SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995
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Commission File Number 33-13008
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ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
- ----------------------------------------------
(Exact name of registrant)
Delaware 75-2197831
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(State of Organization) (I.R.S.Employer Identification No.)
ATA Research, Inc. ProFutures, Inc.
5910 N. Central Expressway 1310 Highway 620
Suite 1520 Suite 200
Dallas, Texas 75206 Austin, Texas 78734
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(Address of principal executive offices)
Registrant's telephone numbers
(214) 891-6200 (800) 348-3601
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Indicate by check mark whether the registrant (1) has 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
STATEMENTS OF FINANCIAL CONDITION
March 31, 1995 (Unaudited) and December 31, 1994 (Audited)
1995 1994
ASSETS
Cash and cash equivalents $ 65,982,660 $ 68,520,482
Net option premiums paid
forward contracts 2,268,958 4,199,010
Unrealized gain on open
forward contracts 636,286 248,843
Accounts receivable 5,753 0
------------ ------------
68,893,657 72,968,335
------------ ------------
Equity in broker trading accounts
Cash 25,670,712 19,705,053
Net option premiums paid 588,382 662,279
Unrealized gain on open contracts 5,309,237 4,317,622
------------ ------------
Deposits with brokers 31,568,331 24,684,954
------------ ------------
Total assets $100,461,988 $ 97,653,289
============ ============
LIABILITIES
Accounts payable $ 31,958 $ 26,602
Administrative charge payable 62,335 0
Commissions and other trading fees
on open contracts 137,284 164,705
Incentive fees payable 1,344,748 1,024,388
Management fees payable 699,491 501,723
Redemptions payable 1,517,742 774,341
------------ ------------
Total liabilities 3,793,558 2,491,759
------------ ------------
PARTNERS' CAPITAL (Net Asset Value)
General Partners - 574.1020 units
outstanding at March 31, 1995
and December 31, 1994 1,076,665 1,079,392
Limited Partners - 50,971.7590 and
50,039.9594 units outstanding
at March 31, 1995 and
December 31, 1994 95,591,765 94,082,138
------------ ------------
Total partners' capital
(Net Asset Value) 96,668,430 95,161,530
------------ ------------
$100,461,988 $ 97,653,289
============ ============
See accompanying notes.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
Three Months Ended
March 31,
1995 1994
INCOME
Trading gains (losses)
Realized $ 649,974 $(4,290,207)
Change in unrealized 1,379,058 (665,325)
----------- -----------
Gain (loss) from trading 2,029,032 (4,955,532)
Interest income 1,256,279 766,804
----------- -----------
Total income (loss) 3,285,311 (4,188,728)
----------- -----------
EXPENSES
Brokerage commissions 696,273 520,962
Other trading fees 4,643 6,598
Management fees 1,314,547 1,157,132
Incentive fees 1,344,748 237,212
Operating expenses 135,899 155,674
----------- -----------
Total expenses 3,496,110 2,077,578
----------- -----------
NET (LOSS) $ (210,799) $(6,266,306)
=========== ===========
NET (LOSS) PER UNIT
(based on weighted average number of
units outstanding during the period) $(4.14) $(117.84)
======= =========
(DECREASE) IN NET ASSET
VALUE PER UNIT $(4.75) $(117.93)
======= =========
See accompanying notes.
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
<CAPTION>
General Limited
Partners Partners Total
------------------ -------------------- --------------------
Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 574 $1,079,392 50,040 $94,082,138 50,614 $95,161,530
Net (loss) for the
three months ended
March 31, 1995 (2,727) (208,072) (210,799)
Additions 0 0 3,366 6,233,534 3,366 6,233,534
Administrative charge 0 (62,335) (62,335)
Redemptions 0 0 (2,434) (4,453,500) (2,434) (4,453,500)
----- ---------- ------ ----------- ------ -----------
Balances at
March 31, 1995 574 $1,076,665 50,972 $95,591,765 51,546 $96,668,430
===== ========== ====== =========== ====== ===========
Balances at
December 31, 1993 571 $1,078,359 52,573 $99,341,520 53,144 $100,419,879
Net (loss) for the
three months ended
March 31, 1994 (67,281) (6,199,025) (6,266,306)
Additions 2 3,500 2,298 4,098,236 2,300 4,101,736
Administrative charge (35) (40,982) (41,017)
Redemptions 0 0 (2,342) (4,137,381) (2,342) (4,137,381)
----- ---------- ------ ----------- ------ -----------
Balances at
March 31, 1994 573 $1,014,543 52,529 $93,062,368 53,102 $94,076,911
===== ========== ====== =========== ====== ===========
</TABLE>
See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
ATA Research/ProFutures Diversified Fund, L.P. (the Partnership)
is a Delaware limited partnership which operates as a
commodity investment pool.
B. Regulation
As a registrant with the Securities and Exchange Commission,
the Partnership is subject to the regulatory requirements
under the Securities Acts of 1933 and 1934. As a commodity
investment pool, the Partnership is subject to the
regulations of the Commodity Futures Trading Commission, an
agency of the United States government which regulates most
aspects of the commodity futures industry, rules of the
National Futures Association, an industry self-regulatory
organization, and the requirements of commodity exchanges and
Futures Commission Merchants (brokers) through which the
Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in
accordance with generally accepted accounting principles.
Gains or losses are realized when contracts are liquidated.
Unrealized gains or losses on open contracts (the difference
between contract purchase price and market price) at the date
of the statement of financial condition are included in
equity in broker trading accounts. Any change in net
unrealized gain or loss from the preceding period is reported
in the statement of operations.
D. Brokerage Commissions
Brokerage commissions and other trading fees are charged to
expense when contracts are opened.
E. Income Taxes
The Partnership prepares calendar year U.S. and state
information tax returns and reports to the partners their
allocable shares of the Partnership's income, expenses and
trading gains or losses.
F. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term
investments in fixed income securities.
G. Syndication Costs
The Partnership, the General Partners and/or the brokers
advance syndication costs for the purpose of funding the
offering of Units. In order to reimburse the Partnership,
the General Partners and/or the brokers for such syndication
costs, each investor in the Partnership pays an
administrative charge of 1% of their investment upon entering
the Partnership.
H. Foreign Currency Transactions
The Partnership's functional currency is the United States
(U.S.) dollar; however, it transacts business in currencies
other than the U.S. dollar. Assets and liabilities
denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the
date of the statement of financial condition. Income and
expense items denominated in currencies other than the U.S.
dollar are translated into U.S. dollars at the rates in
effect during the period. Gains and losses resulting from
the translation to U.S. dollars are reported in income
currently.
Note 2. DEPOSITS WITH BROKERS
The Partnership deposits funds with brokers subject to Commodity
Futures Trading Commission and various exchange regulations on
minimum deposits. Margin requirements are satisfied by the
deposit of cash with such brokers. The Partnership earns interest
income on its assets deposited with the brokers.
The Commodity Exchange Act requires a broker to segregate all
customer's regulated futures transactions from such broker's
proprietary funds. A customer's cash and other property deposited
with a broker (for example, U.S. Treasury bills) are considered
co-mingled with all other funds subject to the broker's
segregation requirements. In the event of a broker's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less
than total cash and other property deposited.
Note 3. GENERAL PARTNERS
The General Partners of the Partnership are ATA Research, Inc. and
ProFutures, Inc., which conduct and manage the business of the
Partnership. The Agreement of Limited Partnership requires the
General Partners to contribute to the Partnership an amount in the
aggregate equal to the greater of $100,000 or 1% of the aggregate
initial capitalization of the Partnership. As of March 31, 1995,
the General Partners and their principals have contributed
$926,500 to the Partnership.
The Agreement of Limited Partnership also requires that the
General Partners maintain in the aggregate a net worth not less
than the sum of (i) the lesser of $250,000 or 15% of the aggregate
capital contributions of any limited partnerships for which they
act as a General Partner if such contributions are equal to or
less than $2,500,000 and (ii) 10% of the aggregate capital
contributions of any limited partnerships for which they shall act
as a general partner if such contributions exceed $2,500,000.
ProFutures, Inc. has callable subscription agreements with
Internationale Nederlanden (U.S.) Derivatives Clearing, Inc.
(ING), formerly Quantum Financial Services, Inc., the
Partnership's primary broker, whereby ING agrees to purchase or
subscribe, up to $19,000,090, for the number of shares of common
stock of ProFutures, Inc. necessary to maintain the general
partner net worth requirements.
A monthly management fee is paid by the Partnership to each
General Partner. ATA Research, Inc. receives 1/12 of 1% of month-
end Net Asset Value (approximately 1% annually) and ProFutures,
Inc. receives 1/4 of 1% of month-end Net Asset Value
(approximately 3% annually).
Note 4. COMMODITY TRADING ADVISORS
The Partnership has trading management contracts with several
commodity trading advisors, pursuant to which the Partnership
pays selected advisors a quarterly incentive fee ranging from
17.5% to 29% of excess cumulative Trading Profits (as defined in
the Prospectus) and an advisory fee ranging from 0% to 2.8%
(annually) of Allocated Net Asset Value (as defined in the
Prospectus).
Note 5. OPERATING EXPENSES
All operating expenses of the Partnership are paid by the
Partnership. The General Partners are not reimbursed for indirect
expenses incurred in performing services for the Partnership and
other items generally falling within the category of overhead.
The General Partners may be reimbursed for the actual costs of
legal, accounting and auditing services used for or by the
Partnership, as well as printing and filing fees and extraordinary
expenses incurred for or by the Partnership.
Note 6. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partners.
The Partnership is not required to make distributions, but may do
so at the sole discretion of the General Partners. A Limited
Partner may request and receive redemption of units owned, subject
to restrictions in the Agreement of Limited Partnership.
Note 7. MARKET AND CREDIT RISK
The Partnership engages in the speculative trading of futures and
option contracts. Purchase and sale of such contracts requires a
deposit of money (margin) in a segregated account at the broker.
Additional deposits may be necessary for any loss on contract
value. The Partnership is able to acquire (or sell) contracts by
depositing only a small portion of the total contract value. The
ability to control large dollar amounts of contracts with a
comparatively small amount of capital (leverage) results in a
minor price change causing a major gain or loss on contract value.
Theoretically, the Partnership is exposed to a market risk (loss)
equal to the value of contracts purchased and unlimited liability
on contracts sold short. However, the Partnership intends to
close all contracts prior to maturity and not receive or pay the
contract value. Open contracts at March 31, 1995 and December
31,1994 are marked-to-market and included in the statement of
financial condition and the change in value from the preceding
period is reported in the statement of operations.
As a writer of options, the Partnership received a premium at the
outset and then bears the risk of unfavorable changes in the price
of the contract underlying the option.
As of March 31, 1995 and December 31, 1994, the notional amount of
contracts to purchase totalled approximately $1,195,400,000 and
$684,000,000, respectively, and the notional amount of contracts
to sell totalled approximately $888,300,000 and $833,000,000,
respectively. These amounts include both financial and non-
financial contracts held as part of a diversified trading
strategy.
As a buyer of options, the Partnership paid a premium at the
outset and then bears the risk of unfavorable changes in the price
of the contract underlying the option. The Partnership's risk of
loss is limited to the premiums paid which amounted to
approximately $26,084,358 at March 31, 1995. At March 31, 1995,
the notional amount of contracts underlying the options to
purchase totalled approximately $239,000,000 and the
notional amount of contracts underlying the options to sell
totalled approximately $230,300,000.
A portion of the Partnership's assets are on deposit with a broker
and dealer in securities. In the event of a broker and dealer's
insolvency, recovery of Partnership assets on deposit may be
limited to account insurance or other protection afforded such
deposits. In the normal course of business, the Partnership does
not require collateral from the broker and dealer.
The Partnership trades forward contracts in unregulated markets
between principals and assumes the risk of loss from counterparty
non-performance.
The General Partners have established procedures to actively
monitor and minimize market and credit risk. The Limited Partners
bear the risk of loss only to the extent of the market value of
their respective investments and, in certain specific
circumstances, distributions and redemptions received.
Note 8. DERIVATIVE FINANCIAL INSTRUMENTS
The futures, options and forward contracts traded by the
Partnership constitute derivative financial instruments, that is,
their value is derived from the underlying commodity, financial
instrument or other indicator. The average fair value of
derivative financial instruments during the three months ended
March 31, 1995 and the fair value as of March 31, 1995 are as
follows:
Assets Liabilities
Average during the three months ended
March 31, 1995 $18,500,000 $(12,200,000)
Fair value as of March 31, 1995 $27,600,000 $(18,800,000)
Net trading income (loss) from derivative financial instruments is
reported on the statement of operations as gain (loss) from
trading. Such gain (loss) from trading reflects the net gain
(loss) arising from the Partnership's speculative trading of
futures and forward contracts and options thereon.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
A. LIQUIDITY: The Registrant is very liquid in that it holds
its assets in cash or near cash investments.
B. CAPITAL RESOURCES: The Registrant has filed several
Registration Statements with the Securities and Exchange
Commission for the sale of Units of Limited Partnership
Interest. The latest offering of $38,547,364 of Units
became effective July 31, 1994. This offering was extended
on January 31, 1995 to continue through April 30, 1995.
As of March 31, 1995, 51,545.8610 Units are outstanding,
including 574.1020 General Partner Units, with an aggregate
Net Asset Value of $96,668,430 ($1,875.39 per Unit).
C. RESULTS OF OPERATIONS: The Registrant commenced commodity
trading during August, 1987. For the years ended December
31, 1992, 1993 and 1994, the Registrant realized net income
(loss) of $1,646,961, $2,169,428 and $(651,490), respectively.
For the three months ended March 31, 1995 the Registrant had a
net loss of $210,799. There are no unusual or infrequent events
which materially affected the Registrant's operations.
Due to the speculative nature of trading commodity interests,
the Registrant's income or loss from operations may vary widely
from period to period.
D. POSSIBLE CHANGES: The General Partners reserve the right to
terminate some and/or engage additional commodity trading
advisors or change any of the Registrant's clearing arrangements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits previously filed, as enumerated in Post-effective
Amendment No. 2, dated June 30, 1994, Prospectus dated July
31, 1994 and Supplement thereto dated January 31, 1995, are
incorporated herein by reference.
Exhibits filed herewith:
10.3(h)(2) Amendment dated February 28, 1995 to Advisory
Contract dated March 11, 1992 between the
Registrant and Luck Trading Company (BVI), Inc..
10.3(x) Advisory Contract between the Registrant and
Niederhoffer Investments, Inc.
10.3(y) Advisory Contract between the Registrant and
Rabar Market Research, Inc.
10.3(z) Advisory Contract between the Registrant and
Considine Trading Corp.
There were no reports filed on Form 8-K.
SIGNATURES
Pursuant to the requirements 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.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
(Registrant)
Date: May 11, 1995 Aladin T. Abughazaleh, President
ATA Research Inc., General Partner
ATA Research/ProFutures Diversified Fund, L.P.
Date: May 11, 1995 Gary D. Halbert, President
ProFutures, Inc., General Partner
ATA Research/ProFutures Diversified Fund, L.P.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
FOURTH AMENDMENT TO ADVISORY CONTRACT
This FOURTH AMENDMENT TO ADVISORY CONTRACT (the "Amendment"), is
dated as of February 28, 1995, by and among ATA RESEARCH/PROFUTURES
DIVERSIFIED FUND, L.P., a Delaware limited partnership (the "Fund"),
its general partners, ATA RESEARCH, INC. and PROFUTURES, INC. (the
"General Partners"), and LUCK TRADING COMPANY (BVI), INC., a British
Virgin Islands corporation (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Fund, the General Partners and the Advisor (as
assignee to Luck Trading Company, Inc.) entered into an Advisory
Contract, dated March 11, 1992, as amended by a First Amendment to
Advisory Contract, dated August 26, 1994, Second Amendment to Advisory
Contract, dated December 3, 1993 and Third Amendment to Advisory
Contract, dated April 1, 1994 (collectively, the "Agreement"),
pursuant to which the Advisor renders and implements commodity trading
advisory services for the Fund in connection with the Fund's commodity
trading activities;
WHEREAS, the parties hereto desire to enter in this Amendment in
order to reflect an additional trading program traded on behalf of the
Fund.
NOW, THEREFORE, the parties agree to add the following provisions
to the Agreement:
200. Trading Program. The Fund and Advisor hereby acknowledge
that, effective on the date hereof, the Fund's account (the "forex
account") is being traded pursuant to Computerized Currency Trading
Program (in addition to the Advisor's Computerized Trading Program),
and that the forex account may be the subject of notional funding
under this Agreement.
201. Funded Account Status Reports. As of the date hereof, the
Fund's forex account is actually funded with cash and/or other margin-
qualified assets totaling approximately $2,000,000. The Fund shall
provide to the Advisor monthly account statements and/or such other
information the Fund deems sufficient to confirm the funded status of
the forex account so long as margin-qualified assets are not actually
deposited in such account.
202. Nominal Account Size. As of the date hereof, the forex
account shall be traded by the Advisor at a nominal account size (the
"Nominal Account Size") of $2,000,000. The Nominal Account Size shall
be increased by profits and decreased by losses in the forex account,
but not by additions to or withdrawals of actual funds from the forex
account. Accordingly, any actual funds deposited or withdrawn shall
represent an adjustment in actual funds deposited and not in the
Nominal Account Size. For purposes of determining profits and losses,
and thereby adjusting the Nominal Account Size, all items of income
and expense shall be taken into account on the accrual basis in
accordance with generally accepted accounting principles.
The terms and conditions of the Agreement, as amended by this
Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, this Fourth Amendment to Advisory Contract has
been executed for and on behalf of the undersigned as of the day and year
first above written.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
ATA Research, Inc., a co-General Partner
By: /s/ Marte W. Anderson
Vice President
ProFutures, Inc., a co-General Partner
By: /s/ Gary Halbert
President
LUCK TRADING COMPANY, INC.
By: /s/ Henry Luk
President
LUCK TRADING COMPANY (BVI), INC.
By: /s/ Henry Luk
President
ACKNOWLEDGED:
ATA RESEARCH, INC.
By: /s/ Marte W. Anderson
Vice President
PROFUTURES, INC.
