuit, action or
proceeding with respect to which indemnification is sought meets the applicable
standard set forth in this Section 7.
(e) The provisions of this Section 7 shall survive the termination
or other expiration of this Agreement.
8. The Trading Advisor's Representations and Warranties. The
Trading Advisor represents and warrants to the Partnership and each General
Partner as follows:
(a) The Trading Advisor is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has
full power and authority to enter into and perform its obligations under this
Agreement and to conduct its business as described in this Agreement and the
Disclosure Notice, and the Trading Advisor is qualified to conduct its business
and is in good standing in every jurisdiction in which the nature or conduct of
its business requires such qualification and failure to so qualify would have a
materially adverse effect on its ability to comply with, or perform its
obligations under, this Agreement, it being understood that any decision as to
the jurisdiction or jurisdictions in which the Trading Advisor shall conduct
its business is within the sole discretion of the Trading Advisor.
(b) This Agreement has been duly and validly authorized, executed
and delivered by the Trading Advisor and is a valid and binding agreement of
the Trading Advisor enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the performance
of the obligations and the consummation of the transactions contemplated in
this Agreement and in the Disclosure Notice will not conflict with, violate,
breach or constitute a default under, any term or provision of the Trading
Advisor's certificate of incorporation, by-laws, or other charter documents, or
any indenture, mortgage, deed of trust, loan agreement, or other agreement or
instrument to which the Trading Advisor or any of its Principals and Affiliates
is a party or by which any of them are bound, or to which any of the property
(including, but not limited to, its Trading Approach) or assets of the Trading
Advisor or its Principals and Affiliates are subject, or any order, rule, law,
statute, regulation, or other legal requirement applicable to the Trading
Advisor or any of its Principals or to the property or assets of the Trading
Advisor or its Principals and Affiliates of any court or any governmental or
administrative body or agency or panel or any regulatory or self-regulatory
organization or exchange having jurisdiction over the Trading Advisor or any of
its Principals and Affiliates.
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<PAGE> 7
(d) The Trading Advisor is registered as a commodity trading advisor
under the Act, its Principals are identified on the Trading Advisor's most
recent CFTC Form 7-R filed with the NFA pursuant to the Act, and it is a member
of the NFA in such capacity and such registration and membership has not
expired or been revoked, lapsed, suspended, terminated, or not renewed or
limited or qualified in any respect.
(e) The Trading Advisor is not bankrupt or insolvent.
(f) The Disclosure Document is complete and accurate in all material
respects, does not contain any misstatement of any material fact, does not omit
to state any material fact necessary to be stated therein in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading, and complies in all material respects with the applicable
requirements of the Act and the rules promulgated thereunder and may be relied
upon by the Partnership and the General Partner in preparing the Disclosure
Notice and allocating assets of the Partnership to the Trading Advisor and
there has not been, since the date of the Disclosure Document's issuance, any
material adverse change in the condition, financial or otherwise, business or
prospects of the Trading Advisor or any of its Principals and Affiliates,
whether or not arising in the ordinary course of business, or relating to the
historical performance and operations of the Trading Advisor.
(g) The Trading Advisor and each Principal has complied and will
continue to comply with all orders, rules, laws, statutes, regulations or other
legal requirements applicable to the Trading Advisor or any of its Principals
and Affiliates or to their respective businesses, properties, or assets,
including the Act and the rules promulgated by the CFTC and the NFA, the
violation of which would materially and adversely affect its or their ability
to comply with, and perform its or their obligations under this Agreement, and
there are no actions, suits, proceedings, or notices of investigations or
investigations pending or threatened against the Trading Advisor, or any of its
Principals or Affiliates, by the NFA, the CFTC or any governmental, regulatory
or self-regulatory agency regarding noncompliance by the Trading Advisor or any
of its Principals or Affiliates with any law, statute, rule or regulation, or
at law or in equity or before or by any court, any federal, state, municipal or
other governmental department commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect
its or their ability to comply with or to perform its or their obligations
under this Agreement or that would be required to be disclosed in the
Disclosure Notice, which is not so disclosed, would result in a material
adverse change in the condition, financial or otherwise, business or prospects
of the Trading Advisor.
(h) The Trading Advisor and each Principal has all governmental,
regulatory, self-regulatory and exchange licenses and approvals and has
effected all filings and registrations with all governmental, regulatory and
self-regulatory agencies required to conduct their respective businesses and to
act as described in the Disclosure Notice and to perform its or their
respective obligations under this Agreement.
(i) With respect to information contained in the Disclosure Notice
relating to the Trading Advisor, including, without limitation, the tables and
notes thereto, the Disclosure Notice does not contain any untrue statement of
material fact or omit to state therein a material fact required to be stated
therein or necessary to be stated therein in order to prevent the
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<PAGE> 8
statements made therein, in light of the circumstances under which they are
made, from being misleading.
(j) In the placement of orders and the allocation of executed trades
for the Partnership and for the accounts of any other client, the Trading
Advisor shall utilize a fair and reasonable order entry system and trade
allocation system, which shall be no less favorable to the Partnership than to
any other account managed by the Trading Advisor.
(k) The Trading Advisor shall promptly notify the other parties
hereto of the commencement of any suit, action or proceeding involving it or
its Principals and Affiliates, whether or not any such suit, action or
proceeding also involves any of the other parties hereto.
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not
true or incomplete, the Trading Advisor shall promptly notify the Partnership
and the General Partner of the occurrence of such event.
9. The Partnership's Representations and Warranties. The
Partnership represents and warrants to the Trading Advisor as follows:
(a) The Partnership is a general partnership organized under the
laws of Illinois. The Partnership has full Partnership power and authority to
perform its obligations under this Agreement and to conduct its business and to
act as described in the Disclosure Notice.
(b) This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Partnership and is a valid and binding agreement
of it enforceable in accordance with its terms.
