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MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of April, 1996 among
SMITH BARNEY FUTURES MANAGEMENT INC., a Delaware corporation ("SBFM"),
SMITH BARNEY MID-WEST FUTURES FUND L. P. II, a New York limited
partnership (the "Partnership") and JOHN W. HENRY & CO., INC., a
California corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner of SMITH BARNEY MID-WEST
FUTURES FUND L. P. II, a limited partnership organized with the objective to
achieve substantial capital appreciation by engaging in speculative trading of a
diversified portfolio of commodity interests which may include futures
contracts, options, forward contracts and physicals; and
WHEREAS, the Limited Partnership Agreement establishing the
Partnership (the "Limited Partnership Agreement") permits SBFM to delegate to
one or more commodity trading advisors SBFM's authority to make trading
decisions for the Partnership; and
WHEREAS, the Advisor is registered as a commodity trading
advisor with the Commodity Futures Trading Commission ("CFTC") and is a member
of the National Futures Association ("NFA"); and
WHEREAS, SBFM is registered as a commodity pool operator
with the CFTC and is a member of the NFA; and
WHEREAS, SBFM and the Advisor wish to enter into this
Agreement in order to set forth the terms and conditions upon which the Advisor
will render and implement advisory services in connection with the conduct by
the Partnership of its commodity trading activities during the term of this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DUTIES OF THE ADVISOR. (a) For the period and on the terms
and conditions of this Agreement, the Advisor shall have sole authority and
responsibility, as one of the Partnership's agents and attorneys-in-fact, for
directing the investment and reinvestment of the assets and funds of the
Partnership allocated to it by SBFM in commodity interests, including commodity
futures contracts, options and forward contracts and physicals. The Advisor will
not be allocated notional funds. All such trading on behalf of the Partnership
shall be in accordance with the trading strategies and trading policies set
forth in the Partnership's private placement offering memorandum and disclosure
document dated as of February
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23, 1996 (as supplemented, the "Prospectus"), and as such trading policies may
be changed from time to time upon receipt by the Advisor of prior written notice
of such change. Any open positions or other investments at the time of receipt
of such notice shall not be deemed to violate the changed policy and shall be
closed or sold in the ordinary course of trading. The Advisor may not change the
trading policies set forth in the Prospectus without the prior written consent
of the Partnership given by SBFM. The Advisor makes no representation or
warranty that the trading to be directed by it for the Partnership will be
profitable or will not incur losses.
(b) SBFM acknowledges receipt of the Advisor's Disclosure
Document dated September 1, 1995 and as amended September 15, November 10,
December 27, 1995 and February 29, 1996 (the "Disclosure Document"). All trades
made by the Advisor for the account of the Partnership shall be made through
such commodity broker or brokers as SBFM shall direct, and the Advisor shall
have no authority or responsibility for selecting or supervising any such broker
in connection with the clearance or confirmation of transactions for the
Partnership or for the negotiation of brokerage rates charged therefor. SBFM
shall also direct the Advisor in writing on Appendix A to this Agreement (which
may be revised by SBFM from time to time) to direct trades in commodity futures
and options to such independent floor brokers as SBFM may determine as agent for
Smith Barney Inc. for execution with instructions to give-up the trades to the
broker designated by SBFM. The Partnership's initial futures commission merchant
will be Smith Barney Inc. All give-up or similar fees relating to the foregoing
shall be paid by the Partnership after all parties have executed the relevant
give-up agreement. The terms of this Section 1(b) shall supersede any
inconsistent terms in the give-up agreement. The Partnership's futures
commission merchant will provide copies of all brokerage statements to the
Advisor.
(c) In connection with its trading for the Partnership, the
Advisor will use its Financial and Metals Portfolio Program. In the event the
Advisor wishes to use a trading system or methodology other than or in addition
to the systems or methodologies outlined in the Prospectus in connection with
its trading for the Partnership, either in whole or in part, it may not do so
unless the Advisor gives SBFM prior written notice of its intention to utilize
such different trading system or methodology and SBFM consents thereto in
writing. In addition, the Advisor will provide five days' prior written notice
to SBFM of any change in a trading system or methodology to be utilized for the
Partnership which the Advisor deems material. If the Advisor deems such change
in system or methodology to be material, the changed system or methodology will
not be utilized for the Partnership without the prior written consent of SBFM.
