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 quarterly period ended March 31, 2000 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. 0-18314
DEAN WITTER PRINCIPAL PLUS FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3541588
(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>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
March 31, 2000 (Unaudited) and December 31, 1999..... .....2
Consolidated Statements of Operations for the
Quarters Ended March 31, 2000 and 1999 (Unaudited)........3
Consolidated Statements of Changes in Partners'
Capital for the Quarters Ended March 31, 2000 and
1999 (Unaudited).......................................... 4
Consolidated Statements of Cash Flows for the
Quarters Ended March 31, 2000 and 1999
(Unaudited)................................................5
Notes to Consolidated Financial Statements
(Unaudited).............................................6-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations..................................... 12-19
Item 3. Quantitative and Qualitative Disclosures
about Market Risk...............................19-32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 33
Item 5.Other Information........................
......... 33
Item 6. Exhibits and Reports on Form 8-K........
.......... 34
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 4,962,880 6,014,023
Net unrealized gain on open contracts 1,342,982
380,736
Total Trading Equity 6,305,862 6,394,759
Investment in Zero-Coupon U.S. Treasury Securities 39,681,140
40,367,536
Interest receivable (DWR) 24,706 24,726
Unrealized loss on Zero-Coupon U.S.
Treasury Securities (849,846) (1,018,390)
Total Assets 45,161,862 45,768,631
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 2,607,495 1,341,552
Accrued brokerage fees (DWR) 152,903 155,551
Accrued administrative expenses 140,720 121,844
Accrued management fee 38,226 38,888
Total Liabilities 2,939,344 1,657,835
Minority Interest 199,564 198,080
Partners' Capital
Limited Partners (22,466.586 and
23,879.732 Units, respectively)41,454,642 43,352,757
General Partner (308 Units) 568,312 559,959
Total Partners' Capital 42,022,954 43,912,716
Total Liabilities and Partners' Capital 45,161,862 4
5,768,631
NET ASSETS PER LIMITED PARTNERSHIP
AGREEMENT 42,022,954 43,912,716
NET ASSET VALUE PER UNIT 1,845.17 1,815.50
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (424,587) 586,273
Net change in unrealized 962,246 (946,109)
Total Trading Results 537,659 (359,836)
Interest Income 622,044 666,798
Change in value of Yield Pool 168,544 (1,112,237)
Total Revenues 1,328,247 (805,275)
EXPENSES
Brokerage fees (DWR) 452,359 505,908
Management fees 113,090 126,477
Transaction fees and costs 21,582 24,805
Administrative expenses 22,000 24,000
Total Expenses 609,031 681,190
INCOME (LOSS) BEFORE MINORITY INTEREST719,216 (
1,486,465)
Minority interest in income (loss) 1,484
(35,121)
NET INCOME (LOSS) 717,732 (1,451,344)
NET INCOME (LOSS) ALLOCATION
Limited Partners 709,379 (1,434,712)
General Partner 8,353 (16,632)
NET INCOME (LOSS) 717,732 (1,451,344)
Less: Net change in unrealized gain
on Zero-Coupon U.S. Treasury Securities -
1,112,237
NET INCOME (LOSS) ALLOCATED TO PARTNERS
FOR TAX AND NET ASSET VALUATION 717,732 (339,107)
Net Income (Loss) Allocation for Tax and Net Asset
Valuation
Limited Partners 709,379 (335,188)
General Partners 8,353 (3,919)
Net Income (Loss) Allocation for Tax and Net Asset
Valuation
Limited Partners 29.67 (12.72)
General Partner 29.67 (12.72)
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital,
December 31, 1998 26,653.343 $51,660,212 $603,953
$52,264,165
Net Loss - (1,434,712) (16,632)
(1,451,344)
Redemptions (377.918) (708,556) -
(708,556)
Partners' Capital,
March 31, 1999 26,275.425 $49,516,944 $587,321
$50,104,265
Partners' Capital,
December 31, 1999 24,187.732 $43,352,757 $559,959
$43,912,716
Net Income - 709,379 8,353 717,732
Redemptions (1,413.146) (2,607,494) -
(2,607,494)
Partners' Capital,
March 31, 2000 22,774.586 $41,454,642 $568,312
$42,022,954
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 717,732 (
1,451,344)
Noncash item included in income (loss):
Net change in unrealized (962,246) 946,109
Change in value of yield pool (168,544) 1
,112,237
Decrease in operating assets:
Investment in Zero-coupon U.S. Treasury Securities686,396
201,432
Interest receivable (DWR) 20 2,998
Increase (decrease) in operating liabilities:
Accrued brokerage fee (DWR) (2,648)
(4,947)