(c) The Partnership has complied and will continue to comply with
all orders, rules, laws, statutes, regulations or other legal requirements
applicable to it, to its business, properties, and assets, including the Act
and the rules promulgated by the CFTC and the NFA, the violation of which would
materially and adversely affect its ability to comply with, and perform its
obligations under this Agreement, and there are no actions, suits, proceedings,
or notices of investigations or investigations pending or threatened against
it, by the NFA, the CFTC or any governmental, regulatory or self-regulatory
agency regarding noncompliance by it with any law, statute, rule or regulation,
or at law or in equity or before or by any court, any federal, state, municipal
or other governmental department, commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect
its ability to comply with or to perform its obligations under this Agreement
or would result in a material adverse change in the condition, financial or
otherwise, business or prospects of the Partnership.
(d) The Partnership has all federal and state governmental,
regulatory, self-regulatory and exchange licenses and approvals and has
effected all filings and registrations with all federal and state governmental
and regulatory and self-regulatory agencies required to conduct its business
and to perform its obligations under this Agreement. The Partnership is
compliance with the CFTC Letter attached hereto as Exhibit 2.
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<PAGE> 9
(e) HAMI is registered as a commodity pool operator under the Act
and is a member of the NFA in such capacity and such registration and
membership has not expired or been revoked, lapsed, suspended, terminated, or
not renewed or limited or qualified in any respect.
(g) HAMI has all federal and state governmental, regulatory,
self-regulatory and exchange licenses and approvals and has effected all
filings and registrations with all federal and state governmental and
regulatory and self-regulatory agencies required to conduct its business and to
perform its obligations under this Agreement.
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not
true or incomplete, the Partnership will promptly notify the Trading Advisor
thereof.
10. Term and Termination; Withdrawal.
(a) This Agreement is terminable at will by either the Partnership
or the Trading Advisor upon five (5) days' notice; provided that each agrees
that it will use best efforts to terminate this Agreement only as of the end of
a calendar month.
(b) Any General Partner may withdraw capital from the Partnership at
any time. The Partnership may withdraw capital at any time. Upon any such
withdrawal, the Partnership shall inform the Trading Advisor as to which
General Partner's capital account in the Partnership such withdrawal is
attributable.
11. Notices. Except as otherwise provided herein, all notices,
demands or requests required to be made or delivered under this Agreement shall
be effective only if in writing and delivered personally or by facsimile or
mail, postage prepaid (airmail if the addressee is in another country), to the
respective addresses below or to such other addresses as may be designated by
the party entitled to receive the same by notice similarly given and shall be
deemed given by the party required to provide notice when received by the party
to whom notice is required to be given.
If to the Partnership or the General Partner to:
Heinold Asset Management, Inc.
One Financial Place
440 South LaSalle Street, 20th Floor
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
------------------------------------------
------------------------------------------
------------------------------------------
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<PAGE> 10
12. Assignment. No party hereto may transfer, sell, encumber,
appoint agents or assign any of its rights or obligations hereunder in whole or
in part without the express written consent of each of the other parties
hereto.
13. Amendment; Modification. This Agreement may not be amended or
modified, nor any of the provisions hereof waived, except by the written
consent of all of the parties hereto.
14. Complete Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject hereof and
supersedes all prior agreements written or oral, and no other agreement, verbal
or otherwise, shall be binding as between the parties hereto unless in writing
and signed by the party against whom enforcement is sought.
15. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their successors and permitted assigns. No
other person other than the persons indemnified under Section 7 hereof for
matters relating to that Section shall have any right or obligation under this
Agreement.
16. Headings. Headings to sections herein are for the convenience
of the parties only, and are not intended to be a part of or to affect the
meanings or interpretation of this Agreement.
17. Governing Law: Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Illinois without giving effect to principles of conflicts of laws.
18. Arbitration. The parties agree that all controversies which
may arise in connection with any transaction contemplated by this Agreement or
the construction, performance or breach of this Agreement shall be determined
by arbitration, to be held in the City of Chicago, State of Illinois unless
otherwise agreed to by the parties hereto, and in accordance with the rules
then obtaining of the NFA, or if no such rules are then in effect or if
jurisdiction is declined, then the rules then obtaining of the American
Arbitration Association; provided, however, that (a) the arbitrator(s) shall be
knowledgeable in industry standards and practices and the matters giving rise
to the dispute, (b) the arbitrator(s) shall not have the power and authority to
award punitive damages, (c) the authority of the arbitrator(s) shall be limited
to construing and enforcing the terms and conditions of this Agreement as
expressly set forth herein, and (d) the arbitrator(s) shall state the reasons
for their award and their legal and factual conclusions underlying the award in
a written opinion. The award of the arbitrator(s), or a majority of them,
shall be final, and judgment upon the award may be confirmed and entered in any
court, state or federal, having jurisdiction.
19. Consent to Jurisdiction. Each party hereto expressly and
irrevocably agrees (a) that it waives any objection, and specifically consents,
to venue in the United States federal or state courts located in the City of
Chicago, State of Illinois, United States of America, so that any action at law
or in equity may be brought and maintained in any such court, and (b) that
service of process in any such action may be effected against such party by
certified or registered mail or in any other manner permitted by applicable
United States Federal Rules of
10
<PAGE> 11
Civil Procedure or Rules of the Courts of the State of Illinois. In addition,
each party hereto expressly and irrevocably waives, in respect of any action
brought in any United States federal or state court located in the City of
Chicago, State of Illinois or any resulting judgment, any objection, and hereby
specifically consents, to the jurisdiction of any such court, and agrees not to
seek to change the situs of such action or to assert that any other court in
any other jurisdiction is a more suitable forum for the hearing and
adjudication of any claim or dispute raised in such action.
20. Survival. The indemnity provisions of this Agreement shall
survive the termination or expiration of this Agreement with respect to any
matter existing prior to such termination; the payment obligations under this
Agreement shall continue until satisfied; and the other provisions of the
Agreement shall survive the termination of this Agreement with respect to any
matter arising while this Agreement was in effect.
21. Waiver of Breach. The waiver by a party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by a party. The failure of a party to insist upon strict
adherence to any provision of this Agreement shall not constitute a waiver or
thereafter deprive such party of the right to insist upon a strict adherence.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 12
IN WITNESS WHEREOF, this Agreement has been executed as of the day
and year first above written.
