DIVERSIFIED FUTURES FUND L.P.Second Amended and Restated Agreement of Limited Partnership Dated as of October 1, 2004

Exhibit 4.1

 

DIVERSIFIED FUTURES FUND L.P.

 

Second Amended and Restated

 

Agreement of Limited Partnership

 

Dated as of

 

October 1, 2004

TABLE OF CONTENTS

 

 

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SECOND AMENDED AND RESTATED

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

DIVERSIFIED FUTURES FUND L.P.

 

This Second Amended and Restated Agreement of Limited Partnership of DIVERSIFIED FUTURES FUND L.P. (the “Partnership”), made and entered into as of the 1st day of October, 2004 by and among PREFERRED INVESTMENT SOLUTIONS CORP. (formerly known as Kenmar Advisory Corp.), a Connecticut corporation, as General Partner of the Partnership, and those persons who execute a counterpart to this Agreement and are hereafter admitted to the Partnership as limited partners in accordance with the provisions hereof and whose names and addresses shall upon such admission be added to the books and records of the Partnership.

 

W I T N E S S E T H :

 

WHEREAS, certain of the parties (or their predecessors) hereto formed a limited partnership in accordance with the Delaware Revised Uniform Limited Partnership Act (6 Del. C. § 17-101 et seq.) (the “Act”) on May 25, 1988, as amended on July 12, 1988 and as amended and restated on July 14, 1988 pursuant to an Amended and Restated Agreement of Limited Partnership (the “Amended Agreement”);

 

WHEREAS, the parties hereto desire to amend certain provisions of the Amended Agreement and to amend and restate in its entirety the terms and provisions of the Amended Agreement, including those provisions relating to the governance of the Partnership and the parties’ respective rights and duties hereunder.

 

NOW, THEREFORE, it is mutually agreed that:

 

ARTICLE I

 

Continuation of Partnership

 

The Parties hereto do hereby continue the Partnership under the provisions of the Act. The former general partner executed and filed a Certificate of Limited Partnership in accordance with the provisions of the Act. The Parties hereto shall execute all such instruments and shall execute, file, record and/or publish such amendments, and other documents and do any and all other acts and things as may be appropriate to comply with the requirements for the formation of a limited partnership under the laws of the State of Delaware. The General Partner may take such further actions as it deems necessary or advisable to permit the Partnership to conduct business as a united partnership in any jurisdiction.

 

ARTICLE II

 

Name

 

The business of the Partnership shall be conducted under the firm name of Diversified Futures Fund L.P. or such other name, to the extent permitted by the Act, as the General Partner shall hereafter designate in writing to the Limited Partners.

 

ARTICLE III

 

Definitions

 

For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the following respective meanings:

 

“Affiliate of the General Partner” means: (i) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of the General Partner; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by the General Partner; (iii) any Person, directly or indirectly, controlling, controlled by, or under common control of the General Partner; (iv) any officer, director or partner of the General Partner; or (v) if such Person is an officer, director or partner of the General Partner, any Person for which such Person acts in any such capacity.

 

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“Agreement” means this Second Amended and Restated Agreement of Limited Partnership, as the same may at any time or from time to time be further amended.

 

“Capital Contribution” shall be the amount contributed and agreed to be contributed by any of the Partners in accordance with Article VII hereof.

 

“Capital Gain” means, for each Fiscal Year of the Partnership, the net gain resulting from each disposition of Partnership assets during such Fiscal Year with respect to which gain or loss is recognized for federal income tax purposes. Any gain or loss required to be recognized by the Partnership for federal income tax purposes for such Fiscal Year pursuant to Section 1256 (or any successor provision) of the Code shall be included in the computation of the Capital Gain for such Fiscal Year.

 

“Capital Loss” means, for each Fiscal Year of the Partnership, the net loss resulting from each disposition of Partnership assets during such Fiscal Year with respect to which gain or loss is recognized for federal income tax purposes. Any gain or loss required to be recognized by the Partnership for federal income tax purposes for such Fiscal Year pursuant to Section 1256 (or any successor provision) of the Code shall be included in the computation of the Capital Loss for such Fiscal Year.

 

“Certificate of Limited Partnership” means the Certificate of Limited Partnership of the Partnership as filed in the State of Delaware on May 25, 1988, as the same may at any time or from time to time be amended.

