Exhibit 3(ii)
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
AND
TRUST AGREEMENT
OF
WORLD MONITOR 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
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Page
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ARTICLE I
DEFINITIONS; THE TRUST............................................................................................1
SECTION 1.1 Definitions........................................................................1
SECTION 1.2 Name...............................................................................7
SECTION 1.3 Delaware Trustee; Business Offices.................................................7
SECTION 1.4 Declaration of Trust...............................................................7
SECTION 1.5 Purposes and Powers................................................................7
SECTION 1.6 Tax Treatment......................................................................8
SECTION 1.7 General Liability of the Managing Owner............................................8
SECTION 1.8 Legal Title........................................................................9
SECTION 1.9 Series Trust.......................................................................9
ARTICLE II
THE TRUSTEE.......................................................................................................9
SECTION 2.1 Term; Resignation..................................................................9
SECTION 2.2 Powers............................................................................10
SECTION 2.3 Compensation and Expenses of the Trustee..........................................10
SECTION 2.4 Indemnification...................................................................10
SECTION 2.5 Successor Trustee.................................................................10
SECTION 2.6 Liability of Trustee..............................................................11
SECTION 2.7 Reliance; Advice of Counsel.......................................................12
ARTICLE III
INTERESTS; CAPITAL CONTRIBUTIONS.................................................................................13
SECTION 3.1 General...........................................................................13
SECTION 3.2 Limited Interests.................................................................14
SECTION 3.3 Establishment of Series of Interests..............................................21
SECTION 3.4 Establishment of Classes..........................................................22
SECTION 3.5 Assets of Series..................................................................22
SECTION 3.6 Liabilities of Series.............................................................23
SECTION 3.7 Dividends and Distributions.......................................................24
SECTION 3.8 Voting Rights.....................................................................25
SECTION 3.9 Equality..........................................................................25
SECTION 3.10 Exchange of Interests.............................................................25
ARTICLE IV
THE MANAGING OWNER...............................................................................................26
SECTION 4.1 Management of the Trust...........................................................26
SECTION 4.2 Authority of Managing Owner.......................................................26
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SECTION 4.3 Obligations of the Managing Owner.................................................29
SECTION 4.4 General Prohibitions..............................................................31
SECTION 4.5 Liability of Covered Persons......................................................32
SECTION 4.6 Indemnification of the Managing Owner.............................................32
SECTION 4.7 Expenses..........................................................................34
SECTION 4.8 Compensation to the Managing Owner................................................35
SECTION 4.9 Other Business of Interestholders.................................................35
SECTION 4.10 Voluntary Withdrawal of the Managing Owner........................................35
SECTION 4.11 Authorization of Registration Statements..........................................35
SECTION 4.12 Litigation........................................................................36
ARTICLE V
TRANSFERS OF INTERESTS...........................................................................................36
SECTION 5.1 General Prohibition...............................................................36
SECTION 5.2 Transfer of Managing Owner's General Interests....................................36
SECTION 5.3 Transfer of Limited Interests.....................................................37
ARTICLE VI
DISTRIBUTION AND ALLOCATIONS.....................................................................................40
SECTION 6.1 Capital Accounts..................................................................40
SECTION 6.2 Weekly Allocations................................................................40
SECTION 6.3 Allocation of Profit and Loss for United States Federal Income Tax
Purposes..........................................................................40
SECTION 6.4 Allocation of Distributions.......................................................42
SECTION 6.5 Admissions of Interestholders; Transfers..........................................42
SECTION 6.6 Liability for State and Local and Other Taxes.....................................43
ARTICLE VII
REDEMPTIONS......................................................................................................43
SECTION 7.1 Redemption of Interests...........................................................43
SECTION 7.2 Redemption by the Managing Owner..................................................45
SECTION 7.3 Redemption Fee....................................................................45
SECTION 7.4 Exchange of Interests.............................................................45
ARTICLE VIII
THE LIMITED OWNERS...............................................................................................45
SECTION 8.1 No Management or Control; Limited Liability.......................................45
SECTION 8.2 Rights and Duties.................................................................46
SECTION 8.3 Limitation on Liability...........................................................47
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ARTICLE IX
BOOKS OF ACCOUNT AND REPORTS.....................................................................................48
SECTION 9.1 Books of Account..................................................................48
SECTION 9.2 Annual Reports and Monthly Statements.............................................48
SECTION 9.3 Tax Information...................................................................48
SECTION 9.4 Calculation of Net Asset Value of a Series........................................48
SECTION 9.5 Other Reports.....................................................................48
SECTION 9.6 Maintenance of Records............................................................49
SECTION 9.7 Certificate of Trust..............................................................49
SECTION 9.8 Registration of Interests.........................................................49
ARTICLE X
FISCAL YEAR......................................................................................................49
SECTION 10.1 Fiscal Year.......................................................................49
ARTICLE XI
AMENDMENT OF TRUST AGREEMENT; MEETINGS...........................................................................50
SECTION 11.1 Amendments to the Trust Agreement.................................................50
SECTION 11.2 Meetings of the Trust.............................................................51
SECTION 11.3 Action Without a Meeting..........................................................52
ARTICLE XII
TERM.............................................................................................................52
SECTION 12.1 Term..............................................................................52
ARTICLE XIII
TERMINATION......................................................................................................52
SECTION 13.1 Events Requiring Dissolution of the Trust or any Series...........................52
SECTION 13.2 Distributions on Dissolution......................................................54
SECTION 13.3 Termination; Certificate of Cancellation..........................................54
ARTICLE XIV
POWER OF ATTORNEY................................................................................................55
SECTION 14.1 Power of Attorney Executed Concurrently...........................................55
SECTION 14.2 Effect of Power of Attorney.......................................................55
SECTION 14.3 Limitation on Power of Attorney...................................................56
ARTICLE XV
MISCELLANEOUS....................................................................................................56
SECTION 15.1 Governing Law.....................................................................56
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SECTION 15.2 Provisions In Conflict With Law or Regulations....................................57
SECTION 15.3 Construction......................................................................57
SECTION 15.4 Notices...........................................................................57
SECTION 15.5 Counterparts......................................................................57
SECTION 15.6 Binding Nature of Trust Agreement.................................................57
SECTION 15.7 No Legal Title to Trust Estate....................................................58
SECTION 15.8 Creditors.........................................................................58
SECTION 15.9 Integration.......................................................................59
EXHIBIT A
CERTIFICATE OF TRUST OF
WORLD MONITOR TRUST..............................................................................................60
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WORLD MONITOR TRUST
THIRD AMENDED AND RESTATED DECLARATION OF TRUST
AND TRUST AGREEMENT
This THIRD AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST
AGREEMENT of WORLD MONITOR 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) entered into a
Declaration of Trust and Trust Agreement dated December 17, 1997 (and amended
the same on February 25, 1998 and March 17, 1998 (the "Amended and Restated
Trust Agreement")); and
WHEREAS, the parties hereto desire to amend certain
provisions of the Amended and Restated Trust Agreement related to the
governance of the Trust and to restate in detail and in their entirety their
respective rights and duties relating to the Trust.
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, except for minor exceptions, 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 Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities of the Managing Owner; (ii) any Person 10%
or more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote, by the Managing Owner; (iii) any
Person, directly or indirectly, controlling, controlled by, or under common
control of the Managing Owner; (iv) any officer, director or partner of the
Managing Owner; or (v) if such Person is an officer, director or partner of
the Managing Owner, any Person for which such Person acts in any such
capacity.
"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.
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"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 or any Series in 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 Contracts, forward
contracts, foreign exchange positions and traded 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.
"Dealing Day" shall have the meaning set forth in the Prospectus.
"Disposition Gain" means, for each Fiscal Year of the Trust, the
Series' aggregate recognized gain (including the portion thereof, if any,
treated as ordinary income) resulting from each disposition of Series 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 Series for federal income tax purposes
pursuant to Section 988 or 1256 (or any successor provisions) of the Code.
"Disposition Loss" means, for each Fiscal Year of the Trust, the
Series' aggregate recognized loss (including the portion thereof, if any,
treated as ordinary loss) resulting from
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each disposition of Series 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 Series
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.
"Incentive Fee" shall have the meaning set forth in the Prospectus.
"Initial Offering Period" means the period with respect to a Series
commencing with the initial effective date of the Prospectus and terminating
no later than the one hundred and twentieth (120th) day following such date
unless extended for up to an additional 60 days at the sole discretion of the
Managing Owner.
"Interestholders" means the Managing Owner and all Limited Owners, as
holders of Interests of a Series, 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 a Series 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 each Series of the Trust,
losses of the Series 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 Series for such Fiscal Year shall not
enter into such computations.
"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.
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"Management Fee" shall have the meaning set forth in the Prospectus.
