Document:

ex10-06.htm

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

EXHIBIT 10.06

 

ADVISORY AGREEMENT

 

THIS AGREEMENT, made as of October 15, 2013 among OASIS PR LLC, a Delaware limited liability company and (the “Trading Company”), R.J. O’Brien Fund Management, LLC, a Delaware limited liability company (the “Managing Member”), and Prescient Ridge Management, LLC, an Illinois limited liability company (the “Trading Advisor”).

 

W I T N E S S E T H:

 

WHEREAS, the Trading Company has been organized as a Delaware limited liability company pursuant to its organizational documents to, among other things, directly or indirectly through a commodity trading advisor, trade, buy, sell, spread, or otherwise acquire, hold, or dispose of commodities (including, but not limited to, foreign currencies, mortgage-backed securities, money market instruments, financial instruments, and any other securities or items which are now, or may hereafter be, the subject of futures contract trading), domestic and foreign commodity futures contracts, forward contracts, foreign exchange commitments, options on physical commodities and on futures contracts, spot (cash) commodities and currencies, exchange of futures contracts for physicals transactions, exchange of physicals for futures contracts transactions, and any rights pertaining thereto, whether traded on an organized exchange or otherwise (hereinafter referred to collectively as “futures interests;” provided, however, such definition shall exclude securities futures products as defined by the Commodity Futures Trading Commission (“CFTC”), options in securities futures and options in equities) and securities (such as United States Treasury securities) approved by the CFTC for investment of customer funds and other securities on a limited basis, and to engage in all activities incident thereto; 

 

WHEREAS, the Trading Company is a master fund has or will have assets invested into it directly or indirectly by one or more entities, including, but not necessarily limited to limited to certain commodity pools operated by the Managing Owner;

 

WHEREAS, the principals of the Trading Advisor have extensive experience trading in futures interests and the Trading Advisor is willing to provide the services and undertake the obligations as set forth herein;

 

WHEREAS, the Trading Company and the Managing Member each desires the Trading Advisor to act as a trading advisor for the Trading Company and to make investment decisions with respect to futures interests for the Trading Company and the Trading Advisor desires so to act; and

 

WHEREAS, the Trading Company, the Managing Member and the Trading Advisor wish to enter into this Agreement which, among other things, sets forth certain terms and conditions upon which the Trading Advisor will conduct the futures interest trading with respect to a portion of the Trading Company’s assets, as described herein.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

	
1.         

	
Undertakings in Connection with Private Placements.

 

(a)         The Trading Advisor agrees (i) to make all disclosures regarding itself, its principals and affiliates, its trading performance, its trading systems, methods and strategies (subject to the need, in the reasonable discretion of the Trading Advisor, to preserve the secrecy of Proprietary Information (as defined in Section 1(c) hereof) concerning such systems, methods and strategies used on behalf of the Account(as defined in Section 4 hereof)), the Trading Company may reasonably require in connection with any private placement offerings in connection with this Agreement and (ii) to otherwise cooperate with the Trading Company and the Managing Member by providing information regarding the Trading Advisor in connection with the preparation of any private placement memorandum including any amendments and/or supplements thereto, as the Trading Company may reasonably request; provided that all such disclosures are subject to the need, in the reasonable discretion of the Trading Advisor, to preserve the secrecy of Proprietary Information concerning its clients, systems methods and strategies. As used herein, unless otherwise provided, the term “principal” shall have the meaning as defined in Rule 4.10(e) of the CFTC’s regulations and the term “affiliate” shall mean an individual or entity that directly or indirectly controls, is controlled by, or is under common control with, such party.

 

(b)         If the Trading Advisor becomes aware of any materially untrue or misleading statement or omission regarding itself or any of its principals or affiliates in the Program Materials (as defined in Section 17 hereof), or of the occurrence of any event or change in circumstances which would result in there being any materially untrue or misleading statement or omission in any private placement memorandum regarding Trading Advisor or any of its principals or affiliates, the Trading Advisor shall promptly notify the Managing Member and shall cooperate with the Managing Member in the preparation of any necessary amendments or supplements to any private placement memorandum. Neither the Trading Advisor nor any of its principals, or affiliates, shall on behalf of the Trading Company distribute a private placement memorandum or selling literature or shall engage in any selling activities whatsoever in connection with this Agreement except as may be specifically approved by the Managing Member and agreed to by the Trading Advisor.

 

  

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(c)         For purposes of this Agreement, and notwithstanding any of the provisions hereof, all non-public information relating to the Trading Advisor including, but not limited to, records, whether original, duplicated, computerized, handwritten, or in any other form, and information contained therein, business and/or marketing and/or sales plans and proposals, names of past and current clients, names of past, current and prospective contacts, trading methodologies, systems, strategies and programs, trading advice, trading instructions, results of proprietary accounts, training materials, research data bases, portfolios, and computer software, and all written and oral information, furnished by the Trading Advisor to the Trading Company or the Managing Member and/or their officers, directors, employees, agents (including, but not limited to, attorneys, accountants, consultants, and financial advisors) or controlling persons (each a “Recipient”), regardless of the manner in which it is furnished, together with any analysis, compilations, studies or other documents or records which are prepared by a Recipient of such information and which contain or are generated from such information, regardless of whether explicitly identified as confidential, with the exception of information which (i) is or becomes generally available to the public other than as a result of acts by the Recipient in violation of this Agreement, (ii) is in the possession of the Recipient prior to its disclosure with respect to this Agreement, (iii) is or becomes available to the Recipient from a source that is not hound by a confidentiality agreement with regard to such information or by any other legal obligation of confidentiality prohibiting such disclosure, or (iv) that is independently developed by the Recipient without use of the confidential information described in this Section 1(c), are and shall be confidential information and/or trade secrets and the exclusive property of the Trading Advisor (“Confidential Information” and/or “Proprietary Information”).

 

(d)         The Trading Company and the Managing Member each warrants and agrees that they and their respective officers, directors, members, equity holders, employees and agents (including for purposes of this Agreement, but not limited to, attorneys, accountants, consultants, and financial advisors) will protect and preserve the Confidential Information and will disclose Confidential Information or otherwise make Confidential Information available only to the Trading Company’s or the Managing Member’s officers, directors, members, equity holders, employees and agents (including for purposes of this Agreement, but not limited to, attorneys, accountants, consultants, and financial advisors), who need to know the Confidential Information (or any part of it) for the purpose of satisfying their fiduciary, legal, reporting, filing or other obligations hereunder or to monitor performance in the account during the term of this Agreement or thereafter, or to the Trading Company, Managing Member or a Recipient, as the case may be, is required to disclose such Confidential Information due to a fiduciary obligation or legal or regulatory request. Additionally, the Trading Company and the Managing Member each warrants and agrees that they and their respective officers, directors, members, equity holders, employees and agents and any Recipient will use the Confidential Information solely for the purpose of satisfying the Trading Company’s or the Managing Member’s obligations under this Agreement and not in a manner which violates the teens of this Agreement.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
2.         

	
Duties of the Trading Advisor.

 

(a)         Upon the commencement of trading operations on or about October 15, 2013 by the Trading Advisor with respect to all or a portion of the assets of the Trading Company, the Trading Advisor hereby agrees to act as a Trading Advisor for the Trading Company and, as such, shall have authority and responsibility for directing the investment and reinvestment of that portion of the Trading Company’s assets allocated to the Trading Advisor, which shall consist of the Allocated Net Assets (as defined in Section 5(c) hereof) plus “notional” funds, if any, allocated to the Trading Advisor, as specified in writing by the Managing Member and consented to by the Trading Advisor (the “Assets”), on the terms and conditions and in accordance with the prohibitions and the trading policies set forth in Exhibit A to this Agreement as amended from time to time and provided in writing to the Trading Advisor by the Managing Member (the “Trading Policies”); provided, however, that the Managing Member may override the instructions of the Trading Advisor without notice to the Trading Advisor to the extent necessary (i) to comply with the Trading Policies and with applicable speculative position limits or to comply with any applicable law or regulation. The Trading Advisor shall not be liable for the consequences of any decision by the Managing Member to override instructions of the Trading Advisor, except to the extent that such consequences result from Trading Advisor’s Failure to comply with the Managing Member’s decision to override an instruction. 

 

(b)         The Trading Advisor shall:

 

(i)         Exercise good faith in trading futures interests for the Account in accordance with the Trading Policies, and the trading systems, methods, and strategies of the Trading Advisor described in the Program Materials, with such changes and additions to such trading systems, methods or strategies as the Trading Advisor, from time to time, incorporates into its trading approach for accounts trading with a substantially similar investment strategy to the Account.

 

(ii)         Provide the Managing Member, within 10 business days of the end of a calendar quarter, and within 10 business days of a separate request which the Managing Member may make from time to time, with information comparing the performance of the Account and the performance of all other client accounts (“Other Accounts”) directed by the Trading Advisor using the trading systems used by the Trading Advisor on behalf of the Trading Company over a specified period of time for the purpose of confirming that the Trading Company has been treated equitably compared to such Other Accounts. In providing such information, the Trading Advisor may take such steps as are necessary to assure the confidentiality of the Trading Advisor’s clients’ identities. The Trading Advisor shall, upon the Managing Member’s request, consult with the Managing Member concerning any material discrepancies between the performance of such Other Accounts and the Account. The Trading Advisor shall promptly inform the Managing Member in writing of any material discrepancies of which the Trading Advisor is aware. The Managing Member acknowledges that the following differences in accounts may cause divergent trading results: different trading strategies, different asset levels, different methods or degrees of leverage, different trading policies, accounts experiencing differing inflows or outflows of equity, different risk profiles, accounts which commence trading at different times and accounts which have different portfolios or different fiscal years.

 

(iii)         Inform the Managing Member when the Trading Advisor’s open positions maintained by the Trading Advisor exceed the Trading Advisor’s applicable speculative position limits.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(iv)         Upon request of the Managing Member, promptly provide the Managing Member with all information concerning the Trading Advisor and its activities in connection with this Agreement that are reasonably requested by the Managing Member (including, without limitation, information relating to changes in control, key personnel, trading approach, or financial condition). Additionally, the Trading Advisor agrees to furnish R.J. O’Brien &Associates, LLC (“RJOB”) in an electronic format as requested by RJOB (i) a final report of all trades in connection with this Agreement at the end of each business day and (ii) a report of any trade in connection with this Agreement made involving a position with a required initial margin equal to 10% or more of the Assets within 30 minutes of the Trading Advisor’s receipt of confirmation, verbal or otherwise, from the executing broker that such a trade has been executed. The Trading Advisor further acknowledges and agrees that the timely provision of all such information is of the essence in order to enable the Trading Company, its designated entities, and RJOB to monitor and comply with mandatory risk control algorithms imposed upon the operation of the Trading Company.

 

(c)         All purchases and sales of futures interests pursuant to this Agreement shall be for the Account and at the risk of the Trading Company and not for the account, or at the risk of the Trading Advisor or any of its affiliates or any of their principals, members, managers, stockholders, directors, officers, or employees, or any other person, if any, who controls the Trading Advisor. All brokerage commissions and related transaction fees arising from such trading by the Trading Advisor shall be for the Account and paid by the Trading Company with respect to the Account.

 

(d)         Subject to Section 7(a) hereof, the Trading Advisor shall assume financial responsibility for any material errors committed or caused by it in transmitting orders for the purchase or sale of futures interests for the Account that result from the Trading Advisor’s gross negligence, fraud or willful misconduct. Material errors may include, but are not limited to, inputting improper trading signals or communicating incorrect orders to the Commodity Brokers (as described in Section 4 hereof). The Trading Advisor shall have an affirmative obligation to promptly notify the Managing Member upon discovery of its own material errors with respect to the Account, and the Trading Advisor shall use its reasonable efforts to identify and promptly notify the Managing Member of any order or trade which the Trading Advisor reasonably believes was not executed in accordance with its instructions to any Commodity Broker or such other commodity broker utilized to execute orders for the Trading Company.

 

(e)         Prior to the commencement of trading by the Trading Company, the Managing Member, on behalf of the Trading Company, shall deliver to the Trading Advisor a trading authorization appointing the Trading Advisor the Trading Company’s attorney-in-fact for such purpose (a form of which is attached hereto as Exhibit B).

 

(f)         In performing services to the Trading Company, the Trading Advisor shall utilize its managed futures program (the “Trading Program”), as described in Exhibit D, and as modified from time to time. The Trading Advisor shall give the Managing Member prior written notice of any change in the Trading Program that the Trading Advisor considers to be material (and shall not effect such change on behalf of the Trading Company without the Managing Member’s consent), including any additional futures interests to be traded by the Trading Advisor not already listed on Exhibit C. Changes in the futures interests traded, provided that such futures interests are listed on Exhibit C, shall not be deemed a modification of the Trading Program.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
3.         

	
Trading Advisor as an Independent Contractor.

 

For all purposes of this Agreement, the Trading Advisor shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized, have no authority to act for or represent the Trading Company in any way or otherwise be deemed an agent of the Trading Company. Nothing contained herein shall be deemed to require the Trading Company to take any action contrary to its governing documents as from time to time in effect, or any applicable law or rule or regulation of any regulatory or self-regulatory body, exchange, or board. Nothing herein contained shall constitute the Trading Advisor or the Managing Member as members of any partnership, joint venture, association, syndicate or other entity, or be deemed to confer on any of them any express, implied, or apparent authority to incur any obligation or liability on behalf of any other. It is expressly agreed that the Trading Advisor is neither a promoter, sponsor, nor issuer with respect to the Trading Company.

 

	
4.         

	
Futures Broker.