Heinold General Partnership Account __
By: The General Partners named on
the attached Schedule
By: Heinold Asset Management, Inc.,
General Partner
By: ___________________________
Daniel E. Ragen
President
Trading Advisor
By: ____________________________
Name:
Title:
12
<PAGE> 13
Schedule
of
General Partners
The Future Fund
The Future Fund II
The Futures Advantage Fund
The Futures Dimension Fund
The Horizon Futures Fund
The Horizon World Futures Fund
The Jefferson Futures Fund
Landmark Fund I, A Limited Partnership
Landmark Fund II, A Limited Partnership
New Century Currency & Financial Fund L.P.
Patriot Futures Fund I
Patriot Futures Fund II
Renaissance Futures Fund
The Resource Fund
Sycamore Futures Fund
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<PAGE> 14
EXHIBIT 1
______________, 1996
- -------------------------
- -------------------------
- -------------------------
- -------------------------
Re: Commodity Trading Authorization
Gentlemen:
Heinold General Partnership Account I, an Illinois general
partnership (the "Partnership"), does hereby make, constitute, and appoint you
as its Attorney-in-Fact to purchase and sell futures contracts, commodities and
commodity options and forward contracts, and any other items which are
currently, or may later become, the subject of futures, forward or options
trading, and other related investments on domestic and international exchanges,
through E.D. & F. Man International Inc., or such other brokers and forward
contract dealers as may be designated, from time to time, in writing by the
Partnership, as brokers, in accordance with the between us dated ________,
1996.
Very truly yours,
Heinold General Partnership Account __
By: The General Partners named on the
attached Schedule
By: Heinold Asset Management, Inc.,
General Partner
By: ______________________________
Daniel E. Ragen
President
<PAGE> 15
Schedule
of
General Partners
The Future Fund
The Future Fund II
The Futures Advantage Fund
The Futures Dimension Fund
The Horizon Futures Fund
The Horizon World Futures Fund
The Jefferson Futures Fund
Landmark Fund I, A Limited Partnership
Landmark Fund II, A Limited Partnership
New Century Currency & Financial Fund L.P.
Patriot Futures Fund I
Patriot Futures Fund II
Renaissance Futures Fund
The Resource Fund
Sycamore Futures Fund
<PAGE> 16
ACKNOWLEDGMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of [Advisor]'s Disclosure
Document dated ____________, 1996.
Heinold General Partnership Account
By: _________________________________
The General Partners named
on the attached Schedule
By: _________________________________
Heinold Asset Management, Inc.
General Partner
By: _________________________________
Daniel E. Ragen
President
<PAGE> 1
FORM OF
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into effective
as of ___________, 1996, by and between _________________, an Illinois limited
partnership (the "Partnership"), and ______________________ (the "Trading
Advisor").
W I T N E S S E T H:
WHEREAS, the purpose and business of the Partnership is to seek
capital appreciation by trading speculatively in futures contracts, commodities
and commodity options and forward contracts, and any other items which are
currently, or may later become, the subject of futures, forward or options
trading, and other related investments (sometimes hereinafter referred to as
"Contracts") on United States and non-United States exchanges and markets; and
WHEREAS, the Partnership, through Heinold Asset Management, Inc., its
general partner (the "General Partner"), pursuant to the Limited Partnership
Agreement of the Partnership, is authorized to utilize the services of
professional trading advisors in connection with the trading activities of the
Partnership; and
WHEREAS, the Partnership has heretofore offered units of limited
partnership interest in the Partnership for sale to investors; and
WHEREAS, the Trading Advisor is engaged in the business of making
trading decisions on behalf of itself and others regarding the purchase and
sale of Contracts; and
WHEREAS, the Partnership and the Trading Advisor each desire the
Trading Advisor to make trading decisions for the Partnership with respect to
the assets of the Partnership allocated to be managed by the Trading Advisor
(the "Allocated Assets") on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
agreements set forth herein, the parties hereto do agree as follows:
1. DUTIES OF THE TRADING ADVISOR.
(a) The Partnership hereby appoints the Trading Advisor, and the
Trading Advisor hereby accepts appointment, as a trading advisor of the
Partnership in connection with the trading activities of the Partnership.
(b) Upon the Trading Advisor's commencing of trading operations for
the Partnership and for the period and on the terms and conditions set forth in
this Agreement, the Trading Advisor shall have sole authority and
responsibility, as the Partnership's agent and
<PAGE> 2
attorney-in-fact, for trading the Allocated Assets in Contracts and in
accordance with the Trading Advisor's Diversified System ("Trading Approach";
which term, for purposes of this Agreement, shall include trading approaches,
systems, instructions, methods, models, strategies, methodologies and formulas)
as described in the disclosure notice dated November 1995 relating to the
appointment of the Trading Advisor as a commodity trading advisor of the
Partnership (the "Disclosure Notice"), subject to the trading policies of the
Partnership furnished to the Trading Advisor in writing ("Trading Policies").
The parties hereto acknowledge that the Trading Advisor will trade Contracts
for the Partnership independently of any other trading advisor retained by the
Partnership. For purposes of this Agreement, the term "Contracts" shall not
include securities and options thereon.
(c) The Trading Advisor agrees to describe to the General
Partner its practices with respect to the leverage used by the Trading Advisor
in managing the Partnership's account relative to other accounts managed by the
Trading Advisor using the Trading Approach to enable the General Partner to
determine whether the "trading level" at which the Trading Advisor is currently
managing the Partnership's account is the level currently designated by the
General Partner.
