Exhibit 3(ii)
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
AND
TRUST AGREEMENT
OF
FUTURES STRATEGIC TRUST
Dated as of October 1, 2004
By and Among
PREFERRED INVESTMENT SOLUTIONS CORP.
(formerly known as Kenmar Advisory Corp.),
WILMINGTON TRUST COMPANY
and
THE INTERESTHOLDERS
from time to time hereunder
TABLE OF CONTENTS
-----------------
Page
----
Article I.
DEFINITIONS; THE TRUST
Section 1.1 Definitions............................................................................1
Section 1.2 Name...................................................................................6
Section 1.3 Delaware Trustee; Business Offices.....................................................6
Section 1.4 Declaration of Trust...................................................................7
Section 1.5 Purposes and Powers....................................................................7
Section 1.6 Tax Treatment..........................................................................7
Section 1.7 General Liability of the Managing Owner................................................8
Section 1.8 Legal Title............................................................................8
Article II.
THE TRUSTEE
Section 2.1 Term; Resignation......................................................................9
Section 2.2 Powers.................................................................................9
Section 2.3 Compensation and Expenses of the Trustee...............................................9
Section 2.4 Indemnification........................................................................9
Section 2.5 Successor Trustee.....................................................................10
Section 2.6 Liability of Trustee..................................................................10
Section 2.7 Reliance; Advice of Counsel...........................................................11
Section 2.8 Not Part of Trust Estate..............................................................12
Article III.
INTERESTS; CAPITAL CONTRIBUTIONS
Section 3.1 General...............................................................................12
Section 3.2 Limited Interests.....................................................................12
Article IV.
THE MANAGING OWNER
Section 4.1 Management of the Trust...............................................................15
Section 4.2 Authority of Managing Owner...........................................................15
Section 4.3 Obligations of the Managing Owner.....................................................18
Section 4.4 General Prohibitions..................................................................19
Section 4.5 Liability of Covered Persons..........................................................21
Section 4.6 Indemnification of the Managing Owner.................................................21
Section 4.7 Expenses..............................................................................22
i
Section 4.8 Compensation to the Managing Owner....................................................23
Section 4.9 Other Business of Interestholders.....................................................23
Section 4.10 Voluntary Withdrawal of the Managing Owner............................................23
Section 4.11 Authorization of Registration Statement...............................................24
Section 4.12 Litigation............................................................................24
Article V.
TRANSFERS OF INTERESTS
Section 5.1 General Prohibition...................................................................24
Section 5.2 Transfer of Managing Owner's General Interests........................................24
Section 5.3 Transfer of Limited Interests.........................................................25
Article VI.
DISTRIBUTION AND ALLOCATIONS
Section 6.1 Capital Accounts......................................................................28
Section 6.2 Monthly Allocations...................................................................29
Section 6.3 Allocation of Profit and Loss for United States Federal Income Tax Purposes...........29
Section 6.4 Allocation of Distributions...........................................................31
Section 6.5 Admissions of Interestholders; Transfers..............................................31
Section 6.6 Liability for State and Local and Other Taxes.........................................31
Article VII.
REDEMPTIONS
Section 7.1 Redemption of Interests...............................................................32
Section 7.2 Redemption By the Managing Owner......................................................34
Article VIII.
THE LIMITED OWNERS
Section 8.1 No Management or Control; Limited Liability...........................................34
Section 8.2 Rights and Duties.....................................................................34
Section 8.3 Limitation on Liability...............................................................35
Article IX.
BOOKS OF ACCOUNT AND REPORTS
Section 9.1 Books of Account......................................................................36
Section 9.2 Annual Reports and Monthly Statements.................................................36
Section 9.3 Tax Information.......................................................................36
ii
Section 9.4 Calculation of Net Asset Value........................................................37
Section 9.5 Other Reports.........................................................................37
Section 9.6 Maintenance of Records................................................................37
Section 9.7 Certificate of Trust..................................................................37
Section 9.8 Registration of Interests.............................................................37
Article X.
FISCAL YEAR
Section 10.1 Fiscal Year...........................................................................38
Article XI.
AMENDMENT OF TRUST AGREEMENT; MEETINGS
Section 11.1 Amendments to the Trust Agreement.....................................................38
Section 11.2 Meetings of the Trust.................................................................39
Section 11.3 Action Without a Meeting..............................................................40
Article XII.
TERM
Section 12.1 Term..................................................................................40
Article XIII.
TERMINATION
Section 13.1 Events Requiring Dissolution..........................................................40
Section 13.2 Distributions on Dissolution..........................................................41
Section 13.3 Termination; Certificate of Cancellation..............................................42
Article XIV.
POWER OF ATTORNEY
Section 14.1 Power of Attorney Executed Concurrently...............................................42
Section 14.2 Effect of Power of Attorney...........................................................43
Section 14.3 Limitation on Power of Attorney.......................................................43
Article XV.
MISCELLANEOUS
Section 15.1 Governing Law.........................................................................44
Section 15.2 Provisions In Conflict with Law or Regulations........................................44
iii
Section 15.3 Construction..........................................................................45
Section 15.4 Notices...............................................................................45
Section 15.5 Counterparts..........................................................................45
Section 15.6 Binding Nature of Trust Agreement.....................................................45
Section 15.7 No Legal Title to Trust Estate........................................................45
Section 15.8 Creditors.............................................................................45
Section 15.9 Integration...........................................................................45
FUTURES STRATEGIC TRUST
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT
This THIRD AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST
AGREEMENT of Futures Strategic Trust ("Trust Agreement") is 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 (the "Managing Owner"), Wilmington Trust Company, a Delaware
banking company, as trustee (the "Trustee"), and the Interestholders from time
to time hereunder.
WHEREAS, the parties (or their predecessors) have heretofore formed
the Trust by filing a Certificate of Trust with the office of the Secretary of
State of the State of Delaware on October 16, 1995 and entered into a
Declaration of Trust and Trust Agreement of the Trust, dated as of October 16,
1995, as amended and restated on December 14, 1995 and January 31, 1996 (the
"Original Agreement"); and
WHEREAS, the parties hereto desire to continue the Trust as a
business trust under the Business Trust Statute and this Trust Agreement; and
WHEREAS, the parties hereto desire to provide for the governance of
the Trust and to set forth in detail their respective rights and duties
relating to the Trust and to amend and restate the Original Agreement in its
entirety.
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
Article I
DEFINITIONS; THE TRUST
Section 1.1 Definitions. These definitions contain certain
provisions required by the NASAA Guidelines and are included verbatim from
such Guidelines, and, accordingly, may not, in all cases, be relevant. As used
in this Trust Agreement, the following terms shall have the following meanings
unless the context otherwise requires:
"Affiliate of the Managing Owner" means: (i) any officer, director,
or partner of the Managing Owner, (ii) any corporation, partnership, trust or
other entity controlling, controlled by or under common control with the
Managing Owner or any Person described in (i) above, (iii) any officer,
director, trustee, or general partner of any Person who is a member, other
than as limited partner, with any Person described in (i) and (ii) above, in a
relationship of joint venture, general partnership or similar form of
unincorporated business association. For purposes of this definition the term
"control" shall also mean the control or ownership of ten percent (10%) or
more of the beneficial interest in the Person referred to.
1
"Business Day" means a day other than Saturday, Sunday or other day
when banks and/or securities exchanges in the City of New York or the City of
Wilmington are authorized or obligated by law or executive order to close.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del.C. ss. 3801 et seq., as the same may be amended from time to
time.
"Capital Contribution" means the amount contributed and agreed to be
contributed to the Trust by any subscriber or by the Managing Owner, as
applicable, in accordance with Article III hereof.
"CE Act" means the Commodity Exchange Act, as amended.
"Certificate of Trust" means the Certificate of Trust of the Trust in
the form attached hereto as Exhibit A, filed with the Secretary of State of
the State of Delaware pursuant to Section 3810 of the Business Trust Statute.
"CFTC" means the Commodity Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodities" means positions in commodity futures contracts,
commodity forward contracts, options on commodity futures contracts and
physical commodities, as well as cash commodities resulting from any of the
foregoing positions.
"Commodity Broker" means any person who engages in the business of
effecting transactions in Commodity Contracts for the account of others or for
his or her own account.
"Commodity Contract" means any futures contract or option thereon
providing for the delivery or receipt at a future date of a specified amount
and grade of a traded commodity at a specified price and delivery point, or
any other futures contract or option thereon approved for trading for U.S.
persons.
"Continuous Offering Period" means the period following the
conclusion of the Initial Offering Period during which additional Interests
may be sold pursuant to this Trust Agreement.
"Corporate Trust Office" means the principal office at which at any
particular time the corporate trust business of the Trustee is administered,
which office at the date hereof is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration.
"Disposition Gain" means, for each Fiscal Year of the Trust, the
Trust's aggregate recognized gain (including the portion thereof, if any,
treated as ordinary income) resulting from each disposition of Trust assets
during such Fiscal Year with respect to which gain or loss is recognized for
federal income tax purposes, including, without limitation, any gain or loss
required to be recognized by the Trust for federal income tax purposes
pursuant to Section 988 or 1256 (or any successor provisions) of the Code.
2
"Disposition Loss" means, for each Fiscal Year of the Trust, the
Trust's aggregate recognized loss (including the portion thereof, if any,
treated as ordinary loss) resulting from each disposition of Trust assets
during such Fiscal Year with respect to which gain or loss is recognized for
federal income tax purposes, including, without limitation, any gain or loss
required to be recognized by the Trust for federal income tax purposes
pursuant to Sections 988 or 1256 (or any successor provisions) of the Code.
"DOL" means the United States Department of Labor.
"Employee Benefit Plan Investors" means Employee Benefit Plans
subject to Title I of ERISA, government plans, church plans, Individual
Retirement Accounts, Keogh Plans covering only self-employed persons and new
employees, and Employee Benefit Plans covering only the sole owner of a
business and/or his spouse.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiscal Quarter" shall mean each period ending on the last day of
each March, June, September and December of each Fiscal Year.
"Fiscal Year" shall have the meaning set forth in Article X hereof.
"Initial Offering Period" means the period commencing with the
initial effective date of the Prospectus and terminating no later than the one
hundred and twentieth (120th) day following such date.
"Interestholders" means the Managing Owner and all Limited Owners, as
holders of Interests, where no distinction is required by the context in which
the term is used.
"Interests" means the beneficial interest of each Interestholder in
the profits, losses, distributions, capital and assets of the Trust. The
Managing Owner's Capital Contributions shall be represented by "General"
Interests and a Limited Owner's Capital Contributions shall be represented by
"Limited" Interests. Interests need not be represented by certificates.
"Limited Owner" means any person or entity who becomes a holder of
Limited Interests (as defined in Article III) and who is listed as such on the
books and records of the Trust, and may include the Managing Owner with
respect to the Limited Interests purchased by it.
"Losses" means, for each Fiscal Year of the Trust, losses of the
Trust 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 Disposition Gain or the
Disposition Loss of the Trust for such Fiscal Year shall not enter into such
computations.
3
"Managing Owner" means Preferred Investment Solutions Corp. (formerly
known as Kenmar Advisory Corp.), or any substitute therefor as provided
herein, or any successor thereto by merger or operation of law.
"Margin Call" means a demand for additional funds after the initial
good faith deposit required to maintain a customer's account in compliance
with the requirements of a particular commodity exchange or of a commodity
broker.
"NASAA Guidelines" means the North American Securities Administrators
Association, Inc. Guidelines for the Registration of Commodity Pool Programs
as last amended and restated.
"Net Asset Value" means the total assets in the Trust Estate
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 Trust, 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, and any other credit or debit accruing to the
Trust but unpaid or not received by the Trust.
(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 the applicable 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 current market value of all open
commodity futures contracts and options traded on a non-United States exchange
shall be based upon the liquidating value for that particular commodity
futures contract and option traded on the applicable non-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 non-United States exchange could not be liquidated on such day, due to the
operation of rules of the exchange upon which that position is traded or
otherwise, the liquidating value 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 current market value of all open
forward contracts entered into by the Trust shall be the mean between the last
bid and last asked prices quoted by the bank or financial institution which is
a party to the contract on the date with respect to which Net Asset Value is
being determined; provided, that if such quotations are not available on such
date, the mean between the last bid and asked prices on the first subsequent
day on which such quotations are available shall be the basis for determining
the market value of such forward contract for such day. The Managing Owner may
in its discretion value any of the
4
Trust Estate pursuant to such other principles as it may deem fair and
equitable so long as such principles are consistent with normal industry
standards.
(c) Interest earned on the Trust's commodity brokerage account shall
be accrued at least monthly.
(d) The amount of any distribution made pursuant to Article VI hereof
shall be a liability of the Trust from the day when the distribution is
declared until it is paid.
"Net Asset Value per Interest" means the Net Asset Value divided by
the number of Interests outstanding on the date of calculation.
"Net Worth" means the excess of total assets over total liabilities
as determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
"NFA" means the National Futures Association.
"Organization and Offering Expenses" shall have the meaning set forth
in Section 4.7 of this Trust Agreement.
"Person" means any natural person, partnership, limited liability
company, business trust, corporation, association or other legal entity.
"Profits" means, for each Fiscal Year of the Trust, as determined for
Federal income tax purposes, with 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 Disposition Gain or the Disposition Loss of the
Trust for such Fiscal Year shall not enter into such computations.
"Prospectus" means the final prospectus and disclosure document of
the Trust, 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 Valuation Date upon which Interests held
by the Interestholders may be redeemed in accordance with the provisions of
Article VII hereof.
"Registration Statement" means the registration statement on Form
S-1, as amended, filed by the Trust with the Securities and Exchange
Commission pursuant to which the Trust registered the Limited Interests, as
the same may at any time and from time to time be further amended or
supplemented.
5
"Sponsor" means any person directly or indirectly instrumental in
organizing the Trust or any person who will manage or participate in the
management of the Trust, including a Commodity Broker who pays any portion of
the Organizational Expenses of the Trust and any other person who regularly
performs or selects the persons who perform services for the Trust. Sponsor
does not include wholly independent third parties such as attorneys,
accountants, and underwriters whose only compensation is for professional
services rendered in connection with the offering of the units. The term
"Sponsor" shall be deemed to include its Affiliates.
"Subscription Agreement" means the agreement included as an exhibit
to the Prospectus pursuant to which subscribers may subscribe for the purchase
of the Limited Interests.
"Trading Manager" means John W. Henry & Co., Inc. and any other
entity or entities, acting in its capacity as a commodity trading advisor
(i.e., any person who for any consideration engages in the business of
advising others, either directly or indirectly, as to the value, purchase, or
sale of Commodity Contracts or commodity options) to the Trust, and any
substitute(s) therefor as provided herein.
"Trust" means the Futures Strategic Trust heretofore formed and
continued pursuant to this Trust Agreement.
"Trust Agreement" means this Third Amended and Restated Declaration
of Trust and Trust Agreement as the same may at any time or from time to time
be amended.
"Trustee" means Wilmington Trust Company or any substitute therefor
as provided herein, acting not in its individual capacity but solely as
trustee of the Trust.
