UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------- --------------
Commission File No. 0-25603
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-4018068
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
C/O DEMETER MANAGEMENT CORPORATION
TWO WORLD TRADE CENTER, 62 FL., NEW YORK, NY 10048
- -------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
-------------------
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check-mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Financial Condition March 31, 1999
(Unaudited).................................................. 2
Statement of Operations for the Period from March
1, 1999 (commencement of operations) to March 31,
1999 (Unaudited)............................................. 3
Statement of Changes in Partners' Capital for the
Period from March 1, 1999 (commencement of
operations) to March 31, 1999 (Unaudited).................... 4
Statement of Cash Flows for the Period from March
1, 1999 (commencement of operations) to March 31,
1999 (Unaudited)............................................. 5
Notes to Financial Statements (Unaudited).................... 6-14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 15-19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.................................................. 20-31
PART II. OTHER INFORMATION
Item 1 Legal Proceedings............................................ 32-33
Item 2. Change in Securities and Use of Proceeds..................... 34
Item 6. Exhibits and Reports on Form 8-K............................. 35
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENT OF FINANCIAL CONDITION
MARCH 31,
1999
----------
$
(Unaudited)
ASSETS
Equity in futures interests trading accounts:
Cash 4,090,503
Net unrealized loss on open contracts (59,408)
----------
Total Trading Equity 4,031,095
Subscriptions receivable 2,077,085
Interest receivable (DWR and Carr) 14,907
----------
Total Assets 6,123,087
==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued brokerage fees (DWR) 25,452
Accrued management fee 7,272
----------
Total Liabilities 32,724
----------
Partners' Capital
Limited Partners (653,909.889 Units) 6,015,173
General Partner (8,173.913 Units) 75,190
----------
Total Partners' Capital 6,090,363
----------
Total Liabilities and Partners' Capital 6,123,087
==========
NET ASSET VALUE PER UNIT 9.20
==========
The accompanying notes are an integral part
of these financial statements.
- 2 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENT OF OPERATIONS
(Unaudited)
FOR THE PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1999
--------------
$
REVENUES
Trading loss:
Realized (272,633)
Net change in unrealized (59,408)
--------
Total Trading Results (332,041)
Interest Income (DWR and Carr) 14,907
--------
Total Revenues (317,134)
--------
EXPENSES
Brokerage fees (DWR) 25,452
Management fee 7,272
--------
Total Expenses 32,724
--------
NET LOSS (349,858)
========
NET LOSS ALLOCATION
Limited Partners (345,048)
General Partner (4,810)
NET LOSS PER UNIT
Limited Partners (.80)
General Partner (.80)
The accompanying notes are an integral part
of these financial statements.
- 3 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Period from March 1, 1999
(commencement of operations)
to March 31, 1999
(Unaudited)
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- ----------- ----------- -----------
Partners' Capital,
Initial Offering 436,313.664 $ 4,303,136 $ 60,000 $ 4,363,136
Offering of Units 225,770.138 2,057,085 20,000 2,077,085
Net Loss -- (345,048) (4,810) (349,858)
----------- ----------- ----------- -----------
Partners' Capital
March 31, 1999 662,083.802 $ 6,015,173 $ 75,190 $ 6,090,363
=========== =========== =========== ===========
The accompanying notes are an integral part
of these financial statements.
- 4 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1999
--------------
$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (349,858)
Noncash item included in net loss:
Net change in unrealized 59,408
Increase in operating assets:
Interest receivable (DWR and Carr) (14,907)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 25,452
Accrued management fee 7,272
----------
Net cash used for operating activities (272,633)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering 4,363,136
Offering of units 2,077,085
Increase in subscriptions receivable (2,077,085)
----------
Net cash provided by financing activities 4,363,136
----------
Net increase in cash 4,090,503
Balance at beginning of period --
----------
Balance at end of period 4,090,503
==========
The accompanying notes are an integral part
of these financial statements.
- 5 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management, all adjustments
necessary for a fair presentation of the results of operations and financial
condition of Morgan Stanley Dean Witter Charter Graham L.P.
(the "Partnership").
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Morgan Stanley Dean Witter Charter Graham L.P. is a limited
partnership organized to engage in the speculative trading of futures and
forward conracts, physical commodities and other commodities interests,
including foreign currencies, financial instruments, metals, energy and
agricultural products (collectively, "futures interests"). The Partnership
commenced operations on March 1, 1999. The Partnership is one of the Morgan
Stanley Dean Witter Charter Series of funds, comprised of the Partnership,
Morgan Stanley Dean Witter Charter Millburn L.P., and Morgan Stanley Dean Witter
Charter Welton L.P. The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR") and an unaffiliated clearing commodity broker, Carr Futures Inc.
("Carr"), provides clearing and execution services. Demeter and DWR are
wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). Graham
Capital Management L.P. (the "Trading Advisor"), is the trading advisor to the
Partnership.
- 6 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition - Futures interests are open commitments until settlement
date. They are valued at market and the resulting unrealized gains and losses
are reflected in income. Monthly, DWR pays the Partnership interest income on
100% of its average daily funds held in its individual account at DWR at a rate
equal to that earned by DWR on its U.S. Treasury bill investments during such
month. In addition, DWR credits the Partnership with 100% of the interest income
received from Carr with respect to the Partnership's Net Assets on deposit with
Carr for the purpose of meeting margin requirements.
- 7 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
For purposes of such interest payments, Net Assets do not include monies due to
the Partnership on forward contracts and other futures interests, but not
actually received.
Net Income (Loss) per Unit - Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
Equity in Futures Interests Trading Accounts - the Partnership's asset "Equity
in futures interests trading accounts" consists of cash on deposit at DWR and
Carr to be used as margin for trading and the net asset or liability related to
unrealized gains or losses on open contracts.
Brokerage and Related Transaction Fees and Costs - The Partnership pays a
flat-rate monthly brokerage fee of 1/12 of 7% of the Partnership's Net Assets as
of the first day of each month (a 7% annual rate). Such fee covers all brokerage
commissions, transaction fees and costs and ordinary administrative and offering
expenses.
Operating Expenses - The Partnership incurs a monthly management fee and may
incur an incentive fee as described below. Demeter bears all other operating
expenses.
- 8 -
<PAGE>
MORGAN STANELY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Management Fee - The Partnership pays the Trading Advisor a flat-rate monthly
fee of 1/12 of 2% of the Net Assets managed by the Trading Advisor on the first
day of each month (a 2% annual rate).
Incentive Fee - The Partnership pays the Trading Advisor a monthly incentive fee
equal to 20% of "Trading Profits" as defined in the Partnership's Prospectus as
of the end of each calendar month. If the Trading Advisor has experienced losses
with respect to Net Assets at the end of any calendar month, the Trading Advisor
must earn back such losses before the Trading Advisor is eligible for an
incentive fee.
Income Taxes - No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
Distributions - Distributions, other than on redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
Continuing Offering - Units of the Partnership are offered at a price equal to
100% of the Net Asset Value per Unit at monthly closings held as of the last day
of each month.
- 9 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Redemptions - Limited Partners may redeem some or all of their Units as of the
last day of the sixth month following the closing at which a person first
becomes a Limited Partner. Redemptions may only be made in whole Units, with a
minimum of 100 Units required for each redemption, unless a Limited Partner is
redeeming his entire interest in the Partnership. Units redeemed on or prior to
the last day of the twelfth month from the date of purchase will be subject to a
redemption charge equal to 2% of the Net Asset Value of a Unit on the Redemption
Date. Units redeemed after the last day of the twelfth month and on or prior to
the last day of the twenty-fourth month from the date of purchase will be
subject to a redemption charge equal to 1% of the Net Asset Value of a Unit on
the Redemption Date. Units redeemed after the last day of the twenty-fourth
month from the date of purchase will not be subject to a redemption charge.
Exchanges - On the last day of the first month, which occurs more than six
months after a person first becomes a Limited Partner in the Partnership, and
the end of each month thereafter, Limited Partners may transfer their investment
among the Morgan Stanley Dean Witter charter Series (subject to certain
restrictions outlined in the Limited Partnership Agreement) without paying
additional charges.
- 10 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Dissolution of the Partnership - The Partnership will terminate on December 31,
2035 or at an earlier date if certain conditions occur as defined in the
Partnership's Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership pays a brokerage fee to DWR on trades executed on its behalf as
described in Note 1. The Partnership's cash is on deposit with DWR and Carr in
future interests trading accounts to meet margin requirements as needed. DWR and
Carr pay interest on these funds as described in Note 1.
3. FINANCIAL INSTRUMENTS
The Partnership trades futures and forward contracts, physical commodities and
other commodities interests, including foreign currencies, financial
instruments, metals, energy and agricultural products. Futures and forwards
represent contracts for delayed delivery of an instrument at a specified date
and price. Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly influence the
market value of these contracts, including interest rate volatility.
- 11 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. The Partnership has elected to adopt the provisions of SFAS No.
133 beginning with the quarter ended March 31, 1999. SFAS No. 133 supersedes
SFAS No. 119 and No. 105, which required the disclosure of average aggregate
fair values and contract/notional values, respectively, of derivative financial
instruments for an entity which carries its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
The net unrealized loss on open contracts is reported as a component of "Equity
in futures interests trading accounts" on the Statement of Financial Condition
and totaled $59,408 at March 31, 1999.
Of the $59,408 net unrealized loss on open contracts at March 31, 1999,
$(43,995) related to exchange-traded futures contracts and $(15,413) related to
off-exchange-traded forward currency contracts.
- 12 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Exchange-traded futures contracts held by the Partnership at March 31, 1999
mature through June 2000. Off-exchange-traded forward currency contracts held by
the Partnership at March 31, 1999 mature through June 1999.
The Partnership is subject to the credit risk associated with counterparty
non-performance. The credit risk associated with the instruments in which the
Partnership is involved is limited to the amounts reflected in the Partnership's
Statements of Financial Condition. DWR and Carr act as the futures commission
merchants or the counterparties with respect to most of the Partnership's
assets. Exchange-traded futures contracts are marked to market on a daily basis,
with variations in value settled on a daily basis. Each of DWR and Carr, as a
futures commission merchant for all of the Partnership's exchange-traded futures
contracts, are required, pursuant to regulations of the Commodity Futures
Trading Commission ("CFTC") to segregate from their own assets, and for the sole
benefit of their commodity customers, all funds held by them with respect to
exchange-traded futures contracts, including an amount equal to the net
unrealized loss on all open futures contracts, which funds, in the aggregate,
totaled $4,046,508 at March 31, 1999.
- 13 -
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
With respect to the Partnership's off-exchange-traded forward currency
contracts, there are no daily settlements of variations in value nor is there
any requirement that an amount equal to the net unrealized loss on open forward
contracts be segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of Carr, the sole
counterparty on all of such contracts, to perform. Carr's parent, Credit
Agricole Indosuez, has guaranteed to the Partnership payment of the net
liquidating value of the transactions in the Partnership's account with Carr
(including foreign currency contracts).
- 14 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY - Assets of the Partnership are deposited with DWR as non-clearing
broker and Carr as clearing broker in separate futures interest trading
accounts. Such assets are held in either non-interest bearing bank accounts or
in securities approved by the CFTC for investment of customer funds. The
Partnership's assets held by DWR and Carr may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is to trade in
futures interests, it is expected that the Partnership will continue to own such
liquid assets for margin purposes.
The Partnership's investment in futures interests may, from time to time,
be illiquid. Most United States futures exchanges limit fluctuations in certain
futures interest prices during a single day by regulations referred to as "daily
price fluctuations limits" or "daily limits". Pursuant to such regulations,
during a single trading day no trades may be executed at prices beyond the daily
limit. If the price for a particular futures interest has increased or decreased
by an amount equal to the daily limit, positions in such futures interest can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Futures interests prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its futures
interests and result in restrictions on redemptions.
- 15 -
<PAGE>
There is no limitation on daily price moves in trading forward contracts
on foreign currency. The markets for some world currencies have low trading
volume and are illiquid, which may prevent the Partnership from trading in
potentially profitable markets or from promptly liquidating unfavorable
positions, subjecting it to substantial losses. Either of these market
conditions could result in restrictions on redemptions.
CAPITAL RESOURCES. The Partnership does not have, nor does it expect to have,
any capital assets. Future redemptions, exchanges and sales of additional Units
of Limited Partnership Interest ("Unit(s)") will affect the amount of funds
available for investment in futures interests in subsequent periods. Since they
are at the discretion of Limited Partners, it is not possible to estimate the
amount and therefore, the impact of future redemptions, exchanges or sales of
additional Units.
RESULTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1999
For the period from March 1, 1999 (commencement of operations) to March 31,
1999, the Partnership recorded total trading losses net of interest income of
$317,134 and posted a decrease in Net Asset Value per Unit. The most significant
losses were recorded during March in the agricultural markets from short corn
futures positions as prices moved higher in a technical and seasonally driven
rally, as well as a lack of heavy producer selling. In the global interest rate
futures markets, losses were experienced
- 16 -
<PAGE>
from short German government bond futures positions as prices increased on
reports that Germany's industrial production showed a sharp increase, creating
hopes that Europe's biggest economy could be strengthening. Additional losses
were recorded from short Australian bond futures positions as prices increased
on reports of depressed gold prices during late-March which have hampered the
Australian dollar, the Australian stock market and enhanced Australian bond
prices. In the metals markets, losses were recorded from short aluminum futures
positions as prices increased during mid-March as good demand in the United
States prompted shipments from Europe amid a drawdown in supply. In the currency
markets, losses were experienced early in March from short Japanese yen
positions as the value of the yen increased versus the U.S. dollar amid new
signs that Japan's economy may be on the mend and speculation that interest
rates may soon rise. In the energy markets, smaller losses were recorded from
short natural gas futures positions as prices increased significantly early in
March on speculative short covering. Total expenses for the period ended March
31, 1999 were $32,724, resulting in a net loss of $349,858. The value of a Unit
decreased from $10.00 at March 1, 1999 (commencement of operations) to $9.20 at
March 31, 1999.
YEAR 2000 PROBLEM. Commodity pools, like financial and business organizations
and individuals around the world, depend on the smooth functioning of computer
systems. Many computer systems in use today cannot recognize the computer code
for the year 2000, but revert to 1900 or some other date. This is commonly known
as
- 17 -
<PAGE>
the "Year 2000 Problem". The Partnership could be adversely affected if computer
systems used by it or any third party with whom it has a material relationship
do not properly process and calculate date-related information and data
concerning dates on or after January 1, 2000. Such a failure could adversely
affect the handling or determination of futures trades and prices and other
services.
MSDW began its planning for the Year 2000 Problem in 1995, and currently
has several hundred employees working on the matter. It has developed its own
Year 2000 compliance plan to deal with the problem and had the plan approved by
the company's executive management, Board of Directors and Information
Technology Department. Demeter is coordinating with MSDW to address the Year
2000 Problem with respect to Demeter's computer systems that affect the
Partnership. This includes hardware and software upgrades, systems consulting
and computer maintenance.
Beyond the challenge facing internal computer systems, the systems failure
of any of the third parties with whom the Partnership has a material
relationship - the futures exchanges and clearing organizations through which it
trades, Carr, or the Trading Advisor - could result in a material financial risk
to the Partnership. All U.S. futures exchanges are subject to monitoring by the
CFTC of their Year 2000 preparedness and the major foreign futures exchanges are
also expected to be subject to market-wide testing of their Year 2000 compliance
during 1999. Demeter intends to monitor the progress of Carr and the Trading
Advisor throughout 1999 in their Year 2000 compliance and, where
- 18 -
<PAGE>
applicable, to test its external interface with Carr and the Trading Advisor.
A worst case scenario would be one in which trading of contracts on behalf
of the Partnership becomes impossible as a result of the Year 2000 problem
encountered by any third parties. A less catastrophic but more likely scenario
would be one in which trading opportunities diminish as a result of technical
problems resulting in illiquidity and fewer opportunities to make profitable
trades. MSDW has begun developing various "contingency plans" in the event that
the systems of such third parties fail. Demeter intends to consult closely with
MSDW in implementing those plans. Despite the best efforts of both Demeter and
MSDW, however, it is possible that these steps will not be sufficient to avoid
any adverse impact to the Partnership.
RISKS ASSOCIATED WITH THE EURO. On January 1, 1999, eleven countries in the
European Union established fixed conversion rates on their existing sovereign
currencies and converted to a common single currency (the "euro"). During a
three-year transition period, the sovereign currencies will continue to exist
but only as a fixed denomination of the euro. Conversion to the euro prevents
the Trading Advisor from trading in certain currencies and thereby limits its
ability to take advantage of potential market opportunities that might otherwise
have existed had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
- 19 -
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
INTRODUCTION
The Partnership is a commodity pool engaged primarily in the speculative trading
of futures interests. The market sensitive instruments held by the Partnership
are acquired solely for speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's primary business activities.
The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned factors result in frequent changes in the fair value of
the Partnership's open positions, and, consequently, in its earnings and cash
flow.
The Partnership's total market risk is influenced by a wide variety of factors,
including the diversification effects among the Partnership's existing open
positions, the volatility present within the market(s), and the liquidity of the
market(s). At varying times, each of these factors may act to exacerbate or mute
the market risk associated with the Partnership.
- 20 -
<PAGE>
The Partnership's past performance is not necessarily indicative of its future
results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent uncertainty of its speculative trading, which may
cause future losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.
QUANTIFYING THE PARTNERSHIP'S TRADING VALUE AT RISK
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The Partnership accounts for open positions on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of the Partnership's
open positions is directly reflected in the Partnership's earnings, whether
realized or unrealized, and the Partnership's cash flow, as profits and losses
on open positions of exchange-traded futures interests are settled daily through
variation margin.
- 21 -
<PAGE>
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisor is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical simulation involves constructing a distribution of
hypothetical daily changes in trading portfolio value. The VaR model generally
takes into account linear exposures to price and interest rate risk. Market
risks that are incorporated in the VaR model include equity and commodity
prices, interest rates, foreign exchange rates, as well as correlation that
exists among these variables. The hypothetical changes in portfolio value are
based on daily observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is sensitive. In the case
of the Partnership's VaR, the historical observation period is approximately
four years. The Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based on observed market risk factor moves, would have
been exceeded once in 100 trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either Demeter
or the Trading Advisor in their daily risk management activities.
- 22 -
<PAGE>
THE PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following table indicates the VaR associated with the Partnership's open
positions as a percentage of total net assets by market category as of March 31,
1999. As of March 31, 1999, the Partnership's total capitalization was
approximately $6 million.
PRIMARY MARKET MARCH 31, 1999
RISK CATEGORY VALUE AT RISK
------------- -------------
Interest Rate (1.08)%
Currency (1.27)
Equity (0.27)
Commodity (0.67)
Aggregate Value at Risk (1.83)%
Aggregate value at risk represents the aggregate VaR of the Partnership's open
positions and not the sum of the VaR of the individual categories listed above.
Aggregate VaR will be lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open positions at March
31, 1999 only and is not necessarily representative of either the historic or
future risk of an investment in the Partnership. Because the Partnership has
only been in operation for a single reporting period, the high, low and average
VaR of the Partnership's open positions are all identical. As the Partnership's
sole business is the speculative
- 23 -
<PAGE>
trading of primarily futures interests, the composition of its portfolio of open
positions can change significantly over any given time period or even within a
single trading day. Such changes in open positions could materially impact
market risk as measured by VaR either positively or negatively.
LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Partnership is
typically many times the applicable margin requirements, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of ruin" not typically found in other
investment vehicles. Due to the relative size of the positions held, certain
market conditions may cause the Partnership to incur losses greatly in excess of
VaR within a short period of time. The foregoing VaR tables, as well as the past
performance of the Partnership, gives no indication of such "risk of ruin". In
addition, VaR risk measures should be interpreted in light of the methodology's
limitations, which include the following: past changes in market risk factors
will not always yield accurate predictions of the distributions and correlations
of future market movements; changes in portfolio value in response to market
movements may differ from the responses implicit in a VaR model; published VaR
results reflect
- 24 -
<PAGE>
past trading positions while future risk depends on future positions; VaR using
a one-day time horizon does not fully capture the market risk of positions that
cannot be liquidated or hedged within one day; and the historical market risk
factor data used for VaR estimation may provide only limited insight into losses
that could be incurred under certain unusual market movements.
The foregoing VaR tables present the results of the Partnership's VaR for the
Partnership's market risk exposures and on an aggregate basis at March 31, 1999.
Since VaR is based on historical data, VaR should not be viewed as predictive of
the Partnership's future financial performance or its ability to manage and
monitor risk and there can be no assurance that the Partnership's actual losses
on a particular day will not exceed the VaR amounts indicated or that such
losses will not occur more than 1 in 100 trading days.
NON-TRADING RISK
The Partnership has non-trading market risk on its foreign cash balances not
needed for margin. However, such balances, as well as any market risk they may
represent, are immaterial. The Partnership also maintains a substantial portion
(approximately 89%) of its available assets in cash at DWR. A decline in
short-term interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered material.
- 25 -
<PAGE>
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features
of the Partnership's market sensitive instruments.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES The following
qualitative disclosures regarding the Partnership's market risk exposures -
except for (i) those disclosures that are statements of historical fact and (ii)
the descriptions of how the Partnership manages its primary market risk
exposures - constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Partnership's primary market risk exposures as well as the strategies used and
to be used by Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any one of which
could cause the actual results of the Partnership's risk controls to differ
materially from the objectives of such strategies. Government interventions,
defaults and expro-priations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased regulation and
many other factors could result in material losses as well as in material
changes to the risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
- 26 -
<PAGE>
The following were the primary trading risk exposures of the Partnership as of
March 31, 1999, by market sector. It may be anticipated however, that these
market exposures will vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of the
Partnership. Interest rate movements directly affect the price of the sovereign
bond futures positions held by the Partnership and indirectly the value of its
stock index and currency positions. Interest rate movements in one country as
well as relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the government debt of
smaller nations - e.g. Australia. Demeter anticipates that G-7 interest rates
will remain the primary market exposure of the Partnership for the foreseeable
future.
The changes in interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates. Most of the speculative
future positions held by the Partnership are in medium-to-long term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Partnership were the medium-to-long term rates to remain steady.
- 27 -
<PAGE>
CURRENCY. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two currencies other
than the U.S. dollar. However, the Partner-ship's major exposures are expected
to be in the dollar/euro, dollar/yen and dollar/Swiss franc positions. Demeter
does not anticipate that the risk profile of the Partnership's currency sector
will change significantly in the future, although it is difficult at this point
to predict the effect of the introduction of the Euro on the Trading Advisor's
currency trading strategies.
EQUITY. The Partnership's primary equity exposure is to equity price risk
in the G-7 countries. The stock index futures traded by the Partnership are by
law limited to futures on broadly based indices. As of March 31, 1999, the
Partnership's primary exposures were in the Nikkei (Japan) stock indices.
Demeter anticipates little, if any, trading in non-G-7 stock indices. The
Partnership is primarily exposed to the risk of adverse price trends or static
markets in the major U.S., European and Japanese indices. (Static markets would
not cause major market changes but would make it difficult for the Partnership
to avoid being "whipsawed" into numerous small losses).
- 28 -
<PAGE>
COMMODITY.
METALS. The Partnership's primary metals market exposure is to
fluctuations in the price of gold. Although the Trading Advisor will from time
to time trade base metals such as aluminum, copper, nickel and zinc, the
principal market exposures of the Partnership are expected to be in the precious
metals. It should be noted that in general, gold trading has been increasingly
limited due to the long-lasting and mainly non-volatile decline in the price of
gold over the last 10-15 years. Demeter anticipates that gold will remain the
primary metals market exposure for the Partnership.
SOFT COMMODITIES AND AGRICULTURALS. The Partnership's primary commodities
exposure is to fluctuations in the price of soft commodities and agriculturals,
which are often directly affected by severe or unexpected weather conditions.
Corn, cocoa and soybeans accounted for the substantial bulk of the Partnership's
commodities exposure at March 31, 1999. Demeter anticipates that the Trading
Advisor will maintain an emphasis on corn, cocoa and soybeans.
ENERGY. The Partnership's primary energy market exposure is to gas
and oil price movements, often resulting from political developments in the
Middle East. Although the Trading Advisor trades natural gas to a limited
extent, oil is by far the dominant energy market exposure of the
Partnership. Oil prices are currently depressed, but they can be volatile
and substantial
- 29 -
<PAGE>
profits and losses have been and are expected to continue to be experienced in
this market.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE The following was
the only non-trading risk exposure of the Partnership at March 31, 1999:
FOREIGN CURRENCY BALANCES. The Partnership's primary foreign currency balances
are in Singapore dollars, Swiss francs, euros and South African rand. The
Partnership controls the non-trading risk of these balances by regularly
converting these balances back into U.S. dollars at varying intervals, depending
upon such factors as size, volatility, etc.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE The means by
which the Partnership and the Trading Advisor, severally, attempt to manage the
risk of the Partnership's open positions are essentially the same in all market
categories traded. Demeter attempts to manage the Partnership's market exposure
by (i) diversifying the Partnership's assets among different market sectors and
trading approaches, and (ii), monitoring the performance of the Trading Advisor
on a daily basis. In addition, the Trading Advisor establishes diversi-fication
guidelines, often set in terms of the maximum margin to be committed to
positions in any one market sector or market sensitive instrument.
- 30 -
<PAGE>
Demeter monitors and controls the risk of the Partnership's non-trading
instruments, cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Advisor.
- 31 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management Inc., MSDW (all such parties referred to hereafter
as the "Dean Witter Parties"), certain other limited partnership commodity pools
of which Demeter is the general partner, and certain trading advisors to those
pools. On June 16, 1997, the plaintiffs in the above actions filed a
consolidated amended complaint, alleging, among other things, that the
defendants committed fraud, deceit, negligent misrepresenta-tion, various
violations of the California Corporations Code, intentional and negligent breach
of fiduciary duty, fraudulent and unfair business practices, unjust enrichment,
and conversion in the sale and operation of the various limited partnership
commodity pools. Similar purported class actions were also filed on September 18
and 20, 1996, in the Supreme Court of the State of New York, New York County,
and on November 14, 1996 in the Superior Court of the State of Delaware, New
Castle County, against the Dean Witter Parties and certain trading advisors on
behalf of all purchasers of interests in various limited partnership commodity
pools sold by DWR. A consolidated and amended complaint in the action pending in
the Supreme Court of the State of New York was filed on August 13, 1997,
alleging that
- 32 -
<PAGE>
the defendants committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various limited partnership
commodity pools. On December 16, 1997, upon motion of the plaintiffs, the action
pending in the Superior Court of the State of Delaware was voluntarily dismissed
without prejudice. The New York Supreme Court dismissed the New York action in
November 1998, but granted plaintiffs leave to file an amended complaint, which
they did in early December 1998. The defendants filed a motion to dismiss the
amended complaint with prejudice on February 1, 1999. On April 12, 1999, the
defendants also filed a motion in the California action to oppose certification
by the court of the class in the California litigation. The complaints seek
unspecified amounts of compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that, in the course of
these actions, other parties could be added as defendants. The Dean Witter
Parties believe that they have strong defenses to, and they will vigorously
contest, the actions. Although the ultimate outcome of legal proceedings cannot
be predicted with certainty, it is the opinion of management of the Dean Witter
Parties that the resolution of the actions will not have a material adverse
effect on the financial condition or the results of operations of any of the
Dean Witter Parties.
- 33 -
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership registered 3,000,000 Units pursuant to a Registration Statement
on Form S-1, which became effective on November 6, 1998 (SEC File Number
333-60115).
The offering commenced February 26, 1999 (the "Initial Offer-ing"). In addition
to the Initial Offering, Units are being sold at monthly closings as of the last
day of each month at a price equal to 100% of the Net Asset Value of a Unit as
of the date of such monthly closing. The managing underwriter is DWR.
The aggregate price of the offering amount registered was $30,000,000 (based
upon the initial offering price of $10.00 per Unit.
Through March 31, 1999, 653,909.889 Units were sold, leaving 2,346,090.111 Units
unsold as of March 31, 1999. The aggregate price of the Units sold through March
31, 1999 was $6,360,222.
Since no expenses are chargeable against proceeds, 100% of the proceeds of the
offering have been applied to the working capital of the Partnership for use in
accordance with the "Investment Programs, Use of Proceeds and Trading Policies"
section of the prospectus included as part of the Registration Statement.