(d) The General Partner and the Partnership acknowledge receipt
of the Trading Advisor's Disclosure Document dated October 9, 1995 (the
"Disclosure Document"). The Trading Advisor shall promptly furnish the
Partnership with a copy of each amended, supplemented or updated Disclosure
Document of the Trading Advisor filed with the Commodity Futures Trading
Commission (the "CFTC") and the National Futures Association ("NFA") upon
acceptance thereof by the CFTC. Prior to the commencement of trading on behalf
of the Partnership, the Partnership shall deliver to the Trading Advisor, and
renew when necessary, a Commodity Trading Authorization, in the form attached
hereto as Exhibit 1, appointing the Trading Advisor as the Partnership's agent
and attorney-in-fact for such purpose. All trades for the account of the
Partnership shall be made through such banks, brokers and dealers as the
General Partner shall direct, and the Trading Advisor shall have no authority
or responsibility for selecting any such banks, brokers or dealers in
connection with the execution of transactions for the Partnership or for the
negotiation of commission rates charged therefor; provided, however, that the
General Partner shall notify the Trading Advisor of any applicable changes in
the commission rates charged by the Partnership's banks, brokers and dealers
with respect to transactions entered into with respect to the Allocated Assets.
(e) In the event the Trading Advisor and its principals [as
that term is defined in Regulation 4.10(e) promulgated by the CFTC under the
Commodity Exchange Act, as amended (the "Act")], shareholders, partners,
employees and affiliates or any person who controls the foregoing
(collectively, "Principals and Affiliates"), wish to use trading programs,
systems or strategies other than or in addition to the Trading Approach in
connection with its trading for the Partnership, either in whole or in part, it
may not do so unless the Trading Advisor gives the General Partner 15 days'
prior written notice of its intention to utilize such different trading
programs, systems or strategies and the General Partner consents thereto in
writing. Non-material changes in the Trading Approach may be instituted
without prior written approval.
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<PAGE> 3
(f) The Trading Advisor agrees to make all material disclosures
to the Partnership regarding itself and its Principals and Affiliates, their
trading performance and general trading methods, their accounts (but not the
identities of customers) and otherwise as are required in the reasonable
judgment of the General Partner or the Partnership to be made in any filings
required by any governmental body or by any applicable law, regulation, rule or
order. Nothing contained in this Agreement shall be construed or deemed to
require the Trading Advisor to disclose the confidential or proprietary details
of its trading strategies.
(g) The Trading Advisor understands and agrees that the General
Partner intends to designate other trading advisors and to apportion from time
to time to such other trading advisors the management of such portion of the
Partnership's assets as the General Partner shall determine in its absolute
discretion. The designation of other trading advisors and apportionment and
reapportionment of a portion of the Partnership's assets to such trading
advisors shall neither terminate this Agreement nor modify in any regard the
respective rights and obligations of the parties hereto.
(h) The General Partner shall have the right to make additions to,
or withdrawals from, the Allocated Assets (including any "notional" funds
comprising part of the Allocated Assets) at any time. The General Partner
shall, however, use its best efforts to make such additions or withdrawals at
month-end. The General Partner agrees that the Trading Advisor may refuse any
additional allocation of funds for any reason. The General Partner, in its
sole discretion, may at any time remove all assets from the management of the
Trading Advisor and may require the Trading Advisor to liquidate existing
positions.
(i) Upon receipt of instructions from the General Partner, the
Trading Advisor shall immediately cease its trading activities with respect to
the Allocated Assets, close out all existing positions in an orderly manner and
not initiate any new positions unless otherwise instructed by the General
Partner or the Partnership.
(j) The Trading Advisor shall review on a daily basis the positions
held by the Allocated Assets and shall immediately notify the General Partner
of any errors committed by the Trading Advisor or of any trade not executed in
accordance with the Trading Advisor's instructions.
2. Other Accounts and Activities of the Trading Advisor.
(a) The services provided by the Trading Advisor hereunder are not
to be deemed exclusive. Subject to the terms of this Agreement, the Trading
Advisor and its Principals and Affiliates shall be free to trade for their own
accounts and to advise other persons and manage other accounts during the term
of this Agreement and to use the same or different degrees of leverage,
information, computer programs and trading strategies or formulas which they
obtain, produce or utilize in the performance of services for the Partnership.
However, the Trading Advisor represents, warrants and agrees that the rendering
of such consulting, advisory and management services to others will not require
any material change in the Trading Approach and
3
<PAGE> 4
will not materially adversely affect the capacity of the Trading Advisor to
continue to render services to the Partnership of the quality and nature
contemplated by this Agreement.
(b) If, at any time during the term of this Agreement, the Trading
Advisor is required to aggregate the Partnership's Contract positions with the
positions of any other person or entity for purposes of applying CFTC- or
exchange-imposed position limits, the Trading Advisor agrees that it will
promptly notify the General Partner if the Partnership's positions are included
in an aggregate amount which equals or exceeds ninety percent (90%) of the
applicable limit. The Trading Advisor agrees that, if its trading
recommendations are altered because of the application of any position limit,
it will not modify the trading instructions with respect to the Partnership's
account in such manner as to affect the Partnership substantially
disproportionately as compared with the Trading Advisor's other accounts. The
Trading Advisor presently believes and represents that existing speculative
position limits will not materially adversely affect its ability to manage the
Partnership's account given the potential size of the Partnership's account and
the Trading Advisor's and its Principals' and Affiliates' current accounts and
all proposed accounts for which they have contracted to act as trading advisor.
The Trading Advisor further represents, warrants and agrees that under no
circumstances will it knowingly or deliberately use trading strategies or
systems for the Partnership that are inferior to trading strategies or systems
employed for any other client or account and that it will not knowingly or
deliberately favor any client or account managed by it over any other client or
account, it being acknowledged, however, that different trading strategies,
methods or degrees of leverage may be utilized for differing sizes of accounts,
accounts with different trading policies, accounts experiencing differing
inflows or outflows of equity, accounts which commence trading at different
times, accounts which have different portfolios or different fiscal years and
accounts with other differences, and that such differences may cause divergent
trading results.
(c) The Partnership and the General Partner acknowledge and agree
that the Trading Advisor and/or its Principals and Affiliates presently act and
that they may continue to act as advisors for other accounts managed by them
and may continue to receive compensation with respect to services for such
accounts in amounts which may be more or less than the amounts received from
the Partnership. The Trading Advisor agrees that in the management of such
other accounts by it and its Principals and Affiliates, it will act in good
faith to seek to achieve an equitable treatment of all accounts under
management including the Partnership's account with respect to, among other
things, priorities of order entry and position limits.