By: /s/ Gary Halbert
President
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
ADVISORY CONTRACT
This ADVISORY CONTRACT (the "Agreement") is made as of the 28th
day of February, 1995, by and among ATA RESEARCH/PROFUTURES
DIVERSIFIED FUND, L.P., a Delaware limited partnership (the "Fund"),
its general partners, ATA RESEARCH, INC., a Texas corporation, and
PROFUTURES, INC., a Texas corporation (collectively the "General
Partners"), and NIEDERHOFFER INVESTMENTS, INC. (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Fund is a limited partnership organized for the
purpose of buying, selling, trading and generally dealing in commodity
futures and options contracts and other commodity interests,
including forward contracts on foreign currency ("commodity
interests");
WHEREAS, the Fund has been offering its Units of Limited
Partnership Interest pursuant to the Fund's July 31, 1994 prospectus,
as now or hereafter amended or supplemented (the "Prospectus"), in
connection with its Form S-1 Registration Statement declared effective
on July 31, 1994, under the Securities Act of 1933, as amended (the
"Securities Act"), and any amendments thereto (the "Registration
Statement");
WHEREAS, the Fund is fully cognizant of the high risks involved
in highly leveraged commodity speculation;
WHEREAS, the General Partners are, pursuant to the Fund's
Agreement of Limited Partnership, authorized to utilize the services
of one or more professional trading advisors and consultants in
connection with the trading activities of the Fund; and
WHEREAS, the parties wish to enter into this Agreement in order
to set forth the terms and conditions upon which the Advisor will
render and implement trading advisory services for the Fund.
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR.
Upon execution of this Agreement, the Advisor shall have sole
authority and responsibility for directing, independently of any other
trading advisors retained by the Fund, the investment and reinvestment
of the Nominal Account Size (as defined in Exhibit B) for trading
commodity interests pursuant to the Advisor's general trading program.
For these purposes, the Fund account is a separate account
established for the Fund with a futures commission merchant(s),
bank(s), dealer(s) or other broker(s) (hereinafter, each a "Clearing
Broker") holding the assets allocated to the Advisor for the
Advisor's management hereunder.
The Fund and Advisor hereby acknowledge that the Fund's account
is being traded pursuant to Advisor's general trading program, and
that such account may be the subject of notional funding under this
Agreement. The Advisor will direct the trading of the Nominal Account
Size in accordance with the written trading policies provided to the
Advisor (as they may be amended from time to time) and any written
instructions given to the Advisor from the General Partners. The
Advisor may only depart from such current trading policies or
instructions provided in writing to the Advisor with the prior written
consent of the General Partners. It is understood that the General
Partners, and not the Advisor, have overall responsibility for
monitoring the Fund's and the trading advisors' compliance in the
aggregate for all of the Fund's advisors with the Fund's trading
policies.
All purchases and sales of commodity interests shall be for the
account and at the risk of the Fund. All commissions and expenses
arising from the trading of, or other transactions in the course of
the administration of, the Fund's account shall be charged to the
Fund. The Fund shall deliver to the Advisor a Commodity Trading
Authorization (see attached Exhibit A) appointing the Advisor the
Fund's agent and attorney-in-fact with respect to the Fund's trading
account directed by such Advisor. However, it is expressly agreed
that, in the event the General Partners shall, in their sole
discretion, using their prudent business judgment, determine that any
trading instructions issued by the Advisor violate the Fund's trading
policies, then the General Partners may negate such Advisor's trading
instructions.
The Advisor is not responsible for the execution or clearance of
the Fund's trades. The Advisor shall not be liable to the Fund or the
General Partners for any errors or omissions by any Clearing Broker.
The Advisor shall, however, use the Advisor's best efforts to notify
the General Partners and the Clearing Broker of any order or trade
which the Advisor reasonably believes was not executed in accordance
with the Advisor's instructions to such Clearing Broker.
Prior to the date of this Agreement, the Advisor has delivered
the Advisor's October 28, 1994 disclosure document (the "Disclosure
Document") conforming in all material respects to the rules adopted
under the Commodity Exchange Act, as amended (the "CEA"). Receipt of
such Disclosure Document is hereby acknowledged.
The Advisor has not alone or in conjunction with the General
Partners been an organizer or a promoter of the Fund, nor is the
Advisor a partner, joint venturer or agent of any other trading
advisor engaged by the Fund.
2. ALLOCATION AND REALLOCATION OF ASSETS; DESIGNATION OF
ADDITIONAL TRADING ADVISORS.
The Fund's account with the Advisor shall initially be funded
with cash and/or other margin-qualified assets totaling $10 million,
which shall be traded at a level equal to the Nominal Account Size.
The Fund shall provide to the Advisor monthly account statements
and/or such other information the Fund deems sufficient to confirm the
funded status of the account so long as margin-qualified assets are
not actually deposited with the Clearing Broker.
Subject to the first paragraph in Section 1 hereof, the General
Partners may in the near future, at any time and from time to time:
(a) subject to the Advisor's consent, allocate to the Advisor for
management an additional portion of the Fund's assets and/or a portion
of any additional capital contributions made to the Fund and/or
increase the Nominal Account Size; (b) reallocate the Fund's assets
among the various trading advisors for the Fund (including away from
the Advisor); and/or (c) designate additional trading advisor(s) for
the Fund, in which case the General Partners may allocate to such
additional advisor(s) the management of such portion of the Fund's
assets or the Nominal Account Size, including a portion of the assets
allocated to the Advisor, as the General Partners shall determine.
The General Partners shall notify the Advisor of any allocation or
reallocation of assets or Nominal Account Size to or from the Advisor
as soon as practicable after the decision to allocate or reallocate
has been made; however, the Fund shall endeavor to make such
allocation or reallocation only at month-end. The terms "Allocated
Net Asset Values" and "Nominal Account Size" for purposes of this
Agreement are defined in Exhibit B, which is attached hereto and
incorporated herein by reference.
Subject to Section 6 hereof, the designation of any additional
advisor(s) for the Fund and/or the allocation and/or reallocation of
the Fund's assets to and/or from the trading advisors for the Fund,
including the Advisor, in accordance with this Section 2 shall neither
terminate this Agreement nor modify in any regard the respective
rights and obligations of the parties hereunder.
3. COMPENSATION.
(a) In consideration of and in compensation for all of the
services to be rendered by the Advisor to the Fund under this
Agreement, the Fund will pay the Advisor (i) a management fee equal to
1/6 of 1% of month-end Nominal Account Size (approximately 2% per
annum), and (ii) an incentive fee equal to 25% of quarterly Trading
Profits generated by Advisor in the trading of Trading Interests.
Both fees shall be accrued monthly and paid quarterly. The term
"Trading Profits" for purposes of calculating the incentive fee is
defined in Exhibit B.
The incentive fee is payable only on cumulative profits in the
Advisor's trading account; subject to Exhibit B, if losses occur, they
will be carried forward and must be regained before any new Trading
Profits can occur; and for any period of less than a full quarter
(including the quarters in which this Agreement commences and
terminates), the incentive fees will be payable as if the portion of
the fiscal quarter constituted a full quarter. Such fees due the
Advisor are payable within thirty (30) days of the end of the quarter.
The General Partners expressly agree that any fees due the Advisor
pursuant to this Section 3 shall survive the termination of this
Agreement.
(b) Neither the Advisor nor any of its principals or affiliates
shall receive any commissions, compensation, remuneration or payments
whatsoever from any Clearing Broker with whom the Fund carries an
account for any transactions executed in the Fund's trading account
managed by the Advisor.
4. RIGHT TO ADVISE OTHERS AND SPECULATIVE POSITION LIMITS.
(a) The Advisor's present business is advising with respect to
the purchase and sale of commodity interests, as defined. The
services provided by the Advisor are not to be deemed exclusive. The
General Partners acknowledge that, subject to the terms of this
Agreement, the Advisor may render advisory, consulting and management
services to other clients for which the Advisor may charge fees
different from those charged to the Fund. The Advisor shall be free
to advise others and manage other commodity accounts during the term
of this Agreement and to use the same or different information,
computer programs and trading strategy which the Advisor obtains,
produces or utilizes in the performance of services for the Fund. In
that connection, however, the Advisor represents and warrants that the
rendering of such consulting, advisory and management services to
other commodity interest trading accounts and entities will not
materially impair the discharge of the Advisor's responsibilities
under this Agreement; it being acknowledged, however, that different
trading strategies or methods may be utilized for different 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, accounts utilizing different
brokers or dealers and accounts with other differences, and that such
differences may cause divergent trading results.
(b) The Advisor will promptly notify the General Partners if
the Fund's positions are included in an aggregate amount which exceeds
the applicable speculative position limits. The Advisor represents
that, if the Advisor's trading recommendations are altered because of
the application of the speculative position limits, such alteration
will not modify the trading instructions in such manner as to affect
the Fund disproportionately compared with the Advisor's other
accounts.
5. THE FUND'S RECORDS.
(a) The General Partners will instruct the Fund's Clearing
Broker to furnish to the Advisor copies of all trade confirmations and
monthly trading reports relating to the trading directed by Advisor.
The Advisor will maintain a record of all trading orders the Advisor
places for the Fund's account, whether by internal records and/or
those of the Clearing Broker, and will monitor the Fund's open
positions which the Advisor initiates.
(b) Subject to the property rights of the Advisor described in
Section 10, and at the reasonable request of the General Partners, the
Advisor and the Advisor's employees and affiliates shall, at the
General Partners' expense, promptly (within two business days) make
available to the General Partners copies of the normal daily, monthly,
quarterly and annual, as the case may be, (i) written reports and any
work papers reflecting the performance of all commodity pool accounts
advised, managed, owned or controlled by the Advisor or the Advisor's
employees and affiliates required to be maintained under the CEA and
the regulations promulgated thereunder and (ii) similar written
information, reflecting the performance of the commodity interest
accounts advised, managed, owned or controlled by the Advisor or the
Advisor's employees and affiliates with respect to which accounts
reports are not required to be delivered to the owners thereof
pursuant to the CEA. At the reasonable request of the General
Partners, the Advisor shall promptly deliver to the General Partners a
written explanation, satisfactory to the General Partners, of
differences (if any) in the performance between the Fund's account and
such other commodity interest accounts. Notwithstanding the
foregoing, the Fund, the General Partners and their agents understand
that (x) the Advisor may delete the names and other identifying
information from such books, records and other information, and (y)
such books, records and other information regarding the Advisor are
confidential and are deemed to be "trade secrets" of the Advisor.
Therefore, the parties agree not to disclose, furnish or distribute to
any person any of such books, records or information obtained by any
of them pursuant to this Section 5(b) without the express written
consent of the Advisor or as ordered by a court of competent
jurisdiction.
6. TERM.
(a) This Agreement shall commence on the date hereof and shall
continue in effect for one year (subject to the Fund's option to
extend the term for additional, successive one year periods, which
option shall be automatically exercised unless the Fund notifies the
Advisor to the contrary at least thirty (30) days before the end of a
period), until its termination as provided herein. This Agreement
shall terminate automatically without notice if (i) the Fund is
terminated pursuant to the Fund's Agreement of Limited Partnership, or
(ii) the Advisor's registration as a commodity trading advisor or
membership in the NFA is terminated or suspended. The General
Partners and/or the Fund may terminate this Agreement, immediately
upon notice, in the event there has been any material breach by
Advisor of any provision of this Agreement including, without
limitation, a breach of the obligation to notify the Fund pursuant to
Section 14 hereof or any of the representations and warranties recited
herein. This Agreement may also be terminated at any time for any
reason by the Fund upon written notice to the Advisor.
(b) The Advisor may terminate this Agreement at any time upon
five (5) day's written notice to the Fund and the General Partners or
immediately, upon notice, if: (i) the registration as a commodity
pool operator or membership in the NFA is terminated or suspended as
to both General Partners; (ii) there has been any material breach of
this Agreement by the Fund or the General Partners; or (iii) the
Fund's trading policies are changed and the Advisor does not wish to
manage Fund assets pursuant to such changed policy.
7. INDEMNITY.
(a) In any threatened, pending or completed action, suit
proceeding or investigation to which the Advisor (or the Advisor's
affiliates, principals or employees) was or is a party or is
threatened to be made a party by reason of the fact that the Advisor
is or was the Advisor of the Fund or in performance of services for
the Fund, the Fund shall indemnify, defend and hold harmless the
Advisor (or the Advisor's affiliates, principals and employees)
against any loss, liability, damage, cost, expense, fees, penalties,
(including reasonable attorneys' and accountants' fees), judgments
and amounts paid in settlement actually and reasonably incurred by the
Advisor in connection with such action, suit, proceeding or
investigation if the Advisor (or the Advisor's affiliates, principals
and employees) acted in good faith and in a manner the Advisor
reasonably believed to be in or not opposed to the best interests of
the Fund, and provided that the Advisor's conduct does not constitute
negligence, misconduct or a material breach of the Advisor's
fiduciary obligations (unless the court or any administrative forum in
which such action, suit, proceeding or investigation was brought shall
determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, the Advisor (or the
Advisor's affiliates, principals and employees) is fairly and
reasonably entitled to indemnification for such expenses which such
court shall deem proper).
(b) Any indemnification under subsection (a) above, unless
ordered by a court, shall be made by the Fund only as authorized in
the specific case and only upon a determination by independent legal
counsel in a written opinion that indemnification is proper in the
circumstances because the Advisor (or the Advisor's affiliates,
principals and employees) have met the applicable standard of conduct
set forth in subsection (a) above.
(c) To the extent that the Advisor (or the Advisor's
affiliates, principals and employees) has been successful on the
merits or otherwise in defense of any action, suit, proceeding or
investigation referred to in subsection (a) above, or in defense of
any claim, issue or matter therein, the Fund shall indemnify, defend
and hold harmless the Advisor against the expenses, including
attorneys' and accountants fees, actually and reasonably incurred by
it in connection therewith pursuant to Section 7(a).
(d) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding or
investigation against the Advisor (or the Advisor's affiliates,
principals or employees) may, in the sole discretion of the General
Partners, be paid by the Fund in advance of the final disposition of
such action, suit, proceeding or investigation, if and to the extent
that the person on whose behalf such expenses are paid shall agree to
reimburse the Fund in the event indemnification is not permitted under
this Section 7.
(e) In the event that any claim, dispute or litigation arises
between the Advisor and any party other than the Fund or the General
Partners, which claim, dispute or litigation is unrelated to the
Fund's business, and if the Fund or the General Partners is made a
party to such claim, dispute or litigation by such other party, the
Advisor shall defend any actions brought in connection therewith
against the Fund and/or the General Partners, each of whom agree to
cooperate in such defense, and the Advisor shall indemnify and hold
harmless the Fund and the General Partners from and with respect to
any amounts awarded to such other party.
(f) None of the foregoing provisions for indemnification shall
be applicable with respect to default judgments, confessions of
judgment or settlements entered into by the party claiming
indemnification ("Indemnitee") without the prior consent of the party
obligated to indemnify the other party ("Indemnitor"); provided,
however, that should the Indemnitor refuse to consent to a settlement
approved by the Indemnitee, the Indemnitee may effect such settlement,
pay such amount in settlement as it shall deem reasonable and seek a
judicial or regulatory determination with respect to reimbursement by
the Indemnitor of any loss, liability, damage, cost or expenses
(including reasonable attorneys' and accountants' fees) incurred by
the Indemnitee in connection with such settlement to the extent such
loss, liability, damage, cost or expense (including reasonable
attorneys' and accountants' fees) was caused by or based upon
violation of this Agreement by the Indemnitor or violation of the
standard of conduct set forth herein. Notwithstanding the foregoing,
the Indemnitor shall, at all times, have the right to offer to settle
any matters and if the Indemnitor successfully negotiates a settlement
and tenders payment therefore to the Indemnitee, the Indemnitee must
either use its best efforts to dispose of the matter in accordance
with the terms and conditions of the proposed settlement or the
Indemnitee may refuse to settle the matter and continue its defense in
which latter event the maximum liability of the Indemnitor to the
Indemnitee shall be the amount of said proposed settlement.
(g) The indemnities granted herein shall survive termination of
this Agreement.
(h) The term "Advisor" as used in Section 7(d) shall include
the Advisor and the Advisor's principals and employees.
8. INDEMNITY PROCEDURE.
Promptly after receipt by any indemnified party ("Indemnitee")
under Section 7 of a notice of the commencement of an action or claim
to which such Section may apply, the Indemnitee shall notify the
indemnifying party ("Indemnitor") in writing of the commencement of
such action or claim if a claim for indemnification in respect of such
action or claim may be made against the Indemnitor under such Section;
but the omission to so notify the Indemnitor shall not relieve the
Indemnitor from any liability which the Indemnitor may have to the
Indemnitee under such Section, except where such omission shall have
materially prejudiced the Indemnitor. In case any such action or
claim shall be brought against an Indemnitee and the Indemnitee shall
notify the Indemnitor of the commencement of such action or claim, the
Indemnitor shall be entitled to participate in such action or claim
and, to the extent that the Indemnitor may desire, to assume the
defense of such action or claim with counsel selected by the
Indemnitor and acceptable to the Indemnitee, and after notice from the
Indemnitor to the Indemnitee of the Indemnitor's election to assume
the defense of such action, the Indemnitor shall not be liable to the
Indemnitee under such Section for any legal, accounting and other
expenses subsequently incurred by the Indemnitee in connection with
the defense of such action or claim other than reasonable costs of
investigation.
Notwithstanding any provision of this Section 8 to the contrary,
if any action or claim as to which indemnity is or may be available an
Indemnitee shall reasonably determine that its interests are or may be
adverse, in whole or in part, to the interests of the Indemnitor or
that there may be legal defenses available to the Indemnitee which are
or may be different from, in addition to, or inconsistent with, the
defenses available to the indemnifying party, the Indemnitee may
retain its own counsel in connection with such action or claim, in
which case the Indemnitee shall be responsible for any legal,
accounting and other expenses reasonably incurred by or on behalf of
it in connection with investigating or defending such action or claim.