"Trust Estate" means any cash, commodity futures, forward and option
contracts, all funds on deposit in the Trust's accounts, and any other
property held by the Trust, and all proceeds therefrom, including any rights
of the Trust pursuant to any Subscription Agreement and any other agreements
to which the Trust is a party.
"Valuation Date" means the date as of which the Net Asset Value of
the Trust is determined.
"Valuation Period" means a regular period of time between Valuation
Dates.
Section 1.2 Name.
(a) The name of the Trust is "Futures Strategic Trust" in which name
the Trustee and the Managing Owner may engage in the business of the Trust,
make and execute contracts and other instruments on behalf of the Trust and
sue and be sued on behalf of the Trust.
Section 1.3 Delaware Trustee; Business Offices.
(a) The Trustee of the Trust in the State of Delaware is Wilmington
Trust Company, which is located at the Corporate Trust Office or at such other
address in the State of Delaware as the Trustee may designate in writing to
the Interestholders. The Trustee shall
6
receive service of process on the Trust in the State of Delaware at the
foregoing address. In the event Wilmington Trust Company resigns or is removed
as the Trustee, the Trustee of the Trust in the State of Delaware shall be the
successor Trustee.
(b) The principal office of the Trust, and such additional offices as
the Managing Owner may establish, shall be located at such place or places
inside or outside the State of Delaware as the Managing Owner may designate
from time to time in writing to the Trustee and the Interestholders. The
principal office of the Trust shall be at Two American Lane, Greenwich,
Connecticut, 06801.
Section 1.4 Declaration of Trust. The Trustee hereby
acknowledges that the Trust has received the sum of $1,000 in a bank account
in the Trust's name controlled by the Managing Owner from the Managing Owner
as grantor of the Trust, and hereby declares that it shall hold such sum in
trust, upon and subject to the conditions set forth herein for the use and
benefit of the Interestholders. It is the intention of the parties hereto that
the Trust shall be a business trust under the Business Trust Statute and that
this Trust Agreement shall constitute the governing instrument of the Trust.
It is not the intention of the parties hereto to create a general partnership,
limited partnership, joint stock association, corporation, bailment or any
form of legal relationship other than a Delaware business trust except to the
extent such Trust is deemed to constitute a partnership under the Code and
applicable state and local tax laws. Nothing in this Trust Agreement shall be
construed to make the Interestholders partners or members of a joint stock
association except to the extent such Interestholders are deemed to be
partners under the Code and applicable state and local tax laws.
Notwithstanding the foregoing, it is the intention of the parties thereto to
create a partnership among the Interestholders for purposes of taxation under
the Code and applicable state and local tax laws. Effective as of the date
hereof, the Trustee shall have all of the rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Trustee has filed the certificate of trust required
by Section 3810 of the Business Trust Statute in connection with the formation
of the Trust under the Business Trust Statute.
Section 1.5 Purposes and Powers. The purposes of the Trust
shall be to trade, buy, sell, spread or otherwise acquire, hold or dispose of
commodity futures, forward and option contracts; (b) to enter into any lawful
transaction and engage in any lawful activities in furtherance of or
incidental to the foregoing purposes; and (c) as determined from time to time
by the Managing Owner, to engage in any other lawful business or activity for
which a business trust may be organized under the Business Trust Statute. The
Trust shall have all of the powers specified in Section 15.1 hereof,
including, without limitation, all of the powers which may be exercised by a
Managing Owner on behalf of the Trust under this Trust Agreement.
Section 1.6 Tax Treatment.
(a) Each of the parties hereto, by entering into this Trust
Agreement, expresses its intention that the Interests will qualify under
applicable tax law as interests in a partnership which holds the Trust Estate
for their benefit, (ii) agrees that it will file its own federal, state and
local income, franchise and other tax returns in a manner that is consistent
with the treatment of the Trust as a partnership in which each of the
Interestholders is a partner and (iii) agrees to use reasonable efforts to
notify the Managing Owner promptly upon a receipt of
7
any notice from any taxing authority having jurisdiction over such holders of
Interests with respect to the treatment of the Interests as anything other
than interests in a partnership.
(b) The Tax Matters Partner (as defined in Section 6231 of the Code
and any corresponding state and local tax law) shall initially be the Managing
Owner. The Tax Matters Partner, at the expense of the Trust, shall prepare or
cause to be prepared and filed the Trust's tax returns as a partnership for
federal, state and local tax purposes and (ii) shall be authorized to perform
all duties imposed by ss. 6221 et seq. of the Code, including, without
limitation, (A) the power to conduct all audits and other administrative
proceedings with respect to the Trust's tax items; (B) the power to extend the
statute of limitations for all Interestholders with respect to the Trust's tax
items; (C) the power to file a petition with an appropriate federal court for
review of a final Trust administrative adjustment; and (D) the power to enter
into a settlement with the IRS on behalf of, and binding upon, those Limited
Owners having less than one percent (1%) interest in the Trust, unless a
Limited Owner shall have notified the IRS and the Managing Owner that the
Managing Owner shall not act on such Limited Owner's behalf. The designation
made in this Section 1.6(b) is hereby approved by each Interestholder as an
express condition to becoming an Interestholder. Each Interestholder agrees to
take any further action as may be required by regulation or otherwise to
effectuate such designation. Subject to Section 4.6, the Trust hereby
indemnifies, to the full extent permitted by law, the Managing Owner from and
against any damages or losses (including attorneys' fees) arising out of or
incurred in connection with any action taken or omitted to be taken by it in
carrying out its responsibilities as Tax Matters Partner, provided such action
taken or omitted to be taken does not constitute fraud, negligence or
misconduct.
(c) Each Interestholder shall furnish the Managing Owner and the
Trustee with information necessary to enable the Managing Owner to comply with
United States federal income tax information reporting requirements in respect
of such Interestholder's Interests.
Section 1.7 General Liability of the Managing Owner.
(a) The Managing Owner shall be liable for the acts, omissions,
obligations and expenses of the Trust, to the extent not paid out of the
assets of the Trust, to the same extent the Managing Owner would be so liable
if the Trust were a partnership under the Delaware Revised Uniform Limited
Partnership Act and the Managing Owner were a general partner of such
partnership. The obligations of the Managing Owner under this Section 1.7
shall be evidenced by its ownership of the General Interests.
(b) Subject to Sections 8.1 and 8.3 hereof, no Interestholder, other
than the Managing Owner, to the extent set forth above, shall have any
personal liability for any liability or obligation of the Trust.
Section 1.8 Legal Title. Legal title to all the Trust Estate
shall be vested in the Trust as a separate legal entity; except where
applicable law in any jurisdiction requires any part of the Trust Estate to be
vested otherwise, the Managing Owner may cause legal title to the Trust Estate
or any portion thereof to be held by or in the name of the Managing Owner or
any other Person as nominee.
8
Article II
THE TRUSTEE
Section 2.1 Term; Resignation.
(a) Wilmington Trust Company has been appointed and hereby agrees to
continue to serve as the Trustee of the Trust. The Trust shall have only one
trustee unless otherwise determined by the Managing Owner. The Trustee shall
serve until such time as the Managing Owner removes the Trustee or the Trustee
resigns and a successor Trustee is appointed by the Managing Owner in
accordance with the terms of Section 2.5 hereof.
(b) The Trustee may resign at any time upon the giving of at least
sixty (60) days advance written notice to the Trust; provided, that such
resignation shall not become effective unless and until a successor Trustee
shall have been appointed by the Managing Owner in accordance with Section 2.5
hereof. If the Managing Owner does not act within such sixty (60) day period,
the Trustee may apply to the Court of Chancery of the State of Delaware for
the appointment of a successor Trustee.
Section 2.2 Powers. Except to the extent expressly set forth in
Section 1.3 and this Article II, the duty and authority of the Trustee to
manage the business and affairs of the Trust is hereby delegated to the
Managing Owner, which duty and authority the Managing Owner may further
delegate as provided herein, all pursuant to Section 3806(b)(7) of the
Business Trust Statute. The Trustee shall have only the rights, obligations
and liabilities specifically provided for herein and in the Business Trust
Statute and shall have no implied rights, obligations and liabilities with
respect to the business and affairs of the Trust. The Trustee shall have the
power and authority to execute, deliver, acknowledge and file all necessary
documents and to maintain all necessary records of the Trust as required by
the Business Trust Statute. The Trustee shall provide prompt notice to the
Managing Owner of its performance of any of the foregoing. The Managing Owner
shall reasonably keep the Trustee informed of any actions taken by the
Managing Owner with respect to the Trust that affect the rights, obligations
or liabilities of the Trustee hereunder or under the Business Trust Statute.
Section 2.3 Compensation and Expenses of the Trustee. The
Trustee shall be entitled to receive from the Managing Owner or an Affiliate
of the Managing Owner reasonable compensation for its services hereunder as
set forth in a separate fee agreement and shall be entitled to be reimbursed
by the Managing Owner or an Affiliate of the Managing Owner for reasonable
out-of-pocket expenses incurred by it in the performance of its duties
hereunder, including without limitation, the reasonable compensation,
out-of-pocket expenses and disbursements of counsel and such other agents as
the Trustee may employ in connection with the exercise and performance of its
rights and duties hereunder.
Section 2.4 Indemnification. The Managing Owner agrees, whether
or not any of the transactions contemplated hereby shall be consummated, to
assume liability for, and does hereby indemnify, protect, save and keep
harmless the Trustee and its successors, assigns, legal representatives,
officers, directors, agents and servants (the "Indemnified Parties") from and
against any and all liabilities, obligations, losses, damages, penalties,
taxes (excluding any taxes
9
payable by the Trustee on or measured by any compensation received by the
Trustee for its services hereunder or any indemnity payments received by the
Trustee pursuant to this Section 2.4), claims, actions, suits, costs, expenses
or disbursements (including legal fees and expenses) of any kind and nature
whatsoever (collectively, "Expenses"), which may be imposed on, incurred by or
asserted against the Indemnified Parties in any way relating to or arising out
of the formation, operation or termination of the Trust, the execution,
delivery and performance of any other agreements to which the Trust is a party
or the action or inaction of the Trustee hereunder or thereunder, except for
Expenses resulting from the gross negligence or willful misconduct of the
Indemnified Parties. The indemnities contained in this Section 2.4 shall
survive the termination of this Trust Agreement or the removal or resignation
of the Trustee. In addition, the Indemnified Parties shall be entitled to
indemnification from the Trust Estate to the extent set forth above and to
secure the same, the Trustee shall have a lien against the Trust Estate which
shall be prior to the rights of the Managing Owner and the Interestholders to
receive distributions from the Trust Estate.
Section 2.5 Successor Trustee. Upon the resignation or removal
of the Trustee, the Managing Owner shall appoint a successor Trustee by
delivering a written instrument to the outgoing Trustee. Any successor Trustee
must satisfy the requirements of Section 3807 of the Business Trust Statute.
Any resignation or removal of the Trustee and appointment of a successor
Trustee shall not become effective until a written acceptance of appointment
is delivered by the successor Trustee to the outgoing Trustee and the Managing
Owner and any fees and expenses due to the outgoing Trustee are paid.
Following compliance with the preceding sentence, the successor Trustee shall
become fully vested with all of the rights, powers, duties and obligations of
the outgoing Trustee under this Trust Agreement, with like effect as if
originally named as Trustee, and the outgoing Trustee shall be discharged of
its duties and obligations under this Trust Agreement.
Section 2.6 Liability of Trustee. Except as otherwise provided
in this Article II, in accepting the trust created hereby, Wilmington Trust
Company acts solely as Trustee hereunder and not in its individual capacity,
and all Persons having any claim against the Trustee by reason of the
transactions contemplated by this Trust Agreement and any other agreement to
which the Trust is a party shall look only to the Trust Estate for payment or
satisfaction thereof; provided, however, that in no event is the foregoing
intended to affect or limit the liability of the Managing Owner as set forth
in Section 1.7 hereof. The Trustee shall not be liable or accountable
hereunder or under any other agreement to which the Trust is a party, except
for its own gross negligence or willful misconduct. In particular, but not by
way of limitation:
(a) The Trustee shall have no liability or responsibility for the
validity or sufficiency of this Trust Agreement or for the form, character,
genuineness, sufficiency, value or validity of the Trust Estate;
(b) The Trustee shall not be liable for any actions taken or omitted
to be taken by it in accordance with the instructions of the Managing Owner;
(c) The Trustee shall not have any liability for the acts or
omissions of the Managing Owner;
10
(d) The Trustee shall not be liable for its failure to supervise the
performance of any obligations of the Managing Owner, any commodity broker,
selling agent or any Trading Manager(s);
(e) No provision of this Trust Agreement shall require the Trustee to
expend or risk funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder if the Trustee shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;
(f) Under no circumstances shall the Trustee be liable for
indebtedness evidenced by or other obligations of the Trust arising under this
Trust Agreement or any other agreements to which the Trust is a party;
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Trust Agreement, or to institute,
conduct or defend any litigation under this Trust Agreement or any other
agreements to which the Trust is a party, at the request, order or direction
of the Managing Owner or any Interestholders unless the Managing Owner or such
Interestholders have offered to the Trustee security or indemnity satisfactory
to it against the costs, expenses and liabilities that may be incurred by the
Trustee (including, without limitation, the reasonable fees and expenses of
its counsel) therein or thereby; and
(h) Notwithstanding anything contained herein to the contrary, the
Trustee shall not be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will require the
consent or approval or authorization or order of or the giving of notice to,
or the registration with or taking of any action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the
State of Delaware, (ii) result in any fee, tax or other governmental charge
under the laws of any jurisdiction or any political subdivision thereof in
existence as of the date hereof other than the State of Delaware becoming
payable by the Trustee or (iii) subject the Trustee to personal jurisdiction,
other than in the State of Delaware, for causes of action arising from
personal acts unrelated to the consummation of the transactions by the
Trustee, as the case may be, contemplated hereby.
Section 2.7 Reliance; Advice of Counsel.
(a) In the absence of bad faith, the Trustee may conclusively rely
upon certificates or opinions furnished to the Trustee and conforming to the
requirements of this Trust Agreement in determining the truth of the
statements and the correctness of the opinions contained therein, and shall
incur no liability to anyone in acting on any signature, instrument, notice,
resolutions, request, consent, order, certificate, report, opinion, bond or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties and need not investigate any fact or
matter pertaining to or in any such document; provided, however, that the
Trustee shall have examined any certificates or opinions so as to determine
compliance of the same with the requirements of this Trust Agreement. The
Trustee may accept a certified copy of a resolution of the board of directors
or other governing body of any corporate party as conclusive evidence that
such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the
determination of
11
which is not specifically prescribed herein, the Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to
such fact or matter, and such certificate shall constitute full protection to
the Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trust hereunder and in
the performance of its duties and obligations under this Trust Agreement, the
Trustee, at the expense of the Trust may act directly or through its agents,
attorneys, custodians or nominees pursuant to agreements entered into with any
of them, and the Trustee shall not be liable for the conduct or misconduct of
such agents, attorneys, custodians or nominees if such agents, attorneys,
custodians or nominees shall have been selected by the Trustee with reasonable
care and (ii) may consult with counsel, accountants and other skilled
professionals to be selected with reasonable care by it. The Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the opinion or advice of any such counsel, accountant or other
such Persons.
