Exhibit 10.4
ADVISORY AGREEMENT
ADVISORY AGREEMENT (the “
Agreement ”) dated as of the 20th day of November,
2006, by and among WCM POOL LLC , a Delaware limited
liability company (the “ Company ”),
PREFERRED INVESTMENT SOLUTIONS CORP. , a Delaware
corporation (the “ Administrator ”), and
WINTON CAPITAL MANAGEMENT LIMITED, a company registered in
England and Wales (the “ Advisor ”).
W
I T N
E S S E T H
:
WHEREAS , the Company has been organized primarily for
the purpose of trading, buying, selling, spreading or otherwise
acquiring, holding or disposing of futures, forward and options
contracts with respect to commodities. Other transactions also may
be effected from time to time, including among others, those as
more fully identified in Exhibit A hereto; the foregoing
commodities and other transactions are collectively referred to as
“ Commodities ”; and
WHEREAS , the Company is authorized and directed to
utilize the services of the Advisor in connection with the
Commodities trading activities of the Company; and
WHEREAS , each of the members of the Company (the
“ Members ”) is a commodity pool of which the
Administrator is the sole managing owner and/or general partners;
and
WHEREAS , none of the Members currently is accepting
additional investments; and
WHEREAS , each of the Members has acquired an interest
in the Company; and
WHEREAS , the Advisor’s present business includes
the management of Commodities accounts for its clients;
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EXECUTION VERSION
WHEREAS , the Advisor is registered as a Commodity
Trading Advisor under the Commodity Exchange Act, as amended (the
“ CE Act ”), and is a member of the National
Futures Association (the “ NFA ”) as a Commodity
Trading Advisor and will maintain such registration and membership
for the term of this Agreement; and
WHEREAS , the Company and the Advisor desire to enter
into this Agreement in order to set forth the terms and conditions
upon which the Advisor will render and implement commodity advisory
services on behalf of the Company during the term of this
Agreement.
NOW, THEREFORE
, the parties agree as
follows:
1. Duties of the Advisor
.
(a) Appointment . The Company
hereby appoints the Advisor, and the Advisor hereby accepts
appointment, as the Company’s limited attorney-in-fact to
exercise discretion to invest and reinvest in Commodities during
the term of this Agreement the assets of the Company (the “
Allocated Assets ”) on the terms and conditions and
for the purposes set forth herein. This limited power-of-attorney
is a continuing power and shall continue in effect with respect to
the Advisor until terminated hereunder. The Advisor shall have sole
authority and responsibility for independently directing the
investment and reinvestment in Commodities of the Allocated Assets
for the term of this Agreement pursuant to the trading programs,
methods, systems and strategies described in Exhibit A
hereto, which the Company has selected to be utilized by the
Advisor in trading the Allocated Assets (collectively referred to
as the Advisor’s “ Trading Approach ”),
subject to the trading policies and limitations as set forth in and
attached hereto as Exhibit B (the “ Trading
Policies and Limitations ”), as the same may be modified
from time to time and provided in writing to the Advisor. The
portion of the Allocated Assets to be allocated by the Advisor at
any point in time to one or more of the various trading
strategies
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EXECUTION VERSION
comprising the Advisor’s Trading Approach
will be determined as set forth in Exhibit A hereto, as it
may be amended from time to time, with the consent of the parties,
it being understood that trading gains and losses automatically
will alter the agreed upon allocations. Upon receipt of a new
allocation, the Advisor will determine and, if required, adjust its
trading in light of the new allocation.
(b) Allocation of
Responsibilities . The Company will have the responsibility for
the management of any portion of the Allocated Assets that are not
invested in Commodities. The Advisor will use its good faith and
best efforts in determining the investment and reinvestment in
Commodities of the Allocated Assets in compliance with the Trading
Policies and Limitations, and in accordance with the
Advisor’s Trading Approach. In the event that the Company
shall, in its sole discretion, determine in good faith, following
consultation appropriate under the circumstances with the Advisor,
that any trading instruction issued by the Advisor violates the
Company’s Trading Policies and Limitations, then the Company,
following reasonable notice to the Advisor appropriate under the
circumstances, may override such trading instruction and shall be
responsible therefor. Nothing herein shall be construed to prevent
the Company from imposing any limitation(s) on the trading
activities of the Company beyond those enumerated in Exhibit
A if the Company determines that such limitation(s) are
necessary or in the best interests of the Company, in which case
the Advisor will adhere to such limitations following written
notification thereof.