In no event shall an Indemnitor be liable for the fees and expenses
of more than one counsel for all indemnities in connection with any
one action or claim or in connection with separate but similar or
related actions or claims in the same jurisdiction arising out of the
same general allegations. An Indemnitor shall not be liable for a
settlement of any such action or claim effected without its prior
written consent, but if any such action or claim shall be settled with
the prior written consent of an Indemnitor or if there shall be a
final judgment for the plaintiff in any such action or claim, the
Indemnitor shall indemnify, hold harmless and defend an Indemnitee
from and against any loss, liability or expense in accordance with
Section 7 by reason of such settlement or judgment.
9. REPRESENTATIONS AND WARRANTIES.
(a) The Advisor represents, warrants and agrees that:
(i) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the Advisor's obligations under this Agreement will not result in any
violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
Advisor is a party or by which the Advisor is bound;
(ii) the Advisor is duly registered as a commodity trading
advisor under the CEA and is a member in such capacity of the National
Futures Association, and the Advisor will maintain and renew such
registration and membership during the term of this Agreement;
(iii) all of the information relating to and furnished by
the Advisor contained in the Advisor's Disclosure Document (as defined
in Section 1 of this Agreement and as it may be amended or
supplemented from time to time while the Registration Statement is
effective), except as the Advisor has previously notified the Fund and
its General Partners, is true and accurate in all material respects,
does not omit any material information and is in full material
compliance with the CEA and rules promulgated thereunder as of the
date of this Agreement;
(iv) the Advisor is not registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, or any state
investment adviser statute, nor are the Advisor's activities such that
the Advisor is required to be so registered;
(v) the Advisor's selection of trades for the Fund will
follow the written trading policies of the Fund, and as they may be
changed in writing from time to time with advance notice to the
Advisor;
(vi) if the Fund suspends trading following written
instructions to that effect to the Advisor by the Fund, the Advisor
will suspend all trading activity for the Fund and liquidate positions
held by the Fund as soon as practicable under the circumstances;
(vii) the Advisor's management of client accounts other
than that of the Fund, which it has agreed to or may in the future
agree to manage, which accounts the Advisor is permitted to manage
under this Agreement (subject to limitations contained in Section 4
hereof), will be conducted in such a manner as to assure that the
Fund's account will receive equitable treatment, it being understood
that the Advisor may adjust the implementation of the Advisor's
trading system in a good faith effort to accommodate additional
accounts or accounts of different sizes;
(viii) except as the Advisor has previously notified the
Fund and its General Partners, there has been no material change in
the Advisor's performance tables contained in the Advisor's current
Disclosure Document; and
(ix) the Advisor will not participate in the brokerage
commissions paid by the Fund to any of its Clearing Brokers, including
ING Derivatives Clearing.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Advisor will promptly notify the Fund and the General
Partners of such event and the facts related thereto in the manner
provided below. Furthermore, all representations, warranties and
covenants hereunder shall inure to the benefit of each of the parties
to whom it is addressed, and their respective heirs, executors,
administrators, successors and permitted assigns.
(b) Each of the General Partners represents, warrants and agrees that:
(i) it is a corporation in good standing under the laws of
the State of Texas and is (and at all times through the date of
termination of the offering and during the term of this Agreement will
be) in good standing and qualified to do business as a foreign
corporation in each jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to be so
qualified would materially adversely affect its ability to act as a
corporation;
(ii) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the General Partner's obligations under this Agreement will not result
in any violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
General Partner is a party or by which the General Partner is bound;
(iii) it is duly registered as a commodity pool operator
under the CEA and is a member in such capacity of the National Futures
Association and will maintain and renew such registration and
membership during the term of this Agreement;
(iv) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the General Partner and is a valid
and binding agreement enforceable in accordance with its terms (except
as may be limited by bankruptcy laws and general equity principles);
(v) the consummation of the transactions set forth in the
Registration Statement and Prospectus are not contrary to the General
Partner's Certificate of Incorporation, By-laws, or any material
statute, law or regulation of any jurisdiction;
(vi) to the best of its knowledge, the Registration
Statement (including the Prospectus) does not contain any misleading
or untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
in which they were made) not misleading; and
(vii) any selling materials of whatever nature which relate
to the Advisor will be submitted for its final approval as to the
disclosure regarding such Advisor.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the General Partners will promptly notify the Advisor of such
event and the facts related thereto in the manner provided below.
Furthermore, all representations, warranties and covenants hereunder
shall inure to the benefit of each of the parties to whom it is
addressed, and their respective heirs, executors, administrators,
successors and permitted assigns.
(c) The Fund represents, warrants and agrees that:
(i) the Fund is a limited partnership in good standing
under the laws of the state of Delaware and is (and at all times
through the date of termination of the offering and during the term of
this Agreement will be) in good standing and qualified to do business
as a foreign limited partnership in each jurisdiction in which the
nature or conduct of its business requires such qualifications and the
failure to be so qualified would materially adversely affect its
ability to act as a limited partnership and perform its obligations
(including this Agreement), and has full capacity and authority to
conduct its business and to perform its obligations under this
Agreement, and to act as described in the Prospectus;
(ii) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the Fund and is a valid and
binding agreement enforceable in accordance with its terms (except as
may be limited by bankruptcy laws and general equity principles);
(iii) the consummation of the transactions set forth in the
Registration Statement (including the Prospectus) are not contrary to
the provisions of the Fund's Agreement of Limited Partnership or
Certificate of Limited Partnership, any material statute, law or
regulation of any jurisdiction, and will not result in a material
violation, breach or default under any term or provision of any
material contract, agreement or order to which the Fund is a party or
by which the Fund is bound;
(iv) the Fund has obtained all governmental and regulatory
registrations and approvals required by law as may be necessary to act
as described in the Prospectus;
(v) the Fund is not required to be registered as an
investment company under the Investment Company Act of 1940, as
amended;
(vi) all material governmental and regulatory registrations
and approvals for the valid authorization, issuance, offer and sale
of the Units have been obtained and, after due inquiry, no order
preventing or suspending the use of the Prospectus with respect to the
Units has been issued by the SEC, CFTC, NFA or the state in which
Units are registered; and
(vii) to the best of its knowledge, the Registration
Statement (including the Prospectus) does not contain any misleading
or untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
in which they were made) not misleading.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Fund will promptly notify the Advisor of such event and the
facts related thereto in the manner provided below. Furthermore, all
representations, warranties and covenants hereunder shall inure to
the benefit of each of the parties to whom it is addressed, and their
respective heirs, executors, administrators, successors and permitted
assigns.
10. PROPERTY RIGHTS OF THE TRADING ADVISOR.
The Fund and the General Partners acknowledge that commodity
trading advice provided by the Advisor is solely the Advisor's
property right. The Fund and General Partners further agree, unless
authorized by the Advisor, that such advice will not be disseminated
in whole or in part, directly or indirectly, to any of the limited
partners, Clearing Broker(s), Clearing Brokers' or General Partners'
cusomers, employees, agents, officers, directors or any others,
except as necessary to conduct the business of the Fund or except as
required by any applicable law or regulation. The Fund and the
General Partners expressly authorize the Advisor, because of their
proprietary and confidential nature, to withhold the names and
addresses of the Advisor's clients from any inspection provided the
General Partners pursuant to this Agreement.
11. NO GUARANTEE OF PERFORMANCE.
The Advisor makes no promises, representations, warranties or
guarantees that any of the Advisor's services to be rendered to the
Fund will result in a profit or will not result in a loss to the Fund.
12. ORDER ENTRY.
Subject to Section 1, the Advisor represents that in the
placement of the Fund orders with the Fund's Clearing Broker, the
Advisor will utilize a fair and reasonable order entry system which
shall be no less favorable to the Fund than that provided for any
other client account advised by the Advisor.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties and no other agreement, verbal or otherwise, shall be binding
on the parties.
14. ADVISOR NOTICE.
The Advisor agrees to notify the Fund and the General Partners
promptly upon discovery of any material omission or untrue or
misleading statement relating to the Advisor in the Disclosure
Document, Registration Statement, the Prospectus or any amendment or
supplement thereto regarding any information concerning the Advisor or
the Advisor's employees, including, without limitation, changes to the
Advisor's name, address, telephone and telefacsimile numbers, and
agrees to cooperate to the extent necessary in the preparation of any
necessary amendments or supplements to any of the foregoing
documents. The representations, warranties, agreements and
obligations to indemnify certain parties hereto contained herein
related to the Disclosure Document, Registration Statement, the
Prospectus or any amendment or supplement thereto shall attach to any
such amendment or supplement.
In connection therewith, from and after the effective date of
this Agreement and for so long as the Advisor continues to manage
assets of the Fund, the Advisor agrees, upon request, to provide the
Fund and/or the General Partners with updated information relating to
the information about the Advisor provided for inclusion in the
Prospectus, as amended or supplemented, and the management of all
client accounts by the Advisor. The Advisor shall use the Advisor's
best efforts to (i) provide monthly data within a reasonable period of
time after the General Partners so request and (ii) assist in the
preparation of performance data required to be presented in any
subsequent amendments to the Registration Statement and/or Prospectus.
15. ASSIGNMENT AND AMENDMENT.
This Agreement may not be assigned or amended by either party
without the written consent of the other party, which consent shall
not be unreasonably withheld.
16. SUCCESSORS; NO THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. In the event
one of the General Partners is removed or resigns and is not replaced,
all authority granted to the General Partners shall be retained by the
remaining General Partner.
There shall be no third party beneficiary(ies) in respect of any
party to this Agreement entitled to claim any relief or bring any
action against another party hereto based on any representation,
warranty or covenant set forth in this Agreement.
17. NOTICES.
All notices required to be delivered under this Agreement shall
be delivered personally, by air courier or by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to the Fund ATA Research/ProFutures Diversified
or the General Fund, L.P.
Partners: c/o ProFutures, Inc.
ATTN: Gary D. Halbert, President
107 Highway 620 South -- #30F
Austin, Texas 78734
ATA Research/ProFutures Diversified
Fund, L.P.
c/o ATA Research, Inc.
ATTN: Aladin T. Abughazaleh, President
5910 N. Central Expwy. -- Suite 1520
Dallas, Texas 75206
Copies to: John K. Gray, Esq.
Bayh, Connaughton & Malone
5910 N. Central Expy., Suite 1000
Dallas, Texas 75206
If to the Advisor: Niederhoffer Investments, Inc.
ATTN: Victor Niederhoffer, President
635 Madison Avenue
New York, New York 10022
Copies to: William Natbony, Esq.
Rosenman & Colin
575 Madison Avenue
New York, New York 10022-2585
18. ATTORNEYS' FEES.
In the event litigation is required to enforce any provisions of
this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees.
19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to contracts made in
that state without reference to its conflicts of laws provisions.
20. SPECIAL DISCLOSURE. The CFTC requires the following
special disclosure for all customer accounts which are not fully-
funded:
SPECIAL DISCLOSURE
FOR NOTIONALLY-FUNDED ACCOUNTS
YOU SHOULD REQUEST YOUR COMMODITY TRADING ADVISOR TO ADVISE YOU
OF THE AMOUNT OF CASH OR OTHER ASSETS (ACTUAL FUNDS) WHICH SHOULD BE
DEPOSITED TO THE ACCOUNT TO BE CONSIDERED "FULLY-FUNDED." THIS IS THE
AMOUNT UPON WHICH THE ADVISOR WILL DETERMINE THE NUMBER OF CONTRACTS
TRADED IN THE FUND'S ACCOUNT AND SHOULD BE AN AMOUNT SUFFICIENT TO
MAKE IT UNLIKELY THAT ANY FURTHER CASH DEPOSITS WOULD BE REQUIRED FROM
YOU OVER THE COURSE OF YOUR PARTICIPATION IN THE ADVISOR'S PROGRAM.
THE ACCOUNT SIZE TO WHICH YOU HAVE AGREED IN WRITING (THE
"NOMINAL" OR "NOTIONAL" ACCOUNT SIZE) IS NOT THE MAXIMUM POSSIBLE LOSS
THAT YOUR ACCOUNT MAY EXPERIENCE. YOU SHOULD CONSULT THE ACCOUNT
STATEMENTS IN ORDER TO DETERMINE THE ACTUAL ACTIVITY IN THE ACCOUNT,
INCLUDING PROFITS, LOSSES AND CURRENT CASH EQUITY BALANCE. TO THE
EXTENT THAT THE EQUITY IN THE ACCOUNT IS AT ANY TIME LESS THAN THE
NOMINAL ACCOUNT SIZE, THE EFFECT ON THE FUND WILL BE THE FOLLOWING:
(a) ALTHOUGH YOUR GAINS AND LOSSES, FEES AND COMMISSIONS MEASURED IN
DOLLARS WILL BE THE SAME, THEY WILL BE GREATER WHEN EXPRESSED AS A
PERCENTAGE OF ACCOUNT EQUITY.
(b) YOU MAY RECEIVE MORE FREQUENT AND LARGER MARGIN CALLS.
(c) THE DISCLOSURES WHICH ACCOMPANY THE PERFORMANCE TABLE ASSOCIATED
WITH THE PROGRAM SELECTED BY THE FUND MAY BE USED TO CONVERT THE RATES
OF RETURN ("ROR") IN THE PERFORMANCE TABLE TO THE CORRESPONDING RORs
FOR PARTICULAR PARTIAL FUNDING LEVELS.
21. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, which counterparts shall constitute one and the same
original instrument.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: PROFUTURES, INC., By: ATA RESEARCH, INC.,
a co-General Partner a co-General Partner
/s/ Gary D. Halbert /s/Aladin T. Abughazaleh,
President President
NIEDERHOFFER INVESTMENTS, INC.
By: /s/ Victor Niederhoffer
President
PROFUTURES, INC., ATA RESEARCH, INC.,
By: /s/ Gary D. Halbert By: /s/ Aladin T. Abughazaleh
President President
EXHIBIT A
February 28, 1995
Niederhoffer Investments, Inc.
ATTN: Victor Niederhoffer, President
635 Madison Avenue
New York, New York 10022
Re: COMMODITY TRADING AUTHORIZATION
Dear Mr. Niederhoffer:
Effective March 1, 1995, ATA Research/ProFutures Diversified
Fund, L.P., a Delaware limited partnership, does hereby make,
constitute and appoint you as its Attorney-in-Fact to purchase and
sell commodity interests, including (a) commodity futures contracts
and options thereon, through ING Derivatives Clearing and others, as
Clearing Broker(s), and (b) spot or forward contracts through such
brokers, dealers or banks as we agree are appropriate, in accordance
with the Advisory Contract between us dated February 28, 1995.
Very truly yours,
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: ATA RESEARCH, INC.,
a co-General Partner
By: /s/ Aladin T. Abughazaleh
President
EXHIBIT B
DEFINITIONS
Net Asset Value - Net Asset Value means the Fund's total assets
less total liabilities, determined according to the following
principles, and where no such principle is governing, then on the
basis of generally accepted accounting principles, consistently
applied. For purposes of this calculation:
(a) Net Asset Value includes any realized or unrealized profit
or loss on open securities and open commodity positions.
(b) All open securities and open commodity positions are valued
at their then market value, which means with respect to open
commodity positions, the settlement price as determined by
the exchange on which the transaction is effected or the
most recent appropriate quotation as supplied by the
Clearing Broker or banks through which the transaction is
effected except that United States Treasury Bills (not
futures contracts thereon) shall be carried at their cost
plus accrued interest. If there are no trades on the date
of the calculation due to the operation of the daily price
fluctuation limits or due to a closing of the exchange on
which the transaction is executed, the contract is valued at
the nominal settlement price as determined by the exchange.
Interest, if any, shall be accrued monthly. The liquidating
or market value of a commodity futures or options contract
not traded on a United States commodity exchange shall mean
its liquidating value determined by the General Partners on
a basis consistently applied for each different variety of
contract.
(c) Brokerage commissions on open positions shall be accrued in
full as a liability of the Fund upon the initiation of such
open positions. Management and incentive fees paid to the
Advisors shall be accrued monthly for purposes of
calculating Net Asset Value only, even if not paid until the
end of the quarter; incentive fees are calculated without
regard to the fees paid to any Consultant and the General
Partners.
Allocated Net Asset Value(s) - Allocated Net Asset Value(s) (for
purposes only of calculating the Advisors' management fees, if any,
and even if paid quarterly) during a month are computed for each
Advisor individually, are computed before any incentive fees and
management fees paid to the respective Advisor and means the month-end
Nominal Account Size of the account.
Nominal Account Size - means initially $10 million, which amount
shall be (a) increased by profits and decreased by losses in the
account, but not by additions to or withdrawals of actual funds from
the account, and/or (b) increased or decreased by such amounts
specified in any notices to the Advisor from the Trading Manager and
the Fund as described in Section 2 of this Agreement. Accordingly,
any actual funds deposited or withdrawn shall represent an adjustment
in actual funds deposited and not in the Nominal Account Size. For
purposes of determining profits and losses, and thereby adjusting the
Nominal Account Size, all items of income and expense shall be taken
into account on the accrual basis in accordance with generally
accepted accounting principles. For purposes hereof, month-end
Nominal Account Size shall be increased by any reductions and
decreased by any additions in Nominal Account Size occurring during
such month (in either case, pro-rated for the number of days Nominal
Account Size is affected by such adjustment).
Trading Profits - Trading Profits (for purposes of calculating
The respective Advisor's incentive fees only and even if paid
quarterly) during a month are computed for the Advisor individually,
are computed after any management fees paid to the respective Advisor
on the Fund's assets allocated to such Advisor, if applicable, and
mean (i) the net of profits and losses resulting from all commodity
trades closed out during such month plus (ii) the net of any profits
and losses on commodity trades open as of the end of such month (after
deduction for accrued commodity brokerage commissions) minus
(iii) the net of any profits and losses on commodity trades open as of
the end of the immediately preceding month (after deduction for
accrued commodity brokerage commissions) and minus (iv) the Advisor's
"Capital Adjusted Carryforward Loss" (as defined below), if any, as of
the beginning of the quarter. If the result of adding and subtracting
items (i) to (iv) above is negative at the end of a month, such amount
shall become the "Ending Carryforward Loss." Interest income is not
included in the calculation of Trading Profits. If in the event that
Units are redeemed and such redemptions are to be charged against the
Advisors, then the "Ending Carryforward Loss" will be reduced pro rata
for each Advisor. If funds are withdrawn from an Advisor during or as
of the end of the month for any reason (including distributions,
redemptions or withdrawals or reallocation from the Advisor's trading
account), the "Capital Adjusted Carryforward Loss" for the next
quarter will be the "Ending Carryforward Loss" multiplied by the
fraction: Allocated Net Asset Value after withdrawal, divided by
Allocated Net Asset Value before withdrawal; if no withdrawal is made,
the "Capital Adjusted Carryforward Loss" for the next quarter will be
the "Ending Carryforward Loss."