(d) The Trading Advisor agrees that it shall make such information
available to the General Partner respecting the performance of the
Partnership's account as compared to the performance of all other accounts
managed by the Trading Advisor and its Principals and Affiliates as shall be
reasonably requested by the General Partner or the Partnership. The Trading
Advisor shall not be required to disclose the identity of its clients.
3. Allocation of Assets to the Trading Advisor. The Trading
Advisor's Allocated Assets initially shall be a total of approximately $500,000
of which $0 is notional funding.
4
<PAGE> 5
4. Fees.
(a) Commencing with the commencement of trading by the Trading
Advisor for the Partnership, the Partnership agrees to pay to the Trading
Advisor as follows:
(i) Management Fee. A monthly management fee equal to ______% of
the Net Asset Value of the Allocated Assets as of the close of business on the
last business day of each calendar month (an approximate __% annual rate).
(ii) For purposes of calculating the management fee, Net Asset Value
of the Allocated Assets shall be determined before reduction for the management
fees or incentive fees, if any, accrued or payable with respect to the
Allocated Assets as of such month-end, and before giving effect to any
distributions and redemptions paid or payable at such month-end. In the event
that (A) the Trading Advisor commences trading as of any day other than the
first day of a calendar month, (B) this Agreement is terminated as of any date
other than the last day of a calendar month, or (C) the Partnership reallocates
assets to or from the Trading Advisor as of any day other than the first or
last day of any calendar month, the amount of the management fee shall be
prorated on the basis of the number of business days during such month that the
Allocated Assets (as adjusted in the case of reallocation of assets) were
traded by the Trading Advisor as compared to the total number of business days
in such calendar month. To the extent that the Partnership instructs the
Trading Advisor to trade the Allocated Assets at a "nominal account size" in
excess of the actual assets comprising Allocated Assets, the Trading Advisor's
management fee shall be calculated based upon the "nominal account size" of the
Allocated Assets.
(iii) Incentive Fee. A quarterly incentive fee equal to __% of any
New Trading Profits (as defined below) achieved during each fiscal quarter.
New Trading Profits during a quarter shall mean the sum of (A) the net of any
profits and losses realized on trades closed out during the period, plus or
minus (B) the change in the net of any unrealized profits and losses on trades
which remained open as of the end of the period (net of accrued brokerage
commissions and other allocated expenses) from the net of any unrealized
profits and losses on trades initiated by the Trading Advisor which remained
open as of the end of the immediately preceding period (net of accrued
brokerage commissions and other allocated expenses), (C) any Trading Advisor
management fees paid or accrued through the end of the period, and (D) the
Trading Advisor's carryforward loss (as hereinafter defined) from the
immediately preceding period. If the sum of subparagraphs (A) through (D) for
any period is negative, such amount shall be the Trading Advisor's carryforward
loss for the next period. For purposes of calculating incentive fees, interest
income earned on the Allocated Assets will be disregarded. In the event of a
withdrawal from the Allocated Assets at a time when the Trading Advisor has a
carryforward loss in effect, the amount thereof shall be reduced by an amount
determined by multiplying the carryforward loss by a fraction, the numerator of
which shall be the amount of the withdrawal and the denominator of which shall
be the Net Asset Value of the Allocated Assets immediately prior to giving
effect to the withdrawal. In the event that an addition is made to the
Allocated Assets subsequent to a reduction in the Trading Advisor's
carryforward loss by reason of a withdrawal, the Trading Advisor's carryforward
loss shall be increased by or created in an amount (up to the aggregate amount
of prior carryforward loss reductions) determined by multiplying the aggregate
amount of prior
5
<PAGE> 6
carryforward loss reductions by a fraction, the numerator of which shall be
the amount of the addition and the denominator of which shall be the sum of the
previous withdrawals which resulted in carryforward loss reductions. The
incentive fee charged to the Partnership with respect to the Allocated Assets
will be dependent upon the performance of the Trading Advisor and will not be
affected by the performance of any other trading advisor appointed by the
Partnership or the Partnership as a whole. The initial incentive period shall
commence on the date the Trading Advisor commences trading activity for the
Partnership and shall end at the immediate following quarter-end (even though
such period may not be a full quarter). Subsequent incentive periods shall
commence on the first day of the next succeeding fiscal quarter and end on the
last day of such fiscal quarter. In the event this Agreement is terminated as
of any date which is not the end of an incentive period, an incentive fee will
be paid by the Partnership, if earned, with respect to the Allocated Assets as
though such termination date were the last day of the incentive period. For
purposes of calculating the first incentive fee, the Trading Advisor hereby
agrees that it shall assume a carryforward loss equal to $75,000.
(d) Payment of Fees. The management fees and incentive fees due
to the Trading Advisor shall be paid by the Partnership within thirty (30) days
of the end of the calendar period to which they relate. The Partnership
expressly agrees that any such fees due the Trading Advisor shall survive the
termination or other expiration of this Agreement.
5. Trading Advisor Independent. The Trading Advisor shall for
all purposes herein be deemed to be an independent contractor to the Partnership
and the General Partner and shall, except as otherwise expressly provided
herein, have no authority to act for or represent the Partnership or the General
Partner in any way or otherwise be deemed a sponsor of the Partnership or an
agent, joint venturer or partner of the Partnership, the General Partner or of
any other trading advisor retained by the Partnership.
6. Broker.
(a) The Trading Advisor agrees to enter all Contract orders
through E.D. & F. Man International Inc. ("Man"), or such other brokers and
forward contract dealers as may be designated, from time to time, in writing by
the Partnership. The Partnership must consent in writing to the use of other
floor brokers who will give up such trades to Man in accordance with exchange
rules and the give-up procedures established by the Partnership from time to
time. The Trading Advisor shall be responsible for any errors committed by any
executing broker who gives-up to Man on behalf of the Partnership. In placing
trades for the Partnership's account, the Trading Advisor agrees that it shall
use its standard procedures for allocating orders among the Trading Advisor's
various accounts and not knowingly favor any other such account over the
Partnership's account.