Section 2.8 Not Part of Trust Estate. Amounts paid to the
Trustee from the Trust Estate, if any, pursuant to this Article II shall not
be deemed to be part of the Trust Estate immediately after such payment.
Article III
INTERESTS; CAPITAL CONTRIBUTIONS
Section 3.1 General.
(a) The beneficial interests in the Trust shall consist of a limited
number of Interests as set forth in this Article III. The Interests shall be
divided into two classes: General Interests and Limited Interests.
(b) Upon the initial contribution by the Managing Owner to the Trust,
the Managing Owner has become the holder of the General Interests. The
Managing Owner and/or its Affiliates will make and maintain a permanent
investment in the Trust as more specifically set forth in Section 3.2.
(c) No certificates or other evidence of beneficial ownership of the
Interests will be issued.
(d) Every Interestholder, by virtue of having purchased or otherwise
acquired an Interest, shall be deemed to have expressly consented and agreed
to be bound by the terms of this Trust Agreement.
Section 3.2 Limited Interests.
(a) Offer of Limited Interests. During the Initial Offering Period,
the Trust shall offer pursuant to Securities and Exchange Commission Rule 415,
at an offering price of $100 per Limited Interest, a maximum of 1,000,000
Limited Interests ($100,000,000). No
12
fractional Limited Interests shall be issued during the Initial Offering
Period. Each newly admitted Limited Owner shall make a Capital Contribution to
the Trust of at least $5,000, except for Individual Retirement Account ("IRA")
subscribers, who shall be required to make a Capital Contribution of not less
than $2,000. The offering shall be made pursuant to and on the terms and
conditions set forth in the Prospectus. The Managing Owner shall make such
arrangements for the sale of the Limited Interests as it deems appropriate.
(b) Effect of the Sale of at least 100,000 Interests. In the event
that at least 100,000 Interests are sold during the Initial Offering Period
(including both Limited Interests offered pursuant to the Prospectus and
General Interests purchased by the Managing Owner up to $500,000), the
Managing Owner will admit all accepted subscribers pursuant to the Prospectus
into the Trust as Limited Owners, by causing such Limited Owners to execute
this Trust 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
Trust reflecting that such subscribers have been admitted as Limited Owners,
as soon as practicable after the termination of the Initial Offering Period.
Such accepted subscribers will be deemed Limited Owners at such time as such
admission is reflected on the books and records of the Trust.
(c) Paid-In Capital if at least 100,000 Interests Are Sold. In the
event that at least 100,000 Interests are sold during the Initial Offering
Period, the Trust shall have paid-in capital of not less than $10,101,000
(including the Managing Owner's contribution for the General Interests as
provided in Section 3.1(b) and in Section 3.2(e) hereof).
(d) Effect of the Sale of Less than 100,000 Interests. In the event
that at least 100,000 Interests are not sold during the Initial Offering
Period, all proceeds of the sale of Limited Interests, 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 ten
(10) Business Days after the conclusion of the Initial Offering Period (or as
soon thereafter as practicable if payment cannot be made in such time period),
and the Trust shall be terminated, and the Managing Owner shall cause the
certificate of cancellation required by Section 3810 of the Business Trust
Statute to be filed.
(e) Required Contribution of Managing Owner. In the event that
100,000 or more of the Limited Interests offered pursuant to the Prospectus
are sold during the Initial Offering Period, the Managing Owner and/or its
Affiliates shall be required to contribute in cash to the capital of the Trust
an amount, which, when added to the total contributions to the Trust by all
Interestholders, will be not less than one percent (1%) of such total
contributions, and in no event shall such contribution be less than $101,000
(including the Managing Owner's and/or its Affiliates' Capital Contributions).
Thereafter, the Managing Owner and/or its Affiliates shall contribute in cash
to the capital of the Trust an amount not less than 1.01% of any additional
Capital Contributions received by the Trust from the Limited Owners. The
Managing Owner and/or its Affiliates may, but are not obligated to, make
additional Capital Contributions at any time during the Initial or Continuous
Offering Periods. The Managing Owner and/or its Affiliates will receive
General Interests. The Managing Owner and/or its Affiliates shall, with
respect to any Interests owned by them, enjoy all of the rights and privileges
and be subject to all of the obligations and duties of a Limited Owner, in
addition to rights and privileges the Managing Owner has as Managing Owner,
except as otherwise provided herein.
13
Notwithstanding anything to the contrary in this Trust Agreement, the interest
of the Managing Owner and/or its Affiliates (without regard to any Limited
Interests of the Managing Owner and/or its Affiliates in the Trust) in each
material item of Trust income, gain, loss and deduction shall be equal, in the
aggregate, to at least one percent (1%) of each such item at all times during
the term of this Trust Agreement.
(f) Offer of Limited Interests After Initial Offering Period. In the
event that 100,000 or more of the Interests are sold during the Initial
Offering Period, the Trust, pursuant to Securities and Exchange Commission
Rule 415, may continue to offer Limited Interests and admit additional Limited
Owners pursuant to the Prospectus during the Continuous Offering Period.
Each newly admitted Limited Owner shall make a Capital
Contribution to the Trust in an amount equal to at least $5,000, except for
IRA subscribers, which amount for such subscribers shall not be less than
$2,000. Notwithstanding the foregoing, existing Limited Owners will be
permitted to make an additional Capital Contribution to the Trust in an amount
equal to at least $100. Each additional Capital Contribution during the
Continuous Offering Period must be in a denomination which is an even multiple
of $100. During the Continuous Offering Period, each newly admitted Limited
Owner, and each existing Limited Owner that makes an additional Capital
Contribution, shall receive Limited Interests in an amount equal to such
Capital Contribution or additional Capital Contribution, as the case may be,
divided by the Net Asset Value per Interest calculated as of the close of
business on the last day of the calendar month in which such contributions
were made.
Subscribers whose subscriptions are received and accepted by the
Trust after the termination of the Initial Offering Period shall be admitted
to the Trust and deemed a Limited Owner on the first day of the month next
succeeding the month during which such subscriber's subscription was accepted.
Existing Limited Owners who contribute additional sums are considered to have
made the contribution and received the related Limited Interests as of the
first day of next succeeding month.
(g) Subscription Agreement. Each Limited Owner who purchases any
Limited Interests offered pursuant to the Prospectus shall contribute to the
capital of the Trust 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 Managing
Owner as a counterpart of this Trust Agreement. All subscription amounts shall
be paid in such form as may be acceptable to the Managing Owner at the time of
the execution and delivery of such Subscription Agreement by United States
subscribers, and in accordance with local practice and procedure by non-United
States subscribers. To the extent that the Managing Owner determines to accept
a subscription check, it shall be subject to prompt collection. All
subscriptions are subject to acceptance by the Managing Owner.
(h) Escrow Agreement. All proceeds from the sale of Limited Interests
offered pursuant to the Prospectus shall be deposited in an interest bearing
escrow account at The Bank of New York, in New York, N.Y. until the conclusion
of the Initial Offering Period. In the event subscriptions for at least
100,000 of the Interests are received and accepted during the Initial Offering
Period, all interest earned on the proceeds of the subscriptions from
subscribers
14
for Limited Interests during the Initial Offering Period will be distributed
to the purchasers of Limited Interests on a pro rata basis (taking into
account time and amount of deposit) not later than ten (10) Business Days
after the conclusion of the Initial Offering Period, or as soon thereafter as
practicable if payment cannot be made in such time period.
(i) Optional Purchase of Limited Interests. Subject to approval by
the Managing Owner, any commodity broker, any Trading Manager, and any
principals, stockholders, directors, officers, employees and affiliates of the
Managing Owner and/or its Affiliates, any commodity broker, and any Trading
Manager, may purchase any number of Limited Interests and will be treated as
Limited Owners with respect to such Interests. In addition to the Interests
required to be purchased by the Managing Owner and/or its Affiliates under
Section 3.2(e), the Managing Owner and/or its Affiliates may also purchase any
number of Limited Interests as it or they determine in its or their
discretion.
Article IV
THE MANAGING OWNER
Section 4.1 Management of the Trust. Pursuant to Section 3806
of the Business Trust Statute, the Trust shall be managed by the Managing
Owner and the conduct of the Trust's business shall be controlled and
conducted solely by the Managing Owner in accordance with this Trust
Agreement.
Section 4.2 Authority of Managing Owner. In addition to and not
in limitation of any rights and powers conferred by law or other provisions of
this Trust Agreement, and except as limited, restricted or prohibited by the
express provisions of this Trust Agreement or the Business Trust Statute, the
Managing Owner shall have and may exercise on behalf of the Trust, all powers
and rights necessary, proper, convenient or advisable to effectuate and carry
out the purposes, business and objectives of the Trust, which shall include,
without limitation, the following:
(a) 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 Trust purposes or
necessary or appropriate for the offer and sale of the Interests and the
conduct of Trust activities, including, but not limited to, contracts with
third parties for:
(i) commodity brokerage services, as well as administrative
services necessary to the prudent operation of the Trust, provided,
however, that in no event shall the fees payable by the Trust for
such services exceed any limitations imposed by the NASAA Guidelines
as in effect on the date hereof, except to the extent that such
limitations are amended to become more restrictive, in which event
such fees will not exceed such more restrictive limitations, and
provided, further, that such services may be performed by an
Affiliate or Affiliates of the Managing Owner so long as the
Managing Owner has made a good faith determination that: (A) the
Affiliate which it proposes to engage to perform such services is
qualified to do so (considering the prior experience of the
Affiliate or the individuals employed thereby); (B) the terms and
conditions of the agreement pursuant to which such Affiliate is to
perform services for the Trust are no less
15
favorable to the Trust than could be obtained from equally-qualified
unaffiliated third parties; and (C) the maximum period covered by
the agreement pursuant to which such affiliate is to perform
services for the Trust shall not exceed one year, and such agreement
shall be terminable without penalty upon sixty (60) days' prior
written notice by the Trust; and
(ii) commodity trading advisory services relating to the
purchase and sale of all Commodities positions on behalf of the
Trust, which services may not be performed by the Managing Owner or
an Affiliate(s) of the Managing Owner, provided, however, that in no
event shall the fees payable by the Trust for such services exceed
any limitations imposed by the NASAA Guidelines as in effect on the
date hereof, except to the extent that such limitations are amended
to become more restrictive, in which event such fees will not exceed
such more restrictive limitations. All advisory services shall be
performed by persons with at least three years experience and who
are also appropriately registered as may be required under federal
and/or state law (e.g., all advice with respect to futures related
transactions shall be required to be given by persons who are
registered with the CFTC as a commodity trading advisor and are
members of the NFA as a commodity trading advisor), but shall not be
performed by any person affiliated with the Trust's Commodities
broker unless the Managing Owner is satisfied that doing so would
not create a conflict of interest.
(b) To establish, maintain, deposit into, sign checks and/or
otherwise draw upon accounts on behalf of the Trust with appropriate banking
and savings institutions, and execute and/or accept any instrument or
agreement incidental to the Trust's business and in furtherance of its
purposes, any such instrument or agreement so executed or accepted by the
Managing Owner in the Managing Owner's name shall be deemed executed and
accepted on behalf of the Trust by the Managing Owner;
(c) To deposit, withdraw, pay, retain and distribute the Trust Estate
or any portion thereof in any manner consistent with the provisions of this
Trust Agreement;
(d) To supervise the preparation and filing of the Registration
Statement and supplements and amendments thereto, and the Prospectus;
(e) To pay or authorize the payment of distributions to the
Interestholders and expenses of the Trust;
(f) To invest or direct the investment of funds of the Trust not then
delegated to a Trading Manager(s) and prohibit any transactions contemplated
hereunder which may constitute prohibited transactions under ERISA or the
Code;
(g) To make any elections on behalf of the Trust under the Code, or
any other applicable federal or state tax law as the Managing Owner shall
determine to be in the best interests of the Trust;
(h) To redeem mandatorily any Limited Interests upon at least ten
(10) days' prior written notice, if the Managing Owner determines that the
continued participation of such Limited Owner in the Trust might cause the
Trust or any Interestholder to be deemed to be
16
managing Plan Assets under ERISA, (ii) there is an unauthorized assignment
pursuant to the provisions of Article V, or (iii) in the event that any
transaction would or might violate any law or constitute a prohibited
transaction under ERISA or the Code and a statutory, class or individual
exemption from the prohibited transaction provisions of ERISA for such
transaction or transactions does not apply or cannot be obtained from the DOL
(or the Managing Owner determines not to seek such an exemption). In the case
of mandatory redemptions, the Redemption Date shall be the close of business
on the date written notice of intent to redeem is sent by the Managing Owner
to a Limited Owner. A notice may be revoked prior to the payment date by
written notice from the Managing Owner to a Limited Owner;
(i) In the sole discretion of the Managing Owner, to admit an
Affiliate or Affiliates of the Managing Owner as additional Managing Owners.
Notwithstanding the foregoing, the Managing Owner may not admit Affiliate(s)
of the Managing Owner as an additional Managing Owner if it has received
notice of its removal as a Managing Owner, pursuant to Section 8.2(d) hereof,
or if the concurrence of at least a majority in interest (over 50%) of the
outstanding Interest (not including Interests owned by the Managing Owner) is
not obtained;
(j) Override any trading instructions: that the Managing Owner, in
its sole discretion, determines in good faith to be in violation of any
trading policy or limitation of the Trust, including as set forth in Section
4.2(k) below; (ii) as and to the extent necessary, upon the failure of any
Trading Manager to comply with a request to make the necessary amount of funds
available to the Trust within five (5) days of such request, to fund
distributions, redemptions (including special redemptions), or
reapportionments among Trading Managers or to pay the expenses of the Trust;
and provided further, that the Managing Owner may make Commodities trading
decisions at any time at which any Trading Manager shall become incapacitated
or some other emergency shall arise as a result of which such Trading Manager
shall be unable or unwilling to act and a successor Trading Manager has not
yet been retained;
(k) Monitor the trading activities of the Trading Manager so that:
(i) The Trust does not establish new Commodities positions for
any one contract month or option if such additional Commodities
positions would result in a net long or short position for that
Commodities position requiring as margin or premium more than
fifteen percent (15%) of the Trust Estate.
(ii) The Trust does not acquire additional Commodities
positions in any commodities interest contract or option if such
additional Commodities positions would result in the aggregate net
long or short Commodities positions requiring as margin or premium
for all outstanding Commodities positions more than sixty-six and
two-thirds percent (66 2/3%) of the Trust Estate. Under certain
market conditions, such as an abrupt increase in margins required by
a commodity exchange or its clearinghouse or an inability to
liquidate open Commodities positions because of daily price
fluctuation limits or both, the Trust may be required to commit as
margin in excess of the foregoing limit. In such event the Managing
Owner will cause each Trading Manager to reduce its open positions
to comply with the foregoing limit before initiating new Commodities
positions.