 

The Trading Advisor shall effect all transactions in futures interests for the Trading Company through the Trading Company’s separate account of the Trading Company to be traded exclusively by the Trading Advisor (the “Account”) maintained with RJOB or such commodity broker or brokers as the Managing Member shall direct and appoint from time to time (the “Futures Brokers”).

 

Notwithstanding the foregoing, the Trading Advisor may execute trades through brokers other than those employed by RJOB and its affiliates so long as arrangements (including executed give-up agreements) are made for such floor brokers to “give-up” or transfer the positions to RJOB in conformity with the Trading Policies set forth in Exhibit A attached hereto.

 

	
5.         

	
Fees.

 

(a)         For the services to be rendered to the Trading Company by the Trading Advisor under this Agreement:

 

(i)         The Trading Company shall pay the Trading Advisor a monthly management fee equal to 1/12 of *% (a *% annual rate) of the Assets allocated to it (as defined in Section 2(a) hereof) as of the last day of each month (the “Management Fee”). The Management Fee is payable in arrears within 20 Business Days of the end of the month for which it was calculated. For purposes of this Agreement, “Business Day” shall mean any day which the securities markets are open in the United States.

 

* Confidential material redacted and filed separately with the Commission.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(ii)         The Trading Company shall pay the Trading Advisor a quarterly incentive fee equal to *% of the New Trading Profit (as defined in Section 5(d) hereof) (the “Incentive Fee”). The initial incentive period will commence on the date the Trading Advisor commences trading the Account and shall end on the last day of the calendar quarter after such date. The Incentive Fee is payable within 20 Business Days of the end of the calendar quarter for which it was calculated.

 

(b)         If this Agreement is terminated on a date other than the last day of a calendar quarter, the Incentive Fee shall be determined as if such date were the end of a calendar quarter. If this Agreement is terminated on a date other than the end of a month, the Management Fee described above shall be determined as if such date were the end of a month, but such fee shall be prorated based on the ratio of the number of trading days in the month through the date of termination to the total number of trading days in the month. If, during any month after the Trading Advisor commences trading operations on behalf of the Account (including the month in which the Trading Advisor commences such operations), the Trading Company does not conduct business operations, or suspends trading for the Account, or, as a result of an act or material failure to act by the Trading Advisor, is otherwise unable to utilize the trading advice of the Trading Advisor on any of the trading days of that month for any reason, the Management Fee shall be prorated based on the ratio of the number of trading days in the month which the Account engaged in trading operations or utilizes the trading advice of the Trading Advisor to the total number of trading days in the month. The Management Fee payable to the Trading Advisor for the month in which the Trading Company begins to receive trading advice from the Trading Advisor pursuant to this Agreement shall be prorated based on the ratio of the number of trading days in the month from the day the Trading Company begins to receive such trading advice to the total number of trading days in the month. In the event that there is an increase or decrease in the Assets as of any day other than the first day of a month, the Trading Advisor shall be paid a pro rata Management Fee on such increase or decrease in the Assets for such month.

 

* Confidential material redacted and filed separately with the Commission.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(c)         The term “Allocated Net Assets” shall mean the total assets of the Trading Company allocated to the Account (including, but not limited to, all cash and cash equivalents, accrued interest and amortization of original issue discount, and the market value (marked-to-market) of all open futures interest positions and other assets of the Account) less all liabilities of the Trading Company with respect to the Account determined in accordance with generally accepted accounting principles consistently applied under the accrual basis of accounting. Unless generally accepted accounting principles require otherwise, the market value of a futures or option contract traded on a United States exchange shall mean the settlement price on the exchange on which the particular futures or option contract shall be traded by the Trading Advisor on behalf of the Account with respect to which the Net Assets are being determined; provided, however, that if a contract could not be liquidated on such day due to the operation of daily limits or other rules of the exchange on which that contract shall be traded or otherwise, the settlement price on the first subsequent day on which the contract could be liquidated shall be the market value of such contract for such day, or if a contract could not be liquidated on such day due to the exchange being closed for an exchange holiday, the settlement price on the most recent preceding day on which the contract could have been liquidated shall be the market value of such contract for such day. The market value of a forward contract or a futures or option contract traded on a foreign exchange or market shall mean its market value as determined by the Managing Member on a basis consistently applied for each different variety of contract.

 

(d)         The term “New Trading Profit” shall mean net futures interest trading profits (realized and unrealized) on the Assets, decreased proportionally by the Trading Advisor’s monthly Management Fees and brokerage commissions and NFA fees applicable to the Account. Interest income is not included in New Trading Profit. Extraordinary expenses do not reduce New Trading Profit. Such trading profits and items of decrease shall be determined from the end of the last calendar quarter in respect of which an Incentive Fee was earned by the Trading Advisor or, if no Incentive Fee has been earned previously by the Trading Advisor, from the date that the Trading Advisor commenced managing the Assets, to the end of the calendar quarter as of which such Incentive Fee calculation is being made. New Trading Profit shall be calculated before reduction for Incentive Fees paid or accrued so that the Trading Advisor does not have to earn back Incentive Fees.

 

(e)         If any payment of Incentive Fees is made to the Trading Advisor on account of New Trading Profit earned by the Trading Advisor and the Trading Advisor thereafter fails to earn New Trading Profit or experiences losses for any subsequent incentive period, the Trading Advisor shall be entitled to retain such amounts of Incentive Fees previously paid to the Trading Advisor in respect of such New Trading Profit. No Incentive Fees shall be payable to the Trading Advisor until the Trading Advisor has earned New Trading Profit; provided, however, that if the Assets are reduced because of redemptions that occur at the end of, and/or subsequent to, a calendar quarter in which the Trading Advisor experiences a futures interest trading loss for the Trading Company, the trading loss that must be recovered before the Trading Advisor will be deemed to experience New Trading Profit in a subsequent calendar quarter will be equal to the amount determined by (x) dividing the Assets after such decrease by the Assets in immediately before such decrease and (y) multiplying that fraction by the amount of the unrecovered futures interest trading loss prior to such decrease. In the event that the Trading Advisor experiences a trading loss in more than one calendar quarter without the Trading Company paying an intervening Incentive Fee and Assets are reduced in more than one such calendar quarter because of redemptions, then the trading loss for each such calendar quarter shall be adjusted in accordance with the formula described above and such reduced amount of futures interest trading loss shall be carried forward and used to offset subsequent futures interest trading profits. No Incentive Fees shall be payable to the Trading Advisor until the Trading Advisor has earned New Trading Profit.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
6.         

	
Term.

 

(a)         This Agreement shall continue in effect for a period of one year from the date the Agreement was entered into unless otherwise terminated as set forth in this Section 6. If the Agreement is not terminated upon the expiration of such one-year period, this Agreement shall automatically renew for an additional one-year period and shall continue to renew for additional one-year periods until this Agreement is otherwise terminated, as provided for herein. This Agreement shall automatically terminate if the Trading Company is dissolved.

 

(b)         The Trading Company and Managing Member each shall have the right to terminate this Agreement in its discretion (i) at any month end upon five days’ prior written notice to the Trading Advisor, or (ii) at any time upon prior written notice to the Trading Advisor upon the occurrence of any of the following events: (A) if any person described as a “principal” of the Trading Advisor in the Prospectus ceases for any reason to be an active “principal” of the Trading Advisor; (B) if the Trading Advisor becomes bankrupt or insolvent; (C) if the Trading Advisor is unable to use its trading systems or methods as in effect on the date hereof and as modified in the future for the benefit of the Trading Company; (D) if the registration, as a commodity trading advisor, of the Trading Advisor with the CFTC or its membership in the NFA is revoked, suspended, terminated, or not renewed, or limited or qualified in any respect; (E) except as provided in Section 12 hereof, if the Trading Advisor merges or consolidates with, or sells or otherwise transfers its advisory business, or all or a substantial portion of its assets, any portion of its futures interest trading systems or methods, or its goodwill to, any individual or entity; (F) if, at any time, the Trading Advisor violates any Trading Policy or administrative policy, except with the prior express written consent of the Managing Member; or (G) if the Trading Advisor fails in a material manner to perform any of its obligations under this Agreement.

 

(c)         The Trading Advisor may terminate this Agreement at any time, upon thirty days’ prior written notice to the Trading Company and Managing Member.

 

(d)         Except as otherwise provided in this Agreement, any termination of this Agreement in accordance with this Section 6 shall be without penalty or liability to any party, on account of such termination.

 

(e)         The indemnities set forth in Section 7, obligations to pay Trading Advisor under Section 5, obligations of confidentiality in Section 1 herein and Sections 11-26 shall survive any termination of this Agreement.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
7.         

	
Standard of Liability: Indemnifications.

 

(a)         Limitation on Trading Advisor. None of the Trading Advisor, any of the Trading Advisor’s affiliates, or any of their respective managers, principals, members, partners, advisory board members, shareholders, officers, directors, employees, principals, controlling persons, or agents (any of the foregoing, individually, an “Advisor Party” and all of the foregoing, collectively, the “Advisor Parties”) shall be liable to the Trading Company, the Managing Member or any other party for any loss or cost arising out of, or in connection with, any act or activity undertaken (or omitted to be undertaken) in fulfillment of any obligation or responsibility under this Agreement, including any such loss sustained by reason of any investment in or sale or retention of any Allocated Net Assets; provided, however, that any Advisor Party exculpated from liability under this Section 7(a) shall not be exculpated from liability with respect to losses found by a court of competent jurisdiction upon entry of a final judgment rendered and unappealable or not timely appealed to be caused by his, her or its gross negligence, willful misconduct or fraud. In no respect by way of limiting the foregoing exculpatory provision but rather by way of greater certainty, no Advisor Party shall be liable to the Trading Company, the Managing Member or any other party for any loss or cost arising out of, or in connection with, any action or omission (including, but not limited to, any error in the preparation or delivery of any account statement, monthly statement or other reports or statements) of the Commodity Broker, the Futures Broker or other brokers or counter-parties permitted to be used by the Trading Adviser under this Agreement.

 

(b)         Trading Advisor Indemnification. The Trading Advisor shall indemnify, defend and hold harmless the Trading Company, the Managing Member, their affiliates and their respective managers, principals, members, partners, advisory board members, shareholders, officers, directors, employees, principals, controlling persons and agents (any of the foregoing, individually, a “Trading Company Party” and all of the foregoing, collectively, the “Trading Company Parties”) from and against any and all losses, claims, damages, liabilities and expenses (including attorneys’ fees and expenses) due to or arising out of: (i) any gross negligence, fraud or violation of applicable laws or regulations by the Trading Advisor or (ii) any litigation, claims or proceedings, brought by any third party not affiliated with the Trading Company Parties, relating to the Other Accounts or any other pooled investment vehicle managed by the Trading Advisor.

 

(c)         Trading Company Indemnification. The Trading Company and the Managing Member shall jointly and severally indemnify, defend and hold harmless the Advisor Parties from and against any and all losses, claims, damages, liabilities and expenses (including attorney’s fees and expenses) due to or arising out of: (i) underfunding of the Account by the Trading Company, (ii) any liability to the Futures Broker, (iii) any gross negligence, fraud, or violation of applicable laws or regulations by any Trading Company Party, (iii) any litigation, claims or proceedings relating to any pooled investment or account offered by or affiliated with the Trading Company or Managing Member (but excluding the Account for avoidance of doubt), including, without limitation, the offering or sale of units with respect to such funds, or (iv) any litigation, claims or proceedings, brought by any third party not affiliated with the Trading Advisor, relating to any separately managed accounts or any other pooled investment vehicle managed by the Trading Company, the Managing Member or their respective affiliates.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(d)         The foregoing agreement of indemnity set forth in Sections 7(b) and (c)shall be in addition to, and shall in no respect limit or restrict, any other remedies which may be available to an indemnified party. In no case shall any party be liable under this indemnity agreement with respect to any claim made against any indemnified party unless the indemnifying party shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure so to notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement except to the extent the indemnifying party is prejudiced by such delay. The indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects within a reasonable time after receipt of such notice, to assume the control and defense of that portion of any suit so brought relating to the indemnifying party’s indemnification obligations hereunder, which defense shall be conducted by counsel chosen by the indemnifying party and satisfactory to the indemnified party or parties, defendant or defendants therein (in each case, acting reasonably). In the event that the indemnifying party elects to assume the defense of any such suit and retain such counsel, the indemnified party or parties, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel retained by it or them.

 

	
8.         

	
Right to Advise Others and Uniformity of Acts and Practices.

