Document:

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                                                                [EXECUTION COPY]

                SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER

         SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of March 28,
2001 (this "Amendment"), to the Credit Agreement dated as of June 29, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among DONNKENNY APPAREL, INC. a Delaware corporation ("DKA"),
BELDOCH INDUSTRIES CORPORATION, a Delaware corporation ("BIC"; together with
DKA, and severally, the "Borrowers"), the Guarantors party thereto, the Lenders
party thereto and THE CIT GROUP/COMMERCIAL SERVICES, INC. as agent for the
Lenders (in such capacity, the "Agent").

         The Borrowers, the Guarantors, the Lenders and the Agent are parties to
the Credit Agreement.

         The Borrowers have requested that the Lenders (a) waive existing Events
of Default under the Credit Agreement, (b) extend the Final Maturity Date and
(c) amend certain other provisions of the Credit Agreement.

         The Lenders are willing to (a) waive such existing Events of Default,
(b) extend the Final Maturity Date and (c) make such other amendments to the
Credit Agreement upon the terms and subject to the conditions set forth in this
Amendment.

         Accordingly, in consideration of the mutual agreements set forth
herein, and for good and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

         1. Defined Terms. Initially capitalized terms used and not otherwise
defined herein shall have their respective meanings as defined in the Credit
Agreement.

<PAGE>

         2. Waiver of Events of Default. The Borrowers have failed to comply
with the covenants set forth in Sections 7.11 (EBITDA), 7.10 (Minimum Interest
Coverage Ratio) and 7.12A (Tangible Net Worth) of the Credit Agreement for the
quarterly period ending December 31, 2000; as a result of which Events of
Default (collectively, the "Subject Defaults") have occurred and are continuing
under Article VIII(d)of the Credit Agreement. In response to the Borrowers'
request for a waiver of the Subject Defaults, Lenders hereby waive the Subject
Defaults, provided, however, that nothing contained in this Amendment shall be
construed to limit, impair or otherwise affect any rights of Lenders in respect
of future noncompliance with any covenant, term or provision of the Credit
Agreement or of any of the other Loan Documents.

         3. Extension of Final Maturity Date. The definition of Final Maturity
Date set forth in the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

              "Final Maturity Date" shall mean June 30, 2004."

         4. Increase in Interest Rate. (a) The definition of Interest Rate set
forth in the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

              ""Interest Rate" shall mean, from and after January 1, 2001, as to
         Prime Rate Loans, a rate of two (2%) percent per annum in excess of the
         Prime Rate and, as to Eurodollar Rate Loans, a rate of [N/A] percent
         per annum in excess of the Adjusted Eurodollar Rate (based on the
         Eurodollar Rate applicable for the Interest Period selected by
         Borrowers as in effect three (3) Business Days after the date of
         receipt by Lender of the request of Borrowers for such Eurodollar Rate
         Loans in accordance with the terms hereof, whether such rate is higher
         or lower than any rate previously quoted to Borrowers); provided, that,
         the Interest Rate shall be increased by two (2%) percent per annum in
         excess of the Interest Rate otherwise in effect, at Agent's option,
         without notice, (a) for

                                        2

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         the period on and after (i) the date of termination hereof and until
         such time as all Obligations are paid in full (notwithstanding entry of
         any judgment against Borrowers) or (ii) the date of the occurrence of
         any Event of Default and for so long as such Event of Default is
         continuing, and (b) on the Revolving Credit Loans at any time
         outstanding in excess of the Availability (whether or not such
         excess(es) arise or are made with or without Agent's knowledge or
         consent and whether made before or after an Event of Default)."

         (b) For the avoidance of doubt, and confirming and restating the
agreement of Borrowers, Lenders and Agent set forth in the Fourth Amendment to
Credit Agreement and Waiver, dated as of April 13, 2000, notwithstanding
anything to the contrary contained in the Credit Agreement or in any of the Loan
Documents, Borrowers have no right to request or receive, and Agent and Lenders
shall not make, any Eurodollar Rate Loans.

         5. Overadvance. Section 1.01 is hereby amended to include the following
additional defined term:

              "'Overadvance' shall have the meaning assigned to such term in
         Section 2.01(c) hereof."

         6. Revolving Credit Loans Sublimit. Section 1.01 is hereby amended to
include the following additional defined term:

              "Revolving Credit Loans Sublimit" shall have the meaning assigned
         to such term in Section 2.01(b) hereof."

         7. Amendment of Revolving Loans Limitation. Section 2.01(b) of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                                       3
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              "(b) Subject to the terms and conditions and relying upon the
         representations and warranties herein set forth, each Lender, severally
         and not jointly, agrees to make Revolving Credit Loans to, and through
         the Agent open Letters of Credit for the benefit of, the Borrowers, at
         any time and from time to time from the date hereof to the Revolving
         Credit Termination Date, in an aggregate principal amount at any time
         outstanding not to exceed the amount of such Lender's Revolving Credit
         Commitment set forth opposite its name in Schedule 2.01(b) annexed
         hereto. Notwithstanding the foregoing:

         (1) The sum of the aggregate principal amount of Revolving Credit Loans
         outstanding at any time to the Borrowers plus the Letter of Credit
         Usage shall not exceed the lesser of (A) the Total Revolving Credit
         Commitment and (B) an amount equal to the total of (i) up to ninety
         percent (90%) of the Net Amount of Eligible Receivables plus (ii) the
         sum of (I) up to sixty percent (60%) of the Net Amount of Eligible
         Inventory plus (II) up to sixty percent (60%) of the undrawn amount of
         all outstanding Letters of Credit for the importation of finished goods
         inventory consigned to the Agent as of the date of determination (such
         sum not to exceed $37,000,000 at any time) minus (iii) any Availability
         Reserves (the amount determined pursuant to this clause (B) referred to
         herein as the "Borrowing Base"); .

         (2) The aggregate principal amount of Revolving Credit Loans
         outstanding at any time to Borrowers shall not exceed one hundred ten
         percent (110%) of the sum of (A) the amount calculated based upon the
         immediately preceding clause (1)(B)(i) plus (B) up to sixty percent
         (60%) of the aggregate value, computed at the lower of cost (on a FIFO
         basis) and current market value, of all Inventory (including, without
         limitation, all Inventory that is not Eligible Inventory), minus (i)
         any Availability Reserves

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         minus (ii) the Letter of Credit Usage at such time (such amount, the
         "Revolving Credit Loans Sublimit");

         (3) The Letter of Credit Usage shall in no event exceed $35,000,000 at
         any time; and

         (4) the sum of (i) the principal amount of the Term Loan outstanding at
         any time plus (ii) the principal amount of the Supplemental Term Loan
         outstanding at any time plus (iii) the aggregate principal amount of
         Revolving Credit Loans outstanding shall in no event exceed $75,000,000
         at any time.

         The Borrowing Base will be computed daily and a compliance certificate
         from a Responsible Officer of the Borrowers presenting its computation
         will be delivered to the Agent in accordance with Section 6.05 hereof.
         If the aggregate principal amount of Revolving Credit Loans outstanding
         at any time to Borrowers exceeds the Revolving Credit Loans Sublimit,
         such excess shall be repayable by Borrowers immediately upon demand
         therefor by Agent.