Accrued administrative expenses 18,876 24,000
Accrued management fee (662) (1,236)
Incentive fee payable -
(147,477)
Net cash provided by operating activities 288,924
681,772
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable1,265,943 (
247,607)
Increase (decrease) in minority interest1,484 (35,121)
Redemptions of Units (2,607,494)
(708,556)
Net cash used for financing activities (1,340,067)
(991,284)
Net decrease in cash (1,051,143) (
309,512)
Balance at beginning of period 6,014,023
9,270,594
Balance at end of period 4,962,880
8,961,082
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED 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 Dean Witter Principal
Plus Fund L.P. (the "Partnership"). The consolidated financial
statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 1999 Annual
Report on Form 10-K.
1. Organization
Dean Witter Principal Plus Fund L.P. is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts and
physical commodities, forward contracts, and other commodity
interests (collectively, "futures interests").
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. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. The Trading
Manager to the Partnership
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
is RXR Inc. (the "Trading Manager").
2. Revenue Recognition
The yield pool is valued at cost plus accreted interest with the
accumulated unrealized gain (loss) on the Zero-Coupon U.S.
Treasury Securities separately disclosed. The year-to-date
change in the yield pool's market value is reflected in the
Consolidated Statements of Operations. The consolidated
statements of financial condition and the consolidated statements
of operations have been reconciled to reflect Net Assets, Net
Asset Value per Unit and Net Income (Loss) in accordance with the
terms of the Limited Partnership Agreement. For the three months
ended March 31, 2000, $551,833 of interest income has been
accreted on the Yield Pool. At March 31, 2000, the cost of the
Yield Pool was $31,421,425 and the accreted interest receivable
thereon was $8,259,715. The market value of the Yield Pool on
March 31 2000, was approximately $38,831,294.
3. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a prevailing rate on
U.S. Treasury bills. The Partnership pays brokerage fees to DWR.
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts and physical commodities, forward contracts, and other
commodity interests. 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.
In June 1998, the Financial Accounting Standards Board ("FASB")
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. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal year beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 gain on open contracts are reported as a
component of "Equity in futures interests trading accounts" on
the consolidated statements of financial condition and totaled
$1,342,982 and $380,736 at March 31, 2000 and December 31, 1999,
respectively.
Of the $1,342,982 net unrealized gain on open contracts at March
31, 2000, $1,379,816 related to exchange-traded futures contracts
and ($36,834) related to off-exchange-traded forward currency
contracts.
Of the $380,736 net unrealized gain on open contracts at December
31, 1999, $325,528 related to exchange-traded futures contracts
and $55,208 related to off-exchange-traded forward currency
contracts.
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Exchange-traded futures contracts held by the Partnership at
March 31, 2000 and December 31, 1999 mature through June 2000.
Off-exchange-traded forward currency contracts held by the
Partnership at March 31, 2000 and December 31, 1999 mature
through June 2000 and March 2000, respectively.
The Partnership has 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 consolidated statements of
financial condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures and futures-styled options 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 and futures-
styled options 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
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
futures and futures-styled options contracts, including an amount
equal to the net unrealized gain on all open futures and futures-
styled options contracts, which funds, in the aggregate, totaled
6,342,696 and $6,339,551 at March 31, 2000 and December 31, 1999,
respectively. 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 gain 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.