"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 of a Series" means the total assets in the Trust
Estate of a Series 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 Series, 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 of a Series shall include any unrealized
profit or loss on open Commodities positions, and any other credit or
debit accruing to the Series but unpaid or not received by the
Series.
(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 of a Series 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 of a Series 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 a Series 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 of a Series 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 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.
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(c) Interest earned on a Series' commodity brokerage account
shall be accrued at least weekly.
(d) The amount of any distribution made pursuant to Article
VI hereof shall be a liability of the Series from the day when the
distribution is declared until it is paid.
"Net Asset Value of a Series per Interest" means the Net Asset Value
of a Series divided by the number of Interests of a Series 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.
"New High Net Trading Profits" shall have the meaning set forth in
the Prospectus.
"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, "Benefit Plan Investor" (as
defined in the Prospectus) or other legal entity.
"Profits" means, for each Fiscal Year of each Series 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 a Series for such Fiscal Year shall not enter into such
computations.
"Prospectus" means the final prospectus and disclosure document of
the Trust and each Series thereof, constituting a part of each 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(s) of the Registration
Statement(s).
"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 Dealing Day upon which Interests held by
the Interestholders may be redeemed in accordance with the provisions of
Article VII hereof.
"Registration Statement" means a registration statement on Form S-1,
as amended, filed for a Series with the Securities and Exchange Commission
pursuant to which the Trust registered the Limited Interests of a Series, as
the same may at any time and from time to time be further amended or
supplemented.
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"Series" means a separate series of the Trust as provided in Sections
3806(b)(2) and 3804 of the Business Trust Statute, the Interests of which
shall be beneficial interests in the Trust Estate separately identified with
and belonging to such Series.
"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 Advisor" means Eagle Trading Systems Inc. for the Series A
Interests, Eclipse Capital Management, Inc. for the Series B Interests and
Hyman Beck & Company, Inc. for the Series C Interests, 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 a Series, and any substitute(s) therefor as
provided herein.
"Trust" means the World Monitor Trust formed 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, with respect to a Series, any cash, commodity
futures, forward and option contracts, all funds on deposit in the Series'
accounts, and any other property held by the Series, and all proceeds
therefrom, including any rights of the Series pursuant to any Subscription
Agreement and any other agreements to which the Trust or a Series thereof is a
party.
"Valuation Date" means the date as of which the Net Asset Value of a
Series is determined.
"Valuation Period" means a regular period of time between Valuation
Dates.
"Valuation Point" means the close of business on Friday of each week
or such other day as may be determined by the Managing Owner.
6
SECTION 1.2 Name. The name of the Trust is "World Monitor 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 sole Trustee of the Trust 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 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 2 American Lane, Greenwich, CT
06801.
SECTION 1.4 Declaration of Trust. The Trustee hereby acknowledges
that the Trust has received the sum of $1,000 per Series in bank accounts in
the name of each Series of the Trust 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 that each Series in 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 of each Series for purposes of taxation under the Code and
applicable state and local tax laws. Effective as of the date hereof, the
Trustee and the Managing Owner 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 and each
Series shall be (a) to trade, buy, sell, spread or otherwise acquire, hold or
dispose of commodity futures, forward and option contracts, including foreign
futures, forward contracts and foreign exchange positions worldwide; (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
7
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, (i) expresses its intention that the Interests of each Series will
qualify under applicable tax law as interests in a partnership which holds the
Trust Estate of each Series 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 each Series as a partnership
in which each of the Interestholders thereof is a partner and (iii) agrees to
use reasonable efforts to notify the Managing Owner promptly upon a receipt of
any notice from any taxing authority having jurisdiction over such holders of
Interests of such Series 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) of each Series shall initially
be the Managing Owner. The Tax Matters Partner, at the expense of each Series,
(i) shall prepare or cause to be prepared and filed each Series' 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 Series' tax items; (B) the
power to extend the statute of limitations for all Interestholders with
respect to the Series' tax items; (C) the power to file a petition with an
appropriate federal court for review of a final administrative adjustment of a
Series; 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 Series, 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 by each Interestholder of a Series in
this Section 1.6(b) is hereby approved by each Interestholder of such Series
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, each Series
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 each Series of the Trust, to the extent not paid
out of the assets of the Series, to the same extent the Managing Owner would
be so liable if each Series were a partnership under
8
the Delaware Revised Uniform Limited Partnership Act and the Managing Owner
were a general partner of such partnership. The foregoing provision shall not,
however, limit the ability of the Managing Owner to limit its liability by
contract. The obligations of the Managing Owner under this Section 1.7 shall
be evidenced by its ownership of the General Interests which, solely for
purposes of the Business Trust Statute, will be deemed to be a separate class
of Interests in each Series. Without limiting or affecting the liability of
the Managing Owner as set forth in this Section 1.7, notwithstanding anything
in this Trust Agreement to the contrary, Persons having any claim against the
Trust by reason of the transactions contemplated by this Trust Agreement and
any other agreement, instrument, obligation or other undertaking to which the
Trust is a party, shall look only to the Trust Estate in accordance with
Section 3.6 hereof for payment or satisfaction thereof.
(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 or any Series
thereof.
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.
SECTION 1.9 Series Trust. The Interests of the Trust shall be divided
into Series as provided in Section 3806(b)(2) of the Business Trust Statute.
Accordingly, it is the intent of the parties hereto that Articles IV, V, VI,
VII, VIII, IX, X and XIII of this Trust Agreement shall apply also with
respect to each such Series as if each such Series were a separate business
trust under the Business Trust Act, and each reference to the term "Trust" in
such Articles shall be deemed to be a reference to each Series to the extent
necessary to give effect to the foregoing intent. The use of the terms "Trust"
or "Series" in this Agreement shall in no event alter the intent of the
parties hereto that the Trust receive the full benefit of the limitation on
interseries liability as set forth in Section 3804 of the Business Trust
Statute.
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
9
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 (other than the Trust) 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 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. The Indemnified
Parties shall not be entitled to indemnification 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
10
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 in accordance
with Section 3.6 hereof 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;
(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 Advisor(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
11
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 (i) 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 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 Managing Owner or an Affiliate of the Managing
Owner (other than the Trust) (i) 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.
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ARTICLE III
INTERESTS; CAPITAL CONTRIBUTIONS
SECTION 3.1 General.
(a) The Managing Owner shall have the power and authority, without
Limited Owner approval, to issue Interests in one or more Series from time to
time as it deems necessary or desirable. Each Series shall be separate from
all other Series in respect of the assets and liabilities allocated to that
Series and shall represent a separate investment portfolio of the Trust. The
Managing Owner shall have exclusive power without the requirement of Limited
Owner approval to establish and designate such separate and distinct Series,
as set forth in Section 3.3, and to fix and determine the relative rights and
preferences as between the Interests of the separate Series as to right of
redemption, special and relative rights as to dividends and other
distributions and on liquidation, conversion rights, and conditions under
which the Series shall have separate voting rights or no voting rights.
(b) The Managing Owner may, without Limited Owner approval, divide
Interests of any Series into two or more classes, Interests of each such class
having such preferences and special or relative rights and privileges
(including exchange rights, if any) as the Managing Owner may determine as
provided in Section 3.4. The fact that a Series shall have been initially
established and designated without any specific establishment or designation
of classes, shall not limit the authority of the Managing Owner to divide a
Series and establish and designate separate classes thereof.
(c) The number of Interests authorized shall be unlimited, and the
Interests so authorized may be represented in part by fractional Interests.
From time to time, the Managing Owner may divide or combine the Interests of
any Series or class into a greater or lesser number without thereby changing
the proportionate beneficial interests in the Series or class. The Managing
Owner may issue Interests of any Series or class thereof for such
consideration and on such terms as it may determine (or for no consideration
if pursuant to an Interest dividend or split-up), all without action or
approval of the Limited Owners. All Interests when so issued on the terms
determined by the Managing Owner shall be fully paid and non-assessable. The
Managing Owner may classify or reclassify any unissued Interests or any
Interests previously issued and reacquired of any Series or class thereof into
one or more Series or classes thereof that may be established and designated
from time to time. The Managing Owner may hold as treasury Interests, reissue
for such consideration and on such terms as it may determine, or cancel, at
its discretion from time to time, any Interests of any Series or class thereof
reacquired by the Trust. The Interests of each Series shall initially be
divided into two classes: General Interests and Limited Interests.
(d) The Managing Owner and/or its Affiliates will make and maintain a
permanent investment in each Series as more specifically set forth in Section
3.2.
(e) No certificates or other evidence of beneficial ownership of the
Interests will be issued.
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(f) 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 Series A Limited Interests.