(c) Gains From Trading
Approach . The Advisor agrees that at least 90% of the annual
gross income and gain, if any, generated by its Trading Approach
for the Company will be “qualifying income” within the
meaning of Section 7704(d) of the Code (it being understood
that such income largely will result from buying and selling
Commodities and that
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EXECUTION VERSION
the Trading Approach is not primarily intended
to generate interest income). The Advisor also agrees that it will
attempt to trade in such a manner as to allow non-U.S. Members (if
any) to qualify for the safe harbors found in
Section 864(b)(2) of the Code and as interpreted in the
regulations promulgated or proposed thereunder.
(d) Modification of Trading
Approach . In the event the Advisor requests to use, or the
Company requests the Advisor to use, a trading program, system,
method or strategy other than or in addition to the trading
programs, systems, methods or strategies comprising the Trading
Approach in connection with trading for the Company (including,
without limitation, the deletion or addition of an agreed upon
trading program, system, method or strategy from or to the then
agreed upon Trading Approach, or a modification in the leverage
employed outside the parameters described in the Advisor’s
Disclosure Document attached hereto as Exhibit C ), either
in whole or in part, the Advisor may not do so and/or shall not be
required to do so, as appropriate, unless both the Company and the
Advisor consent thereto in writing.
(e) Notification of Material
Changes . The Advisor also agrees to give the Company prior
written notice of any proposed material change in its Trading
Approach and agrees not to make any material change in such Trading
Approach (as applied to the Company) over the objection of the
Company, it being understood that the Advisor shall be free to
institute non-material changes in its Trading Approach (as applied
to the Company) without prior written notification. Without
limiting the generality of the foregoing, refinements to the
Advisor’s Trading Approach and the deletion (but not the
addition) of Commodities (other than the addition of Commodities
then being traded (i) on organized domestic commodities
exchanges, (ii) on foreign commodities exchanges recognized by
the Commodity Futures Trading Commission (the “ CFTC
”) as providing customer protections comparable to those
provided on
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EXECUTION VERSION
domestic exchanges or (iii) in the
interbank foreign currency market) to or from the Advisor’s
Trading Approach, shall not be deemed a material change in the
Advisor’s Trading Approach, and prior approval of the Company
shall not be required therefor. The utilization of forward markets
in addition to those enumerated in the Advisor’s Disclosure
Document attached hereto as Exhibit C would be deemed a
material change to the Advisor’s Trading Approach and prior
approval shall be required therefor.
Subject to adequate assurances of
confidentiality, the Advisor agrees that it will discuss with the
Company upon request any trading methods, programs, systems or
strategies used by it for trading customer accounts which differ
from the Trading Approach used for the Company, provided
that nothing contained in this Agreement shall require the Advisor
to disclose what it deems to be proprietary or confidential
information.
(f) Request for Information .
The Advisor agrees to provide the Company with any reasonable
information concerning the Advisor that the Company may reasonably
request (other than the identity of its customers or proprietary or
confidential information concerning the Trading Approach), subject
to receipt of adequate assurances of confidentiality by the
Company, including, but not limited to, information regarding any
change in control, key personnel, Trading Approach and financial
condition which the Company reasonably deems to be material to the
Company; the Advisor also shall notify the Company of any such
matters the Advisor, in its reasonable judgment, believes may be
material to the Company relating to the Advisor and its Trading
Approach. During the term of this Agreement, the Advisor agrees to
provide the Company with updated monthly information related to the
Advisor’s performance results within a reasonable period of
time after the end of the month to which it relates.
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EXECUTION VERSION
(g) Notice of Errors . The
Advisor is responsible for promptly reviewing all oral and written
confirmations its receives to determine whether the Commodities
trades were made in accordance with the Advisor’s
instructions. If the Advisor determines that an error was made in
connection with a trade or that a trade was made other than in
accordance with the Advisor’s instructions, the Advisor shall
utilize its reasonable best efforts to cause the error or
discrepancy to be corrected and where the error is deemed material
promptly notify the Company of the material error.