- 34 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
ITEM
3.01 Form of Limited Partnership Agreement of the Partner-ship, dated as
of November 6, 1998, is incorporated by reference to Exhibit A of
the Partnership's Prospectus, dated November 6, 1998, filed with the
securities and Exchange Commission pursuant to Rule 424(b)(3) under
the Securities Act of 1933, as amended, on November 12, 1998.
3.02 Certificate of Limited Partnership, dated July 15, 1998, is filed
herewith.
10.01 Management Agreement, dated as of November 6, 1998, among the
Partnership, Demeter Management Corporation, and Graham Capital
Management L.P. is filed herewith.
10.02 Customer Agreement, dated as of November 6, 1998, between the
Partnership and Dean Witter Reynolds Inc. is filed herewith.
10.03 Customer Agreement, dated as of November 6, 1998, among the
Partnership, Carr Futures, Inc., and Dean Witter Reynolds Inc. is
filed herewith.
10.04 International foreign Exchange Master Agreement, dated as of
November 6, 1998, between the Partnership and Carr Futures, Inc. is
filed herewith.
10.05 Subscription and Exchange Agreement and Power of Attorney to be
executed by each purchaser of Units is incorporated by reference to
Exhibit B of the Partnership's Prospectus dated November 6, 1998,
filed with the Securities and Exchange commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on November
12, 1998.
10.06 Escrow Agreement, dated November 6, 1998, among the Partnership,
Demeter Management Corporation, Dean Witter Reynolds Inc., and
Chemical Bank is filed herewith.
(B) Reports on Form 8-K. - None
- 35 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Charter
Graham L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 14, 1999 By: /S/ LEWIS A. RAIBLEY, III
---------------------------------
Lewis A. Raibley, III
Director and Chief Financial
Officer
The General Partner which signed the above is the only party authorized to act
for the Registrant. The Registrant has no principal executive officer, principal
financial officer, controller, or principal accounting officer and has no Board
of Directors.
- 36 -
Exhibit 3.02
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
The undersigned, in order to form a limited partnership under and pursuant
to the provisions of the Delaware Revised Uniform Limited Partnership Act,
hereby certifies as follows:
First. Name of Limited Partnership. The name of the limited
partnership is Morgan Stanley Dean Witter Charter Graham L.P. (the
"Partnership").
Second. Registered Office and Agent. The address of the Partnership's
registered office in the State of Delaware is c/o The Corporation Trust
Company, 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the Partnership's registered agent is The Corporation
Trust Company.
Third. General Partner. The name and mailing address of the sole
general partner of the Partnership is Demeter Management Corporation, Two
World Trade Center, 62nd Floor, New York, New York 10048.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership on July 15, 1998.
DEMETER MANAGEMENT CORPORATION,
General Partner
By: /s/ Mark J. Hawley
-------------------------------
Mark J. Hawley
President
Exhibit 10.01
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 6th day of November, 1998 among MORGAN
STANLEY DEAN WITTER CHARTER GRAHAM L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and GRAHAM CAPITAL MANAGEMENT, L.P., a Delaware limited
partnership (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement dated as of July 15, 1998 (the "Limited Partnership
Agreement"), to trade, buy, sell, spread, or otherwise acquire, hold, or dispose
of commodities (which may include 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, commodity
forward contracts, foreign exchange commitments, options on physical commodities
and on futures contracts, spot (cash) commodities and currencies, and any rights
pertaining thereto (hereinafter referred to collectively as "futures interests")
and securities (such as United States Treasury bills) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership is a member partnership of the Morgan Stanley Dean
Witter Charter Series (the "Fund Group") pursuant to which units of limited
partnership interest ("Units") of such member partnerships will be sold to
investors in a common prospectus. Units of the Partnership are being offered
pursuant to a Registration Statement on Form S-1 (No. 333-60115) (as amended
from time to time, the "Registration Statement") filed under the Securities Act
of 1933, as amended (the "Securities Act"), and a final Prospectus dated
November 6, 1998", constituting a part thereof (as amended and supplemented from
time to time) (the "Prospectus"). Such Units can be exchanged by a limited
partner of a member partnership of the Fund Group for Units of other member
partnerships of the Fund Group at 100% of the respective Net Asset Value (as
defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the Trading Advisor has extensive experience trading in futures
interests and is willing to provide certain services and undertake certain
obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to act as trading
advisor for the Partnership and to make investment decisions with respect to
futures interests for the Partnership's Net Assets (as defined in Section 6(c)
hereof) and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading Advisor wish
to enter into this Management Agreement which, among other things, sets forth
certain terms and conditions upon which the Trading Advisor will conduct futures
interests trading for the Partnership;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. UNDERTAKINGS IN CONNECTION WITH THE INITIAL AND CONTINUING OFFERING OF
UNITS.
(a) The Trading Advisor agrees with respect to the initial and continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership, the General Partner, and Dean
Witter Reynolds Inc., the selling agent for the Partnership ("DWR") by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any pre-or
post-effective amendments or supplements thereto, with the SEC, CFTC, NFA, NASD,
and with appropriate governmental authorities as part of making application for
registration of the Units under the securities or Blue Sky laws of such
jurisdictions as the Partnership may deem appropriate. As used herein, the term
"principal" shall have the meaning as defined in Section 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, the Trading Advisor.
(b) The General Partner, in its sole discretion and at any time may (i)
withdraw the SEC registration of the Units, or (ii) discontinue the offering of
Units.
(c) If, while Units continue to be offered and sold, 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 Registration
Statement or Prospectus, 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 the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees thereof
shall distribute the Prospectus or selling literature or shall engage in any
selling activities whatsoever in connection with the continuing offering of
Units except as may be specifically requested by the General Partner.
2. DUTIES OF THE TRADING ADVISOR.
(a) The Trading Advisor hereby agrees to act as Trading Advisor for the
Partnership and, as such, shall have sole authority and responsibility for
directing the investment and reinvestment of the Net Assets of the Partnership
on the terms and conditions and in accordance with the prohibitions and trading
policies set forth in this Agreement, or the Prospectus or as otherwise provided
in writing to the Trading Advisor; PROVIDED, HOWEVER, that the General Partner
may override the instructions of the Trading Advisor to the extent necessary (i)
to comply with the trading policies of the Partnership and with applicable
speculative position limits, (ii) to pay the Partnership's expenses, (iii) to
the extent the General Partner believes doing so is necessary for the protection
of the Partnership, (iv) to terminate the futures interests trading of the
Partnership, or (v) to comply with any applicable law or regulation. The General
Partner agrees not to override any such instructions for the reasons specified
in clause (ii) of the preceding sentence unless the Trading Advisor fails to
comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five calendar days of such request.
The Trading Advisor shall not be liable for the consequences of any decision by
the General Partner to override instructions of the Trading Advisor, except to
the extent that the Trading Advisor is in breach of this Agreement. In
performing services for the Partnership, the Trading Advisor may not materially
alter the trading program(s) used by the Trading Advisor in investing and
reinvesting the Partnership's Net Assets in futures interests as described in
the Prospectus without the prior written consent of the General Partner, it
being understood that changes in the futures interests traded shall not be
deemed an alteration in the Trading Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures interests for
the account of the Partnership in accordance with the prohibitions and
trading policies of the Partnership described in the Prospectus and as
otherwise provided in writing to the Trading Advisor. The Trading Advisor
shall trade the Partnership's Net Assets pursuant to the specified trading
program(s) described in the Prospectus (with such changes and additions to
such trading program(s) as the Trading Advisor, from time to time,
incorporates into its trading program(s) for accounts the size of the
Partnership), unless the Trading Advisor is instructed by the General
Partner to trade the Partnership's Net Assets pursuant to any one or more
of the Trading Advisor's other trading programs described in the
Prospectus.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30
calendar days of a request therefor by the General Partner, with
information comparing the performance of the Partnership's account and the
performance of all other client accounts directed by the Trading Advisor
using the trading programs used by the Trading Advisor for the Partnership
over a specified period of time. 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 General Partner's request, consult with the General Partner
concerning any discrepancies between the performance of such other accounts
and the Partnership's account. The Trading Advisor shall promptly inform
the General Partner of any material discrepancies of which the Trading
Advisor is aware. The General Partner acknowledges that different trading
programs, strategies or implementation methods may be utilized for
different accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity, accounts that
commence trading at different times, accounts which have different
portfolios or different fiscal years and accounts with different expenses,
leverage and interest arrangements and that such differences may cause
divergent trading results.
(iii) Upon request of the General Partner and subject to reasonable
assurances of confidentiality by the General Partner and the Partnership,
provide the General Partner with all material information concerning the
Trading Advisor other than proprietary information (including, without
limitation, information relating to changes in control, personnel, trading
approach, or financial condition). The General Partner acknowledges that
all trading instructions made by the Trading Advisor will be held in
confidence by the General Partner, except to the extent necessary to
conduct the business of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's open
positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this Agreement
shall be for the account, and at the risk, of the Partnership and not for the
account, or at the risk, of the Trading Advisor or any of its stockholders,
directors, officers, or employees, or any other person, if any, who controls the
Trading Advisor within the meaning of the Securities Act. All brokerage fees
arising from trading by the Trading Advisor shall be for the account of the
Partnership. The Trading Advisor makes no representations as to whether its
trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the Trading
Advisor shall assume financial responsibility for any errors committed or caused
by it in transmitting orders for the purchase or sale of futures interests for
the Partnership's account, including, but not limited to, payment of the floor
brokerage commissions, exchange and NFA fees, and other transaction charges and
give-up charges incurred on such trades in an amount not to exceed the total
out-of-pocket costs associated therewith. The Trading Advisor's errors shall
include, but not be limited to, inputting improper trading signals or
communicating incorrect orders for execution. The Trading Advisor shall not be
responsible for errors committed or caused by DWR, Carr Futures, Inc. ("CFI") or
any other floor broker or futures commission merchant executing trades. The
Trading Advisor shall have an affirmative obligation promptly to notify the
General Partner of its own errors, and the Trading Advisor shall use its best
efforts to identify and promptly notify the General Partner of any order or
trade which the Trading Advisor reasonably believes was not executed in
accordance with its instructions.
(e) Prior to the commencement of trading, the General Partner on behalf of
the Partnership shall deliver to the Trading Advisor a trading authorization
appointing the Trading Advisor the Partnership's attorney-in-fact for such
purpose.
3. DESIGNATION OF ADDITIONAL TRADING ADVISORS AND REALLOCATION OF NET
ASSETS.
If the General Partner at any time deems it to be in the best interests of
the Partnership, the General Partner may designate an additional trading advisor
or advisors for the Partnership and may apportion to such additional trading
advisor(s) the management of such amounts of Net Assets as the General Partner
shall determine in its absolute discretion. The designation of an additional
trading advisor or advisors and the apportionment of Net Assets to any such
trading advisor(s) pursuant to this Section 3 shall neither terminate this
Agreement nor modify in any regard the respective rights and obligations of the
Partnership, the General Partner and the Trading Advisor hereunder with respect
to the assets that remain under the management of the Trading Advisor. In the
event that an additional trading advisor is so designated, the Trading Advisor
shall thereafter receive management and incentive fees based, respectively, on
that portion of the Net Assets managed by the Trading Advisor and that portion
of the Trading Profits (as defined in Section 6(d) hereof) properly attributable
to the trading done by the Trading Advisor.
4. TRADING ADVISOR INDEPENDENT.
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 Partnership
in any way or otherwise be deemed an agent of the Partnership. Nothing contained
herein shall be deemed to require the Partnership to take any action contrary to
the Limited Partnership Agreement, the Certificate of Limited Partnership of the
Partnership as from time to time in effect (the "Certificate of Limited
Partnership"), or any applicable law or rule or regulation of any regulatory
body, exchange, or board. Nothing herein contained shall constitute the Trading
Advisor as a member of any partnership, joint venture, association, syndicate or
other entity with the Partnership or the General Partner, or, except as
otherwise specifically provided in this Agreement, 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
Partnership.
5. COMMODITY BROKERS.
The Trading Advisor shall effect all transactions in futures interests for
the Partnership through, and shall maintain a separate account with, such
commodity broker or brokers as the General Partner shall direct. At the present
time, DWR shall act as the non-clearing commodity broker and CFI shall act as
the clearing commodity broker for the Partnership. The General Partner shall
provide the Trading Advisor with copies of brokerage statements. Notwithstanding
that CFI shall act as the clearing commodity broker for the Partnership, the
Trading Advisor may execute trades through floor brokers other than those
employed by CFI so long as arrangements are made for such floor brokers to
"give-up" or transfer the positions to CFI and provided that the rates charged
by such floor brokers have been approved in writing by DWR. The Trading Advisor
will not be responsible for paying give-up fees at rates approved by DWR.
6. FEES.
(a) For the services to be rendered to the Partnership by the Trading
Advisor under this Agreement, the Partnership shall pay the Trading Advisor the
following fees:
(i) A monthly management fee, without regard to the profitability of
the Trading Advisor's trading for the Partnership's account, equal to 1/12
of 2% (a 2% annual rate) of the Partnership's "Net Assets" (as defined in
Section 6(c)) as of the opening of business on the first day of each
calendar month, commencing with the month in which the Partnership begins
to receive trading advice from the Trading Advisor pursuant to this
Agreement.
(ii) A monthly incentive fee equal to 20% of the "Trading Profits" (as
defined in Section 6(d)) experienced by the Partnership as of the end of
each calendar month.
(b) If this Agreement is terminated on a date other than the last day of a
month, the incentive fee described above shall be determined as if such date
were the end of a month. If this Agreement is terminated on a date other than
the end of a month, the management fee described above 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 Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, 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
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall have the same meaning
ascribed thereto in Section 7(d)(1) of the Limited Partnership Agreement.
(d) As used herein, the term "Trading Profits" shall mean net futures
interests trading profits (realized and unrealized) earned on the Partnership's
Net Assets, decreased by the monthly management fees, brokerage fees and any
transaction fees and costs, if any, not included in the brokerage fees; with
such trading profits and items of decrease determined from the end of the last
calendar month in 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 Partnership commenced trading to the end of the month as of which
such incentive fee calculation is being made. Extraordinary expenses of the
Partnership, if any, will not be deducted in determining Trading Profits. No
incentive fee will be paid on interest income earned by the Partnership.
(e) If any payment of incentive fees is made to the Trading Advisor on
account of Trading Profits and the Trading Advisor thereafter fails to earn
Trading Profits 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 Trading Profits.
However, no subsequent incentive fees shall be payable to the Trading Advisor
until the Partnership has again earned Trading Profits; PROVIDED, HOWEVER, that
if the Partnership's Net Assets are reduced or increased because of redemptions
or additions that occur at the end of, or subsequent to, an incentive period in
which the Trading Advisor experiences a futures interests trading loss, the
trading loss for that incentive period which must be recovered before the
Trading Advisor will be deemed to experience Trading Profits will be equal to
the amount determined by (x) dividing the Partnership's Net Assets after such
increase or decrease by the Partnership's Net Assets immediately before such
increase or decrease and (y) multiplying that fraction by the amount of the
unrecovered futures interests trading loss experienced in the month prior to
such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month without the payment of an
intervening incentive fee and the Partnership's Net Assets are increased or
reduced in more than one such month because of redemptions or additions, then
the trading loss for each such month shall be adjusted in accordance with the
formula described above and such increased or reduced amount of futures
interests trading loss shall be carried forward and used to offset subsequent
futures interests trading profits.
(f) The Partnership will remit the management and incentive fees to the
Trading Advisor as soon as practicable, but in no event later than 30 days, in
the case of the management fee, or 45 days, in the case of the incentive fee,
after the month-end as of which they are due, together with an itemized
statement showing the calculations.
7. TERM.
This Agreement shall continue in effect until December 31, 2001 (the
"Initial Termination Date"). If this Agreement is not terminated on the Initial
Termination Date, as provided for herein, then, 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. At least 30 calendar days prior to the
expiration of the Initial Termination Date or any subsequent one-year period, as
the case may be, the Trading Advisor may terminate this Agreement at the end of
the current period by providing written notice to the Partnership indicating
that the Trading Advisor desires to terminate this Agreement at the end of such
period. This Agreement shall also terminate if the Partnership terminates. The
Partnership shall have the right to terminate this Agreement at its discretion
(a) at any month-end upon 5 calendar days' prior written notice to the Trading
Advisor or (b) at any time upon written notice to the Trading Advisor upon the
occurrence of any of the following events: (i) if Ken Tropin ceases for any
reason to be an active executive officer of the Trading Advisor; (ii) if the
Trading Advisor becomes bankrupt or insolvent; (iii) if the Trading Advisor is
unable to use its trading programs, systems or methods as in effect on the date
hereof and as refined and modified in the future for the benefit of the
Partnership; (iv) 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;
(v) 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 interests
trading programs, systems or methods, or its goodwill, to any individual or
entity; (vi) if the Net Asset value of a Unit, after adjusting for
distributions, if any, shall be less than $5.00; (vii) if, at any time, the
Trading Advisor materially violates any trading or administrative policy
described in the Prospectus or otherwise provided in writing to the Trading
Advisor by the General Partner, except with the prior express written consent of
the General Partner; or (viii) if the Trading Advisor fails in a material manner
to perform any of its obligations under this Agreement. The Trading Advisor may
terminate this Agreement at any time, upon written notice to the Partnership, in
the event: (i) that the General Partner imposes additional trading limitation(s)
(not in effect on the date hereof) in the form of one or more trading policies
or administrative policies which the Trading Advisor does not agree to follow in
its management of the Partnership's Net Assets; (ii) the General Partner objects
to the Trading Advisor implementing a proposed material change in the Trading
Advisor's trading program(s) used by the Partnership and Trading Advisor
certifies to the General Partner in writing that it believes such change is in
the best interests of the Partnership; (iii) the General Partner overrides a
trading instruction of the Trading Advisor for reasons unrelated to a
determination by the General Partner that the Trading Advisor has violated the
Partnership's trading policies and the Trading Advisor certifies to the General
Partner in writing that as a result the Trading Advisor believes the performance
results of the Trading Advisor relating to the Partnership will be materially
adversely affected; (iv) the Partnership materially breaches this Agreement and
does not correct the breach within 10 business days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, or, if such consent is given, does not make arrangements to facilitate
such trading within 90 calendar days of such notice; or (vi) the Partnership's
Net Assets fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any termination
of this Agreement.
8. STANDARD OF LIABILITY; INDEMNIFICATIONS.
(a) LIMITATION OF TRADING ADVISOR LIABILITY. In respect of the Trading
Advisor's role in the futures interests trading of the Partnership's assets,
none of the Trading Advisor, or its controlling persons, its affiliates, and
their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) TRADING ADVISOR INDEMNITY IN RESPECT OF MANAGEMENT ACTIVITIES. The
Trading Advisor shall indemnify, defend and hold harmless the Partnership and
the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading by the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a breach of this Agreement or a
representation, warranty or covenant herein, or the result of misconduct or
negligence or conduct not done in good faith in the reasonable belief that it
was in, or not opposed to, the best interests of the Partnership. The
termination of any demand, claim, lawsuit, action or proceeding by settlement
shall not, in itself, create a presumption that the conduct in question was not
undertaken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interest of the Partnership.
(c) PARTNERSHIP AND GENERAL PARTNER INDEMNITY IN RESPECT OF MANAGEMENT
ACTIVITIES. The Partnership and the General Partner shall, jointly and
severally, indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, partners, employees, and controlling persons, from and against any
and all losses, claims, damages, liabilities (joint and several), costs, and
expenses (including any reasonable investigatory, legal, and other expenses
incurred in connection with, and any amounts paid in, any settlement; provided
that the Partnership and the General Partner shall have approved such
settlement) resulting from a demand, claim, lawsuit, action, or proceeding
(other than those incurred as a result of claims brought by or in the right of
an indemnified party) relating to the futures interests trading activities of
the Partnership undertaken by the Trading Advisor, a breach of this Agreement by
the General Partner or the Partnership that relates to futures interests trading
activities or a breach of a representation, warranty or covenant herein by the
General Partner or the Partnership that relates to the futures interests trading
activities of the Partnership; PROVIDED that a court of competent jurisdiction
upon entry of a final judgment finds (or, if no final judgment is entered, an
opinion is rendered to the Partnership by independent counsel reasonably
acceptable to both parties) to the effect that the action or inaction of such
indemnified party that was the subject of the demand, claim, lawsuit, action, or
proceeding did not constitute negligence, misconduct, or a breach of this
Agreement by the Trading Advisor or such indemnified party or a representation,
warranty or covenant of the Trading Advisor herein and was done in good faith
and in a manner such indemnified party reasonably believed to be in, or not
opposed to, the best interests of the Partnership. Notwithstanding the
foregoing, the General Partner shall not have any liability with respect to any
action brought by or on behalf of the Partnership against the Trading Advisor.
The termination of any demand, claim, lawsuit, action or proceeding by
settlement shall not, in itself, create a presumption that the conduct in
question was not undertaken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interest of the Partnership.
(d) TRADING ADVISOR INDEMNITY IN RESPECT OF SALE OF UNITS. The Trading
Advisor shall indemnify, defend and hold harmless DWR, Morgan Stanley & Co.,
Incorporated ("MS&Co."), CFI, the Partnership, the General Partner, any
additional seller, and their affiliates and each of their officers, directors,
principals, shareholders, and controlling persons from and against any loss,
claim, damage, liability, cost, and expense, joint and several, to which any
indemnified person may become subject under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Commodity Exchange
Act, as amended, and rules promulgated thereunder (the "CEAct"), the securities
or Blue Sky law of any jurisdiction, or otherwise (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement, provided that the Trading Advisor shall have
approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Trading Advisor of any
representation, warranty, or agreement in this Agreement relating to the
offering of Units or any certificate delivered by the Trading Advisor pursuant
to this Agreement at a Closing (as such term is defined in the Prospectus); (ii)
a breach of the disclosure requirements under the CEAct or NFA Rules that relate
to the Trading Advisor or the Trading Advisor Principals (including the
historical performance capsules, but excluding the pro forma performance
information except to the extent the pro forma performance information was based
on information furnished by the Trading Advisor); or (iii) a misleading or
untrue statement or alleged misleading or untrue statement of a material fact
made in the Registration Statement, the Prospectus, or any related selling
material or an omission or alleged omission to state a material fact therein
which is required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus and any selling material, in light of the
circumstances under which they were made) not misleading, and such statement or
omission relates specifically to the Trading Advisor, or its Trading Advisor
Principals (as defined below) (including the historical performance capsules,
but excluding the pro forma performance information except to the extent the pro
forma performance information was based on information furnished by the Trading
Advisor) or was made in reliance upon, and in conformity with, written
information or instructions furnished by the Trading Advisor (PROVIDED, HOWEVER,
that with respect to any related selling material only such related selling
material as shall have been approved in writing by the Trading Advisor). This
indemnity shall not relate to any matter for which the Trading Advisor would be
indemnified under Section 8(e).
(e) PARTNERSHIP AND GENERAL PARTNER INDEMNITY IN RESPECT OF SALE OF UNITS.
The Partnership and the General Partner agree, jointly and severally, to
indemnify, defend and hold harmless the Trading Advisor, its affiliates and each
of their officers, directors, principals, partners, shareholders, and
controlling persons from and against any loss, claim, damage, liability, cost,
and expense, joint and several, to which any indemnified person may become
subject under the Securities Act, the Exchange Act, the CEAct, the securities or
Blue Sky law of any jurisdiction, or otherwise (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement, provided that the Partnership and the General
Partner shall have approved such settlement, and in connection with any
administrative proceedings), in respect of the offer or sale of Units, insofar
as such loss, claim, damage, liability, cost, or expense (or action in respect
thereof) arises out of, or is based upon: (i) a breach by the Partnership or the
General Partner of any representation, warranty, or agreement in this Agreement
relating to the offering of Units or any certificate delivered by the
Partnership or the General Partner pursuant to this Agreement at a Closing; or
(ii) a misleading or untrue statement or alleged misleading or untrue statement
of a material fact made in the Registration Statement, the Prospectus, or any
related selling material or an omission or alleged omission to state a material
fact therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not
specifically relate to the Trading Advisor or its Trading Advisor Principals
(including the historical performance capsules, but excluding the pro forma
performance information except to the extent the pro forma performance
information was based on information furnished by the Trading Advisor) or was
not made in reliance upon, and in conformity with, written information or
instructions furnished by the Trading Advisor (PROVIDED, HOWEVER, that with
respect to any related selling material, only such related selling material as
shall have been approved in writing by the Trading Advisor), or does not result
from a breach by the Trading Advisor of any representation, warranty, or
agreement in this Agreement relating to the offering of Units or any certificate
delivered by the Trading Advisor pursuant to this Agreement at a Closing. This
indemnity shall not relate to any matter for which the Partnership would be
indemnified under Section 8(d).
(f) The foregoing agreements of indemnity shall be in addition to, and
shall in no respect limit or restrict, any other remedies which may be available
to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim, or
proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
inconsistent with the defenses available to the indemnifying party, the
indemnified person may retain its own counsel in connection with such action,
claim, or proceeding and will be indemnified by the indemnifying party for any
legal and other expenses reasonably incurred in connection with investigating or
defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and expenses
of more than one counsel for all indemnified persons in connection with any one
action, claim, or proceeding or in connection with separate but similar or
related actions, claims, or proceedings in the same jurisdiction arising out of
the same general allegations. The indemnifying party will not be liable for any
settlement of any action, claim, or proceeding effected without the indemnifying
party's express written consent, but if any action, claim, or proceeding is
settled with the indemnifying party's express written consent, the indemnifying
party will indemnify, defend, and hold harmless an indemnified person as
provided in this Section 8.
9. RIGHT TO ADVISE OTHERS AND UNIFORMITY OF ACTS AND PRACTICES.
(a) The Trading Advisor is engaged in the business of advising investors 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 investors (including affiliates and the partners, stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(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 Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other 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 which 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 body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, 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 Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership'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.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE TRADING ADVISOR.
(a) REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE TRADING ADVISOR. The
Trading Advisor with respect to itself and each of its principals represents and
warrants to and agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the trading
programs on behalf of the Partnership that are described in the Prospectus
(as modified from time to time) or any other trading programs agreed to by
the General Partner.
(ii) The Trading Advisor shall follow, at all times, the trading
policies of the Partnership (as described in the Prospectus) or otherwise
as furnished to the Trading Advisor in writing from time to time.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the specified trading program(s) described in the
Prospectus unless the Trading Advisor is instructed by the General Partner
to trade the Partnership's Net Assets pursuant to any one or more of the
Trading Advisor's other trading programs described in the Prospectus; and
(B) only in futures and option contracts traded on U.S. contract markets,
foreign currency forward contracts traded with CFI, and such other futures
interests that are approved in writing by the General Partner and have been
approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly formed and validly existing as a
limited partnership under the laws of the state of its formation and is
qualified to do business as a foreign limited partnership and 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 limited
partnership power and authority to perform its obligations under this
Agreement, and as described in the Registration Statement and Prospectus.
The only principals (as defined in Rule 4.10(e) under the CEAct) of the
Trading Advisor are those set forth in the Prospectus (the "Trading Advisor
Principals").
(v) All references to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's trading programs, approaches,
systems and performance, in the Registration Statement and the Prospectus,
and in any supplemental selling material which has been approved in writing
by the Trading Advisor, are accurate and complete in all material respects.
With respect to the information relating to the Trading Advisor and each
Trading Advisor Principal, including the Trading Advisor's and each Trading
Advisor Principals' trading programs, approaches, systems, and performance
information, as applicable, (i) the Registration Statement and Prospectus
contain all statements and information required to be included therein
under the CEAct, (ii) the Registration Statement as of its effective date
will not contain any misleading or untrue statement of a material fact or
omit to state a material fact which is required to be stated therein or
necessary to make the statements therein not misleading and (iii) the
Prospectus at its date of issue and as of each monthly closing will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) 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.
(vii) Each of the Trading Advisor and each "principal" of the Trading
Advisor, as defined in Rule 3.1 under the CEAct, has all federal and state
governmental, regulatory and exchange licenses, registrations and approvals
and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to
perform its or his obligations under this Agreement. The Trading Advisor is
registered as a commodity trading advisor under the CEAct and is a member
of the NFA in such capacity.
(viii) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein, the consummation of the transactions
contemplated herein and in the Prospectus and the payment of the fees
hereunder will not violate, or constitute a breach of, or default under,
the partnership agreement of the Trading Advisor or any other 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.
(ix) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial
or otherwise, business or prospects of the Trading Advisor or any Trading
Advisor Principal.
