<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, 1995
--- Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
[No Fee Required]
Commission File Number: 0-10604
THE FUTURE FUND II
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3148138
- ------------------------------- --------------------
(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 II (the "Partnership") is a limited
partnership organized on July 30, 1981 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.
Until November 1, 1988, Heinold Commodities, Inc., a Delaware
corporation, was the General Partner of the Partnership and, in that capacity,
performed various administrative services for it. On November 1, 1988, in
order to effect a consolidation of the commodity pool operations of Geldermann,
Inc. ("Geldermann"), Heinold Commodities, Inc.'s commodity pool assets,
including its investment in the Partnership, were transferred to Heinold Asset
Management, Inc., an affiliate of Heinold Commodities, Inc.
Heinold Asset Management, Inc. (the "General Partner"), 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. The General
Partner is a wholly owned subsidiary of Geldermann, an Illinois corporation.
Until December 12, 1994, Geldermann was an independent operating subsidiary of
ConAgra, Inc., a Delaware corporation with headquarters in Omaha, Nebraska. On
that date, Geldermann was acquired by E. D. & F. Man International Inc.
(formerly known as E. D. & F. Man International Futures 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 period 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 the
Partnership's Limited Partnership Agreement and the Partnership's customer
agreement with the Commodity Broker. References to the "Commodity Broker" refer
to Geldermann, Inc. for the period prior to June 1, 1995 and to E.D. & F. Man
International Inc. for the the period on and after June 1, 1995.
The General Partner invested $355,000 in the Partnership at
the outset of trading. The net asset value of the General Partner's interest
in the Partnership, after the redemption of 277 Unit-equivalents for $392,094
on October 1, 1988, 38 Unit-equivalents for $58,105 on
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November 1, 1991 and 11 Unit-equivalents for $18,740 on October 31, 1994, was
$40,879 as of October 31, 1995.
The Partnership's initial trading advisor 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 advisor with
Trendstat Capital Management, Inc. ("Trendstat"). Trendstat traded on behalf of
the Partnership until February 28, 1995 when the General Partner terminated the
Advisory Agreement. On December 1, 1994, the General Partner allocated a
portion of the Partnership's assets to Sabre Fund Management Limited ("Sabre").
On March 10, 1995, the General Partner entered into Advisory Agreements with
First October Trading Company, Inc. ("First October"), Gandon Fund Management,
Ltd. ("Gandon"), Michael Tym, Jr. ("Tym") and Telesis Management, Inc.
("Telesis"). The Advisory Agreements with Sabre and First October were
terminated on June 30, 1995 and September 29, 1995, respectively. On October
31, 1995, the General Partner terminated the Advisory Agreements with Gandon,
Telesis and Tym .
On November 1, 1995, the General Partner entered into Advisory
Agreements with Hyman Beck & Company, Inc. ("HB&Co."), Marathon Capital Growth
Partners, L.L.C. ("Marathon"), RXR, Inc. ("RXR") and Willowbridge Associates,
Inc. ("Willowbridge"). HB&Co., Marathon, RXR and Willowbridge are collectively
referred to herein as the "Trading Advisors."
The Trading Advisors receive a quarterly Profit Share equal
to 15% of any New Trading Profit (Trendstat received a 12% annual Profit Share
prior to December 1, 1994), determined as of the end of each calendar quarter.
The Profit Share shall also be paid to the Trading Advisors upon the redemption
of Units (any Profit Share accrued in respect of redeemed Units being paid to
the Trading Advisors from the redemption price of such Units) and upon
termination of the Advisory Agreements as if the date of termination were at
year-end.
The Trading Advisors receive a monthly management fee at a
rate which, when annualized, would equal an annual management fee of 2.0%
(Trendstat received 2.4% prior to December 1, 1994) of the Partnership's
average month-end Net Assets before deduction for any month-end Profit Share or
Profit Share accruals and before deduction for month-end brokerage commissions.
Until December 1, 1994, the Partnership paid commodity
brokerage commissions at an annual rate of 9.4% of average month-end Net Assets
(before all fees and charges, including the management fee referenced in the
preceding paragraph, National Futures Assocaiation ("NFA") fees and "give-up"
charges). This amount was reduced by 2.4% (to an annual 7%) as of
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<PAGE> 4
December 1, 1994 to appropriately reflect that the Partnership and not the
Commodity Broker will pay the management fee.
The Trading Advisors have advised the Partnership that their
respective trading methods are based upon technical or fundamental trend
analysis and money management principles, which may be revised from time to
time. The objectives of the trading methods is to participate in all
significant sustained commodity price moves in the commodities traded by the
Partnership.
Regulation
Under the Commodity Exchange Act, as amended (the "Act"),
commodity exchanges and commodity futures trading are subject to regulation by
the Commodity Futures Trading Commission (the "CFTC"). The NFA, a "registered
futures association" under the Act, is the only non-exchange self regulatory
organization for commodities 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 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 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' registration as commodity trading advisors were
terminated or suspended, the General Partner and the Trading Advisors,
respectively, would be unable to continue to manage the business of the
Partnership. Should the General Partner's registration be suspended,
termination of the Partnership might result.
As members of the NFA, the General Partner, 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 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 positions which any person may hold or control in particular
commodities. 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.
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<PAGE> 5
(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, 1995 are set forth under "Item 6.
Selected Financial Data."
(c) Narrative description of business.
(l) See Items l(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:
(1) Manages the business of the Partnership. Pursuant to
this authority, the General Partner has entered into Advisory Agreements with
the Trading Advisors (under which the Trading Advisors have complete discretion
over the assets allocated to each 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).
(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 profit
share 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.
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(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 property
is subject. In addition, there are no pending material proceedings involving
the General Partner or the Commodity Broker.
In the ordinary course of its business, Geldermann is involved
in numerous legal actions, some of which seek substantial damages. In view of
the number and diversity of the claims, the number of jurisdictions involved,
and the inherent difficulty of predicting the outcome of litigation, Geldermann
cannot state what the eventual outcome of these pending claims will be. As a
matter of policy, Geldermann vigorously defends civil litigation, reparations
or arbitration proceedings pending against it, and in all proceedings currently
so pending believes it has defenses which are factually and legally sound.
Geldermann is contesting the allegations of each complaint and believes that
there are meritorious defenses in most of the lawsuits.
Although the CFTC's staff's interpretation that any matter
filed by the CFTC against a registrant is, on its face (even though it has not
been litigated), material litigation which has to be disclosed, Geldermann
takes exception to this. Notwithstanding the preceding, Geldermann herewith
discloses a CFTC Enforcement Action titled In the Matter of Thomas Collins, et
al., CFTC Docket No. 94-13.