 

(a)         The Trading Advisor is engaged in the business of advising clients as to the purchase and sale of futures interests. During the term of this Agreement, the Trading Advisor, its principals and affiliates, will be advising other clients (including affiliates and the managers, members, stockholders, officers, directors, and employees of the Trading Advisor and its affiliates and their families) and trading for their own accounts. The Trading Advisor will use its reasonable efforts to implement a fair and consistent allocation policy that seeks to ensure that all clients are treated equitably and positions allocated as nearly as possible in proportion to the assets available for trading of the accounts managed or controlled by the Trading Advisor which use substantially the same trading strategy as the Account. Upon written request, the Managing Member may request a copy of the Trading Advisor’s procedures regarding the equitable treatment of trades across accounts. Such procedures shall be provided to the Managing Member within 30 days of such request by the Managing Member. Under no circumstances shall the Trading Advisor by any act or omission knowingly or intentionally favor in any material way any account advised or managed by the Trading Advisor over the account of the Trading Company that is using substantially the same trading strategy as the Account. Nothing contained in this Section 8(a) shall preclude the Trading Advisor from charging different management and/or incentive fees to its clients. Subject to the Trading Advisor’s obligations under applicable law, the Trading Advisor and any of its principals or affiliates shall be free to advise and manage accounts for other clients and shall be free to trade on the basis of the same trading systems, methods, or strategies employed by the Trading Advisor for the Account, or trading systems, methods, or strategies that are entirely independent of or materially different from, those employed for the Account, and shall be free to compete for the same futures interests as the Trading Company or to take positions opposite to the Trading Company, where such actions do not knowingly or intentionally prefer any of such accounts in a material manner over the Account on an overall basis.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(b)         The Trading Advisor shall not be restricted as to the number or nature of its clients, except that: (i) so long as the Trading Advisor acts as a trading advisor for the Trading Company, neither the Trading Advisor nor any of its principals or affiliates shall knowingly hold any position or control any other account that would cause the Trading Company, the Trading Advisor, or the principals or affiliates of the Trading Advisor to be in violation of the CEA or any regulations promulgated thereunder, any other applicable law, or any applicable rule or regulation of the CFTC or any other regulatory or self-regulatory body, exchange, or board; and (ii) neither the Trading Advisor nor any of its principals or affiliates shall render futures interests trading advice to any other individual or entity or otherwise engage in activity that shall knowingly cause positions in futures interests to be attributed to the Trading Advisor under the rules or regulations of the CFTC or any other regulatory or self-regulatory body, exchange, or board so as to require the significant modification of positions taken or intended for the account of the Trading Company; provided that the Trading Advisor may modify its trading systems, methods or strategies to accommodate the trading of additional funds or accounts. If applicable speculative position limits are exceeded by the Trading Advisor in the opinion of (i) independent counsel (who shall be other than counsel to the Trading Company), (ii) the CFTC, or (iii) any other regulatory or self-regulatory body, exchange, or board, the Trading Advisor and its principals and affiliates shall promptly liquidate positions in all of their accounts, including the Trading Company’s account, as to which positions are attributed to the Trading Advisor as nearly as possible in proportion to the accounts’ respective amounts available for trading (taking into account different degrees of leverage and “notional” equity) to the extent necessary to comply with the applicable position limits.

 

	
9.         

	
Representations, Warranties, and Covenants of the Trading Advisor.

 

(a)         Representations and Warranties of the Trading Advisor. The Trading Advisor represents and warrants to and agrees with the Managing Member and the Trading Company as follows:

 

(i)         It will exercise good faith in implementing the Trading Program on behalf of the Trading Company as described in the Program Materials (as modified from time to time) or any other trading programs agreed to by the Managing Member and the Trading Advisor.

 

(ii)        The Trading Advisor shall follow and comply with, at all times, the Trading Policies.

 

(iii)       The Trading Advisor shall trade the Account pursuant to the same trading programs described in the Program Materials unless the Managing Member and the Trading Advisor agree otherwise.

 

(iv)       The Trading Advisor is duly organized, validly existing and in Good standing under the laws of the state of its organization and is qualified to do business as a foreign corporation or and is in good standing in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would materially adversely affect the Trading Advisor’s ability to perform its duties under this Agreement. The Trading Advisor has full power and authority to perform its obligations under this Agreement. The only principals of the Trading Advisor are those set forth in the Program Materials (the “Trading Advisor Principals”).

 

  

12

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(v)        This Agreement has been duly and validly authorized, executed and delivered on behalf of the Trading Advisor and is a valid and binding agreement of the Trading Advisor enforceable in accordance with its terms subject to bankruptcy, insolvency, reorganization or similar laws of general application affecting rights and creditors and to general equity principals.

 

(vi)       Each of the Trading Advisor and the Trading Advisor’s Principals has all federal, state and foreign governmental, regulatory and exchange licenses and approvals and has effected all filings and registrations with federal and state governmental and regulatory agencies required to conduct its business and required to perform its or his obligations under this Agreement. The Trading Advisor is registered as a commodity trading advisor under the CEA and is a member of the NFA in such capacity.

 

(vii)      The execution and delivery of this Agreement, the incurrence of the obligations set forth herein, the consummation of the transactions contemplated herein and the payment of the fees hereunder will not violate, or constitute a breach of, or default under, the organizational documents of the Trading Advisor or any agreement or instrument by which it is bound or of any order, rule, law or regulation binding on it of any court or any governmental body or administrative agency or panel or self-regulatory organization having jurisdiction over it.

 

(viii)     Since the respective dates as of which information is given in the Program Materials, and except as may otherwise be stated in or contemplated by the Program Materials, there has not been any material adverse change in the condition, financial or otherwise, business or prospects of the Trading Advisor or, to the knowledge of Trading Advisor, any Trading Advisor Principal.

 

(ix)       Except as set forth in the Program Materials there have not been and there is not pending, or to the best of the Trading Advisor’s knowledge after due inquiry, threatened, any action, suit or proceeding before or by any court or other governmental body to which the Trading Advisor or any Trading Advisor Principal is or was a party, or to which any of the assets of the Trading Advisor is or was subject and which resulted in or might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business or prospects of the Trading Advisor. None of the Trading Advisor or any Trading Advisor Principal has received any notice of an investigation by the NFA, CFTC or other administrative agency or self-regulatory body (whether United States or foreign) regarding noncompliance by the Trading Advisor or any of the Trading Advisor Principals with the CEA or any other applicable law.

 

(x)        Neither the Trading Advisor nor any Trading Advisor Principal has received, or is entitled to receive, directly or indirectly, any commission, finder’s fee, similar fee, or rebate from any person in connection with the organization or operation of the Trading Company.

 

  

13

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(xi)       The foregoing representations and warranties shall be continuing during the term of this Agreement and if at any time any event shall occur which could make any of the foregoing representations or warranties inaccurate, the Trading Advisor shall promptly notify the Managing Member and the Trading Company of the nature of such event.

 

(b)         Covenants of the Trading Advisor. The Trading Advisor covenants and agrees that:

 

(i)         The Trading Advisor shall maintain all registrations and memberships necessary for the Trading Advisor to continue to act as described herein and to at all times comply in all respects with all applicable laws, rules, and regulations, to the extent that the failure to so comply would have a materially adverse effect on the Trading Advisor’s ability to act as described herein.

 

(ii)        The Trading Advisor shall inform the Managing Member immediately as soon as the Trading Advisor or any Trading Advisor Principal becomes the subject of any investigation, claim or proceeding of any regulatory authority having jurisdiction over such person or becomes a named party to any litigation materially affecting (or which may, with the passage of time, materially affect) the business of the Trading Advisor. The Trading Advisor shall also inform the Managing Member immediately if the Trading Advisor or any of its officers becomes aware of any breach of this Agreement by the Trading Advisor.

 

(iii)       The Trading Advisor agrees to cooperate by providing information regarding itself and its performance in the preparation of any amendments or supplements to the Prospectus (subject to the limitation set forth in Section 1 hereof).

 

	
10.         

	
Representations and Warranties of the Trading Company and the Managing Member; Covenants of the Managing Member.

 

(a)         The Trading Company and the Managing Member represent and warrant to the Trading Advisor, as follows:

 

(i)         The Trading Company is a Delaware limited liability company formed pursuant to its organizational documents and Delaware law and its validly existing and in good standing under the laws of the State of Delaware with full power and authority to engage in the trading of futures interests and to engage in its other contemplated activities as described in the Prospectus; the Trading Company is qualified to do business in each jurisdiction in which the nature or conduct of its business requires such qualification and where failure to be so qualified could materially adversely affect the Trading Company’s ability to perform its obligations hereunder.

 

(ii)        The Managing Member is duly organized and validly existing and min good standing as a limited liability company under the laws of the State of Delaware and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature or conduct of its business requires such qualification and where the failure to be so qualified could materially adversely affect the Managing Member’s ability to perform its obligations hereunder.

 

  

14

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(iii)       The Trading Company and the Managing Member have full power and authority under applicable law to conduct their business and to perform their respective obligations under this Agreement and as described in the Prospectus.

 

(iv)       This Agreement has been duly and validly authorized, executed and delivered by the Managing Member on behalf of the Trading Company and constitutes a valid, binding and enforceable agreement of the Trading Company and the Managing Member in accordance with its terms.

 

(v)        The execution and delivery of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein and in the Prospectus will not violate, or constitute a breach of or default under, the Managing Member’s organizational documents, or the Trading Company’s organizational documents, or any material agreement or instrument by which either the Managing Member or the Trading Company, as the case may be, is hound or any material order, rule, law or regulation applicable to the Managing Member or the Trading Company of any court or any governmental body or administrative agency or panel or self-regulatory organization having jurisdiction over the Managing Member or the Trading Company.

 

(vi)       There have not been in the five years preceding the date of this Agreement and there is not pending or, to the Managing Member’s knowledge, threatened, any action, suit or proceeding at law or in equity before or by any court or by any federal, state, municipal or other governmental body or any administrative, self-regulatory or commodity exchange organization to which the Managing Member or the Trading Company is or was a party, or to which any of the assets of the Managing Member or the Trading Company is or was subject; and neither the Managing Member nor any of the principals of the Managing Member (“Managing Member Principals”) has received any notice of an investigation by the NFA, CFTC or any other administrative or self-regulatory organization regarding non-compliance by the Managing Member or the Managing Member Principals or the Trading Company with the CEA, the Securities Act of 1933, as amended, or any applicable laws.

 

(vii)      The Managing Member and the Managing Member Principals have all federal, state and foreign governmental, regulatory and exchange approvals and licenses, and have effected all filings and registrations with federal, state and foreign governmental agencies required to conduct their business or required to perform their obligations under this Agreement and will maintain all such required approvals, licenses, filings and registrations for the term of this Agreement.

 

(viii)     The Trading Company is and shall remain in material compliance in all respects with all laws, rules, regulations and orders of any government, governmental agency or self-regulatory organization applicable to its business as described in this Agreement.

 

  

15

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

(ix)       The Trading Company and Managing Member are each a “qualified eligible person” pursuant to Rule 4.7 of the United States Commodity Exchange Act, as amended (“Rule 4.7”). The Trading Company and Managing Member consent to the Account being an exempt account under Rule 4.7.

 

(x)        The foregoing representations and warranties shall be continuing during the term of this Agreement and if at any time any event shall occur which could make any of the foregoing representations or warranties inaccurate, the Managing Member shall promptly notify the Trading Advisor of the nature of such event.

 

(b)         Covenants of the Managing Member. The Managing Member covenants and agrees that:

 

(i)         The Managing Member shall maintain all registrations and memberships necessary for the Managing Member to continue to act as described herein and to all times comply in all respects with all applicable laws, rules, and regulations, to the extent that the failure to so comply would have a materially adverse effect on the Managing Member’s ability to act as described herein.

 

(ii)        The Managing Member shall inform the Trading Advisor immediately as soon as the Managing Member or any of their principals becomes the subject of any lawsuit, investigation, claim, or proceeding of any regulatory authority having jurisdiction over such person or becomes a named party to any litigation materially affecting the business of the Managing Member or the Trading Company. The Managing Member shall also inform the Trading Advisor immediately if the Managing Member or the Trading Company or any of their officers become aware of any material breach of this Agreement by the Managing Member or the Trading Company.

 

	
11.       

	
Merger or Transfer of Assets.

 

The Managing Member, Trading Company or the Trading Advisor may merge or consolidate with, or sell or otherwise transfer its business, or all or a substantial portion of its assets, to any entity upon written notice to the other parties.

 

	
12.       

	
Complete Agreement.

 

This Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as between the parties unless in writing and signed by the party against whom enforcement is sought.

 

  

16

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
13.       

	
Assignment.

 

Subject to Section 11, hereof, this Agreement may not be assigned, transferred by operation of law, change in control or otherwise, by any party hereto without the express prior written consent of the other parties hereto.

 

	
14.       

	
Amendment.

 

This Agreement may not be amended except by the written consent of the parties hereto. No waiver of any provision of this Agreement shall be implied from any course of dealings between the parties, from any failure by any party to assert its rights hereunder or any occasion or series of occasions.

 

	
15.       

	
Severability.

 

The invalidity or unenforceability of any provision of this Agreement or any covenant herein contained shall not affect the validity or enforceability of any other provision or covenant hereof or herein contained and any such invalid provision or covenant shall be deemed to be severable.

 

	
16.        

	
Inconsistent Filings.

 

If the Trading Advisor intends to file, to participate in the filing of, or to publish any description of the Trading Advisor, or of its respective principals or trading approaches that is materially inconsistent with those in the Program Materials, the Trading Advisor shall inform the Managing Member of such intention and shall furnish copies of all such filings or publications at least ten Business Days prior to the date of filing or publication.

 

	
17.       

	
Program Materials.

 

(a)         During the term of this Agreement, the Trading Advisor shall furnish to the Managing Member promptly copies of any descriptions of the trading program. The Managing Member and the Trading Company each acknowledge receipt of the Trading Advisor’s description of the trading program which is attached hereto as Exhibit D (the “Program Materials”).

 

(b)         The Managing Member, the Trading Company and the fund(s) sponsored or affiliated with the Managing Member and Trading Company will not distribute or supplement any promotional material relating to the Trading Advisor unless the Trading Advisor has approved with reasonable prior notice a copy of such promotional material and has received such material in writing.

 

	
18.       

	
Track Record.

 

The track record and other performance information of the Trading Company shall be the property of the Managing Member and not the Trading Advisor. The Trading Advisor may use the performance information of the Account for reasonable business purposes.

 

  

17

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
19.       

	
Notices.