(h) Liability . Neither the
Advisor nor any employee, director, officer or shareholder of the
Advisor, nor any person who controls the Advisor, shall be liable
to the Company, the Members, the Administrator, or their respective
officers, directors, shareholders, members or employees, or any
person who controls any of them, or the owners of any units of
beneficial interest of any series of any Member on behalf of which
series such Member has acquired an interest in the Company (“
Limited Owners ”), or any of their respective
successors or assigns under this Agreement, except by reason of
acts or omissions in material breach of this Agreement or due to
their willful misconduct or gross negligence or by reason of their
not having acted in good faith in the reasonable belief that such
actions or omissions were in the best interests of the Company; it
being understood that the Advisor makes no guarantee of profit nor
offers any protection against loss, and that all purchases and
sales of Commodities shall be solely for the account and risk of
the Company, and the Advisor shall incur no liability for trading
profits or losses resulting therefrom, provided the Advisor would
not otherwise be liable to the Company under the terms
hereof.
(i) Initial Allocation .
Initially, and continuing until the earlier of (i) such time
as the Company designates and utilizes the services of an Other
Advisor (as such term is
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EXECUTION VERSION
hereinafter defined) in connection with the
Commodities trading activities of the Company, or (ii) such
time as this Agreement is terminated in accordance with its terms,
the Allocated Assets will total an amount equal to substantially
all of the assets of the Company, including all cash and cash
equivalents held by the Company reduced by all liabilities of the
Company. The Administrator and the Company shall ensure that the
trading asset level of the Company’s account managed by the
Advisor is at all times fully funded, and is at no time notionally
funded. Furthermore, at all times during the term of this
Agreement, the Administrator shall ensure that each of the Members
commits to the Company for inclusion as Allocated Assets all or
substantially all of the assets allocated to the Advisor within any
series of such Member on behalf of which series such Member has
acquired an interest in the Company.
(j) Additional Allocations and
Reallocations . Subject to Section 10(a) below, the
Company may (i) allocate additional Allocated Assets to the
Advisor, (ii) reallocate Allocated Assets away from the
Advisor to another commodity trading advisor (an “ Other
Advisor ”), (iii) reallocate Allocated Assets to the
Advisor from an Other Advisor or (iv) allocate additional
Allocated Assets to an Other Advisor. It is expressly acknowledged
by the parties hereto that the Advisor currently is the sole
commodity trading advisor to the Company and has been allocated
100% of the Allocated Assets. In the event the Company designates
and utilizes the services of an Other Advisor in connection with
the Commodities trading activities of the Company, the Company
shall remove any reference to the Advisor from the Company’s
name prior to any such allocation or reallocation of Allocated
Assets to an Other Advisor.
(k) Delivery of Disclosure
Document . The Advisor agrees to provide the Company with any
amendment or supplement to the Disclosure Document attached hereto
as Exhibit C (an “ Update ”) as soon as
such Update is available for distribution following filing in final
form with the CFTC and/or the NFA.
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EXECUTION VERSION
2. Indemnification
.
(a) The Advisor . Subject to
the provisions of Section 3 of this Agreement, the Advisor and
each officer, director, shareholder and employee of the Advisor and
each person who controls the Advisor, shall be indemnified,
defended and held harmless by the Company and the Administrator,
jointly and severally, from and against any and all claims, losses,
judgments, liabilities, damages, costs, expenses (including,
without limitation, reasonable investigatory and attorneys’
fees and reasonable expenses) and amounts paid in settlement of any
claims in compliance with the conditions specified below
(collectively, “ Losses ”) sustained by the
Advisor (i) in connection with any acts or omissions of the
Advisor or any of its officers, directors or employees relating to
its management of the Allocated Assets, including in connection
with this Agreement or otherwise as a result of the Advisor’s
performance of services on behalf of the Company or its role as
trading advisor in respect of the Allocated Assets and/or
(ii) as a result of a material breach of this Agreement by the
Company; provided, however, that (i) such Losses were
not the result of the gross negligence, willful misconduct or
material breach of this Agreement on the part of the Advisor, its
officers, directors, shareholders and employees and each person
controlling the Advisor, (ii) the Advisor and its officers,
directors, shareholders and employees and each person controlling
the Advisor, acted in good faith and in a manner reasonably
believed by it and them to be in or not opposed to the best
interests of the Company and (iii) any such indemnification
will only be recoverable from the Allocated Assets and the assets
of the Administrator; and provided further that no
indemnification shall be permitted under this Section 2 for
amounts paid in settlement if either (A) the Advisor fails to
notify the
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EXECUTION VERSION
Company of the terms of any settlement proposed,
at least fifteen (15) days before any amounts are paid or
(B) the Company does not approve the amount of the settlement
within fifteen (15) days of any such notice (such approval not
to be withheld unreasonably). Notwithstanding the foregoing, the
Company shall at all times have the right to offer to settle any
matter with the approval of the Advisor (which approval shall not
be withheld unreasonably), and if the Company successfully
negotiates a settlement and tenders payment therefor to the party
claiming indemnification (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 Company and the Administrator to the Indemnitee shall be the
amount of said proposed settlement.