Changes in contracts traded or in the leverage employed shall not be deemed to
be material and no prior
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notice or consent shall be required. The Advisor also agrees to provide SBFM,
upon request, with a written report of the assets under the Advisor's management
together with all other matters deemed by the Advisor to be material changes to
its business not previously reported to SBFM.
(d) The Advisor agrees to make all material disclosures to
the Partnership regarding itself and its principals as defined in Part 4 of the
CFTC's regulations ("principals"), shareholders, directors, officers and
employees, their trading performance and general trading methods, its customer
accounts (but not the identities of or identifying information with respect to
its customers) and otherwise as are required in the reasonable judgment of SBFM
to be made in any filings required by Federal or state law or NFA rule or order.
Notwithstanding Sections 1(d) and 4(d) of this Agreement, the Advisor is not
required to disclose the actual trading results of proprietary accounts of the
Advisor or its principals unless SBFM determines that such disclosure is
required in order to fulfill its fiduciary obligations to the Partnership or the
reporting, filing or other obligations imposed on it by Federal or state law or
NFA rule or order. The Partnership and SBFM acknowledge that the trading advice
to be provided by the Advisor is a property right belonging to the Advisor and
that they will keep all such advice confidential. Further, SBFM agrees to treat
as confidential any results of proprietary accounts and/or proprietary
information with respect to trading systems obtained from the Advisor. Nothing
contained in this Agreement shall be deemed or construed to require the Advisor
to disclose any confidential or proprietary details of the Advisor's trading
strategies or the names or identities of the Advisor's clients.
(e) The Advisor understands and agrees that SBFM intends to
designate other trading advisors for the Partnership and to apportion or
reapportion to such other trading advisors the management of an amount of Net
Assets (as defined in Section 3(b) hereof) as it shall determine in its absolute
discretion. The designation of other trading advisors and the apportionment or
reapportionment of Net Assets to any such trading advisors pursuant to this
Section 1 shall neither terminate this Agreement nor modify in any regard the
respective rights and obligations of the parties hereunder.
(f) SBFM may, from time to time, in its absolute discretion,
select additional trading advisors and reapportion funds among the trading
advisors for the Partnership as it deems appropriate. SBFM shall use its best
efforts to make reapportionments, if any, as of the first day of a month. The
Advisor agrees that it may be called upon at any time promptly to liquidate
positions in SBFM's sole discretion so that SBFM may reallocate the
Partnership's assets, meet margin calls on the Partnership's account, fund
redemptions, or for any other reason, except that SBFM will not require the
liquidation of specific
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positions by the Advisor. The Advisor shall not be responsible for the effects
of such liquidations ordered by SBFM. SBFM will use its best efforts to give
three days' prior notice to the Advisor of any reallocations or liquidations and
will use its best efforts to effect such reallocation or liquidation only at
month-end.
(g) The Advisor will not be liable for trading losses in the
Partnership's account including losses caused by errors; provided, however, that
the Advisor will be liable to the Partnership with respect to losses incurred
due to errors committed or caused by it or any of its principals or employees in
communicating improper trading instructions or orders to any broker on behalf of
the Partnership.
2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the
Advisor shall be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Partnership in any way and shall not be deemed an agent, promoter
or sponsor of the Partnership, SBFM, or any other trading advisor or to be
establishing a partnership or joint venture with any of the foregoing. The
Advisor shall not be responsible to the Partnership, its general partner or any
limited partners for any acts or omissions of any other trading advisor acting
or previously acting as an advisor to the Partnership.
3. COMPENSATION. (a) In consideration of and as compensation
for all of the services to be rendered by the Advisor to the Partnership under
this Agreement, the Partnership shall pay the Advisor (i) an incentive fee
payable quarterly equal to 15% of New Trading Profits (as such term is defined
below) earned by the Advisor for the Partnership and (ii) a monthly fee for
professional management services equal to 1/3 of 1% (4% per year) of the
month-end Net Assets of the Partnership allocated to the Advisor.