(x) Except as set forth in the Registration Statement or Prospectus
there has not been in the five years preceding the date of the Prospectus
and there is not pending, or to the best of the Trading Advisor'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 Trading Advisor or any Trading Advisor Principal is or was a
party, or to which any of the assets of the Trading Advisor or any Trading
Advisor Principal is or was subject and which resulted in or might
reasonably be expected to result in any materially adverse change in the
condition, financial or otherwise, of the Trading Advisor or which is
required under the Securities Act or CEAct to be disclosed in the
Prospectus. None of the Trading Advisor or any Trading Advisor Principal
has received any notice of an investigation by the NFA or the CFTC
regarding noncompliance by the Trading Advisor or any of the Trading
Advisor Principals with the CEAct.
(xi) 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 Partnership, other
than as described in the Prospectus.
(xii) The actual performance of each discretionary account of a client
directed by the Trading Advisor and the Trading Advisor Principals since at
least the later of (i) the date of commencement of trading for each such
account or (ii) a date five years prior to the effective date of the
Registration Statement, is disclosed in the Prospectus (other than such
discretionary accounts the performance of which are exempt from the CEAct
disclosure requirements); all of the information regarding the actual
performance of the accounts of the Trading Advisor and the Trading Advisor
Principals set forth in the Prospectus is complete and accurate in all
material respects and is in accordance with and in compliance with the
disclosure requirements under the CEAct and the Securities Act, including
the Division of Trading and Markets "notional equity" advisories and
interpretations and the rules and regulations of the NFA, except that the
Trading Advisor calculates all performance data by including "notional
equity" in determining the account size of partially-funded accounts.
(b) COVENANTS OF THE TRADING ADVISOR. The Trading Advisor covenants and
agrees that:
(i) The Trading Advisor shall use its best efforts to 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 material
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 General Partner immediately
as soon as the Trading Advisor or any of its principals 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 the business of the Trading Advisor. The
Trading Advisor shall also inform the General Partner 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 reasonably to cooperate by providing
information regarding itself and its performance in the preparation of any
amendments or supplements to the Registration Statement and the Prospectus.
(iv) The Trading Advisor agrees to participate, to the extent that the
General Partner may reasonably request, in "road shows" and other
promotional activities relating to the marketing of the Units, provided
that such participation shall not in the reasonable judgment of the Trading
Advisor require the registration of the Trading Advisor or any of its
principals or agents as a broker-dealer or salesman or interfere materially
with the trading activities of the Trading Advisor. The Trading Advisor
shall pay the costs of its reasonably requested participation in such road
shows.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE GENERAL PARTNER AND
THE PARTNERSHIP.
(a) REPRESENTATIONS OF THE PARTNERSHIP AND THE GENERAL Partner. The General
Partner and the Partnership represent and warrant to the Trading Advisor, as
follows:
(i) The Partnership has provided to the Trading Advisor, and filed
with SEC, the Registration Statement and has filed copies thereof with: (i)
the CFTC under the CEAct; (ii) the NASD pursuant to its Conduct Rules; and
(iii) the NFA in accordance with NFA Compliance Rule 2-13. The Partnership
will not file any amendment to the Registration Statement or any amendment
or supplement to the Prospectus unless the Trading Advisor has received
reasonable prior notice of and a copy of such amendments or supplements and
has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required to be taken by the General
Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing will have
been, taken; and, upon payment of the consideration therefor specified in
each accepted Subscription and Exchange Agreement and Power of Attorney, in
such form as attached to the Prospectus, the Units will constitute valid
limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized pursuant
to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act
("DRULPA") and is validly existing 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 Partnership has received a certificate of authority to do
business in the State of New York as provided by Article 8-A of the New
York Revised Limited Partnership Act and 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 Partnership's ability to perform its obligations
hereunder.
(iv) The General Partner is duly organized and validly existing and in
good standing as a corporation under the laws of the State of Delaware and
in good standing and qualified to do business as a foreign corporation
under the laws of the State of New York 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
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full partnership or
corporate power and authority under applicable law to conduct their
business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all statements
and information required to be included therein by the CEAct. When the
Registration Statement becomes effective under the Securities Act and at
all times subsequent thereto up to and including the Initial Closing and
each Monthly Closing, the Registration Statement and Prospectus will comply
in all material respects with the requirements of the Securities Act, the
rules and regulations promulgated thereunder (the "SEC Regulations"), the
rules of the NFA and the CEAct. The Registration Statement as of its
effective date will not contain any misleading or untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus as of its date of issue and at the Initial Closing and each
Monthly Closing will not contain any misleading or untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material,
when read in conjunction with the Prospectus, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material
will comply with the CEAct and the regulations and rules of the NFA and
NASD. The representation and warranties in this clause (vi) shall not,
however, apply to any statement or omission in the Registration Statement,
Prospectus or supplemental selling material (which selling material has
been approved by the Trading Advisor) specifically relating to the Trading
Advisor, or its Trading Advisor Principals or its trading programs (other
than the pro forma performance information except to the extent such
information was based on information furnished by the Trading Advisor) or
made in reliance upon and in conformity with information furnished by the
Trading Advisor.
(vii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business
or prospects of the General Partner or the Partnership, whether or not
arising in the ordinary course of business.
(viii) This Agreement has been duly and validly authorized, executed
and delivered by the General Partner for itself and on behalf of the
Partnership and constitutes a valid, binding and enforceable agreement of
the Partnership and the General Partner in accordance with its terms.
(ix) 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 Registration Statement and Prospectus will
not violate, or constitute a breach of, or default under, the General
Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, the Limited Partnership Agreement, or any agreement or
instrument by which either the General Partner or the Partnership, as the
case may be, is bound or any order, rule, law or regulation applicable to
the General Partner or the Partnership of any court or any governmental
body or administrative agency or panel or self-regulatory organization
having jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or Prospectus,
there has not been in the five years preceding the date of the Prospectus
and there is not pending or, to the best of the General Partner'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 General Partner or the Partnership is or
was a party, or to which any of the assets of the General Partner or the
Partnership is or was subject and which resulted in or might reasonably be
expected to result in any materially adverse change in the condition,
financial or otherwise, of the General Partner or the Partnership or which
is required under the Securities Act or the CEAct to be disclosed in the
Prospectus; and neither the General Partner nor any of the principals of
the General Partner, as "principals" is defined under Rule 4.10 under the
CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with
the Securities Act or the CEAct which is required under the Securities Act
or the CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General Partner, as
defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and
licenses, and have effected all filings with federal and state governmental
agencies and regulatory agencies required to conduct their business and to
act as described in the Registration Statement and Prospectus or required
to perform their obligations under this Agreement (including, without
limitation, registration as a commodity pool operator under the CEAct and
membership in the NFA as a commodity pool operator) and will maintain all
such required approvals, licenses, filings and registrations for the term
of this Agreement. The General Partner's principals identified in the
Registration Statement are all of the General Partner Principals.
(b) COVENANTS OF THE GENERAL PARTNER AND THE PARTNERSHIP. The General
Partner for itself and the Partnership covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain all
registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in
all material 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 General Partner's ability to act as described herein and in
the Prospectus.
(ii) The General Partner shall inform the Trading Advisor immediately
as soon as the General Partner or any of its principals 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 the business of the General Partner. The
General Partner shall also inform the Trading Advisor immediately if the
General Partner or any of its officers become aware of any breach of this
Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Advisor copies of
the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
(iv) The Partnership and the General Partner will keep confidential
and not disseminate any information regarding the trading systems,
strategies, methods and programs of the Trading Advisor or specific trades
made by the Trading Advisor for the account of the Partnership to any of
the limited partners of the Partnership or the customers, employees,
agents, shareholders, officers, directors or affiliates of the General
Partner or DWR or any other person or entity, except such details as may
be, in the reasonable judgment of the General Partner, necessary or
appropriate for the conduct of the business of the Partnership or as
required by law.
(v) The General Partner shall change the name of the Partnership so as
to exclude the name of the Trading Advisor if the Trading Advisor ceases to
be the sole Trading Advisor for the Partnership, unless otherwise agreed to
by the General Partner and the Trading Advisor.
12. MERGER OR TRANSFER OF ASSETS OF TRADING ADVISOR.
The Trading Advisor may merge or consolidate with, or sell or otherwise
transfer its advisory business, or all or a substantial portion of its assets,
any portion of its commodity trading programs, systems or methods, or its
goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. 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.
14. ASSIGNMENT.
This Agreement may not be assigned by any party hereto without the express
written consent of the other parties hereto.
15. AMENDMENT.
This Agreement may not be amended except by the written consent of the
parties hereto.
16. 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.
17. CLOSING CERTIFICATES AND OPINIONS.
(1) The Trading Advisor shall, at the Initial Closing and at the request of
the General Partner at any Monthly Closing, provide the following:
(a) To DWR, the General Partner and the Partnership a certificate, dated
the date of any such closing and in form and substance satisfactory to such
parties, to the effect that:
(i) The representations and warranties by the Trading Advisor in this
Agreement are true, accurate, and complete on and as of the date of the
closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its obligations and
satisfied all of the conditions on its part to be performed or satisfied
under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion of counsel,
which at the Initial Closing will be delivered by the Trading Advisor's outside
counsel and thereafter may be delivered by the Trading Advisor's in-house
counsel, in form and substance satisfactory to such parties, to the effect that:
(i) The Trading Advisor is a limited partnership duly formed and
validly existing under the laws of the state of its formation and is
qualified to do business and in good standing in each other jurisdiction in
which the nature or conduct of its business requires such qualification and
the failure to be duly qualified would materially adversely affect the
Trading Advisor's ability to perform its obligations under this Agreement.
The Trading Advisor has full limited partnership power and authority to
conduct its business as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor Principals)
has all governmental, regulatory, self-regulatory and commodity exchange
and clearing association licenses, registrations, and memberships required
by law, and the Trading Advisor (including the Trading Advisor Principals)
has made all filings necessary to perform its obligations under this
Agreement and to conduct its business as described in the Registration
Statement and Prospectus, except for such licenses, memberships, filings
and registrations, the absence of which would not have a material adverse
effect on its ability to act as described in the Registration Statement and
Prospectus or to perform its obligations under this Agreement, and, to the
best of such counsel's knowledge, after due investigations, none of such
licenses, memberships or registrations have been rescinded, revoked or
suspended.
(iii) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Trading Advisor and constitutes a valid and binding
agreement of the Trading Advisor enforceable in accordance with its terms,
subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally
of rights of creditors and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), and except as enforceability of the indemnification, exculpation,
severability and exclusive jurisdiction provisions contained in this
Agreement may be limited by applicable law or public policy.
(iv) To such counsel's knowledge, based upon due inquiry of certain
officers of the Trading Advisor, except as disclosed in the Prospectus,
there are no actions, suits or proceedings at law or in equity pending or
threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
actions, suits or proceedings within the five years preceding the date of
the Prospectus against the Trading Advisor or any Trading Advisor Principal
which are required to be disclosed in the Registration Statement or
Prospectus.
(v) The execution and delivery of this Agreement, the incurrence of
the obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of
any of the provisions of the limited partnership agreement of the Trading
Advisor and, based upon due inquiry of certain officers of the Trading
Advisor, to the best of such counsel's knowledge, will not constitute a
breach of, or default under, or a violation of any other instrument or
agreement known to such counsel by which the Trading Advisor is bound and
will not violate any order, law, rule or regulation applicable to the
Trading Advisor of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over
the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action" letters, as of the
closing, the performance by the Trading Advisor of the transactions
contemplated by this Agreement and as described in the Prospectus will not
require the Trading Advisor to be registered as an "investment adviser" as
that term is defined in the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that would lead
them to believe that, (A) the Registration Statement at the time it became
effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (B) the
Prospectus at the time it was issued or at the closing contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein relating to the Trading Advisor or
the Trading Advisor Principals, in light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that such counsel need
express no opinion or belief as to the performance data and notes or
descriptions thereto set forth in the Registration Statement and
Prospectus, except that such counsel shall opine, without rendering any
opinion as to the accuracy of the information in such tables, that the
actual performance tables of the Trading Advisor set forth in the
Prospectus comply as to form in all material respects with applicable CFTC
rules and all CFTC and NFA interpretations thereof, except as disclosed in
the Prospectus or as otherwise permitted by the CFTC staff, except that the
Trading Advisor calculates all performance data by including "notional
equity" in determining the account size of partially-funded accounts.
In giving the foregoing opinion, counsel may rely on information obtained
from public officials, officers of the Trading Advisor, and other sources
believed by it to be responsible and may assume that signatures on all documents
examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a report dated the
date of the closing which shall present, for the period from the date after the
last day covered by the historical performance capsules in the Prospectus to the
latest practicable day before closing, updated performance information, and
which shall certify that such information is, to the best of such Trading
Advisor's knowledge, accurate in all material respects.
(2) The General Partner shall, at the Initial Closing following the
effective date of the Registration Statement, provide the following:
(a) To the Trading Advisor a certificate, dated the date of such closing
and in form and substance satisfactory to the Trading Advisor, to the effect
that:
(i) The representations and warranties by the Partnership and the
General Partner in this Agreement are true, accurate, and complete on and
as of the date of the closing as if made on the date of the closing.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued by the SEC and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act. No order
preventing or suspending the use of the Prospectus has been issued by the
SEC, NASD, CFTC, or NFA and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of the General Partner, are
contemplated or threatened under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have performed all of
their obligations and satisfied all of the conditions on their part to be
performed or satisfied under this Agreement at or prior to the date of the
closing.
(b) To the parties hereto, an opinion of Cadwalader, Wickersham & Taft,
counsel to the General Partner and the Partnership, in form and substance
satisfactory to such parties, to the effect that:
(i) The Partnership is a limited partnership duly formed pursuant to
the Certificate of Limited Partnership, the Limited Partnership Agreement
and the DRULPA and is validly existing under the laws of the State of
Delaware with full partnership power and authority to conduct the business
in which it proposes to engage as described in the Registration Statement
and Prospectus and to perform its obligations under this Agreement; the
Partnership has received a Certificate of Authority as contemplated under
the New York Revised Limited Partnership Act and is qualified to do
business in New York and need not affect any other filings or
qualifications under the laws of any other jurisdictions to conduct its
business as described in the Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly existing and in
good standing as a corporation under the laws of the State of Delaware and
is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in
which the nature or conduct of its business requires such qualification and
the failure to so qualify might reasonably be expected to result in
material adverse consequences to the Partnership or the General Partner's
ability to perform its obligations as described in the Registration
Statement and Prospectus. The General Partner has full corporate power and
authority to conduct its business as described in the Registration
Statement and Prospectus and to perform its obligations under this
Agreement.
(iii) The General Partner, each of its principals as defined in Rule
3.1 under the CEAct, and the Partnership have all federal and state
governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the
General Partner and the Partnership to perform their obligations under this
Agreement to conduct their business as described in the Registration
Statement and Prospectus, except for such licenses, memberships, filings,
and registrations, the absence of which would not have a material adverse
effect on the ability of the Partnership or the General Partner to act as
described in the Registration Statement and Prospectus, or to perform their
obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships
or registrations have been rescinded, revoked or suspended.
(iv) This Agreement and the Limited Partnership Agreement have been
duly authorized, executed and delivered by or on behalf of the General
Partner and this Agreement has been duly authorized, executed and delivered
by or on behalf of the Partnership, and each constitutes a valid and
binding agreement of the General Partner and/or the Partnership, as
applicable, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws at the
time in effect affecting the enforceability generally of rights of
creditors and by general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification and exculpation provisions
contained in this Agreement and the Limited Partnership Agreement may be
limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and the offer and
sale of the Units by the Partnership and the incurrence of the obligations
herein set forth and the consummation of the transactions contemplated
herein and in the Prospectus will not be in contravention of the General
Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership and the Limited Partnership Agreement, and the
execution and delivery of the Limited Partnership Agreement will not be in
contravention of the General Partner's certificate of incorporation or
bylaws or the Certificate of Limited Partnership, and, to the best of such
counsel's knowledge based upon due inquiry of certain officers of the
General Partner, none of the foregoing will constitute a breach of, or
default under, or a violation of any agreement or instrument known to such
counsel by which the General Partner or the Partnership is bound or violate
any order known to such counsel or any law, rule or regulation applicable
to the General Partner or the Partnership of any court, governmental body,
administrative agency, panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(vi) To such counsel's knowledge, based upon due inquiry of certain
officers of the General Partner, except as disclosed in the Prospectus,
there are no actions, suits or proceedings at law or in equity pending or
threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
actions, suits or proceedings within the five years preceding the date of
the Prospectus against the General Partner or the Partnership which are
required to be disclosed in the Registration Statement or Prospectus.
(vii) The Registration Statement is effective under the Securities Act
and, to the best of such counsel's knowledge, no proceedings for a stop
order are pending or threatened under Section 8(d) of the Securities Act or
any similar state securities laws.
(viii) At the time the Registration Statement became effective, the
Registration Statement, and at the time the Prospectus was issued and as of
the closing, the Prospectus, complied as to form in all material respects
with the requirements of the Securities Act, the Securities Regulations,
the CEAct and the regulations of the NFA and NASD.
(ix) Based upon reliance on certain SEC "no-action" letters, as of the
closing, the performance by the Partnership of the transactions
contemplated by this Agreement and as described in the Prospectus will not
require the Partnership to register as an "investment company" under the
Investment Company Act of 1940, as amended.
(x) Nothing has come to such counsel's attention that would lead them
to believe that the Registration Statement at the time it became effective
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they where made, not
misleading; provided, however, that Cadwalader, Wickersham & Taft need
express no opinion or belief (a) as to information in the Registration
Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions
thereto set forth in the Registration Statement and Prospectus.
(xi) The General Partner and its "principals," as defined in CFTC Rule
3.1(a), and the Partnership have all federal and state governmental,
regulatory, self-regulatory and exchange approvals, licenses,
registrations, and memberships, and have effected all filings with federal
and state governmental regulators, self-regulatory organizations and
exchanges required to conduct their business and to act as described in the
Prospectus, or required to perform their obligations under this Agreement
and the Limited Partnership Agreement, except for such approvals, licenses,
registrations, memberships, and filings the absence of which would not have
a material adverse effect on their ability to act as described in the
Prospectus, or to perform their obligations under such agreements, and, to
the best of such counsel's knowledge, after due investigation, none of such
approvals, licenses, registrations, memberships, or filings has been
rescinded, revoked, or suspended.
(xii) The information in the Prospectus under the captions "Summary of
the Prospectus--Tax Considerations," "Risk Factors--Taxation and Regulatory
Risks," "Purchases by Employee Benefit Plans--ERISA Considerations,"
"Material Federal Income Tax Considerations," "State and Local Income Tax
Aspects," and "The Limited Partnership Agreements," to the extent that such
information constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct.
(xiii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required to be taken by the General
Partner and the Partnership as a condition to the subscription for and sale
of the Units to qualified subscribers therefor has been taken; and, upon
payment of the consideration therefor specified in the accepted
Subscription and Exchange Agreement and Power of Attorney, the Units will
constitute valid limited partnership interests in the Partnership and each
subscriber who purchases Units will become a Limited Partner, subject to
the requirement that each such purchaser shall have duly completed,
executed and delivered to the Partnership a Subscription and Exchange
Agreement and Power of Attorney relating to the Units purchased by such
purchaser, that such purchaser meets all applicable suitability standards
and that the representations and warranties of such purchaser in the
Subscription and Exchange Agreement and Power of Attorney are true and
correct and that such purchaser is included as a Limited Partner in the
Partnership's records.
In rendering its opinion, such counsel may rely on information obtained
from public officials, officers of the General Partner and other sources
believed by it to be responsible and may assume that signatures on all documents
examined by it are genuine, and that a Subscription and Exchange Agreement and
Power of Attorney in the form attached to the Prospectus has been duly
authorized, completed, dated, executed, and delivered and funds representing the
full subscription price for the Units purchased have been delivered by each
purchaser of Units in accordance with the requirements set forth in the
Prospectus.
18. INCONSISTENT FILINGS.
The Trading Advisor agrees not to file, participate in the filing of, or
publish any description of the Trading Advisor, or of its respective principals
or trading approaches that is materially inconsistent with those in the
Registration Statement and Prospectus, without so informing the General Partner
and furnishing to it copies of all such filings within a reasonable period prior
to the date of filing or publication.
19. DISCLOSURE DOCUMENT.
During the term of this Agreement, the Trading Advisor shall furnish to the
General Partner promptly copies of all disclosure documents filed with the CFTC
or NFA by the Trading Advisor. The General Partner acknowledges receipt of the
Trading Advisor's disclosure document dated October 15, 1998
20. 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,
or when given by registered or certified mail, postage prepaid, return receipt
requested, on the day actually received, 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 Partnership:
Morgan Stanley Dean Witter Charter Graham L.P.
c/o Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, New York 10048
if to the General Partner:
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, New York 10048
Attn: Robert E. Murray
if to the Trading Advisor:
Graham Capital Management, L.P.
Stamford Harbor Park
333 Ludlow Street
Stamford, Connecticut 06902
Attn: Kenneth G. Tropin
21. SURVIVAL.
The provisions of this Agreement shall survive the termination of this
Agreement with respect to any matter arising while this Agreement was in effect.
22. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE BROUGHT BY A
PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS AGREEMENT,
EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY, CITY
AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS
AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY RELIEF WHATSOEVER
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH PARTY EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE COUNTY,
CITY AND STATE OF NEW YORK.
23. 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.
24. 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.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
MORGAN STANLEY DEAN WITTER CHARTER
GRAHAM L.P.
by Demeter Management Corporation,
General Partner
By: /s/ MARK J. HAWLEY
DEMETER MANAGEMENT CORPORATION
By: /s/ MARK J. HAWLEY
GRAHAM CAPITAL MANAGEMENT, L.P.
By: /s/ KENNETH G. TROPIN
Exhibit 10.02
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 6th day of
November, 1998, by and between MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P., a
Delaware limited partnership (the "Customer"), and DEAN WITTER REYNOLDS INC., a
Delaware corporation ("DWR");
W I T N E S S E T H :
WHEREAS, the Customer was organized pursuant to a Certificate of Limited
Partnership filed in the office of the Secretary of State of the State of
Delaware on July 15, 1998, and a Limited Partnership Agreement dated as of July
15, 1998, between Demeter Management Corporation, a Delaware corporation
("Demeter"), acting as general partner (in such capacity, the "General
Partner"), and the limited partners of the Customer to 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,
or may become, the subject of futures contract trading), domestic and foreign
commodity futures contracts, commodity forward contracts, foreign exchange
commitments, options on physical commodities and on futures contracts, spot
(cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests") and securities
(such as United States Treasury bills) approved by the Commodity Futures Trading
Commission (the "CFTC") for investment of customer funds and other securities on
a limited basis, and to engage in all activities incident thereto;
WHEREAS, the Customer (which is a commodity pool) and the General Partner
(which is a registered commodity pool operator) have entered into a management
agreement (the "Management Agreement") with a certain trading advisor (the
"Trading Advisor"), which provides that the Trading Advisor has authority and
responsibility, except in certain limited situations, to direct the investment
and reinvestment of the assets of the Customer in futures interests under the
terms set forth in the Management Agreement;
WHEREAS, the Customer and DWR wish to set forth the terms and conditions
upon which DWR will perform certain non-clearing futures interests brokerage and
certain other services for the Customer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not defined herein shall have the
meaning given to them in the Customer's most recent prospectus as filed with the
Securities and Exchange Commission (the "Prospectus") relating to the offering
of units of limited partnership interest of the Customer (the "Units") and in
any amendment or supplement to the Prospectus.
2. DUTIES OF DWR. DWR agrees to act as a non-clearing commodity broker for
the Customer and introduce the Customer's account to Carr Futures, Inc. ("CFI")
for execution and clearing of futures interests transactions on behalf of the
Customer in accordance with instructions provided by the Trading Advisor, and
the Customer agrees to retain DWR as a non-clearing commodity broker for the
term of this Agreement.
DWR agrees to furnish to the Customer as soon as practicable all of the
information from time to time in its possession which Demeter, as the general
partner of the Customer, is required to furnish to the Limited Partners pursuant
to the Limited Partnership Agreement as from time to time in effect and as
required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus.
3. OBLIGATIONS AND EXPENSES. Except as otherwise set forth herein and in
the Prospectus, the Customer, and not DWR, shall be responsible for all taxes,
management and incentive fees to the Trading Advisor, brokerage fees to DWR, and
all extraordinary expenses incurred by it. DWR shall pay all of the
organizational, initial and continuing offering, and ordinary administrative
expenses of the Customer (including, but not limited to, legal, accounting, and
auditing fees, printing costs, filing fees, escrow fees, marketing costs and
expenses and other related expenses) and all charges of CFI for executing and
clearing the Customer's futures interests trades (as described in paragraph 5
below), and shall not be reimbursed therefor.
4. AGREEMENT NONEXCLUSIVE. DWR shall be free to render services of the
nature to be rendered to the Customer hereunder to other persons or entities in
addition to the Customer, and the parties acknowledge that DWR may render such
services to additional entities similar in nature to the Customer, including
other partnerships organized with Demeter as their general partner. It is
expressly understood and agreed that this Agreement is nonexclusive and that the
Customer has no obligation to execute any or all of its trades for futures
interests through DWR. The parties acknowledge that the Customer may utilize
such other broker or brokers as Demeter may direct from time to time. The
Customer's utilization of an additional commodity broker shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
the Customer and DWR hereunder.
5. COMPENSATION OF DWR. The Customer will pay brokerage fees to DWR at a
monthly flat-rate. The Customer will pay to DWR a monthly flat-rate fee of 1/12
of 7.0% of the Customer's Net Assets (a 7.0% annual rate) as of the first day of
each month. DWR will receive such brokerage fees irrespective of the number of
trades executed on the Customer's behalf.
DWR, from brokerage fees received by it, will pay or reimburse the Customer
for all charges of CFI for executing and clearing trades for the Customer,
including floor brokerage fees, exchange fees, clearinghouse fees, NFA fees,
"give up" fees, any taxes (other than income taxes), any third party clearing
costs incurred by CFI, costs associated with taking delivery of futures
interests, and fees for execution of forward contract transactions.
From time to time, DWR may increase or decrease brokerage fees to be
charged to the Customer; PROVIDED, HOWEVER, that: (i) notice of any such
increase is mailed to each Limited Partner at least five business days prior to
the last date on which a "Request for Redemption" must be received by the
General Partner with respect to the applicable Redemption Date; and (ii) such
notice shall describe the redemption and voting rights of Limited Partners.
Notwithstanding the foregoing, the Customer's expenses are subject to the
following limits: (a) if the Customer were to pay roundturn brokerage
commissions, the brokerage commissions (excluding transaction fees and costs)
payable by the Customer to DWR shall not exceed 80% of DWR's published
non-member rates for speculative accounts and (b) the aggregate of (i) brokerage
commissions (or fees) payable to DWR, (ii) transaction fees and costs payable by
the Customer, and (iii) net excess interest and compensating balance benefits to
DWR (after crediting the Customer with interest as described below) shall not
exceed 14% annually of the Customer's average month-end Net Assets during each
calendar year.
6. INVESTMENT DISCRETION. The parties recognize that DWR shall have no
authority to direct the futures interests investments to be made for the
Customer's account. However, the parties agree that DWR, and not the Trading
Advisor, shall have the authority and responsibility with regard to the
investment, maintenance, and management of the Customer's assets that are held
in segregated or secured accounts, as provided in Section 7 hereof.
7. INVESTMENT OF CUSTOMER FUNDS. The Customer shall deposit its assets in
accounts with DWR. The Customer's assets deposited with DWR will be segregated
or secured in accordance with the Commodity Exchange Act and CFTC regulations
and the Customer's funds will either be invested along with other customer
segregated and secured funds of DWR or held in non-interest bearing bank
accounts. DWR shall credit the Customer with interest income at month-end at the
rate earned by DWR on its U.S. Treasury Bill investments with customer
segregated funds as if 100% of the Customer's average daily funds (including
cash and securities) held in the Customer's account with DWR during the month
were invested in U.S. Treasury Bills at such rate. All of such funds will be
available for margin for the Customer's trading. In addition, DWR shall credit
the Customer with 100% of the interest income DWR receives from CFI, as agreed
from time to time by DWR and CFI, on the Customer's assets deposited as margin
with CFI. The Customer understands that it will not receive any other interest
income on its assets. The Customer's assets held by DWR may be used solely as
margin for the Customer's trading.