17
Section 4.3 Obligations of the Managing Owner. In addition to the
obligations expressly provided by the Business Trust Statute or this Trust
Agreement, the Managing Owner shall:
(a) Devote such of its time to the business and affairs of the Trust
as it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Trust for the benefit of
the Trust and the Limited Owners;
(b) Execute, file, record and/or publish all certificates, statements
and other documents and do any and all other things as may be appropriate for
the formation, qualification and operation of the Trust and for the conduct of
its business in all appropriate jurisdictions;
(c) Retain independent public accountants to audit the accounts of
the Trust;
(d) Employ attorneys to represent the Trust;
(e) Use its best efforts to maintain the status of the Trust as a
"business trust" for state law purposes, and as a "partnership" for federal
income tax purposes;
(f) Monitor the trading policies and limitations of the Trust, as set
forth in the Prospectus, and the activities of the Trust's Trading Manager(s)
in carrying out those policies in compliance with the Prospectus;
(g) Monitor the brokerage fees charged to the Trust, and the services
rendered by futures commission merchants to the Trust, to determine whether
the fees paid by, and the services rendered to, the Trust for futures
brokerage are at competitive rates and are the best price and services
available under the circumstances, and if necessary, renegotiate the brokerage
fee structure to obtain such rates and services for the Trust. In making this
determination the Managing Owner shall not rely solely on the brokerage rates
paid by other major commodity pools. No material change related to brokerage
fees shall be made except upon twenty (20) Business Days' prior notice to the
Limited Owners, which notice shall include a description of the Limited
Owners' voting rights as set forth in Section 8.2 hereof and redemption rights
as set forth in Section 7.1 hereof, and no increase in such fees shall take
effect except at the beginning of a Fiscal Quarter following the consent of at
least a majority in interest of the Limited Owners (excluding the Managing
Owner);
(h) Have fiduciary responsibility for the safekeeping and use of the
Trust Estate, whether or not in the Managing Owner's immediate possession or
control, and the Managing Owner will not employ or permit others to employ
such funds or assets of the Trust (including any interest earned thereon) in
any manner except as and to the extent permitted by the NASAA Guidelines for
the benefit of the Trust, including, among other things, the utilization of
any portion of the Trust Estate as compensating balances for the exclusive
benefit of the Managing Owner. The Managing Owner shall at all times act with
integrity and good faith and exercise due diligence in all activities relating
to the conduct of the business of the Trust and in resolving conflicts of
interest. The Trust shall not permit any Limited Owner to contract away the
fiduciary duty owed to the Limited Owners by the Managing Owner under this
Agreement or the Delaware Business Trust Act. To the extent that, at law or in
equity, the Managing Owner or any officer, director, employee or agent thereof
or any Affiliate of the Managing
18
Owner (collectively, the "Covered Persons"), has duties (including fiduciary
duties) and liabilities relating thereto to the Trust, any other
Interestholder or Covered Person or the Trustee, such Covered Person acting
under the Trust Agreement shall not be liable to the Trust, any other
Interestholder or Covered Person or the Trustee for such Covered Person's good
faith reliance on the provisions of the Trust Agreement; and the duties and
liabilities of such Covered Person may be expanded or restricted by the
provisions of this Trust Agreement;
(i) Agree that, at all times from and after the sale of at least
100,000 Interests, for so long as it remains a Managing Owner of the Trust, it
shall have a minimum "net worth" (as defined below) of, and not take any
affirmative action to reduce its "net worth" below, $1 million, or such higher
amount as may be required under the NASAA Guidelines as they may be amended
from time to time. The NASAA Guidelines define "net worth" as the excess of
total assets over total liabilities as determined by GAAP;
(j) Admit substituted Limited Owners in accordance with this Trust
Agreement;
(k) Refuse to recognize any attempted transfer or assignment of an
Interest that is not made in accordance with the provisions of Article V; and
(l) Maintain a current list in alphabetical order, of the names and
last known addresses and, if available, business telephone numbers of, and
number of Interests owned by, each Interestholder (as provided in Section 3.2
hereof) and the other Trust documents described in Section 9.6 at the Trust's
principal place of business, which documents shall be made available thereat
at reasonable times during ordinary business hours for inspection by any
Limited Owner or his representative for any purpose reasonably related to the
Limited Owner's interest as a beneficial owner of the Trust. Such list shall
be printed on white paper in clearly legible print and shall be updated
quarterly. Upon request, for any purpose reasonably related to the Limited
Owner's interest as a beneficial owner of the Trust, including without
limitation, matters relating to an Interestholder's voting rights hereunder or
the exercise of a Limited Owner's rights under federal proxy law, either in
person or by mail, the Managing Owner will furnish a copy of such list to a
Limited Owner or his representative within ten (10) days of a request
therefor, upon payment of the cost of reproduction and mailing; provided,
however, that the Limited Owner requesting such list shall give written
assurance that the list will not, in any event, be used for commercial
purposes. Subject to applicable law, a Limited Owner shall give the Managing
Owner at least ten (10) Business Days' prior written notice for any inspection
and copying permitted pursuant to this Section 4.3(l) by the Limited Owner or
his authorized attorney or agent.
Section 4.4 General Prohibitions. The Trust shall not:
(a) Borrow money from or loan money to any Interestholder or other
Person, except that the foregoing is not intended to prohibit the deposit on
margin with respect to the initiation and maintenance of the Trust's
Commodities positions or (ii) obtaining lines of credit for the trading of
forward contracts; provided, however, that the Trust is prohibited from
incurring any indebtedness on a non-recourse basis;
19
(b) Create, incur, assume or suffer to exist any lien, mortgage,
pledge conditional sales or other title retention agreement, charge, security
interest or encumbrance, except the right and/or obligation of a commodity
broker to close out sufficient Commodities positions of the Trust so as to
restore the Trust's account to proper margin status in the event that the
Trust fails to meet a Margin Call, (ii) liens for taxes not delinquent or
being contested in good faith and by appropriate proceedings and for which
appropriate reserves have been established, (iii) deposits or pledges to
secure obligations under workmen's compensation, social security or similar
laws or under unemployment insurance, (iv) deposits or pledges to secure
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of business, or (v) mechanic's, warehousemen's,
carrier's, workmen's, materialmen's or other like liens arising in the
ordinary course of business with respect to obligations which are not due or
which are being contested in good faith, and for which appropriate reserves
have been established if required by generally accepted accounting principles,
and liens arising under ERISA;
(c) Commingle its assets with those of any other Person, except to
the extent permitted under the CE Act, and the regulations promulgated
thereunder;
(d) Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any Persons engaged by a potential
Limited Owner for investment advice as an inducement to such advisor to advise
the potential Limited Owner to purchase Limited Interests in the Trust;
(e) Engage in Pyramiding of its Commodities positions; provided,
however, that a Trading Manager(s) may take into account the Trust's open
trade equity on existing positions in determining generally whether to acquire
additional Commodities positions on behalf of the Trust;
(f) Permit rebates to be received by the Managing Owner or any
Affiliate of the Managing Owner, or permit the Managing Owner or any Affiliate
of the Managing Owner to engage in any reciprocal business arrangements which
would circumvent the foregoing prohibition;
(g) Permit the Trading Manager(s) to share in any portion of
brokerage fees related to commodity brokerage services paid by the Trust with
respect to its commodity trading activities;
(h) Enter into any contract with the Managing Owner or an Affiliate
of the Managing Owner (except for selling agreements for the sale of
Interests) which has a term of more than one year and which does not provide
that it may be canceled by the Trust without penalty on sixty (60) days prior
written notice or (ii) for the provision of goods and services, except at
rates and terms at least as favorable as those which may be obtained from
third parties in arms-length negotiations;
(i) permit churning of its Commodity trading account(s) for the
purpose of generating excess brokerage commissions; and
(j) Enter into any exclusive brokerage contract.
20
Section 4.5 Liability of Covered Persons. A Covered Person shall
have no liability to the Trust or to any Interestholder or other Covered
Person for any loss suffered by the Trust which arises out of any action or
inaction of such Covered Person if such Covered Person, in good faith,
determined that such course of conduct was in the best interest of the Trust
and such course of conduct did not constitute negligence or misconduct of such
Covered Person. Subject to the foregoing, neither the Managing Owner nor any
other Covered Person shall be personally liable for the return or repayment of
all or any portion of the capital or profits of any Limited Owner or assignee
thereof, it being expressly agreed that any such return of capital or profits
made pursuant to this Trust Agreement shall be made solely from the assets of
the Trust without any rights of contribution from the Managing Owner or any
other Covered Person.
Section 4.6 Indemnification of the Managing Owner.
(a) The Managing Owner shall be indemnified by the Trust against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by it in connection with the Trust, provided that the
Managing Owner was acting on behalf of or performing services for the Trust
and has determined, in good faith, that such course of conduct was in the best
interests of the Trust and such liability or loss was not the result of
negligence, misconduct, or a breach of this Trust Agreement on the part of the
Managing Owner and (ii) any such indemnification will only be recoverable from
the Trust Estate. All rights to indemnification permitted herein and payment
of associated expenses shall not be affected by the dissolution or other
cessation to exist of the Managing Owner, or the withdrawal, adjudication of
bankruptcy or insolvency of the Managing Owner. Any indemnification under this
Section 4.6(a), unless ordered by a court, shall be made by the Trust only as
authorized in the specific case and only upon a determination by independent
legal counsel in a written opinion that indemnification of the Managing Owner
is proper in the circumstances because it has met the applicable standard of
conduct set forth hereunder.
(b) Notwithstanding the provisions of Section 4.6(a) above, the
Managing Owner and any Person acting as broker-dealer for the Trust shall not
be indemnified for any losses, liabilities or expenses arising from or out of
an alleged violation of federal or state securities laws unless there has been
a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee and the court
approves the indemnification of such expenses (including, without limitation,
litigation costs), (ii) such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction as to the particular indemnitee
and the court approves the indemnification of such expenses (including,
without limitation, litigation costs) or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made.
(c) In any claim for indemnification for federal or state securities
law violations, the party seeking indemnification shall place before the court
the position of the Securities and Exchange Commission, the position of the
Massachusetts Securities Division, the Pennsylvania Securities Commission, the
Tennessee Securities Division and the position of any other applicable state
securities division which requires disclosure with respect to the issue of
indemnification for securities law violations.
21
(d) The Trust shall not incur the cost of that portion of any
insurance which insures any party against any liability the indemnification of
which is herein prohibited.
(e) Expenses incurred in defending a threatened or pending civil,
administrative or criminal action suit or proceeding against the Managing
Owner shall be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, if the legal action relates to the performance of
duties or services by the Managing Owner on behalf of the Trust; (ii) the
legal action is initiated by a third party who is not a Limited Owner or the
legal action is initiated by a Limited Owner and a court of competent
jurisdiction specifically approves such advancement; and (iii) the Managing
Owner undertakes to repay the advanced funds with interest to the Trust in
cases in which it is not entitled to indemnification under this Section 4.6.
(f) The term "Managing Owner" as used only in this Section 4.6 shall
include, in addition to the Managing Owner, any other Covered Person
performing services on behalf of the Trust and acting within the scope of the
Managing Owner's authority as set forth in this Trust Agreement.
(g) In the event the Trust is made a party to any claim, dispute,
demand or litigation or otherwise incurs any loss, liability, damage, cost or
expense as a result of or in connection with any Limited Owner's (or
assignee's) obligations or liabilities unrelated to the Trust business, such
Limited Owner (or assignees cumulatively) shall indemnify, defend, hold
harmless, and reimburse the Trust for all such loss, liability, damage, cost
and expense incurred, including attorneys' and accountants' fees.
Section 4.7 Expenses.
(a) The Managing Owner or an Affiliate of the Managing Owner shall be
responsible for the payment of all Organization and Offering Expenses incurred
in the creation of the Trust and sale of Interests. Organization and Offering
Expenses shall mean those expenses incurred in connection with the formation,
qualification and registration of the Trust and the Interests and in offering,
distributing and processing the Interests under applicable federal and state
law, and any other expenses actually incurred and, directly or indirectly,
related to the organization of the Trust or the initial and continuous
offering of the Interests, including, but not limited to, expenses such as:
initial and ongoing registration fees, filing fees, escrow fees and taxes,
(ii) costs of preparing, printing (including typesetting), amending,
supplementing, mailing and distributing the Registration Statement, the
Exhibits thereto and the Prospectus during the Initial and Continuous Offering
Periods, (iii) the costs of qualifying, printing, (including typesetting),
amending, supplementing, mailing and distributing sales materials used in
connection with the offering and issuance of the Interests during the Initial
and Continuous Offering Periods, (iv) travel, telegraph, telephone and other
expenses in connection with the offering and issuance of the Interests during
the Initial and Continuous Offering Periods, (v) accounting, auditing and
legal fees (including disbursements related thereto) incurred in connection
therewith, and (vi) any extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any permitted
indemnification associated therewith) related thereto.
22
(b) All ongoing charges, costs and expenses of the Trust's operation,
including, but not limited to, the routine expenses associated with
preparation of monthly, annual and other reports required by applicable
Federal and state regulatory authorities, (ii) Trust meetings and preparing,
printing and mailing of proxy statements and reports to Interestholders, (iii)
the payment of any distributions related to redemption of Interests, (iv)
services of accountants employed by Affiliates of the Managing Owner, (v)
postage, insurance and filing fees, (vi) client relations and services, (vii)
computer equipment and system development, (viii) the fixed fees to be paid to
the Managing Owner and/or its Affiliates consistent with applicable regulatory
guidelines, (ix) required payments to the Trust's Trading Manager and other
unaffiliated third party service providers, such as the Trustee, independent
legal counsel and independent certified public accounts, and (x) extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto), shall be billed to
and paid by the Managing Owner, or an affiliate of the Managing Owner, on
behalf of the Trust.
(c) The Managing Owner or any Affiliate of the Managing Owner may
only be reimbursed for the actual cost to the Managing Owner or such Affiliate
of any expenses which it advances on behalf of the Trust for which payment the
Trust is responsible. In addition, payment to the Managing Owner or such
Affiliate for indirect expenses incurred in performing services for the Trust,
such as salaries and fringe benefits of officers and directors, rent or
depreciation, utilities and other administrative items generally falling
within the category of the Managing Owner's "overhead," is prohibited.
Section 4.8 Compensation to the Managing Owner. Except as provided
in Sections 4.7(b)(viii) and 7.1(c) (with respect to the payment of redemption
fees), the Managing Owner shall not, in its capacity as Managing Owner,
receive any salary, fees, profits or distributions. The Managing Owner shall,
in its capacity as an Interestholder, be entitled to receive allocations and
distributions pursuant to the provisions of this Trust Agreement.
Section 4.9 Other Business of Interestholders. Except as otherwise
specifically provided herein, any of the Interestholders and any shareholder,
officer, director, employee or other person holding a legal or beneficial
interest in an entity which is an Interestholder, may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, and the pursuit of such ventures, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. The Managing Owner and Affiliates of the Managing Owner shall not
engage in a venture competitive with the Trust except where such venture will
not have an adverse economic effect on the business of the Trust.