The Complaint in this case alleges that Geldermann, in 1986,
carried and cleared accounts in joint tenancy for a Mid-America local floor
trader and/or ten individuals with whom the floor trader maintained a separate
joint account with each of the ten individuals. None of the afore-mentioned
persons were ever employees of Geldermann. Geldermann's function was only that
of clearing broker. Over a period of approximately four years, at the
direction of the account holder(s), Geldermann transferred certain positions
amongst and between the accounts. It is those transfers that the CFTC is
alleging are non-competitive, fictitious transactions. The CFTC's complaint
also alleges that Geldermann failed to properly supervise the employees who
accepted the transfer instructions from the account holder(s). Geldermann
takes exception to the CFTC's allegation and is vigorously defending this
litigation. Neither the Trading Advisors nor the Partnership have any
connection with this litigation.
Item 4. Submission of Matters to a Vote
of Security Holders.
None.
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<PAGE> 7
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, 1995, there were 296 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, 1995.
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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,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net gain (loss)
on trading of
futures and
forward contracts $ (539,516) $ (954,979) $1,545,559 $1,502,236 $ (976,286)
Interest income 192,864 170,686 177,205 243,036 405,117
---------- ----------- ---------- ---------- -----------
Total income (346,652) (784,293) 1,722,764 1,745,272 (571,169)
---------- ----------- ---------- ---------- -----------
Brokerage commissions 251,724 473,733 571,875 585,545 625,102
Management fees 56,467 0 0 0 0
Profit share 10,323 0 0 115,561 (44,649)
Other administrative
expenses 20,843 21,517 32,230 29,314 31,929
---------- ----------- ---------- ---------- -----------
Total expenses 339,357 495,250 604,105 730,420 612,382
---------- ----------- ---------- ---------- -----------
Net income (loss) $ (686,009) $(1,279,543) $1,118,659 $1,014,852 $(1,183,551)
=========== ============ ========== ========== ============
Net income (loss)
allocated to
General Partner $ (8,527) $ (18,726) $ 14,935 $ 10,773 $ (22,296)
=========== ============ ========== ========== ===========
Net income (loss)
allocated to
limited partners $ (677,482) $(1,260,817) $1,103,724 $1,004,079 $(1,161,255)
=========== ============ ========== ========== ===========
Increase (decrease)
in Net Asset Value
for a Unit Outstand-
ing throughout each
year $ (294.01) $ (486.16) $ 373.38 $ 269.34 $ (285.86)
========== ============ ========== ========== ===========
Total assets $3,102,890 $ 4,377,333 $6,255,140 $5,850,047 $ 5,936,595
========== =========== ========== ========== ===========
</TABLE>
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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 Advisors. 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 loss for the fiscal years ended
October 31, 1995 and October 31, 1994 and a profit for the fiscal year ended
October 31, 1993.
The Net Asset Value per Unit as of October 31, 1995 and
October 31, 1994 was $1,409.63 and $1,703.64, respectively.
The Partnership showed a loss for the fiscal year ended
October 31, 1995 as the Partnership's profitable trading in the energies and
agricultural sectors was more than offset by its unprofitable trading in the
currencies, S&P and financial instrument sectors. Gains were made in the
agricultural sector due to the drought in the second and third quarters. In
addition, the
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Partnership profited from long crude oil positions in the energy market.
However, such gains were not enough to offset the large losses the Partnership
incurred in short S&P and bond positions due to the decline in the interest
rate.
The Partnership showed a loss for the fiscal year ended
October 31, 1994 as the Partnership's profitable trading in the energies and
meat sectors was more than offset by its unprofitable trading in the financial
instruments and currencies sectors.
The Partnership showed a profit for the fiscal year ended
October 31, 1993 as the Partnership was profitable in the agricultural,
currencies, metals, financial instruments and energy sectors and was not
unprofitable in any market.
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.
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.
Item 11. Executive Compensation.
The Partnership has no directors or officers. The General
Partner performs the services described in "Item 2. Properties" herein. The
Commodity Broker acts as the Partnership's commodity broker pursuant to the
Customer Agreement described in "Item 1(a). General development of business."
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<PAGE> 11
The General Partner participates in any appreciation in the
net assets of the Partnership in proportion to its respective 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
Advisors, pursuant to Advisory Agreements, have discretionary authority over
the Partnership's futures and forward contract trading. The General Partner
owned 29 Unit-equivalents valued at $40,879 as of October 31, 1995, 1.3% 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:
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.
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(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 July 30, 1981,
as amended on November 10, 1981.
b. Certificate of Limited Partnership of the Partnership as
filed with the Cook County Recorder of Deeds on July 30, 1981.
The above exhibits are incorporated herein by reference from
the Partnership's Registration Statement on Form S-1, File No. 2-73696.
c. Form L.P.-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, 1977.
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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<PAGE> 13
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. Advisory Agreement dated December 15, 1989 between the
Partnership and Trendstat.
The above exhibit is incorporated by reference from the
Partnership's report on Form 8-K filed on January 1, 1990.
g. Advisory Agreement dated December 1, 1994 between the
Partnership and Sabre Fund Management Limited.
The above exhibits are incorporated by reference from the
Partnership's report on Form 10-K for the Fiscal Year ended October 31, 1994.
h. Management Contract dated March 8, 1995 between the
Partnership and First October Trading Company, Inc.
i. Management Contract dated March 8, 1995 between the
Partnership and Gandon Fund Management, Ltd.
j. Management Contract dated March 8, 1995 between the
Partnership and Telesis Management, Inc.
k. Management Contract dated March 8, 1995 between the
Partnership and Michael Tym, Jr.
l. Management Contract dated November 1, 1995 between the
Partnership, the General Partner and Hyman Beck & Company, Inc.
m. Management Contract dated November 1, 1995 between the
Partnership, the General Partner and Marathon Capital Growth Partners, L.L.C.
n. Management Contract dated November 1, 1995 between the
Partnership, the General Partner and RXR, Inc.
o. Management Contract dated November 8, 1995 between the
Partnership, the General Partner and Willowbridge Associates, Inc.
(27) Financial Data Schedule
The above exhibits are filed herewith.
(b) Reports on Form 8-K:
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<PAGE> 14
The Partnership did not file any reports on Form 8-K during
the quarter ended October 31, 1995.
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<PAGE> 15
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 29th day of January, 1996.