(i) Series A Initial Offering Period. During the Initial
Offering Period, the Trust shall offer pursuant to Securities and
Exchange Commission Rule 415, at an offering price of $100 per
Series A Limited Interest, a maximum of 340,000 Limited Interests
($34,000,000). 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.
(ii) Effect of the Sale of at least 40,000 Series A Interests.
In the event that at least 40,000 Series A Limited Interests are
sold to at least 150 subscribers during the Initial Offering Period
for the Series A Interests (including both Limited Interests offered
pursuant to the Prospectus and Limited 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
Series A 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 Series A of the Trust reflecting that such subscribers
have been admitted as Limited Owners of Series A Interests, as soon
as practicable after the termination of the Series A Initial
Offering Period. Such accepted subscribers will be deemed Series A
Limited Owners at such time as such admission is reflected on the
books and records of Series A of the Trust.
(iii) Paid-In Capital if at least 40,000 Series A Interests Are
Sold. In the event that at least 40,000 Series A Limited Interests
are sold during the Initial Offering Period, Series A shall have
paid-in capital of not less than $4,080,400 (including the Managing
Owner's contribution for the General Interests as provided in
Section 3.1(d) and in Section 3.2(a)(v) hereof).
(iv) Effect of the Sale of Less than 40,000 Series A Interests.
In the event that at least 40,000 Series A Limited Interests are not
sold during the Initial Offering Period for the Series A Interests,
all proceeds of the sale of Series A 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 for the Series A Interests
(or as soon thereafter as practicable if payment cannot be made in
such time period). Such action will not terminate Series A.
(v) Required Contribution of Managing Owner. In the event that
40,000 or more of the Series A Limited Interests offered pursuant to
the Prospectus are sold during the Initial Offering Period for the
Series A Interests, the Managing Owner
14
and/or its Affiliates shall be required to contribute in cash to the
capital of Series A an amount, which, when added to the total
contributions to Series A by all Series A Interestholders, will be
not less than one percent (1%) of such total contributions, and in
no event shall such contribution be less than $40,000 (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 Series A an amount not less
than 1.01% of any additional Capital Contributions received from the
Series A Limited Owners. The Managing Owner and/or its Affiliates
may, but are not obligated to, make additional Capital Contributions
at any time during the Series A Initial or Continuous Offering
Periods. The Managing Owner and/or its Affiliates will receive
Series A General Interests. The Managing Owner and/or its Affiliates
shall, with respect to any Series A Interests owned by them, enjoy
all of the rights and privileges and be subject to all of the
obligations and duties of a Series A Limited Owner, in addition to
rights and privileges the Managing Owner has as Managing Owner,
except as otherwise provided herein. 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 Series A) in each
material item of Series A 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.
(vi) Offer of Series A Limited Interests After Initial Offering
Period. In the event that 40,000 or more of the Series A Limited
Interests are sold during the Initial Offering Period for the Series
A Interests, the Trust may continue to offer Series A Limited
Interests and admit additional Series A Limited Owners and/or accept
additional contributions from existing Series A Limited Owners
pursuant to the Prospectus.
Each additional Capital Contribution to Series A during the
Series A Continuous Offering Period by an existing Series A Limited
Owner must be in a denomination which is an even multiple of $100.
During the Series A Continuous Offering Period, each newly admitted
Series A Limited Owner, and each existing Series A Limited Owner
that makes an additional Capital Contribution to Series A, shall
receive Series A Limited Interests in an amount equal to such
Capital Contribution or additional Capital Contribution, as the case
may be, divided by the Series A Net Asset Value per Series per
Interest calculated as of the Valuation Point immediately prior to
the Dealing Day on which such Capital Contribution will become
effective.
A Subscriber (including existing Series A Limited Owners
contributing additional sums) whose subscription is received and
accepted by the Managing Owner after the termination of the Initial
Offering Period for Series A Interests shall be admitted to the
Trust and deemed a Series A Limited Owner with respect to that
subscription on the Dealing Day which occurs at least five (5)
Business Days after the Subscriber's Subscription Agreement or
Exchange Request is received by the Trust's selling agent, counting
the day of receipt by such selling agent as one Business Day.
(vii) Subscription Agreement. Each Series A Limited Owner who
purchases any Limited Interests offered pursuant to the Prospectus
shall contribute to the
15
capital of Series A 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. If the Managing Owner
determines to accept subscription funds by check, such funds shall
be subject to prompt collection. All subscriptions are subject to
acceptance by the Managing Owner.
(viii) Escrow Agreement. All proceeds from the sale of Series A
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 for the Series A Interests. In the event subscriptions for at
least 40,000 of the Series A Interests are received and accepted
during the Initial Offering for the Series A Interests, all interest
earned on the proceeds of subscriptions from accepted subscribers
for Series A Limited Interests during its Initial Offering Period
will be contributed to Series A, for which the Series A Limited
Owners will receive additional Series A Interests on a pro rata
basis (taking into account time and amount of deposit).
(ix) Optional Purchase of Series A Limited Interests. Subject
to approval by the Managing Owner, any commodity broker, any Trading
Advisor, and any principals, stockholders, directors, officers,
employees and affiliates of the Managing Owner and/or its
Affiliates, any commodity broker, and any Trading Advisor, may
purchase any number of Series A Limited Interests and will be
treated as Series A Limited Owners with respect to such Interests.
In addition to the Series A Interests required to be purchased by
the Managing Owner and/or its Affiliates under Section 3.2(a)(v),
the Managing Owner and/or its Affiliates also may purchase any
number of Series A Limited Interests as it or they determine in its
or their discretion.
(b) Offer of Series B Limited Interests.
(i) Series B Initial Offering Period. During the Initial
Offering Period, the Trust shall offer pursuant to Securities and
Exchange Commission Rule 415, at an offering price of $100 per
Series B Limited Interest, a maximum of 330,000 Series B Limited
Interests ($33,000,000). 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
Series B Limited Interests as it deems appropriate.
(ii) Effect of the Sale of at least 30,000 Series B Interests.
In the event that at least 30,000 Series B Limited Interests are
sold to at least 150 subscribers during the Initial Offering Period
for the Series B Interests (including both Limited Interests offered
pursuant to the Prospectus and Limited 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
Series B Limited Owners, by causing such Limited Owners to execute
this Trust Agreement, pursuant to the Power of Attorney set
16
forth in the Subscription Agreement, and by making an entry on the
books and records of Series B of the Trust reflecting that such
subscribers have been admitted as Limited Owners of Series B
Interests, as soon as practicable after the termination of the
Series B Initial Offering Period. Such accepted subscribers will be
deemed Series B Limited Owners at such time as such admission is
reflected on the books and records of Series B of the Trust.
(iii) Paid-In Capital if at least 30,000 Series B Interests Are
Sold. In the event that at least 30,000 Series B Limited Interests
are sold during the Initial Offering Period, Series B shall have
paid-in capital of not less than $3,060,300 (including the Managing
Owner's contribution for the General Interests as provided in
Section 3.1(d) and in Section 3.2(b)(v) hereof).
(iv) Effect of the Sale of Less than 30,000 Series B Interests.
In the event that at least 30,000 Series B Limited Interests are not
sold during the Initial Offering Period for the Series B Interests,
all proceeds of the sale of Series B 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 for the Series B Interests
(or as soon thereafter as practicable if payment cannot be made in
such time period). Such action will not terminate Series B.
(v) Required Contribution of Managing Owner. In the event that
30,000 or more of the Series B Limited Interests offered pursuant to
the Prospectus are sold during the Initial Offering Period for the
Series B Interests, the Managing Owner and/or its Affiliates shall
be required to contribute in cash to the capital of Series B an
amount, which, when added to the total contributions to Series B by
all Series B Interestholders, will be not less than one percent (1%)
of such total contributions, and in no event shall such contribution
be less than $30,000 (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
Series B an amount not less than 1.01% of any additional Capital
Contributions received from the Series B Limited Owners. The
Managing Owner and/or its Affiliates may, but are not obligated to,
make additional Capital Contributions at any time during the Series
B Initial or Continuous Offering Periods. The Managing Owner and/or
its Affiliates will receive Series B General Interests. The Managing
Owner and/or its Affiliates shall, with respect to any Series B
Interests owned by them, enjoy all of the rights and privileges and
be subject to all of the obligations and duties of a Series B
Limited Owner, in addition to rights and privileges the Managing
Owner has as Managing Owner, except as otherwise provided herein.
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 Series B) in each material item of Series B 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.
(vi) Offer of Series B Limited Interests After Initial Offering
Period. In the event that 30,000 or more of the Series B Limited
Interests are sold during the
17
Initial Offering Period for the Series B Interests, the Trust may
continue to offer Series B Limited Interests and admit additional
Series B Limited Owners and/or accept additional contributions from
existing Series B Limited Owners pursuant to the Prospectus as
amended or supplemented from time to time.