 

All notices required to be delivered under this Agreement shall be in writing and shall be effective when delivered personally on the day delivered, by facsimile on receipt confirmation, by email followed by delivery of an original, or when given by registered or certified mail, postage prepaid, return receipt requested, on the second business day following the day on which it is so mailed, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

if to the Trading Company:

OASIS PR, LLC

c/o R. J. O’Brien Fund Management, LLC

222 S. Riverside Plaza

Suite 900

Chicago, Illinois 60606

Facsimile: 312-373-4831

Email: jdematteo@rjobrien.com 

 

if to the Managing Member:

R. J. O’Brien Fund Management, LLC

222 S. Riverside Plaza

Suite 900

Chicago, Illinois 60606

Facsimile: 312-373-4831

Email: jdematteo@rjobrien.com

With a copy to:

Alston & Bird LLP

90 Park Avenue

New York, NY 10016

Attn: Timothy P. Selby

Facsimile: (212) 210-9444

Email: timothy.selby@alston.com

if to the Trading Advisor:

Prescient Ridge Management, LLC

70 West Madison Street, Suite 2600

Chicago, IL 60602

Attn: Mr. Christopher A. Olson

Fax: (312)___ - ________

Email: colson@pn-nllc.com

 

  

18

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

with a copy to:

Neal, Gerber & Eisenberg LLP

2 North LaSalle Street, 17th Floor

Chicago, IL 60602

Attn: Michael B. Gray, Esq.

Fax: (312) 750-6551

Email: mgray@ngelaw.com

 

	
20.       

	
Third-Party Beneficiaries.

 

This Agreement is not intended and shall not convey any rights to a party to this Agreement.

 

	
21.       

	
Governing Law.

 

This Agreement and any amendment hereto shall be governed by, and construed in accordance with, the laws of the State of Illinois, United States of America (excluding the law thereof which requires the application of or reference to, the law of any other jurisdiction). Each party hereto expressly and irrevocably agrees (a) that it waives any objection, and specifically consents, to venue in the United States federal or state courts located in the City of Chicago, State of Illinois, United States of America, so that any action at law or in equity may be brought and maintained in any such court, and (b) that service of process in any such action may be effected against such party by certified or registered mail or in any other manner permitted by applicable United States Federal Rules of Civil Procedure or rules of the Courts of the State of Illinois. In addition each party hereto expressly and irrevocably waives, in respect of any action brought in any United States federal or state court located in the City of Chicago, State of Illinois or any resulting judgment, any objection, and hereby specifically consents, to the jurisdiction of any such court and agrees not to seek to change the situs of such action or to assert that any other court in any other jurisdiction is a more suitable forum for the hearing and adjudication of any claim or dispute raised in such action.

 

	
22.       

	
Remedies.

 

In any action or proceeding arising out of any of the provisions of this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable or ancillary relief. The Trading Advisor agrees that its sole remedy in any such action or proceeding shall be to seek actual monetary damages for any breach of this Agreement, except that Trading Advisor may seek a declaratory judgment with respect to the indemnification provisions of this Agreement.

 

	
23.       

	
Headings.

 

Headings to sections herein are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

  

19

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

	
24.         

	
Successors.

 

This Agreement including the representations, warranties and covenants contained herein shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns, and no other person shall have any right or obligation under this Agreement.

 

	
25.       

	
Counterparts.

 

This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

	
26.       

	
Waiver of Breach.

 

The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or of a breach by any other party. The failure of a party to insist upon strict adherence to any provision of the Agreement shall not constitute a waiver or thereafter deprive such party of the right to insist upon strict adherence.

 

  

20

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first above written.

 

	 	OASIS PR, LLC
	 	By R.J. O’Brien Fund Management, LLC
	 	Managing Member
	 	 	 
	 	By:	

/s/ Julie M. DeMatteo

	 	 	Name: Julie M. DeMatteo
	 	 	Title: Managing Director
	 	 	 
	 	R.J. O’BRIEN FUND MANAGEMENT, LLC
	 	 	 
	 	By:	

/s/ Julie M. DeMatteo

	 	 	Name: Julie M. DeMatteo
	 	 	Title: Managing Director
	 	 	 
	 	

PRESCIENT RIDGE MANAGEMENT, LLC

	 	 	 
	 	By:	/s/ Christopher A. Olson
	 	 	
Name: Christopher A. Olson

	 	 	
Title: Chief Operating Officer

 

  

21

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

EXHIBIT A

 

Trading Policies

 

1.         The Trading Advisor will not employ the trading technique commonly known as “pyramiding”, in which the Trading Advisor uses unrealized profits on existing positions in a given futures interest due to favorable price movement as margin specifically to buy or sell additional positions in the same or a related futures interest. Taking into account the Trading Company’s open trade equity (i.e., the profit or loss on an open futures interest position) on existing positions in determining generally whether to acquire additional futures interest positions on behalf of the Trading Company will not be considered to constitute “pyramiding”.

 

2.         The Trading Advisor will not utilize borrowings on behalf of the Trading Company except if the Trading Company purchases or takes delivery of commodities. If the Trading Advisor borrows money on behalf of the Trading Company, the lending entity in such case (the “lender”) may not receive interest in excess of its interest costs, nor may the lender receive interest in excess of the amounts which would be charged the Trading Company by unrelated banks on comparable loans for the same purpose, nor may the lender or any affiliate thereof receive any points or other financing charges or fees regardless of the amount. Use of lines of credit in connection with its forward trading does not, however, constitute borrowing for purposes of this trading limitation.

 

3.         The Trading Advisor will not “churn” the Trading Company’s assets. Churning is the unnecessary execution of trades so as to generate increased brokerage commissions.

 

4.         The Trading Advisor will trade currencies and other commodities on futures exchanges, in the interbank and forward contract markets only with banks, brokers, dealers, and other financial institutions which the Managing Member has determined to be creditworthy.

 

5.         The Trading Advisor will trade only in those futures interests that have been approved by the CFTC as suitable for US investors. The Trading Advisor will not establish new positions in a futures interest on behalf of the Trading Company for any one contract month or option if such additional positions would result in a net long or short position for that futures interest requiring as margin or premium more than 15% of the Trading Company’s net assets. In addition, the Trading Advisor will, on behalf of the Trading Company, except under extraordinary circumstances, maintain positions in futures interests in at least two market segments (i.e., agricultural items, industrial items (including energies), metals, currencies, and financial instruments (including stock, financial, and economic indexes)) at any one time.

 

  

A-1

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

6.         The Trading Advisor will not acquire additional positions in any futures interest on behalf of the Trading Company if such additional positions would result in the aggregate net long or short positions for all futures interests requiring as margin or premium for all outstanding positions more than 66 2/3% of the Trading Company’s net assets.

 

7.         The Trading Advisor will not purchase, sell, or trade securities (except securities approved by the CFTC for investment of customer funds).

 

  

A-2

  

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

EXHIBIT B

 

COMMODITY TRADING AUTHORITY

 

Dear Prescient Ridge Management, LLC:

 

OASIS PR, LLC (the “Trading Company”) and R.J. O’Brien Fund Management, LLC, the Trading Company’s managing member (the “Managing Owner”) do hereby make, constitute and appoint you as the Trading Company’s attorney-in-fact to buy and sell futures and forward contracts through such futures commission merchants as shall be agreed on by you and the Managing Owner on behalf of the Trading Company, pursuant to the trading program identified in the Agreement among the Trading Company, the Managing Member and you as of the 15th day of October, as amended or supplemented, and in accordance with the terms and conditions of said Agreement.

 

This authorization shall terminate and be null, void and of no further effect simultaneously with the termination of the said Agreement.

 

	 	
Very truly yours,

	 	 
	 	OASIS PR, LLC
	 	By R.J. O’Brien Fund Management, LLC
	 	Managing Member
	 	 	 
	 	By:	

/s/ Julie M. DeMatteo

	 	 	Name: Julie M. DeMatteo
	 	 	Title: Managing Director
	 	 	 
	 	R.J. O’BRIEN FUND MANAGEMENT, LLC
	 	 	 
	 	By:	

/s/ Julie M. DeMatteo

	 	 	Name: Julie M. DeMatteo
	 	 	Title: Managing Director

 

  

B-1

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

EXHIBIT C

 

FUTURES INTERESTS TRADED

 

2013 Futures contracts (Exchange)

 

	
Equity Products

 

S&P 500 eMini (CME)

S&P MidCap 400 eMini (CME)

NasdaqeMini (CME)

Dow Jones eMini (CBOT)

Russell 2000 Mini Index (ICE)

VIX Volatility Index (CBOE)

 

 

	
 

 

CAC 40 Index (LIFFE)

FTSE 100 Index (LIFFE)

Euro EStoxx (EUREX)

German Dax Index (EUREX)

Japanese Nikkei-225 (CME)

 

	
Fixed Income Products

 

U.S. 30 Yr. Bond (CBOT)

U.S. 10 Yr. Note (CBOT)

U.S. 5 Yr. Note (CBOT)

U.S. 2 Yr. Note (CBOT)

Eurodollars (CME)

 

 

	
 

 

German Bunds (EUREX)

German Bobl (EUREX)

German Schatz (EUREX)

Japanese Government Bond (LIFFE)

Long Gilt (LIFFE)

	
Currencies

 

Euro (CME)

Swiss Franc (CME)

British Pound (CME)

Aussie Dollar (CME)

 

 

	
 

 

Japanese Yen (CME)

Mexican Peso (CME)

Canadian Dollar (CME)

US Dollar Index (10E)

 

	
Commodities

 

Crude Oil (NYMEX)

Heating Oil (NYMEX)

Natural Gas (NYMEX)

Copper (COMEX)

Gold (COMEX)

Silver (COMEX)

	
 

 

Corn (CBOT)

Soybeans (CBOT)

Wheat (CBOT)

Cotton No. 2 (ICE)

Sugar No. 11 (ICE)

RBOB

 

  

C-1

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

Execution Copy

 

EXHIBIT D

 

The Prescient Ridge managed futures program specializes in short-term, systematic trading strategies. The program seeks to produce absolute returns irrespective of individual market direction through the deployment of numerous strategies in exchange listed futures. These strategies are spread over multiple time frames and asset classes to create a diverse portfolio. The program currently trades in excess of 40 exchange listed futures products on both domestic and international exchanges.

 

PR’s Principals are:

 

David Shorr, (48) Chief Executive Officer. Mr. Shorr began his career with O’Connor & Company in 1986 as a derivatives trader at the Chicago Board of Trade. He quickly became a prominent options trader over his eighteen years on the CBOT floor. In 1990 Mr. Shorr and Mr. Zednik formed a proprietary trading firm specializing in trading fixed-income options at the Chicago Board of Trade. In 1998 Mr. Shorr helped create York Business Associates, a proprietary trading firm specializing in trading derivatives on electronic exchanges in both the U.S. and Europe. Mr. Shorr was the founder, CEO and Chairman of the Board of Check Giant, dba CashNetUSA, an internet-based loan company that he founded in 2003. At the end of 2006 Mr. Shorr sold CashNetUSA to a publicly traded company relinquishing his role as Chairman and CEO. Mr. Shorr received a Bachelor of Business Administration from the University of Wisconsin in 1986.

 

Alan Swimmer, (52) President. Prior to joining Prescient Ridge Management Mr. Swimmer spent over 26 years in the Futures and Options industry, building and running futures commission merchant businesses including from 2002 to 2008 as Head of U.S. Futures at Bear Stearns and then as Head of North American Futures Sales at JP Morgan following its purchase of Bear Stearns. Prior to Bear Stearns, Mr. Swimmer was with Citigroup from 1990-2002 and was head of its Chicago futures office. Mr. Swimmer received a B.A. in psychology from Washington University in St. Louis, where he is currently Vice Chair of the Alumni Board of Governors. Mr. Swimmer has been on the Board of Directors of the Minneapolis Grain Exchange since 2008.

 

Jeffrey Olson, (41) Director of Research. Mr. Olson began his career in the Advanced Technologies Division of Andersen Consulting. He continued his information systems career at a boutique consulting firm. Mr. Olson joined York Business Associates in 1996 as head of software development to build user-friendly futures and options electronic trading applications on the Eurex platform. In 2000 he became Vice President of Product Development and Client Services for a related software company of York that specialized in electronic trading, risk management and exchange connectivity. In 2002 Mr. Olson began trading in the S & P 500 Index and US Treasury Bond futures using both fundamental and technical analysis. He also electronically hedged floor options books and ran automated market-making applications. Mr. Olson received his B.S. in Aeronautics and Astronautics from the Massachusetts Institute of Technology in 1994.

 

  

D-1

  

 

CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

Christopher Olson, (46) Chief Operating Officer.  Mr. Olson began his career as a loan analyst for a commercial mortgage broker.  Mr. Olson joined Mr. Zednik and Mr. Shorr as a trading assistant and eventually became risk manager of both fixed income and equity derivative portfolios. In 1998 he established the European office for York Business Associates where he served as director of European derivatives and chief operating officer. While at York Mr. Olson was responsible for day-to-day operations as well as all business relationships and risk management. In 2000 Mr. Olson became director of international sales for a related software company of York that specialized in managing risk for electronic trading. Mr. Olson received his B.S. in Psychology from the University of Richmond in 1989.

 

Joseph Zednik, (72) General Partner. Mr. Zednik has been active in the trading and investment business since 1974. Mr. Zednik began his career at Montgomery Ward and Illinois Bell where he developed his technology and information systems background. In 1973 Mr. Zednik began his career as an independent trader at the Chicago Board of Trade where he has held a seat for almost thirty years. Following his success as an independent trader, in 1985 Mr. Zednik joined Chicago Research and Trading, CRT, where he managed the stock index trading operations. In 1990 Mr. Zednik and Mr. Shorr established a proprietary trading firm specializing in trading fixed-income options at the Chicago Board of Trade. In 1998 Mr. Zednik helped create York Business Associates, a proprietary trading firm specializing in trading derivatives on electronic exchanges with offices in both the U.S. and Europe. Mr. Zednik was also instrumental in the creation of a software company specializing in electronic trading and risk management. Mr. Zednik received a B.A. in Liberal Arts from Illinois Institute of Technology.