Ownership of the right to receive interest on the Customer's assets
pursuant to the preceding paragraph shall be reflected and maintained and may be
transferred only on the books and records of DWR. Any purported transfer of such
ownership shall not be effective or recognized until such transfer shall have
been recorded on the books and records of DWR.
8. STANDARD OF LIABILITY AND INDEMNITY. Subject to Section 2 hereof, DWR
and its affiliates (as defined below) shall not be liable to the Customer, the
General Partner or Limited Partners, or any of its or their respective
successors or assigns, for any act, omission, conduct, or activity undertaken by
or on behalf of the Customer pursuant to this Agreement which DWR determines, in
good faith, to be in the best interests of the Customer, unless such act,
omission, conduct, or activity by DWR or its affiliates constituted misconduct
or negligence.
The Customer shall indemnify, defend and hold harmless DWR and its
affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct or activity undertaken by DWR on behalf of the
Customer pursuant to this Agreement, including, without limitation, any demands,
claims or lawsuits initiated by a Limited Partner (or assignee thereof),
PROVIDED that (i) DWR has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in the
best interests of the Customer, and (ii) the act, omission, conduct, or activity
that was the basis for such loss, liability, damage, cost, or expense was not
the result of misconduct or negligence. Notwithstanding anything to the contrary
contained in the foregoing, neither DWR nor any of its affiliates shall be
indemnified by the Customer for any losses, liabilities, or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(b) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (c) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, PROVIDED, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC, and the positions
of the respective securities administrators of Massachusetts, Missouri,
Tennessee and/or those other states and jurisdictions in which the plaintiffs
claim they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
Furthermore, in any action or proceeding brought by a Limited Partner in the
right of the Customer to which DWR or any affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in this Section 8. The Customer shall make advances
to DWR or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or
legal action relates to the performance of duties or services by such persons to
the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated
by a Limited Partner; and (iii) 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.
DWR shall indemnify, defend and hold harmless the Customer and its
successors or assigns from and against any losses, liabilities, damages, costs,
or expenses (including in connection with the defense or settlement of claims;
PROVIDED DWR has approved such settlement) incurred as a result of the
activities of DWR or its affiliates, PROVIDED, FURTHER, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence.
The indemnities provided in this Section 8 by the Customer to DWR and its
affiliates shall be inapplicable in the event of any losses, liabilities,
damages, costs, or expenses arising out of, or based upon, any material breach
of any warranty, covenant, or agreement of DWR contained in this Agreement to
the extent caused by such breach. Likewise, the indemnities provided in this
Section 8 by DWR to the Customer and any of its successors and assigns shall be
inapplicable in the event of any losses, liabilities, damages, costs, or
expenses arising out of, or based upon, any material breach of any warranty,
covenant, or agreement of the Customer contained in this Agreement to the extent
caused by such breach.
As used in this Section 8, the term "affiliate" of DWR 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 DWR; (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 DWR; (iii) any natural person, partnership, corporation,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with, DWR; or (iv) any officer or
director of DWR. Notwithstanding the foregoing, "affiliates" for purposes of
this Section 8 shall include only those persons acting on behalf of DWR within
the scope of the authority of DWR, as set forth in this Agreement.
9. TERM. This Agreement shall continue in effect until terminated by either
party giving not less than 60 days' prior written notice of termination to the
other party. Any such termination by either party shall be without penalty.
10. 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.
11. ASSIGNMENT. This Agreement may not be assigned by either party without
the express written consent of the other party.
12. AMENDMENT. This Agreement may not be amended except by the written
consent of the parties and provided such amendment is consistent with the
Prospectus.
13. NOTICES. All notices required or desired to be delivered under this
Agreement shall be in writing and shall be effective when delivered personally
on the day delivered, or when given by registered or certified mail, postage
prepaid, return receipt requested, on the day of receipt, 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 Customer:
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Robert E. Murray
if to DWR:
DEAN WITTER REYNOLDS INC.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Robert E. Murray
Senior Vice President
14. SURVIVAL. The provisions of this Agreement shall survive the
termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
15. HEADINGS. Headings of Sections herein are for the convenience of the
parties only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
16. INCORPORATION BY REFERENCE. The Futures Customer Agreement annexed
hereto is hereby incorporated by reference herein and made a part hereof to the
same extent as if such document were set forth in full herein. If any provision
of this Agreement is or at any time becomes inconsistent with the annexed
document, the terms of this Agreement shall control.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
MORGAN STANLEY DEAN WITTER CHARTER
GRAHAM L.P.
By: Demeter Management Corporation,
General Partner
By: /s/ MARK J. HAWLEY
-----------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ MARK J. HAWLEY
-------------------------
Mark J. Hawley
Executive Vice President
<PAGE>
FUTURES CUSTOMER AGREEMENT
In consideration of the acceptance by Dean Witter Reynolds Inc. ("DWR") of one
or more accounts of the undersigned ("Customer") (if more than one account is
carried by DWR, all are covered by this Agreement and are referred to
collectively as the "Account") and DWR's agreement to act as Customer's broker
for the execution, clearance and/or carrying of transactions for the purchase
and sale of commodity interests, including commodities, commodity futures
contracts and commodity options, Customer agrees as follows:
1. APPLICABLE RULES AND REGULATIONS - The Account and each transaction
therein shall be subject to the terms of this Agreement and to (a) all
applicable laws and the regulations, rules and orders (collectively
"regulations") of all regulatory and self-regulatory organizations
having jurisdiction and (b) the constitution, by-laws, rules,
regulations, orders, resolutions, interpretations and customs and
usages (collectively "rules") of the market and any associated clearing
organization (each an "exchange") on or subject to the rules of which
such transaction is executed and/or cleared. The reference in the
preceding sentence to exchange rules is solely for DWR's protection and
DWR's failure to comply therewith shall not constitute a breach of this
Agreement or relieve Customer of any obligation or responsibility under
this Agreement. DWR shall not be liable to Customer as a result of any
action by DWR, its officers, directors, employees or agents to comply
with any rule or regulation.
2. PAYMENTS TO DWR - Customer agrees to pay to DWR immediately on request
(a) commissions, fees and service charges as are in effect from time to
time together with all applicable regulatory and self-regulatory
organization and exchange fees, charges and taxes; (b) the amount of
any debit balance or any other liability that may result from
transactions executed for the account; and (c) interest on such debit
balance or liability at the prevailing rate charged by DWR at the time
such debit balance or liability arises and service charges on any such
debit balance or liability together with any reasonable costs and
attorney's fees incurred in collecting any such debit balance or
liability. Customer acknowledges that DWR may charge commissions at
other rates to other customers.
3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN - Customer shall at all
times and without prior notice or demand from DWR maintain adequate
margins in the account so as continually to meet the original and
maintenance margin requirements established by DWR for Customer. DWR
may change such requirements from time to time at DWR's discretion.
Such margin requirements may exceed the margin requirements set by any
exchange or other regulatory authority and may vary from DWR's
requirements for other customers. Customer agrees, when so requested,
immediately to wire transfer margin funds and to furnish DWR with names
of bank officers for immediate verification of such transfers. Customer
acknowledges and agrees that DWR may receive and retain as its own any
interest, increment, profit, gain or benefit directly or indirectly,
accruing from any of the funds DWR receives from Customer.
4. DELIVERY; OPTION EXERCISE
(a) Customer acknowledges that the making or accepting of delivery
pursuant to a futures contract may involve a much higher
degree of risk than liquidating a position by offset. DWR has
no control over and makes no warranty with respect to grade,
quality or tolerances of any commodity delivered in
fulfillment of a contract.
(b) Customer agrees to give DWR timely notice and immediately on
request to inform DWR if Customer intends to make or take
delivery under a futures contract or to exercise an option
contract. If so requested, Customer shall provide DWR with
satisfactory assurances that Customer can fulfill Customer's
obligation to make or take delivery under any contract.
Customer shall furnish DWR with property deliverable by it
under any contract in accordance with DWR's instructions.
(c) DWR shall not have any obligation to exercise any long option
contract unless Customer has furnished DWR with timely
exercise instructions and sufficient initial margin with
respect to each underlying futures contract.
5. FOREIGN CURRENCY - If DWR enters into any transaction for Customer
effected in a currency other than U.S. dollars: (a) any profit or loss
caused by changes in the rate of exchange for such currency shall be
for Customer's account and risk and (b) unless another currency is
designated in DWR's confirmation of such transaction, all margin for
such transaction and the profit or loss on the liquidation of such
transaction shall be in U.S. dollars at a rate of exchange determined
by DWR in its discretion on the basis of then prevailing market rates
of exchange for such foreign currency.
6. DWR MAY LIMIT POSITIONS HELD - Customer agrees that DWR, at its
discretion, may limit the number of open positions (net or gross) which
Customer may execute, clear and/or carry with or acquire through it.
Customer agrees (a) not to make any trade which would have the effect
of exceeding such limits, (b) that DWR may require Customer to reduce
open positions carried with DWR and (c) that DWR may refuse to accept
orders to establish new positions. DWR may impose and enforce such
limits, reduction or refusal whether or not they are required by
applicable law, regulations or rules. Customer shall comply with all
position limits established by any regulatory or self-regulatory
organization or any exchange. In addition, Customer agrees to notify
DWR promptly if customer is required to file position reports with any
regulatory or self-regulatory organization or with any exchange.
7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION - Customer acknowledges
that:
(a) Any market recommendations and information DWR may communicate
to Customer, although based upon information obtained from
sources believed by DWR to be reliable, may be incomplete and
not subject to verification;
(b) DWR makes no representation, warranty or guarantee as to, and
shall not be responsible for, the accuracy or completeness of
any information or trading recommendation furnished to
Customer;
(c) recommendations to Customer as to any particular transaction
at any given time may differ among DWR's personnel due to
diversity in analysis of fundamental and technical factors and
may vary from any standard recommendation made by DWR in its
market letters or otherwise; and
(d) DWR has no obligation or responsibility to update any market
recommendations or information it communicates to Customer.
Customer understands that DWR and its officers, directors,
affiliates, stockholders, representatives or associated persons may have
positions in and may intend to buy or sell commodity interests which are the
subject of market recommendations furnished to Customer, and that the market
positions of DWR or any such officer, director, affiliate, stockholder,
representative or associated person may or may not be consistent with the
recommendations furnished to Customer by DWR.
8. LIMITS ON DWR DUTIES; LIABILITY - Customer agrees:
(a) that DWR has no duty to apprise Customer of news or of the
value of any commodity interests or collateral pledged or in
any way to advise Customer with respect to the market;
(b) that the commissions which DWR receives are consideration
solely for the execution, reporting and carrying of Customer's
trades;
(c) that if Customer has authorized any third party or parties to
place orders or effect transactions on behalf of Customer in
any Account, each such party has been selected by Customer
based on its own evaluation and assessment of such party and
that such party is solely the agent of Customer, and if any
such party allocates commodity interests among its customers,
Customer has reviewed each such party's commodity interest
allocation system, has satisfied itself that such allocation
system is fair and will seek recovery solely from such party
to recover any damages sustained by Customer as the result of
any allocation made by such party; and
(d) to waive any and all claims, rights or causes of action which
Customer has or may have against DWR or its officers,
employees and agents (i) arising in whole or in part, directly
or indirectly, out of any act or omission of any person,
whether or not legally deemed an agent of DWR, who refers or
introduces Customer to DWR or places orders for Customer and
(ii) for any punitive damages and to limit any claims arising
out of this Agreement or the Account to Customer's direct
out-of-pocket damages.
9. EXTRAORDINARY EVENTS - Customer shall have no claim against DWR for any
loss, damage, liability, cost, charge, expense, penalty, fine or tax
caused directly or indirectly by (a) governmental, court, exchange,
regulatory or self-regulatory organization restrictions, regulations,
rules, decisions or orders, (b) suspension or termination of trading,
(c) war or civil or labor disturbance, (d) delay or inaccuracy in the
transmission or reporting of orders due to a breakdown or failure of
computer services, transmission or communication facilities, (e) the
failure or delay by any exchange to enforce its rules or to pay to DWR
any margin due in respect of Customer's Account, (f) the failure or
delay by any bank, trust company, clearing organization or other person
which, pursuant to applicable exchange rules, is holding Customer
funds, securities or other property to pay or deliver the same to DWR
or (g) any other cause or causes beyond DWR's control.
10. INDEMNIFICATION OF DWR - Customer agrees to indemnify, defend and hold
harmless DWR and its officers, employees and agents from and against
any loss, cost, claim, damage (including any consequential cost, loss
or damage), liability or expense (including reasonable attorneys' fees)
and any fine, sanction or penalty made or imposed by any regulatory or
self-regulatory authority or any exchange as the result, directly or
indirectly, of:
(a) Customer's failure or refusal to comply with any provision of
this Agreement or perform any obligation on its part to be
performed pursuant to this Agreement; and
(b) Customer's failure to timely deliver any security, commodity
or other property previously sold by DWR on Customer's behalf.
11 NOTICES; TRANSMITTALS - DWR shall transmit all communications to
Customer at Customer's address, telefax or telephone number set forth
in the accompanying Futures Account Application or to such other
address as Customer may hereafter direct in writing. Customer shall
transmit all communications to DWR (except routine inquiries concerning
the Account) to 130 Liberty Street, New York, NY 10006, Attention:
Futures Compliance Officer. All payments and deliveries to DWR shall be
made as instructed by DWR from time to time and shall be deemed
received only when actually received by DWR.
12. CONFIRMATION CONCLUSIVE - Confirmation of trades and any other notices
sent to Customer shall be conclusive and binding on Customer unless
Customer or Customer's agent notifies DWR to the contrary (a) in the
case of an oral report, orally at the time received by Customer or its
agent or (b) in the case of a written report or notice, in writing
prior to opening of trading on the business day next following receipt
of the report. In addition, if Customer has not received a written
confirmation that a commodity interest transaction has been executed
within three business days after Customer has placed an order with DWR
to effect such transaction, and has been informed or believes that such
order has been or should have been executed, then Customer immediately
shall notify DWR thereof. Absent such notice, Customer conclusively
shall be deemed estopped to object and to have waived any such
objection to the failure to execute or cause to be executed such
transaction. Anything in this Section 12 withstanding, neither Customer
nor DWR shall be bound by any transaction or price reported in error.
13. SECURITY INTEREST - All money and property ("collateral") now or at any
future time held in Customer's Account, or otherwise held by DWR for
Customer, is subject to a security interest in DWR's favor to secure
any indebtedness at any time owing to it by Customer. DWR, in its
discretion, may liquidate any collateral to satisfy any margin or
Account deficiencies or to transfer the collateral to the general
ledger account of DWR.
14. TRANSFER OF FUNDS - At any time and from time to time and without prior
notice to Customer, DWR may transfer from one account to another
account in which Customer has any interest, such excess funds,
equities, securities or other property as in DWR's judgment may be
required for margin, or to reduce any debit balance or to reduce or
satisfy any deficits in such other accounts except that no such
transfer may be made from a segregated account subject to the Commodity
Exchange Act to another account maintained by Customer unless either
Customer has authorized such transfer in writing or DWR is effecting
such transfer to enforce DWR's security interest pursuant to Section
13. DWR promptly shall confirm all transfers of funds made pursuant
hereto to Customer in writing.
15. DWR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS - In addition to all other
rights of DWR set forth in this Agreement:
(a) when directed or required by a regulatory or self-regulatory
organization or exchange having jurisdiction over DWR or the
Account;
(b) whenever, in its discretion, DWR considers it necessary for
its protection because of margin requirements or otherwise;
(c) if Customer or any affiliate of Customer repudiates, violates,
breaches or fails to perform on a timely basis any term,
covenant or condition on its part to be performed under this
Agreement or another agreement with DWR;
(d) if a case in bankruptcy is commenced or if a proceeding under
any insolvency or other law for the protection of creditors or
for the appointment of a receiver, liquidator, trustee,
conservator, custodian or similar officer is filed by or
against Customer or any affiliate of Customer, or if Customer
or any affiliate of Customer makes or proposes to make any
arrangement or composition for the benefit of its creditors,
or if Customer (or any such affiliate) or any or all of its
property is subject to any agreement, order, judgment or
decree providing for Customer's dissolution, winding-up,
liquidation, merger, consolidation, reorganization or for the
appointment of a receiver, liquidator, trustee, conservator,
custodian or similar officer of Customer, such affiliate or
such property;
(e) DWR is informed of Customer's death or mental incapacity; or
(f) if an attachment or similar order is levied against the
Account or any other account maintained by Customer or any
affiliate of Customer with DWR;
DWR shall have the right to (i) satisfy any obligations due DWR out of
any Customer's property in DWR's custody or control, (ii) liquidate any
or all of Customer's commodity interest positions, (iii) cancel any or
all of Customer's outstanding orders, (iv) treat any or all of
Customer's obligations due DWR as immediately due and payable, (v) sell
any or all of Customer's property in DWR's custody or control in such
manner as DWR determines to be commercially reasonable, and/or (vi)
terminate any or all of DWR's obligations for future performance to
Customer, all without any notice to or demand on Customer. Any sale
hereunder may be made in any commercially reasonable manner. Customer
agrees that a prior demand, call or notice shall not be considered a
waiver of DWR's right to act without demand or notice as herein
provided, that Customer shall at all times be liable for the payment of
any debit balance owing in each account upon demand whether occurring
upon a liquidation as provided under this Section 15 or otherwise under
this Agreement, and that in all cases Customer shall be liable for any
deficiency remaining in each Account in the event of liquidation
thereof in whole or in part together with interest thereon and all
costs relating to liquidation and collection (including reasonable
attorneys' fees).
16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS - Customer
represents and warrants to and agrees with DWR that:
(a) Customer has full power and authority to enter into this
Agreement and to engage in the transactions and perform its
obligations hereunder and contemplated hereby and (i) if a
corporation or a limited liability company, is duly organized
under the laws of the jurisdiction set forth in the
accompanying Futures Account Application, or (ii) if a
partnership, is duly organized pursuant to a written
partnership agreement and the general partner executing this
Agreement is duly authorized to do so under the partnership
agreement;
(b) Neither Customer nor any partner, director, officer, member,
manager or employee of Customer nor any affiliate of Customer
is a partner, director, officer, member, manager or employee
of a futures commission merchant introducing broker, exchange
or self-regulatory organization or an employee or commissioner
of the Commodity Futures Trading Commission (the "CFTC"),
except as previously disclosed in writing to DWR;
(c) The accompanying Futures Account Application and Personal
Financial Statements, if applicable, (including any financial
statements furnished in connection therewith) are true,
correct and complete. Except as disclosed on the accompanying
Futures Account Application or otherwise provided in writing,
(i) Customer is not a commodity pool or is exempt from
registration under the rules of the Commission, and (ii)
Customer is acting solely as principal and no one other than
Customer has any interest in any Account of Customer. Customer
hereby authorizes DWR to contact such banks, financial
institutions and credit agencies as DWR shall deem appropriate
for verification of the information contained herein.
(d) Customer has determined that trading in commodity interests is
appropriate for Customer, is prudent in all respects and does
not and will not violate Customer's charter or by-laws (or
other comparable governing document) or any law, rule,
regulation, judgment, decree, order or agreement to which
Customer or its property is subject or bound;
(e) As required by CFTC regulations, Customer shall create, retain
and produce upon request of the applicable contract market,
the CFTC or the United States Department of Justice documents
(such as contracts, confirmations, telex printouts, invoices
and documents of title) with respect to cash transactions
underlying exchanges of futures for cash commodities or
exchange of futures in connection with cash commodity
transactions;
(f) Customer consents to the electronic recording, at DWR's
discretion, of any or all telephone conversations with DWR
(without automatic tone warning device), the use of same as
evidence by either party in any action or proceeding arising
out of the Agreement and in DWR's erasure, at its discretion,
of any recording as part of its regular procedure for handling
of recordings;
(g) Absent a separate written agreement between Customer and DWR
with respect to give-ups, DWR, in its discretion, may, but
shall have no obligation to, accept from other brokers
commodity interest transactions executed by such brokers on an
exchange for Customer and proposed to be "given-up" to DWR for
clearance and/or carrying in the Account;
(h) DWR, for and on behalf of Customer, is authorized and
empowered to place orders for commodity interest transactions
through one or more electronic or automated trading systems
maintained or operated by or under the auspices of an
exchange, that DWR shall not be liable or obligated to
Customer for any loss, damage, liability, cost or expense
(including but not limited to loss of profits, loss of use,
incidental or consequential damages) incurred or sustained by
Customer and arising in whole or in part, directly or
indirectly, from any fault, delay, omission, inaccuracy or
termination of a system or DWR's inability to enter, cancel or
modify an order on behalf of Customer on or through a system.
The provisions of this Section 16(h) shall apply regardless of
whether any customer claim arises in contract, negligence,
tort, strict liability, breach of fiduciary obligations or
otherwise; and
(i) If Customer is subject to the Financial Institution Reform,
Recovery and Enforcement Act of 1989, the certified
resolutions set forth following this Agreement have been
caused to be reflected in the minutes of Customer's Board of
Directors (or other comparable governing body) and this
Agreement is and shall be, continuously from the date hereof,
an official record of Customer.
Customer agrees to promptly notify DWR in writing if any of the
warranties and representations contained in this Section 16 becomes
inaccurate or in any way ceases to be true, complete and correct.
17. SUCCESSORS AND ASSIGNS - This Agreement shall inure to the benefit of
DWR, its successors and assigns, and shall be binding upon Customer and
Customer's executors, trustees, administrators, successors and assigns,
provided, however, that this Agreement is not assignable by Customer
without the prior written consent of DWR.
18. MODIFICATION OF AGREEMENT BY DWR; NON-WAIVER PROVISION - This Agreement
may only be altered, modified or amended by mutual written consent of
the parties, except that if DWR notifies Customer of a change in this
Agreement and Customer thereafter effects a commodity interest
transaction in an account, Customer agrees that such action by Customer
will constitute consent by Customer to such change. No employee of DWR
other than DWR's General Counsel or his or her designee, has any
authority to alter, modify, amend or waive in any respect any of the
terms of this Agreement. The rights and remedies conferred upon DWR
shall be cumulative, and its forbearance to take any remedial action
available to it under this Agreement shall not waive its right at any
time or from time to time thereafter to take such action.
19. SEVERABILITY - If any term or provision hereof or the application
thereof to any persons or circumstances shall to any extent be contrary
to any exchange, government or self-regulatory regulation or contrary
to any federal, state or local law or otherwise be invalid or
unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as
to which it is contrary, invalid or unenforceable, shall not be
affected thereby.
20. CAPTIONS - All captions used herein are for convenience only, are not a
part of this Agreement, and are not to be used in construing or
interpreting any aspect of this Agreement.
21. TERMINATION - This Agreement shall continue in force until written
notice of termination is given by Customer or DWR. Termination shall
not relieve either party of any liability or obligation incurred prior
to such notice. Upon giving or receiving notice of termination,
Customer will promptly take all action necessary to transfer all open
positions in each account to another futures commission merchant.
22. ENTIRE AGREEMENT - This Agreement constitutes the entire agreement
between Customer and DWR with respect to the subject matter hereof and
supersedes any prior agreements between the parties with respect to
such subject matter.
23. GOVERNING LAW; CONSENT TO JURISDICTION -
(a) In case of a dispute between Customer and DWR arising out of
or relating to the making or performance of this Agreement or
any transaction pursuant to this Agreement (i) this Agreement
and its enforcement shall be governed by the laws of the State
of New York without regard to principles of conflicts of laws,
and (ii) Customer will bring any legal proceeding against DWR
in, and Customer hereby consents in any legal proceeding by
DWR to the jurisdiction of, any state or federal court located
within the State and City of New York in connection with all
legal proceedings arising directly, indirectly or otherwise in
connection with, out of, related to or from Customer's
Account, transactions contemplated by this Agreement or the
breach thereof. Customer hereby waives all objections
Customer, at any time, may have as to the propriety of the
court in which any such legal proceedings may be commenced.
Customer also agrees that any service of process mailed to
Customer at any address specified to DWR shall be deemed a
proper service of process on the undersigned.
(b) Notwithstanding the provisions of Section 23 (a)(ii), Customer
may elect at this time to have all disputes described in this
Section resolved by arbitration. To make such election,
Customer must sign the Arbitration Agreement set forth in
Section 24. Notwithstanding such election, any question
relating to whether Customer or DWR has commenced an
arbitration proceeding in a timely manner, whether a dispute
is within the scope of the Arbitration Agreement or whether a
party (other than Customer or DWR) has consented to
arbitration and all proceedings to compel arbitration shall be
determined by a court as specified in Section 23 (a)(ii).
24. ARBITRATION AGREEMENT (OPTIONAL) - Every dispute between Customer and
DWR arising out of or relating to the making or performance of this
Agreement or any transaction pursuant to this Agreement, shall be
settled by arbitration in accordance with the rules, then in effect, of
the National Futures Association, the contract market upon which the
transaction giving rise to the claim was executed, or the National
Association of Securities Dealers as Customer may elect. If Customer
does not make such election by registered mail addressed to DWR at 130
Liberty Street, 29th Floor, New York, NY 10006; Attention: Deputy
General Counsel, within 45 days after demand by DWR that the Customer
make such election, then DWR may make such election. DWR agrees to pay
any incremental fees which may be assessed by a qualified forum for
making available a "mixed panel" of arbitrators, unless the arbitrators
determine that Customer has acted in bad faith in initiating or
conducting the proceedings. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
IN ADDITION TO FOREIGN FORUMS, THREE FORUMS EXIST FOR THE RESOLUTION OF
COMMODITY DISPUTES: CIVIL COURT LITIGATION, REPARATIONS AT THE
COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND ARBITRATION CONDUCTED
BY A SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY
ARBITRATION MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS,
INCLUDING THE ABILITY TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF
DISPUTES WITHOUT INCURRING SUBSTANTIAL COSTS. THE CFTC REQUIRES,
HOWEVER, THAT EACH CUSTOMER INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF
ARBITRATION AND THAT YOUR CONSENT TO THIS ARBITRATION AGREEMENT BE
VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN
A COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY
CLAIMS OR COUNTERCLAIMS WHICH YOU OR DWR MAY SUBMIT TO ARBITRATION
UNDER THIS AGREEMENT. YOU ARE NOT, HOWEVER, WAIVING YOUR RIGHT TO ELECT
INSTEAD TO PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER
SECTION 14 OF THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE
WHICH MAY BE ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A
DISPUTE ARISES, YOU WILL BE NOTIFIED IF DWR INTENDS TO SUBMIT THE
DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION OF THE COMMODITY
EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A SECTION 14
"REPARATIONS" PROCEEDINGS BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM
THE DATE OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION.
YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT
WITH DWR. See 17 CFR 180.1-180.5. ACCEPTANCE OF THIS ARBITRATION
AGREEMENT REQUIRES A SEPARATE SIGNATURE ON PAGE 8.
25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL) - Without its prior
notice, Customer agrees that when DWR executes sell or buy orders on
Customer's behalf, DWR, its directors, officers, employees, agents,
affiliates, and any floor broker may take the other side of Customer's
transaction through any account of such person subject to its being
executed at prevailing prices in accordance with and subject to the
limitations and conditions, if any, contained in applicable rules and
regulations.
26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL) - Without limiting other
provisions herein, DWR is authorized to transfer from any segregated
account subject to the Commodity Exchange Act carried by DWR for the
Customer to any other account carried by DWR for the Customer such
amount of excess funds as in DWR's judgment may be necessary at any
time to avoid a margin call or to reduce a debit balance in said
account. It is understood that DWR will confirm in writing each such
transfer of funds made pursuant to this authorization within a
reasonable time after such transfer.
27. SUBORDINATION AGREEMENT (APPLIES ONLY TO ACCOUNTS WITH FUNDS HELD IN
FOREIGN COUNTRIES) - Funds of customers trading on United States
contract markets may be held in accounts denominated in a foreign
currency with depositories located outside the United States or its
territories if the customer is domiciled in a foreign country or if the
funds are held in connection with contracts priced and settled in a
foreign currency. Such accounts are subject to the risk that events
could occur which hinder or prevent the availability of these funds for
distribution to customers. Such accounts also may be subject to foreign
currency exchange rate risks.
If authorized below, Customer authorizes the deposit of funds into such
foreign depositories. For customers domiciled in the United States,
this authorization permits the holding of funds in regulated accounts
offshore only if such funds are used to margin, guarantee, or secure
positions in such contracts or accrue as a result of such positions. In
order to avoid the possible dilution of other customer funds, a
customer who has funds held outside the United States agrees by
accepting this subordination agreement that his claims based on such
funds will be subordinated as described below in the unlikely event
both of the following conditions are met: (1) DWR is placed in
receivership or bankruptcy, and (2) there are insufficient funds
available for distribution denominated in the foreign currency as to
which the customer has a claim to satisfy all claims against those
funds.