(b) Default Judgments and
Confessions of Judgment . None of the foregoing provisions for
indemnification shall be applicable with respect to default
judgments or confessions of judgment entered into by the
Indemnitee, with its knowledge, without the prior consent of the
Company.
(c) Procedure . In the event
that an Indemnitee under this Section 2 is made a party to an
action, suit or proceeding alleging both matters for which
indemnification can be made hereunder and matters for which
indemnification may not be made hereunder, such Indemnitee shall be
indemnified only for that portion of the Losses incurred in such
action, suit or proceeding which relates to the matters for which
indemnification can be made.
(d) Expenses . Expenses
incurred in defending a threatened or pending civil, administrative
or criminal action, suit or proceeding against an Indemnitee shall
be paid by the Company or the Administrator in advance of the final
disposition of such action, suit or
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EXECUTION VERSION
proceeding if (i) the legal action, suit or
proceeding, if sustained, would entitle the Indemnitee to
indemnification pursuant to the terms of this Section 2, and
(ii) the Advisor undertakes to repay the advanced funds to the
Company or the Administrator in cases in which the Indemnitee is
not entitled to indemnification pursuant to this
Section 2.
3. Limits on Claims
. The Advisor agrees that
it will not take any of the following actions against the Company
or any Member: (i) seek a decree or order by a court having
jurisdiction in the premises (A) for relief in respect of the
Company or such Member in an involuntary case or proceeding under
the U.S. Bankruptcy Code or any other federal or state bankruptcy,
insolvency, reorganization, rehabilitation, liquidation or similar
law or (B) adjudging the Company or such Member a bankrupt or
insolvent or seeking reorganization, rehabilitation, liquidation,
arrangement, adjustment or composition of or in respect of the
Company or such Member under the U.S. Bankruptcy Code or any other
applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or such Member or of any
substantial part of any of its properties, or ordering the winding
up or liquidation of any of its affairs, (ii) seek a petition
for relief, reorganization or to take advantage of any law referred
to in the preceding clause or (iii) file an involuntary
petition for bankruptcy.
4. Representation
Agreement . The
parties agree to execute a Representation Agreement substantially
in the form of Exhibit D to this Agreement (the “
Representation Agreement ”) contemporaneously
herewith.
5. Advisor Independence
.
(a) Independent Contractor .
The Advisor shall for all purposes herein be deemed to be an
independent contractor with respect to the Company, the
Administrator and
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EXECUTION VERSION
each other commodity trading advisor that may in
the future provide commodity trading advisory services to the
Company and shall, unless otherwise expressly authorized, have no
authority to act for or to represent the Company, the
Administrator, or any other commodity trading advisor in any way,
or otherwise be deemed to be a general agent, joint venturer or
partner of the Company, the Administrator, or any other commodity
trading advisor or in any way be responsible for the acts or
omissions of the Company, the Administrator, or any other commodity
trading advisor as long as it is acting independently of such
persons.
(b) Unauthorized Activities .
Without limiting the obligations of the Company or the
Administrator set forth under this Agreement, nothing herein
contained shall be deemed to require the Company or the
Administrator to take any action contrary to its organizational
documents or any applicable statute, regulation or rule of any
exchange or self-regulatory organization.
(c) Purchase of Interests .
Any of the Advisor, its principals and employees may, in its
discretion, acquire interests in the Members.