 

Trading Strategy:

 

The Prescient Ridge managed futures program specializes in short-term, systematic trading strategies. The program seeks to produce absolute returns irrespective of individual market direction through the deployment of numerous strategies in exchange listed futures. These strategies are spread over multiple time frames and asset classes to create a diverse portfolio. The program currently trades in excess of 40 exchange listed futures products on both domestic and international exchanges.

 

The Prescient Ridge program is differentiated from other CTA/Managed Futures managers in that the program emphasizes short-term trading activity in which the average holding duration is less than one day. These short-duration strategies, referred to as Intraday Strategies, represent approximately 85% of the program’s trading activity and are concentrated in the most liquid exchange traded futures. The general objective of the Intraday Strategies is to identify significant single day directionality using traditional technical analysis techniques - most notably moving average crossovers. In general, these strategies will enter a market early in the trading session and hold the position until the end of the day. The average holding period of these strategies is typically one to five hours. Proprietary trade filters are built into the Intraday Strategies to evaluate the quality of the trade signal. Although the primary exit methodology for these strategies is time based, additional proprietary exits and stop-losses are used.

 

  

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CONFIDENTIAL TREATMENT REQUESTED.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

Additional strategies such as momentum, pattern recognition and trend following are included in the program. These strategies typically have longer holding periods which can range from multiple days to many months. These strategies comprise the remaining trading activity of the program (approximately 15%) and are also predicated on technical analysis with an emphasis on moving averages. Entry and exit methodology for these strategies varies depending on the strategy and trade duration. These strategies help to provide further diversification for the program.

 

The entire program is built on a foundation of risk-management. The risk management process begins with the portfolio optimization, which is conducted quarterly, and is used to determine the trading size for all strategies. The optimization process of Prescient Ridge is different from other programs in that it is rooted in a desire to control draw downs and is not driven by metrics such as targeted return. Dynamic position sizing, which evaluates daily market volatility as well as sudden price movements, allows the program to maintain a consistent risk profile in various market environments. All strategy entries and exits have been designed to mitigate the impact of fundamental information such as economic reports. Additional risk controls are embedded in the program to help avoid illiquid or non-directional markets. The firm closely monitors the performance of the program as well as individual strategies to determine if reductions in exposure are required due to underperformance.

 

 

D-3ex10-07.htm

EXHIBIT 10.07

LIMITED LIABILITY COMPANY AGREEMENT

OF

O’BRIEN ALTERNATIVE STRATEGIC INVESTMENT SOLUTIONS, LLC

This Limited Liability Company Agreement of O’Brien Alternative Strategic Investment Solutions, LLC (the “Company”), dated as of October 21, 2013, by and between R.J. O’Brien Fund Management, LLC, a Delaware limited liability company (the “Managing Member”), and the other parties who shall become members of the Company with respect to each Series (as defined herein) in accordance with the provisions hereof (collectively “Non-Managing Members”; the Managing Member and the Non-Managing Members may be collectively referred to herein as “Members”).

W I T N E S S E T H:

WHEREAS, the parties hereto desire to form a series limited liability company for the purpose of speculative trading in futures interests (as defined herein).

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.           Formation; Name

The parties hereto formed a series limited liability company under the Delaware Limited Liability Company Act, as amended and in effect on September 4, 2013 (the “Act”), which will offer designated series of limited liability company interests in the Company established in accordance with this Agreement and pursuant to Section 18-215 of the Act having separate rights, powers and/or duties with respect to specified obligations and, to the extent provided in this Agreement or a Series Designation (as defined in Section 3) of the designated series, having a separate business purpose or investment objective (each a “Series” and collectively, the “Series”).

The business of each Series will be conducted under the name of each such Series and not under the name of the Company generally. The Managing Member has executed and filed a Certificate of Formation for the Company (the “Certificate of Formation”) in accordance with the Act, and the Managing Member shall execute, file, record and publish as appropriate such amendments, assumed name certificates, and other documents as are or become necessary or advisable in connection with the operation of the Company and each Series, as determined by the Managing Member, and shall take all steps which the Managing Member shall deem necessary or advisable to allow the Company and each Series to conduct business as a series limited liability company where the Company and each Series conducts business in any jurisdiction, and to otherwise provide that the Members will have limited liability with respect to the activities of the Series in all such jurisdictions, and to comply with the laws of any such jurisdiction. Each Non-Managing Member hereby undertakes to furnish to the Managing Member a power of attorney and such additional information as the Managing Member may request to complete such documents and to execute and cooperate in the filing, recording, or publishing of such documents at the request of the Managing Member. The rights, duties and liabilities of the Members will be as provided in the Act, except as otherwise provided herein or in a Series Designation.

2.           Office

The principal office of the Company and each Series shall be c/o R.J. O’Brien Alternative Strategic Investment Solutions, LLC, 222 South Riverside Plaza, Suite 900, Chicago, Illinois 60606, or such other place as the Managing Member may designate from time to time.

The address of the principal office of the Company and each Series in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name and address of the registered agent for service of process on the Company and each Series in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.

 

  

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3.           Series

(a)          Series Designation.  Series may be established from time to time in accordance with this Agreement and the separate agreements establishing each Series described therein (each separate agreement, a “Series Designation”).  No Series may be established except as expressly permitted by this Agreement.  The terms of each Series will be as generally set forth in this Agreement and as specifically set forth in the applicable Series Designation.  However, and notwithstanding any other provision of this Agreement, the terms and provisions of any Series Designation may only alter or amend the terms and provisions of this Agreement as specifically provided herein; and in no case will alter or amend any terms and provisions of any other Series Designation.  For all purposes of the Act, this Agreement together with each Series Designation entered into from time to time constitute the “limited liability company agreement” of the Company within the meaning of the Act.  With respect to each Series and as further described in Section 6 hereof, each Series Designation must be executed by the applicable parties thereto upon the creation of such new Series (subject to Section 11 hereof).  Notwithstanding any other provision of this Agreement, the establishment of a new Series and the execution of any Series Designation will not be deemed an amendment of this Agreement for purposes of Section 16(a).

(b)          Series Separateness.

(1)          Each Series will have:

(aa) separate rights, powers, duties and management from each other Series; and

(bb) exclusive rights with respect to the property, obligations, profits, and losses associated with that Series and all proceeds derived therefrom.  A person may be admitted as a Non-Managing Member of the Company with respect to more than one Series and each Series may have multiple Non-Managing Members.

(2)          The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a Series will be enforceable against the assets of that Series only and not against any other assets of the Company generally or any other Series, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Company generally, or any other Series will be enforceable against the assets of that Series. The books and records maintained for each Series will account for the assets associated with that Series separately from the other assets of the Company, or any other Series, and assets associated with that Series may be held, directly or indirectly, including in the name of that Series, in the name of the Company, the Managing Member (subject to Section 8(c)(2)) through a nominee or otherwise.  Notwithstanding the foregoing, any assets or liabilities of the Company used by (or in connection with the activities of) more than one Series will be allocated to each Series by the Managing Member in accordance with United States generally accepted accounting principles consistently applied under the accrual basis of accounting (“GAAP”).  Costs, fees and expenses may be allocated pro rata amongst the Series that have incurred them.  Books and records maintained for each Series that reasonably identify its assets, including by specific listing, category, type, quantity, computational or allocational formula or procedure or by any other method where the identity of the assets is objectively determinable, will be deemed to account for the assets associated with that Series separately from the other assets of the Company or any other Series.  No assets of one Series may be commingled with the assets of any other Series or the assets, if any, of the Company, generally.  The Certificate of Formation contains a notice of the limitation of liabilities of the Series in conformity with Section 18-215 of the Act.

(3)          The Series Designation of each Series may be updated from time to time as is necessary to accurately reflect the information contained therein, including, without limitation, the admission of a Substitute Non-Managing Member (as defined herein) associated with the Series and the capital contributions of the Non-Managing Member of the Series.  Any revision to a Series Designation made in accordance with this Agreement will not be deemed an amendment to this Agreement for purposes of Section 16(a).

 

  

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4.           Business

Except as may otherwise be expressly provided in this Agreement and a Series Designation, the business of each Series is to engage in any lawful act or activity for which limited liability companies may be organized under the Act, including, but not limited to, directly or indirectly through a commodity trading advisor, trade, buy, sell, spread, or otherwise acquire, hold, or dispose of commodities (including, but not limited to, foreign currencies, money market instruments, financial instruments, and any other securities or items which are now, or may hereafter be, the subject of futures contract trading), domestic and foreign commodity futures contracts, forward contracts, commodity forward contracts, foreign exchange commitments, options on physical commodities and on futures contracts, spot (cash) commodities and currencies, exchange of futures contracts for physicals transactions, exchange of physicals for futures contracts transactions, and any rights pertaining thereto (hereinafter referred to collectively as “futures interests;” provided, however, such definition shall exclude securities futures products as defined by the Commodity Futures Trading Commission (“CFTC”), options on securities futures and options on equities) and securities (such as United States Treasury securities) approved by the CFTC for investment of customer funds and other securities on a limited basis, and to engage in all activities incident thereto. Each Series may pursue this objective in any lawful manner.  Each Series may engage in the foregoing activities through any lawful transaction or any lawful activity into which a limited liability company may enter or in which a limited liability company may engage under the laws of the State of Delaware; including, but not limited to, through an investment of all or a portion of its assets in multiple trading companies (the “Trading Companies”) (provided that such transactions or activities do not subject the Members to any liability in excess of the limited liability provided for herein and contemplated by the Act.)

5.           Dissolution of the Company; Termination of a Series; Winding Up; Fiscal Year

(a)          Dissolution of the Company.

(1)           The Company shall end upon the first to occur of the following: (i) receipt by the Managing Member of a notice setting forth an election to terminate and dissolve the Company at a specified time by the Non-Managing Members holding not less than a “Majority of Interests in the Company” (as defined below), with or without cause, which notice shall be sent by registered mail to the Managing Member not less than 90 days prior to the effective date of such termination and dissolution; (ii) the withdrawal, insolvency, bankruptcy, dissolution or liquidation of the Managing Member (unless a new managing member is elected by a vote of the Non-Managing Members owning a Majority of Interests in the Company and such new managing member shall have elected to continue the business of the Company and the Series); (iii) the occurrence of any event which shall make it unlawful for the existence of the Company to be continued; (iv) the termination or dissolution or bankruptcy of the last of the remaining Series; or (v) a determination by the Managing Member upon 60 days’ notice to the Non-Managing Members to terminate the Company, for any reason.  A “Majority of Interests in the Company” shall mean the Non-Managing Members of each Series, excluding any affiliates (as defined in Section 14(c)) of the Managing Member, representing in aggregate for all Series of the Company, greater than 50% of the Net Asset Value of the Series (as defined in Section 7(d)(1)) of the Company.

(2)           Upon the dissolution of the Company as provided herein, the Company shall be wound up by winding up each Series in the manner provided by Section 5(c).

(b)          Termination of a Series.

(1)           With respect to each Series, a Series shall terminate upon the occurrence of any of the following events: (i) receipt by the Managing Member of a notice setting forth an election to terminate and dissolve a Series at a specified time by the Non-Managing Members holding not less than a “Majority of Interests in a Series” (as defined below), with or without cause, which notice shall be sent by registered mail to the Managing Member not less than 90 days prior to the effective date of such termination and dissolution; (ii) the withdrawal, insolvency, bankruptcy, dissolution or liquidation of the Managing Member (unless a new managing member is elected by a vote of the Non-Managing Members owning a Majority of Interests in the Company, and such new managing member shall have elected to continue the business of the Company and the Series; (iii) the occurrence of any event which shall make it unlawful for the existence of the Company or a Series to be continued; (iv) the occurrence of an event of termination (if any) as provided in a Series Designation; (v) the complete withdrawal by each of the Non-Managing Members from a Series or (vi) a determination by the Managing Member upon 60 days’ notice to the Non-Managing Members to terminate a Series, for any reason.  A “Majority of Interests in a Series” shall mean the Non-Managing Members of a particular Series, excluding any affiliates (as defined in Section 14(c)) of the Managing Member, representing greater than 50% of the Net Asset Value of the Series (as defined in Section 7(d)(1)).

 

  

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(2)           The termination and winding up of a Series will not, in and of itself, cause a dissolution of the Company or the termination of any other Series.  The termination of a Series will not affect the limitation on liabilities of the Series or any other Series provided by this Agreement, the Series Designations, the Certificate of Formation or the Act.

(c)          Winding Up, Liquidation, and Distribution of Assets. Dissolution, payment of creditors, and distribution of the Net Asset Value of each Series (as defined in Section 7(d)(1)) to Members in proportion to their respective positive Capital Account (as defined herein) balances shall be effected as soon as practicable in accordance with the Act.  The Managing Member shall, at its option, be entitled to supervise the liquidation of each Series.  Nothing contained in this Agreement or a Series Designation shall impair, restrict, or limit the rights and powers of the Members under the laws of the State of Delaware and any other jurisdiction in which the Company and each Series shall be conducting business to reform and reconstitute themselves as a limited liability company following dissolution of each Series, either under provisions identical to those set forth herein or any others that they deem appropriate.

(d)          Fiscal Year. The fiscal year of the Company and each Series shall begin on January 1st of each year and end on December 31st of such year (each a “Fiscal Year”).  The Fiscal Year in which the Company and each Series shall terminate shall begin on January 1 and end on the date of dissolution of the Company and the termination of each Series.