By initialing the Subordination Agreement below, Customer agrees that
if both of the conditions listed above occur, its claim against DWR's
assets attributable to funds held overseas in a particular foreign
currency may be satisfied out of segregated customer funds held in
accounts denominated in dollars or other foreign currencies only after
each customer whose funds are held in dollars or in such other foreign
currencies receives its pro-rata portion of such funds. It is further
agreed that in no event may a customer whose funds are held overseas
receive more than its pro-rata share of the aggregate pool consisting
of funds held in dollars, funds held in the particular foreign
currency, and non-segregated assets of DWR.
<PAGE>
OPTIONAL ELECTIONS
The following provisions, which are set forth in this agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
SIGNATURE REQUIRED FOR EACH
ELECTION
ARBITRATION AGREEMENT:
(Agreement Paragraph 24)
----------------------------------
CONSENT TO TAKE THE OTHER SIDE OF ORDERS:
(Agreement Paragraph 25) X /s/ MARK J. HAWLEY
----------------------------------
AUTHORIZATION TO TRANSFER FUNDS:
(Agreement Paragraph 26)
----------------------------------
ACKNOWLEDGEMENT TO SUBORDINATION AGREEMENT
(Agreement Paragraph 27) X /s/ MARK J. HAWLEY
----------------------------------
(Required for accounts holding
non-U.S. currency)
- --------------------------------------------------------------------------------
HEDGE ELECTION
Customer confirms that all transactions in the Account will [ ]
represent bona fide hedging transactions, as defined by the
Commodity Futures Trading Commission, unless DWR is notified
otherwise not later than the time an order is placed for the
Account [check box if applicable]:
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
DWR's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A. Liquidate all open contracts without first seeking [ ]
instructions either from or on behalf of Customer.
B. Attempt to obtain instructions with respect to the [ ]
disposition of all open contracts. (IF NEITHER BOX IS
CHECKED, CUSTOMER SHALL BE DEEMED TO ELECT A)
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS
The undersigned each hereby acknowledges its separate receipt from DWR, and its
understanding of each of the following documents prior to the opening of the
account:
o Risk Disclosure Statement for o Project A(TM) Customer
Futures and Options (in the form Information Statement
prescribed by CFTC
Regulation 1.55(c))
o LME Risk Warning Notice o Questions & Answers on Flexible
Options Trading at the CBOT
o Dean Witter Order Presumption for o CME Average Pricing System
After Hours Electronic Markets Disclosure Statement
o NYMEX ACCESS(SM) Risk Disclosure o Special Notice to Foreign
Statement Brokers and Foreign Traders
o Globex(R) Customer Information and
Risk Disclosure Statement
- --------------------------------------------------------------------------------
REQUIRED SIGNATURES
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify DWR in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
- --------------------------------------------------------------------------------
CUSTOMER NAME(S)
By: DEMETER MANAGEMENT CORPORATION
By: /s/ MARK J. HAWLEY November 6, 1998
- ----------------------------------------------- --------------------------
AUTHORIZED SIGNATURE(S) DATE
Mark J. Hawley, President
- --------------------------------------------------------------------------------
(If applicable, print name and title of signatory)
Exhibit 10.03
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 6th day of
November, 1998, by and among MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P., a
Delaware limited partnership (the "Customer"), CARR FUTURES INC., a Delaware
corporation ("CFI"), and DEAN WITTER REYNOLDS INC., a Delaware corporation
("DWR");
W I T N E S S E T H :
WHEREAS, the Customer was organized pursuant to a Certificate of Limited
Partnership filed in the office of the Secretary of State of the State of
Delaware on July 15, 1998, and a Limited Partnership Agreement dated as of July
15, 1998 between Demeter Management Corporation, a Delaware corporation
("Demeter"), acting as general partner (in such capacity, the "General
Partner"), and the limited partners of the Customer, to 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,
or may become, the subject of futures contract trading), domestic and foreign
commodity futures contracts, commodity forward contracts, foreign exchange
commitments, options on physical commodities and on futures contracts, spot
(cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests"), and securities
(such as United States Treasury bills) approved by the Commodity Futures Trading
Commission (the "CFTC") for investment of customer funds and other securities on
a limited basis, and to engage in all activities incident thereto;
WHEREAS, the Customer (which is a commodity pool) and the General Partner
(which is a registered commodity pool operator) have entered into a management
agreement (the "Management Agreement") with a certain trading advisor (the
"Trading Advisor"), which provides that the Trading Advisor has authority and
responsibility, except in certain limited situations, to direct the investment
and reinvestment of the assets of the Customer in futures interests under the
terms set forth in the Management Agreement;
WHEREAS, the Customer and DWR have entered into that certain Customer
Agreement, dated as of November 6, 1998 (the "DWR Customer Agreement"), whereby
DWR agreed to perform certain non-clearing futures interests brokerage and other
services for the Customer; and
WHEREAS, the Customer, DWR and CFI wish to enter into this Agreement to set
forth the terms and conditions upon which CFI will perform futures interests
execution and clearing services for the Customer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not defined herein shall have the
meaning given to them in the Customer's most recent prospectus as filed with the
Securities and Exchange Commission (the "Prospectus") relating to the offering
of units of limited partnership interest of the Customer (the "Units") and in
any amendment or supplement to the Prospectus.
2. DUTIES OF CFI. CFI agrees to execute and clear all futures interests
brokerage transactions on behalf of the Customer in accordance with instructions
provided by DWR or the Trading Advisor, and the Customer agrees to retain CFI as
its clearing broker for the term of this Agreement. CFI agrees to maintain such
number of subaccounts for the Customer as DWR reasonably shall request. The
execution and clearing services of CFI provided hereunder shall be in accordance
with applicable exchange rules.
CFI agrees to furnish to the Customer as soon as practicable all of the
information from time to time in its possession which Demeter, as the general
partner of the Customer, is required to furnish to the Limited Partners pursuant
to the Limited Partnership Agreement as from time to time in effect and as
required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus. CFI
shall disclose such information (including, without limitation, financial
statements) regarding itself and its affiliates as may be required by the
Customer for SEC, CFTC and state blue sky disclosure purposes.
CFI agrees to notify the Trading Advisor and DWR immediately upon discovery
of any error committed by CFI or any of its agents with respect to a trade
executed or cleared by CFI on behalf of the Customer and to notify DWR promptly
of any order or trade for the Customer's account which CFI believes was not
executed or cleared in accordance with proper instructions given by DWR, Demeter
or the Trading Advisor or other agent for the Customer's account.
Notwithstanding any provision of this Agreement to the contrary, CFI shall
assume financial responsibility for any errors committed or caused by it in
executing or clearing orders for the purchase or sale of futures interests for
the Customer's account and shall credit the Customer's account with any profit
resulting from an error of CFI. Errors made by floor brokers appointed or
selected by CFI shall constitute errors made by CFI. However, CFI shall not be
responsible for errors committed by the Trading Advisor.
CFI acknowledges that other partnerships of which the General Partner is
the general partner are not affiliates of the Customer.
3. MARGINS. The futures and futures option trades for the Customer's
account shall be margined at the applicable exchange or clearinghouse minimum
rates for speculative accounts; all subaccounts shall be combined for
determining such margin requirements. All margin calls for the Customer's
account shall be made to DWR by CFI, and each such call for margin shall be met
by Customer within three hours after DWR has received such call. CFI shall
accept as margin for the Customer's account any instrument deemed acceptable
under exchange or clearinghouse rules pertaining to such account. Upon oral or
written request by DWR, CFI shall, within three hours after receipt of any such
request, wire transfer (by federal bank wire system) to DWR for Customer's
account any funds in the Customer's account with CFI in excess of the margin
requirements for such account.
4. OBLIGATIONS AND EXPENSES. Except as otherwise set forth herein and in
the Prospectus, the Customer, and not CFI, shall be responsible for all taxes,
management and incentive fees to the Trading Advisor, the brokerage fees to DWR
pursuant to the DWR Customer Agreement, and all extraordinary expenses incurred
by it. DWR shall pay all of the organizational, initial and continuing offering,
and ordinary administrative expenses of the Customer (including, but not limited
to, legal, accounting, and auditing fees, printing costs, filing fees, escrow
fees, marketing costs and expenses, and other related expenses), and all charges
of CFI (as described in paragraph 6 below), and shall not be reimbursed
therefor.
5. AGREEMENT NONEXCLUSIVE. CFI shall be free to render services of the
nature to be rendered to the Customer hereunder to other persons or entities in
addition to the Customer, and the parties acknowledge that CFI may render such
services to additional entities similar in nature to the Customer, including
other partnerships organized with Demeter as their general partner. It is
expressly understood and agreed that this Agreement is nonexclusive and that the
Customer has no obligation to execute any or all of its trades for futures
interests through CFI. The parties acknowledge that the Customer may execute and
clear trades for futures interests through such other broker or brokers as
Demeter may direct from time to time. The Customer's utilization of an
additional commodity broker shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Customer and CFI
hereunder.
6. COMPENSATION OF CFI. In compensation of CFI's services pursuant to this
Agreement, DWR shall pay to CFI such fees and costs as DWR and CFI shall agree
from time to time, and the Customer shall pay CFI all floor brokerage fees,
exchange fees, clearinghouse fees, NFA fees, "give-up" fees, any taxes (other
than income taxes), any third party clearing costs incurred by CFI, costs
associated with taking delivery of futures interests, fees for execution of
forward contract transactions (in the aggregate, "Transaction Costs"). DWR shall
reimburse the Customer at each month-end for all Transaction Costs incurred by
the Customer. The Customer shall have no obligation to reimburse DWR for any
payments made by DWR to CFI.
7. INVESTMENT DISCRETION. The parties recognize that CFI shall have no
authority to direct the futures interests investments to be made for the
Customer's account, but shall execute only such orders for the Customer's
account as DWR, Demeter or the Trading Advisor may direct from time to time.
However, the parties agree that CFI, and not the Trading Advisor, shall have the
authority and responsibility with regard to the investment, maintenance, and
management of the Customer's assets that are held in segregated or secured
accounts, as provided in Section 8 hereof.
8. INTEREST ON CUSTOMER FUNDS. The Customer's assets deposited with CFI
will be segregated or secured in accordance with the Commodity Exchange Act and
CFTC regulations. All of such funds will be available for margin for the
Customer's trading and may be used solely as margin for the Customer's trading.
CFI shall pay interest to DWR monthly based upon a daily calculation of the
U.S. Dollar balance equity (i.e., cash and open trade equity) in the Customer's
account as principal and the then prevailing 13-week Treasury bill weekly
auction discount rate, less 10 basis points, divided by 360 as the interest
rate. CFI shall pay to or earn interest from DWR, as the case may be, monthly
based upon a daily calculation of the positive or negative non-U.S. Dollar
balance (in each currency) in the account and any U.S. Dollar balance on deposit
at a foreign clearinghouse at the actual interest rate at which earned or
borrowed by CFI less actual haircuts applied by a third-party other than CFI. If
CFI lends foreign currency to the account, CFI shall be entitled to charge the
account the prevailing borrowing rate for such currency, plus 10 basis points,
in accordance with the schedule of such rates provided by CFI.
The Customer understands that it will not receive any interest income on
its assets held by CFI other than that required to be paid by DWR to Customer
pursuant to Section 7 of the DWR Customer Agreement.
9. RECORDING CONVERSATIONS. CFI consents to the electronic recording, at
the discretion of the Customer, Customer's agents or DWR, of any or all
telephone conversations with CFI (without automatic tone warning device), the
use of same as evidence by either party in any action or proceeding arising out
of this Agreement, and in the Customer's, Customer's agents' or DWR's erasure,
at its discretion, of any recording as a part of its regular procedure for
handling of recordings.
10. DELIVERY; OPTION EXERCise.
(a) The Customer acknowledges that the making or accepting of delivery
pursuant to a futures contract may involve a much higher degree of risk than
liquidating a position by offset. CFI has no control over and makes no warranty
with respect to grade, quality or tolerances of any commodity delivered in
fulfillment of a contract.
(b) The Customer agrees to give CFI timely notice and immediately on
request to inform CFI if the Customer intends to make or take delivery under a
futures contract or to exercise an option contract. If so requested, the
Customer shall provide CFI with satisfactory assurances that the Customer can
fulfill the Customer's obligation to make or take delivery under any contract.
The Customer shall furnish CFI with property deliverable by it under any
contract in accordance with CFI's instructions.
(c) CFI shall not have any obligation to exercise any long option contract
unless the Customer has furnished CFI with timely exercise instructions and
sufficient initial margin with respect to each underlying futures contract.
11. STANDARD OF LIABILITY AND INDEMNITY. Subject to Section 2 hereof, CFI
and its affiliates (as defined below) shall not be liable to the Customer, the
General Partner or Limited Partners, or any of its or their respective
successors or assigns, for any act, omission, conduct, or activity undertaken by
or on behalf of the Customer pursuant to this Agreement which CFI determines, in
good faith, to be in the best interests of the Customer, unless such act,
omission, conduct, or activity by CFI or its affiliates constituted misconduct
or negligence.
The Customer shall indemnify, defend and hold harmless CFI and its
affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct, or activity undertaken by CFI on behalf of the
Customer pursuant to this Agreement, including, without limitation, any demands,
claims or lawsuits initiated by a Limited Partner (or assignee thereof),
PROVIDED that (i) CFI has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in the
best interests of the Customer, and (ii) the act, omission, conduct, or activity
that was the basis for such loss, liability, damage, cost, or expense was not
the result of misconduct or negligence. Notwithstanding anything to the contrary
contained in the foregoing, neither CFI nor any of its affiliates shall be
indemnified by the Customer for any losses, liabilities, or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(b) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (c) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, PROVIDED, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC, and the positions
of the respective securities administrators of Massachusetts, Missouri,
Tennessee and/or those other states and jurisdictions in which the plaintiffs
claim they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
Furthermore, in any action or proceeding brought by a Limited Partner in the
right of the Customer to which CFI or any affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in this Section 11. The Customer shall make advances
to CFI or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or
legal action relates to the performance of duties or services by such persons to
the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated
by a Limited Partner; and (iii) 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.
CFI shall indemnify, defend and hold harmless the Customer and its
successors or assigns from and against any losses, liabilities, damages, costs
or expenses (including in connection with the defense or settlement of claims;
PROVIDED CFI has approved such settlement) incurred as a result of the
activities of CFI or its affiliates, PROVIDED, FURTHER, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence.
The indemnities provided in this Section 11 by the Customer to CFI and its
affiliates shall be inapplicable in the event of any losses, liabilities,
damages, costs, or expenses arising out of, or based upon, any material breach
of any warranty, covenant, or agreement of CFI contained in this Agreement to
the extent caused by such breach. Likewise, the indemnities provided in this
Section 11 by CFI to the Customer and any of its successors and assigns shall be
inapplicable in the event of any losses, liabilities, damages, costs, or
expenses arising out of, or based upon, any material breach of any warranty,
covenant, or agreement of the Customer contained in this Agreement to the extent
caused by such breach.
As used in this Section 11, the term "affiliate" of CFI 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 CFI; (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 CFI; (iii) any natural person, partnership, corporation,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with, CFI; or (iv) any officer or
director of CFI. Notwithstanding the foregoing, "affiliates" for purposes of
this Section 11 shall include only those persons acting on behalf of CFI within
the scope of the authority of CFI, as set forth in this Agreement.
12. TERM. This Agreement shall continue in effect until terminated by any
party giving not less than 60 days' prior written notice of termination to the
other parties. The Customer shall have the right to terminate this Agreement
(i) at any time, effective upon thirty (30) days' prior
written notice to CFI, in the event that:
(A) CFI announces plans to discontinue the provision
of execution and clearing services with respect to
futures contracts, options on futures contracts or
acting as a dealer counterparty for foreign
exchange cash and forward contracts; or
(B) CFI merges or consolidates with or into or
acquires or is acquired by, another entity or
entities acting in concert (excluding any
intergroup reorganizations with any affiliates
of CFI or any capital contributions by, or sale
of CFI stock to any affiliates of CFI, provided
that the guarantee agreement between DWR and
Credit Agricole Indosuez S.A. dated as of July
31, 1997 remains in place or a comparable
guaranty is substituted by a bank with a net
worth and credit rating equal to Credit
Agricole Indosuez S.A.) in a transaction
involving the purchase or sale of stock or
substantially all of the assets of the acquired
entity or which involves a capital contribution
to or by such entity or entities (in an amount
representing fifty percent (50%) or more of the
book value of CFI's or such entity's (or their
respective affiliate's) net worth), or the
purchase or sale of stock representing fifty
percent (50%) or more of CFI's or such entity's
(or their respective affiliate's) outstanding
equity securities; and
(ii) at any time effective immediately upon written notice to
CFI in the event:
(A) CFI ceases to be registered or conduct business as
a futures commission merchant or discontinues its
membership or clearing membership on any major
futures interest exchange in the United States (or
any affiliated clearing corporation) or in the
NFA; or
(B) a receiver, liquidator or trustee of CFI is
appointed by court order and such order remains
in effect for more than thirty (30) days; or
CFI is adjudicated bankrupt or insolvent; or
any of CFI's property is sequestered by court
order and such order remains in effect for more
than thirty (30) days; or a petition is filed
against CFI under any bankruptcy,
reorganization, arrangement, insolvency,
readjustment or debt, dissolution or
liquidation law of any jurisdiction, whether
now or hereafter in effect, and is not
dismissed within thirty (30) days after such
filing; or CFI files a petition in voluntary
bankruptcy or seeking relief under any
provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any
jurisdiction, whether now or hereafter in
effect, or consents to the filing of any
petition against it under any such law; or
(C) CFI, DWR or the Customer is ordered or otherwise
directed to terminate this Agreement by any
governmental, regulatory, or self-regulatory
authority.
Any such termination by any party shall be without penalty.
13. COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the matters referred to herein, and no other
agreement, verbal or otherwise, shall be binding as among the parties unless in
writing and signed by the party against whom enforcement is sought.
14. ASSIGNMENT. This Agreement may not be assigned by any party without the
express written consent of the other parties.
15. AMENDMENT. This Agreement may not be amended except by the written
consent of the parties and provided such amendment is consistent with the
Prospectus.
16. NOTICES. All notices required or desired to be delivered under this
Agreement shall be in writing and shall be effective when delivered personally
on the day delivered, or when given by registered or certified mail, postage
prepaid, return receipt requested, on the day of receipt, 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 Customer:
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Robert E. Murray
if to DWR:
DEAN WITTER REYNOLDS INC.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Robert E. Murray
Senior Vice President
if to CFI:
CARR FUTURES INC
10 South Wacker Drive, Suite 1125
Chicago, Illinois 60606
Attn: Legal/Compliance Department
17. SURVIVAL. The provisions of this Agreement shall survive the
termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
18. HEADINGS. Headings of Sections herein are for the convenience of the
parties only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
19. INCORPORATION BY REFERENCE. The Futures Account Agreement annexed
hereto is hereby incorporated by reference herein and made a part hereof to the
same extent as if such document were set forth in full herein. If any provision
of this Agreement is or at any time becomes inconsistent with the annexed
document, the terms of this Agreement shall control.
20. GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York (without regard
to its choice of law principles). If any action or proceeding shall be brought
by a party to this Agreement or to enforce any right or remedy under this
Agreement, each party hereto hereby consents and will submit to the jurisdiction
of the courts of the State of New York or any federal court sitting in the
County, City and State of New York. Any action or proceeding brought by any
party to this Agreement to enforce any right, assert any claim, or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
By: Demeter Management Corporation,
General Partner
By: /s/ MARK J. HAWLEY
-----------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ MARK J. HAWLEY
-------------------------
Mark J. Hawley
Executive Vice President
CARR FUTURES INC.
By: /s/ LAWRENCE P. ANDERSON
---------------------------
Name: Lawrence P. Anderson
Title: Executive Vice President
<PAGE>
CARR FUTURES INC.
FUTURES ACCOUNT AGREEMENT
In consideration of the acceptance by Carr Futures Inc. ("Carr") of one or more
accounts of the undersigned ("Customer") (if more than one account is at any
time opened or reopened with Carr, all are covered by this Agreement and are
referred to individually and collectively as the "Account"), and Carr's
agreement to act as broker, directly or indirectly, or as dealer, for the
execution, clearance and/or carrying of transactions for the purchase and sale
of commodity interests, including commodities, forward contracts, commodity
futures contracts, options on commodity futures contracts and transaction
involving the exchange of futures for cash commodities or the exchange of
futures in connection with cash commodity transactions, Customer agrees as
follows:
1. APPLICABLE RULES AND REGULATIONS
The Account and each transaction therein shall be subject to the terms of
this Agreement and to (a) all applicable laws and the regulations, rules
and orders (collectively "regulations") of all regulatory and
self-regulatory organizations having jurisdiction and (b) the
constitution, by-laws, rules, regulations, orders, resolutions,
interpretations and customs and usages (collectively "rules") of the
market and any associated clearing organization (each an "exchange") on or
subject to the rules of which such transaction is executed and/or cleared.
The reference in the preceding sentence to exchange rules is solely for
Carr's protection and Carr's failure to comply therewith shall not
constitute a breach of this Agreement or relieve Customer of any
obligation or responsibility under this Agreement. Carr shall not be
liable to Customer as a result of any action by Carr, its officers,
directors, employees or agents to comply with any rule or regulation.
2. PAYMENTS TO CARR
Customer agrees to pay to Carr immediately on request (a) commissions, give-up
charges, fees and service charges as are in effect from time to time,
together with all applicable regulatory and self-regulatory organization
and exchange fees, charges and taxes; (b) the amount of any debit balance
or any other liability that may result from transactions executed for the
Account; and (c) interest on such debit balance or liability at the
prevailing rate charged by Carr at the time such debit balance or
liability arises and service charges on any such debit balance or
liability together with any reasonable costs and attorneys' fees incurred
in collecting any such debit balance or liability. Customer acknowledges
that Carr may charge commissions at other rates to other customers.
3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN
Customer shall at all times, and without prior notice or demand from Carr,
maintain adequate margin (also known as "performance bond") in the Account
so as to continually to meet the original and maintenance margin
requirements established by Carr for Customer. Carr may change such
requirements from time to time at Carr's discretion. Such margin
requirements may exceed the margin requirements set by any exchange or
other regulatory authority and may vary from Carr's requirements for other
customers. Customer agrees, when so requested, orally or by written
notice, immediately (in no less than one hour) to wire transfer (by
federal bank wire system to the account of Carr) margin funds, and to
furnish Carr with names of bank officers for immediate verification of
such transfers. Customer acknowledges and agrees that Carr may receive and
retain as its own any interest, increment, profit, gain or benefit,
directly or indirectly, accruing from any of the funds Carr receives from
Customer.
4. DELIVERY; OPTION EXERCISE
Liquidating instructions on open positions maturing in a current delivery month
must be given to Carr at least five business days prior to the first
notice day in the case of long positions, and at least five business days
prior to the last trading day in the case of short positions.
Alternatively, sufficient funds to take delivery or the necessary delivery
documents must be delivered to Carr within the same period described
above. If funds, documents or instructions are not received, Carr may,
without notice, either liquidate Customer's position or make or receive
delivery on behalf of Customer upon such terms and by such methods as
Carr, in its sole discretion, determines.
If, at any time, Customer fails to deliver to Carr any property previously
sold by Carr on Customer's behalf in compliance with commodity interest
contracts, or Carr shall deem it necessary (whether by reason of the
requirements of any exchange, clearing house or otherwise) to replace any
securities, commodity interest contracts, financial instruments, or other
property previously delivered by Carr for the Account of Customer with
other property of like or equivalent kind or amount, Customer hereby
authorizes Carr, in its sole judgment, to borrow or to buy any property
necessary to make delivery thereof, or to replace any such property
previously delivered, or to deliver the same to such other party or to
whom delivery is to be made. Carr may subsequently repay any borrowing or
purchase thereof with property purchased or otherwise acquired for the
amount of Customer. Customer shall pay Carr for any cost, loss and damages
from the foregoing, including, but not limited to, consequential damages,
penalties and fines which Carr may incur or which Carr may sustain from
its inability to borrow or buy any such property.
Customer understands that some exchanges and clearing houses have established
cut-off times for the tender of exercise instructions, and that an option
will become worthless if instructions are not delivered before such
expiration time. Customer also understands that certain exchanges and
clearing houses automatically will exercise some "in-the-money" options
unless instructed otherwise. Customer acknowledges full responsibility for
taking action either to exercise or to prevent the exercise of an option
contract, as the case may be, and Carr is not required to take any action
with respect to an option contract, including without limitations any
action to exercise an option prior to its expiration date, or to prevent
the automatic exercise of an option, except upon Customer's express
instructions. Customer further understands that Carr may establish
exercise cut-off times which may be different from the times established
by exchanges and clearing houses.
Customer understands that (a) all short option positions are subject to
assignment at any time, including positions established on the same day
that exercises are assigned, and (b) exercised assignment notices are
allocated randomly from among all Carr customer's short options positions
which are subject to exercise. A more detailed description of Carr's
allocation procedures is available upon request.
5. FOREIGN CURRENCY
If Carr enters into any transaction for Customer effected in a currency other
than U.S. dollars: (a) any profit or loss caused by changes in the rate of
exchange for such currency shall be for Customer's Account and risk and
(b) unless another currency is designated in Carr's confirmation of such
transaction, all margin for such transaction and the profit or loss on the
liquidation of such transaction shall be in U.S. dollars at a rate of
exchange determined by Carr in its discretion on the basis of then
prevailing market rates of exchange for such foreign currency.
6. CARR MAY LIMIT POSITIONS HELD
Customer agrees that Carr, at its discretion, may limit the number of open
positions (net or gross) which Customer may execute, clear and/or carry
with or acquire through it. Customer agrees (a) not to make any trade
which would have the effect or exceeding such limits, (b) that Carr may
require Customer to reduce open positions carried with Carr and (c) that
Carr may refuse to accept orders to establish new positions. Carr may
impose and enforce such limits, reduction or refusal whether or not they
are required by applicable law, regulations or rules. Customer shall
comply with all position limits established by any regulatory or
self-regulatory organization or any exchange. In addition, Customer agrees
to notify Carr promptly if Customer is required to file position reports
with any regulatory or self-regulatory organization or with any exchange.
7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION
Customer acknowledges that:
(a) Any market recommendations and information Carr may communicate to
Customer, although based upon information obtained from sources
believed by Carr to be reliable, may be incomplete and not subject
to verification;
(b) Carr makes no representation, warranty or guarantee as to, and shall
not be responsible for, the accuracy or completeness of any
information or trading recommendation furnished to Customer;
(c) Recommendations to Customer as to any particular transaction at any
given time may differ among Carr's personnel due to diversity in
analysis of fundamental and technical factors and may vary from any
standard recommendation made by Carr in its research reports or
otherwise; and
(d) Carr has no obligation or responsibility to update any market
recommendations, research or information it communicates to
Customer.
Customer understands that Carr and its officers, directors, affiliates,
stockholders, representatives or associated persons may have positions in
and may intend to buy or sell commodity interests that are the subject of
market recommendations furnished to Customer, and that the market
positions of Carr or any such officer, director, affiliate, stockholder,
representative or associated person may or may not be consistent with the
recommendations furnished to Customer by Carr.
8. LIMITS ON CARR DUTIES; LIABILITY
Customer agrees:
(a) That Carr has no duty to apprise Customer of news or of the value of
any commodity interests or collateral pledged or in any way to
advise Customer with respect to the market;
(b) That the commissions which Carr receives are consideration solely
for the execution, reporting and carrying of Customer's trades;
(c) If there is an Account Manager, an Account Manager's Agreement for
the Account Manager will be provided to Carr. Customer represents it
has received: (1) a disclosure document concerning such Account
Manager's trading advice, including, in the event the Account
Manager will trade options, the options strategies to be utilized,
or (2) a written statement explaining why Account Manager is not
required under applicable law to provide such a disclosure document
to Customer; and
(d) Customer acknowledges, understands and agrees that Carr is in no way
responsible for any loss to Customer occasioned by the actions of
the Account Manager and Carr does not by implication or otherwise
endorse the operating methods or trading strategies or programs of
the Account Manager.