THE FUTURE FUND II
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/ James R. Curley Chief Executive Officer January 29, 1996
- --------------------- and Director
James R. Curley
/s/ Robert Ledvora Chief Financial Officer, January 29, 1996
- -------------------- (principal accounting
Robert Ledvora officer)
/s/ Thomas M. Harte Director January 29, 1996
- ---------------------
Thomas M. Harte
/s/ Ira Polk Director January 29, 1996
- ---------------------
Ira Polk
/s/ Ned W. Bennett Director January 29,1996
- ---------------------
/s/ Daniel E. Ragen President (principal January 29, 1996
- --------------------- executive officer)
Daniel E. Ragen 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 29, 1996
MANAGEMENT, INC. Registrant
By /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
</TABLE>
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(DELOITTE &
TOUCHE LLP LOGO)
- ---------------
- -------------------------------------------------------------------------------
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED OCTOBER 31, 1995 AND 1994 AND FOR THE
THREE YEARS ENDED OCTOBER 31, 1995 AND
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
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<PAGE> 17
THE FUTURE FUND II
(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, 1995 and 1994 F-2
Statements of Operations for the
Years Ended October 31, 1995, 1994, and 1993 F-3
Statements of Partners' Capital for the
Years Ended October 31, 1995, 1994, and 1993 F-4
Statements of Cash Flows for the
Years Ended October 31, 1995, 1994, and 1993 F-5
Notes to Financial Statements F-6
</TABLE>
<PAGE> 18
(DELOITTE &
TOUCHE LOGO)
- ---------- -------------------------------------------------------
Two Prudential Plaza Telephone: (312) 946-3000
180 North Stetson Avenue Facsimile: (312) 946-2600
Chicago, Illinois 60601-6779
INDEPENDENT AUDITORS' REPORT
To the General Partner and
Limited Partners of
The Future Fund II:
We have audited the accompanying statements of financial condition of
The Future Fund II (an Illinois Limited Partnership, the "Partnership") as of
October 31, 1995 and 1994, and the related statements of operations, partners'
capital, and cash flows for each of the three years in the period ended October
31, 1995. 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 II as of October 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended October 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
January 2, 1996
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
<PAGE> 19
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION
OCTOBER 31, 1995 AND 1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CASH $ - $ 5,630
EQUITY IN FUTURES AND FORWARD TRADING ACCOUNTS:
United States Treasury securities, at cost plus
accrued interest which approximates market value 2,900,726 4,134,508
Net unrealized (depreciation) appreciation on open futures and
forward contracts (70,634) 90,754
Amount due from E. D. & F. Man International
(formerly Geldermann) 272,798 146,44
------------ ------------
Total equity in futures and forward trading accounts 3,102,890 4,371,703
------------ ------------
TOTAL ASSETS $ 3,102,890 $ 4,377,333
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued brokerage commissions payable to E. D. & F. Man
International (formerly Geldermann) $ 16,458 $ 34,079
Redemptions payable 23,964 86,886
Other accrued expenses 2,217 10,897
Accrued management fee 2,756 -
------------ ------------
Total liabilities 45,395 131,862
PARTNERS' CAPITAL:
Limited Partners (units outstanding:
1995 - 2,140; 1994 - 2,463) 3,016,616 4,196,065
General Partner (unit equivalents outstanding:
1995 - 29; 1994 - 29) 40,879 49,406
------------ ------------
Total partners' capital 3,057,495 4,245,471
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 3,102,890 $ 4,377,333
============ ============
NET ASSET VALUE PER OUTSTANDING UNIT OF
PARTNERSHIP INTEREST $ 1,409.63 $ 1,703.64
============ ============
</TABLE>
See notes to financial statements.
-F-2-
<PAGE> 20
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
<TABLE>
STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1995, 1994, AND 1993
- -----------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Net realized trading gains (losses) on
closed futures and forward contracts $ (378,129) $ (756,051) $ 1,635,969
Decrease in net unrealized appreciation
on open futures and forward contracts (161,387) (198,928) (90,410)
Interest income 192,864 170,686 177,205
----------- ------------- ------------
Total revenues (346,652) (784,293) 1,722,764
EXPENSES:
Brokerage commissions 251,724 473,733 571,875
Profit share 10,323 - -
Other administrative expenses 20,843 21,517 32,230
Management fees 56,467 - -
----------- ------------- ------------
Total expenses 339,357 495,250 604,105
----------- ------------- ------------
NET INCOME (LOSS) $ (686,009) $ (1,279,543) $ 1,118,659
=========== ============= ============
NET INCOME (LOSS) ALLOCATED TO:
General Partner $ (8,527) $ (18,726) $ 14,935
=========== ============= ============
Limited Partners $ (677,482) $ (1,260,817) $ 1,103,724
=========== ============= ============
INCREASE (DECREASE) IN NET ASSET
VALUE FOR A UNIT OUTSTANDING
THROUGHOUT EACH YEAR $ (294.01) $ (468.16) $ 373.38
=========== ============= ============
</TABLE>
See notes to financial statements.
-F-3-
<PAGE> 21
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
<TABLE>
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED OCTOBER 31, 1995, 1994, AND 1993
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL
LIMITED GENERAL PARTNERS'
PARTNERS PARTNER CAPITAL
<S> <C> <C> <C>
BALANCE, OCTOBER 31, 1992 $ 5,713,587 $ 71,937 $ 5,785,524
Redemption of 377 units of limited
partnership interest (736,260) - (736,260)
Net income 1,103,724 14,935 1,118,659
------------- ----------- -------------
BALANCE, OCTOBER 31, 1993 6,081,051 86,872 6,167,923
Redemption of 337 units of limited
partnership interest and 11 general
partnership unit equivalents (624,169) (18,740) (642,909)
Net loss (1,260,817) (18,726) (1,279,543)
------------- ----------- -------------
BALANCE, OCTOBER 31, 1994 4,196,065 49,406 4,245,471
Redemption of 323 units of limited
partnership interest (501,967) - (501,967)
Net loss (677,482) (8,527) (686,009)
------------- ----------- -------------
BALANCE, OCTOBER 31, 1995 $ 3,016,616 $ 40,879 $ 3,057,495
============= =========== =============
</TABLE>
See notes to financial statements.
-F-4-
<PAGE> 22
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
<TABLE>
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1995, 1994, AND 1993
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (686,009) $ (1,279,543) $ 1,118,659
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Decrease (increase) in equity in futures
trading accounts 1,268,813 1,877,807 (405,093)
Increase (decrease) in liabilities (23,545) (20,523) 22,694
------------ ------------- ------------
Net cash flows provided by operating activities 559,259 577,741 736,260
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of limited and general partnership
units or unit equivalents (564,889) (577,741) (736,260)
------------ ------------- ------------
NET DECREASE IN CASH (5,630) - -
CASH - Beginning of year 5,630 5,630 5,630
------------ ------------- ------------
CASH - End of year $ - $ 5,630 $ 5,630
============ ============= ============
</TABLE>
See notes to financial statements.
-F-5-
<PAGE> 23
THE FUTURE FUND II
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------
1. ORGANIZATION OF THE PARTNERSHIP
The Future Fund II (the "Partnership") was organized in
July 1981, under the Illinois Uniform Limited
Partnership Act (the "Act"), for purposes of engaging
in speculative trading of futures 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 the
annual rate of 7% of average month-end net assets, as
defined, plus NFA fees and "give-up" charges.
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 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
Revenue Recognition - Futures 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 contracts is reflected as
the change in net unrealized appreciation. Market
values of futures contracts are based upon exchange
settlement prices.