(b) "Net Assets" shall have the meaning set forth in
Paragraph 7(d)(1) of the Limited Partnership Agreement dated as of June 3, 1994
and without regard to amendments thereto (and as set forth in Appendix A
hereto), provided that in determining the Net Assets of the Partnership on any
date, no adjustment shall be made to reflect any distributions, redemptions,
management fees payable, incentive fees payable or accrued other expenses as of
the date of such determination.
(c) "New Trading Profits" shall mean the excess, if any, of
Net Assets before incentive fees paid managed by the Advisor at the end of the
fiscal period over Net Assets managed by the Advisor at the end of the highest
previous fiscal period or Net Assets allocated to the Advisor at the date
trading commences, whichever is higher, and as further adjusted to eliminate the
effect on Net Assets resulting from new capital
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contributions, redemptions, reallocations or capital distributions, if any, made
during the fiscal period decreased by interest or other income, not directly
related to trading activity, earned on the Partnership's assets during the
fiscal period, whether the assets are held separately or in margin accounts.
Ongoing expenses will be attributed to the Advisor based pro rata on the
Advisor's proportionate share of Net Assets and shall not include management
fees of the Partnership's other advisors. Ongoing expenses above will not
include expenses of litigation not involving the activities of the Advisor on
behalf of the Partnership. Interest income earned, if any, will not be taken
into account in computing Trading Profits earned by the Advisor. If Net Assets
allocated to the Advisor are reduced due to redemptions, distributions or
reallocations, there will be a corresponding proportional reduction in the
related loss carryforward amount that must be recouped before the Advisor is
eligible to receive another incentive fee.
(d) Quarterly incentive fees and monthly management fees
shall be paid within twenty (20) business days following the end of the period,
as the case may be, for which such fee is payable. In the event of the
termination of this Agreement as of any date which shall not be the end of a
calendar quarter or a calendar month, as the case may be, the quarterly
incentive fee shall be computed and paid as if the effective date of the
termination were the last day of the then current quarter and the monthly
management fee shall be prorated to the effective date of termination. If,
during any month, the Partnership does not conduct business operations or the
Advisor is unable to provide the services contemplated herein for more than two
successive business days, the monthly management fee shall be prorated by the
ratio which the number of business days during which SBFM conducted the
Partnership's business operations or utilized the Advisor's services bears in
the month to the total number of business days in such month, it being
acknowledged that under the Advisor's trading programs there will be periods
when no open positions will be maintained for the Partnership.
(e) The provisions of this Paragraph 3 shall survive
the termination of this Agreement.
4. RIGHT TO ENGAGE IN OTHER ACTIVITIES. (a) The services
provided by the Advisor hereunder are not to be deemed exclusive. SBFM on its
own behalf and on behalf of the Partnership acknowledges that, subject to the
terms of this Agreement, the Advisor and its officers, directors, employees and
shareholder(s), may render advisory, consulting and management services to other
clients and accounts. The Advisor and its officers, directors, employees and
shareholder(s) shall be free to trade for their own accounts and to advise other
investors and manage other commodity accounts during the term of this Agreement
and to use the same or different information, computer programs and trading
strategies, programs or formulas which they obtain, produce or utilize in the
performance of services to SBFM for the
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Partnership. However, the Advisor represents, warrants and agrees that it
believes that the rendering of such consulting, advisory and management services
to other accounts and entities will not require any material change in the
Advisor's basic trading strategies and will not affect the capacity of the
Advisor to continue to render services to SBFM for the Partnership of the
quality and nature contemplated by this Agreement.
(b) If, at any time during the term of this Agreement, the
Advisor is required to aggregate the Partnership's commodity positions with the
positions of any other person for purposes of applying CFTC- or exchange-imposed
speculative position limits, the Advisor agrees that it will promptly notify
SBFM if the Partnership's positions are included in an aggregate amount which
exceeds the applicable speculative position limit. The Advisor agrees that, if
its trading recommendations are altered because of the application of any
speculative position limits, it will not modify the trading instructions with
respect to the Partnership's account in such manner as to affect the Partnership
substantially disproportionately as compared with the Advisor's other accounts.
The Advisor further represents, warrants and agrees that under no circumstances
will it knowingly or deliberately use trading strategies or methods for the
Partnership that are inferior to strategies or methods employed for any other
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account in any manner,
it being acknowledged, however, that the Advisor offers ten different trading
programs, and that different trading strategies or methods may be utilized for
differing sizes of accounts, accounts with different trading policies, fees,
commissions or levels of diversification, 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 executing brokers and accounts with other
differences, and that such differences may cause divergent trading results.