9. EXTRAORDINARY EVENTS
Customer agrees that Carr shall have no liability for damages, claims, losses or
expenses caused by any errors, omissions or delays resulting from an act,
condition or cause beyond the reasonable control of Carr, including, but
not limited to: war; insurrection; riot; strike; act of God; fire; flood;
extraordinary weather conditions; accident; action of government
authority; action of exchange, clearinghouse or clearing organization;
communications or power failure; equipment or software malfunction; error,
omission or delay in the report of transactions; prices, exchange rates or
other market or transaction information; or the insolvency, bankruptcy,
receivership, liquidation or other financial difficulty of any bank,
clearing broker, exchange, market, clearinghouse or clearing organization.
10. INDEMNIFICATION OF CARR, CONTRIBUTION AND REIMBURSEMENT
(a) To the extent permitted by law, Customer agrees to indemnify and
hold harmless Carr and its shareholders, directors, officers,
employees, agents, affiliates and controlling persons against any
liability for damages, claims, losses or expenses which they may
incur as the result of: (x) Customer's violation of federal or state
laws or regulations, or of rules of any exchange or self-regulatory
organization; (y) any other breach of this Agreement by Customer; or
(z) any breach by Carr of federal or state laws or regulations, or
of the charter provisions, by-laws, rules, margin or other
requirements, of the exchanges or self-regulatory organizations,
provided that such violation was caused by Carr's acting in good
faith on Customer's behalf. Such damages, claims, losses or expenses
shall include legal fees and expenses, costs of settling claims,
interest, and fines or penalties imposed by the exchanges,
self-regulatory organization or governmental authority.
(b) Customer agrees that if the indemnification provided in paragraph
(a) above is held to be unavailable to Carr, the parties hereto
shall share in and contribute to such damages, claims, losses or
expenses in proportion to their relative benefits from the
transactions involved and their relative degree of fault in causing
the liability.
(c) Customer agrees to reimburse Carr and its shareholders, directors,
officers, employees, agents, affiliates and controlling persons on
demand for any costs incurred in collecting any sums Customer owes
under this Agreement and any costs of successfully defending against
claims asserted against them by Customer.
11. NOTICES; TRANSMITTALS
Carr shall transmit all communications to Customer at Customer's address,
facsimile or telephone number set forth below or to such other address as
Customer may hereafter direct in writing. Customer shall transmit all
communications to Carr regarding this Agreement (except routine inquiries
concerning the Account) to 10 South Wacker Drive, Suite 1100, Chicago,
Illinois 60606; facsimile, (312) 441-4201, Attention: Legal/Compliance
Department. All payments and deliveries to Carr shall be made as
instructed by Carr from time to time and shall be deemed received only
when actually received by Carr.
12. CONFIRMATION CONCLUSIVE
Confirmation of trades and any other notices sent to Customer shall be
conclusive and binding on Customer unless customer or Customer's agent
notifies Carr to the contrary (a) in the case of an oral report, orally at
the time received by Customer or its agent; or (b) in the case of a
written report or notice, in writing prior to opening of trading on the
business day next following receipt of the report. In addition, if
Customer has not received a written confirmation that a commodity interest
transaction has been executed within three business days after Customer
has placed an order with Carr to effect such transaction, and has been
informed or believes that such order has been or should have been
executed, then Customer immediately shall notify Carr thereof. Absent such
notice, Customer conclusively shall be deemed estopped to object and to
have waived any such objection to the failure to execute or cause to be
executed such transaction. Anything in this Section 12 notwithstanding,
neither Customer nor Carr shall be bound by any transaction or price
reported in error.
13. SECURITY INTEREST
Customer hereby grants to Carr a first lien upon and a security interest in any
and all cash, securities, whether certificated or uncertificated, security
entitlements, investment property, financial assets, foreign currencies,
commodity interests and other property (including securities and options)
and the proceeds of all of the foregoing (together the "Collateral")
belonging to Customer or in which Customer may have an interest, now or in
the future, and held by Carr or in Carr's control or carried in any of
Customer's Accounts, or in Customer's accounts carried under other
agreements with Carr or its affiliates. Such security interest is granted
as security for the performance by Customer of its obligations hereunder
and for the payment of all loans and other liabilities which Customer has
or may in the future have to Carr, whether under this Agreement or any
other agreement between the parties hereto. Customer agrees to execute
such further instruments, documents, filings and agreements as may be
requested at any time by Carr in order to perfect and maintain perfected
the foregoing lien and security interest. Carr, in its discretion, may
liquidate any Collateral to satisfy any margin or Account deficiencies or
to transfer the Collateral to the general ledger account of Carr.
In the event that the provisions of Section 13, which relate to Collateral in
any account carried by Carr for Customer other than an Account instituted
hereunder, conflict with the agreement under which such other account was
instituted, such other agreement between Carr and Customer shall take
precedence over the provisions of this Section 13.
14. TRANSFER OF FUNDS
At any time and from time to time and without prior notice to Customer, Carr
may transfer from one Account to another Account in which Customer has any
interest, such excess funds, equities, securities or other property as in
Carr's judgment may be required for margin, or to reduce any debit balance
or to reduce or satisfy any deficits in such other Accounts except that no
such transfer may be made from a segregated Account subject to the
Commodity Exchange Act to another Account maintained by Customer unless
either Customer has authorized such transfer in writing or Carr is
effecting such transfer to enforce Carr's security interest pursuant to
Section 13. Carr promptly shall confirm all transfers of funds made
pursuant hereto to Customer in writing.
15. CARR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS
In addition to all other rights of Carr set forth in this Agreement:
(a) When directed or required by a regulatory or self-regulatory
organization or exchange having jurisdiction over Carr or the
Account;
(b) Whenever Carr reasonably considers it necessary for its protection
because of margin requirements or otherwise;
(c) If Customer or any affiliate of Customer repudiates, violates,
breaches or fails to perform on a timely basis any term, covenant or
condition on its part to be performed under this Agreement or
another agreement with Carr;
(d) If a case in bankruptcy is commenced or if a proceeding under any
insolvency or other law for the protection of creditors or for the
appointment of a receiver, liquidator, trustee, conservator,
custodian or similar officer is filed by or against Customer or any
affiliate of Customer, or if Customer or any affiliate of Customer
makes or proposes to make any arrangement or composition for the
benefit of its creditors, or if Customer (or any such affiliate) or
any or all of its property is subject to any agreement, order,
judgment or decree providing for Customer's dissolution, winding-up,
liquidation, merger, consolidation, reorganization or for the
appointment of a receiver, liquidator, trustee, conservator,
custodian or similar officer of Customer, such affiliate or such
property;
(e) Carr is informed of Customer's death or mental incapacity; or
(f) If an attachment or similar order is levied against the Account or
any other account maintained by a Customer or any affiliate of
Customer with Carr;
Carr shall have the right to (i) satisfy any obligations due Carr out of any
Customer's property (also referred to as "Collateral") in Carr's custody
or control, (ii) liquidate any or all of Customer's commodity interest
positions, such liquidation shall include transactions involving the
exchange of futures for cash commodities or the exchange of futures in
connection with cash commodity transactions, (iii) cancel any or all of
Customer's outstanding orders, (iv) treat any or all of Customer's
obligations due Carr as immediately due and payable, (v) sell any or all
of Customer's property in Carr's custody or control in such manner as Carr
determines to be commercially reasonable, and/or (vi) terminate any or all
of Carr's obligations for future performance to Customer, all without any
notice to or demand on Customer if deemed necessary by Carr. Any sale
hereunder may be made in any commercially reasonable manner. Customer
agrees that a prior demand, call or notice shall not be considered a
waiver of Carr's right to act without demand or notice as herein provided,
that Customer shall at all times be liable for the payment of any debit
balance owing in each Account upon demand whether occurring upon a
liquidation as provided under this Section 15 or otherwise under this
Agreement, and that in all cases Customer shall be liable for any
deficiency remaining in each Account in the event of liquidation thereof
in whole or in part together with interest thereon and all costs relating
to liquidation and collection (including reasonable attorneys' fees). In
the event that the provisions of Section 15, which relate to Collateral in
any account carried by Carr for Customer other than an Account instituted
hereunder, conflict with the agreement under which such other account was
instituted, such other agreement between Carr and Customer shall take
precedence over the provisions of this Section 15.
16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Customer represents and warrants to and agrees with Carr that:
(a) Customer has full power and authority to enter into this Agreement
and to engage in the transactions and perform its obligations
hereunder and contemplated hereby, and:
(1) If Customer is a corporation or partnership, Customer
represents and warrants that (a) it is duly organize and in
good standing under the laws of the jurisdiction in which it
is established and in every state in which it does business;
(b) is empowered to enter into and perform this Agreement and
to effectuate transactions in commodity interests, financial
instruments and foreign currency as contemplated hereby; (c)
that Customer has determined that trading in commodity
interests is appropriate for Customer, is prudent in all
respects and does not and will not violate any statute, rule,
regulation, judgment or decree to which Customer is subject or
bound; (d) that Customer has had a least one year's prior
experience in effectuating transactions in commodity
interests, financial instruments, and foreign currency as
contemplated hereby; and (e) no person or entity has any
interest in or control of the Account to which this Agreement
pertains except as disclosed by Customer to Carr in writing.
(2) If Customer is a trust, Customer represents and warrants that
(a) it is a duly formed and existing trust under the laws of
the state of its formation or such other laws as are
applicable, including ERISA or similar state law, and the
party or parties designated as trustee or trustees by Customer
to Carr in writing submitted herewith constitute the only or
all of the proper trustees thereof; (b) the trustee or
trustees are empowered to enter into and perform this
Agreement and to effectuate transactions in commodity
interests, financial instruments, and foreign currency as
contemplated hereby; (c) the trustee or trustees make the
representations set forth in Section 1 hereof as if the term
trustee(s) were substituted for the term Customer therein; and
(d) no person or entity has any interest in or control of the
Account to which this Agreement pertains except as disclosed
by Customer to Carr in writing.
(b) Neither Customer nor any partner, director, officer, member, manager
or employee of Customer nor any affiliate of Customer is a partner,
director, officer, member, manager or employee of a futures
commission merchant, introducing broker, bank, broker-dealer,
exchange or self-regulatory organization or an employee or
commissioner of the Commodity Futures Trading Commission (the
"CFTC"), except as previously disclosed in writing to Carr;
(c) Any financial statements or other information furnished in
connection therewith are true, correct and complete. Except as
disclosed in writing, (i) Customer is not a commodity pool or is
exempt from registration under the rules of the CFTC, and (ii)
Customer is acting solely as principal and no one other than
Customer has any interest in any Account of Customer. Customer
hereby authorizes Carr to contact such banks, financial institutions
and credit agencies as Carr shall deem appropriate for verification
of the information contained herein;
(d) Customer has determined that trading in commodity interests is
appropriate for Customer, is prudent in all respects and does not
and will not violate Customer's charter or by-laws (or other
comparable governing document) or any law, rule, regulation,
judgment, decree, order or agreement to which Customer or its
property is subject or bound;
(e) As required by CFTC regulations, Customer shall create, retain and
produce upon request of the applicable contract market, the CFTC or
other regulatory authority documents (such as contracts,
confirmations, telex printouts, invoices an documents of title) with
respect to cash transactions underlying exchanges of futures for
cash commodities or exchange of futures in connection with cash
commodity transactions;
(f) Customer consents to the electronic recording, at Carr's discretion,
of any or all telephone conversations with Carr (without automatic
tone warning device); the use of same as evidence by either party in
any action or proceeding arising out of the Agreement and in Carr's
erasure, at its discretion, of any recording as part of its regular
procedure for handling of recordings;
(g) Absent a separate written agreement between Customer and Carr with
respect to give-ups, Carr, in its discretion, may, but shall have no
obligation to, accept from other brokers commodity interest
transactions executed by such brokers on an exchange for Customer
and proposed to be "given-up" to Carr for clearance and/or carrying
in the Account;
(h) Carr, for an on behalf of Customer, is authorized and empowered to
place orders for commodity interest transactions through one or more
electronic or automated trading systems maintained or operated by or
under the auspices of an exchange, that Carr shall not be liable or
obligated to Customer for any loss, damage, liability, cost or
expense (including but not limited to loss of profits, loss of use,
incidental or consequential damages) incurred or sustained by
Customer and arising in whole or in part, directly or indirectly,
from any fault, delay, omission, inaccuracy or termination of a
system or Carr's inability to enter, cancel or modify an order on
behalf of Customer on or through a system. The provisions of this
Section 16(h) shall apply regardless of whether any customer claim
arises in contract, negligence, tort, strict liability, breach or
fiduciary obligations or otherwise; and
(i) If Customer is subject to the Financial Institution Reform, Recovery
and Enforcement Act of 1989, the certified resolutions set forth
following this Agreement have been caused to be reflected in the
minutes of Customer's Board of Directors (or other comparable
governing body) and this Agreement is and shall be, continuously
from the date hereof, an official record of Customer.
Customer agrees to promptly notify Carr in writing if any of the warranties and
representations contained in this Section 16 become inaccurate or in any
way cease to be true, complete and correct.
17. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of the parties hereto, their
successors and assigns, and shall be binding upon the parties hereto,
their successors and assigns, provided, however, that this Agreement is
not assignable by any party without the prior written consent of the other
parties..
18. MODIFICATION OF AGREEMENT BY CARR; NON-WAIVER PROVISION
This Agreement may only be altered, modified or amended by mutual written
consent of the parties. The rights and remedies conferred upon Carr shall
be cumulative, and its forbearance to take any remedial action available
to it under this Agreement shall not waive its right at any time or from
time to time thereafter to take such action.
19. SEVERABILITY
If any term or provision hereof or the application thereof to any persons or
circumstances shall to any extent be contrary to any exchange, government
or self-regulatory regulation or contrary to any federal, state or local
law or otherwise be invalid or unenforceable, the remainder of this
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is contrary, invalid or
unenforceable, shall not be affected thereby.
20. CAPTIONS
All captions used herein are for convenience only, are not a part of this
Agreement, and are not to be used in construing or interpreting any aspect
of this Agreement.
21. TERMINATION
This Agreement shall continue in force until written notice of termination is
given by Customer or Carr. Termination shall not relieve either party of
any liability or obligation incurred prior to such notice. Upon giving or
receiving notice of termination, Customer will promptly take all action
necessary to transfer all open positions in each Account to another
futures commission merchant.
22. ENTIRE AGREEMENT
This Agreement (as amended by the attached Customer Agreement dated the date
hereof into which this Agreement is incorporated by reference) constitutes
the entire agreement between Customer and Carr with respect to the subject
matter hereof and supersedes any prior agreements between the parties with
respect to such subject matter.
23. GOVERNING LAW; CONSENT TO JURISDICTION
(a) In case of a dispute between Customer and Carr arising out of or
relating to the making or performance of this Agreement or any
transaction pursuant to this Agreement (i) this Agreement and its
enforcement shall be governed by the laws of the State of Illinois
without regard to principles of conflicts of laws, and (ii) Customer
will bring any legal proceeding against Carr in, and Customer hereby
consents in any legal proceeding by Carr to the jurisdiction of, any
state or federal court located within Chicago, Illinois, in
connection with all legal proceedings arising directly, indirectly
or otherwise in connection with, out of, related to or from
Customer's Account, transactions contemplated by this Agreement or
the breach thereof. Customer hereby waives all objections Customer,
at any time, may have as to the propriety of the court in which any
such legal proceedings may be commenced. Customer also agrees that
any service of process mailed to Customer at any address specified
to Carr shall be deemed a proper service of process on the
undersigned. Customer agrees that venue of all proceedings shall be
in Chicago, Illinois.
(b) Notwithstanding the provisions of Section 23(a)(ii), Customer may
elect at this time to have all disputes described in this Section
resolved by arbitration. To make such election, Customer must sign
the Arbitration Agreement set forth in Section 24. Notwithstanding
such election, any question relating to whether Customer or Carr has
commenced an arbitration proceeding in a timely manner, whether a
dispute is within the scope of the Arbitration Agreement or whether
a party (other than Customer or Carr) has consented to arbitration
and all proceedings to compel arbitration shall be determined by a
court as specified in Section 23(a)(ii).
24. ARBITRATION AGREEMENT (OPTIONAL)
Every dispute between Customer and Carr arising out of or relating to the making
or performance of this Agreement or any transaction pursuant to this
Agreement, shall be settled by arbitration in accordance with the rules,
then in effect, of the National Futures Association, the contract market
upon which the transacting giving rise to the claim was executed, or the
National Association of Securities Dealers as Customer may elect. If
Customer does not make such election by registered mail addressed to Carr
at 10 South Wacker Drive, Suite 1100, Chicago, Illinois 60606, Attention:
Legal/Compliance Department, within 45 days after demand by Carr that the
Customer make such election, then Carr may make such election. Carr agrees
to pay any incremental fees which may be assessed by a qualified forum for
making available a "mixed panel" of arbitrators, unless the arbitrators
determine that Customer has acted in bad faith in initiating or conducting
the proceedings. Judgment upon any aware rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
THREE FORUMS EXIST FOR THE RESOLUTION OF COMMODITY DISPUTES: CIVIL COURT
LITIGATION, REPARATIONS AT THE COMMODITY FUTURES TRADING
COMMISSION("CFTC") AND ARBITRATION CONDUCTED BY A SELF-REGULATORY OR
OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION MAY
IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE ABILITY TO
OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT INCURRING
SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH CUSTOMER
INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT YOUR
CONSENT OT THIS ARBITRATION AGREEMENT BE VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A
COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY
CLAIMS OR COUNTERCLAIMS WHICH YOU OR CARR MAY SUBMIT TO ARBITRATION
UNDER THIS AGREEMENT. YOU ARE NOT HOWEVER, WAIVING YOUR RIGHT TO ELECT
INSTEAD TO PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER
SECTION 14 OF THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE
WHICH MAY BE ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A
DISPUTE ARISES, YOU WILL BE NOTIFIED IF CARR INTENDS TO SUBMIT THE
DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION OF THE COMMODITY
EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A SECTION 14
"REPARATIONS" PROCEEDINGS BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM
THE DATE OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION.
YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT WITH CARR.
See 17 CFR 1890.1-180.5.
Acceptance of this arbitration agreement requires a separate signature on page
15.
25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL)
Without its prior notice, Customer agrees that when Carr executes sell or buy
orders on Customer's behalf, Carr, its directors, officers, employees,
agents, affiliates, and any floor broker may take the other side of
customer's transaction through any Account of such person subject to its
being executed a prevailing prices in accordance with and subject to the
limitations and conditions, if any, contained in applicable rules and
regulations.
26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL)
Without limiting other provisions herein, Carr is authorized to transfer from
any segregated Account subject to the Commodity Exchange Act carried by
Carr for the Customer to any other Account carried by Carr for the
Customer such amount of excess funds as in Carr's judgment may be
necessary at any time to avoid a margin call or to reduce a debit balance
in said Account. It is understood that Carr will confirm in writing each
such transfer of funds made pursuant to this authorization within a
reasonable time after such transfer.
27. ELECTRONIC TRANSMISSION OF STATEMENTS (OPTIONAL)
Customer elects and consents to receive transmission of statements of
transactions and statements of account solely by electronic means,
including without limitation, by electronic mail or facsimile. Customer
shall not incur any costs or fees in connection with the receipt of such
statements by electronic transmission. Customer shall receive such
statements by electronic transmission until such time as it revokes its
consent in writing to Carr.
28. SUBORDINATION AGREEMENT
(Applies only to Accounts with funds held in foreign currencies)
Funds of customers trading on United States contract markets may be held in
accounts denominated in a foreign currency with depositories located
outside or inside the United States or its territories if the customer is
domiciled in a foreign country or if the funds are held in connection with
contracts priced and settled in a foreign currency. Such accounts are
subject to the risk that events could occur which hinder or prevent the
availability of these funds for distribution to customers. Such accounts
also may be subject to foreign currency exchange rate risks.
If authorized below, Customer authorizes the deposit of funds into such
depositories. For customer domiciled in the United States, this
authorization permits the holding of funds in regulated accounts only if
such funds are used to margin, guarantee, or secure positions in such
contracts or accrue as a result of such positions. In order to avoid the
possible dilution of other customer funds, a customer agrees by accepting
this subordination agreement that his claims based on such funds will be
subordinated as described below in the unlikely event both of the
following conditions are met: (1) Carr is placed in receivership or
bankruptcy, and (2) there are insufficient funds available for
distribution denominated in the foreign currency as to which the customer
has a claim to satisfy all claims against those funds.
By initialing the Subordination Agreement below, Customer agrees that if both
of the conditions listed above occur, its claim against Carr's assets
attributable to funds held overseas in a particular foreign currency may
be satisfied out of segregated customer funds held in accounts denominated
in dollars or other foreign currencies only after each customer whose
funds are held in dollars or in such other foreign currencies receives its
pro-rata portion of such funds. It is further agreed that in no event may
a customer whose funds are so held receive more than its pro-rata share of
the aggregate pool consisting of funds held in dollars, funds held in the
particular foreign currency, and non-segregated assets of Carr.
<PAGE>
OPTIONAL ELECTIONS/ACKNOWLEDGMENT
The following provisions, which are set forth in this Agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
SIGNATURE REQUIRED FOR EACH ELECTION
ARBITRATION AGREEMENT ---------------------------------------
(Agreement Paragraph 24) (Date)
CONSENT TO TAKE THE OTHER SIDE OF
ORDERS (Agreement Paragraph 25) X /s/ MARK J. HAWLEY 11-6-98
---------------------------------------
(Date)
AUTHORIZATION TO TRANSFER FUNDS
(Agreement Paragraph 26) ---------------------------------------
(Date)
CONSENT TO RECEIVE STATEMENTS BY
ELECTRONIC TRANSMISSION ---------------------------------------
(Agreement Paragraph 27) (Date)
ACKNOWLEDGMENT OF SUBORDINATION
AGREEMENT (Agreement Paragraph 28)
(Required for accounts holding non-U.S. X /s/ MARK J. HAWLEY 11-6-98
currency) ---------------------------------------
(Date)
HEDGE ELECTION
[ ] Customer confirms that all transactions in the Account will represent bona
fide hedging transactions, as defined by the Commodity Futures Trading
Commission, unless Carr is notified otherwise not later than the time an
order is placed for the Account:
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
Carr's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A) [ ] Liquidate all open contracts without first seeking instructions
either from or on behalf of Customer.
B) [ ] Attempt to obtain instructions with respect to the disposition of
all open contracts.
(If neither box is checks, Customer shall be deemed to elect A).)
<PAGE>
ACKNOWLEDGMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS
The undersigned hereby acknowledges its separate receipt from Carr, and its
understanding of each of the following documents prior to opening of the
Account:
o Risk Disclosure Statement for Futures and Options
o LME Risk Warning Notice
o NYMEX ACCESS(SM) Risk Disclosure Statement
o Globex(R)Customer Information and Risk Disclosure Statement
o Project A(TM)Customer Information Statement
o Questions & Answers on Flexible Options Trading at the CBOT
o CME Average Pricing System Disclosure Statement
o Special Notice to Foreign Brokers and Foreign Traders
REQUIRED SIGNATURES
CUSTOMER
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify Carr in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
- --------------------------------------------------------------------------------
Customer name(s)
By: DEMETER MANAGEMENT CORPORATION
By: /s/ MARK J. HAWLEY NOVEMBER 6, 1998
- ------------------------------------------------------ ---------------------
Authorized signature(s) Date
MARK J. HAWLEY, PRESIDENT
- --------------------------------------------------------------------------------
[If applicable, print name and title of signatory]
CARR FUTURES INC.
Accepted and Agreed:
Carr Futures Inc.
By: /s/ LAWRENCE P. ANDERSON By:
-------------------------------- --------------------------------
Title: EXECUTIVE VICE PRESIDENT Title:
-------------------------------- --------------------------------
Date: NOVEMBER 6, 1998 Date:
-------------------------------- --------------------------------
Exhibit 10.04
CARR FUTURES INC.
10 South Wacker Drive, Suite 1100
Chicago, IL 60606
Facsimile (312) 441-4201
INTERNATIONAL FOREIGN EXCHANGE MASTER AGREEMENT
MASTER AGREEMENT dated as of November 6, 1998, by and between CARR FUTURES
INC., a Delaware corporation and MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
SECTION 1. DEFINITIONS
Unless otherwise required by the context, the following terms
shall have the following meanings in the Agreement:
"AGREEMENT" has the meaning given to it in Section 2.2.
"BASE CURRENCY", as to a Party, means the Currency agreed to as
such in relation to it in Part VII of the Schedule.
"BUSINESS DAY" means for purposes of: (i) clauses (i), (viii) and
(xii) of the definition of Event of Default, a day which is a
Local Banking Day for the Non-Defaulting Party; (ii) solely in
relation to delivery of a Currency, a day which is a Local
Banking Day in relation to that Currency; and (iii) any other
provision of the Agreement, a day which is a Local Banking Day
for the applicable Designated Offices of both Parties; PROVIDED,
HOWEVER, that neither Saturday nor Sunday shall be considered a
Business Day for any purpose.
"CLOSE-OUT AMOUNT" has the meaning given to it in Section 5.1.
"CLOSE-OUT DATE" means a day on which, pursuant to the provisions
of Section 5.1, the Non-Defaulting Party closes out Currency
Obligations or such a close-out occurs automatically.
"CLOSING GAIN", as to the Non-Defaulting Party, means the
difference described as such in relation to a particular Value
Date under the provisions of Section 5.1.
"CLOSING LOSS", as to the Non-Defaulting Party, means the
difference described as such in relation to a particular Value
Date under the provisions of Section 5.1.
"CONFIRMATION" means a writing (including telex, facsimile, or
other electronic means from which it is possible to produce a
hard copy) evidencing an FX Transaction, and specifying:
(i) the Parties thereto and their Designated Offices through
which they are respectively acting,
(ii) the amounts of the Currencies being bought or sold and by
which Party,
(iii) the Value Date, and
(iv) any other term generally included in such a writing in
accordance with the practice of the relevant foreign
exchange market.
"CREDIT SUPPORT" has the meaning given to it in Section 5.2.
"CREDIT SUPPORT DOCUMENT", as to a Party (the "first Party"),
means a guaranty, hypothecation agreement, margin or security
agreement or document, or any other document containing an
obligation of a third party ("Credit Support Provider") or of the
first Party in favor of the other Party supporting any
obligations of the first Party under the Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning given to it in the
definition of Credit Support Document.
"CURRENCY" means money denominated in the lawful currency of any
country or the Ecu.
"CURRENCY OBLIGATION" means any obligation of a Party to deliver
a Currency pursuant to an FX Transaction or the application of
Section 3.3(a) or (b).
"CUSTODIAN" has the meaning given to it in the definition of
Insolvency Proceeding.
"DEFAULTING PARTY" has the meaning given to it in the definition
of Event of Default.
"DESIGNATED OFFICE(S)", as to a Party, means the office or
offices specified in Part II of the Schedule.
"EFFECTIVE DATE" means the date of this Master Agreement.