The Partnership has a netting agreement with Carr. This
agreement, which seeks to reduce both the Partnership's and
Carr's exposure to off-exchange-traded forward currency
contracts, should materially decrease the Partnership's credit
risk in the event of Carr's bankruptcy or insolvency. 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).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for the Trading Manager, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, forwards, and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken nor liquidated unless traders are willing to effect trades
at or within the limit. Futures prices have occasionally moved
the daily limit for several consecutive days with little or
<PAGE>
no trading. These market conditions could prevent the
Partnership from promptly liquidating its futures or options
contracts and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. 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 prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources - The Partnership does not have, or expect to
have, any capital assets. Redemptions of additional units of
limited partnership interest ("Unit(s)") in the future will
affect the amount of funds available for investments in futures
interests in subsequent periods. It is not possible to estimate
the amount and therefore, the impact of future redemptions of
Units.
Results of Operations
General. The Partnership's results depend on its Trading Manager
and the ability of the Trading Manager's trading programs to take
<PAGE>
advantage of price movements or other profit opportunities in the
futures, forwards and options markets. The following presents a
summary of the Partnership's operations for the three months
ended March 31, 2000 and 1999, respectively, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Manager trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Manager or will be profitable in the
future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
its Trading Manager's trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income and change in value
of the yield pool of $1,328,247 and posted an increase in Net
Asset Value per Unit. The most significant gains of approximately
1.3% were recorded during February and March in the global
interest rate futures component from long positions in U.S.
interest rate futures as prices moved higher followed by
volatility in the U.S. stock markets as investors shifted assets
into U.S. Treasury notes from stocks. During January, gains were
recorded from short positions in eurodollar futures as prices
decreased as short-term U.S. interest rates climbed after a
<PAGE>
government report pointed to rising wage costs. In the currency
markets, profits of approximately 0.2% were recorded during March
from long Japanese yen positions versus the Australian dollar and
from cross-rate positions, specifically in the euro relative to
the British pound, as the value of the European common currency
weakened during January versus the pound, hurt by skepticism
about Europe's economic outlook and lack of public support for
the economy from European officials. In the metals markets,
gains of approximately 0.2% were recorded early in February from
long nickel futures positions as nickel prices climbed to their
highest level in five years. In the energy markets, gains of
approximately 0.1% were recorded during February from long
positions in crude oil futures and its refined products as oil
prices increased on concerns about future output levels from the
world's leading producer countries amid dwindling stockpiles and
increasing demand. These gains were partially offset by losses
of approximately 0.2% recorded during February in the livestock
markets from short lean hog futures positions as prices climbed
higher amid expectations of higher wholesale pork prices due to
light slaughter rates. During January, losses were incurred from
long positions in live cattle futures as prices declined after
the USDA raised its forecast for U.S. red meat production in
2000. In the agricultural markets, losses of approximately 0.2%
were experienced from long corn futures positions as prices
declined later in March amid rainfall in the U.S. Midwest. Early
<PAGE>
in February, losses were incurred from long positions in soybean
oil as prices moved lower following rains in the growing region
of South America, particularly Brazil. Total expenses for the
three months ended March 31, 2000 were $609,301, resulting in net
income before minority interest of $719,216. The minority
interest in such income was $1,484, resulting in net income of
$717,732 for the Partnership. The value of a Unit increased from
$1,815.50 at December 31, 1999 to $1,845.17 at March 31, 2000.
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading losses net of interest income and change in value
of the yield pool of $805,275 and posted a decrease in Net Asset
Value per Unit. The most significant losses of approximately
1.7% were experienced primarily during February in the fixed
income component of the balanced portfolio from long U.S.