Each additional Capital Contribution to Series B during the
Series B Continuous Offering Period by an existing Series B Limited
Owner must be in a denomination which is an even multiple of $100.
During Series B Continuous Offering Period, each newly admitted
Series B Limited Owner, and each existing Series B Limited Owner
that makes an additional Capital Contribution to Series B, shall
receive Series B Limited Interests in an amount equal to such
Capital Contribution or additional Capital Contribution, as the case
may be, divided by the Series B Net Asset Value per Interest
calculated as of the Valuation Point immediately prior to the
Dealing Day on which such Capital Contribution will become
effective.
A Subscriber (including existing Series B Limited Owners
contributing additional sums) whose subscription is received and
accepted by the Managing Owner after the termination of the Initial
Offering Period for Series B Interests shall be admitted to the
Trust and deemed a Series B Limited Owner with respect to that
subscription on the first Dealing Day which occurs at least five (5)
Business Days after the Subscriber's Subscription Agreement or
Exchange Request is received by the Trust's selling agent, counting
the day of receipt by such selling agent as one Business Day.
(vii) Subscription Agreement. Each Series B Limited Owner who
purchases any Limited Interests offered pursuant to the Prospectus
shall contribute to the capital of Series B 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.
(viii) Escrow Agreement. All proceeds from the sale of Series B
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 for the Series B Interests. In the event subscriptions for at
least 30,000 of the Series B Interests are received and accepted
during the Initial Offering for the Series B Interests, all interest
earned on the proceeds of subscriptions from accepted subscribers
for Series B Limited Interests during its Initial Offering Period
will be contributed to Series B, for which the Series B Limited
Owners will receive additional Series B Interests on a pro rata
basis (taking into account time and amount of deposit).
18
(ix) Optional Purchase of Series B Limited Interests. Subject
to approval by the Managing Owner, any commodity broker, any Trading
Advisor, and any principals, stockholders, directors, officers,
employees and affiliates of the Managing Owner and/or its
Affiliates, any commodity broker, and any Trading Advisor, may
purchase any number of Series B Limited Interests and will be
treated as Series B Limited Owners with respect to such Interests.
In addition to the Series B Interests required to be purchased by
the Managing Owner and/or its Affiliates under Section 3.2(b)(v),
the Managing Owner and/or its Affiliates also may purchase any
number of Series B Limited Interests as it or they determine in its
or their discretion.
(c) Offer of Series C Limited Interests.
(i) Series C Initial Offering Period. During the Initial
Offering Period, the Trust shall offer pursuant to Securities and
Exchange Commission Rule 415, at an offering price of $100 per
Series C Limited Interest, a maximum of 330,000 Series C Limited
Interests ($33,000,000). No fractional Limited Interests shall be
issued during the Initial Offering Period. 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.
(ii) Effect of the Sale of at least 30,000 Series C Interests.
In the event that at least 30,000 Series C Limited Interests are
sold to at least 150 subscribers during the Initial Offering Period
for the Series C Interests (including both Limited Interests offered
pursuant to the Prospectus and Limited 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
Series C 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 Series C of the Trust reflecting that such subscribers
have been admitted as Limited Owners of Series C Interests, as soon
as practicable after the termination of the Series C Initial
Offering Period. Such accepted subscribers will be deemed Series C
Limited Owners at such time as such admission is reflected on the
books and records of Series C of the Trust.
(iii) Paid-In Capital if at least 30,000 Series C Interests Are
Sold. In the event that at least 30,000 Series C Limited Interests
are sold during the Initial Offering Period, Series C shall have
paid-in capital of not less than $3,060,300 (including the Managing
Owner's contribution for the General Interests as provided in
Section 3.1(d) and in Section 3.2(c)(v) hereof).
(iv) Effect of the Sale of Less than 30,000 Series C Interests.
In the event that at least 30,000 Series C Limited Interests are not
sold during the Initial Offering Period for the Series C Interests,
all proceeds of the sale of Series C 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 for the Series C
19
Interests (or as soon thereafter as practicable if payment cannot be
made in such time period). Such action will not terminate Series C.
(v) Required Contribution of Managing Owner. In the event that
30,000 or more of the Series C Limited Interests offered pursuant to
the Prospectus are sold during the Initial Offering Period for the
Series C Interests, the Managing Owner and/or its Affiliates shall
be required to contribute in cash to the capital of Series C an
amount, which, when added to the total contributions to Series C by
all Series C Interestholders, will be not less than one percent (1%)
of such total contributions, and in no event shall such contribution
be less than $30,000 (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
Series C an amount not less than 1.01% of any additional Capital
Contributions received from the Series C Limited Owners. The
Managing Owner and/or its Affiliates may, but are not obligated to,
make additional Capital Contributions at any time during the Series
C Initial or Continuous Offering Periods. The Managing Owner and/or
its Affiliates will receive Series C General Interests. The Managing
Owner and/or its Affiliates shall, with respect to any Series C
Interests owned by them, enjoy all of the rights and privileges and
be subject to all of the obligations and duties of a Series C
Limited Owner, in addition to rights and privileges the Managing
Owner has as Managing Owner except as otherwise provided herein.
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 Series C) in each material item of Series C 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.
(vi) Offer of Series C Limited Interests After Initial Offering
Period. In the event that 30,000 or more of the Series C Limited
Interests are sold during the Initial Offering Period for the Series
C Interests, the Trust may continue to offer Series C Limited
Interests and admit additional Series C Limited Owners and/or accept
additional contributions from existing Series C Limited Owners
pursuant to the Prospectus as amended or supplemented from time to
time.
Each additional Capital Contribution to Series C during the
Series C Continuous Offering Period by an existing Series C Limited
Owner must be in a denomination which is an even multiple of $100.
During Series C Continuous Offering Period, each newly admitted
Series C Limited Owner, and each existing Series C Limited Owner
that makes an additional Capital Contribution to Series C, shall
receive Series C Limited Interests in an amount equal to such
Capital Contribution or additional Capital Contribution, as the case
may be, divided by the Series C Net Asset Value per Interest
calculated as of the Valuation Point immediately prior to the
Dealing Day on which such Capital Contribution will become
effective.
A Subscriber (including existing Series C Limited Owners
contributing additional sums) whose subscription is received and
accepted by the Managing Owner after the termination of the Initial
Offering Period for Series C Interests shall be admitted to the
Trust and deemed a Series C Limited Owner with respect to that
subscription on
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the first Dealing Day which occurs at least five (5) Business Days
after the Subscriber's Subscription Agreement or Exchange Request is
received by the Trust's selling agent, counting the day of receipt
by such selling agent as one Business Day.
(vii) Subscription Agreement. Each Series C Limited Owner who
purchases any Limited Interests offered pursuant to the Prospectus
shall contribute to the capital of Series C 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.
(viii) Escrow Agreement. All proceeds from the sale of Series C
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 for the Series C Interests. In the event subscriptions for at
least 30,000 of the Series C Interests are received and accepted
during the Initial Offering for the Series C Interests, all interest
earned on the proceeds of subscriptions from accepted subscribers
for Series C Limited Interests during its Initial Offering Period
will be contributed to the Series C, for which the Series C Limited
Owners will receive additional Series C Interests on a pro rata
basis (taking into account time and amount of deposit).
(ix) Optional Purchase of Series C Limited Interests. Subject
to approval by the Managing Owner, any commodity broker, any Trading
Advisor, and any principals, stockholders, directors, officers,
employees and affiliates of the Managing Owner and/or its
Affiliates, any commodity broker, and any Trading Advisor, may
purchase any number of Series C Limited Interests and will be
treated as Series C Limited Owners with respect to such Interests.
In addition to the Series C Interests required to be purchased by
the Managing Owner and/or its Affiliates under Section 3.2(c)(v),
the Managing Owner and/or its Affiliates also may purchase any
number of Series C Limited Interests as it or they determine in its
or their discretion.
(d) Termination of the Trust. If the minimum number of Interests in
each Series being offered are not sold during the Initial Offering Period for
each Series, then 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.
SECTION 3.3 Establishment of Series of Interests.
(a) Without limiting the authority of the Managing Owner set forth in
Section 3.3(b) to establish and designate any further Series, the Managing
Owner hereby establishes and designates three initial Series, as follows:
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Series A, Series B and Series C
The provisions of this Article III shall be applicable to the above-designated
Series and any further Series that may from time to time be established and
designated by the Managing Owner as provided in Section 3.3(b).
(b) The establishment and designation of any Series of Interests
other than those set forth above shall be effective upon the execution by the
Managing Owner of an instrument setting forth such establishment and
designation and the relative rights and preferences of such Series, or as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular Series previously established and designated,
the Managing Owner may by an instrument executed by it abolish that Series and
the establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Trust Agreement.