Section 4.10 Voluntary Withdrawal of the Managing Owner. The
Managing Owner may withdraw voluntarily as the Managing Owner of the Trust
only upon one hundred and twenty (120) days' prior written notice to all
Limited Owners and the Trustee and the prior approval of Limited Owners
holding at least a majority in interest (over 50%) of the outstanding
Interests (excluding Interests of the Managing Owner). If the withdrawing
Managing Owner is the last remaining Managing Owner, Limited Owners holding at
least a majority in interest (over 50%) of the outstanding Interests (not
including Interests held by the Managing Owner) may vote to elect and appoint,
effective as of a date on or prior to the withdrawal, a successor
23
Managing Owner who shall carry on the business of the Trust. If the Managing
Owner withdraws as Managing Owner and the Limited Owners or remaining Managing
Owner elect to continue the Trust, the withdrawing Managing Owner shall pay
all expenses incurred as a result of its withdrawal. In the event of its
removal or withdrawal, the Managing Owner shall be entitled to a redemption of
its Interest at the Net Asset Value thereof on the next Redemption Date
following the date of removal or withdrawal.
Section 4.11 Authorization of Registration Statement. Each Limited
Owner (or any permitted assignee thereof) hereby agrees that the Managing
Owner is authorized to execute, deliver and perform the agreements, acts,
transactions and matters contemplated hereby or described in or contemplated
by the Registration Statement on behalf of the Trust without any further act,
approval or vote of the Limited Owners of the Trust, notwithstanding any other
provision of this Trust Agreement, the Business Trust Statute or any
applicable law, rule or regulation.
Section 4.12 Litigation. The Managing Owner is hereby authorized to
prosecute, defend, settle or compromise actions or claims at law or in equity
at the Trust's expense as may be necessary or proper to enforce or protect the
Trust's interests. The Managing Owner shall satisfy any judgment, decree or
decision of any court, board or authority having jurisdiction or any
settlement of any suit or claim prior to judgment or final decision thereon,
first, out of any insurance proceeds available therefor, next, out of the
Trust's assets, and thereafter out of the assets of the Managing Owner.
Article V.
TRANSFERS OF INTERESTS
Section 5.1 General Prohibition. A Limited Owner may not sell,
assign, transfer or otherwise dispose of, or pledge, hypothecate or in any
manner encumber any or all of his Interests or any part of his right, title
and interest in the capital or profits of the Trust except as permitted in
this Article V and any act in violation of this Article V shall not be binding
upon or recognized by the Trust (regardless of whether the Managing Owner
shall have knowledge thereof), unless approved in writing by the Managing
Owner.
Section 5.2 Transfer of Managing Owner's General Interests.
(a) Upon an Event of Withdrawal (as defined in Section 13.1), the
Managing Owner's General Interests shall be purchased by the Trust for a
purchase price in cash equal to the Net Asset Value thereof. The Managing
Owner will not cease to be a Managing Owner of the Trust merely upon the
occurrence of its making an assignment for the benefit of creditors, filing a
voluntary petition in bankruptcy, filing a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statue, law or
regulation, filing an answer or other pleading admitting or failing to contest
material allegations of a petition filed against it in any proceeding of this
nature or seeking, consenting to or acquiescing in the appointment of a
trustee, receiver of liquidator for itself or of all or any substantial part
of its properties.
24
(b) To the full extent permitted by law, and on sixty (60) days'
prior written notice to the Limited Owners, of their right to vote thereon, if
the transaction is other than with an Affiliated entity, nothing in this Trust
Agreement shall be deemed to prevent the merger of the Managing Owner with
another corporation or other entity, the reorganization of the Managing Owner
into or with any other corporation or other entity, the transfer of all the
capital stock of the Managing Owner or the assumption of the Interests,
rights, duties and liabilities of the Managing Owner by, in the case of a
merger, reorganization or consolidation, the surviving corporation or other
entity by operation of law or the transfer of the Managing Owner's Interests
to an Affiliate of the Managing Owner. Without limiting the foregoing, none of
the transactions referenced in the preceding sentence shall be deemed to be a
voluntary withdrawal for purposes of Section 4.10 or an Event of Withdrawal or
assignment of Interests for purposes of Section 5.2(a) or 5.2(c).
(c) Upon assignment of all of its Interests, the Managing Owner shall
not cease to be a Managing Owner of the Trust, or to have the power to
exercise any rights or powers as a Managing Owner, or to have liability for
the obligations of the Trust under Section 1.7 hereof, until an additional
Managing Owner, who shall carry on the business of the Trust, has been
admitted to the Trust.
Section 5.3 Transfer of Limited Interests.
(a) Permitted assignees of the Limited Owners shall be admitted as
substitute Limited Owners, pursuant to this Article V, only upon the consent
of the Managing Owner, which may be withheld in the Managing Owner's sole and
absolute discretion. The parties hereto hereby agree that such restrictions
are necessary and desirable in order to maintain the Trust's tax
classification as a partnership, to avoid having the Trust classified as a
publicly traded partnership or to avoid adverse legal consequences to the
Trust.
(i) A substituted Limited Owner is a permitted assignee that
has been admitted to the Trust as a Limited Owner with all the rights and
powers of a Limited Owner hereunder. If all of the conditions provided in
Section 5.3(b) below are satisfied, the Managing Owner shall admit
permitted assignees into the Trust as Limited Owners by making an entry
on the books and records of the Trust reflecting that such permitted
assignees have been admitted as Limited Owners, and such permitted
assignees will be deemed Limited Owners at such time as such admission is
reflected on the books and records of the Trust.
(ii) A permitted assignee is a Person to whom a Limited Owner
has assigned his Limited Interests with the consent of the Managing
Owner, as provided below in Section 5.3(d), but who has not become a
substituted Limited Owner. A permitted assignee shall have no right
to vote, to obtain any information on or account of the Trust's
transactions or to inspect the Trust's books, but shall only be
entitled to receive the share of the profits, or the return of the
Capital Contribution, to which his assignor would otherwise be
entitled as set forth in Section 5.3(d) below to the extent of the
Limited Interests assigned. Each Limited Owner agrees that any
permitted assignee may become a substituted Limited Owner without
the further act or consent of any
25
Limited Owner, regardless of whether his permitted assignee becomes
a substituted Limited Owner.
(iii) A Limited Owner shall bear all costs (including
attorneys' and accountants' fees) related to any transfer,
assignment, pledge or encumbrance of his Limited Interests.
(b) No permitted assignee of the whole or any portion of a Limited
Owner's Limited Interests shall have the right to become a substituted Limited
Owner in place of his assignor unless all of the following conditions are
satisfied:
(i) The written consent of the Managing Owner to such
substitution shall be obtained, the granting or denial of which
shall be within the sole and absolute discretion of the Managing
Owner;
(ii) A duly executed and acknowledged written instrument of
assignment has been filed with the Trust setting forth the intention
of the assignor that the permitted assignee become a substituted
Limited Owner in his place;
(iii) The assignor and permitted assignee execute and
acknowledge and/or deliver such other instruments as the Managing
Owner may deem necessary or desirable to effect such admission,
including his execution, acknowledgement and delivery to the
Managing Owner, as a counterpart to this Trust Agreement, of a Power
of Attorney in the form set forth in the Subscription Agreement; and
(iv) Upon the request of the Managing Owner, an opinion of the
Trust's independent legal counsel is obtained to the effect that (i)
the assignment will not jeopardize the Trust's tax classification as
a partnership or cause the Trust to be deemed a publicly traded
partnership, and (ii) the assignment does not violate this Trust
Agreement or the Business Trust Statute.
(c) Any Person admitted to the Trust as an Interestholder shall be
subject to all of the provisions of this Trust Agreement as if an original
signatory hereto.
(d) (i) Subject to the provisions of Section 5.3(e) below,
compliance with the suitability standards imposed by the Trust for
the purchase of new Interests, applicable federal securities and
state "Blue Sky" laws and the rules of any other applicable
governmental authority, a Limited Owner shall have the right to
assign all or any of his Limited Interests to any assignee by a
written assignment (on a form acceptable to the Managing Owner) the
terms of which are not in contravention of any of the provisions of
this Trust Agreement, which assignment has been executed by the
assignor and received by the Trust and recorded on the books
thereof. An assignee of a Limited Interest (or any interest therein)
will not be recognized as a permitted assignee without the consent
of the Managing Owner, which consent the Managing Owner shall
withhold only under the following circumstances: (A) if necessary,
in the judgment of the Managing Owner (and upon receipt of an
opinion of counsel to this effect), to preserve the classification
of the Trust as a partnership for federal income tax purposes or to
preserve the characterization or treatment of Trust income or loss;
or (B) if, as a result of such assignment, the Trust
26
would be unable to satisfy at least one of the safe harbors for avoiding
treatment as a publicly traded partnership provided in Treas. Reg. ss.
1.7704-1(e) (or under other safe harbors established by the IRS that
protect against treatment as a publicly traded partnership); or (C) if
such assignment is effectuated through an established securities market
or a secondary market (or the substantial equivalent thereof). The
Managing Owner shall withhold its consent to assignments made under the
foregoing circumstances, and shall exercise such right by taking any
actions as it seems necessary or appropriate in its reasonable discretion
so that such transfers or assignments of rights are not in fact
recognized, and the assignor or transferor continues to be recognized by
the Trust as an Interestholder for all purposes hereunder, including the
payment of any cash distribution. The Managing Owner shall incur no
liability to any investor or prospective investor for any action or
inaction by it in connection with the foregoing, provided it acted in
good faith.
(ii) Except as specifically provided in this Trust Agreement,
a permitted assignee of an Interest shall be entitled to receive
distributions from the Trust attributable to the Interest acquired by
reason of such assignment from and after the effective date of the
assignment of such Interest to him. The "effective date" of an assignment
of a Limited Interest as used in this clause shall be the first day of
the next succeeding calendar month, provided the Managing Owner shall
have been in receipt of the written instrument of assignment for at least
thirty (30) days prior thereto. If the assignee is (A) an ancestor or
descendant of the Limited Owner, (B) the personal representative or heir
of a deceased Limited Owner, (C) the trustee of a trust whose beneficiary
is the Limited Owner or another person to whom a transfer could otherwise
be made or (D) the shareholders, partners, or beneficiaries of a
corporation, partnership or trust upon its termination or liquidation,
then the "effective date" of an assignment of an Interest in the Trust
shall be the first day of the calendar month immediately following the
month in which the written instrument of assignment is received by the
Managing Owner.
(iii) Anything herein to the contrary notwithstanding, the
Trust and the Managing Owner shall be entitled to treat the permitted
assignor of such Interest as the absolute owner thereof in all respects,
and shall incur no liability for distributions made in good faith to him,
until such time as the written assignment has been received by, and
recorded on the books of, the Trust.
(e) (i) No assignment or transfer of an Interest may be made which
would result in the Limited Owners and permitted assignees of the Limited
Owners owning, directly or indirectly, individually or in the aggregate,
five percent (5%) or more of the stock of the Managing Owner or any
related person as defined in Sections 267(b) and 707(b)(1) of the Code.
If any such assignment or transfer would otherwise be made by bequest,
inheritance of operation of law, the Interest transferred shall be deemed
sold by the transferor to the Trust immediately prior to such transfer in
the same manner as provided in Section 5.3(e)(iii).
(ii) No assignment or transfer of an interest in the Trust may
be made which would contravene the NASAA Guidelines, as adopted in any
state in which the proposed transferor and transferee reside including,
without limitation, the restriction set
27
forth in Paragraph F(2) of Article V thereof, which precludes any
assignment (except for assignments by gift, inheritance, intrafamily
assignment, family dissolutions and transfers to affiliates), which would
result in either the assignee or the assignor holding Interests valued at
less than $5,000 (or $2,000 in the case if IRAs), provided, however, that
this limitation shall not apply in respect of a Limited Owner wishing to
assign its or his entire interest in the Trust.
(iii) Anything else to the contrary contained herein
notwithstanding: (A) In any particular twelve (12) consecutive month
period no assignment or transfer of an Interest may be made which would
result in increasing the aggregate total of Interests previously assigned
and/or transferred in said period to forty-nine percent (49%) or more of
the outstanding Interests. This limitation is hereinafter referred to as
the "forty-nine percent (49%) limitation"; (B) Clause (ii)(A) hereof
shall not apply to a transfer by gift, bequest or inheritance, or a
transfer to the Trust, and, for purposes of the forty-nine percent (49%)
limitation, any such transfer shall not be treated as such; (C) If, after
the forty-nine percent (49%) limitation is reached in any consecutive
twelve (12) month period, a transfer of an Interest would otherwise take
place by operation of law (but not including any transfer referred to in
clause (iii)(B) hereof) and would cause a violation of the forty-nine
percent (49%) limitation, then said Interest(s) shall be deemed to have
been sold by the transferor to the Trust in liquidation of said
Interest(s) immediately prior to such transfer for a liquidation price
equal to the Net Asset Value of said Interest(s) on such date of
transfer. The liquidation price shall be paid within ninety (90) days
after the date of the transfer.
(f) The Managing Owner, in its sole discretion, may cause the Trust
to make, refrain from making, or once having made, to revoke, the election
referred to in Section 754 of the Code, and any similar election provided by
state or local law, or any similar provision enacted in lieu thereof.
(g) The Managing Owner, in its sole discretion, may cause the Trust
to make, refrain from making, or once having made, to revoke the election by a
qualified fund under Section 988(c)(1)(E)(V), and any similar election
provided by state or local law, or any similar provision enacted in lieu
thereof.
(h) Each Limited Owner hereby agrees to indemnify and hold harmless
the Trust and each Interestholder against any and all losses, damages,
liabilities or expense (including, without limitation, tax liabilities or loss
of tax benefits) arising, directly or indirectly, as a result of any transfer
or purported transfer by such Limited Owner in violation of any provision
contained in this Section 5.3.
Article VI.
DISTRIBUTION AND ALLOCATIONS
Section 6.1 Capital Accounts. A capital account shall be
established for each Interestholder on the books of the Trust (such account
sometimes hereinafter referred to as a
28
"book capital account"). The initial balance of each Interestholder's book
capital account shall be the amount of his initial Capital Contribution to the
Trust.
Section 6.2 Monthly Allocations. As of the close of business (as
determined by the Managing Owner) on the last Business Day of each calendar
month during each Fiscal Year of the Trust, the following determinations and
allocations shall be made:
(a) First, any increase or decrease in the Trust's Net Asset Value as
of such date as compared to the next previous determination of Net Asset Value
shall be credited or charged to the book capital accounts of the
Interestholders in the ratio that the balance of each Interestholder's book
capital account bears to the balance of all Interestholders' book capital
accounts; and
(b) Next, the amount of any distribution to be made to an
Interestholder and any amount to be paid to an Interestholder upon redemption
of his Interests shall be charged to that Interestholder's book capital
account as of the applicable record date and Redemption Date, respectively.
Section 6.3 Allocation of Profit and Loss for United States Federal
Income Tax Purposes. As of the end of each Fiscal Year of the Trust, the
Trust's recognized profit and loss shall be allocated among the
Interestholders pursuant to the following subparagraphs for federal income tax
purposes. Except as otherwise provided herein, such allocations of profit and
loss shall be pro rata from Disposition Gain (or Disposition Loss) and Profits
(or Losses).
(a) First, the Profits or Losses of the Trust shall be allocated pro
rata among the Interestholders based on their respective book capital accounts
as of the last of each calendar month in which such Profits or Losses accrued.