 

“Code” means the Internal Revenue Code of 1986.

 

“Commodities Positions” means positions in commodity futures contracts, commodity forward contracts, options on commodity futures contracts and traded commodities, and cash commodity transactions, or any other futures contract or option thereon approved for trading for U.S. persons.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Fiscal Year” shall have the meaning set forth in Article XIII hereof.

 

“General Partner” means Preferred Investment Solutions Corp. (formerly known as Kenmar Advisory Corp.), and any other entity acting in its capacity as a general partner of the Partnership, and any substitute therefor as provided herein, or any successor thereto by merger or operation of law.

 

“Initial Limited Partner” means Richard A. Henderson.

 

“Limited Partner” means any person or entity who becomes a limited partner of the Partnership and who is listed as such on the books and records of the Partnership, and may include the General Partner with respect to Units purchased by it.

 

“Losses” means, for each Fiscal Year of the Partnership, losses of the Partnership as determined for federal income tax purposes, and each item of income, gain, loss or deduction entering into the computation thereof, except that any gain or loss taken into account in determining the Capital Gain or the Capital Loss of the Partnership for such Fiscal Year shall not enter into such computations.

 

“NASAA Guidelines” means the North American Securities Administrators Association, Inc. “Guidelines For Registration of Commodity Pool Programs”, as then currently in force and in effect.

 

“Net Asset Value” means the total assets including, but not limited to, all cash and cash equivalents (valued at cost plus accrued interest and amortization of original issue discount) less total liabilities, of the Partnership, each determined on the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting (“GAAP”), including, but not limited to, the extent specifically set forth below:

 

(a) Net Asset Value shall include any unrealized profit or loss on open Commodities Positions.

 

(b) All open commodity futures contracts and options traded on a United States exchange are calculated at their then current market value, which shall be based upon the settlement price for that particular commodity futures contract and option traded on a United States exchange on the date with respect to which Net Asset Value is being determined; provided, that if a commodity futures contract or option traded on a United States exchange could not be liquidated on such day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, the settlement price on the first subsequent day on which the position could be liquidated shall be the basis for determining the market value of such position for such day. The liquidating value of a commodity forward contract or a

 

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commodity futures or option contract not traded on a United States exchange shall mean its liquidating value as determined by the General Partner on a basis consistently applied. In determining the Net Asset Value of the Partnership’s option positions, the market value of the open options sold by the Partnership shall be subtracted from the market value of the open option positions purchased by the Partnership. Each “leg” of complex options positions such as “conversions” and “spreads” shall be evaluated separately in determining Net Assets. The General Partner may in its discretion value any assets of the Partnership pursuant to such other principles as it may deem fair and equitable.

 

(c) Interest earned on the Partnership’s commodity brokerage account shall be accrued at least monthly; and

 

(d) The amount of any distribution made pursuant to Article VIII hereof shall be a liability of the Partnership from the day when the distribution is declared until it is paid.

 

“Net Asset Value per Unit” means the Net Asset Value divided by the number of Units outstanding on the date of calculation.

 

“Offering Period” means, with respect to the initial offering of Units, the period commencing with the dates of the Prospectus and terminating no later than the ninetieth (90th) day following such date, unless the General Partner, in its sole discretion, elects to extend the offering period for up to an additional ninety (90) days.

 

“Organization and Offering Expenses” shall have the meaning set forth in Subparagraph G(1) of Article X of this Agreement.

 

“Partners” means the General Partner and all Limited Partners where no distinction is required by the context in which the term is used.

 

“Partnership Interest” means the interest of each Partner in the profits, losses, distributions, capital and assets of the Partnership. “Limited Partnership Interest” means a Partnership Interest of a Limited Partner and “General Partnership Interest” means a Partnership Interest of the General Partner. Partnership Interests are represented by Units.

 

“Person” means any natural person, partnership, corporation, association or other legal entity.

 

“Profits” means, for each Fiscal Year of the Partnership, profits of the Partnership as determined for Federal income tax purposes, and each item of income, gain, loss or deduction entering into the computation thereof, except that any gain or loss taken into account in determining the Capital Gain or the Capital Loss of the Partnership for such Fiscal Year shall not enter into such computations.