Operating Expenses - The Partnership bears all expenses
incurred in connection with its activities. These
include brokerage commissions, "give-up" charges and NFA
fees; the trading advisor's profit share; and periodic
legal, auditing, tax return preparation and filing fees.
The General Partner bears all other operating expenses.
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.
-F-6-
<PAGE> 24
3. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
CONCENTRATION OF CREDIT RISK
The Partnership invests in various financial and
commodity futures and forward contracts for speculative
purposes. These contracts are marked to market daily,
with variations in value of the futures contracts
settled on a daily basis with the exchange upon which
they are traded. At October 31, 1995, the Partnership
held no long or short financial futures positions. The
Partnership held long and short financial futures
positions with aggregate notional values of
approximately $4,166,000 and $34,846,000, respectively,
at October 31, 1994, and approximately $13,736,000 and
$3,155,000, respectively, at October 31, 1993.
The exchange upon which each financial futures contract
is traded acts as the counterparty and, accordingly,
bears the risk of performance. A substantial portion of
the Partnership's open financial futures contracts was
transacted with the Chicago Mercantile Exchange.
Generally, financial futures contracts can be closed out
or offset at the discretion of the trading advisor.
However, if the market is not liquid, it could prevent
the timely closeout or offset of any unfavorable
positions or require the Partnership to hold those
positions until the delivery date, regardless of the
change in their value or the trading advisor's
investment strategies.
4. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement ("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, 2002, or upon the occurrence of certain future
events, as specified in the Agreement.
5. ADVISORY AGREEMENT
Effective January 1, 1990, the Partnership entered into
a management agreement with Trendstat Capital
Management, Inc. (the "Trading Advisor"). Under the
terms of the agreement, the Trading Advisor has sole
responsibility for determining the Partnership's futures
and forward trades. As compensation for these services,
the Trading Advisor receives an annual profit share
equal to 12% of any "new trading profits," as defined in
the agreement, accrued monthly and paid as of the end of
each calendar year. This profit share is retained by
the Trading Advisor even when "trading losses" occur in
subsequent years;
-F-7-
<PAGE> 25
however, no further profit share is payable until any
such trading losses (other than losses attributable to
redeemed units) are recouped by the Partnership.
As of December 1, 1994, the Partnership entered into an
advisory agreement with Sabre Fund Management Limited.
As of the same date, both active advisors will receive
annual profit shares equal to 15% of any "new trading
profits," as defined in the agreement, accrued monthly
and paid as of the end of each calendar year.
On February 28, 1995, the Partnership terminated its
trading agreement with Trendstat Capital Management,
Inc.
Effective March 10, 1995, the Partnership entered into
trading agreements with trading advisors, Telesis
Management, Inc. ("Telesis"), First October Trading Co.
("First October"), Gandon Fund Management Ltd. ("Gandon"),
and Michael Tym, Jr. ("Tym").
Under the terms of the advisory agreements, the trading
advisors have sole responsibility for determining
futures and options trades. As compensation for
services, each advisor receives certain fees.
Management fees are paid at .167 of 1% (2% annually) of
monthly net assets. Each advisor also receives
incentive fees paid at the end of each calendar quarter
at 15% of new trading profits, as defined.
On June 30, 1995, the partnership terminated its trading
agreement with Sabre. Effective September 29, 1995, the
Partnership terminated its trading agreement with First
October.
On October 31, 1995 the Partnership terminated its
trading agreements with Telesis, Tym, and Gandon.
Effective November 1, 1995, the Partnership entered into
trading agreements with Willowbridge Associates, Inc.
("Willowbridge"), RXR Group, Inc. ("RXR"), Hyman Beck and
Co. ("Hyman Beck"), and Marathon Capital Growth partners
("Marathon").
6. PROSPECTIVE ACCOUNTING STANDARDS
In October 1994, the FASB issued SFAS 119, Disclosure
About Derivative Financial Instruments and Fair Value of
Financial Instruments. This Statement requires
disclosures about amounts, nature, and terms of
derivative financial instruments that are not subject to
Statement 105 because they do not result in
off-balance-sheet risk of accounting loss. This
Statement is effective for financial statements issued
for fiscal years ending after December 15, 1994, except
for entries with less than $150 million in total assets.
For those entities, this Statement is effective for
fiscal years ending after December 15, 1995. The
adoption of this Statement is not expected to have a
significant impact on the Partnership.
******
-F-8-
<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/ Robert Ledvora
- ----------------------------------------------------
Robert Ledvora
Executive Vice-President and Chief Financial Officer
<PAGE> 27
EXHIBIT INDEX
10(h) Management Contract dated March 8, 1995 between
the Partnership and First October Trading
Company, Inc.
10(i) Management Contract dated March 8, 1995 between
the Partnership and Gandon Fund Management, Ltd.
10(j) Management Contract dated March 8, 1995 between
the Partnership and Telesis Management, Inc.
10(k) Management Contract dated March 8, 1995 between
the Partnership and Michael Tym, Jr.
10(l) Management Contract dated November 1, 1995
between the Partnership, the General Partner
and Hyman Beck & Company, Inc.
10(m) Management Contract dated November 1, 1995
between the Partnership, the General Partner and
Marathon Capital Growth Partners, L.L.C.
10(n) Management Contract dated November 1, 1995
between the Partnership, the General Partner
and RXR, Inc.
10(o) Management Contract dated November 8, 1995
between the Partnership, the General Partner and
Willowbridge Associates, Inc.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10(h)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 8th day of March 1995, by and between The Future Fund II, an
Illinois limited partnership (the "Partnership"), and First October Trading
Company, Inc. (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 Futures Options Portfolio ("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 April 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 acknowledges and agrees that the aggregate
amount of Allocated Assets which the Trading Advisor shall treat as equity and
manage on behalf of the Partnership pursuant to this Agreement may include
"notional" funds. 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 March 3, 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 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.
2
<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
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.
3
<PAGE> 4
(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 $588,347 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 0.166% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Exhibit 2, hereto.
(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 15% of any
New Trading Profits (as defined below) achieved during each calendar 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)
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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 calendar quarter and end on the last day of
such calendar 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 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
Geldermann, Inc. ("Geldermann"), 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 Geldermann 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 Geldermann 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
Geldermann 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
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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
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
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<PAGE> 8
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.
(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
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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 statements
made therein, in light of the circumstances under which they are made, from
being misleading.
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(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.
(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.
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(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.
(k) 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.
(l) 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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19. 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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Ned Bennett, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
First October Trading Company, Inc.
45 Bell Street
Chagrin Falls, Ohio 44022
Attn: Ralph Vince, President
Fax No.: 216-247-0076
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.
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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. 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.
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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.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
FIRST OCTOBER TRADING COMPANY, INC.
By: /s/ Ralph Vince
---------------
Ralph Vince
President
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EXHIBIT 1
March 8, 1995
First October Trading Company, Inc.