"EVENT OF DEFAULT" means the occurrence of any of the following
with respect to a Party (the "Defaulting Party", the other Party
being the "Non-Defaulting Party"):
(i) the Defaulting Party shall (A) default in any payment when
due under the Agreement to the Non-Defaulting Party with
respect to any Currency Obligation and such failure shall
continue for two (2) Business Days after the Non-Defaulting
Party has given the Defaulting Party written notice of
non-payment, or (B) fail to perform or comply with any
other obligation assumed by it under the Agreement and such
failure is continuing thirty (30) days after the
Non-Defaulting Party has given the Defaulting Party written
notice thereof;
(ii) the Defaulting Party shall commence a voluntary Insolvency
Proceeding or shall take any corporate action to authorize
any such Insolvency Proceeding;
(iii) a governmental authority or self-regulatory organization
having jurisdiction over either the Defaulting Party or its
assets in the country of its organization or principal
office (A) shall commence an Insolvency Proceeding with
respect to the Defaulting Party or its assets or (B) shall
take any action under any bankruptcy, insolvency or other
similar law or any banking, insurance or similar law or
regulation governing the operation of the Defaulting Party
which may prevent the Defaulting Party from performing its
obligations under the Agreement as and when due;
(iv) an involuntary Insolvency Proceeding shall be commenced
with respect to the Defaulting Party or its assets by a
person other than a governmental authority or
self-regulatory organization having jurisdiction over
either the Defaulting Party or its assets in the country of
its organization or principal office and such Insolvency
Proceeding (A) results in the appointment of a Custodian or
a judgment of insolvency or bankruptcy or the entry of an
order for winding-up, liquidation, reorganization or other
similar relief, or (B) is not dismissed within five (5)
days of its institution or presentation;
(v) the Defaulting Party is bankrupt or insolvent, as defined
under any bankruptcy or insolvency law applicable to it;
(vi) the Defaulting Party fails, or shall otherwise be unable,
to pay its debts as they become due;
(vii) the Defaulting Party or any Custodian acting on behalf of
the Defaulting Party shall disaffirm, disclaim or repudiate
any Currency Obligation;
(viii)any representation or warranty made or given or deemed
made or given by the Defaulting Party pursuant to the
Agreement or any Credit Support Document shall prove to
have been false or misleading in any material respect as at
the time it was made or given or deemed made or given and
one (1) Business Day has elapsed after the Non-Defaulting
Party has given the Defaulting Party written notice
thereof;
(ix) the Defaulting Party consolidates or amalgamates with or
merges into or transfers all or substantially all its
assets to another entity and (A) the creditworthiness of
the resulting, surviving or transferee entity is materially
weaker than that of the Defaulting Party prior to such
action, or (B) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving
or transferee entity fails to assume all the obligations of
the Defaulting Party under the Agreement by operation of
law or pursuant to an agreement satisfactory to the
Non-Defaulting Party;
(x) by reason of any default, or event of default or other
similar condition or event, any Specified Indebtedness
(being Specified Indebtedness of an amount which, when
expressed in the Currency of the Threshold Amount, is in
aggregate equal to or in excess of the Threshold Amount) of
the Defaulting Party or any Credit Support Provider in
relation to it: (A) is not paid on the due date therefor
and remains unpaid after any applicable grace period has
elapsed, or (B) becomes, or becomes capable at any time of
being declared, due and payable under agreements or
instruments evidencing such Specified Indebtedness before
it would otherwise have been due and payable;
(xi) the Defaulting Party is in breach of or default under any
Specified Transaction and any applicable grace period has
elapsed, and there occurs any liquidation or early
termination of, or acceleration of obligations under, that
Specified Transaction or the Defaulting Party (or any
Custodian on its behalf) disaffirms, disclaims or
repudiates the whole or any part of a Specified
Transaction;
(xii) (A) any Credit Support Provider of the Defaulting Party or
the Defaulting Party itself fails to comply with or perform
any agreement or obligation to be complied with or
performed by it in accordance with the applicable Credit
Support Document and such failure is continuing after any
applicable grace period has elapsed; (B) any Credit Support
Document relating to the Defaulting Party expires or ceases
to be in full force and effect prior to the satisfaction of
all obligations of the Defaulting Party under the
Agreement, unless otherwise agreed in writing by the
Non-Defaulting Party; (C) the Defaulting Party or any
Credit Support Provider of the Defaulting Party (or, in
either case, any Custodian acting on its behalf)
disaffirms, disclaims or repudiates, in whole or in part,
or challenges the validity of, any Credit Support Document;
(D) any representation or warranty made or given or deemed
made or given by any Credit Support Provider of the
Defaulting Party pursuant to any Credit Support Document
shall prove to have been false or misleading in any
material respect as at the time it was made or given or
deemed made or given and one (1) Business Day has elapsed
after the Non-Defaulting Party has given the Defaulting
Party written notice thereof; or (E) any event set out in
(ii) to (vii) or (ix) to (xi) above occurs in respect of
any Credit Support Provider of the Defaulting Party; or
(xiii)any other condition or event specified in Part IX of the
Schedule or in Section 8.14 if made applicable to the
Agreement in Part XI of the Schedule.
"FX TRANSACTION" means any transaction between the Parties for
the purchase by one Party of an agreed amount in one Currency
against the sale by it to the other of an agreed amount in
another Currency, both such amounts either being deliverable on
the same Value Date or, if the Parties have so agreed in Part VI
of the Schedule, being cash-settled in a single Currency, which
is or shall become subject to the Agreement and in respect of
which transaction the Parties have agreed (whether orally,
electronically or in writing): the Currencies involved, the
amounts of such Currencies to be purchased and sold, which Party
will purchase which Currency and the Value Date.
"INSOLVENCY PROCEEDING" means a case or proceeding seeking a
judgment of or arrangement for insolvency, bankruptcy,
composition, rehabilitation, reorganization, administration,
winding-up, liquidation or other similar relief with respect to
the Defaulting Party or its debts or assets, or seeking the
appointment of a trustee, receiver, liquidator, conservator,
administrator, custodian or other similar official (each, a
"Custodian") of the Defaulting Party or any substantial part of
its assets, under any bankruptcy, insolvency or other similar law
or any banking, insurance or similar law governing the operation
of the Defaulting Party.
"LIBOR", with respect to any Currency and date, means the average
rate at which deposits in the Currency for the relevant amount
and time period are offered by major banks in the London
interbank market as of 11:00 a.m. (London time) on such date, or,
if major banks do not offer deposits in such Currency in the
London interbank market on such date, the average rate at which
deposits in the Currency for the relevant amount and time period
are offered by major banks in the relevant foreign exchange
market at such time on such date as may be determined by the
Party making the determination.
"LOCAL BANKING DAY" means (i) for any Currency, a day on which
commercial banks effect deliveries of that Currency in accordance
with the market practice of the relevant foreign exchange market,
and (ii) for any Party, a day in the location of the applicable
Designated Office of such Party on which commercial banks in that
location are not authorized or required by law to close.
"MASTER AGREEMENT" means the terms and conditions set forth in
this Master Agreement, including the Schedule.
"MATCHED PAIR NOVATION NETTING OFFICE(S)", in respect of a Party,
means the Designated Office(s) specified in Part V of the
Schedule.
"NON-DEFAULTING PARTY" has the meaning given to it in the
definition of Event of Default.
"NOVATION NETTING OFFICE(S)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"PARTIES" means the parties to the Agreement, including their
successors and permitted assigns (but without prejudice to the
application of clause (ix) of the definition Event of Default);
and the term "Party" shall mean whichever of the Parties is
appropriate in the context in which such expression may be used.
"PROCEEDINGS" means any suit, action or other proceedings
relating to the Agreement or any FX Transaction.
"SCHEDULE" means the Schedule attached to and part of this Master
Agreement, as it may be amended from time to time by agreement of
the Parties.
"SETTLEMENT NETTING OFFICE(S)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"SPECIFIED INDEBTEDNESS" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money, other than in respect of
deposits received.
"SPECIFIED TRANSACTION" means any transaction (including an
agreement with respect thereto) between one Party to the
Agreement (or any Credit Support Provider of such Party) and the
other Party to the Agreement (or any Credit Support Provider of
such Party) which is a rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or
equity linked swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option
with respect to any of these transactions) or any combination of
any of the foregoing transactions.
"SPOT DATE" means the spot delivery day for the relevant pair of
Currencies as generally used by the relevant foreign exchange
market.
"THRESHOLD AMOUNT" means the amount specified as such for each
Party in Part VIII of the Schedule.
"VALUE DATE" means, with respect to any FX Transaction, the
Business Day (or where market practice in the relevant foreign
exchange market in relation to the two Currencies involved
provides for delivery of one Currency on one date which is a
Local Banking Day in relation to that Currency but not to the
other Currency and for delivery of the other Currency on the next
Local Banking Day in relation to that other Currency ("Split
Settlement") the two (2) Local Banking Days in accordance with
that market practice) agreed by the Parties for delivery of the
Currencies to be purchased and sold pursuant to such FX
Transaction, and, with respect to any Currency Obligation, the
Business Day (or, in the case of Split Settlement, Local Banking
Day) upon which the obligation to deliver Currency pursuant to
such Currency Obligation is to be performed.
SECTION 2. FX TRANSACTIONS
2.1 SCOPE OF THE AGREEMENT. The Parties (through their respective
Designated Offices) may enter into FX Transactions, for such
quantities of such Currencies, as may be agreed subject to the
terms of the Agreement; PROVIDED that neither Party shall be
required to enter into any FX Transaction with the other Party.
Unless otherwise agreed in writing by the Parties, each FX
Transaction entered into between Designated Offices of the
Parties on or after the Effective Date shall be governed by the
Agreement. Each FX Transaction between any two Designated Offices
of the Parties outstanding on the Effective Date which is
identified in Part I of the Schedule shall also be governed by
the Agreement.
2.2 SINGLE AGREEMENT. This Master Agreement, the terms agreed
between the Parties with respect to each FX Transaction (and, to
the extent recorded in a Confirmation, each such Confirmation),
and all amendments to any of such items shall together form the
agreement between the Parties (the "Agreement") and shall
together constitute a single agreement between the Parties. The
Parties acknowledge that all FX Transactions are entered into in
reliance upon such fact, it being understood that the Parties
would not otherwise enter into any FX Transaction.
2.3 CONFIRMATIONS. FX Transactions shall be promptly confirmed by
the Parties by Confirmations exchanged by mail, telex, facsimile
or other electronic means from which it is possible to produce a
hard copy. The failure by a Party to issue a Confirmation shall
not prejudice or invalidate the terms of any FX Transaction.
2.4 INCONSISTENCIES. In the event of any inconsistency between
the provisions of the Schedule and the other provisions of the
Agreement, the Schedule will prevail. In the event of any
inconsistency between the terms of a Confirmation and the other
provisions of the Agreement, the other provisions of the
Agreement shall prevail, and the Confirmation shall not modify
the other terms of the Agreement.
SECTION 3. SETTLEMENT AND NETTING
3.1 SETTLEMENT. Subject to Sections 3.2 and 3.3, each Party shall
deliver to the other Party the amount of the Currency to be
delivered by it under each Currency Obligation on the Value Date
for such Currency Obligation.
3.2 SETTLEMENT NETTING. If, on any date, more than one delivery
of a particular Currency under Currency Obligations is to be made
between a pair of Settlement Netting Offices, then each Party
shall aggregate the amounts of such Currency deliverable by it
and only the difference between these aggregate amounts shall be
delivered by the Party owing the larger aggregate amount to the
other Party, and, if the aggregate amounts are equal, no delivery
of the Currency shall be made.
3.3 NOVATION NETTING.
(a) BY CURRENCY. If the Parties enter into an FX
Transaction through a pair of Novation Netting Offices
giving rise to a Currency Obligation for the same Value
Date and in the same Currency as a then existing
Currency Obligation between the same pair of Novation
Netting Offices, then immediately upon entering into
such FX Transaction, each such Currency Obligation shall
automatically and without further action be individually
canceled and simultaneously replaced by a new Currency
Obligation for such Value Date determined as follows:
the amounts of such Currency that would otherwise have
been deliverable by each Party on such Value Date shall
be aggregated and the Party with the larger aggregate
amount shall have a new Currency Obligation to deliver
to the other Party the amount of such Currency by which
its aggregate amount exceeds the other Party's aggregate
amount, PROVIDED that if the aggregate amounts are
equal, no new Currency Obligation shall arise. This
Section 3.3 shall not affect any other Currency
Obligation of a Party to deliver any different Currency
on the same Value Date.
(b) BY MATCHED PAIR. If the Parties enter into an FX
Transaction between a pair of Matched Pair Novation
Netting Offices then the provisions of Section 3.3(a)
shall apply only in respect of Currency Obligations
arising by virtue of FX Transactions entered into
between such pair of Matched Pair Novation Netting
Offices and involving the same pair of Currencies and
the same Value Date.
3.4 GENERAL.
(a) INAPPLICABILITY OF SECTIONS 3.2 AND 3.3. The provisions of
Sections 3.2 and 3.3 shall not apply if a Close-Out Date
has occurred or a voluntary or involuntary Insolvency
Proceeding or action of the kind described in clause (ii),
(iii) or (iv) of the definition of Event of Default has
occurred without being dismissed in relation to either
Party.
(b) FAILURE TO RECORD. The provisions of Section 3.3 shall
apply notwithstanding that either Party may fail to record
the new Currency Obligations in its books.
(c) CUTOFF DATE AND TIME. The provisions of Section 3.3 are
subject to any cut-off date and cut-off time agreed between
the applicable Novation Netting Offices and Matched Pair
Novation Netting Offices of the Parties.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants to the other Party as of the Effective Date and as of
the date of each FX Transaction that: (i) it has authority to
enter into the Agreement (including such FX Transaction); (ii)
the persons entering into the Agreement (including such FX
Transaction) on its behalf have been duly authorized to do so;
(iii) the Agreement (including such FX Transaction) is binding
upon it and enforceable against it in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally
and applicable principles of equity) and does not and will not
violate the terms of any agreements to which such Party is bound;
(iv) no Event of Default, or event which, with notice or lapse of
time or both, would constitute and Event of Default, has occurred
and is continuing with respect to it; and (v) it acts as
principal in entering into each FX Transaction; and (vi) if the
Parties have so specified in Part XV of the Schedule, it makes
the representations and warranties set forth in such Part XV.
4.2 COVENANTS. Each Party covenants to the other Party that: (i)
it will at all times obtain and comply with the terms of and do
all that is necessary to maintain in full force and effect all
authorizations, approvals, licenses and consents required to
enable it lawfully to perform its obligations under the
Agreement; (ii) it will promptly notify the other Party of the
occurrence of any Event of Default with respect to itself or any
Credit Support Provider in relation to it; and (iii) if the
Parties have set forth additional covenants in Part XVI of the
Schedule, it makes the covenants set forth in such Part XVI.
SECTION 5. CLOSE-OUT AND LIQUIDATION
5.1 MANNER OF CLOSE-OUT AND LIQUIDATION. (a) CLOSE-OUT. If an
Event of Default has occurred and is continuing, then the
Non-Defaulting Party shall have the right to close-out all, but
not less than all, outstanding Currency Obligations (including
any Currency Obligation which has not been performed and in
respect of which the Value Date is on or precedes the Close-Out
Date) except to the extent that in the good faith opinion of the
Non-Defaulting Party certain of such Currency Obligations may not
be closed-out under applicable law. Such close-out shall be
effective upon receipt by the Defaulting Party of notice that the
Non-Defaulting Party is terminating such Currency Obligations.
Notwithstanding the foregoing, unless otherwise agreed by the
Parties in Part X of the Schedule, in the case of an Event of
Default in clause (ii), (iii) or (iv) of the definition thereof
with respect to a Party and, if agreed by the Parties in Part IX
of the Schedule, in the case of any other Event of Default
specified and so agreed in Part IX with respect to a Party,
close-out shall be automatic as to all outstanding Currency
Obligations, as of the time immediately preceding the institution
of the relevant Insolvency Proceeding or action. The
Non-Defaulting Party shall have the right to liquidate such
closed-out Currency Obligations as provided below.
(b) LIQUIDATION. Liquidation of Currency Obligations terminated
by close-out shall be effected as follows:
(i) CALCULATING CLOSING GAIN OR LOSS. The Non-Defaulting Party
shall calculate in good faith, with respect to each such
terminated Currency Obligation, except to the extent that
in the good faith opinion of the Non-Defaulting Party
certain of such Currency Obligations may not be liquidated
as provided herein under applicable law, as of the
Close-Out Date or as soon thereafter as reasonably
practicable, the Closing Gain, or, as appropriate, the
Closing Loss, as follows:
(A) for each Currency Obligation calculate a "Close-Out
Amount" as follows:
(1) in the case of a Currency Obligation whose Value
Date is the same as or is later than the
Close-Out Date, the amount of such Currency
Obligation; or
(2) in the case of a Currency Obligation whose Value
Date precedes the Close-Out Date, the amount of
such Currency Obligation increased, to the extent
permitted by applicable law, by adding interest
thereto from and including the Value Date to but
excluding the Close-Out Date at overnight LIBOR;
and
(3) for each such amount in a Currency other than the
Non-Defaulting Party's Base Currency, convert
such amount into the Non-Defaulting Party's Base
Currency at the rate of exchange at which, at the
time of the calculation, the Non-Defaulting Party
can buy such Base Currency with or against the
Currency of the relevant Currency Obligation for
delivery (x) if the Value Date of such Currency
Obligation is on or after the Spot Date as of
such time of calculation for the Base Currency,
on the Value Date of that Currency Obligation or
(y) if such Value Date precedes such Spot Date,
for delivery on such Spot Date (or, in either
case, if such rate of exchange is not available,
conversion shall be accomplished by the
Non-Defaulting Party using any commercially
reasonable method); and
(B) determine in relation to each Value Date: (1) the sum
of all Close-Out Amounts relating to Currency
Obligations under which the Non-Defaulting Party
would otherwise have been entitled to receive the
relevant amount on that Value Date; and (2) the sum
of all Close-Out Amounts relating to Currency
Obligations under which the Non-Defaulting Party
would otherwise have been obliged to deliver the
relevant amount to the Defaulting Party on that Value
Date; and
(C) if the sum determined under (B)(1) is greater than
the sum determined under (B)(2), the difference shall
be the Closing Gain for such Value Date; if the sum
determined under (B)(1) is less than the sum
determined under (B)(2), the difference shall be the
Closing Loss for such Value Date.
(ii) DETERMINING PRESENT VALUE. To the extent permitted by
applicable law, the Non-Defaulting Party shall adjust the
Closing Gain or Closing Loss for each Value Date falling
after the Close-Out Date to present value by discounting
the Closing Gain or Closing Loss from and including the
Value Date to but excluding the Close-Out Date, at LIBOR
with respect to the Non-Defaulting Party's Base Currency as
at the Close-Out Date or at such other rate as may be
prescribed by applicable law.
(iii) NETTING. The Non-Defaulting Party shall aggregate the
following amounts so that all such amounts are netted into
a single liquidated amount payable to or by the
Non-Defaulting Party: (x) the sum of the Closing Gains for
all Value Dates (discounted to present value, where
appropriate, in accordance with the provisions of Section
5.1(b)(ii)) (which for the purposes of this aggregation
shall be a positive figure); and (y) the sum of the Closing
Losses for all Value Dates (discounted to present value,
where appropriate, in accordance with the provisions of
Section 5.1(b)(ii)) (which for the purposes of the
aggregation shall be a negative figure).
(iv) SETTLEMENT PAYMENT. If the resulting net amount is
positive, it shall be payable by the Defaulting Party to
the Non-Defaulting Party, and if it is negative, then the
absolute value of such amount shall be payable by the
Non-Defaulting Party to the Defaulting Party.
5.2 SET-OFF AGAINST CREDIT SUPPORT. Where close-out and
liquidation occurs in accordance with Section 5.1, the
Non-Defaulting Party shall also be entitled (i) to set off the
net payment calculated in accordance with Section 5.1(b)(iv)
which the Non-Defaulting Party owes to the Defaulting Party, if
any, against any credit support or other collateral ("Credit
Support") held by the Defaulting Party pursuant to a Credit
Support Document or otherwise (including the liquidated value of
any non-cash Credit Support) in respect of the Non-Defaulting
Party's obligations under the Agreement or (ii) to set off the
net payment calculated in accordance with Section 5.1(b)(iv)
which the Defaulting Party owes to the Non-Defaulting Party, if
any, against any Credit Support held by the Non-Defaulting Party
(including the liquidated value of any non-cash Credit Support)
in respect of the Defaulting Party's obligations under the
Agreement; PROVIDED that, for purposes of either such set-off,
any Credit Support denominated in a Currency other than the
Non-Defaulting Party's Base Currency shall be converted into such
Base Currency at the spot price determined by the Non-Defaulting
Party at which, at the time of calculation, the Non-Defaulting
Party could enter into a contract in the foreign exchange market
to buy the Non-Defaulting Party's Base Currency in exchange for
such Currency.
5.3 OTHER FOREIGN EXCHANGE TRANSACTIONS. Where close-out and
liquidation occurs in accordance with Section 5.1, the
Non-Defaulting Party shall also be entitled to close-out and
liquidate, to the extent permitted by applicable law, any other
foreign exchange transaction entered into between the Parties
which is then outstanding in accordance with provisions of
Section 5.1, with each obligation of a Party to deliver a
Currency under such a foreign exchange transaction being treated
as if it were a Currency Obligation under the Agreement.
5.4 PAYMENT AND LATE INTEREST. The net amount payable by one
Party to the other Party pursuant to the provisions of Sections
5.1 and 5.3 above shall be paid by the close of business on the
Business Day following the receipt by the Defaulting Party of
notice of the Non-Defaulting Party's settlement calculation, with
interest at overnight LIBOR from and including the Close-Out Date
to but excluding such Business Day (and converted as required by
applicable law into any other Currency, any costs of conversion
to be borne by, and deducted from any payment to, the Defaulting
Party). To the extent permitted by applicable law, any amounts
owed but not paid when due under this Section 5 shall bear
interest at overnight LIBOR (or, if conversion is required by
applicable law into some other Currency, either overnight LIBOR
with respect to such other Currency or such other rate as may be
prescribed by such applicable law) for each day for which such
amount remains unpaid. Any addition of interest or discounting
required under this Section 5 shall be calculated on the basis of
a year of such number of days as is customary for transactions
involving the relevant Currency in the relevant foreign exchange
market.
5.5 SUSPENSION OF OBLIGATIONS. Without prejudice to the
foregoing, so long as a Party shall be in default in payment or
performance to the other Party under the Agreement and the other
Party has not exercised its rights under this Section 5, or, if
"Adequate Assurances" is specified as applying to the Agreement
in Part XI of the Schedule, during the pendency of a reasonable
request to a Party for adequate assurances of its ability to
perform its obligations under the Agreement, the other Party may,
at its election and without penalty, suspend its obligation to
perform under the Agreement.
5.6 EXPENSES. The Defaulting Party shall reimburse the
Non-Defaulting Party in respect of all out-of-pocket expenses
incurred by the Non-Defaulting Party (including fees and
disbursements of counsel, including attorneys who may be
employees of the Non-Defaulting Party) in connection with any
reasonable collection or other enforcement proceedings related to
the payments required under the Agreement.
5.7 REASONABLE PRE-ESTIMATE. The Parties agree that the amounts
recoverable under this Section 5 are a reasonable pre-estimate of
loss and not a penalty. Such amounts are payable for the loss of
bargain and the loss of protection against future risks and,
except as otherwise provided in the Agreement, neither Party will
be entitled to recover any additional damages as a consequence of
such losses.
5.8 NO LIMITATION OF OTHER RIGHTS; SET-OFF. The Non-Defaulting
Party's rights under this Section 5 shall be in addition to, and
not in limitation or exclusion of, any other rights which the
Non-Defaulting Party may have (whether by agreement, operation of
law or otherwise), and, to the extent not prohibited by law, the
Non-Defaulting Party shall have a general right of set-off with
respect to all amounts owed by each Party to the other Party,
whether due and payable or not due and payable (PROVIDED that any
amount not due and payable at the time of such set-off shall, if
appropriate, be discounted to present value in a commercially
reasonable manner by the Non-Defaulting Party). The
Non-Defaulting Party's rights under this Section 5.8 are subject
to Section 5.7.
SECTION 6. FORCE MAJEURE, ACT OF STATE, ILLEGALITY OR IMPOSSIBILITY
6.1 FORCE MAJEURE, ACT OF STATE, ILLEGALITY OR Impossibility. If
either Party is prevented from or hindered or delayed by reason
of force majeure or act of state in the delivery or receipt of
any Currency in respect of a Currency Obligation or if it becomes
or, in the good faith judgment of one of the Parties, may become
unlawful or impossible for either Party to make or receive any
payment in respect of a Currency Obligation, then the Party for
whom such performance has been prevented, hindered or delayed or
has become illegal or impossible shall promptly give notice
thereof to the other Party and either Party may, by notice to the
other Party, require the close-out and liquidation of each
affected Currency Obligation in accordance with the provisions of
Sections 5.1 and, for such purposes, the Party unaffected by such
force majeure, act of state, illegality or impossibility (or, if
both Parties are so affected, whichever Party gave the relevant
notice) shall perform the calculation required under Section 5.1
as if it were the Non-Defaulting Party. Nothing in this Section
6.1 shall be taken as indicating that the Party treated as the
Defaulting Party for the purpose of calculations required by
Section 5.1 has committed any breach or default.
6.2 TRANSFER TO AVOID FORCE MAJEURE, ACT OF STATE, ILLEGALITY OR
IMPOSSIBILITY. If Section 6.1 becomes applicable, unless
prohibited by law, the Party which has been prevented, hindered
or delayed from performing shall, as a condition to its right to
designate a close-out and liquidation of any affected Currency
Obligation, use all reasonable efforts (which will not require
such Party to incur a loss, excluding immaterial, incidental
expenses) to transfer as soon as practicable, and in any event
before twenty (20) days after it gives notice under Section 6.1,
all its rights and obligations under the Agreement in respect of
the affected Currency Obligations to another of its Designated
Offices so that such force majeure, act of state, illegality or
impossibility ceases to exist. Any such transfer will be subject
to the prior written consent of the other Party, which consent
will not be withheld if such other Party's policies in effect at
such time would permit it to enter into transactions with the
transferee Designated Office on the terms proposed, unless such
transfer would cause the other Party to incur a material tax or
other cost.
SECTION 7. PARTIES TO RELY ON THEIR OWN EXPERTISE
Each Party will be deemed to represent to the other Party on the
date on which it enters into an FX Transaction that (absent a
written agreement between the Parties that expressly imposes
affirmative obligations to the contrary for that FX Transaction):
(i) (A) it is acting for its own account, and it has made its own
independent decisions to enter into that FX Transaction and as to
whether that FX Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such advisors as it
has deemed necessary; (B) it is not relying on any communication
(written or oral) of the other Party as investment advice or as a
recommendation to enter into that FX Transaction, it being
understood that information and explanations related to the terms
and conditions of an FX Transaction shall not be considered
investment advice or a recommendation to enter into that FX
Transaction; and (C) it has not received from the other Party any
assurance or guarantee as to the expected results of that FX
Transaction; (ii) it is capable of evaluating and understanding
(on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of
that FX Transaction; and (iii) the other Party is not acting as a
fiduciary or an advisor for it in respect of that FX Transaction.
SECTION 8. MISCELLANEOUS
8.1 CURRENCY INDEMNITY. The receipt or recovery by either Party
(the "first Party") of any amount in respect of an obligation of
the other Party (the "second Party") in a Currency other than
that in which such amount was due, whether pursuant to a judgment
of any court or pursuant to Section 5 or 6, shall discharge such
obligation only to the extent that, on the first day on which the
first Party is open for business immediately following such
receipt or recovery, the first Party shall be able, in accordance
with normal banking practice, to purchase the Currency in which
such amount was due with the Currency received or recovered. If
the amount so purchasable shall be less than the original amount
of the Currency in which such amount was due, the second Party
shall, as a separate obligation and notwithstanding any judgment
of any court, indemnify the first Party against any loss
sustained by it. The second Party shall in any event indemnify
the first Party against any costs incurred by it in making any
such purchase of Currency.
8.2 ASSIGNMENT. Neither Party may assign, transfer or charge or
purport to assign, transfer or charge its rights or its
obligations under the Agreement to a third party without the
prior written consent of the other Party and any purported
assignment, transfer or charge in violation of this Section 8.2
shall be void.
8.3 TELEPHONIC RECORDING. The Parties agree that each Party and
its agents may electronically record all telephonic conversations
between them and that any such recordings may be submitted in
evidence to any court or in any Proceedings for the purpose of
establishing any matters pertinent to the Agreement.
8.4 NOTICES. Unless otherwise agreed, all notices, instructions
and other communications to be given to a Party under the
Agreement shall be given to the address, telex (if confirmed by
the appropriate answerback), facsimile (confirmed if requested)
or telephone number and to the individual or department specified
by such Party in Part III of the Schedule. Unless otherwise
specified, any notice, instruction or other communication given
in accordance with this Section 8.4 shall be effective upon
receipt.
8.5 TERMINATION. Each of the Parties may terminate the Agreement
at any time by seven (7) days' prior written notice to the other
Party delivered as prescribed in Section 8.4, and termination
shall be effective at the end of such seventh day; PROVIDED,
HOWEVER, that any such termination shall not affect any
outstanding Currency Obligations, and the provisions of the
Agreement shall continue to apply until all the obligations of
each Party to the other under the Agreement have been fully
performed.
8.6 SEVERABILITY. In the event any one or more of the provisions
contained in the Agreement should be held invalid, illegal or
unenforceable in any respect under the law of any jurisdiction,
the validity, legality and enforceability of the remaining
provisions contained in the Agreement under the law of such
jurisdiction, and the validity, legality and enforceability of
such and any other provisions under the law of any other
jurisdiction shall not in any way be affected or impaired
thereby. The Parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
8.7 NO WAIVER. No indulgence or concession granted by a Party and
no omission or delay on the part of a Party in exercising any
right, power or privilege under the Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
8.8 MASTER AGREEMENT. Where one of the Parties to the Agreement
is domiciled in the United States, the Parties intend that the
Agreement shall be a master agreement, as referred to in 11
U.S.C. Section 101(53B)(C) and 12 U.S.C.