 

“Prospectus” means the final prospectus and disclosure document of the Partnership, constituting a part of the Registration Statement, as filed with the Securities and Exchange Commission and declared effective thereby, as the same may at any time and from time to time be amended or supplemented after the effective date of the Registration Statement.

 

“Pyramiding” means the use of unrealized profits on existing Commodities. Positions to provide margins for additional Commodities Positions of the same or a related commodity.

 

“Redemption Date” means the date upon which Units held by Limited Partners may be redeemed in accordance with the provisions of Paragraph A of Article IX hereof.

 

“Registration Statement” means the registration statement on Form S-l, as amended, filed by the Partnership with the Securities and Exchange Commission pursuant to which the Partnership registered Units of Limited Partnership Interest, as the same may at any time and from time to time be further amended or supplemented.

 

“Subscription Agreement” means the agreement included as an exhibit to the Prospectus pursuant to which subscribers may subscribe for the purchase of Units of Limited Partnership Interest.

 

“Trading Manager” means any entity acting in its capacity as a commodity trading advisor to the Partnership, and any substitute therefor as provided herein.

 

“Unit” means the Partnership Interest of a Partner. The Capital Contribution of the General Partner and/or its Affiliates shall be represented by “General Partnership Units” and a Limited Partner’s Capital Contribution shall be represented by “Limited Partnership Units.” When used herein without qualification the term “Units” means both Limited Partnership Units and General Partnership Units. Units need not be evidenced by certificates.

 

“Unitholder” means holder of Units.

 

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ARTICLE IV

 

Purpose

 

The business and purpose of the Partnership is primarily to trade, buy, sell, spread or otherwise acquire, hold or dispose of commodity futures contracts on U.S. exchanges and foreign currency forward contracts world-wide. In addition, from time to time the Partnership also may engage in transactions in futures contracts on foreign exchanges, forward contracts on other than foreign currencies, U.S. and foreign exchange-traded commodity options and other commodity interests. The primary objective of the Partnership’s business is the appreciation of its assets through speculative trading.

 

ARTICLE V

 

Names and Addresses of Partners

 

The General Partner of the Partnership is Preferred Investment Solutions Corp. (formerly known as Kenmar Advisory Corp.), a Connecticut corporation, having its principal office for the transaction of business at Two American Lane, Greenwich, Connecticut 06801, which was admitted to the Partnership as a general partner of the Partnership immediately prior to the former general partner of the Partnership ceasing to be a general partner of the Partnership. The names and addresses (until changed in accordance with Paragraph A of Article XXI hereof) of the Limited Partners shall be as set forth in the books and records of the Partnership.

 

ARTICLE VI

 

Principal Place of Business

 

The principal place of business of the Partnership at which Partnership records will be kept shall be at Two American Lane, Greenwich, Connecticut 06801. The General Partner may from time to time change the principal place of business of the Partnership and, in such event, the General Partner shall notify the Limited Partners in writing within ten days after the effective date of such change. The General Partner may establish additional places of business for the Partnership when and where required by the business of the Partnership. The address of the registered office of the Partnership in the State of Delaware shall be c/o RL&F Service Corp., Tenth Floor, One Rodney Square, 10th and King Streets, Wilmington, New Castle County, Delaware 19801. The name and address of the registered agent for service of process on the Partnership in the State of Delaware shall be RL&F Service Corp., Tenth Floor, One Rodney Square, 10th and King Streets, Wilmington, New Castle County, Delaware 19801, or such other agent as may be designated from time to time by the General Partner.

 

ARTICLE VII

 

Capital Contributions

 

A. Offer of Units of Limited Partnership Interest. The Partnership may, in the discretion of the General Partner, offer on a continuous basis, Units in the Partnership from time to time following the Offering Period, on such terms and conditions as the General Partner shall determine. No fractional Units shall be issued. The offering shall be made pursuant to and on the terms and conditions set forth in the Prospectus. The General Partner shall make such arrangements for the sale of the Units as it deems appropriate.

 

B. Initial Paid-In Capital. The Initial Limited Partner shall contribute $1,000 to the capital of the Partnership and shall be allocated ten (10) Limited Partnership Units for such contribution and the General Partner shall contribute $1,000 to the capital of the Partnership and shall be allocated ten (10) General Partnership Units for such contribution. At the conclusion of the Offering Period, the Initial Limited Partner shall withdraw as a Limited Partner and his $1,000 capital contribution will be returned to him, without interest, and he will have no further rights or obligations as a Limited Partner.