6.           Capital Contributions and Offering of Limited Liability Company Interests

The Managing Member may contribute such amounts (or no amounts) as determined by the Managing Member, which may vary by Series) to each Series for which it received a limited liability company interest in each Series (a “Managing Member Interest”).  The Managing Member may contribute to each Series such additional amount in cash as determined by it in its sole discretion.  Such additional contribution by the Managing Member was evidenced by additional Managing Member Interests with respect to each Series on the books and records of each such Series.  The Managing Member, without notice to or consent of the Non-Managing Members, may withdraw any portion of its capital contributions.

Interests in the Company with respect to each Series, other than the Managing Member Interests, shall be designated as Non-Managing Member Interests (collectively the “Interests” or, individually, an “Interest”), which may be offered in one or more “Classes”.  Each Non-Managing Member of a Series will hold Interests pursuant to its Series Designation.  The name and address of the Non-Managing Members associated with each Series shall be set forth on Schedule A to the Series Designation.  A person will be deemed admitted as a Non-Managing Member of a Series at the time the person (i) executes the Series Designation or a counterpart signature page of the Series Designation (subject to Section 11 hereof) and (ii) is listed by the Managing Member as a Non-Managing Member of the Series on the Series Designation; all subject to any further requirements for the establishment of a Series as set forth in this Agreement.

In connection with the Company’s offering of Interests in each Series, the Managing Member, on behalf of each Series, shall: (a) qualify the Interests for sale under the “Blue Sky” and securities laws of such states of the United States or other jurisdictions as the Managing Member shall deem advisable; (b) make such arrangements for the offering and sale of Interests as it shall deem appropriate; and (c) take such action with respect to the matters described in clauses (a) and (b) as it shall deem advisable or necessary.

 

  

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No certificate evidencing Interests in a Series shall be issued to a Non-Managing Member (although each Non-Managing Member will receive confirmations of purchase from the Managing Member in its customary form).  The Managing Member may, without the consent of, or notice to, the Non-Managing Members, offer Interests in additional Classes and Series with different terms as it may determine in its sole discretion from time to time.  The terms of each Class or Series may vary in the Managing Member’s sole discretion; including, but not limited to, differences in the fees and expenses charged to each Class or Series.

The Managing Member is authorized to permit any existing Non-Managing Member to make an additional capital contribution with respect to its Series, upon such terms and conditions as the Managing Member, in its sole discretion shall determine.  The terms and conditions by which any existing Non-Managing Member may increase its capital contribution shall be subject to all the provisions of this Agreement and the Series Designation.  Except as expressly provided for herein or in a Series Designation, no Non-Managing Member shall be required to make additional capital contributions to its Series.

7.           Allocation of Profits and Losses; Accounting; Other Matters

(a)         Capital Accounts. A separate capital account (a “Capital Account”) shall be established with respect to each Series for each Member holding Managing Member Interests or Interests, as applicable, in such Series.  With respect to each Series, the initial balance of each Member’s Capital Account shall be the amount of the Member’s initial capital contribution with respect to the Series.  A Member’s Capital Account in a Series shall be increased by any additional capital contributions made by such Member to the Series, increased or decreased by the increase or decrease in the Net Asset Value of the Series allocated to such Member pursuant to Section 7(b), decreased by any Series’ commissions, fees or expenses allocable to such Member, and decreased by the amount of any distribution made to such Member by the Series pursuant to Section 7(b) or as otherwise set forth in this Agreement or a respective Series Designation.  The provisions of this Section 7 and the other provisions of this Agreement or any Series Designation relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and will be interpreted and applied in a manner consistent therewith.

(b)         Monthly Allocations. As of the close of business on the last day of each month or at such other times as otherwise determined by the Managing Member (a “Determination Date”) during each Fiscal Year of the Series, the following determinations and allocations shall be made with respect to such Series:

(1)           The Net Asset Value of the Series (as defined in Section 7(d)(1)) shall be determined.

(2)           Any increase or decrease in the Net Asset Value of the Series over those of the immediately preceding Determination Date (or, in the case of the first Determination Date, the initial purchase of Managing Member Interests or Interests, as applicable), shall then be credited or charged to the Capital Accounts of its Members.

(3)           The amount of any distribution to a Member and any amount paid to a Member upon redemption of its Interest in the Series shall be charged to that Member’s Capital Account.

(4)           If any item of loss, deduction or expense otherwise allocable to a Member under this Section 7(b) would create a negative balance in the Capital Account of such Member (or increase the amount by which such Capital Account balance is negative), the item will not be allocated to such Member but will instead be specially allocated to the Managing Member.

 

(c)          Allocation of Profit and Loss for Federal Income Tax Purposes. Items of a Series’ income, gain, loss, deduction or credit realized for federal income tax purposes will be allocated among the Members participating in such Series for federal income tax purposes in a manner as determined by the Managing Member that equitably reflects the allocations made pursuant to Section 7(b) and is consistent with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations thereunder (including all requirements (i.e., the inclusion of a “qualified income offset” provision) set forth in Treasury Regulations Section 1.704-1(b)).

(1)           Solely for federal income tax purposes, if Series property (including an investment in a Trading Company) is reflected in the Capital Accounts of the Members at a Net Asset Value of the Series that differs from the adjusted tax basis of such property, allocations of depreciation, amortization, income, gain or loss with respect to such property will be made among the Members in a manner which takes such difference into account consistent with the principles set forth in Section 704(b) and Section 704(c) of the Code.

 

  

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(2)           The allocations of increases and decreases in Net Asset Value of the Series and of profit and loss for federal income tax purposes shall not exceed the allocations permitted under Subchapter K of the Code, as determined by the Managing Member, whose determination shall be binding.  The Managing Member may adjust the allocations set forth in Section 7(c), in the Managing Member’s discretion, if the Managing Member believes that doing so will achieve more equitable allocations or allocations more consistent with the Code and the applicable Treasury Regulations.

(d)          Definitions; Accounting.

(1)           Net Asset Value of the Series. Shall mean the total assets of a Series (including, but not limited to, its investment in the Trading Companies, all cash and cash equivalents, accrued interest and amortization of original issue discount, and the market value of all open futures interest contract positions and other assets of the Series) less all liabilities of the Series (including, but not limited to, its pro rata share of each Trading Company’s liabilities in which the Series is invested, including brokerage commissions that would be payable upon the closing of open futures interest contract positions, management fees, incentive fees, selling commissions, administrative fees, other fees, and extraordinary expenses, determined in accordance with GAAP.  As determined by the Managing Member, the costs associated with the organization and offering of the Company may be amortized over 60 calendar months from the date the initial Series of the Company commences investing.  Net Asset Value of the Series may be determined on a per Class basis as determined by the Managing Member.  Appropriate reserves may be created, accrued, and charged against the Net Asset Value of the Series by the Managing Member for contingent liabilities, if any, as of the date any such contingent liability becomes known to the Managing Member.

(e)          Expenses and Limitations Thereof. Except as may otherwise be expressly provided in this Agreement or a Series Designation, each Non-Managing Member, Class or Series shall be responsible for the fees and expenses charged to it through its investment in a Trading Company.  Each Series will also be obligated to pay any extraordinary expenses of the Series or its pro rata portion of the Company’s (determined in accordance with GAAP) that it may incur.  After the initial capital contribution and after each subsequent capital contribution to a Series, substantially all of the Series’ assets will be invested in the Trading Companies, but may also be held in custodial accounts or interest-bearing accounts or similar.

(f)          Limited Liability of Members. Interests shall be fully paid and nonassessable. No Member shall be liable for its Series’ obligations in excess of such Member’s unredeemed capital contribution, undistributed profits, if any, and any distributions and amounts received upon redemption of Interests, together with interest thereon.  Neither any Series nor the Company will make a claim against a Member with respect to such amounts distributed to such Member or amounts received by such Member upon a redemption of Interests, unless the Net Asset Value of the Series (which shall not include any right of contribution from the Member except to the extent previously made by it pursuant to this Agreement) shall be insufficient to discharge the liabilities of the Series which shall have arisen prior to the payment of such amount.

(g)          Return of Non-Managing Member’s Capital Contribution. Except to the extent that a Non-Managing Member shall have the right to withdraw capital through redemption in accordance with Sections 10(b), no Non-Managing Member shall have any right to demand the return of his capital contribution, or any profits added thereto, except upon the dissolution of the Company or the termination of its Series.  In no event shall a Non-Managing Member be entitled to demand or receive from a Series property other than cash.

(h)          Distributions. With respect to each Series and with respect to each Non-Managing Member, the Managing Member shall have sole discretion in determining what distributions (other than on redemption in accordance with the terms herein and the terms of a Series Designation), if any, to make to a Non-Managing Member.  If made, all distributions shall be pro rata in accordance with the respective Capital Accounts of the Members.  The Managing Member may, but shall not have any obligation to, distribute assets in-kind at any time or for any reason.

  

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8.           Management Policies

(a)          Management of the Company and each Series. Except as may be otherwise specifically provided herein or a Series Designation, the Managing Member, to the exclusion of all Non-Managing Members, shall conduct and manage the business of the Company and each Series.  No Non-Managing Member shall have the power to represent, act for, sign for, or bind the Managing Member, the Company or its Series.  Except as provided herein or in a Series Designation, no Member shall be entitled to any salary, draw, or other compensation from the Company.  Each Non-Managing Member hereby undertakes to furnish to the Managing Member such additional information as may be reasonably determined by the Managing Member to be required or appropriate for the Company or such Non-Managing Member’s Series, including, but not limited to, opening and maintaining an account or accounts with commodity brokerage firms for the purpose of trading in futures interest contracts.  No person dealing with the Managing Member shall be required to determine its authority to make any undertaking on behalf of the Company or a Series or to determine any fact or circumstances bearing upon the existence of its authority.

(b)          Miscellaneous. The Managing Member may take such actions as it deems necessary or desirable to manage the business of the Company and each Series, as applicable, including, but not limited to:

(1)           Opening bank accounts, investment and trading accounts and paying or authorizing the payment of distributions to the Non-Managing Members and the expenses of the Company and each Series, such as management and incentive fees, and brokerage commissions and fees, as permitted by this Agreement or a Series Designation.

(2)           The Managing Member shall prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any federal, state, or local tax returns which shall be required to be filed by each Series.  The Managing Member shall cause the Company and each Series to pay any taxes payable by the Company and each Series; provided, however, that the Managing Member shall not be required to cause the Company or a Series to pay any tax so long as the Managing Member or the Company or a Series shall be in good faith and by appropriate legal proceedings contesting the validity, applicability, or amount thereof and such contest shall not materially endanger any right or interest of the Company or any Series.  No Non-Managing Member shall file a notice with the Internal Revenue Service under Section 6222(b) of the Code in connection with such Non-Managing Member's intention to treat an item on such Series’ federal income tax return in a manner which is inconsistent with the treatment of such item on the Series’ federal income tax return unless such Non-Managing Member has, not less than 30 days prior to the filing of such notice, provided the tax matters partner with a copy of the notice and thereafter in a timely manner provides such other information related thereto as the tax matters partner shall reasonably request.

(3)           The Managing Member shall be authorized to perform all duties imposed by Sections 6221 through 6233 of the Code on the Managing Member as “tax matters partner” of each Series, including, but not limited to, the following: (a) the power to conduct all audits and other administrative proceedings with respect to the each Series’ tax items; (b) the power to extend the statute of limitations for all Non-Managing Members with respect each Series’ tax items; and (c) the power to file a petition with an appropriate federal court for review of a final administrative adjustment for each Series.  This Section 8(b)(4) and each of the rights, obligations and terms set forth in such Section shall survive the dissolution of the Company and the termination of any Series.

(4)           If a Series is required to withhold United States taxes on income with respect to Interests held by the Non-Managing Members in a Series, the Managing Member may pay such tax out of its own funds and then be reimbursed out of the proceeds of any distribution or redemption with respect to such Interests.

(5)           The Managing Member shall keep at the principal office of the Company and each Series, as applicable, such books and records relating to the business of the Company and each Series as it deems necessary or advisable or as are required by the Commodity Exchange Act, as amended (the “CE Act”), and the rules and regulations thereunder.

 

  

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(6)           To the extent required by CFTC regulations, such books and records of a Series shall be available to the Non-Managing Member invested in such Series or its authorized attorneys or agents for inspection and copying during normal business hours of the Managing Member and, upon 10 days’ written notice, copies shall be sent to the Non-Managing Member upon payment by him of reasonable reproduction and distribution costs.  Any agreement entered into by a Non-Managing Member in connection with his purchase of Interests, shall be retained by the Managing Member for not less than the period prescribed by applicable law.

(7)           The Managing Member shall devote such time and resources to the Company’s and each Series’ business and affairs as it shall, in its sole discretion, deem necessary or advisable to effectively manage the Company and each Series.  The Managing Member may engage in other business activities and shall not be required to refrain from any other activity or disgorge any profits from any such activity, whether as managing member of additional partnerships formed for investment in futures interests or otherwise.  The Managing Member may engage and compensate, on behalf of the Company and each Series, such persons, firms, or corporations, including any affiliated person or entity, as the Managing Member in its sole judgment shall deem advisable for the conduct and operation of the business of the Company and each Series; provided, however, that, except as described herein or in a Series Designation, the Managing Member shall not engage any person, firm, or corporation which is an affiliate of the Managing Member to perform services for the Company or a Series without having made a good faith determination that (i) 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) and (ii) the terms and conditions of the agreement pursuant to which such affiliate is to perform services for the Company and the Series are no less favorable to the Company and each Series than could be obtained from equally qualified unaffiliated third parties, or are otherwise determined by the Managing Member to be fair and reasonable to the Company and the Series and the Non-Managing Members.

(8)           The Managing Member may enter into agreements and contracts with third parties, terminate such agreements and institute, defend and settle litigation arising therefrom and give receipts, releases and discharges with respect to all of the foregoing any matters incidental thereto.