(c) It is acknowledged that the Advisor and/or its officers,
employees, directors and shareholder(s) presently act, and it is agreed that
they may continue to act, as advisor for other accounts managed by them, and may
continue to receive compensation with respect to services for such accounts in
amounts which may be more or less than the amounts received from the
Partnership.
(d) The Advisor agrees that it shall make such information
available to SBFM respecting the performance of the Partnership's account as
compared to the performance of other accounts managed by the Advisor or its
principals as shall be reasonably requested by SBFM, provided that in no event
shall the Advisor be required to disclose the identity of its customers. The
Advisor presently believes and represents that existing
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speculative position limits will not materially adversely affect its ability to
manage the Partnership's account given the potential size of the Partnership's
account and the Advisor's and its principals' current accounts and all proposed
accounts for which they have contracted to act as trading manager.
5. TERM. (a) This Agreement shall continue in effect until
June 30, 1997. SBFM may, in its sole discretion, renew this Agreement for
one-year periods upon notice to the Advisor not less than 30 days prior to the
expiration of the previous period. At any time during the term of this
Agreement, SBFM may terminate this Agreement at any month-end upon 30 days'
notice to the Advisor. At any time during the term of this Agreement, SBFM may
elect to immediately terminate this Agreement if (i) the Net Asset Value per
Unit (as that term is defined in Section 7(d)(2) of the Limited Partnership
Agreement) shall decline as of the close of business on any day to $400 or less;
(ii) the Net Assets allocated to the Advisor (adjusted for redemptions,
distributions, withdrawals or reallocations, if any) decline by 50% or more as
of the end of a trading day from such Net Assets' previous highest value; (iii)
limited partners owning more than 50% of the outstanding Units shall vote to
require SBFM to terminate this Agreement; (iv) the Advisor fails to comply with
the terms of this Agreement as to any material term; (v) SBFM, in good faith,
upon due consideration by its board of directors, reasonably determines that the
performance of the Advisor has been such that SBFM's fiduciary duties to the
Partnership require SBFM to terminate this Agreement; or (vi) SBFM reasonably
believes that the application of speculative position limits will substantially
affect the performance of the Partnership. At any time during the term of this
Agreement, SBFM may elect immediately to terminate this Agreement if (i) the
Advisor merges, consolidates with another entity not controlled by John W.
Henry, sells a substantial portion of its assets to an entity not controlled by
John W. Henry, or becomes bankrupt or insolvent, (ii) Mr. John W. Henry dies,
becomes incapacitated, leaves the employ of the Advisor, ceases to control the
Advisor or is otherwise not managing the trading programs or systems of the
Advisor, or (iii) the Advisor's registration as a commodity trading advisor with
the CFTC or its membership in the NFA or any other regulatory authority, is
terminated or suspended. This Agreement will immediately terminate upon
dissolution of the Partnership or upon cessation of trading prior to
dissolution.
(b) The Advisor may terminate this Agreement by giving not
less than 30 days' notice to SBFM in the event that (i) the trading policies of
the Partnership as set forth in the Prospectus are changed in such manner that
the Advisor reasonably believes will adversely affect the performance of its
trading strategies; (ii) after June 30, 1997; (iii) SBFM or the Partnership
fails to comply with the terms of this Agreement. The Advisor may immediately
terminate this Agreement if SBFM's registration as a commodity pool operator or
its membership in the NFA is terminated or suspended; (iv) if SBFM withholds its
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consent to a change in the Advisor's program specified in Section 1(c) of this
Agreement; or (v) if SBFM requires the Advisor to liquidate positions pursuant
to section 1(f) hereof. In addition, the Advisor may terminate this Agreement at
any month-end after the termination of the Initial Offering Period (as that term
is defined in the Prospectus) upon 60 days' prior written notice to SBFM.
(c) Except as otherwise provided in this Agreement, any
termination of this Agreement in accordance with this Paragraph 5 shall be
without penalty or liability to any party.