 

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C. Subscription Agreement. Each Limited Partner who purchases any Limited Partnership Units offered pursuant to the Prospectus shall contribute to the capital of the Partnership such amount as he shall state in the Subscription Agreement which he shall execute (as required therein), acknowledge and, together with the Power of Attorney set forth therein, deliver to the General Partner as a counterpart to this Agreement, which amount shall be an even multiple of $100 but not less than fifty (50) Limited Partnership Units, except for Individual Retirement Account (“IRA”) subscribers, where the minimum subscription shall be not less than twenty (20) Limited Partnership Units. All subscription amounts shall be paid by check, subject to prompt collection, in cash, or in such other form as may be acceptable to the General Partner, at the time of the execution and delivery of such Subscription Agreement. All subscriptions are subject to acceptance by the General Partner.

 

D. Escrow Arrangements. All proceeds from the sale of Limited Partnership Units offered pursuant to the Prospectus shall be deposited in an interest bearing escrow account at Bankers Trust Company, in New York, N.Y. until the conclusion of the Offering Period. In the event 50,000 or more of the Limited Partnership Units offered pursuant to the Prospectus are sold during the Offering Period, all interest earned on the proceeds of the subscriptions during the Offering Period will be distributed to the purchasers of Limited Partnership Units on a pro rata basis (taking into account time and amount of deposit) no later than fifteen (15) business days after the conclusion of the Offering Period (or as soon thereafter as practicable if payment cannot be made in such time period).

 

E. Effect of the Sale of at least 50,000 Limited Partnership Units. In the event at least 50,000 Limited Partnership Units are sold, the General Partner will admit all accepted subscribers into the Partnership as Limited Partners, by causing such Limited Partners to execute this Agreement, pursuant to the Power of Attorney set forth in the Subscription Agreement, and by making an entry on the books and records of the Partnership reflecting that such subscribers have been admitted as Limited Partners, as soon as practicable after the termination of the Offering Period. Accepted subscribers will be deemed Limited Partners at such time as such admission is reflected on the books and records of the Partnership.

 

F. Paid-In Capital if at least 50,000 Limited Partnership Units Are Sold. In the event that 50,000 or more of the Limited Partnership Units offered pursuant to the Prospectus are sold during the Offering Period, the Partnership shall have paid-in capital of not less than $5,100,000 (including the General Partner’s contribution for the purchase of Units as provided in Paragraphs B and H of this Article VII), after giving effect to the Initial Limited Partner’s withdrawal as provided in Paragraph B of this Article VII.

 

G. Effect of the Sale of Less than 50,000 Limited Partnership Units. In the event that at least 50,000 Limited Partnership Units offered pursuant to the Prospectus are not sold during the Offering Period, all proceeds of the sale of Limited Partnership Units, together with any interest earned thereon, will be returned to the subscribers on a pro rata basis (taking into account the amount and time of deposit), no later than fifteen (15) business days after the conclusion of the Offering Period (or as soon thereafter as practicable if payment cannot be made in such time period), and the Partnership shall be dissolved and the General Partner shall cancel the Certificate of Limited Partnership.

 

H. General Partner’s Contribution if at least 50,000 Limited Partnership Units Are Sold. In the event that 50,000 or more of the Limited Partnership Units offered pursuant to the Prospectus are sold during the Offering Period, the General Partner and/or its Affiliates shall contribute, and maintain, in cash to the capital of the Partnership an amount, which, when added to the total contributions to the Partnership by all Partners, will be not less than 1% of such total contributions, but in no event shall such contribution be less than $100,000. The General Partner and/or its Affiliate will receive General Partnership Units in proportion to its contribution. The General Partner and/or its Affiliate shall, with respect to any Limited Partnership Unit or Units owned by them, enjoy all of the rights and privileges and be subject to all of the obligations and duties of a Limited Partner, in addition to rights and privileges the General Partner has as a General Partner.