(b) Next, Disposition Gain or Disposition Loss from the Trust's
trading activities for each Fiscal Year of the Trust shall be allocated among
the Interestholders as follows:
(i) There shall be established a tax capital account with
respect to each outstanding Interest. The initial balance of each tax
capital account shall be the amount paid by the Interestholder to the
Trust for the Interest. Tax capital accounts shall be adjusted as of the
end of each Fiscal Year as follows: (A) Each tax capital account shall be
increased by the amount of income (Profits or Disposition Gain) which
shall have been allocated to the Interestholder who shall hold the
Interest pursuant to Section 6.3(a) above and Sections 6.3(b)(ii) and
6.3(b)(iii) below; (B) Each tax capital account shall be decreased by the
amount of expense or loss (Losses or Disposition Losses) which shall have
been allocated to the Interestholder who shall hold the Interest pursuant
to Section 6.3(a) above and Sections 6.3(b)(iv) and 6.3(b)(v) below and
by the amount of any distribution which shall have been received by the
Interestholder with respect to the Interest (other than on redemption of
Interests); and (C) If an Interest is redeemed, the tax capital account
with respect to such Interest shall be eliminated on the Redemption Date.
29
(ii) Disposition Gain realized during any calendar month shall
be allocated first among all Interestholders whose book capital accounts
shall be in excess of their Interests' tax capital accounts (after making
the adjustments, other than adjustments resulting from the allocations to
be made pursuant to this Section 6.3(b)(ii) for the current calendar
month, described in Section 6.3(b)(i) above) in the ratio that each such
Interestholder's excess shall bear to all such Interestholder's excesses.
(iii) Disposition Gain realized during any calendar month that
remains after the allocation pursuant to Section 6.3(b)(ii) above shall
be allocated to those Interestholders who were Interestholders during
such month in the ratio that each such Interestholder's book capital
account bears to all such Interestholders' book capital accounts for such
month.
(iv) Disposition Loss realized during any calendar month shall
be allocated first among all Interestholders whose Interests' tax capital
accounts shall be in excess of their book capital accounts (after making
the adjustments, other than adjustments resulting from the allocations to
be made pursuant to this Section 6.3(b)(iv) for the current calendar
month, described in Section 6.3(b)(i) above) in the ratio that each such
Interestholder's excess shall bear to all such Interestholders' excesses.
(v) Disposition Loss realized during any calendar month that
remains after the allocation pursuant to Section 6.3(b)(iv) above shall
be allocated to those Interestholders who were Interestholders during
such calendar month in the ratio that each such Interestholder's book
capital account bears to all such Interestholders' book capital accounts
for such calendar month.
(c) The tax allocations prescribed by this Section 6.3 shall be made
to each holder of an Interest whether or not the holder is a substituted
Limited Owner. For purposes of this Section 6.3, tax allocations shall be made
to the Managing Owner's Interests on an Interest-equivalent basis.
(d) The allocation of income and loss (and items thereof) for federal
income tax purposes set forth in this Section 6.3 is intended to allocate
taxable income and loss among Interestholders generally in the ratio and to
the extent that net profit and net loss shall be allocated to such
Interestholders under Section 6.2 so as to eliminate, to the extent possible,
any disparity between an Interestholder's book capital account and his tax
capital account, consistent with the principles set forth in Sections 704(b)
and (c)(2) of the Code.
(e) Notwithstanding this Section 6.3, if after taking into account
any distributions to be made with respect to such Interest for the relevant
period pursuant to Section 6.4 herein, any allocation would produce a deficit
in the book capital account of an Interest, the portion of such allocation
that would create such a deficit shall instead be allocated pro rata to the
book capital accounts of the other Interests held by the same Interestholder
(subject to the same limitation) and, as to any balance, shall be allocated
pro rata to the book capital accounts of all the remaining Interestholders
(subject to the same limitation).
30
Section 6.4 Allocation of Distributions. Initially, distributions
shall be made by the Managing Owner, and the Managing Owner shall have sole
discretion in determining the amount and frequency of distributions, other
than redemptions, which the Trust shall make with respect to the Interests;
provided, however, that the Trust shall not make any distribution that
violates the Business Trust Statute. The aggregate distributions made in a
Fiscal Year (other than distributions on termination, which shall be allocated
in the manner described in Article VIII) shall be allocated among the holders
of record of Interests in the ratio in which the number of Interests held of
record by each of them bears to the number of Interests held of record by all
of the Interestholders as of the record date of such distribution; provided,
further, however, that any distribution made in respect of an Interest shall
not exceed the book capital account for such Interest.
Section 6.5 Admissions of Interestholders; Transfers. For purposes of
this Article VI, Interestholders shall be deemed admitted, and a tax and book
capital account shall be established in respect of the Interests acquired by
such Interestholder or in respect of additional Interests acquired by an
existing Interestholder, as of the first day of the calendar month following
the calendar month in which such Interestholder's subscription or additional
Capital Contribution, as the case may be, is accepted, or the transfer of
Interests to such Interestholder is recognized, except that persons accepted
as subscribers to the Trust pursuant to Section 3.2(b) shall be deemed
admitted on the date determined pursuant to such Section. Any Interestholder
to whom an Interest had been transferred shall succeed to the tax and book
capital accounts attributable to the Interest transferred.
Section 6.6 Liability for State and Local and Other Taxes. In the
event that the Trust shall be separately subject to taxation by any state or
local or by any foreign taxing authority, the Trust shall be obligated to pay
such taxes to such jurisdiction. In the event that the Trust shall be required
to make payments to any Federal, state or local or any foreign taxing
authority in respect of any Interestholder's allocable share of Trust income,
the amount of such taxes shall be considered a loan by the Trust to such
Interestholder, and such Interestholder shall be liable for, and shall pay to
the Trust, any taxes so required to be withheld and paid over by the Trust
within ten (10) days after the Managing Owner's request therefor. Such
Interestholder shall also be liable for (and the Managing Owner shall be
entitled to redeem additional Interests of the foreign Interestholder as
necessary to satisfy) interest on the amount of taxes paid over by the Trust
to the IRS or other taxing authority, from the date of the Managing Owner's
request for payment to the date of payment or the redemption, as the case may
be, at the rate of two percent (2%) over the prime rate charged from time to
time by Citibank, N.A. The amount, if any, payable by the Trust to the
Interestholder in respect of its Interests so redeemed, or in respect of any
other actual distribution by the Trust to such Interestholder, shall be
reduced by any obligations owed to the Trust by the Interestholder, including,
without limitation, the amount of any taxes required to be paid over by the
Trust to the IRS or other taxing authority and interest thereon as aforesaid.
Amounts, if any, deducted by the Trust from any actual distribution or
redemption payment to such Interestholder shall be treated as an actual
distribution to such Interestholder for all purposes of this Trust Agreement.
31
Article VII.
REDEMPTIONS
Section 7.1 Redemption of Interests. The Interestholders recognize
that the profitability of the Trust depends upon long-term and uninterrupted
investment of capital. It is agreed, therefore, that Trust profits and gains
may be automatically reinvested, and that distributions, if any, of profits
and gains to the Interestholders will be on a limited basis. Nevertheless, the
Interestholders contemplate the possibility that one or more of the Limited
Owners may elect to realize and withdraw profits, or withdraw capital through
the redemption of Interests prior to the dissolution of the Trust. In that
regard and subject to the provisions of Section 4.2(h):
(a) Subject to the conditions set forth in this Article VII, each
Limited Owner (or any permitted assignee thereof) shall have the right to
redeem any Limited Interest or portion thereof that he owns immediately
following the close of business on the last day of a month following the date
the Managing Owner is in receipt of written notice of redemption for at least
ten (10) days (a "Redemption Date"), commencing with the end of the first full
calendar month of Trust trading activity. Interests will be redeemed on a
"first in, first out" basis based on time of receipt of redemption requests.
If an Interestholder (or permitted assignee thereof) is permitted to redeem
any or all of his Interests as of a date other than a Redemption Date, such
adjustments in the determination and allocation among the Interestholders of
Disposition Gain, Disposition Loss, Profits, Losses and items of income or
deduction for tax accounting purposes shall be made as are necessary or
appropriate to reflect and give effect to the redemption.
(b) Subject to the provisions of Section 13.1(h), in the event that
the Net Asset Value per Interest as of the close of any Business Day shall
decrease to less than fifty percent (50%) of the Net Asset Value per Interest
as of the last day of the preceding month, Limited Owners shall be given
notice of such event, as provided in Section 9.4 hereof. In such event, the
Managing Owner will cease its commodity trading activities for twenty (20)
Business Days and (ii) Limited Owners shall be permitted to redeem one or more
whole or fractional Interests that they own by notifying the Managing Owner of
their intent to redeem. Such special redemptions will be effective as of the
twentieth (20th) Business Day following the mailing date of the notice
described in Section 9.4 hereof (the "Special Redemption Date"), provided the
Managing Owner is in receipt of such notice from the Limited Owner for a least
five (5) Business Days. Interests will be valued as of the close of business
on the Special Redemption Date.
(c) The value of an Interest for purposes of redemption shall be the
book capital account balance of such Interest at the close of business on the
Redemption Date, less any amount owing by such Limited Owner (and his
permitted assignee, if any) to the Trust pursuant to Sections 4.6(g), 5.3(h)
or 6.6 of this Trust Agreement; provided, however, that Interests which are
redeemed on or prior to the end of the first and second six-month periods
after such Interests are sold will be assessed redemption charges of 4% and
3%, respectively, which redemption charges will be paid to the Managing Owner,
provided, however, that no such redemption charges will be imposed with
respect to any Interests in the event that the Limited Owner thereof (i)
certifies to the Trust that the Interests are being redeemed as a result of an
increase in fees and expenses imposed on the Trust above those disclosed in
the Prospectus or (ii) invests the
32
redemption proceeds in another futures fund sponsored by the Managing Owner
and/or its Affiliates. If redemption of an Interest shall be requested by a
permitted assignee, all amounts which shall be owed to the Trust under
Sections 4.6(g), 5.3(h) or 6.6 hereof by the Interestholder of record, as well
as all amounts which shall be owed by all permitted assignees of such
Interests, shall be deducted from the Net Asset Value of such Interests upon
redemption.
(d) The effective date of redemption shall be the Redemption Date and
payment of the value of the redeemed Interests generally shall be made within
ten (10) Business Days following the Redemption Date; provided, that all
liabilities, contingent or otherwise, of the Trust, except any liability to
Interestholders on account of their Capital Contributions, have been paid or
there remains property of the Trust sufficient to pay them; and provided
further, that under extraordinary circumstances as may be determined by the
Managing Owner in its sole discretion, including, but not limited to, the
inability to liquidate Commodity positions as of such Redemption Date, or
default or delay in payments due the Trust from commodity brokers, banks or
other Persons, or significant administrative hardship, the Trust may in turn
delay payment to Limited Owners requesting redemption of Interests of the
proportionate part of the value of redeemed Interests represented by the sums
which are the subject of such default or delay, in which event payment for
redemption of such Interests will be made to Limited Owners as soon thereafter
as is practicable. A Limited Owner may revoke his notice of intent to redeem
on or prior to the Redemption Date by written instructions to the Managing
Owner. If a Limited Owner revokes his notice of intent to redeem and
thereafter wishes to redeem, such Limited Owner will be required to submit
written notice thereof in accordance with Section 7.1(e) and will be redeemed
on the first Redemption Date to occur after the Managing Owner shall have been
in receipt of such written notice for at least ten (10) Business Days.
(e) A Limited Owner (or any permitted assignee thereof) wishing to
redeem Interests must provide the Managing Owner with written notice of his
intent to redeem, which notice shall specify the name and address of the
redeeming Limited Owner and the amount of Limited Interests 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 Managing Owner and shall be
mailed or delivered to the principal place of business of the Managing Owner.
Such notice must include representations and warranties that the redeeming
Limited Owner (or any permitted assignee thereof) is the lawful and beneficial
owner of the Interests to be redeemed and that such Interests are not subject
to any pledge or otherwise encumbered in any fashion. In certain
circumstances, the Trust may require additional documents, such as, but not
limited to, trust instruments, death certificates, appointments as executor or
administrator or certificates of corporate authority. Limited Owners
requesting redemption shall be notified in writing within ten (10) Business
Days following the Redemption Date whether or not their Interests will be
redeemed, unless payment for the redeeming Interests is made within that ten
(10) Business Day period, in which case the notice of acceptance of the
redemption shall not be required.
(f) The Managing Owner may suspend temporarily any redemption if the
effect of such redemption, either alone or in conjunction with other
redemptions, would be to impair the Trust's ability to operate in pursuit of
its objectives. In addition, the Managing Owner may mandatorily redeem
Interests pursuant to Section 4.2(h).
33
(g) Interests that are redeemed shall be extinguished and shall not
be retained or reissued by the Trust.
(h) Except as discussed above, all requests for redemption in proper
form will be honored, and the Trust's positions will be liquidated to the
extent necessary to discharge its liabilities on the Redemption Date.
Section 7.2 Redemption By the Managing Owner. Notwithstanding any
provision in this Trust Agreement to the contrary, for so long as it shall act
as the Trust's Managing Owner, the Managing Owner shall not transfer or redeem
any of its General Interests to the extent that any such transfer or
redemption would result in the Managing Owner and/or its Affiliates having
less than a one percent (1%) interest in the Trust.
Article VIII.
THE LIMITED OWNERS
Section 8.1 No Management or Control; Limited Liability. The
Limited Owners shall not participate in the management or control of the
Trust's business nor shall they transact any business for the Trust or have
the power to sign for or bind the Trust, said power being vested solely and
exclusively in the Managing Owner. Except as provided in Section 8.3 hereof,
no Limited Owner shall be bound by, or be personally liable for, the expenses,
liabilities or obligations of the Trust in excess of his Capital Contribution
plus his share of the Trust Estate and profits remaining in the Trust, if any.
Except as provided herein, each Limited Interest owned by a Limited Owner
shall be fully paid and no assessment shall be made against any Limited Owner.
No salary shall be paid to any Limited Owner in his capacity as a Limited
Owner, nor shall any Limited Owner have a drawing account or earn interest on
his contribution.
Section 8.2 Rights and Duties. The Limited Owners shall have the
following rights, powers, privileges, duties and liabilities:
(a) The Limited Owners shall have the right to obtain information of
all things affecting the Trust, provided that such is for a purpose reasonably
related to the Limited Owner's interest as a beneficial owner of the Trust,
including, without limitation, such reports as are set forth in Article IX and
such information as is set forth in Section 4.3(l) hereof. In the event that
the Managing Owner neglects or refuses to produce or mail to a Limited Owner a
copy of the information set forth in Section 4.3(l) hereof, the Managing Owner
shall be liable to such Limited Owner for the costs, including reasonable
attorney's fees, incurred by such Limited Owner to compel the production of
such information, and for any actual damages suffered by such Limited Owner as
a result of such refusal or neglect; provided, however, it shall be a defense
of the Managing Owner that the actual purpose of the Limited Owner's request
for such information was not reasonably related to the Limited Owner's
interest as a beneficial owner in the Trust (e.g., to secure such information
in order to sell it, or to use the same for a commercial purpose unrelated to
the participation of such Limited Owner in the Trust). The foregoing rights
are in addition to, and do not limit, other remedies available to Limited
Owners under federal or state law.
34
(b) The Limited Owners shall receive from the Trust the share of the
distributions provided for in this Trust Agreement in the manner and at the
times provided for in this Trust Agreement.