              Subject to the foregoing and within the foregoing limits, the
         Borrowers may borrow, repay (or, subject to the provisions of Section
         2.09 hereof, prepay) and reborrow Revolving Credit Loans, on and after
         the date hereof and prior to the Revolving Credit Termination Date,
         subject to the terms, provisions and limitations set forth herein,
         including without limitation, the requirement that, except as set forth
         in Section 2.01(c), no Revolving Credit Loan shall be made hereunder if
         the amount thereof exceeds the Availability outstanding at such time."

                                       5
<PAGE>

         8. Overadvances During 2001 Fiscal Year. Borrowers have previously
delivered to Agent Borrowers' budget for their 2001 Fiscal Year, entitled "2001
Budget", dated January 17, 2001 (the "2001 Budget"), in contemplation of the
making of this Amendment. Borrowers have advised Agent that, in order to achieve
the results of operations projected by the 2001 Budget, Borrowers contemplate
requesting Agent to make Overadvances in an aggregate amount outstanding in
certain months during Borrowers' 2001 Fiscal Year that, as detailed in the 2001
Budget, exceed the maximum amount of Overadvances that Agent, in its sole
discretion, may presently make to Borrowers pursuant to Section 2.01(c) without
the consent of Lenders. Borrowers have therefore requested that Agent and
Lenders amend Section 2.01(c), based on the monthly Overadvance amounts set
forth in the 2001 Budget, and Agent and Lenders have agreed to amend Section
2.01(c) as set forth hereinbelow; provided, however, that Borrowers understand
and expressly acknowledge and agree that, notwithstanding that the amendment and
restatement of Section 2.01(c) set forth hereinbelow is based on the Overadvance
amounts contained in the 2001 Budget, such amendment and restatement of Section
2.01(c) shall not be deemed and does not in any manner constitute a commitment
by Agent and/or Lenders to make any Overadvances whatsoever, including, without
limitation, Overadvances that would be within the limitations set forth in
Section 2.01(c), as amended hereby. Subject to the foregoing, Section 2.01(c) of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

              "(c) Notwithstanding anything to the contrary contained in this
         Agreement or any of the other Loan Documents, at the request of the
         Borrowers at any time during Borrowers' 2001 Fiscal Year, the Agent
         may, in its sole and absolute discretion, subject to the Total
         Revolving Credit Commitment, make Revolving Credit Loans and issue
         Letter of Credit Guarantees to the Borrowers on behalf of the Lenders
         in excess of the Availability ("Overadvance"), which Overadvance shall
         be repayable on demand and, if not sooner demanded, no later than
         January 4, 2002, provided, that, the aggregate amount of any such
         Overadvance which the Agent may make without the consent of all of the
         Lenders shall not exceed for each month during Borrowers' 2001 Fiscal
         Year the

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         amount set forth below opposite each such month. Each Lender shall be
         obligated to pay the Agent the amount of its ratable share of any such
         additional Revolving Credit Loans or Letter of Credit Guaranties.
         Provided no Event of Default shall have occurred and be continuing,
         notwithstanding anything to the contrary contained in the Credit
         Agreement, Overadvances shall not bear interest at the applicable
         Interest Rate set forth in the proviso in the definition of Interest
         Rate (the "Default Rate"). Any Overadvance not repaid on demand shall,
         however, without waiving any Event of Default which has occurred
         thereby, bear interest at the Default Rate. The making of an
         Overadvance by the Agent shall in no way limit, waive or otherwise
         affect the Agent's right with respect to the making of any additional
         Overadvance:

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<PAGE>

                                     MAXIMUM
                                  DISCRETIONARY
         MONTH                     OVERADVANCE
         -----                     -----------
        January                    $10,956,000
        February                   $11,828,000
         March                     $11,478,000
         April                     $12,795,000
          May                      $13,392,000
          June                     $12,568,000
          July                     $10,359,000
         August                     $8,090,000
       September                    $4,676,000
        October                     $3,598,000
        November                    $3,970,000
        December                   $4,611,000"

         9. Amendment of Section 7.10. Section 7.10 of the Credit Agreement is
amended and restated in its entirety to read as follows:

              "Section 7.10 Minimum Interest Coverage Ratio. Permit the Interest
         Coverage Ratio of the Parent and its Subsidiaries on a Consolidated
         basis for each four consecutive fiscal quarter period ending on the
         last day of each of the fiscal quarters set forth below to be less than
         the ratio set forth below opposite such fiscal quarter:

         Quarterly Period Ending            Minimum Interest Coverage Ratio
         -----------------------            -------------------------------
             March 31, 2001                           0.51 to 1:00

                                       8

<PAGE>

         June 30, 2001                               0.62 to 1:00
         September 30, 2001                          0.90 to 1:00
         December 31, 2001                           1.34 to 1.00"

         10. Amendment of Section 7.11. Section 7.11 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:

              "Section 7.11 EBITDA. Permit EBITDA of the Parent and its
         Subsidiaries (in each case computed and calculated in accordance with
         GAAP) on a Consolidated basis for each four consecutive fiscal quarter
         period ending on the last day of each of the fiscal quarters set forth
         below to be less than the amount set forth below opposite each such
         fiscal quarter:

         Quarterly Period Ending                          EBITDA
         -----------------------                          ------
         March 31, 2001                                 $2,392,000
         June 30, 2001                                  $3,010,000
         September 30, 2001                             $4,510,000
         December 31, 2001                              $6,256,000"

         11. Amendment of Section 7.12A. Section 7.12A of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:

              "Section 7.12A Tangible Net Worth. Permit the Tangible Net Worth
         of the Parent and its Subsidiaries (in each case computed and
         calculated in accordance with GAAP) on a Consolidated basis as of the
         end of each of the fiscal quarters set forth below to be less than the
         amount set forth below opposite each such fiscal quarter:

                                        9

<PAGE>

         Quarterly Period Ending                      Tangible Net Worth
         -----------------------                      ------------------
         March 31, 2001                                    $2,364,000
         June 30, 2001                                     $1,166,000
         September 30, 2001                                $2,579,000
         December 31, 2001                                 $2,908,000"

         12. Future Amendment of Financial Covenants. Agent, Lenders and
Borrowers agree that on or before December 15 of each year for which financial
covenants have been provided for under the Credit Agreement, the parties will
agree upon further amendment of Sections 7.11 (EBITDA), 7.10 (Minimum Interest
Coverage Ratio) and 7.12A (Tangible Net Worth) of the Credit Agreement for
Borrowers' next fiscal year, based upon the summary of business plans and
financial operations projections that Borrowers are obligated to deliver to
Agent for each such subsequent fiscal year pursuant to Section 6.05 of the
Credit Agreement. Such further amendments will be calculated by Agent in a
manner consistent with the calculation of the revisions to such financial
covenants provided for in this Amendment.

         13. Waiver and Amendment Fee. In consideration of the waiver of the
Subject Defaults and the amendments to the Credit Agreement as set forth herein,
Borrowers shall pay to Agent, for the benefit of Lenders , or Agent, at its
option, may charge the account(s) of Borrowers maintained by Agent a waiver and
amendment fee in the amount of $200,000, which fee is fully earned and payable
as of the date hereof and shall constitute part of the Obligations.