 

I. Optional Purchase of Limited Partnership Units. The General Partner and/or its Affiliates and (subject to approval by the General Partner) any commodity broker, any Trading Manager and their respective principals, stockholders, directors, officers, employees and affiliates may purchase any number of Limited Partnership Units during or following the Offering Period, and will be treated as Limited Partners with respect to such Units. Notwithstanding anything to the contrary in this Agreement, the interest of the General Partner and/or its Affiliates (without regard to any limited partnership interest in the Partnership of the General Partner and/or its Affiliates) in each material item of Partnership income, gain, loss or deduction shall be equal to at least 1% of each such item at all times during the term of this Agreement.

 

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ARTICLE VIII

 

Distributions and Allocations

 

A. Capital Accounts. A capital account shall be established for each Partner on the books of the Partnership (such account is sometimes hereinafter referred to as a “book capital account”). The initial balance of each Partner’s book capital account shall be the amount of his initial capital contribution to the Partnership.

 

B. Monthly Allocations. As of the close of business (as determined by the General Partner) on the last day of each calendar month during each Fiscal Year of the Partnership, the following determinations and allocations shall be made:

 

(1) The Partnership’s Net Asset Value shall be determined;

 

(2) Any increase or decrease in Net Asset Value as compared to the next previous determination of Net Asset Value shall then be credited or charged to the book capital accounts of the Partners in the ratio that the balance of each Partner’s account bears to the balance of all Partners’ book capital accounts; and

 

(3) The amount of any distribution to a Partner, any amount paid to a Partner upon redemption of Units and any amount paid to the General Partner upon withdrawal of its interest in the Partnership shall then be charged to that Partner’s book capital account.

 

C. Allocation of Profit and Loss For United States Federal Income Tax Purposes. As of the end of each Fiscal Year of the Partnership, the Partnership’s realized profit and loss shall be allocated among the Partners pursuant to the following subparagraphs for federal income tax purposes. Such allocations of profit and loss shall be pro rata from Capital Gain or Loss and Profits and Losses.

 

(1) Items of ordinary income (such as interest and credits in lieu of interest) and expense (such as management fees, incentive fees, brokerage fees, and costs in connection with the organization and offering of Units in the Partnership including legal, accounting, auditing, preparing and printing Prospectuses, mailing costs and filing fees, and extraordinary expenses) shall be allocated pro rata among the Partners based on their respective book capital accounts as of the end of each month in which the items of ordinary income and expense accrued.

 

(2) Capital Gain or Capital Loss from the Partnership’s trading activities for each Fiscal Year of the Partnership shall be allocated as follows:

 

(a) For the purpose of allocating the Partnership’s Capital Gain and Capital Loss among the Partners, there shall be established a tax capital account with respect to each outstanding Unit. The initial balance of each tax capital account shall be the amount paid by the Partner to the Partnership for the Unit. Tax capital accounts shall be adjusted as of the end of each Fiscal Year as follows:

 

(i) Each tax capital account shall be increased by the amount of income (Profits or Capital Gain) which shall have been allocated to the Partner who shall hold the Unit pursuant to Paragraph C(1) above and Subparagraph (c) below;

 

(ii) Each tax capital account shall be decreased by the amount of expense or loss (Losses or Capital Losses) which shall have been allocated to the Partner who shall hold the Unit pursuant to Paragraph C(1) above and Subparagraph (e) below and by the amount of any distribution which shall have been received by the Partner with respect to the Unit (other than on redemption of Units); and

 

(iii) When a Unit shall be redeemed, the tax capital account with respect to such Unit shall be eliminated on the Redemption Date.

 

(b) Capital Gain shall be allocated first to each Partner who has redeemed one or more of his Units during the Fiscal Year up to the excess, if any, of the amount received upon redemption of the Units over the tax capital account attributable to the redeemed Unit.

 

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(c) Capital Gain remaining after the allocation thereof pursuant to Subparagraph (b) above shall be allocated next among all Partners whose book capital accounts shall be in excess of their Units’ tax capital accounts (after the adjustments in Subparagraph (b) above) in the ratio that each such Partner’s excess shall bear to all such Partners’ excesses. In the event that Capital Gain to be allocated pursuant to this Subparagraph (c) shall be greater than the excess of all such Partners’ book capital accounts over all such Partners’ tax capital accounts, the excess Capital Gain shall be allocated among all Partners in the ratio that each Partner’s book capital account shall bear to all Partners’ book capital accounts.