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In accordance with the foregoing formula, the Fund pays the
Advisor a quarterly incentive fee, calculated monthly, whenever
Trading Profits (as defined) are achieved. Subject to the preceding
paragraph, if the Fund has a net loss on the Fund's allocation to the
Advisor thereafter, the Advisor will retain all incentive fees
previously paid but no further incentive fee will be payable until the
Advisor recovers the losses on that allocation and then generates
Trading Profits as defined. Thus, the incentive fee to an Advisor
is payable only on cumulative profits (which are not reduced by
incentive fees previously paid). The Fund may at any time employ
other advisors whose compensation may be calculated without regard
to the losses which may be incurred by the present advisors.
Similarly, the Fund may renew its relationship with any advisor on the
same or different terms. In addition, it should be noted that since
the incentive fee on Trading Profits is paid on a quarterly basis, the
Fund may pay substantial incentive fees during portions of the year
even though subsequent losses result in a yearly net loss for the
Fund. The Advisors will retain all payments made to them even if
later losses occur. In addition, an incentive fee may be paid to one
Advisor but the Fund may experience a loss or no change in its Net
Asset Value as a result of the trading by the other Advisors.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
TRADING POLICIES
(1) The Fund will attempt to diversify its market position to
avoid reliance on one or a few commodities. No Advisor may initiate
additional positions in any commodity if the margins (or its
equivalent) therefor, when added to the margins of all open positions
in that commodity, would exceed 33 1/3% of the Allocated Net Asset
Value (as defined) of the Fund attributable to the Advisor's
management.
(2) No Advisor may initiate positions if the margin (or its
equivalent) therefor, when added to the margins of all then open
positions, would exceed 75% of the Allocated Net Asset Value of the
Fund attributable to the Advisor's management. In the event that, due
to abrupt increases in required margins, the Fund's then open
positions require margins in excess of that percentage, the total
portfolio will be reduced as soon as practicable in light of market
conditions to an amount within such percentage.
(3) The Fund may not allocate more than ten percent (10%) of its
assets (calculated as of the date the allocation is made) to one or
more Advisors for the purpose of purchasing, selling, writing or
trading in commodity options on markets other than contract markets
designated by the CFTC.
(4) The Fund will not purchase, sell or trade in securities to
such extent as to be required to be registered as an investment
company under the Investment Company Act of 1940, as amended.
(5) The Fund may trade in spreads or straddles in order to take
advantage of potential profit in spread relationships and to limit
risks.
(6) The Fund does not intend to regularly make or take delivery
of commodities or to trade in cash commodities, other than forward
contracts on foreign currencies. Open positions in futures contracts
are expected to be closed prior to the delivery date and, as far as
practicable, no new positions will be opened during the delivery
month.
(7) The Fund will not employ the trading technique, commonly
known as pyramiding, in which the speculator uses unrealized profits
on existing positions as margin for the purchase or sale of additional
positions in the same or a related commodity. However, an Advisor may
take into account the Fund's open trade equity in assets of the Fund
in determining whether to acquire additional commodity futures
contracts on behalf of the Fund.
(8) No loans may be made by the Fund to any person, including
the General Partners and their affiliates.
(9) The Fund's assets will not be commingled with the assets of
any other person; funds used to satisfy margin requirements will not
be considered commingled for this purpose.
(10) No rebates or give-ups may be paid to or received by the
General Partners, nor may the General Partners participate in any
reciprocal business arrangements which could circumvent this
prohibition.
(11) No Advisor may receive an incentive or management fee if it
participates, directly or indirectly, in any commodity brokerage
commissions generated by the Fund.
(12) No agreement with the Advisors, the Clearing Broker or the
General Partners shall exceed one year and any such agreements are
terminable without penalty upon respectively 30 days, 60 days and 120
days written notice by the Fund. Material changes in the trading
policies described above must be approved by a vote of a majority of
the outstanding Units (not including Units of General Partnership
Interest but including Units of Limited Partnership Interest held by
affiliates of the General Partners). The General Partners do not
believe that action by the limited partners to authorize material
changes in the Fund's trading policies would constitute participation
in the control of the management of the Fund sufficient to cause the
limited partners to lose their limited liability for Fund obligations.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
ADVISORY CONTRACT
This ADVISORY CONTRACT (the "Agreement") is made as of the 28th
day of February, 1995, by and among ATA RESEARCH/PROFUTURES
DIVERSIFIED FUND, L.P., a Delaware limited partnership (the "Fund"),
its general partners, ATA RESEARCH, INC., a Texas corporation, and
PROFUTURES, INC., a Texas corporation (collectively the "General
Partners"), and RABAR MARKET RESEARCH, INC. (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Fund is a limited partnership organized for the
purpose of buying, selling, trading and generally dealing in commodity
futures and options contracts of any kind or nature whatsoever and
other commodity interests including, but not limited to, forward or
spot contracts on currencies ("commodity interests");
WHEREAS, the Fund has been offering its Units of Limited
Partnership Interest pursuant to the Fund's July 31, 1994 prospectus,
as now or hereafter amended or supplemented (the "Prospectus"), in
connection with its Form S-1 Registration Statement declared effective
on July 31, 1994, under the Securities Act of 1933, as amended (the
"Securities Act"), and any amendments thereto (the "Registration
Statement");
WHEREAS, the Fund is fully cognizant of the high risks involved
in highly leveraged commodity speculation;
WHEREAS, the General Partners are, pursuant to the Fund's
Agreement of Limited Partnership, authorized to utilize the services
of one or more professional trading advisors and consultants in
connection with the trading activities of the Fund; and
WHEREAS, the parties wish to enter into this Agreement in order
to set forth the terms and conditions upon which the Advisor will
render and implement trading advisory services for the Fund.
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR.
Effective March 3, 1995, the Advisor shall have sole authority
and responsibility for directing, independently of any other trading
advisors retained by the Fund, the investment and reinvestment of the
Nominal Account Size (as defined in Exhibit B) for trading commodity
interests pursuant to the Advisor's general trading program. For
these purposes, the Fund account is a separate account established
for the Fund with a futures commission merchant(s), bank(s), dealer(s)
or other broker(s) (hereinafter, each a "Clearing Broker") holding the
assets allocated to the Advisor for the Advisor's management
hereunder.
The Fund and Advisor hereby acknowledge that the Fund's account
will be traded pursuant to Advisor's general trading program, and that
such account may be the subject of notional funding under this
Agreement. The Advisor will direct the trading of the Nominal Account
Size in accordance with the written trading policies provided to the
Advisor (as they may be amended from time to time) and any written
instructions given to the Advisor from the General Partners. The
Advisor may only depart from such current trading policies or
instructions provided in writing to the Advisor with the prior written
consent of the General Partners. Any open positions or investments at
the time of receipt of any amended written instructions shall not be
deemed to violate the written instructions. It is understood that the
General Partners, and not the Advisor, have overall responsibility for
monitoring the Fund's and the trading advisors' compliance in the
aggregate for all of the Fund's advisors with the Fund's trading
policies.
All purchases and sales of commodity interests shall be for the
account and at the risk of the Fund. All commissions and expenses
(currently no more than $8.00 per round-turn for trades on U.S.
exchanges, including exchange fees, but exclusive of National Futures
Association ("NFA") fees and any "give-up" fees) arising from the
trading of, or other transactions in the course of the administration
of, the Fund's account shall be charged to and paid by the Fund. In
this regard, the Fund is expected to directly pay round-turn brokerage
commissions of no more than $8.00, including exchange fees, for trades
on U.S. exchanges, plus NFA fees and give-up fees. The Fund shall
deliver to the Advisor a Commodity Trading Authorization (see
attached Exhibit A) appointing the Advisor the Fund's agent and
attorney-in-fact with respect to the Fund's trading account directed
by such Advisor. However, it is expressly agreed that, in the event
the General Partners shall, in their sole discretion, using their
prudent business judgment, determine that any trading instructions
issued by the Advisor violate the Fund's trading policies, then the
General Partners may negate such Advisor's trading instructions; and
the Advisor will bear no responsibility for the performance resulting
from the action taken by the General Partners.
The Advisor is not responsible for the execution or clearance of
the Fund's trades; provided, however, that the Advisor may direct all
trades in commodity interests to any futures commission merchant,
bank, or independent floor broker (collectively, "independent
brokers") it chooses with instructions to give-up the trades to the
relevant Clearing Broker. The Advisor shall not be liable to the Fund
or the General Partners for any errors or omissions by any such
independent broker or Clearing Broker. The Advisor shall, however,
use the Advisor's best efforts to notify the General Partners and the
Clearing Broker of any order or trade which the Advisor reasonably
believes was not executed in accordance with the Advisor's
instructions to such Clearing Broker.
Prior to the date of this Agreement, the Advisor has delivered
the Advisor's December 1, 1994 disclosure document (the "Disclosure
Document") conforming in all material respects to the rules adopted
under the Commodity Exchange Act, as amended (the "CEA"). Receipt of
such Disclosure Document is hereby acknowledged.
The Advisor has not alone or in conjunction with the General
Partners been an organizer or a promoter of the Fund, nor is the
Advisor a partner, joint venturer or agent of any other trading
advisor engaged by the Fund.
2. ALLOCATION AND REALLOCATION OF ASSETS; DESIGNATION OF
ADDITIONAL TRADING ADVISORS.
The Fund's account with the Advisor shall initially be funded
with cash and/or other margin-qualified assets totaling $7 million,
which shall be traded at a level equal to the Nominal Account Size.
Each time the Fund adds or withdraws actual funds or notional funds
to/from the account, the Fund shall provide to the Advisor a letter
stating the amount of actual funds, notional funds and total funds
added to or withdrawn from the account.
Subject to the first paragraph in Section 1 hereof, the General
Partners may in the near future, at any time and from time to time:
(a) subject to the Advisor's consent, allocate to the Advisor for
management an additional portion of the Fund's assets and/or a portion
of any additional capital contributions made to the Fund and/or
increase the Nominal Account Size; (b) reallocate the Fund's assets
among the various trading advisors for the Fund (including away from
the Advisor); and/or (c) designate additional trading advisor(s) for
the Fund, in which case the General Partners may allocate to such
additional advisor(s) the management of such portion of the Fund's
assets or the Nominal Account Size, including a portion of the assets
allocated to the Advisor, as the General Partners shall determine.
The Fund shall endeavor to make such allocations or reallocations only
at month-end. The terms "Allocated Net Asset Values" and "Nominal
Account Size" for purposes of this Agreement are defined in Exhibit B,
which is attached hereto and incorporated herein by reference.
Subject to Section 6 hereof, the designation of any additional
advisor(s) for the Fund and/or the allocation and/or reallocation of
the Fund's assets to and/or from the trading advisors for the Fund,
including the Advisor, in accordance with this Section 2 shall neither
terminate this Agreement nor modify in any regard the respective
rights and obligations of the parties hereunder.
3. COMPENSATION.
(a) In consideration of and in compensation for all of the
services to be rendered by the Advisor to the Fund under this
Agreement, the Fund will pay the Advisor (i) a management fee equal to
1/12 of 1% of month-end Nominal Account Size (1% per annum), and (ii)
an incentive fee equal to 27.5% of quarterly Trading Profits generated
by Advisor in the trading of commodity interests. Both fees shall be
accrued monthly and paid quarterly. The term "Trading Profits" for
purposes of calculating the incentive fee is defined in Exhibit B.
The incentive fee is payable only on cumulative profits in the
Advisor's trading account; subject to Exhibit B, if losses occur, they
will be carried forward and must be regained before any new Trading
Profits can occur. The management fee will be paid to the Advisor
whether or not trading has been profitable. For any period of less
than a full quarter or month (including the quarters or months in
which this Agreement commences and terminates), the incentive fee will
be payable as if the portion of the quarter constituted a full quarter
and the management fee will be prorated for such partial month. Also,
in the event of a withdrawal (whether by reason of redemptions,
distributions or otherwise) or reallocation of assets from the account
traded by the Advisor as of any date which is not the end of a
calendar month, the monthly management fee shall be prorated to the
effective date of such withdrawal or reallocation. Such fees due the
Advisor are payable within thirty (30) days of the end of the quarter.
All such fees will be paid by wire transfer of immediately available
funds as follows:
The Bank of New York
One North Lexington Avenue
White Plains, New York 10604
Branch #749, Westchester/Putnam Division
ABA #021 000 018
Phone: (914) 946-6210
For further credit to:
Rabar Market Research, Inc.
Account: #6771841021
The Fund and the General Partners expressly agree that any fees due
the Advisor pursuant to this Section 3 shall survive the termination
of this Agreement.
(b) Neither the Advisor nor any of its principals or affiliates
shall receive any commissions, compensation, remuneration or payments
whatsoever from any Clearing Broker with whom the Fund carries an
account for any transactions executed in the Fund's trading account
managed by the Advisor.
4. RIGHT TO ADVISE OTHERS AND SPECULATIVE POSITION LIMITS.
(a) The Advisor's present business is advising with respect to
the purchase and sale of commodity interests, as defined. The
services provided by the Advisor are not to be deemed exclusive. The
General Partners acknowledge that, subject to the terms of this
Agreement, the Advisor may render advisory, consulting and management
services to other clients for which the Advisor may charge fees
different from those charged to the Fund. The Advisor shall be free
to advise others and manage other commodity accounts during the term
of this Agreement and to use the same or different information,
computer programs and trading strategy which the Advisor obtains,
produces or utilizes in the performance of services for the Fund. In
that connection, however, the Advisor represents and warrants that the
rendering of such consulting, advisory and management services to
other commodity interest trading accounts and entities will not
materially impair the discharge of the Advisor's responsibilities
under this Agreement; it being acknowledged, however, that different
trading strategies or methods may be utilized for different 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, accounts utilizing different
brokers or dealers and accounts with other differences, and that such
differences may cause divergent trading results.
(b) The Advisor will promptly notify the General Partners if the
Fund's positions are included in an aggregate amount which exceeds the
applicable speculative position limits. The Advisor represents that,
if the Advisor's trading recommendations are altered because of the
application of the speculative position limits, such alteration will
not modify the trading instructions in such manner as to affect the
Fund disproportionately compared with the Advisor's other accounts.
5. THE FUND'S RECORDS.
(a) The General Partners will instruct the Fund's Clearing
Broker to furnish to the Advisor copies of all trade confirmations and
monthly trading reports relating to the trading directed by Advisor.
The Advisor will maintain a record of all trading orders filled for
the Fund's account, whether by internal records and/or those of the
Clearing Broker, and will monitor the Fund's open positions which the
Advisor initiates.
(b) Subject to the property rights of the Advisor described in
Section 10, and at the reasonable request of the General Partners, the
Advisor shall, at the General Partners' expense, promptly (within
seven business days) make available to the General Partners copies of
the normal daily, monthly, quarterly and annual, as the case may be,
(i) written reports and any work papers reflecting the performance of
all commodity pool accounts advised, managed, owned or controlled by
the Advisor or the Advisor's employees and affiliates required to be
maintained under the CEA and the regulations promulgated thereunder
and (ii) similar written information, reflecting the performance of
the commodity interest accounts advised, managed, owned or controlled
by the Advisor or the Advisor's employees and affiliates with respect
to which accounts reports are not required to be delivered to the
owners thereof pursuant to the CEA. At the reasonable request of the
General Partners, the Advisor shall promptly deliver to the General
Partners a written explanation, satisfactory to the General Partners,
of differences (if any) in the performance between the Fund's account
and such other commodity interest accounts. Notwithstanding the
foregoing, the Fund, the General Partners and their agents understand
that (x) the Advisor may delete the names and other identifying
information from such books, records and other information, and (y)
such books, records and other information, regarding the Advisor are
confidential and are deemed to be "trade secrets" of the Advisor.
Therefore, the parties agree not to disclose, furnish or distribute to
any person any of such books, records or information obtained by any
of them pursuant to this Section 5(b) without the express written
consent of the Advisor or as ordered by a court of competent
jurisdiction.
6. TERM.
(a) This Agreement shall commence on the date hereof and shall
continue in effect for one year (subject to the Fund's option to
extend the term for additional, successive one year periods, which
option shall be automatically exercised unless the Fund notifies the
Advisor to the contrary at least thirty (30) days before the end of a
period), until its termination as provided herein. This Agreement
shall terminate automatically without notice if (i) the Fund is
terminated pursuant to the Fund's Agreement of Limited Partnership, or
(ii) the Advisor's registration as a commodity trading advisor or
membership in the NFA is terminated or suspended. The General
Partners and/or the Fund may terminate this Agreement, immediately
upon notice, in the event there has been any material breach by
Advisor of any provision of this Agreement including, without
limitation, a breach of the obligation to notify the Fund pursuant to
Section 14 hereof or any of the representations and warranties recited
herein. This Agreement may also be terminated at any time for any
reason by the Fund upon written notice to the Advisor.
(b) The Advisor may terminate this Agreement at any time upon
five (5) day's written notice to the Fund and the General Partners.
The Advisor may also terminate this Agreement immediately, upon
notice, if: (i) the registration as a commodity pool operator or
membership in the NFA is terminated or suspended as to both General
Partners; (ii) there has been any material breach of this Agreement by
the Fund or the General Partners; or (iii) the Fund's trading policies
are changed and the Advisor does not wish to manage Fund assets
pursuant to such changed policy; or (iv) the General Partners negate
any trading instructions issued by the Advisor.