         14. Representations and Warranties. Borrowers hereby represent and
warrant to Lenders that the representations and warranties set forth in Article
IV of the Credit Agreement are true on and as of the date hereof, as if made on
and as of the date hereof, after giving effect to this Amendment, except to the
extent that any such representation or warranty expressly relates to a prior
date, and breach of any of the representations and warranties made in this
paragraph 9 shall constitute and Event of Default under Article VIII(a) of the
Credit Agreement. Borrowers further represent and warrant that, after giving
effect to this

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Amendment, no Event of Default or event which, with the lapse of
time or the giving of notice or both, would become an Event of Default has
occurred and is continuing.

         15. Effectiveness. This Amendment shall become effective on the date
Agent shall have received counterparts of this Amendment duly executed and
delivered by each of the parties hereto.

         16. Continuing Effect of Credit Agreement. This Amendment shall not
constitute a waiver or amendment of any provision of the Credit Agreement not
expressly referred to herein and shall not be construed as a consent to any
further or future action on the part of either of the Borrowers that would
require consent of Lenders. Except as expressly amended by this Amendment, the
provisions of the Credit Agreement are and shall remain in full force and
effect.

         17. Applicable Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of New York (other than the conflicts
of law principles thereof).

         18. Counterparts; Facsimile Signature. This Amendment may be executed
in counterparts, each of which shall constitute and original and all of which
when taken together shall constitute but one contract. Delivery of an executed
counterpart of the signature page of this Amendment by facsimile shall be
effective as delivery of a manually executed signature page hereto.

                            [SIGNATURE PAGES FOLLOW.]

                                       11

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective authorized officers as of the
day and year first above written.

                  DONNKENNY APPAREL, INC., as a Borrower and a Guarantor

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                  BELDOCH INDUSTRIES CORPORATION, as a Borrower and a
                  Guarantor

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                  CHRISTIANSBURG GARMENT COMPANY, INCORPORATED,
                  as a Guarantor

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                  H SQUARED DISPOSITIONS, INC., as a Guarantor

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                       [SIGNATURES CONTINUE ON NEXT PAGE]

                                       12
<PAGE>

                    [SIGNATURES CONTINUE FROM PREVIOUS PAGE]

                  THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                  THE CIT GROUP/COMMERCIAL SERVICES, INC., as a Lender

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                  CENTURY BUSINESS CREDIT CORPORATION, as a Lender

                  By:
                      ----------------------------------------------------------

                  Name:
                        --------------------------------------------------------

                  Title:
                         -------------------------------------------------------

                                       13<PAGE>   1
                                                                    EXHIBIT 10.2

October 20, 2000

Beacon Management Corporation (USA)
Attn.: Thomas Nash
47 Hulfish Street
Princeton, New Jersey  08542

RE:      THE FULCRUM FUND LIMITED PARTNERSHIP

Dear Mr. Nash:

We are writing this letter (the "Cover Letter") to confirm our understanding
that you will manage a portion of the assets of the above-captioned entity
pursuant to the Model Sub-Advisory Agreement, dated January 1, 1998 (the "Model
Agreement"), a copy of which is attached hereto and incorporated herein. In
addition, we have agreed to the following:

1. Each capitalized term used in this Cover Letter will have the meaning
assigned to it in the Model Agreement.

2. The Client and the Kenmar Pool is The Fulcrum Fund Limited Partnership, a
Connecticut limited partnership with a principal place of business located at
c/o Kenmar Advisory Corp., Two American Lane, Greenwich Connecticut 06831.

3. The Sub-Advisor is Beacon Management Corporation (USA), a Delaware
corporation, with a principal place of business at 47 Hulfish Street, Princeton,
New Jersey 08542, a telephone number of (609) 924-5395.

4. The Sub-Advisor's Disclosure Document is dated July 18, 2000.

5. The Commodity Broker is E.D. &F. Man International Inc.

6. The Brokerage Commissions are $10.00 plus fees per roundturn transaction.

7. The Subaccount will initially be funded with all of the funds of the Kenmar
Pool in cash and notional funds.

8. The Trading Program will be the Meka system as described in the Sub-Advisor's
Disclosure Document.

9. The annualized Management Fee is 2%.

10. The Incentive Fee is 20%.

                                       1
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Beacon Management Corporation (USA)
October 20, 2000
Page 2

11. With respect to the Management Fee and the Incentive Fee, you will share up
to 22.50% of those fees with Kenmar.

If this is acceptable, please sign both copies of the Cover Letter and return
one copy to Mark M. Rossow, Esq. The other copy is for your files.

The Fulcrum Fund Limited Partnership

By: Kenmar Advisory Corp., General Partner

By: /s/ ESTHER ECKERLING GOODMAN
   --------------------------------------
   Esther Eckerling Goodman
   Chief Operating Officer and
   Senior Executive Vice President

ACCEPTED AND AGREED TO:

Beacon Management Corporation (USA)

By: /s/ THOMAS J. NASH
   --------------------------------------
   Name:
   Title:

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                          MODEL SUB-ADVISORY AGREEMENT

                                 JANUARY 1, 1998

                                   WITNESSETH:

WHEREAS, Kenmar Pool is authorized to select, retain, remove and/or replace
commodity trading advisors on behalf of the Client and to allocate and
reallocate the assets of the Client (as defined below) among such advisors;

WHEREAS, Kenmar Pool has received, reviewed and understands the Sub-Advisor's
Disclosure Document dated as set forth in the Cover Letter;

WHEREAS, Kenmar Pool desires to allocate to the Sub-Advisor a portion of the
assets of the Client to manage upon the terms and subject to the conditions set
forth herein;

WHEREAS, the Sub-Advisor desires to serve as an advisor for the Client and to
trade the Subaccount (as defined below) upon the terms and subject to the
conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                                 INTERPRETATION

1.1 DEFINITIONS. As used in this Agreement, the following terms will have the
following meanings:

Affiliate. Any individual or entity that controls (directly or indirectly), is
controlled by (directly or indirectly), or is under common control with
(directly or indirectly), the individual or entity to which referred.

Agreement. This Sub-Advisory Agreement and the Cover Letter.

Allocation Date. The date on which funds are initially allocated to the
Subaccount.

Applicable Laws. (i) The provisions of all applicable statutes and laws of the
United States of America (including the states thereof) including the Commodity
Exchange Act of 1974, as amended, or of any other country, political subdivision
or jurisdiction in which a transaction is executed on behalf of the Client and
(ii) the constitution, by-laws, rules, regulations, orders, customs and usage of
(A) any market (and its clearing house, if any) on which a transaction is
executed on behalf of the Client and (B) the NFA or any other regulatory or
self-regulatory organization with jurisdiction over any market, clearing house
and/or member thereof and/or any bank, broker, advisor or other intermediary
dealing in Commodity Interests on behalf of the Client.

Brokerage Commissions. The brokerage commissions to be charged the Subaccount on
the roundturn basis set forth in the Cover Letter, plus floor brokerage,
exchange, clearing, clearinghouse, principal, NFA, and administrative "give-up"
fees and other transaction fees and expenses.

3
<PAGE>   4

CFTC. The Commodity Futures Trading Commission, or such other governmental
agency that performs the functions that are being performed as of the date of
this Agreement by the Commodity Futures Trading Commission.

Client. The Client, as set forth in the Cover Letter.

Commodity Broker. The Commodity Broker, as set forth in the Cover Letter.

Commodity Interests. (i) Commodities, futures contracts, forward contracts,
foreign exchange commitments, swap contracts, spot (cash) commodities and other
items, options on the foregoing, and any rights pertaining to the foregoing
contracts, instruments or investments throughout the world and (ii) securities
approved by the CFTC for investment of customer funds.