(d) Confidentiality . The
Company and the Administrator acknowledge that the Trading
Approach, including methods, models and strategies of the Advisor,
is the confidential property of the Advisor. Nothing in this
Agreement shall require the Advisor to disclose the confidential or
proprietary details of its Trading Approach. The Company and the
Administrator further agree that they will keep confidential and
will not disseminate the Advisor’s trading advice to the
Company, except as, and to the extent that, it may be determined by
the Administrator to be (i) necessary for the monitoring of
the business of the Company or the Members, including the
performance of brokerage services by the Company’s commodity
broker(s), or (ii) expressly required by law or regulation.
The Parties agree to execute a Non-Disclosure Agreement
substantially in the form of Exhibit E to this Agreement (the
“ NDA ”) contemporaneously herewith.
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EXECUTION VERSION
6. Commodity Broker
.
All Commodities traded for the
account of the Company shall be made through such floor broker or
brokers, commodity broker or brokers, or counterparty or
counterparties, as the Company directs, or otherwise in accordance
with such order execution procedures as are agreed upon between the
Advisor and the Company. Unless otherwise agreed upon between the
Advisor and the Company, the Advisor shall not have any authority
or responsibility in selecting or supervising any floor broker or
counterparty for execution of Commodities trades of the Company or
for negotiating floor brokerage commission rates or other
compensation to be charged therefor. The Advisor shall not be
responsible for determining that any such broker or counterparty
used in connection with any Commodities transactions meets the
financial requirements or standards imposed by the Trading Policies
and Limitations.
7. Fees .
In consideration of and in
compensation for the performance of the Advisor’s services
under this Agreement, the Advisor shall receive from the Company a
monthly management fee (the “ Management Fee ”)
and a quarterly incentive fee (the “ Incentive Fee
”) based on the Allocated Assets, as follows:
(a) A Management Fee
equal to 1 / 12 of 2% (0.16667%) per month of
the Allocated Assets determined as of the close of business on the
last day of each month (an annual rate of 2.0%). For purposes of
determining the Management Fee, any distributions, redemptions or
reallocation of the Allocated Assets made as of the last day of the
month shall be added back to the Allocated Assets, and there shall
be no reduction for (i) any accrued but unpaid
incentive
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EXECUTION VERSION
fees due the Advisor under paragraph
(b) below for the quarter in which such fees are being
computed or (ii) any accrued but unpaid extraordinary expenses
unrelated to the Company. The Management Fee determined for any
month in which an Advisor manages the Allocated Assets for less
than a full month shall be prorated, such proration to be
calculated on the basis of the number of days in the month the
Allocated Assets were under the Advisor’s management as
compared to the total number of days in such month, with such
proration to include appropriate adjustments for any funds taken
away from the Advisor’s management during the month for
reasons other than distributions or redemptions, including, but not
limited to, the reduction of the Allocated Assets allocated to the
Advisor’s management resulting from the payment of
extraordinary expenses. Management Fees paid pursuant to this
section are non-refundable.
(b) An incentive fee of twenty
percent (20%) (the “ Incentive Fee ”) of
“ New High Net Trading Profits ” (as hereinafter
defined) generated on the Allocated Assets, including realized and
unrealized gains and losses thereon, as of the close of business on
the last day of each calendar quarter (the “ Incentive
Measurement Date ”).
New High Net Trading Profits (for
purposes of calculating the Advisor’s Incentive Fee only)
will be computed as of the Incentive Measurement Date and will
include such profits (as outlined below) since the Incentive
Measurement Date of the most recent preceding calendar quarter for
which an incentive fee was earned (or, with respect to the first
Incentive Fee, as of the commencement of operations) (the “
Incentive Measurement Period ”).