7. INDEMNITY.
(a) In any threatened, pending or completed action, suit
proceeding or investigation to which the Advisor (or the Advisor's
affiliates, principals or employees) was or is a party or is
threatened to be made a party by reason of the fact that the Advisor
is or was the Advisor of the Fund or in performance of services for
the Fund, the Fund shall indemnify, defend and hold harmless the
Advisor (and the Advisor's affiliates, principals and employees)
against any loss, liability, damage, cost, expense, fees, penalties,
(including reasonable attorneys' and accountants' fees), judgments
and amounts paid in settlement actually and reasonably incurred by the
Advisor in connection with such action, suit, proceeding or
investigation if the Advisor (or the Advisor's affiliates, principals
and employees) acted in good faith and in a manner the Advisor
reasonably believed to be in or not opposed to the best interests of
the Fund, and provided that the Advisor's conduct does not constitute
negligence, misconduct or a material breach of the Advisor's
fiduciary obligations (unless the court or any administrative forum in
which such action, suit, proceeding or investigation was brought shall
determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, the Advisor (or the
Advisor's affiliates, principals and employees) is fairly and
reasonably entitled to indemnification for such expenses which such
court shall deem proper).
(b) Any indemnification under subsection (a) above, unless
ordered by a court, shall be made by the Fund only as authorized in
the specific case and only upon a determination by independent legal
counsel in a written opinion that indemnification is proper in the
circumstances because the Advisor (or the Advisor's affiliates,
principals and employees) have met the applicable standard of conduct
set forth in subsection (a) above.
(c) To the extent that the Advisor (or the Advisor's affiliates,
principals and employees) has been successful on the merits or
otherwise in defense of any action, suit, proceeding or investigation
referred to in subsection (a) above, or in defense of any claim, issue
or matter therein, the Fund shall indemnify, defend and hold harmless
the Advisor (and its affiliates, principals and employees) against the
expenses, including attorneys' and accountants fees, actually and
reasonably incurred by it in connection therewith pursuant to Section
7(a).
(d) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding or
investigation against the Advisor (or the Advisor's affiliates,
principals or employees) may, in the sole discretion of the General
Partners, be paid by the Fund in advance of the final disposition of
such action, suit, proceeding or investigation, if and to the extent
that the person on whose behalf such expenses are paid shall agree to
reimburse the Fund in the event indemnification is not permitted under
this Section 7.
(e) In the event that any claim, dispute or litigation arises
between the Advisor and any party other than the Fund or the General
Partners, which claim, dispute or litigation is unrelated to the
Fund's business, and if the Fund or the General Partners is made a
party to such claim, dispute or litigation by such other party, the
Advisor shall defend any actions brought in connection therewith
against the Fund and/or the General Partners, each of whom agree to
cooperate in such defense, and the Advisor shall indemnify and hold
harmless the Fund and the General Partners from and with respect to
any amounts awarded to such other party.
(f) If any claim, dispute or litigation arises between the Fund
or the General Partners and any party other than the Advisor which
claim, dispute or litigation is unrelated to the Advisor's business,
and if the Advisor (or the Advisor's affiliates, principals or
employees) is made a party to such claim, dispute or litigation by
such other party, the Fund or the General Partners shall defend any
actions brought in connection therewith on behalf of the Advisor, who
agrees to cooperate in such defense, and the Fund shall indemnify and
hold harmless the Advisor and the Advisor's affiliates, principals and
employees from and with respect to any amounts awarded to such other
party.
(g) The Advisor agrees to indemnify, defend and hold harmless
the Fund against any and all liabilities incurred by the Fund and/or
the General Partners by reason of any act or omission of the Advisor
relating to the Advisor's management of Fund assets maintained in the
Fund's trading account with the Advisor (including reasonable costs
and expenses of investigating and defending any claims, demand or
suit) if such act or omission relates to a breach of a representation
or warranty made by Advisor herein or involves negligence, misconduct
or a material breach of Advisor's obligations under this Agreement, or
the CEA and rules promulgated thereunder.
(h) None of the foregoing provisions for indemnification shall
be applicable with respect to default judgments, confessions of
judgment or settlements entered into by the party claiming
indemnification ("Indemnitee") without the prior consent of the party
obligated to indemnify the other party ("Indemnitor"); provided,
however, that should the Indemnitor refuse to consent to a settlement
approved by the Indemnitee, the Indemnitee may effect such settlement,
pay such amount in settlement as it shall deem reasonable and seek a
judicial or regulatory determination with respect to reimbursement by
the Indemnitor of any loss, liability, damage, cost or expenses
(including reasonable attorneys' and accountants' fees) incurred by
the Indemnitee in connection with such settlement to the extent such
loss, liability, damage, cost or expense (including reasonable
attorneys' and accountants' fees) was caused by or based upon
violation of this Agreement by the Indemnitor or violation of the
standard of conduct set forth herein. Notwithstanding the foregoing,
the Indemnitor shall, at all times, have the right to offer to settle
any matters and if the Indemnitor successfully negotiates a settlement
and tenders payment therefore to the Indemnitee, the Indemnitee must
either use its best efforts to dispose of the matter in accordance
with the terms and conditions of the proposed settlement or the
Indemnitee may refuse to settle the matter and continue its defense in
which latter event the maximum liability of the Indemnitor to the
Indemnitee shall be the amount of said proposed settlement.
(i) The indemnities granted herein shall survive termination of
this Agreement.
(j) The term "Advisor" as used in Sections 7(d) and (f) shall
include the Advisor and the Advisor's employees.
8. INDEMNITY PROCEDURE.
Promptly after receipt by any indemnified party ("Indemnitee")
under Section 7 of a notice of the commencement of an action or claim
to which such Section may apply, the Indemnitee shall notify the
indemnifying party ("Indemnitor") in writing of the commencement of
such action or claim if a claim for indemnification in respect of such
action or claim may be made against the Indemnitor under such Section;
but the omission to so notify the Indemnitor shall not relieve the
Indemnitor from any liability which the Indemnitor may have to the
Indemnitee under such Section, except where such omission shall have
materially prejudiced the Indemnitor. In case any such action or
claim shall be brought against an Indemnitee and the Indemnitee shall
notify the Indemnitor of the commencement of such action or claim, the
Indemnitor shall be entitled to participate in such action or claim
and, to the extent that the Indemnitor may desire, to assume the
defense of such action or claim with counsel selected by the
Indemnitor and acceptable to the Indemnitee, and after notice from the
Indemnitor to the Indemnitee of the Indemnitor's election to assume
the defense of such action, the Indemnitor shall not be liable to the
Indemnitee under such Section for any legal, accounting and other
expenses subsequently incurred by the Indemnitee in connection with
the defense of such action or claim other than reasonable costs of
investigation.
Notwithstanding any provision of this Section 8 to the contrary,
if any action or claim as to which indemnity is or may be available an
Indemnitee shall reasonably determine that its interests are or may be
adverse, in whole or in part, to the interests of the Indemnitor or
that there may be legal defenses available to the Indemnitee which are
or may be different from, in addition to, or inconsistent with, the
defenses available to the indemnifying party, the Indemnitee may
retain its own counsel in connection with such action or claim, in
which case the Indemnitee shall be responsible for any legal,
accounting and other expenses reasonably incurred by or on behalf of
it in connection with investigating or defending such action or claim.
In no event shall an Indemnitor be liable for the fees and expenses
of more than one counsel for all indemnities in connection with any
one action or claim or in connection with separate but similar or
related actions or claims in the same jurisdiction arising out of the
same general allegations. An Indemnitor shall not be liable for a
settlement of any such action or claim effected without its prior
written consent, but if any such action or claim shall be settled with
the prior written consent of an Indemnitor or if there shall be a
final judgment for the plaintiff in any such action or claim, the
Indemnitor shall indemnify, hold harmless and defend an Indemnitee
from and against any loss, liability or expense in accordance with
Section 7 by reason of such settlement or judgment.
9. REPRESENTATIONS AND WARRANTIES.
(a) The Advisor represents, warrants and agrees that:
(i) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the Advisor's obligations under this Agreement will not result in any
violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
Advisor is a party or by which the Advisor is bound;
(ii) the Advisor is duly registered as a commodity trading
advisor under the CEA and is a member in such capacity of the NFA, and
the Advisor will maintain and renew such registration and membership
during the term of this Agreement;
(iii) all of the information relating to and furnished by
the Advisor contained in the Advisor's Disclosure Document (as defined
in Section 1 of this Agreement and as it may be amended or
supplemented from time to time while the Registration Statement is
effective), except as the Advisor has previously notified the Fund and
its General Partners, is true and accurate in all material respects,
does not omit any material information and is in material compliance
with the CEA and rules promulgated thereunder as of the date of this
Agreement;
(iv) the Advisor is not registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, or any state
investment adviser statute, nor are the Advisor's activities such that
the Advisor is required to be so registered;
(v) the Advisor's selection of trades for the Fund will not
violate the written trading policies of the Fund (as they may be
changed from time to time);
(vi) if the Fund suspends trading following written
instructions to that effect to the Advisor by the Fund, the Advisor
will suspend all trading activity for the Fund and liquidate positions
held by the Fund as soon as practicable under the circumstances (it
being agreed that the Advisor will have no liability for the
performance resulting from any such liquidation, unless the Advisor
has been in material breach of this Agreement or its responsibilities
under the CEA and the rules promulgated thereunder); and
(vii) neither the Advisor nor any of its affiliates will
participate in the brokerage commissions paid by the Fund to any
Clearing Broker, including ING Derivatives Clearing, and any
independent broker.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Advisor will promptly notify the Fund and the General
Partners of such event and the facts related thereto in the manner
provided below. Furthermore, all representations, warranties and
covenants hereunder shall inure to the benefit of each of the parties
to whom it is addressed, and their respective heirs, executors,
administrators, successors and permitted assigns.
(b) Each of the General Partners represents, warrants and agrees
that:
(i) it is a corporation in good standing under the laws of
the State of Texas and is (and at all times through the date of
termination of the offering and during the term of this Agreement will
be) in good standing and qualified to do business as a foreign
corporation in each jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to be so
qualified would materially adversely affect its ability to act as a
corporation, and it has full capacity and authority to enter into this
Agreement; and to perform its obligations and provide the services
required of it hereunder;
(ii) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the General Partner's obligations under this Agreement will not result
in any violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
General Partner is a party or by which the General Partner is bound;
(iii) it is duly registered as a commodity pool operator
under the CEA and is a member in such capacity of the NFA and will
maintain and renew such registration and membership during the term of
this Agreement;
(iv) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the General Partner and is a valid
and binding agreement enforceable in accordance with its terms (except
as may be limited by bankruptcy laws and general equity principles);
(v) the consummation of the transactions set forth in the
Registration Statement and Prospectus are not contrary to the General
Partner's Certificate of Incorporation, By-laws, or any material
statute, law or regulation of any jurisdiction;
(vi) the Registration Statement (including the Prospectus)
does not contain any misleading or untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances in which they were made)
not misleading; and
(vii) any selling materials of whatever nature which relate
to the Advisor will be submitted for its final approval as to the
disclosure regarding such Advisor, and will not be distributed without
the Advisor's prior consent.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the General Partners will promptly notify the Advisor of such
event and the facts related thereto in the manner provided below.
Furthermore, all representations, warranties and covenants hereunder
shall inure to the benefit of each of the parties to whom it is
addressed, and their respective heirs, executors, administrators,
successors and permitted assigns.
(c) The Fund represents, warrants and agrees that:
(i) the Fund is a limited partnership in good standing
under the laws of the state of Delaware and is (and at all times
through the date of termination of the offering and during the term of
this Agreement will be) in good standing and qualified to do business
as a foreign limited partnership in each jurisdiction in which the
nature or conduct of its business requires such qualifications and the
failure to be so qualified would materially adversely affect its
ability to act as a limited partnership and perform its obligations
(including this Agreement), and has full capacity and authority to
conduct its business and to perform its obligations under this
Agreement, and to act as described in the Prospectus;
(ii) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the Fund and is a valid and
binding agreement enforceable in accordance with its terms (except as
may be limited by bankruptcy laws and general equity principles);
(iii) the consummation of the transactions set forth in the
Registration Statement (including the Prospectus) are not contrary to
the provisions of the Fund's Agreement of Limited Partnership or
Certificate of Limited Partnership, any material statute, law or
regulation of any jurisdiction, and will not result in a material
violation, breach or default under any term or provision of any
material contract, agreement or order to which the Fund is a party or
by which the Fund is bound;
(iv) all material governmental and regulatory registrations
and approvals for the valid authorization, issuance, offer and sale of
the Units have been obtained and, after due inquiry, no order
preventing or suspending the use of the Prospectus with respect to the
Units has been issued by the Securities and Exchange Commission,
Commodity Futures Trading Commission ("CFTC"), NFA or the states in
which Units are registered;
(v) the Fund is not required to be registered as an
investment company under the Investment Company Act of 1940, as
amended;
(vi) the Registration Statement (including the Prospectus)
does not contain any misleading or untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances in which they were made) not
misleading.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Fund will promptly notify the Advisor of such event and the
facts related thereto in the manner provided below. Furthermore, all
representations, warranties and covenants hereunder shall inure to
the benefit of each of the parties to whom it is addressed, and their
respective heirs, executors, administrators, successors and permitted
assigns.
10. PROPERTY RIGHTS OF THE TRADING ADVISOR.
The Fund and the General Partners acknowledge that commodity
trading advice provided by the Advisor is solely the Advisor's
property right. The Fund and General Partners further agree, unless
authorized by the Advisor, that such advice will not be disseminated
in whole or in part, directly or indirectly, to any of the limited
partners, Clearing Broker(s), Clearing Brokers' or General Partners'
customers, employees, agents, officers, directors or any others,
except as necessary to conduct the business of the Fund or except as
required by any applicable law or regulation. The Fund and the
General Partners expressly authorize the Advisor, because of their
proprietary and confidential nature, to withhold the names and
addresses of the Advisor's clients from any inspection provided the
General Partners pursuant to this Agreement.
11. NO GUARANTEE OF PERFORMANCE.
The Advisor makes no promises, representations, warranties or
guarantees that any of the Advisor's services to be rendered to the
Fund will result in a profit or will not result in a loss to the Fund.
12. ORDER ENTRY.
Subject to Section 1, the Advisor represents that in the
placement of the Fund orders with the Fund's Clearing Broker, the
Advisor will utilize a fair and reasonable order entry system which
shall be no less favorable to the Fund on an overall basis than that
provided for any other client account advised by the Advisor.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties and no other agreement, verbal or otherwise, shall be binding
on the parties.
14. ADVISOR NOTICE.
The Advisor agrees to notify the Fund and the General Partners
promptly upon discovery of any material omission or untrue or
misleading statement relating to the Advisor in the Disclosure
Document, Registration Statement, the Prospectus or any amendment or
supplement thereto regarding any information concerning the Advisor or
the Advisor's employees, including, without limitation, changes to the
Advisor's name, address, telephone and telefacsimile numbers, and
agrees to cooperate to the extent necessary in the preparation of any
necessary amendments or supplements to any of the foregoing
documents. The representations, warranties, agreements and
obligations to indemnify certain parties hereto contained herein
related to the Disclosure Document, Registration Statement, the
Prospectus or any amendment or supplement thereto shall attach to any
such amendment or supplement.
In connection therewith, from and after the effective date of
this Agreement and for so long as the Advisor continues to manage
assets of the Fund, the Advisor agrees, upon request, to provide the
Fund and/or the General Partners with updated information relating to
the information about the Advisor provided for inclusion in the
Prospectus.
15. ASSIGNMENT AND AMENDMENT.
This Agreement may not be assigned or amended by either party
without the written consent of the other party, which consent shall
not be unreasonably withheld.
16. SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. In the event
one of the General Partners is removed or resigns and is not replaced,
all authority granted to the General Partners shall be retained by the
remaining General Partner.
17. NOTICES.
All notices required to be delivered under this Agreement shall
be delivered personally, by air courier or by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to the Fund ATA Research/ProFutures Diversified
or the General Fund, L.P.
Partners: c/o ProFutures, Inc.
ATTN: Gary D. Halbert, President
107 Highway 620 South -- #30F
Austin, Texas 78734
ATA Research/ProFutures Diversified
Fund, L.P.
c/o ATA Research, Inc.
ATTN: Aladin T. Abughazaleh, President
5910 N. Central Expwy. -- Suite 1520
Dallas, Texas 75206
Copies to: John K. Gray, Esq.
Bayh, Connaughton & Malone
5910 N. Central Expy., Suite 1000
Dallas, Texas 75206
If to the Advisor: Rabar Market Research, Inc.
Attn: Paul Rabar, President
10 Bank Street -- Suite 830
White Plains, New York 10606-1933
Copies to: Adam C. Cooper, Esq.
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
18. ATTORNEYS' FEES.
In the event litigation is required to enforce any provisions of
this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees.
19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to contracts made in
that state without reference to its conflicts of laws provisions.
20. SPECIAL DISCLOSURE. The CFTC requires the following special
disclosure for all customer accounts which are not fully-funded:
SPECIAL DISCLOSURE
FOR NOTIONALLY-FUNDED ACCOUNTS
YOU SHOULD REQUEST YOUR COMMODITY TRADING ADVISOR TO ADVISE YOU
OF THE AMOUNT OF CASH OR OTHER ASSETS (ACTUAL FUNDS) WHICH SHOULD BE
DEPOSITED TO THE ACCOUNT TO BE CONSIDERED "FULLY-FUNDED." THIS IS THE
AMOUNT UPON WHICH THE ADVISOR WILL DETERMINE THE NUMBER OF CONTRACTS
TRADED IN THE FUND'S ACCOUNT AND SHOULD BE AN AMOUNT SUFFICIENT TO
MAKE IT UNLIKELY THAT ANY FURTHER CASH DEPOSITS WOULD BE REQUIRED FROM
YOU OVER THE COURSE OF YOUR PARTICIPATION IN THE ADVISOR'S PROGRAM.