SECTION 3.4 Establishment of Classes. The division of any Series into
two or more classes and the establishment and designation of such classes
shall be effective upon the execution by the Managing Owner of an instrument
setting forth such division, and the establishment, designation, and relative
rights and preferences of such classes, or as otherwise provided in such
instrument. The relative rights and preferences of the classes of any Series
may differ in such respects as the Managing Owner may determine to be
appropriate, provided that such differences are set forth in the
aforementioned instrument. At any time that there are no Interests outstanding
of any particular class previously established and designated, the Managing
Owner may by an instrument executed by it abolish that class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Trust Agreement.
SECTION 3.5 Assets of Series. All consideration received by the Trust
for the issue or sale of Interests of a particular Series together with all of
the Trust Estate in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors of such Series and except as may
otherwise be required by applicable tax laws, and shall be so recorded upon
the books of account of the Trust. Separate and distinct records shall be
maintained for each Series and the assets associated with a Series shall be
held and accounted for separately from the other assets of the Trust, or any
other Series. In the event that there is any Trust Estate, or any income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Series, the Managing Owner
shall allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as the Managing
Owner, in its sole discretion, deems fair and equitable. Each such allocation
by the Managing Owner shall be conclusive and binding upon all Interestholders
for all purposes.
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SECTION 3.6 Liabilities of Series.
(a) The Trust Estate belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series and only
that Series; and all expenses, costs, charges and reserves attributable to
that Series, and any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any particular
Series, shall be allocated and charged by the Managing Owner to and among any
one or more of the Series established and designated from time to time in such
manner and on such basis as the Managing Owner in its sole discretion deems
fair and equitable. Each allocation of liabilities, expenses, costs, charges
and reserves by the Managing Owner shall be conclusive and binding upon all
Interestholders for all purposes. The Managing Owner shall have full
discretion, to the extent not inconsistent with applicable law, to determine
which items shall be treated as income and which items as capital, and each
such determination and allocation shall be conclusive and binding upon the
Interestholders. Every written agreement, instrument or other undertaking made
or issued by or on behalf of a particular Series shall include a recitation
limiting the obligation or claim represented thereby to that Series and its
assets.
(b) Without limitation of the foregoing provisions of this Section,
but subject to the right of the Managing Owner in its discretion to allocate
general liabilities, expenses, costs, charges or reserves as herein provided,
the debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Series shall be enforceable
against the assets of such Series only and against the Managing Owner, and not
against the assets of the Trust generally or (ii) of any other Series. Notice
of this limitation on interseries liabilities shall be set forth in the
Certificate of Trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Business Trust Statute, and upon the giving of such
notice in the Certificate of Trust, the statutory provisions of Section 3804
of the Business Trust Statute relating to limitations on interseries
liabilities (and the statutory effect under Section 3804 of setting forth such
notice in the Certificate of Trust) shall become applicable to the Trust and
each Series. Every Interest, note, bond, contract, instrument, certificate or
other undertaking made or issued by or on behalf of a particular Series shall
include a recitation limiting the obligation on Interests represented thereby
to that Series and its assets.
(c) (i) Except as set forth below, any debts, liabilities,
obligations, indebtedness, expenses, interests and claims of any nature and
all kinds and descriptions (collectively, "Claims and Interests"), if any, of
the Managing Owner and the Trustee (the "Subordinated Claims") incurred,
contracted for or otherwise existing, arising from, related to or in
connection with all Series, any combination of Series or one particular Series
and their respective assets (the "Applicable Series") and the assets of the
Trust shall be expressly subordinate and junior in right of payment to any and
all other Claims against the Trust and any Series thereof, and any of their
respective assets, which may arise as a matter of law or pursuant to any
contract, provided, however, that the Claims of each of the Managing Owner and
the Trustee (if any) against the Applicable Series shall not be considered
Subordinated Claims with respect to enforcement against and distribution and
repayment from the Applicable Series, the Applicable Series' assets and the
Managing Owner and its assets; and provided further that the valid Claims of
either the Managing Owner or the Trustee, if any, against the Applicable
Series shall be pari passu and equal in right of repayment and distribution
with all other valid Claims
23
against the Applicable Series and (ii) the Managing Owner and the Trustee will
not take, demand or receive from any Series or the Trust or any of their
respective assets (other than the Applicable Series, the Applicable Series'
assets and the Managing Owner and its assets) any payment for the Subordinated
Claims;
(ii) The Claims of each of the Managing Owner and the Trustee
with respect to the Applicable Series shall only be asserted and
enforceable against the Applicable Series, the Applicable Series'
assets and the Managing Owner and its assets; and such Claims shall
not be asserted or enforceable for any reason whatsoever against any
other Series, the Trust generally, or any of their respective
assets;
(iii) If the Claims of the Managing Owner or the Trustee
against the Applicable Series or the Trust are secured in whole or
in part, each of the Managing Owner and the Trustee hereby waives
(under section 1111(b) of the Bankruptcy Code (11 U.S.C. ss.
1111(b)) any right to have any deficiency Claims (which deficiency
Claims may arise in the event such security is inadequate to satisfy
such Claims) treated as unsecured Claims against the Trust or any
Series (other than the Applicable Series), as the case may be;
(iv) In furtherance of the foregoing, if and to the extent that
the Managing Owner and the Trustee receive monies in connection with
the Subordinated Claims from a Series or the Trust (or their
respective assets), other than the Applicable Series, the Applicable
Series' assets and the Managing Owner and its assets, the Managing
Owner and the Trustee shall be deemed to hold such monies in trust
and shall promptly remit such monies to the Series or the Trust that
paid such amounts for distribution by the Series or the Trust in
accordance with the terms hereof; and
(v) The foregoing Consent shall apply at all times
notwithstanding that the Claims are satisfied, and notwithstanding
that the agreements in respect of such Claims are terminated,
rescinded or canceled.
(d) Any agreement entered into by the Trust, any Series, or the
Managing Owner, on behalf of the Trust generally or any Series, including,
without limitation, the Subscription Agreement entered into with each
Interestholder, will include language substantially similar to the language
set forth in Section 3.6(c).
SECTION 3.7 Dividends and Distributions.
(a) Dividends and distributions on Interests of a particular Series
or any class thereof may be paid with such frequency as the Managing Owner may
determine, which may be daily or otherwise, to the Interestholders in that
Series or class, from such of the income and capital gains, accrued or
realized, from the Trust Estate belonging to that Series, or in the case of a
class, belonging to that Series and allocable to that class, as the Managing
Owner may determine, after providing for actual and accrued liabilities
belonging to that Series. All dividends and distributions on Interests in a
particular Series or class thereof shall be distributed pro rata to the
Interestholders in that Series or class in proportion to the total outstanding
Interests in that Series or class held by such Interestholders at the date and
time of record
24
established for the payment of such dividends or distribution, except to the
extent otherwise required or permitted by the preferences and special or
relative rights and privileges of any Series or class. Such dividends and
distributions may be made in cash or Interests of that Series or class or a
combination thereof as determined by the Managing Owner or pursuant to any
program that the Managing Owner may have in effect at the time for the
election by each Interestholder of the mode of the making of such dividend or
distribution to that Interestholder.
(b) The Interests in a Series or a class of the Trust shall represent
beneficial interests in the Trust Estate belonging to such Series or in the
case of a class, belonging to such Series and allocable to such class. Each
Interestholder in a Series or a class shall be entitled to receive its pro
rata share of distributions of income and capital gains made with respect to
such Series or such class. Upon reduction or withdrawal of its Interests or
indemnification for liabilities incurred by reason of being or having been a
holder of Interests in a Series or a class, such Interestholder shall be paid
solely out of the funds and property of such Series or in the case of a class,
the funds and property of such Series and allocable to such class of the
Trust. Upon liquidation or termination of a Series of the Trust,
Interestholders in such Series or class shall be entitled to receive a pro
rata share of the Trust Estate belonging to such Series or in the case of a
class, belonging to such Series and allocable to such class.
SECTION 3.8 Voting Rights. Notwithstanding any other provision
hereof, on each matter submitted to a vote of the Interestholders of a Series,
each Interestholder shall be entitled to a proportionate vote based upon the
product of the Net Asset Value of a Series per Interest multiplied by the
number of Interests, or fraction thereof, standing in its name on the books of
such Series. As to any matter which affects the Interests of more than one
Series, the Interestholders of each affected Series shall be entitled to vote,
and each such Series shall vote as a separate class.