 

(d) Capital Loss shall be allocated first to each Partner who shall have redeemed one or more of his Units during the Fiscal Year up to the excess, if any, of the tax capital account attributable to the redeemed Units over the amount which shall have been received upon redemption of the Unit.

 

(e) Capital Loss remaining after the allocation thereof pursuant to Subparagraph (d) above shall be allocated next among all Partners whose Units’ tax capital accounts shall be in excess of their book capital. accounts (after the adjustments in Subparagraph (d) above) in the ratio that each such Partner’s excess shall bear to all such Partners’ excesses. In the event that Capital Loss to be allocated pursuant to this Subparagraph (e) shall be greater than the excess of all such tax capital accounts over all such Partners’ book capital accounts, the excess loss shall be allocated among all Partners in the ratio that each Partner’s book capital account shall bear to all Partners’ book capital accounts.

 

(3) The tax allocations prescribed by this Paragraph C shall be made to each holder of a Unit whether or not the holder is a substituted Limited Partner. In the event that a Unit shall have been transferred pursuant to Paragraph C of Article XIV hereof, the allocations pie scribed by this Paragraph C shall be made with respect to such Unit without regard to the assignment, except that in the year of assignment the allocations prescribed by this Paragraph C shall be divided between the assignor and the assignee based on the number of months each shall have held the assigned Unit. For purposes of this Paragraph C, tax allocations shall he made to the General Partner’s Units of General Partnership Interest on a Unit-equivalent basis.

 

(4) The allocation of income and loss (and items thereof) for federal income tax purposes set forth in this Paragraph C shall be intended to allocate taxable income and loss among Partners generally in the ratio and to the extent that net profit and net loss shall be allocated to such Partners under Paragraph B of this Article VIII so as to eliminate, to the extent possible, any disparity between a Partner’s book capital account and his tax capital account. consistent with the principles set forth in Section 704(c)(2) of the Code.

 

(5)Notwithstanding the foregoing subparagraphs of this Paragraph E of Article VIII, if any allocation would produce a deficit in the tax capital account of any Unit, the portion of such allocation that would create such a deficit shall instead be allocated to the tax capital account of the General Partnership Units.

 

D. Allocation of Distributions. The General Partner shall have sole discretion in determining the amount and frequency of distributions, other than redemptions, which the Partnership shall make with respect to the Units; provided, however, that no Partner shall receive a distribution to the extent that, after giving effect to the distribution, all liabilities of the Partnership, other than liabilities to the Partners on account of their Partnership interests, exceed the fair market value of the Partnership assets. The aggregate distributions made in a Fiscal Year (other than distributions on termination, which shall be allocated in the manner described in Paragraph B of Article XVII) shall be allocated among the holders of record of Units in the ratio in which the number of Units held of record by each of them bears to the number of Units held of record by all of the Partners as of the record date of such distribution, provided, however that any distribution made in respect of a Unit shall not exceed the tax capital account for such Unit.

 

E. Admissions of Partners; Transfers. For purposes of this Article VIII, Partners shall be deemed admitted (and a tax and book capital account shall be established in respect of the Units acquired by such Partner) as of the first day of the calendar month following the calendar month in which such Partner’s subscription is accepted, or the transfer of Units to such Partner is recognized, except that persons accepted as subscribers to the Partnership pursuant to Paragraph E of Article VII shall be deemed admitted on the date determined pursuant to such Paragraph E. Any Partner to whom a Unit has been transferred shall succeed to the tax and book capital accounts attributable to the Unit transferred.

 

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F. No Personal Liability of General Partner for Return of Capital or Profits. Subject to the provisions of Paragraph E of Article X of this Agreement, the General Partner shall not be personally liable for the return or repayment of all or any portion of the capital or profits of any Limited Partner, it being expressly agreed that any such return of capital or profits made pursuant to this Agreement shall be made solely from the assets of the Partnership without any rights of contribution from the General Partner.

 

G. Liability for State and Local Tax. In the event that the Partnership shall be separately subject to state or local taxation by any jurisdiction or taxing authority, and in the event that such tax is payable by the Partnership or by the General Partner, each Partner shall be liable for and shall reimburse the Partnership or the General Partner, as appropriate, for any income taxes due and payable or paid to such jurisdiction within ten (10) days from the General Partner’s request thereof, in an amount equal to the ratio which the number of Units of record held by each such Partner bears to the number of Units of record held by all of the Partners as of the last day of the period for which such tax has been assessed.