THE ACCOUNT SIZE TO WHICH YOU HAVE AGREED IN WRITING (THE
"NOMINAL" OR "NOTIONAL" ACCOUNT SIZE) IS NOT THE MAXIMUM POSSIBLE LOSS
THAT YOUR ACCOUNT MAY EXPERIENCE. YOU SHOULD CONSULT THE ACCOUNT
STATEMENTS IN ORDER TO DETERMINE THE ACTUAL ACTIVITY IN THE ACCOUNT,
INCLUDING PROFITS, LOSSES AND CURRENT CASH EQUITY BALANCE. TO THE
EXTENT THAT THE EQUITY IN THE ACCOUNT IS AT ANY TIME LESS THAN THE
NOMINAL ACCOUNT SIZE, THE EFFECT ON THE FUND WILL BE THE FOLLOWING:
(a) ALTHOUGH YOUR GAINS AND LOSSES, FEES AND COMMISSIONS MEASURED IN
DOLLARS WILL BE THE SAME, THEY WILL BE GREATER WHEN EXPRESSED AS A
PERCENTAGE OF ACCOUNT EQUITY.
(b) YOU MAY RECEIVE MORE FREQUENT AND LARGER MARGIN CALLS.
(c) THE DISCLOSURES WHICH ACCOMPANY THE PERFORMANCE TABLE ASSOCIATED
WITH THE PROGRAM SELECTED BY THE FUND MAY BE USED TO CONVERT THE RATES
OF RETURN ("ROR") IN THE PERFORMANCE TABLE TO THE CORRESPONDING RORs
FOR PARTICULAR PARTIAL FUNDING LEVELS.
21. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, which counterparts shall constitute one and the same
original instrument.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: PROFUTURES, INC., By: ATA RESEARCH, INC.,
a co-General Partner a co-General Partner
By: /s/ Gary D. Halbert By: /s/ Aladin T. Abughazaleh
President President
RABAR MARKET RESEARCH, INC.
By: /s/ Paul Rabar
President
PROFUTURES, INC., ATA RESEARCH, INC.,
By: /s/ Gary D. Halbert By: /s/ Aladin T. Abughazaleh
President President
EXHIBIT A
February 28, 1995
Rabar Market Research, Inc.
Attn: Paul Rabar, President
10 Bank Street -- Suite 830
White Plains, New York 10606-1933
Re: COMMODITY TRADING AUTHORIZATION
Dear Mr. Rabar:
Effective March 3, 1995, ATA Research/ProFutures Diversified
Fund, L.P., a Delaware limited partnership, does hereby make,
constitute and appoint you as its Attorney-in-Fact to purchase and
sell commodity interests, including but not limited to (a) U.S.
domestic and foreign commodity futures contracts and options thereon,
through ING Derivatives Clearing and others, as Clearing Broker(s),
and (b) spot or forward contracts through such brokers, dealers or
banks as we agree are appropriate, in accordance with the Advisory
Contract between us dated February 28, 1995.
Very truly yours,
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: ATA RESEARCH, INC.,
a co-General Partner
/s/ Aladin T. Abughazaleh
President
EXHIBIT B
DEFINITIONS
Net Asset Value - Net Asset Value means the Fund's total assets
(including interest that has accrued but not yet been paid) less total
liabilities, determined according to the following principles, and
where no such principle is governing, then on the basis of generally
accepted accounting principles, consistently applied. For purposes of
this calculation:
(a) Net Asset Value includes any realized or unrealized profit
or loss on open securities and open commodity positions.
(b) All open securities and open commodity positions are valued
at their then market value, which means with respect to open commodity
positions, the settlement price as determined by the exchange on which
the transaction is effected or the most recent appropriate quotation
as supplied by the Clearing Broker or banks through which the
transaction is effected except that United States Treasury Bills (not
futures contracts thereon) shall be carried at their cost plus accrued
interest. If there are no trades on the date of the calculation due
to the operation of the daily price fluctuation limits or due to a
closing of the exchange on which the transaction is executed, the
contract is valued at the nominal settlement price as determined by
the exchange. Interest, if any, shall be accrued monthly. The
liquidating or market value of a commodity futures or options contract
not traded on a United States commodity exchange shall mean its
liquidating value determined by the General Partners on a basis
consistently applied for each different variety of contract.
(c) Brokerage commissions on open positions shall be accrued in
full as a liability of the Fund upon the initiation of such open
positions. Management and incentive fees paid to the Advisors shall
be accrued monthly for purposes of calculating Net Asset Value only,
even if not paid until the end of the quarter; incentive fees are
calculated without regard to the fees paid to any Consultant and the
General Partners.
Allocated Net Asset Value(s) - Allocated Net Asset Value(s) (for
purposes only of calculating the Advisors' management fees, if any,
and even if paid quarterly) during a month are computed for each
Advisor individually, are computed before any incentive fees and
management fees paid to the respective Advisor and means the month-end
Nominal Account Size of the account.
Nominal Account Size - means initially $7 million, which amount
shall be (a) increased by profits and decreased by losses in the
account, but not by additions to or withdrawals of actual funds from
the account, and/or (b) increased or decreased by such amounts
specified in any notices to the Advisor from the Trading Manager and
the Fund as described in Section 2 of this Agreement. Accordingly,
any actual funds deposited or withdrawn shall represent an adjustment
in actual funds deposited and not in the Nominal Account Size. For
purposes of determining profits and losses, and thereby adjusting the
Nominal Account Size, all items of income and expense shall be taken
into account on the accrual basis in accordance with generally
accepted accounting principles. For purposes hereof, month-end
Nominal Account Size shall be increased by any reductions and
decreased by any additions in Nominal Account Size occurring during
such month (in either case, pro-rated for the number of days Nominal
Account Size is affected by such adjustment).
Trading Profits - Trading Profits (for purposes of calculating
the respective Advisor's incentive fees only and even if paid
quarterly) during a month are computed for the Advisor individually,
are computed after any management fees paid to the respective Advisor
on the Fund's assets allocated to such Advisor, if applicable, and
mean (i) the net of profits and losses resulting from all commodity
trades closed out during such month plus (ii) the net of any profits
and losses on commodity trades open as of the end of such month (after
deduction for accrued commodity brokerage commissions) minus
(iii) the net of any profits and losses on commodity trades open as of
the end of the immediately preceding month (after deduction for
accrued commodity brokerage commissions) and minus (iv) the Advisor's
"Capital Adjusted Carryforward Loss" (as defined below), if any, as of
the beginning of the quarter. If the result of adding and subtracting
items (i) to (iv) above is negative at the end of a month, such amount
shall become the "Ending Carryforward Loss." Interest income is not
included in the calculation of Trading Profits. If in the event that
Units are redeemed and such redemptions are to be charged against the
Advisors, then the "Ending Carryforward Loss" will be reduced pro rata
for each Advisor. If funds are withdrawn from an Advisor during or as
of the end of the month for any reason (including distributions,
redemptions or withdrawals or reallocation from the Advisor's trading
account), the "Capital Adjusted Carryforward Loss" for the next
quarter will be the "Ending Carryforward Loss" multiplied by the
fraction: Allocated Net Asset Value after withdrawal, divided by
Allocated Net Asset Value before withdrawal; if no withdrawal is
made, the "Capital Adjusted Carryforward Loss" for the next quarter
will be the "Ending Carryforward Loss."
------------------------
In accordance with the foregoing formula, the Fund pays the
Advisor a quarterly incentive fee, calculated monthly, whenever
Trading Profits (as defined) are achieved. Subject to the preceding
paragraph, if the Fund has a net loss on the Fund's allocation to the
Advisor thereafter, the Advisor will retain all incentive fees
previously paid but no further incentive fee will be payable until the
Advisor recovers the losses on that allocation and then generates
Trading Profits as defined. Thus, the incentive fee to an Advisor is
payable only on cumulative profits (which are not reduced by incentive
fees previously paid). The Fund may at any time employ other advisors
whose compensation may be calculated without regard to the losses
which may be incurred by the present advisors. Similarly, the Fund
may renew its relationship with any advisor on the same or different
terms. In addition, it should be noted that since the incentive fee
on Trading Profits is paid on a quarterly basis, the Fund may pay
substantial incentive fees during portions of the year even though
subsequent losses result in a yearly net loss for the Fund. The
Advisors will retain all payments made to them even if later losses
occur. In addition, an incentive fee may be paid to one Advisor but
the Fund may experience a loss or no change in its Net Asset Value as
a result of the trading by the other Advisors.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
TRADING POLICIES
(1) The Fund will attempt to diversify its market position to
avoid reliance on one or a few commodities. No Advisor may initiate
additional positions in any commodity if the margins (or its
equivalent) therefor, when added to the margins of all open positions
in that commodity, would exceed 33 1/3% of the Allocated Net Asset
Value (as defined) of the Fund attributable to the Advisor's
management.
(2) No Advisor may initiate positions if the margin (or its
equivalent) therefor, when added to the margins of all then open
positions, would exceed 75% of the Allocated Net Asset Value of the
Fund attributable to the Advisor's management. In the event that, due
to abrupt increases in required margins, the Fund's then open
positions require margins in excess of that percentage, the total
portfolio will be reduced as soon as practicable in light of market
conditions to an amount within such percentage.
(3) The Fund may not allocate more than ten percent (10%) of its
assets (calculated as of the date the allocation is made) to one or
more Advisors for the purpose of purchasing, selling, writing or
trading in commodity options on markets other than contract markets
designated by the CFTC.
(4) The Fund will not purchase, sell or trade in securities to
such extent as to be required to be registered as an investment
company under the Investment Company Act of 1940, as amended.
(5) The Fund may trade in spreads or straddles in order to take
advantage of potential profit in spread relationships and to limit
risks.
(6) The Fund does not intend to regularly make or take delivery
of commodities or to trade in cash commodities, other than forward
contracts on foreign currencies. Open positions in futures contracts
are expected to be closed prior to the delivery date and, as far as
practicable, no new positions will be opened during the delivery
month.
(7) The Fund will not employ the trading technique, commonly
known as pyramiding, in which the speculator uses unrealized profits
on existing positions as margin for the purchase or sale of additional
positions in the same or a related commodity. However, an Advisor may
take into account the Fund's open trade equity in assets of the Fund
in determining whether to acquire additional commodity futures
contracts on behalf of the Fund.
(8) No loans may be made by the Fund to any person, including
the General Partners and their affiliates.
(9) The Fund's assets will not be commingled with the assets of
any other person; funds used to satisfy margin requirements will not
be considered commingled for this purpose.
(10) No rebates or give-ups may be paid to or received by the
General Partners, nor may the General Partners participate in any
reciprocal business arrangements which could circumvent this
prohibition.
(11) No Advisor may receive an incentive or management fee if it
participates, directly or indirectly, in any commodity brokerage
commissions generated by the Fund.
(12) No agreement with the Advisors, the Clearing Broker or the
General Partners shall exceed one year and any such agreements are
terminable without penalty upon respectively 30 days, 60 days and 120
days written notice by the Fund. Material changes in the trading
policies described above must be approved by a vote of a majority of
the outstanding Units (not including Units of General Partnership
Interest but including Units of Limited Partnership Interest held by
affiliates of the General Partners). The General Partners do not
believe that action by the limited partners to authorize material
changes in the Fund's trading policies would constitute participation
in the control of the management of the Fund sufficient to cause the
limited partners to lose their limited liability for Fund obligations.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
ADVISORY CONTRACT
This ADVISORY CONTRACT (the "Agreement") is made as of the 1st
day of February, 1995, by and among ATA RESEARCH/PROFUTURES
DIVERSIFIED FUND, L.P., a Delaware limited partnership (the "Fund"),
its general partners, ATA RESEARCH, INC., a Texas corporation, and
PROFUTURES, INC., a Texas corporation (collectively the "General
Partners"), and CONSIDINE TRADING CORP., an Illinois corporation (the
"Advisor").
W I T N E S S E T H:
WHEREAS, the Fund is a limited partnership organized for the
purpose of buying, selling, trading and generally dealing in commodity
futures and options contracts and other commodity interests,
including forward contracts on foreign currency ("commodity
interests");
WHEREAS, the Fund has been offering its Units of Limited
Partnership Interest pursuant to the Fund's August 30, 1993
prospectus, as now or hereafter amended or supplemented (the
"Prospectus"), in connection with its Form S-1 Registration Statement
declared effective on August 30, 1993, under the Securities Act of
1933, as amended (the "Securities Act"), and any amendments thereto
(the "Registration Statement");
WHEREAS, the Fund is fully cognizant of the high risks involved
in highly leveraged commodity speculation;
WHEREAS, the General Partners are, pursuant to the Fund's
Agreement of Limited Partnership, authorized to utilize the services
of one or more professional trading advisors and consultants in
connection with the trading activities of the Fund; and
WHEREAS, the parties wish to enter into this Agreement in order
to set forth the terms and conditions upon which the Advisor will
render and implement trading advisory services for the Fund.
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR.
Upon execution of this Agreement, the Advisor shall have sole
authority and responsibility for directing, independently of any other
trading advisors retained by the Fund, the investment and reinvestment
of the Nominal Account Size (as defined in Exhibit B) for trading
commodity interests pursuant to the Advisor's general trading program.
(For these purposes, the Fund account is a separate account
established for the Fund with futures commission merchant(s), bank(s),
dealer(s) or other broker(s) (hereinafter, each a "Clearing Broker")
holding the assets allocated to the Advisor for the Advisor's
management hereunder.)
The Fund and Advisor hereby acknowledge that the Fund's account
is being traded pursuant to Advisor's general trading program, and
that such account may be the subject of notional funding under this
Agreement. The Advisor will direct the trading of the Nominal Account
Size in accordance with the written trading policies provided to the
Advisor (as they may be amended from time to time) and any written
instructions given to the Advisor from the General Partners. The
Advisor may only depart from such current trading policies or
instructions provided in writing to the Advisor with the prior written
consent of the General Partners. It is understood that the General
Partners, and not the Advisor, have overall responsibility for
monitoring the Fund's and the trading advisors' compliance in the
aggregate for all of the Fund's advisors with the Fund's trading
policies.
All purchases and sales of commodity interests shall be for the
account and at the risk of the Fund. All commissions and expenses
arising from the trading of, or other transactions in the course of
the administration of, the Fund's account shall be charged to the
Fund. The Fund shall deliver to the Advisor a Commodity Trading
Authorization (see attached Exhibit A) appointing the Advisor the
Fund's agent and attorney-in-fact with respect to the Fund's trading
account directed by such Advisor. However, it is expressly agreed
that, in the event the General Partners shall, in their sole
discretion, using their prudent business judgment, determine that any
trading instructions issued by the Advisor violate the Fund's trading
policies, then the General Partners may negate such Advisor's trading
instructions.
The Advisor is not responsible for the execution or clearance of
the Fund's trades. The Advisor shall not be liable to the Fund or the
General Partners for any errors or omissions by any Clearing Broker.
The Advisor shall, however, use the Advisor's best efforts to notify
the General Partners and the Clearing Broker of any order or trade
which the Advisor reasonably believes was not executed in accordance
with the Advisor's instructions to such Clearing Broker.
Prior to the date of this Agreement, the Advisor has delivered
the Advisor's January 1, 1995 disclosure document (the "Disclosure
Document") conforming in all material respects to the rules adopted
under the Commodity Exchange Act, as amended (the "CEA"). Receipt of
such Disclosure Document is hereby acknowledged.
The Advisor has not alone or in conjunction with the General
Partners been an organizer or a promoter of the Fund, nor is the
Advisor a partner, joint venturer or agent of any other trading
advisor engaged by the Fund.
2. ALLOCATION AND REALLOCATION OF ASSETS; DESIGNATION OF
ADDITIONAL TRADING ADVISORS.
The Fund's account with the Advisor shall initially be funded
with cash and/or other margin-qualified assets totaling
$2,000,000, which shall be traded at a level equal to the Nominal
Account Size. The Fund shall provide to the Advisor monthly account
statements and/or such other information the Fund deems sufficient to
confirm the funded status of the account so long as margin-qualified
assets are not actually deposited with the Clearing Broker.
Subject to the first paragraph in Section 1 hereof, the General
Partners may in the near future, at any time and from time to time:
(a) subject to the Advisor's consent, allocate to the Advisor for
management an additional portion of the Fund's assets and/or a portion
of any additional capital contributions made to the Fund and/or
increase the Nominal Account Size; (b) reallocate the Fund's assets
among the various trading advisors for the Fund (including away from
the Advisor); and/or (c) designate additional trading advisor(s) for
the Fund, in which case the General Partners may allocate to such
additional advisor(s) the management of such portion of the Fund's
assets or the Nominal Account Size, including a portion of the assets
allocated to the Advisor, as the General Partners shall determine.
The General Partners shall notify the Advisor of any allocation or
reallocation of assets or Nominal Account Size to or from the Advisor
as soon as practicable after the decision to allocate or reallocate
has been made; however, the Fund shall endeavor to make such
allocation or reallocation only at month-end.
Subject to Section 6 hereof, the designation of any additional
advisor(s) for the Fund and/or the allocation and/or reallocation of
the Fund's assets to and/or from the trading advisors for the Fund,
including the Advisor, in accordance with this Section 2 shall neither
terminate this Agreement nor modify in any regard the respective
rights and obligations of the parties hereunder.
3. COMPENSATION.
(a) The General Partners shall in no event themselves be liable
for the Advisor's fees. Rather, in consideration of and in
compensation for all of the services to be rendered by the Advisor to
the Fund under this Agreement, the Fund will pay the Advisor no
management fee but the Fund will pay the Advisor an incentive fee
equal to twenty-five percent (25%) of quarterly Trading Profits
generated by Advisor's trading hereunder. The fee shall be accrued
monthly and paid quarterly. The term "Trading Profits" for purposes
of the calculating the fee is defined in the attached Exhibit B,
incorporated herein by reference.
The incentive fee is payable only on cumulative profits in the
Advisor's trading account; subject to Exhibit B, if losses occur, they
will be carried forward and must be regained before any new Trading
Profits can occur; and for any period of less than a full quarter
(including the quarters in which this Agreement commences and
terminates), the incentive fees will be payable as if the portion of
The fiscal quarter constituted a full quarter. Such fees due the
Advisor are payable within thirty (30) days of the end of the quarter.
The General Partners expressly agree that any fees due the Advisor
pursuant to this Section 3 shall survive the termination of this
Agreement.