(b) All forward contract and other trades for the Partnership
will be executed through the forward trading and other facilities of such
affiliates of Man or other entities as the Partnership may designate from time
to time.
7. Standard of Liability; Indemnifications.
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<PAGE> 7
(a) Standard of Liability. Neither the Trading Advisor nor any
of its Principals and Affiliates shall be liable to the Partnership, the General
Partner or any of their respective successors or assigns under this Agreement
except by reason of (i) acts or omissions to act which constitute bad faith,
negligence or misconduct or (ii) a breach of any of the representations,
warranties, covenants or agreements of the Trading Advisor set forth in this
Agreement.
(b) Indemnity. (i) The Partnership agrees to indemnify and hold
harmless the Trading Advisor and each of its Principals and Affiliates from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, attorneys' and accountants' fees and
disbursements), judgments and amounts paid in settlement (collectively,
"Losses") to which an indemnified person may become subject arising out of this
Agreement, the transactions contemplated hereby or the fact the Trading Advisor
is or was a trading advisor to the Partnership, unless any such Losses arise
out of, relate to, or are based upon the Trading Advisor's failure to meet the
standard of liability applicable to it under Section 7(a).
(ii) The Trading Advisor agrees to indemnify and hold harmless the
Partnership, the General Partner and each of their respective Principals and
Affiliates from and against any and all Losses to which they may become
subject, if any such Losses arise out of, relate to, or are based upon the
Trading Advisor's failure to meet the standard of liability applicable to it
under Section 7(a).
(c) Promptly after receipt by a party to be indemnified under
Section 7(b), above, of any notice of the commencement of any action or
proceeding, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnified party under such subsection, notify the
indemnifying party in writing of the commencement thereof, but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such subsection. The
requirement that an indemnifying party be given written notice of the
commencement of any action shall be deemed to be satisfied if such indemnifying
party shall have actual knowledge thereof or shall have been given written
notice of the commencement of any action or proceeding within a reasonable time
after the commencement thereof. If any such action shall be brought against
any indemnified party and the indemnified party notifies the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to such indemnified party, and shall have the
right to negotiate and consent to a settlement thereof, provided that the
indemnified party shall have consented to the settlement. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent it,
if, in the indemnified party's reasonable judgment, it is advisable for such
party to be represented by separate counsel, in which event the fees and
expenses of such separate counsel shall be borne by the indemnified party. No
indemnifying party shall be liable for any settlement of any such action
effected without its consent, but if any such action or proceeding is settled
with the consent of any
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<PAGE> 8
indemnifying party or if there be a final judgment for the plaintiff in any
such action or proceeding (of which an indemnifying party shall have been
notified), such indemnifying party shall indemnify and hold harmless each
indemnified party from and against any Losses incurred or suffered by reason of
such settlement or judgment.
(d) Any indemnification required by this Section 7, unless
ordered or expressly permitted by a court, shall be made by the indemnifying
party only upon a determination by independent legal counsel in a written
opinion that the conduct which is the subject of the claim, demand, lawsuit,
action or proceeding with respect to which indemnification is sought meets the
applicable standard set forth in this Section 7.
(e) The provisions of this Section 7 shall survive the
termination or other expiration of this Agreement.
8. The Trading Advisor's Representations and Warranties. The
Trading Advisor represents and warrants to the Partnership and the General
Partner as follows:
(a) The Trading Advisor is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and has
full power and authority to enter into and perform its obligations under this
Agreement and to conduct its business as described in this Agreement and the
Disclosure Notice, and the Trading Advisor is qualified to conduct its business
and is in good standing in every jurisdiction in which the nature or conduct of
its business requires such qualification and failure to so qualify would have a
materially adverse effect on its ability to comply with, or perform its
obligations under, this Agreement, it being understood that any decision as to
the jurisdiction or jurisdictions in which the Trading Advisor shall conduct its
business is within the sole discretion of the Trading Advisor.
(b) This Agreement has been duly and validly authorized, executed
and delivered by the Trading Advisor and is a valid and binding agreement of
the Trading Advisor enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the
performance of the obligations and the consummation of the transactions
contemplated in this Agreement and in the Disclosure Notice will not conflict
with, violate, breach or constitute a default under, any term or provision of
the Trading Advisor's certificate of incorporation, by-laws, or other charter
documents, or any indenture, mortgage, deed of trust, loan agreement, or other
agreement or instrument to which the Trading Advisor or any of its Principals
and Affiliates is a party or by which any of them are bound, or to which any of
the property (including, but not limited to, its Trading Approach) or assets of
the Trading Advisor or its Principals and Affiliates are subject, or any order,
rule, law, statute, regulation, or other legal requirement applicable to the
Trading Advisor or any of its Principals or to the property or assets of the
Trading Advisor or its Principals and Affiliates of any court or any
governmental or administrative body or agency or panel or any regulatory or
self-regulatory organization or exchange having jurisdiction over the Trading
Advisor or any of its Principals and Affiliates.
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<PAGE> 9
(d) The Trading Advisor is registered as a commodity trading advisor
under the Act, its Principals are identified on the Trading Advisor's most
recent CFTC Form 7-R filed with the NFA pursuant to the Act, and it is a member
of the NFA in such capacity and such registration and membership has not
expired or been revoked, lapsed, suspended, terminated, or not renewed or
limited or qualified in any respect.
(e) The Trading Advisor is not bankrupt or insolvent.
(f) The Disclosure Document is complete and accurate in all material
respects, does not contain any misstatement of any material fact, does not omit
to state any material fact necessary to be stated therein in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading, and complies in all material respects with the applicable
requirements of the Act and the rules promulgated thereunder and may be relied
upon by the Partnership and the General Partner in preparing the Disclosure
Notice and allocating assets of the Partnership to the Trading Advisor and
there has not been, since the date of the Disclosure Document's issuance, any
material adverse change in the condition, financial or otherwise, business or
prospects of the Trading Advisor or any of its Principals and Affiliates,
whether or not arising in the ordinary course of business, or relating to the
historical performance and operations of the Trading Advisor.