Cover Letter. The cover letter to which the Model Sub-Advisory Agreement is
attached.

Dealer. Such commodity dealer as the parties hereto may select.

Disclosure Document. The most current disclosure document of the Sub-Advisor as
it may be amended or supplemented from time to time.

Incentive Fee. A calendar quarterly incentive fee, payable to the Sub-Advisor,
equal to the percentage set forth on the Cover Letter of Net New Trading
Profits.

Kenmar Pool. The Kenmar entity set forth in the Cover Letter.

Management Fee. A monthly management fee payable to the Sub-Advisor, without
regard to whether the Subaccount is profitable, equal to one-twelfth of the
percentage set forth on the Cover Letter of the month-end Net Asset Value of the
Subaccount before reduction for the Management Fee and Incentive Fee, if any,
accrued with respect to such month, pro rated for the actual number of trading
days in the month for which the Sub-Advisor managed the Subaccount or, in the
case of mid-month additions or withdrawals, if any, the applicable portion
thereof.

NFA. The National Futures Association, or such other self-regulatory
organization that performs the functions that are being performed as of the date
of this Agreement by the National Futures Association.

Net Asset Value. The total assets of the Subaccount including, but not limited
to, all cash and cash equivalents, notional funds and open Commodity Interest
positions less total liabilities, including, but not limited to, Brokerage
Commissions that would be payable with respect to the closing of open Commodity
Interest positions, all as determined in accordance with the principles set
forth in this Agreement or, where no such principles are specified herein, in
accordance with United States generally accepted accounting principles applied
on a consistent basis. The value of all Commodity Interests will be the market
value thereof. The market value of a Commodity Interest traded on an exchange
will be the settlement price on the exchange on the date of determination;
provided, however, that if a Commodity Interest could not be liquidated on the
day with respect to which the assets of the Subaccount are being determined, the
settlement price on the first subsequent day on which the contract could be
liquidated will be deemed to be the market value thereof. The market value of a
forward contract, a swap contract, or other off-exchange contract, instrument,
or transaction will mean its market value as determined by Kenmar Pool on a
basis consistently applied.

Net New Trading Profits. The realized (as adjusted by change in unrealized) net
trading profits earned on the Subaccount (excluding interest or
interest-equivalent income), decreased by the Management Fee and Brokerage
Commissions (as adjusted by change in accrued Brokerage Commissions), with all
such items determined from the first day of the calendar quarter that
immediately follows the last calendar quarter for which an Incentive Fee was
earned by the Sub-Advisor (or, if no Incentive Fee was earned previously by

4
<PAGE>   5

the Sub-Advisor, from the Allocation Date) to the close of business on the last
day of the calendar quarter with respect to which such Incentive Fee calculation
is being made.

Position Limit.  The speculative position limit of a certain Commodity Interest.

Principal. (1) Any person including, but not limited to, a sole proprietor,
general partner, officer or director, or person occupying a similar status or
performing similar functions, having the power, directly or indirectly, through
agreement or otherwise, to exercise a controlling influence over the activities
of the entity; (2) any holder or any beneficial owner of ten percent or more of
the outstanding share of any class of stock of the entity; and (3) any person
who has contributed ten percent or more of the capital of the entity.

Subaccount. The trading subaccount of the Client to be opened at the Commodity
Broker or Dealer, in which the Sub-Advisor is to invest in Commodity Interests
pursuant to the Trading Methods upon the terms and subject to the conditions set
forth herein. The Subaccount will initially be funded as set forth in the Cover
Letter.

Sub-Advisor. The Sub-Advisor, as set forth in the Cover Letter.

Trading Manager Agreement. The agreement between the Client and Kenmar Advisory
Corp. ("KAC"), whereby KAC was retained to select, remove and/or replace
commodity trading advisors on behalf of the Client and to allocate and
reallocate the assets of the Client among such advisors.

Trading Methods. The trading program(s), system(s), method(s), model(s),
strategy(ies) and/or formula(e) of the Sub-Advisor as disclosed in its
Disclosure Document.

Withdrawal Ratio. The ratio created by dividing (x) the Net Asset Value of the
funds withdrawn or allocated from the Subaccount by (y) the Net Asset Value of
the Subaccount as of the close of business on the immediately preceding business
day.

1.2 HEADINGS. Headings herein are for the convenience of the parties only, and
are not intended to affect the meaning or interpretation of this Agreement.

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<PAGE>   6

                                   ARTICLE II

                     DUTIES AND UNDERTAKINGS OF KENMAR POOL

2.1 SUBACCOUNT. Kenmar Pool will open and maintain the Subaccount and allocate
funds thereto and therefrom in accordance with this Agreement. Such funds will
be used to fulfill the margin requirements and other financial obligations of
the Subaccount. The Client, and not the Sub-Advisor, will have the sole and
exclusive authority and responsibility with regard to the investment,
maintenance and management of assets held in the Subaccount in securities (such
as U.S. Government securities) and in cash, whether held in accounts with
futures commission merchants, custodial accounts or otherwise.

2.2 POWER OF ATTORNEY. Pursuant to the power of attorney granted to it by the
Client, Kenmar Pool hereby constitutes, appoints, and authorizes the Sub-Advisor
as its agent and attorney-in-fact with respect to the Subaccount as such
Subaccount may be increased or decreased by trading profits or losses or
subsequent additions or withdrawals. The Sub-Advisor will trade, buy, sell,
spread, swap or otherwise acquire, hold, or dispose of Commodity Interests, on
margin or otherwise, all in accordance with the authority and terms and
conditions set forth in this Agreement. Kenmar Pool hereby gives and grants to
the Sub-Advisor full power and authority to act for the Subaccount and on the
Subaccount's behalf to do everything and anything whatsoever requisite,
necessary, and appropriate to be done in connection with this power of attorney
as fully and in the same manner and with the same force and effect as the Client
might or could do if personally present.

2.3 COLLECT FEES. Kenmar Pool will use its best efforts to collect the
Management and Incentive Fees due the Sub-Advisor from the Client and, provided
that Kenmar Pool has received such Fees from the Client, will pay such Fees to
the Sub-Advisor. In the event Kenmar Pool is not paid such fees on a timely
basis, Kenmar Pool will take all reasonable and appropriate action to collect
such fees.

                                   ARTICLE III

                   DUTIES AND UNDERTAKINGS OF THE SUB-ADVISOR

3.1 INVEST SUBACCOUNT.

(a) As of the Allocation Date, the Sub-Advisor will have sole authority and
responsibility for investing and reinvesting the Subaccount in Commodity
Interests pursuant to the Trading Methods, which investments and reinvestments
will be at and for the risk of the Client and the Subaccount.

(b) Notwithstanding Subsection 3.1(a) above, Kenmar Pool may override the
trading instructions of the Sub-Advisor to the extent that Kenmar Pool deems
advisable for the protection of the Client or as required by law. Kenmar Pool
will have the right orally, to be confirmed in writing: (i) to increase or
decrease (including decrease to $0) the amount of funds allocated to the
Subaccount by such date certain (including immediately) as Kenmar Pool deems
appropriate (in which case the Sub-Advisor will modify accordingly its positions
commensurate with its risk/money management parameters); and/or (ii) to instruct
the Sub-Advisor to liquidate all or a portion of the Client's positions by such
date certain (including immediately) as Kenmar Pool deems appropriate.