(9)           Except as otherwise provided for herein, the Managing Member may pay any and all reasonable fees and to make any and all reasonable expenditures to an affiliated entity which it, in its discretion, deems necessary or appropriate in connection with the administration of the Company and each Series.

(10)         The Managing Member may engage consultants, experts, professionals, accountants, administrator, auditors, attorneys, brokers, engineers, custodians, escrow agents, and any other third parties deemed necessary by the Managing Member, and terminate any such engagements.

(c)          Segregation by Series; Title to Assets.

(1)           Each Series may acquire assets and incur debts, liabilities, expenses or other obligations only to the extent that they are acquired by the Company with respect to a Series and not with respect to the Company generally.  In furtherance of the foregoing, the Managing Member may allocate and charge any assets, debts, liabilities, expenses or other obligations of the Company acquired or incurred by the Company and not readily associated with a particular Series to, between or among any one or more Series, in such manner and on such basis as the Managing Member in its reasonable discretion deems fair and equitable, in accordance with GAAP.

 (2)           Assets associated with a Series may be held directly or indirectly, including in the name of such Series, in the name of the Company, in the name of the Managing Member, through a nominee or otherwise, as the Managing Member may determine in its sole discretion.  The Managing Member hereby declares and warrants that any assets of a Series for which legal title is held in the name of the Managing Member will be held in trust by the Managing Member for the use and benefit of such Series in accordance with the terms and provisions of this Agreement and the applicable Series Designation.  All assets of a Series will be accounted for as the property of that Series in the books and records of the Company and that Series, irrespective of the name in which legal title to the assets of that Series is held.

9.           Audits; Reports to Non-Managing Members

(a)           Reports. The Managing Member shall use its best efforts to cause the Company and each Series to produce and make available such audits and periodic reports and disclosures relating to the business of the Company and each Series as it deems necessary or advisable or as are required by the CE Act, and the rules and regulations thereunder.

 

  

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(b)           Tax Information.  Within 90 days after the close of each Fiscal Year the Managing Member shall cause the Company to provide such tax information relating to each Series as is necessary for the completion of federal income tax returns.

10.         Transfer and Redemption of Interests

(a)          Transfer, Sale, Pledge and Assignment. A Non-Managing Member may not transfer, sell, pledge or assign his Interests to a substituted Non-Managing Member (each a “Substituted Non-Managing Member”) unless the Managing Member first consents to such transfer, sale, pledge or assignment in writing, which consent may be withheld in its sole discretion.  The Managing Member need not recognize any transfer, sale, pledge or assignment until the Managing Member has received at least 30 days’ prior written notice thereof from the Non-Managing Member, which notice shall set forth the address and social security or taxpayer identification number of the transferee or assignee and the value of Interests to be transferred or assigned, and which notice shall be signed by the Non-Managing Member (and his signature is guaranteed by a commercial bank with a correspondent in New York, New York or by a member of a registered national securities exchange) and executed by the purchaser, assignee, transferee, purchaser or pledgee.  Any transfer or assignment of Interests permitted by this Agreement and a Series Designation will be effective as of the first day of the month following the requisite notice period (unless such notice period is waived by the Managing Member in its sole discretion).

No transfer, pledge, sale or assignment shall be permitted unless the Managing Member is satisfied that (i) such transfer, sale, pledge or assignment will not be in violation of the Act or applicable federal, state, or foreign securities laws, and (ii) notwithstanding such transfer, sale, pledge or assignment, each Series shall continue to be classified as a company rather than as an association taxable as a corporation under the Code.  No transfer, sale, pledge or assignment shall be effective or recognized by the Company if such transfer, sale, pledge or assignment would result in the termination of the Series for federal income tax purposes, and any attempted transfer, sale, pledge or assignment in violation hereof shall be ineffective to transfer, sale, pledge or assign any such Interests. Any transferee, pledge, purchaser or assignee of Interests who has not been admitted to a Series as a Substituted Non-Managing Member shall not have any of the rights of a Non-Managing Member, except that such person shall receive that share of capital and profits and shall have the right of redemption to which his transferor, seller, pledgor or assignor would otherwise have been entitled and shall remain subject to the other terms of this Agreement binding upon Non-Managing Members.  No Non-Managing Member shall have any right to approve of any person becoming a Substituted Non-Managing Member.  The Non-Managing Member shall bear all costs (including any attorneys’ and accountants’ fees) related to such transfer, sale, pledge or assignment of his Interests.

In the event that the Managing Member consents to the admission of a Substituted Non-Managing Member to a Series pursuant to this Section 10(a), the Managing Member is hereby authorized to take such actions as may be necessary to reflect such substitution of a Non-Managing Member.  Each Substituted Non-Managing Member shall execute and acknowledge such instruments, in a form and substance satisfactory to the Managing Member, as the Managing Member deems necessary or desirable to effectuate such admission and to confirm the agreement of the Substituted Non-Managing Member to be bound by all terms and provisions of this Agreement and the applicable Series Designation.  Further, each Substituted Non-Managing Member agrees upon the request of the Managing Member, to execute such certificates or other documents and perform such acts as the Managing Member deems appropriate to preserve the limited liability status of the Company and each Series after the completion of any assignment, transfer, sale or pledge of the Interests.

Each Substituted Non-Managing Member, as a condition of admission, hereby indemnifies the Managing Member, the Company and the applicable Series against any loss, damage, cost or expense (including without limitation, tax liabilities or loss of tax benefits) arising directly or indirectly as a result of his/its admission as a Substituted Non-Managing Member.

 

  

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(b)          Redemption. Except as set forth below and in accordance with the terms hereof or a Series Designation, a Non-Managing Member (or any Substituted Non-Managing Member) may withdraw all or part of his unredeemed capital contribution and undistributed profits with respect to his Series, if any, reduced as hereinafter described (any such withdrawal being herein referred to as a “Redemption”).  A Non-Managing Member shall maintain the minimum investment in the Series as shall be determined by the Managing Member in its sole discretion.  Redemption of all or some of a Non-Managing Member’s Capital Account shall be effective as of the last Business Day of the month subsequent to the timely receipt by the Managing Member of a Request for Redemption, in proper form (unless any or all of such requirements are waived in the sole discretion of the Managing Member) (each a “Redemption Date”); provided that all liabilities, contingent or otherwise, of the Company (except any liability to Members on account of their capital contributions) shall have been paid, or there shall remain property of the Series sufficient to pay them.  As used herein, “Request for Redemption” shall mean a letter in the form specified by the Managing Member.  The Managing Member may consent to Redemptions by a Non-Managing Member in any amount at any time.

Upon Redemption, a Non-Managing Member (or a Substituted Non-Managing Member) shall receive the value of its Capital Account that is requested for withdrawal.  If a Redemption is requested by an assignee, all amounts owed to the Company or the Series under Section 14(d) by the Member to whom such Interests were sold, as well as all amounts owed by all assignees of such Interests, shall be deducted from the amount otherwise due upon Redemption.  The Managing Member shall endeavor to pay Redemptions within 10 Business Days after the Redemption Date; provided, however, if the Managing Member believes that extraordinary circumstances exist, including, but not limited to, the Series’ inability to liquidate any positions as of a Redemption Date, or a default or delay in payments due to the Series by one or more of the Trading Companies, or other significant administrative or other hardships exist (collectively, “Hardships”), the Company may in turn delay payment to Members requesting Redemption of the proportionate part of the value of redeemed Interests represented by the illiquid sum or sums which are the subject of such Hardships, in which event payment for Redemptions will be made to the Members as soon as practicable following the resolution of such Hardships.  The Managing Member may, in its absolute discretion, waive any restrictions or charges applicable to Redemptions.

The Managing Member may suspend Redemptions of Interests of any Class or Series in any Fiscal Year in which the Managing Member determines that (i) such suspension is necessary in order to assure that the Company and each Series will not be treated as “publicly traded” under Internal Revenue Code of 1986, as amended, §7704, and (ii) treatment as “publicly traded” would be adverse to the Non-Managing Members.  The Managing Member’s good faith determinations pursuant to the preceding sentence shall be final and conclusive as to all Non-Managing Members.  In addition, the Managing Member may suspend Redemptions of Interests of any Class or Series for the whole or part of any Fiscal Year if the Managing Member determines that (i) the effect of Redemptions, including Redemptions for which Redemption Requests have been received, would materially impair the Series’ ability to operate in pursuit of its objectives; (ii) the remaining Non-Managing Members would be unfairly and materially disadvantaged; or (iii) Redemptions may result in significant participation in the Company by benefit plan investors; or (iv) as otherwise described in a Series Designation.

The Managing Member may, at any time, require any Non-Managing Member to redeem all or a portion of such Non-Managing Member’s Interests by giving not less than 5 days’ written notice to the Non-Managing Member or without notice in the case of certain events under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

11.         Special Power of Attorney

 

Each Non-Managing Member of a Series, by the execution of this Agreement, does irrevocably constitute and appoint the Managing Member, with full power of substitution, as his true and lawful attorney-in-fact, in his name, place, and stead (a) to execute, acknowledge, swear to, deliver, file, and record on his behalf in the appropriate public offices and publish: (i) this Agreement, the Series Designation and the Certificate of Formation and amendments thereto; (ii) all instruments that the Managing Member deems necessary or appropriate to reflect any amendment, change, or modification of this Agreement, the Series Designation or the Certificate of Formation made in accordance with terms of this Agreement; (iii) certificates of assumed name; and (iv) all instruments that the Managing Member deems necessary or appropriate to qualify the Company and each Series to do business as a foreign limited liability company in other jurisdictions, and (b) to admit a Substitute Non-Managing Member for a Series and, to the extent that it is necessary under the laws of any jurisdiction, to execute, deliver, and file amended certificates or agreements of limited liability company or other instruments to reflect such admission.  The Power of Attorney granted herein shall be irrevocable and deemed to be a power coupled with an interest and shall survive the incapacity, death, dissolution, liquidation, or termination of a Non-Managing Member.  Each Non-Managing Member hereby agrees to be bound by any representation made by the Managing Member and by any successor thereto acting in good faith pursuant to such Power of Attorney.  In the event of any conflict between this Agreement and any instrument filed by an attorney-in-fact pursuant to the Power of Attorney granted in this Section 11, this Agreement shall control.

 

  

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12.         Withdrawal of Members

The Company and each Series shall terminate and be dissolved upon the withdrawal, insolvency, bankruptcy, dissolution or liquidation of the Managing Member (unless a new managing member is elected by a vote of a Majority of Interests in the Company, and such new managing member shall have elected to continue the business of the Company and the Series).  The Managing Member shall not withdraw or assign all of its Managing Member Interests at any time without giving the Non-Managing Members 30 days’ prior written notice of its intention to withdraw or assign, and, if the Non-Managing Members thereupon elect a new managing member or partners which elect to continue the business of the Company and the Series, the withdrawing Managing Member shall pay all reasonable expenses incurred by the Company and each Series in connection with such withdrawal.  The Managing Member shall be paid in accordance with Section 10(b) with respect to its Managing Member Interests in the Company as of the date of such withdrawal.

The death, incompetency, insolvency, bankruptcy, liquidation, or dissolution of a Non-Managing Member shall not terminate its Series, and such Non-Managing Member, his estate, custodian, or personal representative shall have no right to withdraw such Non-Managing Member’s Interest in its Series except as provided in Section 10.  Each Non-Managing Member (and any assignee of such Member’s Interest) 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 its Series and any right to an audit or examination of the books of its Series.

13.         No Personal Liability for Return of Capital

Subject to Section 14, neither the Managing Member nor any “affiliate” (as defined in Section 14(c)) shall be personally liable for the return or repayment of all or any portion of the capital or profits of any Member (or assignee) with respect to its Series, it being expressly agreed that any such return of capital or profits made pursuant to this Agreement or a Series Designation shall be made solely from the assets (which shall not include any right of contribution from the Managing Member) of such Series.

14.         Standard of Liability; Indemnification

(a)          Standard of Liability. Neither the Managing Member, nor its principals, shareholders, officers, directors, employees, representatives, agents or affiliates (as defined in Section 14(c)) shall be liable, responsible or accountable in damages or otherwise to the Company or a Series or any of the Non-Managing Members, their respective successors, assignees or transferees or to their third parties for any act or omission performed or omitted by them on behalf of the Company or a Series and in a manner reasonably believed by them to be within the scope of the authority granted to them by this Agreement or a Series Designation except when such action or failure to act constitutes gross negligence, willful misconduct, bad faith or reckless disregard.  Moreover, neither the Managing Member, nor its officers, directors, employees, shareholders, principals or affiliates, shall have any liability to the Company or a Series for any losses suffered by it due to the action or inaction of any agent retained by the Company or a Series, whether through negligence, dishonesty or otherwise, provided that the agent was selected with reasonable care.  The Managing Member may consult with counsel and accountants in respect of the Company’s or a Series’ affairs and be fully protected and justified in any action or inaction which is taken in good faith and in accordance with the information, reports, statements, advice or opinion provided by such persons, provided that they were selected with reasonable care and the matter consulted is reasonably believed by the Managing Member to be within such persons’ professional or expert competence.  Notwithstanding any of the foregoing to the contrary, the provisions of this Section 14 shall not be construed so as to relieve (or attempt to relieve) the Managing Member of any liability to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Section 14 to the fullest extent permitted by law.