(b) The Advisor shall not receive any commissions, compensation,
remuneration or payments whatsoever from any clearing broker with whom
the Fund carries an account for any transactions executed in the
Fund's trading account with the Advisor.
4. RIGHT TO ADVISE OTHERS AND SPECULATIVE POSITION LIMITS.
(a) The Advisor's present business is advising with respect to
the purchase and sale of commodity interests, as defined. The
services provided by the Advisor are not to be deemed exclusive. The
General Partners acknowledge that, subject to the terms of this
Agreement, the Advisor may render advisory, consulting and management
services to other clients for which the Advisor may charge fees
different from those charged to the Fund. The Advisor shall be free
to advise others and manage other commodity accounts during the term
of this Agreement and to use the same or different information,
computer programs and trading strategy which the Advisor obtains,
produces or utilizes in the performance of services for the Fund. In
that connection, however, the Advisor represents and warrants that the
rendering of such consulting, advisory and management services to
other commodity interest trading accounts and entities will not
materially impair the discharge of the Advisor's responsibilities
under this Agreement; it being acknowledged, however, that different
trading strategies or methods may be utilized for different 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, accounts utilizing different
brokers or dealers and accounts with other differences, and that such
differences may cause divergent trading results.
(b) The Advisor will promptly notify the General Partners if the
Fund's positions are included in an aggregate amount which exceeds the
applicable speculative position limits. The Advisor represents that,
if the Advisor's trading recommendations are altered because of the
application of the speculative position limits, such alteration will
not modify the trading instructions in such manner as to affect the
Fund disproportionately compared with the Advisor's other accounts.
5. THE FUND'S RECORDS.
(a) The General Partners will instruct the Fund's Clearing
Broker to furnish to the Advisor copies of all trade confirmations
and monthly trading reports relating to the trading directed by
Advisor. The Advisor will maintain a record of all trading orders the
Advisor places for the Fund's account, whether by internal records
and/or those of the Clearing Broker, and will monitor the Fund's open
positions which the Advisor initiates.
(b) Subject to the property rights of the Advisor described in
Section 10, and at the reasonable request of the General Partners, the
Advisor and the Advisor's employees and affiliates shall, at the
General Partners' expense, promptly (within two business days) make
available to the General Partners copies of the normal daily, monthly,
quarterly and annual, as the case may be, (i) written reports and any
work papers reflecting the performance of all commodity pool accounts
advised, managed, owned or controlled by the Advisor or the Advisor's
employees and affiliates required to be maintained under the CEA and
the regulations promulgated thereunder and (ii) similar written
information, reflecting the performance of the commodity interest
accounts advised, managed, owned or controlled by the Advisor or the
Advisor's employees and affiliates with respect to which accounts
reports are not required to be delivered to the owners thereof
pursuant to the CEA. At the reasonable request of the General
Partners, the Advisor shall promptly deliver to the General Partners a
written explanation, satisfactory to the General Partners, of
differences (if any) in the performance between the Fund's account and
such other commodity interest accounts. Notwithstanding the
foregoing, the Fund, the General Partners and their agents understand
that (x) the Advisor may delete the names and other identifying
information from such books, records and other information, and (y)
such books, records and other information regarding the Advisor are
confidential and are deemed to be "trade secrets" of the Advisor.
Therefore, the parties agree not to disclose, furnish or distribute to
any person any of such books, records or information obtained by any
of them pursuant to this Section 5(b) without the express written
consent of the Advisor or as ordered by a court of competent
jurisdiction.
6. TERM.
(a) This Agreement shall commence on the date hereof and shall
continue in effect for one year (subject to the Fund's option to
extend the term for additional, successive one year periods, which
option shall be automatically exercised unless the Fund notifies the
Advisor to the contrary at least thirty (30) days before the end of a
period), until its termination as provided herein. This Agreement
shall terminate automatically without notice if (i) the Fund is
terminated pursuant to the Fund's Agreement of Limited Partnership, or
(ii) the Advisor's registration as a commodity trading advisor or
membership in the NFA is terminated or suspended. The General
Partners and/or the Fund may terminate this Agreement, immediately
upon notice, in the event there has been any material breach by
Advisor of any provision of this Agreement including, without
limitation, a breach of the obligation to notify the Fund pursuant to
Section 14 hereof or any of the representations and warranties recited
herein. This Agreement may also be terminated at any time for any
reason by the Fund upon written notice to the Advisor.
(b) The Advisor may terminate this Agreement at any time upon
five (5) day's written notice to the Fund and the General Partners or
immediately, upon notice, if: (i) the registration as a commodity
pool operator or membership in the NFA is terminated or suspended as
to both General Partners; (ii) there has been any material breach of
this Agreement by the Fund or the General Partners; or (iii) the
Fund's trading policies are changed and the Advisor does not wish to
manage Fund assets pursuant to such changed policy.
7. INDEMNITY.
(a) In any threatened, pending or completed action, suit
proceeding or investigation to which the Advisor (or the Advisor's
affiliates, principals or employees) was or is a party or is
threatened to be made a party by reason of the fact that the Advisor
is or was the Advisor of the Fund or in performance of services for
the Fund, the Fund shall indemnify, defend and hold harmless the
Advisor (or the Advisor's affiliates, principals and employees)
against any loss, liability, damage, cost, expense, fees, penalties,
(including reasonable attorneys' and accountants' fees), judgments
and amounts paid in settlement actually and reasonably incurred by the
Advisor in connection with such action, suit, proceeding or
investigation if the Advisor (or the Advisor's affiliates, principals
and employees) acted in good faith and in a manner the Advisor
reasonably believed to be in or not opposed to the best interests of
the Fund, and provided that the Advisor's conduct does not constitute
negligence, misconduct or a material breach of the Advisor's
fiduciary obligations (unless the court or any administrative forum in
which such action, suit, proceeding or investigation was brought shall
determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, the Advisor (or the
Advisor's affiliates, principals and employees) is fairly and
reasonably entitled to indemnification for such expenses which such
court shall deem proper).
(b) Any indemnification under subsection (a) above, unless
ordered by a court, shall be made by the Fund only as authorized in
the specific case and only upon a determination by independent legal
counsel in a written opinion that indemnification is proper in the
circumstances because the Advisor (or the Advisor's affiliates,
principals and employees) have met the applicable standard of conduct
set forth in subsection (a) above.
(c) To the extent that the Advisor (or the Advisor's affiliates,
principals and employees) has been successful on the merits or
otherwise in defense of any action, suit, proceeding or investigation
referred to in subsection (a) above, or in defense of any claim, issue
or matter therein, the Fund shall indemnify, defend and hold harmless
the Advisor against the expenses, including attorneys' and accountants
fees, actually and reasonably incurred by it in connection therewith
pursuant to Section 7(a).
(d) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding or
investigation against the Advisor (or the Advisor's affiliates,
principals or employees) may, in the sole discretion of the General
Partners, be paid by the Fund in advance of the final disposition of
such action, suit, proceeding or investigation, if and to the extent t
hat the person on whose behalf such expenses are paid shall agree to
reimburse the Fund in the event indemnification is not permitted under
this Section 7.
(e) In the event that any claim, dispute or litigation arises
between the Advisor and any party other than the Fund or the General
Partners, which claim, dispute or litigation is unrelated to the
Fund's business, and if the Fund or the General Partners is made a
party to such claim, dispute or litigation by such other party, the
Advisor shall defend any actions brought in connection therewith
against the Fund and/or the General Partners, each of whom agree to
cooperate in such defense, and the Advisor shall indemnify and hold
harmless the Fund and the General Partners from and with respect to
any amounts awarded to such other party.
(f) If any claim, dispute or litigation arises between the Fund
or the General Partners and any party other than the Advisor which
claim, dispute or litigation is unrelated to the Advisor's business,
and if the Advisor (or the Advisor's affiliates, principals or
employees) is made a party to such claim, dispute or litigation by
such other party, the Fund or the General Partners shall defend any
actions brought in connection therewith on behalf of the Advisor, who
agrees to cooperate in such defense, and the Fund shall indemnify and
hold harmless the Advisor and the Advisor's affiliates, principals and
employees from and with respect to any amounts awarded to such other
party.
(g) The Advisor agrees to indemnify, defend and hold harmless
the Fund against any and all liabilities incurred by the Fund and/or
the General Partners by reason of any act or omission of the Advisor
relating to the Advisor's management of Fund assets maintained in the
Fund's trading account with the Advisor (including reasonable costs
and expenses of investigating and defending any claims, demand or
suit) if such act or omission relates to a breach of a representation
or warranty made by Advisor herein or involves negligence, misconduct
or a material breach of Advisor's obligations under this Agreement, or
the CEA and rules promulgated thereunder.
(h) None of the foregoing provisions for indemnification shall
be applicable with respect to default judgments, confessions of
judgment or settlements entered into by the party claiming
indemnification ("Indemnitee") without the prior consent of the party
obligated to indemnify the other party ("Indemnitor"); provided,
however, that should the Indemnitor refuse to consent to a settlement
approved by the Indemnitee, the Indemnitee may effect such settlement,
pay such amount in settlement as it shall deem reasonable and seek a
judicial or regulatory determination with respect to reimbursement by
the Indemnitor of any loss, liability, damage, cost or expenses
(including reasonable attorneys' and accountants' fees) incurred by
the Indemnitee in connection with such settlement to the extent such
loss, liability, damage, cost or expense (including reasonable
attorneys' and accountants' fees) was caused by or based upon
violation of this Agreement by the Indemnitor or violation of the
standard of conduct set forth herein. Notwithstanding the foregoing,
the Indemnitor shall, at all times, have the right to offer to settle
any matters and if the Indemnitor successfully negotiates a settlement
and tenders payment therefore to the Indemnitee, the Indemnitee must
either use its best efforts to dispose of the matter in accordance
with the terms and conditions of the proposed settlement or the
Indemnitee may refuse to settle the matter and continue its defense in
which latter event the maximum liability of the Indemnitor to the
Indemnitee shall be the amount of said proposed settlement.
(i) The indemnities granted herein shall survive termination of
this Agreement.
(j) The term "Advisor" as used in Sections 7(d) and (f) shall
include the Advisor and the Advisor's employees.
8. INDEMNITY PROCEDURE.
Promptly after receipt by any indemnified party ("Indemnitee")
under Section 7 of a notice of the commencement of an action or claim
to which such Section may apply, the Indemnitee shall notify the
indemnifying party ("Indemnitor") in writing of the commencement of
such action or claim if a claim for indemnification in respect of such
action or claim may be made against the Indemnitor under such Section;
but the omission to so notify the Indemnitor shall not relieve the
Indemnitor from any liability which the Indemnitor may have to the
Indemnitee under such Section, except where such omission shall have
materially prejudiced the Indemnitor. In case any such action or
claim shall be brought against an Indemnitee and the Indemnitee shall
notify the Indemnitor of the commencement of such action or claim, the
Indemnitor shall be entitled to participate in such action or claim
and, to the extent that the Indemnitor may desire, to assume the
defense of such action or claim with counsel selected by the
Indemnitor and acceptable to the Indemnitee, and after notice from the
Indemnitor to the Indemnitee of the Indemnitor's election to assume
the defense of such action, the Indemnitor shall not be liable to the
Indemnitee under such Section for any legal, accounting and other
expenses subsequently incurred by the Indemnitee in connection with
the defense of such action or claim other than reasonable costs of
investigation.
Notwithstanding any provision of this Section 8 to the contrary,
if any action or claim as to which indemnity is or may be available an
Indemnitee shall reasonably determine that its interests are or may be
adverse, in whole or in part, to the interests of the Indemnitor or
that there may be legal defenses available to the Indemnitee which are
or may be different from, in addition to, or inconsistent with, the
defenses available to the indemnifying party, the Indemnitee may
retain its own counsel in connection with such action or claim, in
which case the Indemnitee shall be responsible for any legal,
accounting and other expenses reasonably incurred by or on behalf of
it in connection with investigating or defending such action or claim.
In no event shall an Indemnitor be liable for the fees and expenses
of more than one counsel for all indemnities in connection with any
one action or claim or in connection with separate but similar or
related actions or claims in the same jurisdiction arising out of the
same general allegations. An Indemnitor shall not be liable for a
settlement of any such action or claim effected without its prior
written consent, but if any such action or claim shall be settled with
the prior written consent of an Indemnitor or if there shall be a
final judgment for the plaintiff in any such action or claim, the
Indemnitor shall indemnify, hold harmless and defend an Indemnitee
from and against any loss, liability or expense in accordance with
Section 7 by reason of such settlement or judgment.
9. REPRESENTATIONS AND WARRANTIES.
(a) The Advisor represents, warrants and agrees that:
(i) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the Advisor's obligations under this Agreement will not result in any
violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
Advisor is a party or by which the Advisor is bound;
(ii) the Advisor is duly registered as a commodity trading
advisor under the CEA and is a member in such capacity of the National
Futures Association, and the Advisor will maintain and renew such
registration and membership during the term of this Agreement;
(iii) all of the information relating to and furnished by
the Advisor contained in the Advisor's Disclosure Document (as
defined in Section 1 of this Agreement and as it may be amended or
supplemented from time to time while the Registration Statement is
effective), except as the Advisor has previously notified the Fund and
its General Partners, is true and accurate in all material respects,
does not omit any material information and is in full material
compliance with the CEA and rules promulgated thereunder as of the
date of this Agreement;
(iv) the Advisor is not registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, or any state
investment adviser statute, nor are the Advisor's activities such that
the Advisor is required to be so registered;
(v) the Advisor's selection of trades for the Fund will
follow the written trading policies of the Fund, and as they may be
changed from time to time;
(vi) if the Fund suspends trading following written
instructions to that effect to the Advisor by the Fund, the Advisor
will suspend all trading activity for the Fund and liquidate positions
held by the Fund as soon as practicable under the circumstances;
(vii) all express references to the Advisor in the
Prospectus are complete and accurate in all material respects and, as
to the Advisor, the Prospectus does not contain any untrue statement
of a material fact or omit any material fact required to be stated
therein or which is necessary to make the Prospectus not misleading;
except the foregoing representations and warranties will not apply
to computations made by the Fund, the General Partners or the Clearing
Brokers in the table relating to the Advisor and the editing and
updating of the Advisor's actual performance tables prepared at the
direction of ATA Research, Inc., it being understood that the accuracy
and completeness of the data provided by the Advisor to the Fund for
use in the Prospectus will be warranted and represented by the Advisor
to be accurate in all material respects;
(viii) the Advisor's management of client accounts other
than that of the Fund, which it has agreed to or may in the future
agree to manage, which accounts the Advisor is permitted to manage
under this Agreement (subject to limitations contained in Section 4
hereof), will be conducted in such a manner as to assure that the
Fund's account will receive equitable treatment, it being understood
that the Advisor may adjust the implementation of the Advisor's
trading system in a good faith effort to accommodate additional
accounts or accounts of different sizes;
(ix) except as the Advisor has previously notified the Fund
and its General Partners, there has been no material change in the
Advisor's performance tables contained in the Advisor's current
Disclosure Document; and
(x) the Advisor will not participate in the brokerage
commissions paid by the Fund to any of its Clearing Brokers, including
ING Derivatives Clearing.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Advisor will promptly notify the Fund and the General
Partners of such event and the facts related thereto in the manner
provided below. Furthermore, all representations, warranties and
covenants hereunder shall inure to the benefit of each of the parties
to whom it is addressed, and their respective heirs, executors,
administrators, successors and permitted assigns.
(b) Each of the General Partners represents, warrants and agrees
that:
(i) it is a corporation in good standing under the laws of
the State of Texas and is (and at all times through the date of
termination of the offering and during the term of this Agreement will
be) in good standing and qualified to do business as a foreign
corporation in each jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to be so
qualified would materially adversely affect its ability to act as a
corporation;
(ii) this Agreement is a valid and binding agreement
enforceable in accordance with its terms (except as may be limited by
bankruptcy laws and general equity principles) and the performance of
the General Partner's obligations under this Agreement will not result
in any violation, breach or default under any term or provision of any
material undertaking, contract, agreement or order to which the
General Partner is a party or by which the General Partner is bound;
(iii) it is duly registered as a commodity pool operator
under the CEA and is a member in such capacity of the National Futures
Association and will maintain and renew such registration and
membership during the term of this Agreement;
(iv) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the General Partner and is a valid
and binding agreement enforceable in accordance with its terms (except
as may be limited by bankruptcy laws and general equity principles);
(v) the consummation of the transactions set forth in the
Registration Statement and Prospectus are not contrary to the General
Partner's Certificate of Incorporation, By-laws, or any material
statute, law or regulation of any jurisdiction;
(vi) to the best of its knowledge, the Registration
Statement (including the Prospectus) does not contain any misleading
or untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
in which they were made) not misleading; and
(vii) any selling materials of whatever nature which relate
to the Advisor will be submitted for its final approval as to the
disclosure regarding such Advisor.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the General Partners will promptly notify the Advisor of such
event and the facts related thereto in the manner provided below.
Furthermore, all representations, warranties and covenants hereunder
shall inure to the benefit of each of the parties to whom it is
addressed, and their respective heirs, executors, administrators,
successors and permitted assigns.
(c) The Fund represents, warrants and agrees that:
(i) the Fund is a limited partnership in good standing
under the laws of the state of Delaware and is (and at all times
through the date of termination of the offering and during the term of
this Agreement will be) in good standing and qualified to do business
as a foreign limited partnership in each jurisdiction in which the
nature or conduct of its business requires such qualifications and the
failure to be so qualified would materially adversely affect its
ability to act as a limited partnership and perform its obligations
(including this Agreement), and has full capacity and authority to
conduct its business and to perform its obligations under this
Agreement, and to act as described in the Prospectus;
(ii) this Agreement has been duly and validly authorized,
executed and delivered on behalf of the Fund and is a valid and
binding agreement enforceable in accordance with its terms (except as
may be limited by bankruptcy laws and general equity principles);
(iii) the consummation of the transactions set forth in the
Registration Statement (including the Prospectus) are not contrary to
the provisions of the Fund's Agreement of Limited Partnership or
Certificate of Limited Partnership, any material statute, law or
regulation of any jurisdiction, and will not result in a material
violation, breach or default under any term or provision of any
material contract, agreement or order to which the Fund is a party or
by which the Fund is bound;
(iv) the Fund has obtained all governmental and regulatory
registrations and approvals required by law as may be necessary to act
as described in the Prospectus;
(v) the Fund is not required to be registered as an
investment company under the Investment Company Act of 1940, as
amended;
(vi) all material governmental and regulatory registrations
and approvals for the valid authorization, issuance, offer and sale
of the Units have been obtained and, after due inquiry, no order
preventing or suspending the use of the Prospectus with respect to the
Units has been issued by the SEC, CFTC, NFA or the state in which
Units are registered; and
(vii) to the best of its knowledge, the Registration
Statement (including the Prospectus) does not contain any misleading
or untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
in which they were made) not misleading.