New High Net Trading Profits for any
Incentive Measurement Period will be the net profits, if any, from
trading of the Allocated Assets during such period (including
(i) realized trading profit (loss) plus or minus (ii) the
change in unrealized trading profit (loss) on open positions) and
will be calculated after the determination of the Company’s
fixed brokerage fee
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EXECUTION VERSION
and other transaction costs attributable to the
Allocated Assets, the Advisor’s Management Fee, the operating
expenses for which the Company is responsible, and any
extraordinary expenses ( e.g. , litigation, costs or
damages) paid during an Incentive Measurement Period which are
specifically related to the Advisor, but before deduction of any
Incentive Fees payable during the Incentive Measurement Period. New
High Net Trading Profits will not include interest earned or
credited on the Allocated Assets. New High Net Trading Profits will
be generated only to the extent that the Advisor’s cumulative
New High Net Trading Profits exceed the highest level of cumulative
New High Net Trading Profits achieved by the Advisor as of a
previous Incentive Measurement Date. Except as set forth below, net
losses from prior quarters must be recouped before New High Net
Trading Profits can again be generated. If a withdrawal or
distribution occurs or if this Agreement is terminated at any date
that is not an Incentive Measurement Date, the date of the
withdrawal or distribution or termination will be treated as if it
were an Incentive Measurement Date, but any Incentive Fee accrued
in respect of the withdrawn assets on such date shall not be paid
to the Advisor until the next scheduled Incentive Measurement Date.
New High Net Trading Profits for an Incentive Measurement Period
shall exclude capital contributions to the Company in an Incentive
Measurement Period, distributions or redemptions paid or payable by
the Company during an Incentive Measurement Period, as well as
losses, if any, associated with redemptions, distributions, and
reallocations of assets during the Incentive Measurement Period and
prior to the Incentive Measurement Date ( i.e. , to
the extent that assets are allocated away from the Advisor (through
redemptions, distributions or allocations caused by the Company),
any loss carryforward attributable to the Advisor shall be reduced
in the same proportion that the assets allocated away from the
Advisor bears to the Allocated Assets prior to the re- allocation
and New High Net Trading Profits shall reflect this reduction in
loss
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EXECUTION VERSION
carryforward). In calculating New High Net
Trading Profits, incentive fees paid for a previous Incentive
Measurement Period will not reduce cumulative New High Net Trading
Profits in subsequent periods.
(c) Timing of Payment .
Management Fees and Incentive Fees shall be paid generally within
fifteen (15) business days following the end of the period for
which they are payable. The first incentive fee which may be due
and owing to the Advisor in respect of any New Trading Profits will
be due and owing as of the end of the first calendar quarter during
which the Trading Advisor managed the Allocated Assets for at least
forty-five (45) days. If an Incentive Fee shall have been paid
by the Company to the Advisor in respect of any calendar quarter
and the Advisor shall incur subsequent losses on the Allocated
Assets, the Advisor shall nevertheless be entitled to retain
amounts previously paid to it in respect of New High Net Trading
Profits.
(d) Fee Data . The Company
will provide the Advisor with the data used by the Company to
compute the foregoing fees generally within ten (10) business
days of the end of the relevant period.
(e) Third Party Payments .
Neither the Advisor nor any of its officers, directors, employees
or stockholders shall receive any commissions, compensation,
remuneration or payments whatsoever from any broker with which the
Company carries an account for transactions executed in the
Company’s account. The parties acknowledge that a familial
relationship of any of the foregoing persons may receive floor
brokerage commissions in respect of trades effected pursuant to the
Advisor’s Trading Approach on behalf of the Company, which
payment shall not violate the preceding sentence.
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EXECUTION VERSION
8. Term and Termination
.
(a) Term . This Agreement
shall commence on the date hereof and, unless sooner terminated
pursuant to paragraph (b), (c) or (d) of this
Section 8, shall continue in effect until the close of
business on the last day of the month ending twelve (12) full
months following the commencement of the Company’s trading
activities. Thereafter, unless this Agreement is terminated
pursuant to paragraphs (b), (c) or (d) of this
Section 8, this Agreement shall be renewed automatically on
the same terms and conditions set forth herein for successive
additional one-year terms, each of which shall commence on the
first day of the month subsequent to the conclusion of the
preceding term. Subject to Section 8(d)(iv) hereof, the
automatic renewal(s) set forth in the preceding sentence hereof
shall not be affected by (i) any allocation of the Allocated
Assets away from the Advisor pursuant to this Agreement or
(ii) the retention of Other Advisors following a reallocation
or otherwise.
(b) Automatic Termination .
This Agreement shall terminate automatically in the event that the
Company is terminated or in the event that any Member commences an
offering of units of beneficial interest of such Member or any
series thereof (if applicable). In addition, this Agreement shall
terminate automatically in the event that the value of the
Allocated Assets, as of the end of any business day, have declined
by at least 40% from the value of the Allocated Assets (i) as
of the first day of this Agreement or (ii) as of the first day
of any calendar year, as adjusted on an ongoing basis by
(A) any decline(s) in the value of the Allocated Assets caused
by distributions, redemptions, reallocations and withdrawals and
(B) additions to the value of the Allocated Assets caused by
additional allocations.