SECTION 3.9 Equality. Except as provided herein or in the instrument
designating and establishing any class or Series, all Interests of each
particular Series shall represent an equal proportionate beneficial interest
in the assets belonging to that Series subject to the liabilities belonging to
that Series, and each Interest of any particular Series or classes shall be
equal to each other Interest of that Series or class; but the provisions of
this sentence shall not restrict any distinctions permissible under Section
3.7 that may exist with respect to dividends and distributions on Interests of
the same Series or class. The Managing Owner may from time to time divide or
combine the Interests of any particular Series or class into a greater or
lesser number of Interests of that Series or class without thereby changing
the proportionate beneficial interest in the assets belonging to that Series
or in any way affecting the rights of Interestholders of any other Series or
class.
SECTION 3.10 Exchange of Interests. Subject to compliance with the
requirements of applicable law, the Managing Owner shall have the authority to
provide that Interestholders of any Series shall have the right to exchange
said Interests into one or more other Series in accordance with such
requirements and procedures as may be established by the Managing Owner. The
Managing Owner shall also have the authority to provide that Interestholders
of any class of a particular Series shall have the right to exchange said
Interests into one or more other classes of that particular Series or any
other Series in accordance with such requirements and procedures as may be
established by the Managing Owner.
25
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 or any
Series in 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, provided, however, that in no
event shall the fees payable by the Trust for such services exceed
14% annually of the average Net Asset Value of each Series,
excluding the Series' assets not directly related to trading
activity, which fees shall include fees related to out-of-pocket
brokerage expenses, in accordance with limitations imposed by
Section IV. the NASAA Guidelines on March 17, 1998; and provided
further, to the extent that such limitations are amended to become
more restrictive, 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 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) (A) commodity trading advisory services relating to the
purchase and sale of all Commodities positions on behalf of each
Series, 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 Management Fees and Incentive Fees payable by the
Trust for such services exceed 6% of a Series' Net Asset Value and
15% of a Series' New High Net Trading Profits, respectively, except
that for each 1% reduction in Management Fees below 6% of a Series'
Net Asset Value, Incentive Fees
26
may be increased by an additional 2% of Net High Net Trading
Profits; and (B) administrative services necessary to the prudent
operation of the Trust, provided, however, that in no event shall
the fees payable by the Trust for administrative services (which do
not include Management Fees, Incentive Fees, or commodity brokerage
services, legal and audit services or extraordinary expenses), when
combined with Management Fees, exceed 6% annually of the Net Asset
Value of each Series, each in accordance with the limitations set
forth in Section IV. of the NASAA Guidelines on March 17, 1998;
provided, however, that to the extent that such limitations are
amended to become more restrictive, 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 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 each Series 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 each Series;
(f) To invest or direct the investment of funds of any Series not
then delegated to a Trading Advisor(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 each Series 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 Series;
(h) To redeem mandatorily any Limited Interests upon at least ten
(10) days' prior written notice, if (i) the Managing Owner determines that the
continued participation of such Limited Owner in the Trust might cause the
Trust, a Series in the Trust or any Interestholder to be deemed to be 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
27
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,
and if the concurrence of at least a majority in interest (over 50%) of the
outstanding Interests of all Series (not including Interests owned by the
Managing Owner) is not obtained;
(j) To override any trading instructions: (i) 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 Advisor 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 Advisors or to pay the expenses of any Series
in the Trust; and provided further, that the Managing Owner may make
Commodities trading decisions at any time at which any Trading Advisor shall
become incapacitated or some other emergency shall arise as a result of which
such Trading Advisor shall be unable or unwilling to act and a successor
Trading Advisor has not yet been retained;
(k) Monitor the trading activities of the Trading Advisor so that:
(i) Any Series 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 of a Series.
(ii) Any Series 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 of a Series. 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, a Series may be required to commit
as margin in excess of the foregoing limit. In such event the
Managing Owner will cause each Trading Advisor to reduce its open
futures or options positions to comply with the foregoing limit
before initiating new Commodities positions.
28
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 each Series of the
Trust and for the conduct of its business in all appropriate jurisdictions;
(c) Retain independent public accountants to audit the accounts of
each Series in the Trust;
(d) Employ attorneys to represent the Trust or a Series thereof;
(e) Use its best efforts to maintain the status of the Trust as a
"business trust" for state law purposes, and of each Series of the Trust as a
"partnership" for federal income tax purposes;
(f) Monitor the trading policies and limitations of each Series, as
set forth in the Prospectus, and the activities of the Trust's Trading
Advisor(s) in carrying out those policies in compliance with the Prospectus;
(g) Monitor the brokerage fees charged to each Series, and the
services rendered by futures commission merchants to each Series, to determine
whether the fees paid by, and the services rendered to, each Series 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 each Series. 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 (i) 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 a
description of the Limited Owners' redemption rights as set forth in Section
7.1 hereof, and (ii) consent of the Limited Owners holding Interests
representing at least a majority (over 50%) in Net Asset Value of the Series
affected (excluding Interests held by the Managing Owner). No increase in such
fees shall take effect except at the beginning of a Fiscal Quarter following
consent of the Limited Owners as provided in this subparagraph (g);
(h) Have fiduciary responsibility for the safekeeping and use of the
Trust Estate of each Series, 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 each Series (including any interest earned
thereon as provided for in the Prospectus) in any manner except as and to the
extent permitted by the NASAA Guidelines for the benefit of each Series in 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
29
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 each Series 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 Owner (collectively, the "Covered Persons"), has duties
(including fiduciary duties) and liabilities relating thereto to any Series,
any other Interestholder or Covered Person or the Trustee, such Covered Person
acting under the Trust Agreement shall not be liable to the Series, 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 the
Subscription Minimum (as defined in the Prospectus), 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, $1,000,000, 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 generally accepted accounting principles;
(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;
(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; and
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(m) Notify the Interestholders within seven (7) days from the date
of:
(i) any material change in contracts with any Series' Trading
Advisor;
(ii) any material modification made in the calculation of the
Incentive Fee paid to any Trading Advisor; and
(iii)any material change affecting the compensation of any
person compensated by a Series.
SECTION 4.4 General Prohibitions. The Trust or any Series shall
not:
(a) Borrow money from or loan money to any Interestholder or other
Person or any other Series, except that the foregoing is not intended to
prohibit (i) the deposit on margin with respect to the initiation and
maintenance of each Series' Commodities positions or (ii) obtaining lines of
credit for the trading of forward contracts; provided, however, that each
Series is prohibited from incurring any indebtedness on a non-recourse basis;
(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 (i) the right and/or obligation of a commodity
broker to close out sufficient commodities positions of each Series so as to
restore the Series' account to proper margin status in the event that the
Series 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, or with those of any other Series;
(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 Advisor(s) may take into account the Series' open
trade equity on existing positions in determining generally whether to acquire
additional Commodities positions on behalf of the Series;
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(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 Advisor(s) to share in any portion of
brokerage fees related to commodity brokerage services paid by a Series 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) (i) 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;
(j) Enter into any exclusive brokerage contract; and
(k) operate the Trust in any manner so as to contravene section 3804
of the Business Trust Statute.
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 or a Series
thereof against any losses, judgments, liabilities, expenses and amounts paid
in settlement of any claims sustained by it in connection with its activities
for a particular Series of the Trust, provided that (i) the Managing Owner was
acting on behalf of or performing services for the relevant Series and has
determined, in good faith, that such course of conduct was in the best
interests of the Series 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, or the filing of a voluntary
or involuntary petition in bankruptcy under Title 11 of the
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U.S. Code by or against 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, it being understood that the source of payments
made in respect of indemnification under this Trust Agreement shall be the
assets of each Series on a pro rata basis, as the case may be.
(b) Notwithstanding the provisions of Section 4.6(a) above, the
Managing Owner and any Person acting as broker-dealer for each Series 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 (i) 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.
(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 (i) the legal action relates to the performance
of duties or services by the Managing Owner on behalf of the Trust or a
particular Series 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
advance; 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 or any Series thereof and acting
within the scope of the Managing Owner's authority as set forth in this Trust
Agreement.
(g) In the event the Trust or any Series 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
33
or in connection with any Limited Owner's (or assignee's) obligations or
liabilities unrelated to 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.
(h) The payment of any amount pursuant to this Section shall be
subject to Section 3.6 with respect to the allocation of liabilities and other
amounts, as appropriate, among the Series of the Trust.
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 each Series thereof 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: (i) 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.
(b) All ongoing charges, costs and expenses of the Trust's operation,
including, but not limited to, the routine expenses associated with (i)
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)
routine services of the Trustee, legal counsel, auditors and accountants,
whether employed directly or by Affiliates of the Managing Owner; (v) postage,
insurance and filing fees; (vi) client relations and services and (vii)
computer equipment and system development shall be billed to and paid by the
Managing Owner or an Affiliate of the Managing Owner. All ongoing expenses
associated with (I) the fixed fee to be paid to the Managing Owner and/or its
Affiliates consistent with applicable regulatory guidelines, (II) required
payments to the Trust's Trading Advisors and (III) extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto) shall be billed to and/or paid
by the appropriate Series of the Trust, subject to such other limitations as
are set forth herein concerning the limitations on the Series' liability for
the liabilities of another Series.