6. INDEMNIFICATION. (a)(i) In any threatened, pending or
completed action, suit, or proceeding to which the Advisor was or is a party or
is threatened to be made a party arising out of or in connection with this
Agreement or the management of the Partnership's assets, SBFM shall, subject to
subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the
Advisor against any loss, liability, damage, cost, expense (including, without
limitation, attorneys' and accountants' fees), judgments and amounts paid in
settlement actually and reasonably incurred by it in connection with such
action, suit, or proceeding if the Advisor acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Partnership, and provided that its conduct did not constitute negligence,
intentional misconduct, or a breach of its fiduciary obligations to the
Partnership as a commodity trading advisor in accordance with applicable law,
unless and only to the extent that the court or administrative forum in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, the
Advisor is fairly and reasonably entitled to indemnity for such expenses which
such court or administrative forum shall deem proper; and further provided that
no indemnification shall be available from the Partnership if such
indemnification is prohibited by Section 16 of the Partnership Agreement. The
termination of any action, suit or proceeding by judgment, order or settlement
shall not, of itself, create a presumption that the Advisor did not act in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Partnership.
(ii) To the extent that the Advisor has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in subparagraph (i) above, or in defense of any claim, issue or matter therein,
SBFM shall indemnify it against the expenses (including, without limitation,
attorneys' and accountants' fees) actually and reasonably incurred by it in
connection therewith.
(iii) Any indemnification under subparagraph (i) above,
unless ordered by a court or administrative forum, shall be made by SBFM only as
authorized in the specific case and only upon a determination by independent
legal counsel in a written
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opinion that such indemnification is proper in the circumstances because the
Advisor has met the applicable standard of conduct set forth in subparagraph (i)
above. Such independent legal counsel shall be selected by SBFM in a timely
manner, subject to the Advisor's approval, which approval shall not be
unreasonably withheld. The Advisor will be deemed to have approved SBFM's
selection unless the Advisor notifies SBFM in writing, received by SBFM within
five days of SBFM's telecopying to the Advisor of the notice of SBFM's
selection, that the Advisor does not approve the selection.
(iv) In the event the Advisor is made a party to any claim,
dispute or litigation or otherwise incurs any loss or expense as a result of, or
in connection with, the Partnership's or SBFM's activities or claimed activities
unrelated to the Advisor, SBFM shall indemnify, defend and hold harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.
(v) As used in this Paragraph 6(a), the terms "Advisor" shall
include the Advisor, its principals, officers, directors, stockholders and
employees and the term "SBFM" shall include the Partnership.
(b)(i) The Advisor agrees to indemnify, defend and hold
harmless SBFM, the Partnership and their affiliates against any loss, liability,
damage, cost or expense (including, without limitation, attorneys' and
accountants' fees), judgments and amounts paid in settlement actually and
reasonably incurred by them (A) as a result of the breach of any representations
and warranties made by the Advisor in this Agreement, or (B) as a result of any
act or omission of the Advisor relating to the Partnership if there has been a
final judicial or regulatory determination or, in the event of a settlement of
any action or proceeding with the prior written consent of the Advisor, a
written opinion of an arbitrator pursuant to Paragraph 14 hereof, to the effect
that such acts or omissions violated the terms of this Agreement or involved
negligence, bad faith, recklessness or intentional misconduct on the part of the
Advisor.
(ii) In the event SBFM, the Partnership or any of their
affiliates is made a party to any claim, dispute or litigation or otherwise
incurs any loss or expense as a result of, or in connection with, the activities
or claimed activities of the Advisor or its principals, officers, directors,
shareholder(s) or employees unrelated to SBFM's or the Partnership's business,
the Advisor shall indemnify, defend and hold harmless SBFM, the Partnership or
any of their affiliates against any loss, liability, damage, cost or expense
(including, without limitation, attorneys' and accountants' fees) incurred in
connection therewith.
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(c) In the event that a person entitled to indemnification
under this Paragraph 6 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 person shall be
indemnified only for that portion of the loss, liability, damage, cost or
expense incurred in such action, suit or proceeding which relates to the matters
for which indemnification can be made.
(d) None of the indemnifications contained in this Paragraph
6 shall be applicable with respect to default judgments, confessions of judgment
or settlements entered into by the party claiming indemnification without the
prior written consent, which shall not be unreasonably withheld, of the party
obligated to indemnify such party.