 

Article IX

 

Redemptions

 

A. Redemption of Partnership Units. The Partners recognize that the profitability of the Partnership depends upon long term and uninterrupted investment of capital. It is agreed, therefore, that Partnership profits and gains may be automatically reinvested, and that distributions, if any, of capital and profits to the Partners will be on a limited basis. Nevertheless, the Partners contemplate the possibility that one or more of the Limited Partners may elect to realize and withdraw any profits, or may desire to withdraw capital, through the redemption of Units prior to the dissolution of the Partnership. In that regard and subject to the provisions of Subparagraph B(9) of Article X:

 

(1) Subject to the conditions set forth in this Article IX, each Limited Partner (or any assignee thereof) shall have the right to redeem one or more whole Units that he or it owns as of the close of business on the last day of a fiscal quarter (the “Redemption Date”), commencing with the end of the first full fiscal quarter of Partnership trading activity. Redemptions of Units by a Limited Partner (other than an IRA) at or prior to the end of the first Redemption Date will be assessed a redemption penalty equal to 4% of the Net Asset Value of a Unit on that Redemption Date. Redemptions by a Limited Partner (other than an IRA) at or prior to the end of the second Redemption Date will be assessed a redemption penalty equal to 3% of the Net Asset Value of a Unit on that Redemption Date. Redemptions by a Limited Partner (other than an IRA) at or prior to the end of the third Redemption Date will be assessed a redemption penalty equal to 2% of the Net Asset Value of a Unit on that Redemption Date. All redemption penalties shall be payable to the General Partner. The redemption penalties will not be charged if the Limited Partner simultaneously invests the redemption proceeds in another futures fund sponsored by the General Partner and/or its Affiliates. Units will be redeemed on a “first in, first out” basis, unless otherwise requested by the redeeming Limited Partner. Units will be valued for purposes of redemption as of the close of business on a Redemption Date next succeeding the earliest date on which the General Partner shall have been in receipt of the required notice for at least ten (10) days. If a Partner (or assignee thereof) is permitted to redeem any or all of his or its Units as of a date other than a Redemption Date, such adjustments in the determination and allocation among the Partners of Capital Gain, Capital Loss, Profits, Losses and items of income or deduction for tax and accounting purposes shall be made as are necessary appropriately to reflect and give effect to the redemption.

 

(2) The value of a Unit for purposes of redemption shall be the book capital account balance of such Unit at the close of business on the Redemption Date, less (a) any amount owing by such Limited Partner (and his assignee, if any) to the Partnership pursuant to Subparagraph F(8) of Article X of this Agreement, (b) any redemption penalty as provided for in Subparagraph (1) of this Section A and (c) such Unit’s pro rata portion of unamortized organization and offering expenses (which, during the first, second and third permissible Redemption Dates, will be paid out of the applicable redemption penalty). If redemption of a Unit shall be requested by an assignee, all amounts which shall be owed to the Partnership under Subparagraph F(8) of Article X hereof by the Partner of record, as well as all amounts which shall be owed by all assignees of such Units shall be deducted from the Net Asset Value of such Units upon redemption.

 

(3) The effective date of redemption shall be the Redemption Date. Payment of the value of the redeemed Units generally shall be made within ten (10) days following the Redemption Date; provided ,

 

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that all liabilities, contingent or otherwise, of the Partnership, except any liability to Partners on account of their capital contributions, have been paid or there remains property of the Partnership sufficient to pay them; and provided further, that under extraordinary circumstances, including, but not limited to, the inability to liquidate Commodity Positions as of such Redemption Date, or default or delay in payments due the Partnership from commodity brokers, banks or other persons, the Partnership may in turn delay payment to Limited Partners requesting redemption of Units of the proportionate part of the value of redeemed Units represented by the sums which are the subject of such default or delay, in which event payment for redemption of such Units will be made to Limited Partners as soon thereafter as is practicable. A Limited Partner may revoke his or its notice of intent to redeem on or prior to the Redemption Date by written instructions to the General Partner. If a Limited Partner revokes his notice of intent to redeem and thereafter wishes to redeem, such Limited Partner will be required to submit written notice thereof in accordance with Subparagraph A(2) of this Article IX and will be redeemed on the first Redemption Date to occur after the General Partner shall have been in receipt of such written notice for at least ten (10) days.