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(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 or any series thereof
for which payment one or more Series of the Trust is responsible. In addition,
payment to the Managing Owner or such Affiliate for indirect expenses incurred
in performing services for the Trust or any Series thereof, 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
Section 4.7(b)(I) and 7.3 (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 as described in the
Prospectus.
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 Interests
equal to at least a majority (over 50%) of the Net Asset Value of each Series
(excluding Interests held by the withdrawing Managing Owner). If the
withdrawing Managing Owner is the last remaining Managing Owner, Limited
Owners holding Interests equal to at least a majority (over 50%) of the Net
Asset Value of each Series (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 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 of a
Series thereof on the next Redemption Date following the date of removal or
withdrawal.
SECTION 4.11 Authorization of Registration Statements. 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 Statements 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.
35
SECTION 4.12 Litigation. The Managing Owner is hereby authorized to
prosecute, defend, settle or compromise actions or claims at law or in equity
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 (to the extent that it is permitted to do so under the
various other provisions of this Agreement) 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 any Series in 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 statute, 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 or liquidator for itself or of all or any substantial part
of its properties.
(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 5.2(a) or 5.2(c).
36
(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 each Series' tax
classification as a partnership, to avoid having any Series classified as a
publicly traded partnership or to avoid adverse legal consequences to any
Series in the Trust.
(i) A substituted Limited Owner is a permitted assignee that
has been admitted to any Series 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
Series 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 Series.
(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 Series'
transactions or to inspect the Series' 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 Limited Owner, regardless of
whether his permitted assignee becomes a substituted Limited Owner.
(iii) A Limited Owner shall bear all extraordinary costs
(including attorneys' and accountants' fees), if any, 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;
37
(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, acknowledgment 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 (A)
the assignment will not jeopardize the Series' tax classification as
a partnership and (B) the assignment does not violate this Trust
Agreement or the Business Trust Statute.
(c) Any Person admitted to any Series 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 each Series of the Trust as
a partnership for federal income tax purposes or to preserve the
characterization or treatment of any Series' income or loss; or (B) 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 Series 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
Dealing Day of the next succeeding week, provided the Managing Owner
shall have been in receipt of the
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written instrument of assignment for at least five (5) Business 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
week immediately following the week 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 Series 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 any Series 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 forth in
Paragraph F(2) of Article V thereof, which precludes any assignment
(except for assignments by gift, inheritance, intra family
assignment, family dissolutions and transfers to affiliates), which
would result in either the assignee or the assignor holding
Interests in any combination of Series valued at less than $5,000
(or $2,000 in the case of IRAs), provided, however, that this
limitation shall not apply in respect of a Limited Owner wishing to
assign its or his entire interest in all Series of 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 of any Series.
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
39
a Series 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 any Series
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 any Series
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 Series in which an Interest is
owned Trust (such account sometimes hereinafter referred to as a "book capital
account"). The initial balance of each Interestholder's book capital account
shall be the amount of his initial Capital Contribution to a Series.
SECTION 6.2 Weekly Allocations. As of the close of business (as
determined by the Managing Owner) on the Valuation Point of each week 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 of
a Series as of such date as compared to the next previous determination of Net
Asset Value of a Series 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 each Series, the
Series' recognized profit and loss shall be allocated among the
Interestholders pursuant to the following subparagraphs for
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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 Series shall be allocated pro
rata among the Interestholders based on their respective book capital accounts
as of the last day of each week in which such Profits or Losses accrued.
(b) Next, Disposition Gain or Disposition Loss from the Series'
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 Series 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.
(ii) Disposition Gain realized during any week 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 week, 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 week that remains
after the allocation pursuant to Section 6.3(b)(ii) above shall be
allocated to those Interestholders who were Interestholders during
such week in the ratio that each such Interestholder's book capital
account bears to all such Interestholders' book capital accounts for
such week.
(iv) Disposition Loss realized during any week 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 week, 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 week that remains
after the allocation pursuant to Section 6.3(b)(iv) above shall be
allocated to those Interestholders
41
who were Interestholders during such week in the ratio that each
such Interestholder's book capital account bears to all such
Interestholders' book capital accounts for such calendar week.
(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).
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 a Series shall make with respect to the Interests;
provided, however, that a Series 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 Dealing Day following the week in which
such Interestholder's Subscription Agreement or Exchange Request, as the case
may be, is received, provided the Managing Owner shall have been in receipt of
such Subscription Agreement or Exchange Request for at least five (5) Business
Days, or in which 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.
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SECTION 6.6 Liability for State and Local and Other Taxes. In the
event that any Series shall be separately subject to taxation by any state or
local or by any foreign taxing authority, the Series shall be obligated to pay
such taxes to such jurisdiction. In the event that the Series 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 Series income,
the amount of such taxes shall be considered a loan by the Series to such
Interestholder, and such Interestholder shall be liable for, and shall pay to
the Series, any taxes so required to be withheld and paid over by the Series
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 Series
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 Series to the
Interestholder in respect of its Interests so redeemed, or in respect of any
other actual distribution by the Series to such Interestholder, shall be
reduced by any obligations owed to the Series by the Interestholder,
including, without limitation, the amount of any taxes required to be paid
over by the Series to the IRS or other taxing authority and interest thereon
as aforesaid. Amounts, if any, deducted by the Series 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.
ARTICLE VII
REDEMPTIONS
SECTION 7.1 Redemption of Interests. The Interestholders recognize
that the profitability of any Series depends upon long-term and uninterrupted
investment of capital. It is agreed, therefore, that Series 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 a Series. 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 a Limited Interest or portion thereof on the first Dealing Day
following the date the Managing Owner is in receipt of an acceptable form of
written notice of redemption for at least five (5) Business Days (a
"Redemption Date"). Interests will be redeemed on a "first in, first out"
basis based on time of receipt of redemption requests at a redemption price
equal to the Net Asset Value of a Series per Interest calculated as of the
Valuation Point immediately preceding the applicable Redemption Date. 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.
43
(b) The value of an Interest for purposes of redemption shall be the
book capital account balance of such Interest at the Valuation Point
immediately preceding 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. 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 a Series of such Interests upon redemption.
(c) The effective date of redemption shall be the Redemption Date,
and payment of the value of the redeemed Interests (except for Interests
redeemed as part of an Exchange as provided in Section 7.4) generally shall be
made within ten (10) Business Days following the Redemption Date; provided,
that all liabilities, contingent or otherwise, of the Trust or any Series in
the Trust, except any liability to Interestholders on account of their Capital
Contributions, have been paid or there remains property of the Series
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(d) 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 five (5) Business Days.
(d) 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 five (5) Business
Days following the Redemption Date whether or not their Interests will be
redeemed, unless payment for the redeeming Interests is made within that five
(5) Business Day period, in which case the notice of acceptance of the
redemption shall not be required.
(e) 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
44
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).
(f) Interests that are redeemed shall be extinguished and shall not
be retained or reissued by the Trust or any Series.
(g) Except as discussed above, all requests for redemption in proper
form will be honored, and the Series' 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.
SECTION 7.3 Redemption Fee. The Managing Owner will receive a
redemption fee, as provided in the Prospectus, of percentage of the Net Asset
Value of an Interest of any Series redeemed during the first and second
successive six-month periods following the effective date of its purchase.
This redemption fee will not be charged if the Limited Owner simultaneously
(i) exchanges the redeemed Interest or portion thereof for an Interest of
equal value in another Series, or (ii) invests the redemption proceeds in
another futures fund sponsored by the Managing Owner and/or its Affiliates.
SECTION 7.4 Exchange of Interests. Interests in one Series may be
exchanged, without applicability of redemption fees, for Interests of
equivalent value of any other Series (an "Exchange") on any Dealing Day,
subject to the conditions on Redemptions in this Article VII, except that an
Exchange will be made on the first Dealing Day following the date the Managing
Owner is in receipt of an Exchange Request for at least five (5) Business
Days.
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 any Series
thereof or have the power to sign for or bind the Trust or any Series thereof,
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 of
any Series in which such Limited Owners owns an Interest and profits remaining
in the Series, if any. Except as provided in Section 8.3 hereof, 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.
45
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 (or any Series thereof in which it holds an
Interest), 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.