45 Bell Street
Chagrin Falls, Ohio 44022
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 March 8, 1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
<PAGE> 1
EXHIBIT 10(i)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 8th day of March 1995, by and between The Future Fund II, an
Illinois limited partnership (the "Partnership"), and Gandon Fund Management
Ltd. (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 Currency Program ("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 March 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 acknowledges and agrees that the aggregate
amount of Allocated Assets which the Trading Advisor shall treat as equity and
manage on behalf of the Partnership pursuant to this Agreement may include
"notional" funds. 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 February 1, 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 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.
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(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
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.
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(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 $618,695 of which
$0 is notional funding.
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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 0.166% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Exhibit 2, hereto.
(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 15% 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)
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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 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
Geldermann, Inc. ("Geldermann"), 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 Geldermann 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 Geldermann 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
Geldermann 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
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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 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
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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.
(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
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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 statements
made therein, in light of the circumstances under which they are made, from
being misleading.
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(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.
(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.
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(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.
(k) 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.
(l) 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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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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Ned Bennett, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
Gandon Fund Management Ltd.
Andersen House
1 Harbour Master Place
International Financial Services Centre
Dublin 1 Ireland
Attn: David Carroll
Fax No.: 01-670-1330
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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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. The failure of a party to insist upon strict
adherence to any provision of this Agreement
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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.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
GANDON FUND MANAGEMENT LTD.
By: /s/ Michael Cullen
------------------
Michael Cullen
Chief Executive
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EXHIBIT 1
March 8, 1995
Gandon Fund Management Ltd.
Andersen House
1 Harbour Master Place
International Financial Services Centre
Dublin 1 Ireland
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 March 8,
1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
<PAGE> 1
EXHIBIT 10(j)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 8th day of March 1995, by and between The Future Fund II,
an Illinois limited partnership (the "Partnership"), and Telesis Management,
Inc. (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 attorney-in-fact, for trading
the Allocated Assets in Contracts and in accordance with the Trading
<PAGE> 2
Advisor's Leveraged Program ("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 April 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 April 17, 1994 (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 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
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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 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
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<PAGE> 4
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 $541,359 of which
$0 is notional funding.
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:
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(i) Management Fee. A monthly management fee equal to 0.166% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Exhibit 2, hereto.
(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 15% 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
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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 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
Geldermann, Inc. ("Geldermann"), 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 Geldermann 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 Geldermann 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
Geldermann 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.
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(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 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
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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.
(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
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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 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.
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(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.
(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
10
<PAGE> 11
herein 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.
(k) 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.
(l) Notwithstanding paragraph (k) of this Section 10, 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.
(m) Notwithstanding paragraph (k) of this Section 10, this Agreement
may be terminated by the Trading Advisor immediately upon written notice to the
Partnership if (i) the General Partner, 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
11
<PAGE> 12
the General Partner or a material adverse change in control, organizational
structure, financial condition, regulatory compliance or personnel of the
General Partner, (ii) any of the General Partner's registrations under the Act
or otherwise are suspended, terminated, lapsed or not renewed, (iii) the
General Partner's membership in the NFA or other self-regulatory organization
is suspended, terminated, lapsed or not renewed, (iv) the General Partner
otherwise becomes unable to serve as a limited partnership to the full extent
contemplated by this Agreement, (v) the General Partner breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement, or (vi) the Trading Advisor determines doing so is in its best
interests.
19. 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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Ned Bennett, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
Telesis Management, Inc.
1236 Coast Village Circle
Suite F
Montecito, California 93108
Attn: Eric Sanborn
Fax No.: 805-565-1905
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.
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<PAGE> 13
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 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.
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<PAGE> 14
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.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
TELESIS MANAGEMENT, INC.
By: /s/ Eric Sanborn
------------------
Eric Sanborn
President
14
<PAGE> 15
EXHIBIT 1
March 8, 1995
Telesis Management, Inc.
1236 Coast Village Circle
Suite F
Montecito, California 93108
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 March 8,
1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
<PAGE> 1
EXHIBIT 10(k)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 8th day of March 1995, by and between The Future Fund II,
an Illinois limited partnership (the "Partnership"), and Michael Tym, Jr. (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 attorney-in-fact, for trading
the Allocated Assets in Contracts and in accordance with the Trading
<PAGE> 2
Advisor's Global A Trading Program ("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 April 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 acknowledges and agrees that the aggregate
amount of Allocated Assets which the Trading Advisor shall treat as equity and
manage on behalf of the Partnership pursuant to this Agreement may include
"notional" funds. 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 February 28, 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 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.
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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
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.
3
<PAGE> 4
(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 $773,369
of which $0 is notional funding.
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<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 0.166% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Section 4 of the
Partnership's Limited Partnership Agreement which is attached as Exhibit 2,
hereto.
(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 15% of
any New Trading Profits (as defined below) achieved during each calendar
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
5
<PAGE> 6
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 calendar quarter-end on the
last day of such calendar 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 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
Geldermann, Inc. ("Geldermann"), 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 Geldermann 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 Geldermann 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
Geldermann 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 indemnifying party or if there be a final judgment for
the plaintiff in any such action or proceeding (of which an indemnifying party
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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.
(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
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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 statements
made therein, in light of the circumstances under which they are made, from
being misleading.
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(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.
(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.
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(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.
(k) 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.
(l) 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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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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Ned Bennett, President
Fax No.: 312-902-6697
If to the Trading Advisor to:
Michael Tym, Jr.
141 West Jackson Boulevard
Suite 1570
Chicago, Illinois 60604
Attn: Michael Tym, Jr.
Fax No.: 312-663-5906
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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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 action 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
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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.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
MICHAEL TYM, JR.
By: /s/Michael Tym, Jr.
-------------------
Michael Tym, Jr.
Sole Proprietor
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EXHIBIT 1
March 8, 1995
Michael Tym, Jr.
141 West Jackson Boulevard
Suite 1570
Chicago, Illinois 60604
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 March 8,
1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Ned W. Bennett
------------------
Ned W. Bennett
President
<PAGE> 1
EXHIBIT 10(l)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of November 1, 1995, by and between The Future Fund II, an
Illinois limited partnership (the "Partnership"), and Hyman Beck & Company,
Inc. (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 attorney-in-fact, for trading
the Allocated Assets in Contracts and in accordance with the Trading
<PAGE> 2
Advisor's Global Portfolio Trading Program ("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 acknowledges and agrees that the aggregate
amount of Allocated Assets which the Trading Advisor shall treat as equity and
manage on behalf of the Partnership pursuant to this Agreement may include
"notional" funds. The General Partner shall inform the Trading Advisor of the
amount of "notional" funds included in Allocated Assets from time to time. 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 August 5, 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 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
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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 Allocated Assets) at any time. 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 the positions held by the
Allocated Assets in accordance with its standard policies and procedures 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 should not, in
the judgement of the Trading Advisor, require any material change in the
Trading Approach and should not, in the judgement of the Trading
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Advisor, 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. The Trading Advisor makes no representation
that the trading to be directed by it on behalf of the Partnership will be
profitable or will not result in losses.