(c) Except for the Limited Owners' redemption rights set forth in
Article VII hereof or upon a mandatory redemption effected by the Managing
Owner pursuant to Section 4.2(h) hereof, Limited Owners shall have the right
to demand the return of their capital account only upon the dissolution and
winding up of the Trust and only to the extent of funds available therefor. In
no event shall a Limited Owner be entitled to demand or receive property other
than cash. No Limited Owner shall have priority over any other Limited Owner
either as to the return of capital or as to profits, losses or distributions.
No Limited Owner shall have the right to bring an action for partition against
the Trust.
(d) Limited Owners holding at least a majority in interest (over 50%)
of the outstanding Interests (not including Interests held by the Managing
Owner and its Affiliates, including the commodity broker) may vote to continue
the Trust as provided in Section 13.1(b), (ii) approve the voluntary
withdrawal of the Managing Owner and elect a successor Managing Owner as
provided in Section 4.10, (iii) remove the Managing Owner on reasonable prior
written notice to the Managing Owner, (iv) elect and appoint one or more
additional Managing Owners, or consent to such matters as are set forth in
Section 5.2(b), (v) approve a material change in the trading policies of the
Trust, or the brokerage fees paid by the Trust, as set forth in the
Prospectus, which change shall not be effective without the prior written
approval of such majority, (vi) approve the termination of any agreement
entered into between the Trust and the Managing Owner or any Affiliate of the
Managing Owner for any reason, without penalty, (vii) approve amendments to
this Trust Agreement as set forth in Section 11.1 hereof, and (viii) terminate
the Trust as provided in Section 13.1(g), and in the case of (iv), (v) and
(vi) in each instance on sixty (60) days' prior written notice.
Except as set forth above, the Limited Owners shall have no voting or
other rights with respect to the Trust. Prior to the exercise by the Limited
Owners of the rights set forth in Section 8.2(d), the Trust will, if
practicable, provide the Limited Owners with an opinion of independent legal
counsel in each state where the Trust may be deemed to be conducting its
business with respect to whether or not such exercise would constitute such
participation in the control of the Trust business as would adversely affect
the Limited Owners limited liability under the laws of such state.
Section 8.3 Limitation on Liability.
(a) Except as provided in Sections 4.6(g), 5.3(h) and 6.6 hereof, and
as otherwise provided under Delaware law, the Limited Owners shall be entitled
to the same limitation of personal liability extended to stockholders of
private corporations for profit organized under the general corporation law of
Delaware and no Limited Owner shall be liable for claims against, or debts of
the Trust in excess of his Capital Contribution and his share of the Trust
Estate and undistributed profits, except in the event that the liability is
founded upon misstatements or omissions contained in such Limited Owner's
Subscription Agreement delivered in connection with his purchase of Interests.
In addition, and subject to the exceptions set forth in the immediately
preceding sentence, the Trust shall not make a claim against a
35
Limited Owner with respect to amounts distributed to such Limited Owner or
amounts received by such Limited Owner upon redemption unless, under Delaware
law, such Limited Owner is liable to repay such amount.
(b) The Trust shall indemnify, to the full extent permitted by law,
to the extent of the Trust Estate, each Limited Owner (excluding the Managing
Owner to the extent of its ownership of any Limited Interests) against any
claims of liability asserted against such Limited Owner solely because he is a
beneficial owner of the Trust (other than for taxes for which such Limited
Owner is liable under Section 6.6 hereof).
(c) Every written note, bond, contract, instrument, certificate or
undertaking made or issued by the Managing Owner shall give notice to the
effect that the same was executed or made by or on behalf of the Trust and
that the obligations of such instrument are not binding upon the Limited
Owners individually but are binding only upon the assets and property of the
Trust, and no resort shall be had to the Limited Owners' personal property for
satisfaction of any obligation or claim thereunder, and appropriate references
may be made to this Trust Agreement and may contain any further recital which
the Managing Owner deems appropriate, but the omission thereof shall not
operate to bind the Limited Owners individually or otherwise invalidate any
such note, bond, contract, instrument, certificate or undertaking.
Article IX.
BOOKS OF ACCOUNT AND REPORTS
Section 9.1 Books of Account. Proper books of account shall be
kept and shall be audited annually by an independent certified public
accounting firm selected by the Managing Owner in its sole discretion, and
there shall be entered therein all transactions, matters and things relating
to the Trust's business as are required by the CE Act and regulations
promulgated thereunder, and all other applicable rules and regulations, and as
are usually entered into books of account kept by Persons engaged in a
business of like character. The books of account shall be kept at the
principal office of the Trust and each Limited Owner (or any duly constituted
designee of a Limited Owner) shall have, at all times during normal business
hours, free access to and the right to inspect and copy the same for any
purpose reasonably related to the Limited Owner's interest as a beneficial
owner of the Trust, including such access as is required under CFTC rules and
regulations. Such books of account shall be kept, and the Trust shall report
its Profits and Losses on, the accrual method of accounting for financial
accounting purposes on a Fiscal Year basis as described in Article X.
Section 9.2 Annual Reports and Monthly Statements. Each Limited
Owner shall be furnished as of the end of each month and as of the end of each
Fiscal Year with such reports (in such detail) as are required to be given to
Limited Owners by the CFTC and the NFA, (b) any other reports (in such detail)
required by any other governmental authority which has jurisdiction over the
activities of the Trust and (c) any other reports or information which the
Managing Owner, in its discretion, determines to be necessary or appropriate.
Section 9.3 Tax Information. Appropriate tax information (adequate
to enable each Limited Owner to complete and file his federal tax return)
shall be delivered to each
36
Limited Owner as soon as practicable following the end of each Fiscal Year but
generally no later than March 15.
Section 9.4 Calculation of Net Asset Value. Net Asset Value will
be estimated on each Business Day. Upon request, on any Business Day, the
Managing Owner shall make available to any Limited Owner the estimated Net
Asset Value per Interest. Each Limited Owner shall be notified of any decline
in the estimated Net Asset Value per Interest to less than 50% of the Net
Asset Value per Interest as of the last day of the preceding month within
seven (7) Business Days of such occurrence. Included in such notification
shall be a description of the Limited Owners' voting rights as set forth in
Section 8.2 hereof and redemption rights as set forth in Section 7.1 hereof.
Section 9.5 Other Reports. The Managing Owner shall send such
other reports and information, if any, to the Limited Owners as it may deem
necessary or appropriate. Each Limited Owner shall be notified of any material
change in the terms of the Advisory Agreement, including any change in the
Trading Manager or any modification in connection with the method of
calculating the incentive fee; (b) any change of Trustee; (c) any other
material change affecting the compensation of any party within seven (7)
Business Days of such occurrence; and (d) a description of any material effect
on the Interests such changes may have. Included in such notification shall be
a description of the Limited Owners' voting rights as set forth in Section 8.2
hereof and redemption rights as set forth in Section 7.1 hereof. In addition,
the Managing Owner shall submit to the Securities Administrator of any State
having jurisdiction over the Trust any information required to be filed with
such Administrator, including, but not limited to, reports and statements
required to be distributed to the Limited Owners.
Section 9.6 Maintenance of Records. The Managing Owner shall
maintain for a period of at least eight (8) Fiscal Years all books of account
required by Section 9.1 hereof; a list of the names and last known address of,
and number of Interests owned by, all Interestholders, a copy of the
Certificate of Trust and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any certificate
has been executed; copies of the Trust's federal, state and local income tax
returns and reports, if any; and a record of the information obtained to
indicate that a Limited Owner meets the investor suitability standards set
forth in the Prospectus, and (b) for a period of at least six (6) Fiscal Years
copies of any effective written trust agreements, subscription agreements and
any financial statements of the Trust.
Section 9.7 Certificate of Trust. Except as otherwise provided
in the Business Trust Statute or this Trust Agreement, the Managing Owner
shall not be required to mail a copy of any Certificate of Trust filed with
the Secretary of State of the State of Delaware to each Limited Owner;
however, such certificates shall be maintained at the principal office of the
Trust and shall be available for inspection and copying by the Limited Owners
in accordance with this Trust Agreement.
Section 9.8 Registration of Interests. Subject to Section 4.3(l)
hereof, the Managing Owner shall keep, at the Trust's principal place of
business, an Interest Register in which, subject to such reasonable
regulations as it may provide, it shall provide for the registration of
Interests and of transfers of Interests. Subject to the provisions of Article
V, the
37
Managing Owner may treat the Person in whose name any Interest shall be
registered in the Interest Register as the Interestholder of such Interest for
the purpose of receiving distributions pursuant to Article VI and for all
other purposes whatsoever.
Article X.
FISCAL YEAR
Section 10.1 Fiscal Year. The Fiscal Year shall begin on the 1st
day of January and end on the 31st day of December of each year. The first
Fiscal Year of the Partnership shall commence on the date of filing of the
Certificate of Trust and end on the 31st day of December 1995. The Fiscal Year
in which the Trust shall terminate shall end on the date of termination of the
Trust.
Article XI.
AMENDMENT OF TRUST AGREEMENT; MEETINGS
Section 11.1 Amendments to the Trust Agreement.
(a) Amendments to this Trust Agreement may be proposed by the
Managing Owner or by Limited Owners holding at least ten percent (10%) of the
then outstanding Interests. Following such proposal, the Managing Owner shall
submit to the Limited Owners a verbatim statement of any proposed amendment,
and statements concerning the legality of such amendment and the effect of
such amendment on the limited liability of the Limited Owners. The Managing
Owner shall include in any such submission its recommendations as to the
proposed amendment. The amendment shall become effective only upon the written
approval or affirmative vote of Limited Owners holding at least a majority in
interest (over 50%) of the then outstanding Interests (excluding Interests
held by the Managing Owner and its Affiliates), or such higher percentage as
may be required by applicable law, and upon receipt of an opinion of
independent legal counsel as set forth in Section 8.2 hereof and to the effect
that the amendment is legal, valid and binding and will not adversely affect
the limitations on liability of the Limited Owners as described in Section 8.3
of this Trust Agreement. Notwithstanding the foregoing, where any action taken
or authorized pursuant to any provision of this Trust Agreement requires the
approval or affirmative vote of Limited Owners holding a greater interest in
Limited Interests than is required to amend this Trust Agreement under this
Section 11.1, and/or the approval or affirmative vote of the Managing Owners,
an amendment to such provision(s) shall be effective only upon the written
approval or affirmative vote of the minimum number of Interestholders which
would be required to take or authorize such action, or as may otherwise be
required by applicable law, and upon receipt of an opinion of independent
legal counsel as set forth above in this Section 11.1. In addition, except as
otherwise provided below, reduction of the capital account of any assignee or
modification of the percentage of Profits, Losses or distributions to which an
assignee is entitled hereunder shall not be affected by amendment to this
Trust Agreement without such assignee's approval.
(b) Notwithstanding any provision to the contrary contained in
Section 11.1(a) hereof, the Managing Owner may, without the approval of the
Limited Owners, make such
38
amendments to this Trust Agreement which are necessary to add to the
representations, duties or obligations of the Managing Owner or surrender any
right or power granted to the Managing Owner herein, for the benefit of the
Limited Owners, (ii) are necessary to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent with any other
provision herein or in the Prospectus, or to make any other provisions with
respect to matters or questions arising under this Trust Agreement or the
Prospectus which will not be inconsistent with the provisions of the Trust
Agreement or the Prospectus, or (iii) the Managing Owner deems advisable,
provided, however, that no amendment shall be adopted pursuant to this clause
(iii) unless the adoption thereof (A) is not adverse to the interests of the
Limited Owners; (B) is consistent with Section 4.1 hereof; (C) except as
otherwise provided in Section 11.1(c) below, does not affect the allocation of
Profits and Losses among the Limited Owners or between the Limited Owners and
the Managing Owner; and (D) does not adversely affect the limitations on
liability of the Limited Owners, as described in Article VIII hereof or the
status of the Trust as a partnership for federal income tax purposes.
(c) Notwithstanding any provision to the contrary contained in
Sections 11.1(a) and (b) hereof, the Managing Owner may, without the approval
of the Limited Owners, amend the provisions of Article VI of this Trust
Agreement relating to the allocations of Profits, Losses, Disposition Gain,
Disposition Loss and distributions among the Interestholders if the Trust is
advised at any time by the Trust's accountants or legal counsel that the
allocations provided in Article VI of this Trust Agreement are unlikely to be
respected for federal income tax purposes, either because of the promulgation
of new or revised Treasury Regulations under Section 704 of the Code or other
developments in the law. The Managing Owner is empowered to amend such
provisions to the minimum extent necessary in accordance with the advice of
the accountants and counsel to effect the allocations and distributions
provided in this Trust Agreement. New allocations made by the Managing Owner
in reliance upon the advice of the accountants or counsel described above
shall be deemed to be made pursuant to the obligation of the Managing Owner to
the Trust and the Limited Owners, and no such new allocation shall give rise
to any claim or cause of action by any Limited Owner.
(d) Upon amendment of this Trust Agreement, the Certificate of Trust
shall also be amended, if required by the Business Trust Statute, to reflect
such change.
(e) No amendment shall be made to this Trust Agreement without the
consent of the Trustee if such amendment adversely affects any of the rights,
duties or liabilities of the Trustee; provided, however, that the Trustee may
not withhold its consent for any action which the Limited Owners are permitted
to take under Section 8.2(d) above. The Trustee shall execute and file any
amendment to the Certificate of Trust if so directed by the Managing Owner or
if such amendment is required in the opinion of the Trustee.
Section 11.2 Meetings of the Trust. Meetings of the Trust may be
called by the Managing Owner and will be called by it upon the written request
of Limited Owners holding at least ten percent (10%) of the outstanding
Interests. Such call for a meeting shall be deemed to have been made upon the
receipt by the Managing Owner of a written request from the requisite
percentage of Limited Owners. The Managing Owner shall deposit in the United
States mails, within fifteen (15) days after receipt of said request, written
notice to all Interestholders of the meeting and the purpose of the meeting,
which shall be held on a date, not less than thirty (30)
39
nor more than sixty (60) days after the date of mailing of said notice, at a
reasonable time and place. Any notice of meeting shall be accompanied by a
description of the action to be taken at the meeting and an opinion of
independent counsel as to the effect of such proposed action on the liability
of Limited Owners for the debts of the Trust. Interestholders may vote in
person or by proxy at any such meeting.
Section 11.3 Action Without a Meeting. Any action required or
permitted to be taken by Interestholders by vote may be taken without a
meeting on written consent setting forth the actions so taken, signed by the
holders of the Interests having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
holders of all Interests entitled to vote thereon were present and voted.
Article XII.
TERM
Section 12.1 Term. The term for which the Trust is to exist shall
commence on the date of the filing of the Certificate of Trust, and shall
expire on December 31, 2020, unless sooner terminated pursuant to the
provisions of Article XIII hereof or as otherwise provided by law.
Article XIII.
TERMINATION
Section 13.1 Events Requiring Dissolution. The Trust shall dissolve
at any time upon the happening of any of the following events:
(a) The expiration of its term as provided in Article XII hereof.