 

  

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(b)          Indemnification by each Series. Each Series shall indemnify, defend, and hold harmless the Managing Member, its principals, shareholders, officers, directors, employees, representatives, agents or affiliates (as defined in Section 14(c)) from and against any loss, liability, damage, cost, or expense (including attorneys’ and accountants’ fees and expenses incurred in defense of any demands, claims, or lawsuits) actually and reasonably incurred arising from any act or omission performed or omitted by them on behalf of the Company or such Series, including, without limitation, any demands, claims, or lawsuits initiated by a Non-Managing Member (or assignee thereof); provided that the act or omission performed or omitted that was the basis of such loss, liability, damage, cost, or expense was not the result of gross negligence, willful misconduct, bad faith or reckless disregard.  Furthermore, in any action or proceeding brought by a Non-Managing Member in the right of the Company or a Series to which the Managing Member or any affiliate is a party defendant, any such person shall be indemnified only to the extent and subject to the conditions specified in the Act and this Section 14(b).  Each Series shall make advances to the Managing Member or its affiliates hereunder only if: (1) the demand, claim, lawsuit, or legal action relates to the performance of duties or services by such persons to the Company or such Series; (2) such demand, claim, lawsuit, or legal action is not initiated by a Non-Managing Member; and (3) such advances are repaid, with interest at the legal rate under Delaware law, if the person receiving such advance is ultimately found not to be entitled to indemnification hereunder.

Nothing contained in this Section 14(b) shall increase the liability of any Non-Managing Member to its Series beyond the amount of his capital and profits, if any, in such Series, including amounts received on distributions and Redemptions, together with interest thereon.  The Managing Member may allocate and charge any liabilities, expenses or other obligations of the Company acquired or incurred by the Company with respect to this Section 14(b) and not readily associated with a particular Series to, between or among any one or more Series, in such manner and on such basis as the Managing Member in its reasonable discretion deems fair and equitable.  All rights to indemnification and payment of legal fees and expenses shall not be affected by the dissolution of the Company or termination a Series or the withdrawal, insolvency, or dissolution of the Managing Member.

The Company and each Series shall not incur the cost of that portion of liability insurance which insures the Managing Member and its affiliates for any liability as to which the Managing Member and its affiliates are prohibited from being indemnified.

(c)          Affiliate. As used in this Agreement, the term “affiliate” of a person shall mean: (i) any natural person, partnership, corporation, association, or other legal entity directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of such person; (ii) any partnership, corporation, association, or other legal entity 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by such person; (iii) any natural person, partnership, corporation, association, or other legal entity directly or indirectly controlling, controlled by, or under common control with such person; (iv) any officer, director or partner of such person or (v) if such person is an officer, director or partner, any partnership, corporation, association, or other legal entity for which such person acts in any such capacity. Notwithstanding the foregoing, “affiliates” for purposes of this Section 14(c) shall include only those persons performing services for the Company or a Series.

(d)          Indemnification by Members. In the event that the Company or a Series is made a party to any claim, dispute, or litigation or otherwise incurs any loss or expense as a result of, or in connection with, any Member’s (or assignee’s) obligations or liabilities unrelated to the Company’s business, such Member (or assignees cumulatively) shall indemnify, defend, hold harmless and reimburse the Company for such loss, liability, damage, cost and expense to which the Company shall become subject (including attorneys’ and accountants’ fees and expenses).

 

  

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15.         Benefit Plan Investors

(a)          Investment in Accordance with Law. Each Non-Managing Member that is, or is investing assets on behalf of, an “employee benefit plan,” as defined in and subject to ERISA, or a “plan,” as defined in and subject to Section 4975 of the Code (each such employee benefit plan and plan, a “Plan”), and each fiduciary thereof who has caused the Plan to become a Non-Managing Member (a “Plan Fiduciary”), represents and warrants that: (a) the Plan Fiduciary has considered an investment in the Series for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in the Series for such Plan is consistent with the Plan Fiduciary’s responsibilities under ERISA; (c) the investment in the Series by the Plan does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan’s investment in the Series has been duly authorized and approved by all necessary parties; (e) none of the Managing Member, any affiliates of the Managing Member, any commodity trading advisor to the Series, any employee or any affiliate of the Managing Member that sells Interests, any additional placement agent, any person, firm or corporation engaged by the Managing Member to provide services to the Company or the Series, any of their respective affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of assets of the Plan used to purchase Interests; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase Interests for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; (f) the Plan Fiduciary (i) is authorized to make, and is responsible for, the decision for the Plan to invest in the Series, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA, including that Plan investments be diversified so as to minimize the risks of large losses; (ii) is independent of the Managing Member, any affiliates of the Managing Member, each commodity trading advisor to the Series, any employee or any affiliate of the Managing Member that sells Interests, any additional placement agent, any person, firm or corporation engaged by the Managing Member to provide services to the Company and the Series, each selling agent and each of their respective affiliates; and (iii) is qualified to make such investment decision; and (g) the Plan’s investment in the Series does not constitute a prohibited transaction or fiduciary breach under ERISA or the Code.

(b)          Disclosures and Restrictions Regarding Benefit Plan Investors. Each Non-Managing Member that is a “benefit plan investor” (defined as any Plan, any other employee benefit plan or plan as defined in but not subject to either ERISA or Section 4975 of the Code and any entity deemed for any purpose of ERISA or Section 4975 of the Code to hold assets of any employee benefit plan or plan) represents that the individual signing the Series Agreement has disclosed such Non-Managing Member’s status as a benefit plan investor in writing to the Managing Member.  Each Non-Managing Member that is not a “benefit plan investor” represents and agrees that if at a later date such Non-Managing Member becomes a benefit plan investor, such Non-Managing Member will immediately notify the Managing Member of such change of status.  Notwithstanding anything herein to the contrary, the Managing Member, on behalf of the Company and each Series, may take any and all action to prevent the Company from holding “plan assets” under ERISA or the Code with respect to any Plan, including, but not limited to, if appropriate under the circumstances as determined by the Managing Member in its sole discretion, refusing to admit persons as Non-Managing Members or refusing to accept additional capital contributions or refusing to permit Redemptions of Interests, and requiring the Redemption of Interests of any Non-Managing Member in accordance with Section 10(b) hereof, as may be necessary or desirable to assure that at all times the aggregate of all Capital Accounts of all benefit plan investors do not amount to or exceed 25% of the total Capital Accounts of all Non-Managing Members (not including the investments of the Managing Member, any commodity trading advisor to the Series, any person who provides investment advice for a fee (direct or indirect) with respect to the Series and “affiliates,” as such term is defined in the applicable regulation promulgated under ERISA, of any such person).

 

  

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16.         Amendments

(a)          Managing Member’s Authority to Amend. The Managing Member may make any amendment to this Agreement or a Series Designation that is not materially adverse to the Non-Managing Members, without the consent of the affected Non-Managing Members, including but not limited to the following: (i) change the name of the Company or a Series or cause the Company or a Series to transact business under another name; (ii) clarify any inaccuracy or any ambiguity, or reconcile any inconsistent provisions herein, (iii) effect the intent of the allocations proposed herein to the maximum extent possible in the event of a change in the Code or the interpretations thereof affecting such allocations; (iv) attempt to ensure that a Series is not taxed as an association taxable as a corporation for federal income tax purposes; (v) qualify or maintain the qualification of the Company as a series limited liability company in any jurisdiction; (vi) delete or add any provision of or to this Agreement or a Series Designation required to be deleted or added by the staff of the CFTC, any other federal agency, any state “Blue Sky” official, or other governmental official, or in order to opt to be governed by any amendment or successor to the Act, or to comply with applicable law; (vii) make any modification to this Agreement or a Series Designation to reflect the admission of additional or substitute managing members; (viii) make any amendment that is appropriate or necessary, in the opinion of the Managing Member, to prevent the Company or a Series or the Managing Member or its directors, officers or controlling persons from in any manner being subject to the provisions of the Investment Company Act of 1940 (the “1940 Act”), or the Investment Advisers Act of 1940, as amended (the “Advisers Act”); (ix) take such actions as may be necessary or appropriate to avoid the assets of the Company or a Series being treated for any purpose of ERISA or Section 4975 of the Code as assets of any “employee benefit plan” as defined in and subject to ERISA or of any plan as defined in and subject to Section 4975 of the Code (or any corresponding provisions of succeeding law) or to avoid the Company’s or the Series’ engaging in a prohibited transaction as defined in Section 406 of ERISA or Section 4975(c) of the Code; and (x) make any amendment that is appropriate or necessary, in the opinion of the Managing Member, to qualify the Company or a Series under the 1940 Act, and any persons under the 1940 Act and the Advisers Act, if the Managing Member reasonably believes that doing so is necessary.  Any such supplemental or amendatory agreement of the Company or a Series shall be adhered to and have the same force and effect from and after its effective date as if the same had originally been embodied in, and formed a part of this Agreement or a Series Designation; provided, however, that no such supplemental or amendatory agreement shall, without the consent of all Non-Managing Members affected thereby, change or alter the provisions of this Agreement or a Series Designation, reduce the Capital Account of any Non-Managing Member, or modify the allocation of profits, losses or distributions to which any Non-Managing Member is entitled with respect to its Series.

(b)          Non-Managing Member Voting. Except as otherwise specifically set forth in this Agreement, the Non-Managing Members shall have only the voting rights set forth in the Act.  A meeting of the Non-Managing Members for the purpose of acting upon any matter upon which the Non-Managing Members are entitled to vote may be called at any time by Non-Managing Members owning a Majority of Interests in the Company or in a Series, as applicable, or by the Managing Member.  The Non-Managing Members or the Managing Member shall give written notice of any such meeting to all Non-Managing Members and the Managing Member and such meeting shall be held not less than 10 days and not more than 60 days after the notice to the Non-Managing Members and the Managing Member is provided.  Any action required or permitted to be taken by the Non-Managing Members may be taken with or without a meeting, or by written consent of the Non-Managing Members.  Non-Managing Members shall not have a vote with respect to any Series other than the Series in which they have invested.

17.         Governing Law

The validity and construction of this Agreement and each Series Designation shall be governed by, and construed in accordance with, the law of the State of Delaware, including, specifically, the Act (without regard to its choice of law principles).  If any action or proceeding shall be brought by a party to this Agreement or a Series Designation or to enforce any right or remedy under this Agreement or a Series Designation, each party hereto hereby consents and will submit to the jurisdiction of the courts of the State of Illinois or any federal court sitting in the State of Illinois.  Any action or proceeding brought by any party to this Agreement or a Series Designation to enforce any right, assert any claim or obtain any relief whatsoever in connection with this Agreement or a Series Designation shall be brought by such party exclusively in the courts of the State of Illinois or any federal court sitting in the State of Illinois.

18.         Miscellaneous

(a)          Representations, Warranties, Covenants and Understandings of the Members. Any representations, warranties, covenants and understanding of a Non-Managing Member made with respect to such Non-Managing Member’s admission to the Company with respect to a Series or the making of any additional capital contribution are incorporated herein by reference and made a part hereof as if originally contained herein.

(b)          Notices. All notices and requests to the Managing Member under this Agreement or a Series Designation (other than Subscriptions, Requests for Redemption and notices of assignment or transfer of Interests) shall be in writing and shall be effective upon personal delivery or, if sent by registered or certified mail, postage prepaid, addressed to the Managing Member at 222 South Riverside Plaza, Suite 900, Chicago, Illinois 60606 (or such other address as the Managing Member shall have notified the Non-Managing Members), upon the deposit of such notice in the United States mail.  Requests for Redemption and notices of assignment, sale, pledge or transfer of Interests shall be effective upon timely receipt by the Managing Member.  Except as otherwise provided herein, all reports and notices hereunder shall be in writing and shall be sent by first-class mail to the last known address of the Non-Managing Member or other form of writing (including electronic mail) as agreed to or accepted by the Non-Managing Member.

 

  

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(c)          Binding Effect. This Agreement and each Series Designation shall inure to the benefit of, and be binding upon, all applicable of the parties, their successors, assigns as permitted herein, custodians, estates, heirs, and personal representatives.  For purposes of determining the rights of any Member or assignee hereunder and thereunder, the Company (and each Series) and the Managing Member may rely upon the Series’ records as to who are Members and assignees, and all Members and assignees agree that their rights shall be determined and that they shall be bound thereby, including all rights which they may have under Section 16.

(d)          Entire Agreement. This Agreement and each Series Designation, plus any other agreement which may be required to be signed by the Managing Member prior to the date hereof shall constitute the entire agreement among the Members with respect to the subject matter hereof and thereof, and shall supersede any prior agreement or understanding, oral or written, relating to the Company and each Series.

(e)          Severability. In the event that any provision of this Agreement or a Series Designation shall be declared invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions of this Agreement or such Series Designation, it being hereby agreed that such provisions are severable and that this Agreement and the Series Designation shall be construed in all respects as if such invalid or unenforceable provision were omitted.

(f)          No Third Party Beneficiaries. This Agreement and each Series Designation are not intended and shall not convey any rights to persons not party to this Agreement or such Series Designation, as the case may be.

(g)          Counterparts. This Agreement and each Series Designation may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

(h)          Creditors. None of the provisions of this Agreement or any Series Designation shall be for the benefit of or enforceable by any creditors of the Company or such Series.

(i)           Captions. Captions in no way define, limit, extend, or describe the scope of this Agreement or each Series Designation nor the effect of any of their provisions.

 

(Signature page follows)

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	 	
MANAGING MEMBER:

	 	 
	 	
R.J. O’BRIEN FUND MANAGEMENT, LLC

	 	 
	 	 
/s/ Julie M. DeMatteo

	 	
Name:  Julie M. DeMatteo

	 	

Title:    Managing Director

 

NON-MANAGING MEMBER:

With respect to a Series, each person who shall execute a Series Designation in accordance with the terms of this Agreement and who is listed by the Managing Member as a Non-Managing Member of the Series on the Series Designation.

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