(e) The provisions of this Paragraph 6 shall survive the
termination of this Agreement.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The Advisor represents and warrants that:
(i) All references to the Advisor and its principals in the
Prospectus dated February 23, 1996 are accurate in all material respects and as
to them the Prospectus does not contain any untrue statement of a material fact
or omit to state a material fact which is necessary to make the statements
therein not misleading. All references to the Advisor and its principals in the
Prospectus will, after review and approval of such references by the Advisor
prior to the use of such Prospectus in connection with the offering of the
Partnership's units, be accurate in all material respects.
(ii) The information with respect to the Advisor set forth in
the actual performance tables in the Prospectus is based on all of the customer
accounts managed on a discretionary basis by the Advisor's principals and/or the
Advisor during the period covered by such tables and required to be disclosed
therein.
(iii) The Advisor will be acting as a commodity trading
advisor with respect to the Partnership and not as a securities investment
adviser and is duly registered with the CFTC as a commodity trading advisor, is
a member of the NFA, and is in compliance with such other registration and
licensing requirements as shall be necessary to enable it to perform its
obligations hereunder, and agrees to maintain and renew such registrations and
licenses during the term of this Agreement.
(iv) The Advisor is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
full power and authority to enter into this Agreement and to provide the
services required of it hereunder.
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(v) The Advisor will not, by acting as a commodity trading
advisor to the Partnership, breach or cause to be breached any undertaking,
agreement, contract, statute, rule or regulation to which it is a party or by
which it is bound.
(vi) This Agreement has been duly and validly authorized,
executed and delivered by the Advisor and is a valid and binding agreement
enforceable in accordance with its terms.
(vii) At any time during the term of this Agreement that a
prospectus relating to the Units is required to be delivered in connection with
the offer and sale thereof, the Advisor agrees upon the request of SBFM to
provide the Partnership with such information as shall be necessary so that, as
to the Advisor and its principals, such prospectus is accurate.
(b) SBFM represents and warrants for itself and the
Partnership that:
(i) The Prospectus (as from time to time amended or
supplemented, which amendment or supplement is approved by the Advisor as to
descriptions of itself and its actual performance) does not contain any untrue
statement of a material fact or omit to state a material fact which is necessary
to make the statements therein not misleading, except that the foregoing
representation does not apply to any statement or omission concerning the
Advisor in the Prospectus, made in reliance upon, and in conformity with,
information furnished to SBFM by or on behalf of the Advisor expressly for use
in the Prospectus.
(ii) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full corporate
power and authority to perform its obligations under this Agreement.
(iii) SBFM and the Partnership have the capacity and
authority to enter into this Agreement on behalf of the Partnership.
(iv) This Agreement has been duly and validly authorized,
executed and delivered on SBFM's and the Partnership's behalf and is a valid and
binding agreement of SBFM and the Partnership enforceable in accordance with its
terms.
(v) SBFM will not, by acting as General Partner to the
Partnership and the Partnership will not, breach or cause to be breached any
undertaking, agreement, contract, statute, rule or regulation to which it is a
party or by which it is bound which would materially limit or affect the
performance of its duties under this Agreement.
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(vi) It is registered as a commodity pool operator and is a
member of the NFA, and it will maintain and renew such registration and
membership during the term of this Agreement.
(vii) The Partnership is a limited partnership duly organized
and validly existing under the laws of the State of New York and has full power
and authority to enter into this Agreement and to perform its obligations under
this Agreement.
(viii) SBFM and the Partnership agree that John W. Henry
shall have no liability to the Partnership or SBFM under this Agreement or in
connection with the transactions contemplated herein except for fraud and
willful misconduct by John W. Henry.
8. COVENANTS OF THE ADVISOR, SBFM AND THE PARTNERSHIP.
(a) The Advisor agrees as follows:
(i) In connection with its activities on behalf of the
Partnership, the Advisor will comply with all applicable rules and regulations
of the CFTC and/or the commodity exchange on which any particular transaction is
executed.
(ii) The Advisor will promptly notify SBFM of the
commencement of any material suit, action or proceeding involving it, whether or
not any such suit, action or proceeding also involves SBFM.