(c) The Sub-Advisor may, in its sole discretion, refine or modify the Trading
Methods; provided, however, that the Sub-Advisor will give Kenmar Pool at least
thirty (30) days' prior written notice of any

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<PAGE>   7

proposed material change to the Trading Methods and will not trade the
Subaccount based upon such proposed material change without the prior written
approval of Kenmar Pool. Kenmar Pool may instruct the Sub-Advisor not to make
any material alteration in the trading strategy used for the Sub-Account, in
which case the Sub-Advisor may terminate this Agreement pursuant to Section
7.2(g) hereof.

Any notices of material changes in Trading Methods required hereunder shall be
subject to reasonable assurances of confidentiality and need not disclose any
proprietary information concerning the nature of such material change. The
addition and/or deletion of markets or Commodity Interests from the Subaccount
shall not be deemed a change in the Sub-Advisor's strategy, and prior written
notice to Kenmar Pool shall not be required therefor, unless the Sub-Advisor's
strategy used for the Subaccount is limited to a specific group of contracts or
a market sector in a manner inconsistent with such addition or deletion.

3.2 UNIFORMITY OF ACTS AND PRACTICES.

(a) The Sub-Advisor will treat Kenmar Pool in a fiduciary capacity; accordingly,
under no circumstance will the Sub-Advisor favor or prefer any client's
Commodity Interest account over the Subaccount. Subject to that standard, the
Sub-Advisor will be free (i) to advise other investors as to the purchase and
sale of Commodity Interests and to manage and trade for such other investors'
Commodity Interest accounts as well as trade for the Sub-Advisor's own Commodity
Interest accounts and (ii) to trade other accounts using the Trading Methods or,
subject to Subsection 3.2(b) below, using a trading system, method, model,
strategy or formula different from the Trading Methods. Notwithstanding anything
to the contrary in this Subsection 3.2(a), the Sub-Advisor will be deemed not to
be favoring or preferring another client's Commodity Interest account over the
Subaccount if the Sub-Advisor manages or trades such other client's Commodity
Interest account either (i) in accordance with specific written instructions of
a client, (ii) in accordance with the Sub-Advisor's money management approach
based upon the amount of equity and/or profits in such account, or (iii) in
accordance with another trading program, system, method, model, strategy and/or
formula disclosed in the Sub-Advisor's Disclosure Document.

(b) In addition to, and not in lieu of Section 3.1 above, the Sub-Advisor will
consult with Kenmar Pool from time to time regarding modified or different
trading programs, systems, methods, models, strategies and/or formulas that the
Sub-Advisor has developed and tested and deems suitable for trading client
Commodity Interest accounts, and, if both the Sub-Advisor and Kenmar Pool deem
it appropriate, the Sub-Advisor will trade the Subaccount pursuant to such
strategy. In no event will the Sub-Advisor employ any such modified or different
trading system, method, model, strategy or formula on behalf of any other
client's Commodity Interest account unless the Sub-Advisor has also offered such
modified or different trading system, method, model, strategy or formula to
Kenmar Pool for trading on behalf of the Subaccount (subject to capacity
constraints).

(c) At the reasonable request of Kenmar Pool and at the Sub-Advisor's expense,
the Sub-Advisor will promptly provide Kenmar Pool with an explanation of the
differences, if any, in performance between the Subaccount and any other client
Commodity Interest account for which the Sub-Advisor is responsible for trading
(in whole or in part) pursuant to the Trading Methods (subject to the need to
preserve the secrecy of proprietary information concerning the Trading Advisor's
strategies and the identity of the Sub-Advisor's clients).

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<PAGE>   8

3.3 PLACEMENT OF TRADES.

(a) The Sub-Advisor will cause all Commodity Interest transactions for the
Subaccount to be cleared through the Commodity Broker.

(b) Notwithstanding Subsection 3.3(a) above, the Sub-Advisor may arrange for the
execution of orders for the Subaccount through floor brokers selected by the
Sub-Advisor, provided that such floor brokers "give-up" such transactions to the
Commodity Broker for clearance and carrying in the Subaccount, and provided
further that Kenmar Pool will have given its prior written consent to the
brokerage and floor commissions and fees and other transaction costs to be
charged by such floor broker.

3.4 SPECULATIVE POSITION LIMITS.

(a) The Sub-Advisor will not enter into or own, hold or control (either alone or
together with any other individual or entity) any position in any Commodity
Interest, or control any other Commodity Interest account, or render commodity
trading advice to any other individual or entity, or otherwise engage in any
activity that would cause the Sub-Advisor to knowingly cause the Client to be in
violation of any applicable Position Limits.

(b) If the positions in any Commodity Interest owned, held or controlled by the
Sub-Advisor (either alone or aggregated with the positions of any other
individual or entity to the extent such aggregation is required by Applicable
Law) equals or exceeds the Position Limits thereof, the Sub-Advisor will
promptly notify Kenmar Pool of that fact and will take the action set forth in
Subsection 3.4(c) below.

(c) If the Sub-Advisor reaches a Position Limit, thereby necessitating the
reduction of positions in that Commodity Interest, the Sub-Advisor will reduce
the contracts of all those so participating in that Commodity Interest on an
equitable basis, taking into consideration the size of each account and the
leverage at which it is traded.

3.5 INFORMATION.

(a) The Sub-Advisor, at its own expense, will provide Kenmar Pool with (i)
copies of all amendments and supplements to the Sub-Advisor's Disclosure
Document and (ii) monthly reports presenting the updated actual performance data
of the Sub-Advisor, in form and substance consistent with the Applicable Laws
for the preceding month.

(b) At the reasonable request of Kenmar Pool or the Client and to the extent
that they are available without undue expense or burden, the Sub-Advisor shall
make available to Kenmar Pool or the Client copies of the daily, monthly,
quarterly, and annual, as the case may be, written reports and/or account
statements prepared by the Sub-Advisor in the ordinary course, reflecting the
performance of all other Commodity Interest accounts advised, managed, owned, or
controlled by the Sub-Advisor, in each case which implement the same Trading
Methods used for the Client (with the names of clients deleted).

(c) The Sub-Advisor acknowledges its obligation to review the Subaccount's
positions on a daily basis and promptly to notify Kenmar Pool of any errors
committed by the Sub-Advisor or any trade which the Sub-Advisor believes was not
executed in accordance with its instructions.

The Sub-Advisor will send Kenmar Pool copies of all trades made by the
Sub-Advisor on behalf of the Subaccount, by facsimile transmission or other
means, by 4:30 p.m. (New York time) on the day such trades are made.

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<PAGE>   9

3.6 BOOKS AND RECORDS. Upon 24 hours' notice to the Sub-Advisor by Kenmar Pool
or the Client, Kenmar Pool or the Client or their respective accountants or
agents shall have the right, during normal business hours at the Sub-Advisor's
offices, to have access to and to inspect and copy such books and records
relating to the Sub-Advisor and its trading as are reasonably necessary to
verify (i) the completeness and accuracy of any performance data provided
pursuant to this Agreement, (ii) that the Subaccount is being treated equitably
by the Sub-Advisor or (iii) otherwise to verify compliance with the terms of
this Agreement (subject to the need to preserve the secrecy of such information
and of the identity of the Sub-Advisor's clients). Such right of inspection
shall terminate upon the termination of this Agreement and shall not include any
right to access computer programs, records or other information used in
determining trading decisions.