All representations, warranties and covenants hereunder shall be
continuing during the term of this Agreement, including any renewal
period, and shall survive the delivery of any payment for any Units
sold by the Fund and the termination of this Agreement with respect to
any matter arising while such agreements are in effect. In addition,
if at any time, any event has occurred which would make, or tend to
make, the foregoing representations, warranties and covenants not
true, the Fund will promptly notify the Advisor of such event and the
facts related thereto in the manner provided below. Furthermore, all
representations, warranties and covenants hereunder shall inure to
the benefit of each of the parties to whom it is addressed, and their
respective heirs, executors, administrators, successors and permitted
assigns.
10. PROPERTY RIGHTS OF THE TRADING ADVISOR.
The Fund and the General Partners acknowledge that commodity
trading advice provided by the Advisor is solely the Advisor's
property right. The Fund and General Partners further agree, unless
authorized by the Advisor, that such advice will not be disseminated
in whole or in part, directly or indirectly, to any of the limited
partners, Clearing Broker(s), Clearing Brokers' or General Partners'
customers, employees, agents, officers, directors or any others,
except as necessary to conduct the business of the Fund or except as
required by any applicable law or regulation. The Fund and the
General Partners expressly authorize the Advisor, because of their
proprietary and confidential nature, to withhold the names and
addresses of the Advisor's clients from any inspection provided the
General Partners pursuant to this Agreement.
11. NO GUARANTEE OF PERFORMANCE.
The Advisor makes no promises, representations, warranties or
guarantees that any of the Advisor's services to be rendered to the
Fund will result in a profit or will not result in a loss to the Fund.
12. ORDER ENTRY.
Subject to Section 1, the Advisor represents that in the
placement of the Fund orders with the Fund's Clearing Broker, the
Advisor will utilize a fair and reasonable order entry system which
shall be no less favorable to the Fund than that provided for any
other client account advised by the Advisor.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties and no other agreement, verbal or otherwise, shall be binding
on the parties.
14. ADVISOR NOTICE.
The Advisor agrees to notify the Fund and the General Partners
promptly upon discovery of any material omission or untrue or
misleading statement relating to the Advisor in the Disclosure
Document, Registration Statement, the Prospectus or any amendment or
supplement thereto regarding any information concerning the Advisor or
the Advisor's employees, including, without limitation, changes to the
Advisor's name, address, telephone and telefacsimile numbers, and
agrees to cooperate to the extent necessary in the preparation of any
necessary amendments or supplements to any of the foregoing
documents. The representations, warranties, agreements and
obligations to indemnify certain parties hereto contained herein
related to the Disclosure Document, Registration Statement, the
Prospectus or any amendment or supplement thereto shall attach to any
such amendment or supplement.
In connection therewith, from and after the effective date of
this Agreement and for so long as the Advisor continues to manage
assets of the Fund, the Advisor agrees, upon request, to provide the
Fund and/or the General Partners with updated information relating to
the information about the Advisor provided for inclusion in the
Prospectus, as amended or supplemented, and the management of all
client accounts by the Advisor. The Advisor shall use the Advisor's
best efforts to (i) provide monthly data within a reasonable period of
time after the General Partners so request and (ii) assist in the
preparation of performance data required to be presented in any
subsequent amendments to the Registration Statement and/or Prospectus.
15. ASSIGNMENT AND AMENDMENT.
This Agreement may not be assigned or amended by either party
without the written consent of the other party, which consent shall
not be unreasonably withheld.
16. SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. In the event
one of the General Partners is removed or resigns and is not replaced,
all authority granted to the General Partners shall be retained by the
remaining General Partner.
17. NOTICES.
All notices required to be delivered under this Agreement shall
be delivered personally, by air courier or by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to the Fund ATA Research/ProFutures Diversified
or the General Fund, L.P.
Partners: c/o ProFutures, Inc.
ATTN: Gary D. Halbert, President
107 Highway 620 South -- #30F
Austin, Texas 78734
ATA Research/ProFutures Diversified
Fund, L.P.
c/o ATA Research, Inc.
ATTN: Aladin T. Abughazaleh, President
5910 N. Central Expwy. -- Suite 1520
Dallas, Texas 75206
Copies to: John K. Gray, Esq.
Bayh, Connaughton & Malone
5910 N. Central Expy., Suite 1000
Dallas, Texas 75206
If to the Advisor: Jerry Considine, President
Considine Trading Corp.
605 W. Madison, Tower 3, Suite 4704
Chicago, Illinois 60601
18. ATTORNEYS' FEES.
In the event litigation is required to enforce any provisions of
this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees.
19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to contracts made in
that state without reference to its conflicts of laws provisions.
20. SPECIAL DISCLOSURE. The CFTC requires the following special
disclosure for all customer accounts which are not fully-funded:
SPECIAL DISCLOSURE
FOR NOTIONALLY-FUNDED ACCOUNTS
YOU SHOULD REQUEST YOUR COMMODITY TRADING ADVISOR TO ADVISE YOU
OF THE AMOUNT OF CASH OR OTHER ASSETS (ACTUAL FUNDS) WHICH SHOULD BE
DEPOSITED TO THE ACCOUNT TO BE CONSIDERED "FULLY-FUNDED." THIS IS THE
AMOUNT UPON WHICH THE ADVISOR WILL DETERMINE THE NUMBER OF CONTRACTS
TRADED IN THE FUND'S ACCOUNT AND SHOULD BE AN AMOUNT SUFFICIENT TO
MAKE IT UNLIKELY THAT ANY FURTHER CASH DEPOSITS WOULD BE REQUIRED FROM
YOU OVER THE COURSE OF YOUR PARTICIPATION IN THE ADVISOR'S PROGRAM.
THE ACCOUNT SIZE TO WHICH YOU HAVE AGREED IN WRITING (THE
"NOMINAL" OR "NOTIONAL" ACCOUNT SIZE) IS NOT THE MAXIMUM POSSIBLE LOSS
THAT YOUR ACCOUNT MAY EXPERIENCE. YOU SHOULD CONSULT THE ACCOUNT
STATEMENTS IN ORDER TO DETERMINE THE ACTUAL ACTIVITY IN THE ACCOUNT,
INCLUDING PROFITS, LOSSES AND CURRENT CASH EQUITY BALANCE. TO THE
EXTENT THAT THE EQUITY IN THE ACCOUNT IS AT ANY TIME LESS
THAN THE NOMINAL ACCOUNT SIZE, THE EFFECT ON THE FUND WILL BE THE
FOLLOWING:
(a) ALTHOUGH YOUR GAINS AND LOSSES, FEES AND COMMISSIONS MEASURED IN
DOLLARS WILL BE THE SAME, THEY WILL BE GREATER WHEN EXPRESSED AS A
PERCENTAGE OF ACCOUNT EQUITY.
(b) YOU MAY RECEIVE MORE FREQUENT AND LARGER MARGIN CALLS.
(c) THE DISCLOSURES WHICH ACCOMPANY THE PERFORMANCE TABLE ASSOCIATED
WITH THE PROGRAM SELECTED BY THE FUND MAY BE USED TO CONVERT THE RATES
OF RETURN ("ROR") IN THE PERFORMANCE TABLE TO THE CORRESPONDING RORs
FOR PARTICULAR PARTIAL FUNDING LEVELS.
21. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, which counterparts shall constitute one and the same
original instrument.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: PROFUTURES, INC., By: ATA RESEARCH, INC.,
a co-General Partner a co-General Partner
By: /s/ Gary D. Halbert By: /s/ Aladin T. Abughazaleh
President President
CONSIDINE TRADING CORP.
By: /s/ Jerry Considine
President
PROFUTURES, INC., ATA RESEARCH, INC.,
By: /s/ Gary D. Halbert By: /s/ Aladin T. Abughazaleh
President President
EXHIBIT A
February 1, 1995
Jerry Considine, President
Considine Trading Corp.
605 W. Madison, Tower 3, Suite 4704
Chicago, Illinois 60601
Re: COMMODITY TRADING AUTHORIZATION
Dear Mr. Considine:
Effective February 1, 1995, ATA Research/ProFutures Diversified
Fund, L.P., a Delaware limited partnership, does hereby make,
constitute and appoint you as its Attorney-in-Fact to purchase and
sell commodity interests, including (a) commodity futures contracts
and options thereon, through ING Derivatives Clearing and others, as
Clearing Broker(s), and (b) spot or forward contracts through such
brokers, dealers or banks as we agree are appropriate, in accordance
with the Advisory Contract between us dated February 1, 1995.
Very truly yours,
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
By: ATA RESEARCH, INC.,
a co-General Partner
/s/ Aladin T. Abughazaleh
President
EXHIBIT B
DEFINITIONS
Net Asset Value - Net Asset Value means the Fund's total assets
less total liabilities, determined according to the following
principles, and where no such principle is governing, then on the
basis of generally accepted accounting principles, consistently
applied. For purposes of this calculation:
(a) Net Asset Value includes any realized or unrealized profit
or loss on open securities and open commodity positions.
(b) All open securities and open commodity positions are valued
at their then market value, which means with respect to open commodity
positions, the settlement price as determined by the exchange on which
the transaction is effected or the most recent appropriate quotation
as supplied by the Clearing Broker or banks through which the
transaction is effected except that United States Treasury Bills (not
futures contracts thereon) shall be carried at their cost plus accrued
interest. If there are no trades on the date of the calculation due
to the operation of the daily price fluctuation limits or due to a
closing of the exchange on which the transaction is executed, the
contract is valued at the nominal settlement price as determined by
the exchange. Interest, if any, shall be accrued monthly. The
liquidating or market value of a commodity futures or options contract
not traded on a United States commodity exchange shall mean its
liquidating value determined by the General Partners on a basis
consistently applied for each different variety of contract.
(c) Brokerage commissions on open positions shall be accrued in
full as a liability of the Fund upon the initiation of such open
positions. Management and incentive fees paid to the Advisors shall
be accrued monthly for purposes of calculating Net Asset Value only,
even if not paid until the end of the quarter; incentive fees are
calculated without regard to the fees paid to any Consultant and the
General Partners.
Allocated Net Asset Value(s) - Allocated Net Asset Value(s) (for
purposes only of calculating the Advisors' management fees, if any,
and even if paid quarterly) during a month are computed for each
Advisor individually, are computed before any incentive fees and
management fees paid to the respective Advisor and means the month-end
Nominal Account Size of the account.
Nominal Account Size - means initially $6 million, which amount
shall be (a) increased by profits and decreased by losses in the
account, but not by additions to or withdrawals of actual funds from
the account, and/or (b) increased or decreased by such amounts
specified in any notices to the Advisor from the Trading Manager and
the Fund as described in Section 2 of this Agreement. Accordingly,
any actual funds deposited or withdrawn shall represent an adjustment
in actual funds deposited and not in the Nominal Account Size. For
purposes of determining profits and losses, and thereby adjusting the
Nominal Account Size, all items of income and expense shall be taken
into account on the accrual basis in accordance with generally
accepted accounting principles. For purposes hereof, month-end
Nominal Account Size shall be increased by any reductions and
decreased by any additions in Nominal Account Size occurring during
such month (in either case, pro-rated for the number of days Nominal
Account Size is affected by such adjustment).
Trading Profits - Trading Profits (for purposes of calculating
the respective Advisor's incentive fees only and even if paid quar
terly) during a month are computed for the Advisor individually, are
computed after any management fees paid to the respective Advisor on
the Fund's assets allocated to such Advisor, if applicable, and mean
(i) the net of profits and losses resulting from all commodity trades
closed out during such month plus (ii) the net of any profits and
losses on commodity trades open as of the end of such month (after
deduction for accrued commodity brokerage commissions) minus
(iii) the net of any profits and losses on commodity trades open as of
the end of the immediately preceding month (after deduction for
accrued commodity brokerage commissions) and minus (iv) the Advisor's
"Capital Adjusted Carryforward Loss" (as defined below), if any, as of
the beginning of the quarter. If the result of adding and subtracting
items (i) to (iv) above is negative at the end of a month, such amount
shall become the "Ending Carryforward Loss." Interest income is not
included in the calculation of Trading Profits. If in the event that
Units are redeemed and such redemptions are to be charged against the
Advisors, then the "Ending Carryforward Loss" will be reduced pro rata
for each Advisor. If funds are withdrawn from an Advisor during or as
of the end of the month for any reason (including distributions,
redemptions or withdrawals or reallocation from the Advisor's trading
account), the "Capital Adjusted Carryforward Loss" for the next
quarter will be the "Ending Carryforward Loss" multiplied by the
fraction: Allocated Net Asset Value after withdrawal, divided by
Allocated Net Asset Value before withdrawal; if no withdrawal is
made, the "Capital Adjusted Carryforward Loss" for the next quarter
will be the "Ending Carryforward Loss."
------------------------
In accordance with the foregoing formula, the Fund pays the
Advisor a quarterly incentive fee, calculated monthly, whenever
Trading Profits (as defined) are achieved. Subject to the preceding
paragraph, if the Fund has a net loss on the Fund's allocation to the
Advisor thereafter, the Advisor will retain all incentive fees
previously paid but no further incentive fee will be payable until the
Advisor recovers the losses on that allocation and then generates
Trading Profits as defined. Thus, the incentive fee to an Advisor is
payable only on cumulative profits (which are not reduced by incentive
fees previously paid). The Fund may at any time employ other advisors
whose compensation may be calculated without regard to the losses
which may be incurred by the present advisors. Similarly, the Fund
may renew its relationship with any advisor on the same or different
terms. In addition, it should be noted that since the incentive fee
on Trading Profits is paid on a quarterly basis, the Fund may pay
substantial incentive fees during portions of the year even though
subsequent losses result in a yearly net loss for the Fund. The
Advisors will retain all payments made to them even if later losses
occur. In addition, an incentive fee may be paid to one Advisor but
the Fund may experience a loss or no change in its Net Asset Value as
a result of the trading by the other Advisors.
ATA RESEARCH/PROFUTURES DIVERSIFIED FUND, L.P.
TRADING POLICIES
(1) The Fund will attempt to diversify its market position to
avoid reliance on one or a few commodities. No Advisor may initiate
additional positions in any commodity if the margins (or its
equivalent) therefor, when added to the margins of all open positions
in that commodity, would exceed 33 1/3% of the Allocated Net Asset
Value (as defined) of the Fund attributable to the Advisor's
management.
(2) No Advisor may initiate positions if the margin (or its
equivalent) therefor, when added to the margins of all then open
positions, would exceed 75% of the Allocated Net Asset Value of the
Fund attributable to the Advisor's management. In the event that, due
to abrupt increases in required margins, the Fund's then open
positions require margins in excess of that percentage, the total
portfolio will be reduced as soon as practicable in light of market
conditions to an amount within such percentage.
(3) The Fund may not allocate more than ten percent (10%) of its
assets (calculated as of the date the allocation is made) to one or
more Advisors for the purpose of purchasing, selling, writing or
trading in commodity options on markets other than contract markets
designated by the CFTC.
(4) The Fund will not purchase, sell or trade in securities to
such extent as to be required to be registered as an investment
company under the Investment Company Act of 1940, as amended.
(5) The Fund may trade in spreads or straddles in order to take
advantage of potential profit in spread relationships and to limit
risks.
(6) The Fund does not intend to regularly make or take delivery
of commodities or to trade in cash commodities, other than forward
contracts on foreign currencies. Open positions in futures contracts
are expected to be closed prior to the delivery date and, as far as
practicable, no new positions will be opened during the delivery
month.
(7) The Fund will not employ the trading technique, commonly
known as pyramiding, in which the speculator uses unrealized profits
on existing positions as margin for the purchase or sale of additional
positions in the same or a related commodity. However, an Advisor may
take into account the Fund's open trade equity in assets of the Fund
in determining whether to acquire additional commodity futures
contracts on behalf of the Fund.
(8) No loans may be made by the Fund to any person, including
the General Partners and their affiliates.
(9) The Fund's assets will not be commingled with the assets of
any other person; funds used to satisfy margin requirements will not
be considered commingled for this purpose.
(10) No rebates or give-ups may be paid to or received by the
General Partners, nor may the General Partners participate in any
reciprocal business arrangements which could circumvent this
prohibition.
(11) No Advisor may receive an incentive or management fee if it
participates, directly or indirectly, in any commodity brokerage
commissions generated by the Fund.
(12) No agreement with the Advisors, the Clearing Broker or the
General Partners shall exceed one year and any such agreements are
terminable without penalty upon respectively 30 days, 60 days and 120
days written notice by the Fund. Material changes in the trading
policies described above must be approved by a vote of a majority of
the outstanding Units (not including Units of General Partnership
Interest but including Units of Limited Partnership Interest held by
affiliates of the General Partners). The General Partners do not
believe that action by the limited partners to authorize material
changes in the Fund's trading policies would constitute participation
in the control of the management of the Fund sufficient to cause the
limited partners to lose their limited liability for Fund obligations.
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 65,982,660
<SECURITIES> 68,893,657
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,461,988
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 100,461,988
<CURRENT-LIABILITIES> 3,793,558
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 100,461,988
<SALES> 0
<TOTAL-REVENUES> 3,285,311
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,496,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (210,799)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,799)
<EPS-PRIMARY> (4.14)
<EPS-DILUTED> (4.14)
</TABLE>