(g) The Trading Advisor and each Principal has complied and will
continue to comply with all orders, rules, laws, statutes, regulations or other
legal requirements applicable to the Trading Advisor or any of its Principals
and Affiliates or to their respective businesses, properties, or assets,
including the Act and the rules promulgated by the CFTC and the NFA, the
violation of which would materially and adversely affect its or their ability
to comply with, and perform its or their obligations under this Agreement, and
there are no actions, suits, proceedings, or notices of investigations or
investigations pending or threatened against the Trading Advisor, or any of its
Principals or Affiliates, by the NFA, the CFTC or any governmental, regulatory
or self-regulatory agency regarding noncompliance by the Trading Advisor or any
of its Principals or Affiliates with any law, statute, rule or regulation, or
at law or in equity or before or by any court, any federal, state, municipal or
other governmental department commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect
its or their ability to comply with or to perform its or their obligations
under this Agreement or that would be required to be disclosed in the
Disclosure Notice, which is not so disclosed, would result in a material
adverse change in the condition, financial or otherwise, business or prospects
of the Trading Advisor.
(h) The Trading Advisor and each Principal has all governmental,
regulatory, self-regulatory and exchange licenses and approvals and has
effected all filings and registrations with all governmental, regulatory and
self-regulatory agencies required to conduct their respective businesses and to
act as described in the Disclosure Notice and to perform its or their
respective obligations under this Agreement.
(i) With respect to information contained in the Disclosure Notice
relating to the Trading Advisor, including, without limitation, the tables and
notes thereto, the Disclosure
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<PAGE> 10
Notice does not contain any untrue statement of material fact or omit to state
therein a material fact required to be stated therein or necessary to be stated
therein in order to prevent the statements made therein, in light of the
circumstances under which they are made, from being misleading.
(j) In the placement of orders and the allocation of executed trades
for the Partnership and for the accounts of any other client, the Trading
Advisor shall utilize a fair and reasonable order entry system and trade
allocation system, which shall be no less favorable to the Partnership than to
any other account managed by the Trading Advisor.
(k) The Trading Advisor shall promptly notify the other parties
hereto of the commencement of any suit, action or proceeding involving it or
its Principals and Affiliates, whether or not any such suit, action or
proceeding also involves any of the other parties hereto.
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not
true or incomplete, the Trading Advisor shall promptly notify the Partnership
and the General Partner of the occurrence of such event.
9. The Partnership's Representations and Warranties. The
Partnership represents and warrants to the Trading Advisor as follows:
(a) The Partnership is duly organized, validly existing and in good
standing as a limited partnership under the laws of Illinois. The Partnership
has full power and authority to perform its obligations under this Agreement
and to conduct its business and to act as described in the Disclosure Notice.
(b) This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Partnership and is a valid and binding agreement
of it enforceable in accordance with its terms.
(c) The Partnership has complied and will continue to comply with
all orders, rules, laws, statutes, regulations or other legal requirements
applicable to it, to its business, properties, and assets, including the Act
and the rules promulgated by the CFTC and the NFA, the violation of which would
materially and adversely affect its ability to comply with, and perform its
obligations under this Agreement, and there are no actions, suits, proceedings,
or notices of investigations or investigations pending or threatened against
it, by the NFA, the CFTC or any governmental, regulatory or self-regulatory
agency regarding noncompliance by it with any law, statute, rule or regulation,
or at law or in equity or before or by any court, any federal, state, municipal
or other governmental department, commission, board, bureau, agency, or
instrumentality, or by any regulatory or self-regulatory organization, or
exchange, in which an adverse decision would materially and adversely affect
its ability to comply with or to perform its obligations under this Agreement
or that would be required to be disclosed in the Disclosure Notice, which is
not so disclosed, or would result in a material adverse change in the condition,
financial or otherwise, business or prospects of the Partnership.
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<PAGE> 11
(d) The Partnership has all federal and state governmental,
regulatory, self-regulatory and exchange licenses and approvals and has
effected all filings and registrations with all federal and state governmental
and regulatory and self-regulatory agencies required to conduct its business
and to act as described in the Disclosure Notice and to perform its obligations
under this Agreement.
(e) Except with respect to information contained in the Disclosure
Notice relating to the Trading Advisor or any other advisor, the Disclosure
Notice does not contain any untrue statement of material fact or omit to state
therein a material fact required to be stated therein or necessary to be stated
therein in order to prevent the statements made therein, in light of the
circumstances under which they are made, from being misleading.
(f) The General Partner is registered as a commodity pool operator
under the Act and is a member of the NFA in such capacity and such registration
and membership has not expired or been revoked, lapsed, suspended, terminated,
or not renewed or limited or qualified in any respect.
(g) The General Partner has all federal and state governmental,
regulatory, self-regulatory and exchange licenses and approvals and has
effected all filings and registrations with all federal and state governmental
and regulatory and self-regulatory agencies required to conduct its business
and to act as described in the Disclosure Notice and to perform its obligations
under this Agreement.
The foregoing representations and warranties shall be continuing
during the term of this Agreement and any renewal hereof and if at any time any
event shall occur which would make or tend to make any of the foregoing not
true or incomplete, the General Partner will promptly notify the Trading
Advisor thereof.
10. Term and Termination.
(a) Unless terminated earlier as provided below, the term of this
Agreement shall be until the end of the twelfth full calendar month after the
Trading Advisor commences trading activity and is automatically renewable
thereafter for successive one-year periods unless (i) the Partnership
terminates this Agreement during the initial one-year term thereof by giving
thirty days' prior written notice to the Trading Advisor, or (ii) either the
Trading Advisor or the Partnership terminates the Agreement at the end of the
initial one-year term or at any time thereafter by giving thirty days' prior
written notice to such other party.