(b) The filing of a certificate of dissolution or revocation of the
charter (and the expiration of 90 days after the date of notice to the
Managing Owner of revocation without a reinstatement of its charter) of the
Managing Owner, or upon the withdrawal, removal, adjudication of bankruptcy or
insolvency of the Managing Owner (each of the foregoing events an "Event of
Withdrawal") unless at the time there is at least one remaining Managing Owner
and that remaining Managing Owner carries on the business of the Trust or (ii)
within ninety (90) days of such Event of Withdrawal all the remaining
Interestholders agree in writing to continue the business of the Trust and to
select, effective as of the date of such event, one or more successor Managing
Owners. If the Trust is terminated as the result of an Event of Withdrawal of
a Managing Owner and a failure of the Interestholders to continue the business
of the Trust and appoint a successor Managing Owner as provided in clause
(b)(ii) above, within one hundred and twenty (120) days of such Event of
Withdrawal, Limited Owners holding a majority in interest (over 50%) of the
outstanding Interests (not including Interests held by the Managing Owner and
its Affiliates) may elect to continue the business of the Trust by forming a
new business trust (the "Reconstituted Trust") on the same terms and
provisions as set forth in this Trust Agreement (whereupon the parties hereto
shall execute and deliver any documents or instruments as may be necessary to
reform the Trust). Any such election must also provide for
40
the election of a Managing Owner to the Reconstituted Trust. If such an
election is made, all Limited Owners of the Trust shall be bound thereby and
continue as Limited Owners of the Reconstituted Trust.
(c) The occurrence of any event which would make unlawful the
continued existence of the Trust.
(d) In the event that subscriptions for at least 100,000 Interests
are not sold during the Initial Offering Period.
(e) In the event of the suspension, revocation or termination of the
Managing Owner's registration as a commodity pool operator under the CE Act,
or membership as a commodity pool operator with the NFA unless at the time
there is at least one remaining Managing Owner whose registration or
membership has not been suspended, revoked or terminated.
(f) The Trust becomes insolvent or bankrupt.
(g) The vote of Limited Owners holding more than fifty percent (50%)
of the outstanding Interests (which excludes the Interests of the Managing
Owner) to terminate the Trust, notice of which is sent to the Managing Owner
not less than ninety (90) Business Days prior to the effective date of such
termination.
(h) The decline of the Net Asset Value of the Trust Estate by fifty
percent (50%) from the Net Asset Value of the Trust Estate at the commencement
of the Trust's trading activities or (ii) on the first day of a fiscal year,
in each case after appropriate adjustment for distributions, additional
capital contributions and redemptions.
(i) The determination of the Managing Owner that the Trust's
aggregate net assets in relation to the operating expenses of the Trust make
it unreasonable or imprudent to continue the business of the Trust, or, in the
exercise of its reasonable discretion, the determination of the Managing Owner
to dissolve the Trust because the aggregate Net Asset Value of the Trust as of
the close of business on any Business Day declines below $5 million.
The death, legal disability, bankruptcy, insolvency, dissolution, or
withdrawal of any Limited Owner (as long as such Limited Owner is not the sole
Limited Owner of the Trust) shall not result in the termination of the Trust,
and such Limited Owner, his estate, custodian or personal representative shall
have no right to withdraw or value such Limited Owner's Interests except as
provided in Section 7.1 hereof. Each Limited Owner (and any assignee thereof)
expressly agrees that in the event of his death, he waives on behalf of
himself and his estate, and he directs the legal representative of his estate
and any person interested therein to waive the furnishing of any inventory,
accounting or appraisal of the assets of the Trust and any right to an audit
or examination of the books of the Trust, except for such rights as are set
forth in Article IX hereof relating to the Books of Account and reports of the
Trust.
Section 13.2 Distributions on Dissolution. Upon the dissolution of
the Trust, the Managing Owner (or in the event there is no Managing Owner,
such person (the "Liquidating Trustee") as the majority in interest of the
Limited Owners may propose and approve) shall take
41
full charge of the Trust assets and liabilities. Any Liquidating Trustee so
appointed shall have and may exercise, without further authorization or
approval of any of the parties hereto, all of the powers conferred upon the
Managing Owner under the terms of this Trust Agreement, subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers, and provided that the Liquidating Trustee shall not have general
liability for the acts, omissions, obligations and expenses of the Trust.
Thereafter, the business and affairs of the Trust shall be wound up and all
assets shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom shall be applied and
distributed in the following order of priority: to the expenses of liquidation
and termination and to creditors, including Interestholders who are creditors,
to the extent otherwise permitted by law, in satisfaction of liabilities of
the Trust (whether by payment or the making of reasonable provision for
payment thereof) other than liabilities for distributions to Interestholders,
and (b) to the Managing Owner and each Limited Owner pro rata in accordance
with his positive book capital account balance, less any amount owing by such
Interestholder to the Trust, after giving effect to all adjustments made
pursuant to Article VI and all distributions theretofore made to the
Interestholders pursuant to Article VI. After the distribution of all
remaining assets of the Trust, the Managing Owner will contribute to the Trust
an amount equal to the lesser of (i) the deficit balance, if any, in its book
capital account, and (ii) the excess of 1.01% of the total Capital
Contributions of the Limited Owners over the capital previously contributed by
the Managing Owner. Any Capital Contributions made by the Managing Owner
pursuant to this Section shall be applied first to satisfy any amounts then
owed by the Trust to its creditors, and the balance, if any, shall be
distributed to those Interestholders in the Trust whose book capital account
balances (immediately following the distribution of any liquidation proceeds)
were positive, in proportion to their respective positive book capital account
balances.
Section 13.3 Termination; Certificate of Cancellation. Following the
dissolution and distribution of the assets of the Trust, the Trust shall
terminate and Managing Owner or Liquidating Trustee, as the case may be, shall
execute and cause such certificate of cancellation of the Certificate of Trust
to be filed in accordance with the Business Trust Statute. Notwithstanding
anything to the contrary contained in this Trust Agreement, the existence of
the Trust as a separate legal entity shall continue until the filing of such
certificate of cancellation.
Article XIV.
POWER OF ATTORNEY
Section 14.1 Power of Attorney Executed Concurrently. Concurrently
with the written acceptance and adoption of the provisions of this Trust
Agreement, each Limited Owner shall execute and deliver to the Managing Owner
a Power of Attorney as part of the Subscription Agreement, or in such other
form as may be prescribed by the Managing Owner. Each Limited Owner, by its
execution and delivery hereof, irrevocably constitutes and appoints the
Managing Owner and its officers and directors, with full power of
substitution, as the true and lawful attorney-in-fact and agent for such
Limited Owner with full power and authority to act in his name and on his
behalf in the execution, acknowledgment, filing and publishing of Trust
documents, including, but not limited to, the following:
42
(a) Any certificates and other instruments, including but not limited
to, any applications for authority to do business and amendments thereto,
which the Managing Owner deems appropriate to qualify or continue the Trust as
a business trust in the jurisdictions in which the Trust may conduct business,
so long as such qualifications and continuations are in accordance with the
terms of this Trust Agreement or any amendment hereto, or which may be
required to be filed by the Trust or the Interestholders under the laws of any
jurisdiction;
(b) Any instrument which may be required to be filed by the Trust
under the laws of any state or by any governmental agency, or which the
Managing Owner deems advisable to file; and
(c) This Trust Agreement and any documents which may be required to
effect an amendment to this Trust Agreement approved under the terms of the
Trust Agreement, and the continuation of the Trust, the admission of the
signer of the Power of Attorney as a Limited Owner or of others as additional
or substituted Limited Owners, or the termination of the Trust, provided such
continuation, admission or termination is in accordance with the terms of this
Trust Agreement.
Section 14.2 Effect of Power of Attorney. The Power of Attorney
concurrently granted by each Limited Owner to the Managing Owner:
(a) Is a special, irrevocable Power of Attorney coupled with an
interest, and shall survive and not be affected by the death, disability,
dissolution, liquidation, termination or incapacity of the Limited Owner;
(b) May be exercised by the Managing Owner for each Limited Owner by
a facsimile signature of one of its officers or by a single signature of one
of its officers acting as attorney-in-fact for all of them; and
(c) Shall survive the delivery of an assignment by a Limited Owner of
the whole or any portion of his Limited Interests; except that where the
assignee thereof has been approved by the Managing Owner for admission to the
Trust as a substituted Limited Owner, the Power of Attorney of the assignor
shall survive the delivery of such assignment for the sole purpose of enabling
the Managing Owner to execute, acknowledge and file any instrument necessary
to effect such substitution.
Each Limited Owner agrees to be bound by any representations made by
the Managing Owner and by any successor thereto, determined to be acting in
good faith pursuant to such Power of Attorney and not constituting negligence
or misconduct.
Section 14.3 Limitation on Power of Attorney. The Power of Attorney
concurrently granted by each Limited Owner to the Managing Owner shall not
authorize the Managing Owner to act on behalf of Limited Owners in any
situation in which this Trust Agreement requires the approval of Limited
Owners unless such approval has been obtained as required by this Trust
Agreement. In the event of any conflict between this Trust Agreement and any
instruments filed by the Managing Owner or any new Managing Owner pursuant to
this Power of Attorney, this Trust Agreement shall control.
43
Article XV.
MISCELLANEOUS
Section 15.1 Governing Law. The validity and construction of this
Trust Agreement and all amendments hereto shall be governed by the laws of the
State of Delaware, and the rights of all parties hereto and the effect of
every provision hereof shall be subject to and construed according to the laws
of the State of Delaware without regard to the conflict of laws provisions
thereof; provided, however, that causes of action for violations of federal or
state securities laws shall not be governed by this Section 15.1, and
provided, further, that the parties hereto intend that the provisions hereof
shall control over any contrary or limiting statutory or common law of the
State of Delaware (other than the Business Trust Statute) and that, to the
maximum extent permitted by applicable law, there shall not be applicable to
the Trust, the Trustee, the Managing Owner, the Interestholders or this Trust
Agreement any provision of the laws (statutory or common) of the State of
Delaware (other than the Business Trust Statute) pertaining to trusts which
relate to or regulate in a manner inconsistent with the terms hereof: the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (b) affirmative requirements to post
bonds for trustees, officers, agents, or employees of a trust, (c) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (d) fees or
other sums payable to trustees, officers, agents or employees of a trust, (e)
the allocation of receipts and expenditures to income or principal, (f)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (g) the establishment of fiduciary or
other standards or responsibilities or limitations on the acts or powers of
trustees or managers that are inconsistent with the limitations on liability
or authorities and powers of the Trustee or the Managing Owner set forth or
referenced in this Trust Agreement. Section 3540 of Title 12 of the Delaware
Code shall not apply to the Trust. The Trust shall be of the type commonly
called a "business trust," and without limiting the provisions hereof, the
Trust may exercise all powers that are ordinarily exercised by such a trust
under Delaware law. The Trust specifically reserves the right to exercise any
of the powers or privileges afforded to business trusts and the absence of a
specific reference herein to any such power, privilege or action shall not
imply that the Trust may not exercise such power or privilege or take such
actions.
Section 15.2 Provisions In Conflict with Law or Regulations.
(a) The provisions of this Trust Agreement are severable, and if the
Managing Owner shall determine, with the advice of counsel, that any one or
more of such provisions (the "Conflicting Provisions") are in conflict with
the Code, the Business Trust Statute or other applicable federal or state
laws, the Conflicting Provisions shall be deemed never to have constituted a
part of this Trust Agreement, even without any amendment of this Trust
Agreement pursuant to this Trust Agreement; provided, however, that such
determination by the Managing Owner shall not affect or impair any of the
remaining provisions of this Trust Agreement or render invalid or improper any
action taken or omitted prior to such determination. No Managing Owner or
Trustee shall be liable for making or failing to make such a determination.
44
(b) If any provision of this Trust Agreement shall be held invalid or
unenforceable in any jurisdiction, such holding shall not in any manner affect
or render invalid or unenforceable such provision in any other jurisdiction or
any other provision of this Trust Agreement in any jurisdiction.
Section 15.3 Construction. In this Trust Agreement, unless the
context otherwise requires, words used in the singular or in the plural
include both the plural and singular and words denoting any gender include all
genders. The title and headings of different parts are inserted for
convenience and shall not affect the meaning, construction or effect of this
Trust Agreement.
Section 15.4 Notices. All notices or communications under this
Trust Agreement (other than requests for redemption of Interests, notices of
assignment, transfer, pledge or encumbrance of Interests, and reports and
notices by the Managing Owner to the Limited Owners) shall be in writing and
shall be effective upon personal delivery, or if sent by mail, postage
prepaid, or if telegraphed, by prepaid telegram; and addressed, in each such
case, to the address set forth in the books and records of the Trust or such
other address as may be specified in writing, of the party to whom such notice
is to be given, upon the deposit of such notice in the United States mail.
Requests for redemption, notices of assignment, transfer, pledge or
encumbrance of Interests shall be effective upon timely receipt by the
Managing Owner in writing.
Section 15.5 Counterparts. This Trust Agreement may be executed in
several counterparts, and all so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all the parties are
not signatory to the original or the same counterpart.
Section 15.6 Binding Nature of Trust Agreement. The terms and
provisions of this Trust Agreement shall be binding upon and inure to the
benefit of the heirs, custodians, executors, estates, administrators, personal
representatives, successors and permitted assigns of the respective
Interestholders. For purposes of determining the rights of any Interestholder
or assignee hereunder, the Trust and the Managing Owner may rely upon the
Trust records as to who are Interestholders and permitted assignees, and all
Interestholders and assignees agree that the Trust and the Managing Owner, in
determining such rights, shall rely on such records and that Limited Owners
and assignees shall be bound by such determination.
Section 15.7 No Legal Title to Trust Estate. The Interestholders
shall not have legal title to any part of the Trust Estate.
Section 15.8 Creditors. No creditors of any Interestholders shall
have any right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to the Trust Estate.
Section 15.9 Integration. This Trust Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
45
IN WITNESS WHEREOF, the undersigned have duly executed this
Declaration of Trust and Trust Agreement as of the day and year first above
written.
WILMINGTON TRUST COMPANY,
as Trustee
By: Rosemary Kennard
--------------------------------------
Name: Rosemary Kennard
Title: Assistant Vice President
PREFERRED INVESTMENT SOLUTIONS CORP.,
as Managing Owner
By: Joseph J. Allessie
--------------------------------------
Name: Joseph J. Allessie
Title: Secretary
All Limited Owners now and hereafter
admitted as Limited Owners of the Trust,
pursuant to powers of attorney now and
hereafter executed in favor of, and
granted and delivered to, the Managing
Owner
By: Joseph J. Allessie
--------------------------------------
Attorney-in fact
46
EXHIBIT A
CERTIFICATE OF TRUST
OF
WILLOWBRIDGE STRATEGIC TRUST
----------------------------
THIS Certificate of Trust of WILLOWBRIDGE STRATEGIC TRUST (the
"Trust"), dated October 16, 1995, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form
a business trust under the Delaware Business Trust Act (12 Del.C. ss. 3801 et
seq.).
1. Name. The name of the business trust formed hereby is
WILLOWBRIDGE STRATEGIC TRUST.
2. Delaware Trustee. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective
as of its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
as trustee
By:
----------------------------------------
Name:
Title:
47