Section 1821(e)(8)(D)(vii).
8.9 TIME OF ESSENCE. Time shall be of the essence in the
Agreement.
8.10 HEADINGS. Headings in the Agreement are for ease of
reference only.
8.11 PAYMENTS GENERALLY. All payments to be made under the
Agreement shall be made in same day (or immediately available)
and freely transferable funds and, unless otherwise specified,
shall be delivered to such office of such bank, and in favor of
such account as shall be specified by the Party entitled to
receive such payment in Part IV of the Schedule or in a notice
given in accordance with Section 8.4.
8.12 AMENDMENTS. No amendment, modification or waiver of the
Agreement will be effective unless in writing executed by each of
the Parties.
8.13 CREDIT SUPPORT. A Credit Support Document between the
Parties may apply to obligations governed by the Agreement. If
the Parties have executed a Credit Support Document, such Credit
Support Document shall be subject to the terms of the Agreement
and is hereby incorporated by reference in the Agreement. In the
event of any conflict between a Credit Support Document and the
Agreement, the Agreement shall prevail, except for any provision
in such Credit Support Document in respect of governing law.
8.14 ADEQUATE ASSURANCES. If the Parties have so agreed in Part
XI of the Schedule, the failure by a Party to give adequate
assurances of its ability to perform any of its obligations under
the Agreement within two (2) Business Days of a written request
to do so when the other Party has reasonable grounds for
insecurity shall be an Event of Default under the Agreement.
8.15 CORRECTION OF CONFIRMATIONS. Unless either Party objects to
the terms contained in any Confirmation sent by the other Party
or sends a corrected Confirmation within three (3) Business Days
of receipt of such Confirmation, or such shorter time as may be
appropriate given the Value Date of the FX Transaction, the terms
of such Confirmation shall be deemed correct and accepted absent
manifest error. If the Party receiving a Confirmation sends a
corrected Confirmation within such three (3) Business Days, or
shorter period, as appropriate, then the Party receiving such
corrected Confirmation shall have three (3) Business Days, or
shorter period, as appropriate, after receipt thereof to object
to the terms contained in such corrected Confirmation.
SECTION 9. LAW AND JURISDICTION
9.1 GOVERNING LAW. The Agreement shall be governed by, and
construed in accordance with the laws of the jurisdiction set
forth in Part XII of the Schedule without giving effect to
conflict of laws principles.
9.2 CONSENT TO JURISDICTION. (a) With respect to any Proceedings,
each Party irrevocably (i) submits to the non-exclusive
jurisdiction of the courts of the jurisdiction set forth in Part
XIII of the Schedule and (ii) waives any objection which it may
have at any time to the laying of venue of any Proceedings
brought in any such court, waives any claim that such Proceedings
have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such
court does not have jurisdiction over such Party. Nothing in the
Agreement precludes either Party from bringing Proceedings in any
other jurisdiction nor will the bringing of Proceedings in any
one or more jurisdictions preclude the bringing of Proceedings in
any other jurisdiction.
(b) Each Party irrevocably appoints the agent for service of
process (if any) specified with respect to it in Part XIV of the
Schedule. If for any reason any Party's process agent is unable
to act as such, such Party will promptly notify the other Party
and within thirty (30) days will appoint a substitute process
agent acceptable to the other Party.
9.3 WAIVER OF JURY TRIAL. Each Party irrevocably waives any and
all right to trial by jury in any Proceedings.
9.4 WAIVER OF IMMUNITIES. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to
itself and its revenues and assets (irrespective of their use or
intended use), all immunity on the grounds of sovereignty or
other similar grounds from (i) suit, (ii) jurisdiction of any
courts, (iii) relief by way of injunction, order for specific
performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or assets
might otherwise be entitled in any Proceedings in the courts of
any jurisdiction and irrevocably agrees, to the extent permitted
by applicable law, that it will not claim any such immunity in
any Proceedings.
IN WITNESS WHEREOF, the Parties have caused the Agreement to be duly
executed by their respective authorized officers as of the date first written
above.
CARR FUTURES INC.
By /s/ LAWRENCE P. ANDERSON
-------------------------------------------
Name: Lawrence P. Anderson
Title: Executive Vice President
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
By Demeter Management Corporation
General Partner
By /s/ MARK HAWLEY
-------------------------------------------
Name: Mark Hawley
Title: President
<PAGE>
SCHEDULE
Schedule to the International Foreign Exchange Master Agreement
dated as of November 6, 1998
between Morgan Stanley Dean Witter Charter Graham L.P. ("Party A") and
Carr Futures Inc. ("Party B").
Part I. Scope of Agreement
The Agreement shall apply to all foreign exchange transactions
outstanding between any two Designated Offices of the Parties on
the Effective Date.
It shall be understood that Party A shall typically be conducting
its foreign exchange transactions under the Agreement through its
Trading Advisors who shall be disclosed by Party A to Party B from
time to time by notice. The Trading Advisors will act as Party A's
agents for all purposes hereunder until further notice.
Part II. DESIGNATED OFFICES
Each of the following shall be a Designated Office:
PARTY A:
c/o Demeter Management
Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Attn: _____Robert E. Murray
Telephone No.: (212) 392-7404
Facsimile No.: (212) 392-2804
PARTY B:
Carr Futures Inc.
One World Trade Center
92nd Floor
New York, NY 10048
Attn: David Mangold
Telephone No.: (212) 453-6365
Facsimile No.: (212) 453-6361
Part III. NOTICES:
If sent to Party A:
Address: c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Telephone Number: (212) 392-7404
Facsimile Number: (212) 392-2804
Name of Individual or Department to whom Notices are to be sent:
Robert E. Murray
With copies to Party A's designated Trading Advisors.
If sent to Party B:
Address: Carr Futures Inc.
One World Trade Center
New York, New York 10048
Telephone Number: (212) 453-6365
Facsimile Number: (212) 453-6361
Name of Individual or Department to whom Notices are to be sent:
David Mangold
Part IV. PAYMENT INSTRUCTIONS
Name of Bank and Office, Account Number and Reference with respect
to relevant Currencies:
Party A Party B
Citibank, N.A. Harris Trust & Savings Bank,
Chicago
ABA: 021-000089 ABA: 071.000.288
Account Name: Dean Witter For the Account of Carr Futures
Inc.,
Reynolds, Inc. Chicago Customer Segregated
Account No. 40611164 Account No. 203-908-9
FFC: Morgan Stanley Dean FFC: Morgan Stanley Dean Witter
Witter Charter Graham L.P., Charter Graham L.P.,
Account # (As Party B is notified Account # (As Party A is
notified from time notified from time
to time) to time)
Part V. NETTING
A. SETTLEMENT NETTING OFFICES
Each of the following shall be a Settlement Netting Office:
Party A: Same as in Part II.
Party B: Same as in Part II.
B. NOVATION NETTING OFFICES
Each of the following shall be a Novation Netting Office:
Party A: Same as in Part V-A.
Party B: Same as in Part V-A.
C. MATCHED PAIR NOVATION NETTING OFFICES
Each of the following shall be a Matched Pair Novation Netting
Office:
Party A: Not Applicable.
Party B: Not Applicable.
Part VI. CASH SETTLEMENT OF FX TRANSACTIONS
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include
foreign exchange transactions for the purchase and sale of one
Currency against another but which shall be settled by the
delivery of only one Currency based on the difference between
exchange rates as agreed by the Parties as evidenced in a
Confirmation. Section 3.1 is modified so that only one Currency
shall be delivered for any such FX Transaction in accordance with
the formula agreed by the Parties. Section 5.1(b)(i)(A) is
modified so that the Close-Out Amount for any such FX Transaction
for which the cash settlement amount has been fixed on or before
the Close-Out Date pursuant to the terms of such FX Transaction
shall be equal to the Currency Obligation arising therefrom
(increased by adding interest in the manner provided in clause
(A)(2) if the Value Date precedes the Close-Out Date) and for any
such FX Transaction for which the cash settlement amount has not
yet been fixed on the Close-Out Date pursuant to the terms of such
FX Transaction, the Close-Out Amount shall be as determined by the
Non-Defaulting Party in good faith and in a commercially
reasonable manner.
Part VII. Base Currency
Party A's Base Currency is the United States dollar.
Party B's Base Currency is the United States dollar.
Part VIII. Threshold Amount
For purposes of clause (x) of the definition of Event of Default:
Party A's Threshold Amount is 3% of Party A's equity capital as
evidenced by Party A's latest financial statements.
Party B's Threshold Amount is 3% of Party B's equity capital as
evidenced by Party B's latest financial statements.
Part IX. Additional Events of Default
The following provisions which are checked shall constitute Events
of Default:
None.
[ ] (a) occurrence of garnishment or provisional garnishment
against a claim against the Defaulting Party acquired by
the Non-Defaulting Party. The automatic termination
provisions of Section 5.1 [shall] [shall not] apply to
either Party that is a Defaulting Party in respect of
this Event of Default.
[ ] (b) suspension of payment by the Defaulting Party or any
Credit Support provider in accordance with the Bankruptcy
Law or the Corporate Reorganization Law in Japan. The
automatic termination provision of Section 5.1 [shall]
[shall not] apply to either Party that is a Defaulting
Party in respect of this Event of Default.
[ ] (c) disqualification of the Defaulting Party or any Credit
Support Provider by any relevant bill clearing house
located in Japan. The automatic termination provision of
Section 5.2 [shall][shall not] apply to either Party that
is a Defaulting Party in respect of this Event of
Default.
Part X. AUTOMATIC TERMINATION
The automatic termination provision of Section 5.1 shall not apply
to Party A as Defaulting Party in respect of clause (ii), (iii) or
(iv) of the definition of Event of Default.
The automatic termination provision of Section 5.1 shall not apply
to Party B as Defaulting Party in respect of clause (ii), (iii) or
(iv) of the definition of Event of Default.
Part XI. ADEQUATE ASSURANCES
Adequate Assurances under Section 8.14 shall apply to the
Agreement.
Part XII. GOVERNING LAW
In accordance with Section 9.1 of the Agreement, the Agreement
shall be governed by the laws of the State of New York.
Part XIII. Consent to Jurisdiction
In accordance with Section 9.2 of the Agreement, each Party
irrevocably submits to the non-exclusive jurisdiction of the
courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City.
Part XIV. Agent for Service of Process
Not applicable.
Part XV. Certain Regulatory Representations
A. The following FDICIA representation shall not apply:
1. Party A represents and warrants that it qualifies as a
"financial institution" within the meaning of the Federal
Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
2. Party B hereby represents and warrants that it qualifies as a
"financial institution" by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
3. A Party representing that it is a "financial institution" as
that term is defined in 12 C.F.R. Section 231.3 of Regulation
EE issued by the Board of Governors of the Federal Reserve
System ("Regulation EE") represents that:
(a) it is willing to enter into financial contracts" as a
counterparty "on both sides of one or more financial
markets" as those terms are used in Section 231.3 of
Regulation EE; and
(b) during the 15-month period immediately preceding the date
it makes or is deemed to make this representation, it has
had on at least one (1) day during such period, with
counterparties that are not its affiliates (as defined in
Section 231.2(b) of Regulation EE) either:
(i) one or more financial contracts of a total gross
notional principal amount of $1 billion
outstanding; or
(ii) total gross mark-to-market positions (aggregated
across counterparties) of $100 million; and
(c) agrees that it will notify the other Party if it no
longer meets the requirements for status as a financial
institution under Regulation EE.
4. If both Parties are financial institutions in accordance with
the above, the Parties agree that the Agreement shall be a
netting contract, as defined in 12 U.S.C. Section 4402(14), and
each receipt or payment or delivery obligation under the
Agreement shall be a covered contractual payment entitlement or
covered contractual payment obligation, respectively, as
defined in FDICIA.
B. The following ERISA representation shall apply:
Each Party represents and warrants that it is neither (i) an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 which is subject to Part 4
of Subtitle B of Title I of such Act; (ii) a "plan" as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986; nor (iii)
an entity the assets of which are deemed to be assets of any such
"employee benefit plan" or "plan" by reason of the U.S. Department
of Labor's plan asset regulation, 29 C.F.R.
Section 2510.3-101.
C. The following CFTC eligible swap participant representation shall
apply:
Each Party represents and warrants that it is an "eligible swap
participant" under, and as defined in, 17 C.F.R. Section 35.1.
Part XVI. ADDITIONAL COVENANTS
The following covenant[s] shall apply to the Agreement:
A. Party B covenants and agrees that when Party A or an agent for
Party A requests Party B to an FX Transaction, Party B will do a
back-to-back principal trade and the price of the FX Transaction
to Party A will be the same price at which Party B effects its
back-to-back trade with its counterparty, and Party B will not
profit from any mark-up or spread on the FX Transaction.
B. With respect to each FX Transaction, Party A shall pay to Party B
a round-turn fee as follows. For FX Transactions not having a
Party B-imposed forward date, the fee shall be $4.30 per
round-turn ($2.15 per side) for each $85,000 equivalent of the
Currency in the FX Transaction. For FX Transactions with a Party
B-imposed forward date restriction, the fee shall be $5.00 per
round-turn ($2.50 per side) for each $135,000 equivalent of the
Currency in the FX Transaction.
C. Party A shall post margin with Party B with respect to all FX
Transactions in an amount equal to 3.0% of the value of such FX
Transactions on major currencies and 5.0% of the value of such FX
Transactions on minor currencies. All calls for margin shall be
made by Party B orally or by written notice to Dean Witter
Reynolds, and each such call for margin shall be met by Party A
within three hours after Dean Witter Reynolds has received such
call by wire transfer (by federal bank wire system) to the
account of Party B. Party B shall accept as margin any
instrument deemed acceptable as margin under the rules of the
Chicago Mercantile Exchange. Upon oral or written request by
Dean Witter Reynolds, Party B shall, within three hours after
receipt of any such request, wire transfer (by federal bank wire
system) to Dean Witter Reynolds for Party A's account any margin
funds held by Party B in excess of the margin requirements
specified hereby. Notwithstanding Part VI above, all payments,
unless otherwise agreed to, shall be paid in U.S. dollars.
Exhibit 10.06
ESCROW AGREEMENT
November 6, 1998
The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Morgan Stanley Dean Witter Charter Series
ESCROW ACCOUNT
Gentlemen:
In accordance with arrangements made by Demeter Management Corporation, a
Delaware corporation (the "General Partner"), on behalf of Morgan Stanley Dean
Witter Charter Graham L.P. ("Charter Graham"), Morgan Stanley Dean Witter
Charter Millburn L.P. ("Charter Millburn"), and Morgan Stanley Dean Witter
Charter Welton L.P. ("Charter Welton"; together with Charter Graham and Charter
Millburn, the "Partnerships" and individually, a "Partnership"), and Dean Witter
Reynolds Inc., the selling agent for the Partnerships (the "Depositor"; together
with the Partnerships herein sometimes collectively referred to as the "Parties"
and, individually, as a "Party"), the Depositor shall: (i) deliver to you, as
escrow agent ("Escrow Agent"), all subscription funds (by the direct transfer of
immediately available funds into a non-interest-bearing escrow account
established by you for the Partnerships, for investment in your interest-bearing
money market account) received by the Depositor from each subscriber
("Subscriber" or, collectively, the "Subscribers") during the "Initial Offering
Period" and thereafter during the "Continuing Offering" (as described in the
Partnerships' Prospectus, as the same may be updated, supplemented, and amended
from time to time (the "Prospectus")), in connection with the offering to the
public of Units of Limited Partnership Interest of the Partnerships (the
"Units"); and (ii) also promptly transmit to the General Partner a complete
report of all funds deposited with you during the Initial Offering Period and
the Continuing Offering. Except as otherwise determined herein, all capitalized
terms used in this Agreement are defined in the Prospectus. You, as Escrow
Agent, shall hold such subscription funds, together with any additions,
substitutions, or other financial instruments in which such funds may be
invested or for which such funds may be exchanged (collectively referred to
herein as the "Fund"), IN ESCROW upon the following terms:
1. (a) Following receipt by you of written notice from the General
Partner that the General Partner has rejected a Subscriber's subscription, in
whole or in part, during the Initial Offering Period or the Continuing Offering,
you shall transmit to the Depositor, as soon as practicable but in no event
later than three business days following receipt by you of such notice (i) the
amount of such Subscriber's subscription funds that shall have been deposited
with you hereunder and that the General Partner shall have notified you of as
having been rejected, and (ii) any interest earned on the Fund and allocated to
the rejected amount of such subscription in accordance with Section 2 hereof.
You shall at the same time give notice to the Depositor of the amount of
aggregate subscription funds and/or interest so returned.
(b) On the second business day before the scheduled day of each
Closing during the Initial Offering Period and the Continuing Offering, the
General Partner shall notify you of the portion of the Fund that represents
subscriptions to be accepted by the General Partner for each Partnership equal
to the number of Units subscribed for, multiplied by a price per Unit equal to
$10 with respect to the Initial Closing, and thereafter at 100% of the Net Asset
Value per Unit thereof as of the close of business on the date of the Monthly
Closing. Upon receipt by you of joint written notice from the General Partner
and the Depositor on the date of each such Closing to the effect that all of the
terms and conditions with respect to the release of subscription funds from
escrow set forth in the Prospectus have been fulfilled, you shall promptly pay
and deliver to each Partnership the portion of the Fund specified in the General
Partner's prior instructions (excluding any interest earned on the Fund and
funds relating to rejected subscriptions).
(c) On the date of each Closing, or as soon thereafter as practicable,
you shall transmit to the Depositor an amount representing: (i) for each
Subscriber whose subscription shall be accepted by the General Partner in whole
or in part, any interest earned on the Fund and allocated to the accepted
portion of such Subscriber's subscription in accordance with Section 2 hereof,
and (ii) for each Subscriber whose subscription shall have been rejected by the
General Partner in whole or in part but whose subscription funds shall not have
been previously returned to the Depositor by you in accordance with the first
paragraph of this Section 1, such Subscriber's subscription funds that shall
have been deposited with you hereunder and that shall have been rejected by the
General Partner, together with any interest earned on the Fund and allocated to
the rejected amount of such subscription in accordance with Section 2 hereof.
You shall at the same time give notice to the Depositor of the aggregate amount
of subscription funds and/or interest so returned.
(d) Notwithstanding subparagraph (a) of this Paragraph 1, upon receipt
by you of written notice from the General Partner that a Subscriber has been
rejected (because good funds representing payment for Units have not been
deposited in the Subscriber's customer account with the Depositor or because
such Subscriber has provided bad funds in the form of a bad check, draft, or
otherwise to the Depositor), you shall transmit to the Depositor, within three
business days following receipt by you of such notice, the amount of
subscription funds deposited with you hereunder relating to that amount (the
portion of such Subscriber's subscription for which good funds have not been
provided), together with any interest earned on the Fund and allocated to such
portion of such a subscription in accordance with Section 2 hereof to the date
of such return, and shall immediately notify the General Partner of the return
of such funds.
2. You shall hold the Fund (including any interest earned thereon) for
the account of the Partnerships pending delivery to either the Partnerships or
the Depositor, pursuant to Paragraphs 1 or 3 hereof, as the case may be. On each
day that subscription funds are transferred to you hereunder in immediately
available funds and receipt is confirmed before 2:00 P.M., New York City time,
you shall immediately invest such subscription funds solely in your
interest-bearing money market account. If subscription funds are transferred to
you in immediately available funds and receipt is confirmed after 2:00 P.M., New
York City time, you shall so invest such funds on the next day. Interest earned
on the Fund shall be allocated by the Depositor among the subscribers
proportionately based on (A) the amount of their respective subscriptions on
deposit in the Fund, and (B) the period of time from the date that their
respective subscriptions shall have been deposited in the Fund to the earlier of
the delivery of the Fund to the Partnerships at a Closing or the Depositor in
accordance with Sections 1 or 3 hereof, as the case may be.
3. If, during the Initial Offering Period, you are notified in writing
jointly by the Parties that subscriptions for fewer than 400,000 Units of any of
Charter Graham, Charter Millburn or Charter Welton have been subscribed for and
not rejected by the General Partner, that the offering of Units for any such
Partnership(s) have been terminated, and that no Initial Closing with respect to
any such Partnership(s) will be held, you shall transmit to the Depositor, as
soon as practicable but in no event later than three business days after receipt
by you of such notice, an amount representing the full amount of all
subscription funds that shall have been deposited with you hereunder for any
such Partnership(s), together with any interest earned on the Fund in accordance
with Paragraph 2 hereof for any such Partnership(s). You shall at the same time
give notice to the Depositor of the aggregate amounts of subscription funds
and/or interest so returned.
4. The Parties further agree with you as follows:
(a) Your duties and responsibilities shall be limited solely to those
expressly set forth in this Agreement and are ministerial in nature. You shall
neither be subject to nor obliged to recognize any other agreement between, or
other direction or instruction of, any or all of the Parties or any Subscriber
even though reference thereto may be made herein; provided, however, that with
your written consent, this Agreement may be amended at any time or times by an
instrument in writing signed by the Parties.
(b) You are authorized, in your sole discretion, to disregard any and
all notices or instructions given by any of the Parties or by any other person,
firm, or corporation, except only such notices or instructions as are hereunder
provided for and orders or process of any court entered or issued with or
without jurisdiction. If the Fund or any part thereof is at any time attached,
garnished, or levied upon under any court order or in case the payment,
assignment, transfer, conveyance, or delivery of the Fund shall be stayed or
enjoined by any court order, or in case any order, judgment, or decree shall be
made or entered by any court affecting the Fund or any part thereof, then and in
any such event you are authorized, in your sole discretion, to rely upon and
comply with any such order, writ, judgment, or decree that you are advised by
legal counsel of your own choosing is binding upon you, and if you comply with
any such order, writ, judgment, or decree you shall not be liable to any of the
Parties or to any other person, firm, or corporation by reason of such
compliance even though such order, writ, judgment, or decree may be subsequently
reversed, modified, annulled, set aside, or vacated.
(c) You shall be fully protected in relying upon any written notice,
demand, certificate, document, or instrument believed by you in good faith to be
genuine and to have been signed or presented by the proper person or persons or
Party or Parties. The Parties shall provide you with a list of officers and
employees who shall be authorized to deliver instructions hereunder. You shall
not be liable for any action taken or omitted by you in connection herewith in
good faith and in the exercise of your own best judgment.
(d) Should any dispute arise with respect to the delivery, ownership,
right of possession, and/or disposition of the subscription funds deposited with
you hereunder, or should any claim be made upon any such subscription funds by a
third party, you, upon receipt of written notice of such dispute by any of the
Parties or by a third party, are authorized and directed to retain in your
possession all or any of such subscription funds until such dispute shall have
been settled either by mutual agreement of the parties involved or by final
order, decree, or judgment of any court in the United States.
(e) If for any reason funds are deposited in the escrow account other
than by transfer of immediately available funds, you shall proceed as soon as
practicable to collect checks, drafts, and other collection items at any time
deposited with you hereunder. All such collections shall be subject to the usual
collection agreement regarding items received by your commercial banking
department for deposit or collection; provided, however, that if any check,
draft, or other collection item at any time deposited with you hereunder is
returned to you as being uncollectible (except by reason of an account closing),
you shall attempt a second time to collect such item before returning such item
to the Depositor as uncollectible. Subject to the foregoing, you shall promptly
notify the Parties of any uncollectible check, draft, or other collection item
deposited with you hereunder and shall promptly return such uncollectible item
to the Depositor, in which case you shall not be liable to pay any interest on
the subscription funds represented by such uncollectible item. In no event,
however, shall you be required or have a duty to take any legal action to
enforce payment of any check or note deposited hereunder.
(f) You shall not be responsible for the sufficiency or accuracy of
the form, execution, validity, or genuineness of documents now or hereafter
deposited with you hereunder, or for any lack of endorsement thereon or for any
description therein, nor shall you be responsible or liable in any respect on
account of the identity, authority, or rights of the persons executing or
delivering or purporting to execute or deliver any such document, or endorsement
or this Agreement. You shall not be liable for any loss sustained as a result of
any investment made pursuant to the instructions of the Parties or as a result
of any liquidation of an investment prior to its maturity, or the failure of the
Parties to give you any instructions to invest or reinvest the Fund or any
earnings thereon.
(g) All notices required or desired to be delivered hereunder shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day of receipt, 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 a Partnership, the Partnerships or the General Partner:
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
President
if to the Depositor:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Robert E. Murray
Senior Vice President
in either case with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Edwin L. Lyon, Esq.
if to you:
The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Whenever, under the terms hereof, the time for giving a notice or performing an
act falls on a Saturday, Sunday, or legal holiday, such time shall be extended
to the next business day.
(h) The Depositor agrees to indemnify, defend, and hold you harmless
from and against, any and all loss, damage, tax, liability, and expense that may
be incurred by you arising out of or in connection with your duties hereunder,
except as caused by your gross negligence, bad faith, or willful misconduct,
including the legal costs and expenses of defending yourself against any claim
or liability in connection with your performance hereunder.
(i) You shall be paid by the Depositor a single fee of $3,000 in
advance for your services with respect to the first year from the date hereof or
any portion thereof in connection herewith. In addition, the Depositor shall pay
an additional $3,000 fee for any services provided hereunder in any subsequent
year.
(j) It is understood that you may at any time resign hereunder as
Escrow Agent by giving written notice of your resignation to the Parties at
their address set forth above at least 20 days prior to the date specified for
such resignation to take effect, and upon the effective date of such
resignation, all property then held by you hereunder shall be delivered by you
to such person as may be designated jointly by the Parties in writing, whereupon
all your obligations hereunder shall cease and terminate. If you shall resign
prior to the conclusion of the first 60 days of the Initial Offering Period, you
shall pay back to the Depositor an amount equal to the product of $50 and the
number of days remaining until the 60th day of the Initial Offering Period. If
you shall resign at or after the conclusion of the first 60 days of the Initial
Offering Period, you shall have no obligation to pay any amount back to the
Depositor. If no successor Escrow Agent has been appointed or has accepted such
appointment by such date, all your obligations hereunder shall nevertheless
cease and terminate. Your sole responsibility thereafter shall be to keep safely
all property then held by you and to deliver the same to a person designated by
the Parties hereto or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction.
5. This Agreement shall be governed by and construed in accordance with
the law of the State of New York and any action brought hereunder shall be
brought in the courts of the State of New York, sitting in the County of New
York.
6. The undersigned Escrow Agent hereby acknowledges and agrees to hold,
deal with, and dispose of, the Fund (including any interest earned thereon) and
any other property at any time held by the Escrow Agent hereunder in accordance
with this Agreement.
If the foregoing Agreement is satisfactory to you, please so indicate by signing
at the place provided below.
Sincerely,
MORGAN STANLEY DEAN WITTER CHARTER
GRAHAM L.P.
By: Demeter Management Corporation
By: /s/ MARK J. HAWLEY
----------------------------
Mark J. Hawley
President
MORGAN STANLEY DEAN WITTER CHARTER
MILLBURN L.P.
By: Demeter Management Corporation
By: /s/ MARK J. HAWLEY
----------------------------
Mark J. Hawley
President
MORGAN STANLEY DEAN WITTER CHARTER
WELTON L.P.
By: Demeter Management Corporation
By: /s/ MARK J. HAWLEY
----------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ ROBERT E. MURRAY
----------------------------
Robert E. Murray
Senior Vice President
Accepted:
THE CHASE MANHATTAN BANK
By: /s/ PAUL GILKESON
------------------------
Name: Paul Gilkeson
Title: Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Morgan Stanley Dean Witter Charter Graham L.P. and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,090,503
<SECURITIES> 0
<RECEIVABLES> 2,091,992<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,123,087<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,123,087<F3>
<SALES> 0
<TOTAL-REVENUES> (317,134)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (349,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (349,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,858)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscription receivable of $2,077,085 and
interest receivable of $14,907.
<F2>In addition to cash and receivables, total assets include net
unrealized loss on open contracts of $(59,408).
<F3>Liabilities include accrued management fee of $7,272 and
accrued brokerage fees of $25,452.
<F4>Total revenues include realized trading revenue of $(272,633),
net change in unrealized of $(159,408) and interest income of $14,907.
</FN>
</TABLE>