(b) Notwithstanding the foregoing, this Agreement may be terminated
by the Partnership immediately upon written notice to the Trading Advisor if
(i) the Trading Advisor, if other than a natural person, merges, consolidates
with or sells a substantial portion of its assets to any individual or entity,
or there is a material adverse change relating to the Trading Advisor or a
material adverse change in control, organizational structure, financial
condition, regulatory compliance or personnel of the Trading Advisor, (ii) any
of the Trading Advisor's registrations
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<PAGE> 12
under the Act or otherwise are suspended, terminated, lapsed or not renewed,
(iii) the Trading Advisor's membership in the NFA or other self-regulatory
organization is suspended, terminated, lapsed or not renewed, (iv) the Trading
Advisor otherwise becomes unable to serve as a trading advisor to the full
extent contemplated by this Agreement, (v) the Trading Advisor breaches any of
its representations, warranties, covenants or agreements contained in this
Agreement, or (vi) the General Partner determines doing so is in the best
interests of the Partnership.
9. Notices. Except as otherwise provided herein, all notices,
demands or requests required to be made or delivered under this Agreement shall
be effective only if in writing and delivered personally or by facsimile or
mail, postage prepaid (airmail if the addressee is in another country), to the
respective addresses below or to such other addresses as may be designated by
the party entitled to receive the same by notice similarly given and shall be
deemed given by the party required to provide notice when received by the party
to whom notice is required to be given.
If to the Partnership or the General Partner to:
Heinold Asset Management, Inc.
One Financial Place
440 South LaSalle Street, 20th Floor
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
_______________________________
_______________________________
_______________________________
Attn: ________________________
Fax No.: ____________________
12. Assignment. No party hereto may transfer, sell, encumber,
appoint agents or assign any of its rights or obligations hereunder in whole or
in part without the express written consent of each of the other parties
hereto.
13. Amendment; Modification. This Agreement may not be amended or
modified, nor any of the provisions hereof waived, except by the written
consent of all of the parties hereto.
14. Complete Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject hereof and
supersedes all prior agreements
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<PAGE> 13
written or oral, and no other agreement, verbal or otherwise, shall be binding
as between the parties hereto unless in writing and signed by the party against
whom enforcement is sought.
15. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their successors and permitted assigns. No
other person other than the persons indemnified under Section 7 hereof for
matters relating to that Section shall have any right or obligation under this
Agreement.
16. Headings. Headings to sections herein are for the convenience
of the parties only, and are not intended to be a part of or to affect the
meanings or interpretation of this Agreement.
17. Governing Law: Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Illinois without giving effect to principles of conflicts of laws.
18. Arbitration. The parties agree that all controversies which
may arise in connection with any transaction contemplated by this Agreement or
the construction, performance or breach of this Agreement shall be determined
by arbitration, to be held in the City of Chicago, State of Illinois unless
otherwise agreed to by the parties hereto, and in accordance with the rules
then obtaining of the NFA, or if no such rules are then in effect or if
jurisdiction is declined, then the rules then obtaining of the American
Arbitration Association; provided, however, that (a) the arbitrator(s) shall be
knowledgeable in industry standards and practices and the matters giving rise
to the dispute, (b) the arbitrator(s) shall not have the power and authority to
award punitive damages, (c) the authority of the arbitrator(s) shall be limited
to construing and enforcing the terms and conditions of this Agreement as
expressly set forth herein, and (d) the arbitrator(s) shall state the reasons
for their award and their legal and factual conclusions underlying the award in
a written opinion. The award of the arbitrator(s), or a majority of them,
shall be final, and judgment upon the award may be confirmed and entered in any
court, state or federal, having jurisdiction.
19. Consent to Jurisdiction. Each party hereto expressly and
irrevocably agrees (a) that it waives any objection, and specifically consents,
to venue in the United States federal or state courts located in the City of
Chicago, State of Illinois, United States of America, so that any action at law
or in equity may be brought and maintained in any such court, and (b) that
service of process in any such action may be effected against such party by
certified or registered mail or in any other manner permitted by applicable
United States Federal Rules of Civil Procedure or Rules of the Courts of the
State of Illinois. In addition, each party hereto expressly and irrevocably
waives, in respect of any action brought in any United States federal or state
court located in the City of Chicago, State of Illinois or any resulting
judgment, any objection, and hereby specifically consents, to the jurisdiction
of any such court, and agrees not to seek to change the situs of such action or
to assert that any other court in any other jurisdiction is a more suitable
forum for the hearing and adjudication of any claim or dispute raised in such
action.
20. Survival. The indemnity provisions of this Agreement shall
survive the termination or expiration of this Agreement with respect to any
matter existing prior to such
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<PAGE> 14
termination; the payment obligations under this Agreement shall continue until
satisfied; and the other provisions of the Agreement shall survive the
termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
21. Waiver of Breach. The waiver by a party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by a party. The failure of a party to insist upon strict
adherence to any provision of this Agreement shall not constitute a waiver or
thereafter deprive such party of the right to insist upon a strict adherence.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 15
IN WITNESS WHEREOF, this Agreement has been executed as of the day
and year first above written.
___________________________________
By: Heinold Asset Management, Inc.,
General Partner
By: _______________________________
Daniel E. Ragen
President
___________________________________
By: _______________________________
Name:
Title:
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<PAGE> 16
EXHIBIT 1
______________, 199_
___________________________
___________________________
___________________________
___________________________
Re: Commodity Trading Authorization
Gentlemen:
______________, an Illinois limited partnership (the
"Partnership"), does hereby make, constitute, and appoint you as its
Attorney-in-Fact to purchase and sell futures contracts, commodities and
commodity options and forward contracts, and any other items which are
currently, or may later become, the subject of futures, forward or options
trading, and other related investments on domestic and international exchanges,
through E.D. & F. Man International Inc., or such other brokers and forward
contract dealers as may be designated, from time to time, in writing by the
Partnership, as brokers, in accordance with the between us dated
___________________.
Very truly yours,
_________________________
By: Heinold Asset Management, Inc.,
General Partner
By: ______________________________
Daniel E. Ragen
President
<PAGE> 17
ACKNOWLEDGEMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of ________________________'s
Disclosure Document dated ___________________.
__________________________________
By: Heinold Asset Management, Inc.
By: ______________________________
Daniel E. Ragen
President
Dated: _______________