The Sub-Advisor shall not be required to disclose the actual trading results of
the proprietary accounts of the Sub-Advisor or its principals except upon the
request of the Client or Kenmar Pool for good cause given.

3.7 NOTICES. The Sub-Advisor will notify Kenmar Pool orally (to be confirmed in
writing) promptly following the occurrence of any of the following events:

 (a) The Sub-Advisor modifies or revises its performance numbers so that there
is a material difference between the previous numbers and the revised numbers.

(b) An error is committed with respect to the Subaccount or an order or trade on
behalf of the Subaccount was executed other than in accordance with the
Sub-Advisor's instructions.

(c) The Sub-Advisor merges, consolidates with, or sells or otherwise transfers
its advisory business, all or any portion of its assets, all or any portion of
its Trading Method or its goodwill.

(d) The Sub-Advisor becomes bankrupt or insolvent.

(e) The Sub-Advisor is unable to use any material part or aspect of its Trading
Method.

(f) The Sub-Advisor's registration with the CFTC or membership with the NFA is
revoked, suspended, terminated or not renewed, or limited, conditioned,
restricted or qualified in any respect.

(g) Any material change in the management, ownership, personnel, organizational
structure or control of the Sub-Advisor or a material adverse change in the
financial condition of the Sub-Advisor that, in the reasonable judgment of the
Sub-Advisor, could adversely impact its ability to perform its obligations
hereunder.

(h) The Sub-Advisor becomes aware of (i) any misleading statement or any untrue
statement of a material fact or any omission to state a material fact necessary
to make the statements contained in the Sub-Advisor's Disclosure Document, in
light of the circumstances under which such statements were made, not
misleading, or (ii) the occurrence of any event or change in circumstances which
shall have resulted or could reasonably be expected to result in there being any
such misleading or untrue statement or omission.

3.8 DELIVERY OF SUB-ADVISOR'S DISCLOSURE DOCUMENT. The Sub-Advisor shall, during
the term of this Agreement, deliver to Kenmar Pool copies of all Disclosure
Documents filed by the Sub-Advisor with any governmental authority, promptly
following such filing.

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<PAGE>   10

                                   ARTICLE IV

                                      FEES

4.1 MANAGEMENT FEE. For services rendered by the Sub-Advisor under this
Agreement and provided that the Client has paid Kenmar Pool the Sub-Advisor's
Management Fee, Kenmar Pool will pay the Sub-Advisor its Management Fee within
ten (10) business days following Kenmar Pool's receipt of such Fee from the
Client.

4.2 INCENTIVE FEE. In addition to the Management Fee, for services rendered by
the Sub-Advisor under this Agreement and provided that the Client has paid
Kenmar Pool the Sub-Advisor's Incentive Fee, Kenmar Pool will pay the
Sub-Advisor its Incentive Fee within ten (10) business days following Kenmar
Pool's receipt of such Fee from the Client.

If the Sub-Advisor has a loss when funds are withdrawn or allocated away from
the Subaccount (other than for the payment of Brokerage Commissions, Management
and Incentive Fees and other proper charges or expenses), for the purpose of
calculating subsequent Incentive Fees, such loss will be reduced by an amount
equal to the product of (x) such loss and (y) the Withdrawal Ratio (as defined
herein). If funds are subsequently reallocated to the Sub-Advisor, for the
purpose of calculating subsequent Incentive Fees, Net New Trading Profits will
be reduced by an amount equal to the product of (x) the amount of such earlier
loss reduction(s) and (y) the lesser of (i) 1 and (ii) the ratio created by
dividing (A) the amount of assets reallocated to the Sub-Advisor by (B) the
amount of assets previously withdrawn or allocated from the Sub-Advisor.

4.3 COMMISSIONS. The Sub-Advisor will not receive any share of the Brokerage
Commissions paid to any commodity broker, whether in the form of rebates or
otherwise.

4.4 SURVIVAL. Fees due the Sub-Advisor under this Article IV at the expiration
or termination of this Agreement will survive such expiration or termination and
Kenmar Pool will pay such Fees to the Sub-Advisor within ten (10) business days
of Kenmar Pool's receipt of such Fees from the Client.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

5.1 BY THE SUB-ADVISOR. The Sub-Advisor hereby represents and warrants to Kenmar
Pool and the Client as follows:

(a) If the Sub-Advisor is a corporation or partnership, it is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation or formation with full power and authority to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly and
validly authorized, executed and delivered by the Sub-Advisor and is a legal,
valid and binding agreement of the Sub-Advisor enforceable against the
Sub-Advisor in accordance with its terms. The individual executing and
delivering this Agreement for and on behalf of the Sub-Advisor is of full legal
age in the jurisdiction in which he resides and is legally competent and has
full power and authority and is permitted by Applicable Law to do so on behalf
of the Sub-Advisor.

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<PAGE>   11

(b) The Sub-Advisor's Disclosure Document and the reports provided to Kenmar
Pool pursuant to Subsection 3.5(a) above are true, accurate and complete in all
material respects. Such Disclosure Document complies in all material respects
with all Applicable Laws. Except as otherwise disclosed in the Disclosure
Document, the actual performance of all accounts managed or directed by the
Sub-Advisor and required to be disclosed is reflected therein in accordance with
the requirements of the Applicable Laws and such information is fairly presented
and is true, correct and complete in all material respects.

(c) The performance of the obligations under this Agreement by the Sub-Advisor
will not conflict with, violate the terms of or constitute a default under: (i)
if the Sub-Advisor is a corporation or partnership, the organizational documents
of the Sub-Advisor; (ii) any agreement or instrument to which the Sub-Advisor is
a party or by which the Sub-Advisor is bound or to which any of the property
(including but not limited to the Trading Method) or assets of the Sub-Advisor
is subject; or (iii) any order, rule, law, regulation or other legal requirement
applicable to the Sub-Advisor or to the property or assets of the Sub-Advisor.

(d) The Sub-Advisor is currently registered as a commodity trading advisor with
the CFTC and is a member in such capacity with the NFA, and such registration
and membership have not expired or been revoked, suspended, terminated or not
renewed, or limited, conditioned, restricted, or qualified in any respect. The
Sub-Advisor and each Principal have all required governmental, regulatory, and
self-regulatory licenses, registrations and memberships necessary to carry out
its obligations under this Agreement and to act as described in this Agreement.

(e) The Sub-Advisor and each Principal thereof is in material compliance with
all Applicable Laws, the non-compliance with which will materially effect the
Sub-Advisor's ability to performs its obligations under this agreement.

(f) There is neither pending nor, to the knowledge of the Sub-Advisor,
threatened any material investigation, action, suit or proceeding by or before
any court or governmental, regulatory, or self-regulatory authority or other
body to which the Sub-Advisor is a party, or to which any assets of the
Sub-Advisor is subject that may adversely affect the Sub-Advisor's business. The
Sub-Advisor has not received any notice of an investigation regarding
non-compliance by the Sub-Advisor with the Applicable Laws that may adversely
affect the Sub-Advisor's business.

(g) The answer of the Sub-Advisor's Principals to each question of Part G of
Form 8-R is "no".