 

(4) A Limited Partner wishing to redeem Units must provide the General Partner with written notice of its or his intent to redeem, which notice shall specify the name and address of the redeeming Limited Partner and the amount of Limited Partnership Units sought to be redeemed. The notice of redemption shall be in the form annexed to the Prospectus or in any other form acceptable to the General Partner and shall be mailed or delivered to the principal office of the General Partner. Such notice must include representations and warranties that the redeeming Limited Partner is the lawful and beneficial owner of the Units to be redeemed and that such Units are not subject to any pledge or otherwise encumbered in any fashion in certain circumstances, the Partnership may require additional documents, such as, but not limited to, trust instruments, death certificates, appointments as executor or administrator or certificates of corporate authority. No redemption of less than a whole Limited Partnership Unit will be permitted except that fractional Units may be redeemed if a Limited Partner shall be redeeming his entire interest in the Partnership. Limited Partners requesting redemption shall be notified in writing within ten (10) days following the Redemption Date whether or not their Units will be redeemed, unless payment for the redeeming Units is made within that ten (10) day period, in which case the notice of acceptance of the redemption shall not be required.

 

(5) The General Partner may, in the case of extraordinary hardship (e.g., the death. divorce, impending insolvency, medical emergency or loss of employment by the Limited Partner) and where it finds that earlier payment will in no respect jeopardize the interests of other Limited Partners, permit redemption upon fewer than ten (10) days’ prior written notice and payment. In addition, the General Partner may suspend temporarily any redemption if the effect of such redemption, either alone or in conjunction with other redemptions, would be to impair the Partnership’s ability to operate in pursuit of its objectives.

 

(6) Except as discussed above, all requests for redemption in proper form will be honored and the Partnership’s positions will be liquidated to the extent necessary to discharge its liabilities on the date of redemption.

 

B. General Partner May Not Redeem. Notwithstanding any provision in this Agreement to the contrary, the General Partner shall not have the right to transfer or redeem any General Partnership Units owned by it so long as it acts as the General Partner of the Partnership, except for Units of General Partnership Interest held by the General Partner and/or its Affiliates constituting more than a 1% interest in the Profits and Losses of the Partnership.

 

ARTICLE X

 

Management and Operation of Partnership Business

 

A. Management of Partnership Business. The Partnership shall be managed by the General Partner and the conduct of the Partnership’s business shall be controlled and conducted solely by the General Partner in accordance with this Agreement.

 

B. Authority of General Partner. In addition to and not in limitation of any rights and powers conferred by law or other provisions of this Agreement, and except as limited, restricted or prohibited by the express provisions of this Agreement, the General Partner shall have and may exercise, on behalf of the Partnership, all

 

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powers and rights necessary, proper, convenient or advisable to effectuate and carry out the purposes, business and objectives of the Partnership and shall, except as provided in this Agreement or the Act, have and possess the same rights and powers as any general partner in a partnership without limited partners formed under the laws of the State of Delaware. Such powers shall include, without limitation, the following:

 

(1) To enter into, execute, deliver and maintain contracts, agreements and any or all other documents and instruments, and to do and perform all such things, as may be in furtherance of Partnership purposes or necessary or appropriate to the offer and sale of the Units and the conduct of Partnership activities, including, but not limited to, contracts with third parties for:

 

(a) commodity brokerage services, as well as specialized administrative services, on behalf of the Partnership (which services may be performed by an Affiliate or Affiliates of the General Partner); and

 

(b) commodity trading advisory services relating to the purchase and sale of all Commodities Positions on behalf of the Partnership, which services may not be performed by the General Partner or an Affiliate of the General Partner; provided, however, that to the extent that any agreement for any advisory services is entered into after the date of the Prospectus, any compensation paid to any such advisor, including management and incentive fees, pursuant to any such agreement (if different from the compensation arrangement set forth in the Prospectus) will not exceed any limitations then currently imposed by the NASAA Guidelines; and provided further, that to the extent any new advisor is to be retained to replace an existing advisor which has sustained losses on behalf of the Partnership, the General Partner will give reasonable prior notice