(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 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 funded at less than the Trading Advisor's recommended
minimum account size, 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 client
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
or the performance of proprietary/experimental accounts.
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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. 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 0.166% 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 2.0% annual rate).
The definition of the term "Net Asset Value" is set forth in Section 4 of the
Partnership's Limited Partnership Agreement which is attached as Exhibit 2,
hereto.
(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 15% 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
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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 (or
if there is a withdrawal from the Allocated Assets) 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 (or date of withdrawal) 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 an initial carryforward loss
(constituting a portion of the Partnership's current overall carryforward loss)
equal to $75,000; which carryforward loss shall not exceed 15% of the Allocated
Assets hereunder.
(b) 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 not previously approved by Man in writing 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
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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.
(c) The Trading Advisor must consent to any banks, brokers and
dealers not set forth herein (such consent not to be unreasonably withheld).
The Trading Advisor shall be permitted to trade on a "give-up" basis upon prior
written consent from the Partnership (such consent not to be unreasonably
withheld).
7. STANDARD OF LIABILITY; INDEMNIFICATIONS.
(a) Standard of Liability. The Trading Advisor shall not 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 directly out of, relate directly to, or are
based directly 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,
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<PAGE> 8
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.
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
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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 and does not contain any misstatement of any material fact and
complies in all material respects with the applicable requirements of the Act
and the rules promulgated thereunder (as in effect on the date on which such
Disclosure Document was last filed with the CFTC) including the requirement to
include all material information 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; provided, that, with respect to information concerning the
Trading Advisor, the Partnership and/or the General Partner have determined the
extent of the information regarding the Trading Advisor and its historical
trading performance that is necessary and adequate for inclusion in the
Disclosure Notice.
(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
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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) The information contained in the Disclosure Notice relating to
the Trading Advisor, including, without limitation, the tables and notes
thereto, has been reviewed and approved by the Trading Advisor and is complete
and accurate in all material respects and does not contain any untrue statement
of material fact.
(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, if such action or proceeding might reasonably be
expected to have a materially adverse effect on the Trading Advisor's ability
to comply with or perform its obligations under this Agreement, 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 General
Partner and the Partnership represent and warrant 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,
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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, 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
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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.
(c) The Trading Advisor may terminate this Agreement in its
discretion, (i) upon thirty days' prior written notice to the Partnership in
the event that the trading or accounting policies applicable to the Partnership
as in effect on the date hereof or as amended from time to time in the
reasonable judgment of the Trading Advisor adversely affect the performance of
the Trading Advisor's Trading Approach, (ii) immediately upon written notice to
the Partnership if the Partnership or the General Partner materially breaches
any representation, warranty or covenant or otherwise fails to comply with the
terms of this Agreement, or (iii) upon thirty days' prior written notice to the
Partnership if the Allocated Assets allocated to the Trading Advisor shall be
less than $250,000 (after adding back trading losses in the current quarter and
applicable loss carryforwards).
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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-663-7904
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If to the Trading Advisor to:
Hyman Beck & Company, Inc.
Prudential Business Campus
6 Campus Drive
Parsippany, New Jersey 07054
Attn: Alexander Hyman, President
Fax No.: 201-644-3366
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. 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
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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 action 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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IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
------------------------------
Daniel E. Ragen
President
HYMAN BECK & COMPANY, INC.
By: /s/ Alexander Hyman
------------------------------
Alexander Hyman
Principal
HEINOLD ASSET MANAGEMENT, INC.
By: /s/ Daniel E. Ragen
------------------------------
Daniel E. Ragen
President
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EXHIBIT 1
November 1, 1995
Hyman Beck & Company, Inc.
Prudential Business Campus
6 Campus Drive
Parsippany, New Jersey 07054
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 Management Contract between us
dated November 1, 1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-----------------------------
Daniel E. Ragen
President
<PAGE> 17
ACKNOWLEDGMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of Hyman Beck & Company,
Inc.'s Disclosure Document dated August 5, 1995.
The Future Fund II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-----------------------------
Daniel E. Ragen
President
<PAGE> 1
EXHIBIT 10(m)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of November 1, 1995, by and between The Future Fund II, an
Illinois limited partnership (the "Partnership"), and Marathon Capital Growth
Partners, L.L.C. (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 attorney-in-fact, for trading
the Allocated Assets in Contracts and in accordance with the Trading
<PAGE> 2
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 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
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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 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
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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. 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:
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(i) Management Fee. A monthly management fee equal to 0.166% 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 2% 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 15% 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
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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.
(b) 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.
(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.
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(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 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
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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.
(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
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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 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.
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(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.
(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
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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 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.
19. 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
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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:
Marathon Capital Growth Partners, L.L.C.
67 Mason Street
Greenwich, Connecticut 06830
Attn: Bruce Terry, Managing Director
Fax No.: 203-629-7056
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.
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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. 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.
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<PAGE> 14
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.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.,
General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
MARATHON CAPITAL GROWTH PARTNERS, L.L.C.
By: /s/ Bruce N. Terry
------------------
Bruce N. Terry
Managing Director
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EXHIBIT 1
November 1, 1995
Marathon Capital Growth Partners, L.L.C.
67 Mason Street
Greenwich, Connecticut 06830
Re: Commodity Trading Authorization
Gentlemen:
The Future Fund II, 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 Management Contract between us
dated November 1, 1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.,
General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
<PAGE> 17
ACKNOWLEDGEMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of Marathon Capital Growth
Partners, L.L.C.'s Disclosure Document dated October 9, 1995.
The Futures Fund II
By: Heinold Asset Management, Inc.
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
Dated: November 1, 1995
<PAGE> 1
EXHIBIT 10(n)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 1st day of November 1995, by and among The Futures Fund II,
an Illinois limited partnership (the "Partnership"), Heinold Asset Management,
Inc., a Delaware corporation and the general partner of the Partnership (the
"General Partner") and RXR, Inc. (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 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 Trading Program ("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 acknowledges and agrees that the aggregate
amount of Allocated Assets which the Trading Advisor shall treat as equity and
manage on behalf of the Partnership pursuant to this Agreement may include
"notional" funds. 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 November 1, 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 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 which consent shall not be unreasonably withheld. Non-material
changes in the Trading Approach may be instituted without prior written
approval. Changes in Contracts traded pursuant
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<PAGE> 3
to the Trading Approach shall be considered non-material changes in the
Trading Approach; however, the Trading Advisor agrees to notify the General
Partner of such changes in Contracts within three business days of such change.
(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 systems, strategies, methods and programs.
(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; provided, that the
General Partner shall use its best efforts to do so only at calendar
month-ends. 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; provided, that the General Partner shall use its best efforts to do
so only at calendar month-ends.