(h) Neither the Sub-Advisor nor any of its Affiliates or subsidiaries has any
arrangement or relationships with any futures commission merchant or
broker-dealer pursuant to which the Sub-Advisor or any of its Affiliates is or
may become entitled to receive any portion of the commissions or fees paid to
such entities by the Client.

5.2 BY KENMAR POOL. Kenmar Pool represents and warrants to the Sub-Advisor as
follows:

(a) Kenmar Pool is duly organized and validly existing in its jurisdiction of
formation with full power and authority to execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by or on behalf of Kenmar Pool and is a
legal, valid and binding agreement of Kenmar Pool enforceable against Kenmar
Pool in accordance with its terms. The individual executing and delivering this
Agreement for and on behalf of Kenmar Pool is of full legal age in the
jurisdiction in which he resides and is legally competent and has full power and
authority and is permitted by applicable law to do so on behalf of Kenmar Pool.

(b) The performance of the obligations under this Agreement by Kenmar Pool will
not conflict with, violate the terms of or constitute a default under: (i)
Kenmar Pool's organizational documents; (ii) any other agreement or instrument
to which Kenmar Pool is a party or by which Kenmar Pool is bound or to which

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<PAGE>   12

any of the property or assets of Kenmar Pool is subject; or (iii) any order,
rule, law, regulation or other legal requirement applicable to Kenmar Pool or to
the property or assets of Kenmar Pool.

(c) There is neither pending nor, to the knowledge of Kenmar Pool, threatened
any investigation, action, suit or proceeding before or by any court or
governmental, regulatory or self-regulatory authority or other body to which
Kenmar Pool is a party, or to which any of its assets are subject that may
adversely affect Kenmar Pool's business. Kenmar Pool has not received any notice
of any investigation regarding its non-compliance with the Applicable Laws that
may adversely affect Kenmar Pool's business.

(d) Kenmar Pool is in material compliance with all Applicable Laws, the
non-compliance with which will materially effect Kenmar Pool's ability to
performs its obligations under this agreement.

(e) Kenmar Pool has all required governmental, regulatory, and self-regulatory
licenses, registrations and memberships necessary to carry out its obligations
under this Agreement and to act as described in this Agreement.

(f) The Trading Manager Agreement pursuant to which Kenmar Pool was retained by
the Client authorizes Kenmar Pool to retain the Sub-Advisor on behalf of the
Client and to allocate the Subaccount to the Sub-Advisor.

(g) Kenmar Pool has received, reviewed, and furnished the Client with a copy of
the Sub-Advisor's current Disclosure Document.

5.3 REPRESENTATIONS CONTINUING. The foregoing representations and warranties
will be continuing during the term of this Agreement and, if at any time any
event will occur that could make any of the foregoing incomplete or inaccurate,
the party whose representation and warranty would become incomplete or
inaccurate will promptly notify the other party of the occurrence of the event
causing such incompleteness or inaccuracy.

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                                   ARTICLE VI

                    STANDARD OF LIABILITY AND INDEMNIFICATION

6.1 STANDARD OF LIABILITY. The Sub-Advisor will not be liable to Kenmar Pool,
the Client or any Principal, Affiliate or beneficiary thereof, for any loss,
liability, claim, demand, damage, cost and expense except those arising out of
or based upon an act, omission, conduct or activity of the Sub-Advisor under
this Agreement arising out of or based upon: (i) any violation of any Applicable
Law caused by the Sub-Advisor or its Principals, Affiliates, employees or
agents, (ii) a breach of any representation, warranty, covenant or material term
of this Agreement by the Sub-Advisor or its Principals, Affiliates, employees or
agents, or (iii) an act of, or omission to act due to, breach of fiduciary duty
under Applicable Law, bad faith, misconduct or negligence by the Sub-Advisor or
its Principals, Affiliates, employees or agents.

6.2 SUB-ADVISOR'S AGREEMENT TO INDEMNIFY. The Sub-Advisor will indemnify, hold
harmless and defend Kenmar Pool and its Principals and Affiliates and the
employees thereof from and against, any loss, liability, claim, demand, damage,
cost and expense (including reasonable attorneys' and accountants' fees and cost
of investigation) arising out of or based upon an act, omission, conduct or
activity of the Sub-Advisor under this Agreement arising out of or based upon:
(i) any violation of any Applicable Law caused by the Sub-Advisor or its
Principals, Affiliates, employees or agents, (ii) a breach of any
representation, warranty, covenant or material term of this Agreement by the
Sub-Advisor or its Principals, Affiliates, employees or agents or, (iii) an act
of, or omission to act due to, breach of fiduciary duty, bad faith, misconduct
or negligence by the Sub-Advisor or its Principals, Affiliates, employees or
agents.

6.3 KENMAR POOL'S AGREEMENT TO INDEMNIFY. Kenmar Pool will indemnify, hold
harmless, and defend the Sub-Advisor and its Principals and employees from and
against any loss, liability, claim, demand, damage, cost and expense (including
reasonable attorneys' and accountants' fees and cost of investigation) arising
out of or based upon an act, omission, conduct or activity of Kenmar Pool under
this Agreement arising from: (i) any violation of any Applicable Law caused by
Kenmar Pool, (ii) a breach of any representation, warranty, covenant or material
term of this Agreement by Kenmar Pool or (iii) an act of, or omission to act due
to, breach of fiduciary duty, bad faith, misconduct or negligence by Kenmar
Pool.

6.4 INDEMNITY PROCEDURE.

(a) Promptly after receipt by an indemnified party under Section 6.2 or 6.3 of
notice of the commencement of an action or claim to which either such Section
may apply, the indemnified party will notify the indemnifying party in writing
of the commencement of such action or claim. The omission so to notify the
indemnifying party will not relieve the indemnifying party of any liability that
the indemnifying party may have to the indemnified party under either such
Section except to the extent such omission will have materially prejudiced the
indemnifying party. The indemnity obligations herein will be in addition to any
rights or remedies a party may have under Applicable Law.

(b) In case any such action or claim will be brought against an indemnified
party and the indemnified party will notify the indemnifying party of the
commencement of such action or claim, the indemnifying party will be entitled to
participate in such action or claim and, to the extent that the indemnifying
party may desire, to assume the defense of such action or claim at its own
expense with counsel selected by the indemnifying party and approved by the
indemnified party. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election so to assume the defense of such
action or claim, the indemnifying party will not be liable to the indemnified
party under either such Section for any legal, accounting, and other expenses
subsequently incurred by the indemnified party in connection with the
defense of such action or claim other than reasonable costs of investigation.

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<PAGE>   14

(c) Notwithstanding any provision of this Section 6.4 to the contrary, if in any
action or claim as to which indemnity is or may be available an indemnified
party will reasonably determine that its interests are or may be adverse, in
whole or in part, to the interests of the indemnifying party or that there may
be legal defenses available to the indemnified party that are or may be
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified party may retain its own counsel in
connection with such action or claim and will be indemnified by the indemnifying
party for any legal, accounting and other expenses reasonably incurred by or on
behalf of it in connection with investigating or defending such action or claim.