(b) The Limited Owners shall receive from the Series in which they
hold Interests, 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 Series in which they hold Interests 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. Except with respect to Series or
class differences, 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 Interests representing at least a majority
(over 50%) in Net Asset Value of each affected Series (not including Interests
held by the Managing Owner and its Affiliates, including the commodity broker)
voting separately as a class may vote to (i) continue the Series 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 a Series, or the brokerage fees
paid by a Series, 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 Series as provided in
46
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
any Series of the Trust in excess of his Capital Contribution to that Series
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 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, on a pro rata basis among Series, to
the full extent permitted by law and the other provisions of this Agreement,
and 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 one or more Series' Interests (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. Nothing
contained in this Section 8.3 shall diminish the limitation on the liability
of each Series to the extent set forth in Section 3.5 and 3.6 hereof.
47
ARTICLE IX
BOOKS OF ACCOUNT AND REPORTS
SECTION 9.1 Books of Account. Proper books of account for each Series
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 Series' 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 any Series, including such access as is required under CFTC rules and
regulations. Such books of account shall be kept, and each Series 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 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 of a Series. Net Asset
Value of a Series will be estimated as required. Upon request, on any Business
Day, the Managing Owner shall make available to any Limited Owner the
estimated Net Asset Value of a Series per Interest. Each Limited Owner shall
be notified of any decline in the estimated Net Asset Value of a Series per
Interest to less than 50% of the Net Asset Value of a Series 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.
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 (a) any
material change in the terms of the Advisory Agreement, including any change
in the Trading Advisor 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
48
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
(a) 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 Series' 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. The Certificate of Trust shall not be
amended in any respect if the effect of such amendment is to diminish the
limitation on interseries liability under Section 3804 of the Business Trust
Statute.
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 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 Trust shall commence on the date of filing of the Certificate of
Trust and end on the 31st day of December 1997. The Fiscal Year in which any
Series in the Trust shall terminate shall end on the date of termination of
the Series.
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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 Interests equal to at least ten
percent (10%) of the Net Asset Value of each Series of the Trust, unless the
proposed amendment affects only certain Series, in which case such amendment
may be proposed by Limited Owners holding Interests equal to at least ten
percent (10%) of Net Asset Value of a Series of each affected Series.
Following such proposal, the Managing Owner shall submit to the Limited Owners
of each affected Series 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 Interests equal to at least a
majority (over 50%) of the Net Asset Value of a Series (excluding Interests
held by the Managing Owner and its Affiliates) of the Trust or, if the
proposed amendment affects only certain Series, of each affected Series, 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 amendments to this Trust Agreement which (i) 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
50
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 each Series
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.
(f) No provision of this Agreement may be amended, waived or
otherwise modified orally but only by a written instrument adopted in
accordance with this Section.
SECTION 11.2 Meetings of the Trust. Meetings of the Interestholders
of the Trust or any Series thereof may be called by the Managing Owner and
will be called by it upon the written request of Limited Owners holding
Interests equal to at least ten percent (10%) of the Net Asset Value of a
Series of the Trust or any Series thereof. 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 Trust or
any Series thereof of the meeting and the purpose of the meeting, which shall
be held on a date, not less than thirty (30) 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.
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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 by written consent setting forth the actions so taken. Such written
consents shall be treated for all purposes as votes at a meeting. If the vote
or consent of any Interestholder to any action of the Trust or any
Interestholder, as contemplated by this Agreement, is solicited by the
Managing Owner, the solicitation shall be effected by notice to each
Interestholder given in the manner provided in Section 15.4. The vote or
consent of each Interestholder so solicited shall be deemed conclusively to
have been cast or granted as requested in the notice of solicitation, whether
or not the notice of solicitation is actually received by that Interestholder,
unless the Interestholder expresses written objection to the vote or consent
by notice given in the manner provided in Section 15.4 below and actually
received by the Trust within 20 days after the notice of solicitation is
effected. The Managing Owner and all persons dealing with the Trust shall be
entitled to act in reliance on any vote or consent which is deemed cast or
granted pursuant to this Section and shall be fully indemnified by the Trust
in so doing. Any action taken or omitted in reliance on any such deemed vote
or consent of one or more Interestholders shall not be void or voidable by
reason of timely communication made by or on behalf of all or any of such
Interestholders in any manner other than as expressly provided in Section
15.4.
ARTICLE XII
TERM
SECTION 12.1 Term. The term for which the Trust and each Series is to
exist shall commence on the date of the filing of the Certificate of Trust,
and shall expire on December 31, 2047, 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 of the Trust or any Series.
The Trust or, as the case may be, any Series thereof shall dissolve at any
time upon the happening of any of the following events:
(a) The expiration of the Trust term as provided in Article XII
hereof.
(b) The filing of a certificate of dissolution or revocation of the
Managing Owner's charter (and the expiration of 90 days after the date of
notice to the Managing Owner of revocation without a reinstatement of its
charter) or upon the withdrawal, removal, adjudication or admission of
bankruptcy or insolvency of the Managing Owner (each of the foregoing events
an "Event of Withdrawal") unless (i) at the time there is at least one
remaining Managing Owner and that remaining Managing Owner carries on the
business of the Trust and each Series 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 each Series and to select, effective as
of the date of such event, one or more successor Managing Owners. If the Trust
is terminated as the
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result of an Event of Withdrawal and a failure of all remaining
Interestholders to continue the business of the Trust and to 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 Interests representing at least a majority (over 50%) of the Net Asset
Value of each Series (not including Interests held by the Managing Owner and
its Affiliates) may elect to continue the business of the Trust and each
Series thereof 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
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 or any Series thereof, as the case may be.
(d) The failure to sell the Subscription Minimums (as defined in the
Prospectus) of all Series or any number of Series to at least 150 subscribers
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 or, as the case may be, any Series becomes insolvent or
bankrupt.
(g) The Limited Owners holding Interests representing at least a
majority (over 50%) of the Net Asset Value of a Series (which excludes the
Interests of the Managing Owner) vote to dissolve the Series, notice of which
is sent to the Managing Owner not less than ninety (90) Business Days prior to
the effective date of such Series' termination.
(h) The Limited Owners of each Series holding Interests representing
at least a majority (over 50%) of the Net Asset Value of the Series (which
excludes the Interests of the Managing Owner) vote to dissolve 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 terminations.
(i) The decline of the Net Asset Value of a Series of the Trust
Estate by fifty percent (50%) from the Net Asset Value of a Series of the
Trust Estate (i) at the commencement of the Series' 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.
(j) The determination of the Managing Owner that the Series'
aggregate net assets in relation to the operating expenses of the Series make
it unreasonable or imprudent to continue the business of the Series, or, in
the exercise of its reasonable discretion, the determination of the Managing
Owner to dissolve a Series because the aggregate Net Asset Value of such
Series as of the close of business on any Business Day declines below $5
million.
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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 or any
Series thereof, 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
Series in which they own an Interest and any right to an audit or examination
of the books of the Series in which they own an Interest, except for such
rights as are set forth in Article IX hereof relating to the Books of Account
and reports of the Series.
SECTION 13.2 Distributions on Dissolution. Upon the dissolution of
the Trust or any Series, 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 full charge
of the Series 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 or Series 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: (a) 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
Series 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 Series, 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 Series, the Managing Owner will contribute to the
Series 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 Series to its creditors, and the balance, if any, shall be
distributed to those Interestholders in the Series 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 all Series 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.
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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:
(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
55
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.
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: (a) 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
56
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.
(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 sent electronically, by facsimile or by overnight courier; 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, upon transmission and electronic confirmation
thereof or upon deposit with a representative of an overnight courier, as the
case may be. 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
57
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.
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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.
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: Rosemay 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: PREFERRED INVESTMENT SOLUTIONS CORP.,
as Managing Owner
By: Joseph J. Allessie
--------------------------------------
Name: Joseph J. Allessie
Title: Secretary
59
EXHIBIT A
CERTIFICATE OF TRUST
OF
WORLD MONITOR TRUST
This Certificate of Trust is filed in accordance with the provisions
of the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.) and sets
forth the following:
FIRST: The name of the trust is World Monitor Trust (the "Trust").
SECOND: The name and the business address of the Delaware trustee
is Wilmington Trust Company, Rodney Square North, 1110 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
THIRD: Pursuant to Section 3806(b)(2) of the Delaware Business Trust
Act, the Trust shall issue one or more series of beneficial interests having
the rights, powers and duties as set forth in the Declaration of Trust and
Trust Agreement of the Trust dated December 17, 1997, as the same may be
amended from time to time (each a "Series").
FOURTH: Notice of Limitation of Liability of each Series: Pursuant to
Section 3804 of the Delaware Business Trust Act, there shall be a limitation
on liability of each particular Series such that the debts, liabilities,
claims, obligations and expenses incurred, contracted for or otherwise
existing with respect to, in connection with or arising under a particular
Series shall be enforceable against the assets of that Series only, and not
against the assets of the Trust generally or the assets of any other Series.
WILMINGTON TRUST COMPANY, Trustee
By: /s/ Debra Eberly
---------------------------------------
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