(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
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<PAGE> 4
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 client or account and that it will not knowingly or
deliberately favor any client or account managed by it on an overall basis 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 differing fee and expense
structures, accounts which have different portfolios or different fiscal years
and accounts with other differences, and that such differences may cause
divergent trading results; provided, that the Partnership hereby acknowledges
that the Trading Advisor offers trading programs other than the Trading
Approach selected by the Partnership and that such other trading programs may
obtain more favorable results than the Trading Approach.
(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 on an overall basis 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
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<PAGE> 5
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. 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 0.16% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Section 4 of the
Partnership's Limited Partnership Agreement which is attached as Exhibit 2,
hereto.
(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 15% 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.
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<PAGE> 6
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. For purposes of calculating the
first incentive fee, the Trading Advisor hereby agrees that it shall assume an
initial carryforward loss equal to $75,000.
(b) 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
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<PAGE> 7
the Trading Advisor's various accounts and not knowingly favor any other such
account on an overall basis 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) any material 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
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<PAGE> 8
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.
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,
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<PAGE> 9
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, conforms to the requirements of Part 4 of the Act 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 in all material respects 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.
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<PAGE> 10
(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 on an overall basis 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 General
Partner and 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 enter into and perform its obligations under
this Agreement and to conduct its business and to act as described in the
Disclosure Notice. The Partnership 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 the 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 Partnership shall conduct its
business is within the sole discretion of the Partnership.
(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. 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 Partnership's certificate of limited partnership or its
limited partnership agreement or of any indenture, mortgage, deed of trust,
loan agreement, or other agreement or instrument to which the Partnership is a
party or by which it is bound, or to which any of the property or assets of the
Partnership are subject, or any order, rule, law, statute, regulation, or other
legal requirement applicable to the Partnership or to the property or assets of
the Partnership 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 Partnership.
10
<PAGE> 11
(c) The Partnership has complied and will continue to comply in all
material respects 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 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. The Disclosure
Notice complies in all material respects with the Act and the rules and
regulations promulgated thereunder by the CFTC.
(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 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 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.
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<PAGE> 12
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 or the
Trading Advisor terminates this Agreement during the initial one-year term
thereof by giving thirty days' prior written notice to the other parties
hereto, 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 the other parties hereto.
(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.
(c) Notwithstanding the foregoing, this Agreement may be terminated
by the Trading Advisor immediately upon written notice to the Partnership if
the General Partner's registration under the Act or otherwise is suspended,
terminated, lapsed or not renewed.
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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-663-7904
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<PAGE> 13
If to the Trading Advisor to:
RXR, Inc.
Financial Centre
695 East Main Street
Suite 102
Stamford, Connecticut 06901
Attn: Mark Rosenberg, President
Fax No.: 203-325-5999
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. 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
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<PAGE> 14
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. Except as set forth in Section 18
above, 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 action 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> 15
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
HEINOLD ASSET MANAGEMENT, INC.
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
RXR, INC.
By: /s/ Mark Rosenberg
------------------
Mark Rosenberg
President
15
<PAGE> 16
EXHIBIT 1
November 1, 1995
RXR, Inc.
Financial Centre
695 East Main Street
Suite 102
Stamford, Connecticut 06901
Re: Commodity Trading Authorization
-------------------------------
Gentlemen:
The Future Fund II, 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 Management Contract between us
dated November 1, 1995.
Very truly yours,
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
<PAGE> 1
EXHIBIT 10(o)
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT ("Agreement"), is made and entered into
effective as of the 8th day of November 1995, by and between The Future Fund
II, an Illinois limited partnership (the "Partnership"), Heinold Asset
Management, Inc., a Delaware corporation and Willowbridge Associates Inc., a
Delaware corporation (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 Select Investment Program utilizing the
Argo Trading 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 June 30, 1995 (the "Disclosure Document"),
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) Subject to receipt of adequate assurances of confidentiality, the
Trading Advisor agrees, upon request, 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 in writing by the
General Partner.
(d) The General Partner 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. Other than
"give-up" agreements with executing brokers approved by the General Partner,
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. The General Partner will cause the
Partnership's commodity broker to provide the Trading Advisor with copies of
all confirmation, purchase and sale, monthly and similar statements at the time
such statements are available to the General Partner.
(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
2
<PAGE> 3
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; provided, that, the General Partner and the Partnership shall not
distribute any Disclosure Notice relating to the appointment of the Trading
Advisor as a commodity trading advisor of the Partnership or other description
of the Trading Advisor, its Principals and Affiliates or its or their trading
performance without the prior written consent of the Trading Advisor. Within
three business days following receipt of such description, the Trading Advisor
shall provide the General Partner in writing, any changes thereto and shall
review and approve such changes prior to its distribution. The Trading Advisor
shall review and provide any revised description within two business days.
Failure to respond to any revised description of the Trading Advisor within
three business days shall constitute the Trading Advisor's consent to such
distribution. Nothing contained in this Agreement shall be construed or deemed
to require the Trading Advisor to disclose the identity of customers or any
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; provided, however, the
Trading Advisor may terminate this Agreement in the event that the Allocated
Assets total less than U.S. $180,000.
(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 upon two days' written
notice to the Trading Advisor. 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 upon two days' written
notice to the Trading Advisor, remove all assets from the management of the
Trading Advisor and may require the Trading Advisor to liquidate existing
positions.
(i) Upon receipt of written 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.
3
<PAGE> 4
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-five percent (95%) 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 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 and that accounts may have different trading policies, different
inflows or outflows of equity, commence trading at different times, different
fee structures, different portfolios, different fiscal years and other
differences, and that such differences may cause divergent trading results.
The Partnership and the General Partner acknowledge, however, that if the
Allocated Assets are less than U.S.$1,000,000, the Trading Advisor may not be
able to trade the full Argo Trading System for the Partnership. As a result,
the Partnership's trading performance may be different from the other accounts
traded pursuant to the Argo Trading System.
(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.
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(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 or the
performance of proprietary accounts.
3. ALLOCATION OF ASSETS TO THE TRADING ADVISOR. The Trading
Advisor's Allocated Assets initially shall be a total of approximately U.S.
$1,500,000 of which U.S. $0 is notional funding.
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 0.166% 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 2% annual rate). The
definition of the term "Net Asset Value" is set forth in Section 4 of the
Partnership's Limited Partnership Agreement which is attached as Exhibit 2,
hereto.
(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, redemptions or reallocations 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 15% 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
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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. For purposes of calculating the first incentive
fee, the Trading Advisor hereby agrees that it shall assume an initial
carryforward loss (constituting a portion of the Partnership's current overall
carryforward loss) equal to $187,500; which carryforward loss shall not exceed
12.5% of the Allocated Assets hereunder.