6.5 SETTLEMENT. If an indemnified party takes over the defense, an indemnifying
party will not be liable for a settlement of any such action or claim effected
without its written consent, but if any such action or claim will be settled
with the written consent of an indemnifying party or if there will be a final
judgment for the plaintiff in any such action or claim, the indemnifying party
will indemnify, hold harmless, and defend the indemnified party from and against
any loss, liability, expense in accordance with this Article VI by reason of
such settlement or judgment. Neither party will consent to entry of any judgment
or enter into any settlement that requires the payment of money, or imposes any
other material obligation on the other party, or that does not include an
unqualified release for the other party, without the other party's written
consent.

6.6 EFFECT OF EXPIRATION OR TERMINATION. This Article VI will survive expiration
or termination of this Agreement.

                                   ARTICLE VII

                              TERM AND TERMINATION

7.1 TERM. This Agreement will commence on the date hereof and will continue in
full force and effect until terminated pursuant to Section 7.2 below.

7.2 TERMINATION. This Agreement will terminate as follows:

(a) Upon ninety (90) days prior written notice from one party to the other
party, which notice will include the effective date of termination, which may
only be the last day of any month and the Sub-Advisor may not terminate
hereunder earlier than two (2) full years from the date hereof unless the Kenmar
Pool exercises its right to override pursuant to Section 3.1 (b).

(b) Upon thirty (30) days prior written notice from one party to the other party
if there is a material breach of any representation, warranty, covenant or
material term of this Agreement by the other party and the other party has
failed to cure such material breach prior to ten (10) days before the effective
date of termination.

(c) Upon five (5) days prior written notice from the Sub-Advisor to Kenmar Pool
if the Sub-Advisor has not received its Management Fee or Incentive Fee within
twenty (20) business days after the Client has paid Kenmar Pool the
Sub-Advisor's Management Fee and Incentive Fee.

(d) Immediately, upon the dissolution or insolvency of Kenmar Pool or the
Sub-Advisor.

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<PAGE>   15

(e) Immediately, upon Kenmar Pool's or the Sub-Advisor's registration with the
CFTC or membership with the NFA as a commodity trading advisor being revoked,
suspended, terminated or not renewed, or limited, conditioned, restricted or
qualified in any respect.

(f) Immediately, upon termination of the Trading Manager Agreement pursuant to
which KAC is authorized to allocate the assets of the Subaccount to the
Sub-Advisor.

(g) At the discretion of the Sub-Advisor, (a) immediately should the Sub-Advisor
notify Kenmar Pool pursuant to Section 3.2(c) of a proposed material change to
the strategies to be used in managing the Subaccount and either (i) the Kenmar
Pool has instructed the Sub-Advisor not to implement such changes or (ii) the
thirty (30) day period set forth in Section 3.2(c) has lapsed; or (b) upon
thirty (30) days' notice to Kenmar Pool, as of any month-end if the Sub-Advisor
has determined to cease managing any customer accounts pursuant to the same
strategy as the Sub-Advisor has been retained to employ on behalf of the Client.

                                  ARTICLE VIII

                                  MISCELLANEOUS

8.1 STATUS.

(a) The Sub-Advisor is, and for all purposes will be deemed to be, an
independent contractor, and unless otherwise expressly provided herein or with
the prior written authorization of Kenmar Pool or the Client, the Sub-Advisor
will have no authority to act for or represent Kenmar Pool or the Client in any
way and will not otherwise be deemed to be an agent of Kenmar Pool or the
Client.

(b) Unless otherwise expressly provided herein or with the prior written
authorization of the Sub-Advisor, neither Kenmar Pool nor the Client will have
any authority to act for or represent the Sub-Advisor in any way and will not
otherwise be deemed to be an agent of the Sub-Advisor.

(c) Nothing contained in this Agreement will create a partnership, joint
venture, association, syndicate, unincorporated business or other separate
entity between or among Kenmar Pool, the Client and/or the Sub-Advisor.

(d) The Sub-Advisor is neither a sponsor nor a promoter of the Client.

8.2 CONFIDENTIALITY.

(a) The Trading Methods (including Commodity Interest positions established
pursuant to the Trading Methods) are the sole and exclusive property of the
Sub-Advisor, and Kenmar Pool will keep confidential and not disseminate the
Trading Method or any other information with respect to the Sub-Advisor that is
known by Kenmar Pool to be confidential and proprietary to the Sub-Advisor.
Nothing herein will require the Sub-Advisor to disclose any proprietary or
confidential information concerning its Trading Methods or any customer names.

(b) The obligations of the parties in relation to confidentiality will not apply
to the extent that any information (i) is required to be disclosed in accordance
with any law (including any Applicable Law), rule, regulation or order of any
court, arbitration panel, governmental, regulatory or self-regulatory authority
or any audit requirement or (ii) has entered into the public domain other than
by a breach of duty on the part of any party hereto.

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<PAGE>   16

8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto with respect to the matters referred to herein, and no other
agreement, verbal or otherwise, will be binding between the parties hereto with
respect to the matters referred to herein unless in writing and signed by the
parties.

8.4 AMENDMENT. This Agreement may not be amended except by a writing signed by
the parties hereto.

8.5 ASSIGNMENT. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party, except that Kenmar Pool
may assign this Agreement or transfer all or a portion of its assets or goodwill
to, Kenneth A. Shewer and/or Marc S. Goodman and/or any entity controlled by
either or both of them and may merge or consolidate with any entity controlled
by either or both of them.

8.6 SUCCESSORS. This Agreement will be binding upon and inure to the benefit of
the parties hereto, their successors and permitted assigns, and no other person
will have any right or obligation under this Agreement.

8.7 WAIVER. No waiver of any provision of this Agreement will be implied from
any course of dealing between the parties hereto or from any failure by either
party hereto to assert its rights hereunder on any occasion or series of
occasions.

8.8 SEVERABILITY. If any provision of this Agreement, or the application of any
provision to any person or circumstance, will be held to be inconsistent with
any present or future law, ruling, rule or regulation of any court or
governmental, regulatory, or self-regulatory authority having jurisdiction over
the subject matter hereof, such provision will be deemed to be rescinded or
modified in accordance with such law, ruling, rule or regulation, and the
remainder of this Agreement, or the application of such provision to any person
or circumstance other than those as to which it will be held inconsistent, will
not be affected thereby.

8.9 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT WITHOUT REFERENCE TO CHOICE
OF LAW DOCTRINE.

8.10 CONSENT TO ARBITRATION. ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY
HERETO TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY RELIEF WHATSOEVER
ARISING FROM, IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY BREACH
HEREOF, OR THE ENFORCEMENT HEREOF, OR ANY TRANSACTION COVERED HEREBY WILL BE
BROUGHT AND MAINTAINED BY SUCH PARTY EXCLUSIVELY IN, AND THE OTHER PARTIES
HEREBY CONSENT AND SUBMIT TO THE EXCLUSIVE JURISDICTION OF, AN APPROPRIATE
ARBITRATION BODY LOCATED WITHIN THE COUNTY OF FAIRFIELD, STATE OF CONNECTICUT.

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

8.12 SURVIVAL. The provisions of this Agreement shall survive the termination
hereof with respect to any matter arising while this Agreement shall be in
effect.

8.13 NOTICES. Any notice required or desired to be delivered pursuant to this
Agreement will be in writing and will be delivered by courier service, postage
prepaid mail, telex, facsimile transmission, telegram or other similar means and
will be effective, if by mail, 7 days after mailing, or if notified otherwise,
when actually received by the party to whom such notice will be directed,
addressed as set forth in Cover Letter.

17

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