(c) Optional Termination Right of
Company . This Agreement may be terminated at any time at the
election of the Company in its sole discretion upon at least
thirty
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EXECUTION VERSION
(30) days’ prior written notice to the
Advisor. The Company will use its best efforts to cause any
termination to occur as of a month-end. This Agreement also may be
terminated upon prior written notice, appropriate under the
circumstances, to the Advisor in the event that (i) the
Company determines in good faith, following consultation
appropriate under the circumstances with the Advisor, that the
Advisor is unable to use its agreed upon Trading Approach to any
material extent, as such Trading Approach may be refined or
modified in the future in accordance with the terms of this
Agreement for the benefit of the Company; (ii) the
Advisor’s registration as a commodity trading advisor under
the CE Act or membership as a commodity trading advisor with the
NFA is revoked, suspended, terminated or not renewed;
(iii) the Company determines in good faith, following
consultation appropriate under the circumstances with the Advisor,
that the Advisor has failed to conform, and after receipt of
written notice, continues to fail to conform in any material
respect, to (A) any of the Company’s Trading Policies
and Limitations or (B) the Advisor’s Trading Approach;
(iv) there is an unauthorized assignment of this Agreement by
the Advisor; (v) the Advisor dissolves, merges or consolidates
with another entity or sells a substantial portion of its assets,
any portion of its Trading Approach utilized by the Company or its
business goodwill, in each instance without the consent of the
Company; (vi) the Advisor becomes bankrupt (admitted or
decreed) or insolvent; (vii) for any other reason, the Company
determines in good faith that such termination is essential for the
protection of the Company, including, without limitation, a good
faith determination by the Company that the Advisor has breached a
material obligation to the Company under this Agreement relating to
the trading of the Allocated Assets.
(d) Optional Termination Right of
Advisor . This Agreement may be terminated Advisor in its sole
discretion at any time upon ninety (90) days written notice to
the
17
EXECUTION VERSION
Company. This Agreement also may be terminated
upon prior written notice, appropriate under the circumstances, to
the Company in the event (i) of the receipt by the Advisor of
an opinion of qualified independent counsel satisfactory to the
Advisor and the Company (which consent the Company will not
withhold unreasonably) that by reason of the Advisor’s
activities with respect to the Company it is required to register
as an investment adviser under the Investment Advisers Act of 1940
and it is not so registered; (ii) that the registration of the
Administrator as a commodity pool operator under the CE Act or its
NFA membership as a commodity pool operator is revoked, suspended,
terminated or not renewed; (iii) that the Company
(A) imposes additional trading limitation(s) pursuant to
Section 1 of this Agreement which the Advisor does not agree
to follow in its management of the Allocated Assets or
(B) overrides trading instructions of the Advisor or does not
consent to a material change to the Trading Approach requested by
the Advisor; (iv) if the value of the Allocated Assets
decreases to less than $5 million as the result of redemptions,
distribution, reallocation of Allocated Assets or deleveraging
initiated by the Company but not trading losses, as of the close of
business on any Friday; (v) the Company elects (pursuant to
Section 1 of this Agreement) to have the Advisor use a
different Trading Approach in the Advisor’s management of the
Allocated Assets from that which the Advisor is then using to
manage such Allocated Assets and the Advisor objects to using such
different Trading Approach; (vi) there is an unauthorized
assignment of this Agreement by the Company and/or the
Administrator; (vii) there is a material breach of this
Agreement by the Company and/or the Administrator and, after giving
written notice to the Company which identifies such breach, such
material breach has not been cured within ten (10) days
following receipt of such notice by the Company; (viii) the
Advisor provides the Company with written notice, at least ninety
(90) days’ prior to the end of the then current term, of
the
18
EXECUTION VERSION
Advisor’s desire and intention to
terminate this Agreement as of the end of the then current term; or
(ix) other good cause is shown and the written consent of the
Company is obtained (which shall not be withheld
unreasonably).
(e) Termination Fees . In the
event that this Agreement is terminated with respect to, or by, the
Adv