(iii) In the placement of orders for the Partnership's
account and for the accounts of any other client, the Advisor will utilize a
fair and reasonable order entry system, which shall, on an overall basis, be no
less favorable to the Partnership than to any other account managed by the
Advisor. The Advisor acknowledges its obligation to review the Partnership's
positions in the account managed by the Advisor daily and promptly to notify the
broker and SBFM and the Partnership's broker of (i) any error committed by the
Advisor or its principals or employees or (ii) any trade which the Advisor
believes was not executed in accordance with its instructions.
(iv) The Advisor shall, upon written demand of SBFM related
to a possible claim arising under Section 6(b)(i) or (ii) hereof, maintain a net
worth of not less than $2,000,000.
(b) SBFM agrees for itself and the Partnership that:
(i) SBFM and the Partnership will comply with all applicable
rules and regulations of the CFTC and/or the commodity exchange on which any
particular transaction is executed.
(ii) SBFM will promptly notify the Advisor of the
commencement of any material suit, action or proceeding involving
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it or the Partnership, whether or not such suit, action or proceeding also
involves the Advisor.
9. COMPLETE AGREEMENT. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof.
10. ASSIGNMENT. This Agreement may not be assigned by any
party without the express written consent of the other parties.
11. AMENDMENT. This Agreement may not be amended except by
the written consent of the parties.
12. NOTICES. All notices, demands or requests required to
be made or delivered under this Agreement shall be in writing and
delivered personally or by registered or certified mail or expedited
courier, return receipt requested, postage prepaid, to the addresses
below or to such other addresses as may be designated by the party
entitled to receive the same by notice similarly given:
If to SBFM:
Smith Barney Futures Management Inc.
390 Greenwich Street - 1st Floor
New York, New York 10013
Attention: David J. Vogel
If to the Advisor:
John W. Henry & Co., Inc.
One Glendinning Place
Westport, Connecticut 06880
Attention: Ms. Elizabeth A. M. Kenton
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. ARBITRATION. The parties agree that any dispute or
controversy arising out of or relating to this Agreement or the interpretation
thereof, shall be settled by arbitration in accordance with the rules, then in
effect, of the National Futures Association or, if the National Futures
Association shall refuse jurisdiction, then in accordance with the rules, then
in effect, of the American Arbitration Association; provided, however, that the
power of the arbitrator shall be limited to interpreting this Agreement as
written and the arbitrator shall state in writing his reasons for his award.
Judgment upon any award made by the arbitrator may be entered in any court of
competent jurisdiction.
14
15. NO THIRD PARTY BENEFICIARIES. There are no third
party beneficiaries to this Agreement.
16. SALES MATERIALS. SBFM will provide a copy of all sales
materials referring to the Advisor and used in connection with the offering to
the Advisor for its review and approval prior to SBFM's public use of the
sales materials.
IN WITNESS WHEREOF, this Agreement has been executed for
and on behalf of the undersigned as of the day and year first above written.
SMITH BARNEY
FUTURES MANAGEMENT INC.
By:
David J. Vogel
President and Director
SMITH BARNEY
MID-WEST FUTURES FUND L. P. II
By: Smith Barney
Futures Management Inc.
(General Partner)
By:
David J. Vogel
President and Director
JOHN W. HENRY & CO., INC.
By:
Name:
Title:
Appendix A
1. GIVE-UP BROKERS: The initial give-up brokers shall be Dean Witter,
Barclays de Zoete Wedd Futures, E. D. & F. Man and J.P. Morgan Futures, Inc.
2. NET ASSETS of the Partnership shall mean the total assets of the
Partnership including all cash, accrued interest, and the market value of all
open commodity positions maintained by the Partnership, less brokerage charges
accrued and less all other liabilities of the Partnership, determined
in accordance with generally accepted accounting principles under the
accrual basis of accounting. The value of a commodity futures or option
contract is the unrealized gain or loss on the contract that is determined by
marking it to the current settlement price for a like contract acquired on
the valuation date. Physical commodities, options, forward contracts and
futures contracts, when no market quote is available, will be valued at
their fair market value as determined by the General Partner. U. S.
Treasury securities and other interest bearing obligations will be
valued at cost plus accrued interest. Interests in other commodity pools
will be valued at their net asset value as determined by the pool operator,
or, if the General Partner has not received such determination or believes
that fairness so requires, at fair value determined by the General
Partner.