(b) 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
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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 in writing 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 material breach of any of the
representations, warranties, covenants or agreements of the Trading Advisor set
forth in this Agreement; it being understood that Contract transactions made by
the Trading Advisor on behalf of the Partnership shall be for the account of
the Partnership and the risk of the Partnership. The General Partner
acknowledges that the Trading Advisor makes no guarantee of profits or of
protection against losses.
(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
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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, arbitrator, or administrative forum, 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.
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
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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 or on a CFTC Form
3-R filed subsequently, 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, except as
disclosed in writing to the General Partner.
(g) The Trading Advisor and each Principal has complied and will
continue to comply in all material respects 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, to their knowledge,
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
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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 specifically approved for use in the Disclosure
Notice by the Trading Advisor in writing, 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. Within three business days following receipt of
the Disclosure Notice, the Trading Advisor shall provide the General Partner in
writing, any changes thereto and shall review and approve such changes prior to
its distribution. The Trading Advisor shall review and provide any revised
description within two business days. Failure to respond to any revised
description of the Trading Advisor within three business days shall constitute
the Trading Advisors consent to distribution of the Disclosure Notice.
(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 on an overall basis 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 material 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 and the General Partner each represent and warrant 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 and 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. The Partnership
is qualified to conduct its business and is in good standing
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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 Partnership shall conduct its business is within the
sole discretion of the Partnership.
(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 in all
material respects 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 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 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
Partnership's certificate of incorporation, or other charter documents, or any
indenture, mortgage, deed of trust, loan agreement, or other agreement or
instrument to which the Partnership is a party or by which it is bound, or to
which any of the property or assets of the Partnership is subject, or any
order, rule, law, statute, regulation, or other legal requirement applicable to
the Partnership or to the property or assets of the Partnership 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
Partnership.
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(g) The General Partner is registered as a commodity pool operator
under the Act, its Principals are identified on the General Partner's most
recent CFTC Form 7-R filed with the NFA pursuant to the Act or on a CFTC Form
3-R filed subsequently, 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.
(h) The General Partner and each Principal 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.
(i) The General Partner shall promptly notify the other parties
hereto of the commencement of any material 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 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. The parties shall use best efforts to
terminate this Agreement at month-end.
(b) Notwithstanding paragraph (a) of this Section 10, 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 key personnel of the
Trading Advisor, (ii) any of the Trading Advisor's registrations under the Act
are suspended, terminated, lapsed or not renewed, (iii) the Trading Advisor's
membership in the NFA 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 materially
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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(c) Notwithstanding paragraph (a) of this Section 10, this Agreement
may be terminated by the Trading Advisor immediately upon written notice to the
Partnership if (i) the General Partner, 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
General Partner or a material adverse change in control, organizational
structure, financial condition, regulatory compliance or key personnel of the
General Partner, (ii) any of the General Partner's registrations under the Act
are suspended, terminated, lapsed or not renewed, (iii) the General Partner's
membership in the NFA is suspended, terminated, lapsed or not renewed, (iv) the
General Partner otherwise becomes unable to serve as general partner of the
Partnership to the full extent contemplated by this Agreement, (v) the General
Partner materially breaches any of its representations, warranties, covenants
or agreements contained in this Agreement, (vii) the Allocated Assets total
less than U.S.$180,000, (vii) the Trading Advisor's license agreement with
Caxton Corporation is terminated, or (viii) the Trading Advisor determines
doing so is in the best interests of the Partnership.
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 Plaza
440 South LaSalle Street
Chicago, Illinois 60605
Attn: Daniel E. Ragen, President
Fax No.: 312-663-7904
If to the Trading Advisor to:
Willowbridge Associates Inc.
101 Morgan Lane
Suite 180
Plainsboro, New Jersey 08536
Attn: Theresa C. Morris, Vice President
Fax No.: 609-936-9088
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.
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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 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
14
<PAGE> 15
to seek to change the situs of such action or to assert that any other
court in any such action 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 or expiration; 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.
23. CONFIDENTIALITY. Nothing in this Agreement shall require the
Trading Advisor to disclose the details of its trading systems, methods,
models, strategies and formulas. The General Partner and the Partnership
acknowledge that the trading systems, methods, models, strategies and formulas
of the Trading Advisor are the sole and exclusive property of the Trading
Advisor. The General Partner and the Partnership further agree that it will
each keep confidential and will not disseminate information regarding such
systems, methods, models, strategies and formulas to any person; provided,
however, such restrictions shall not apply to information which (a) is or
becomes generally available to the public other than as a result of disclosure
by the General Partner or the Partnership, (b) was available to the General
Partner or the Partnership on a non-confidential basis prior to its disclosure
by the Trading Advisor, or (c) becomes available to the General Partner or the
Partnership on a non-confidential basis from a person other than the Trading
Advisor, unless such information was specifically provided to the General
Partner or the Partnership on a confidential basis.
15
<PAGE> 16
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
THE FUTURE FUND II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
HEINOLD ASSET MANAGEMENT, INC.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
WILLOWBRIDGE ASSOCIATES INC.
By: /s/ Theresa C. Morris
---------------------
Theresa C. Morris
Vice President
16
<PAGE> 17
EXHIBIT 1
November 7, 1995
Willowbridge Associates Inc.
101 Morgan Lane
Suite 180
Plainsboro, New Jersey 08536
Re: Commodity Trading Authorization
-------------------------------
Ladies and Gentlemen:
The Future Fund II, 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 and spot contracts, and any other items which are
currently, or may later become, the subject of futures, forward, spot or
options trading, and other related investments on domestic and international
exchanges and markets, through E.D. & F. Man International Inc., or such other
brokers and forward or spot 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 November 8, 1995.
Very truly yours,
The Future Fund II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
<PAGE> 18
ACKNOWLEDGMENT OF RECEIPT
OF DISCLOSURE DOCUMENT
The undersigned hereby acknowledges receipt of Willowbridge Associates
Inc.'s Disclosure Document dated June 30, 1995.
The Future Fund II
By: Heinold Asset Management, Inc.
Its General Partner
By: /s/ Daniel E. Ragen
-------------------
Daniel E. Ragen
President
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1994
<PERIOD-START> OCT-31-1994 OCT-31-1993
<PERIOD-END> OCT-31-1995 OCT-31-1994
<CASH> 272,798 152,071
<RECEIVABLES> (70,634) 90,754
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 2,900,726 4,134,508
<PP&E> 0 0
<TOTAL-ASSETS> 3,102,890 4,377,333
<SHORT-TERM> 0 0
<PAYABLES> 45,395 131,862
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 3,057,495 4,245,471
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 3,102,890 4,377,333
<TRADING-REVENUE> (539,516) (954,979)
<INTEREST-DIVIDENDS> 192,864 170,686
<COMMISSIONS> (251,724) (473,733)
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> (87,633) (21,517)
<INCOME-PRETAX> 0 0
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (686,009) (1,279,543)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