interest rate futures positions as prices dropped in reaction to
Federal Reserve Chairman Alan Greenspan's warnings in
Congressional testimony late in February that a strong economy
could reignite inflation. Fears that the Federal Reserve
eventually could boost target interest rates pushed down domestic
bond prices and forced yields higher. In the livestock markets,
losses of approximately 0.2% were recorded mainly in January from
short positions in hog and cattle futures as prices in both
markets moved sharply higher on concerns that winter storms would
hurt supplies, on reports of an increase in demand and plans for
<PAGE>
government aid programs to help struggling farmers. In soft
commodities, losses of approximately 0.1% were experienced mostly
during March from short cotton futures positions as prices
increased to their highest level since mid-December on
technically motivated speculative buying and rumors that an
influential merchant turned bullish early in March. In the
metals markets, losses of approximately 0.1% were recorded
largely from short copper futures positions as prices moved
significantly higher in late March in response to a decline in
LME warehouse stocks and evidence that Japanese consumption has
stabilized. These losses were partially offset by gains of
approximately 0.4% recorded in the stock index component
primarily during January and March from long S&P 500 Index
futures positions as domestic equity prices increased in reaction
to Wall Street reaching a major milestone during March, as the
Dow Jones Industrial Average hit 10,000 for the first time.
Overall, stock prices were boosted by widespread favorable
sentiment towards the U.S. economy and robust trading momentum.
In the currency markets, gains of approximately 0.4% were
recorded throughout a majority of the quarter mainly from short
euro positions as the value of the U.S. dollar hit new highs
during March versus the European common currency on the strength
of the U.S. economy, concerns pertaining to the economic health
of Europe and Japan and growing uncertainty about the military
action in Yugoslavia. In the energy markets, gains of
approximately 0.3% were recorded mostly during March from long
<PAGE>
positions in crude and gas oil futures as prices moved
significantly higher due largely to the news that both OPEC and
non-OPEC countries had reached an agreement to cut total output
by approximately two million barrels a day beginning April 1,
1999. In the agricultural markets, smaller gains of
approximately 0.2% were recorded primarily in January and
February from short soybean oil futures positions as prices
declined to 23-year lows in reaction to a healthy South American
crop outlook, weak world demand and fears that Brazil will flood
the market in an effort to support their ailing economy. Total
expenses for the three months ended March 31, 1999 were $681,190
resulting in a net loss before minority interest of $1,486,465.
The minority interest in such loss was $35,121, resulting in a
net loss of $1,451,344 for the Partnership. The value of a Unit
decreased from $1,887.62 at December 31, 1998 to $1,874.90 at
March 31, 1999.
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 Manager from trading those sovereign
currencies and thereby limits its ability to take advantage of
potential market opportunities that might otherwise have existed
<PAGE>
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these 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 among the
Partnership's open positions, the volatility present within the
<PAGE>
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
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 using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
<PAGE>
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures interests are settled daily through variation
margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Manager is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model 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, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
<PAGE>
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Manager in its daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of March 31, 2000 and 1999.
At March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $42 million and $50 million,
respectively.
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (0.68)% (0.61)%
Equity (0.59) (0.81)
Currency (0.29) (0.25)
Commodity (0.16) (0.16)
Aggregate Value at Risk (1.02)% (1.06)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
<PAGE>
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, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly over
any given time period, or even within a single trading day. Any
changes in open positions could positively or negatively materially
impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Interest Rate (0.68)% (0.42)% (0.56)%
Equity (0.81) (0.16) (0.45)
Currency (0.29) (0.22) (0.26)
Commodity (0.21) (0.14) (0.17)
Aggregate Value at Risk (1.06)% (0.55)% (0.81)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
<PAGE>
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership's open positions
thus creates a "risk of ruin" not typically found in other
investments. The relative size of the positions held may cause the
Partnership to incur losses greatly in excess of VaR within a short
period of time, given the effects of the leverage employed and
market volatility. The VaR tables above, as well as the past
performance of the Partnership, gives no indication of such "risk
of ruin". In addition, VaR risk measures should be viewed in light
of the methodology's limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect 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
<PAGE>
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 VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at March 31, 2000 and for the end of the four
quarterly reporting periods from April 1, 1999 through March 31,
2000. 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 or monitor risk. There can be
no assurance that the Partnership's actual losses on a particular
day will not exceed the VaR amounts indicated above 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. These balances and any market risk
they may represent are immaterial. The Partnership also maintains
a substantial portion (approximately 10%) 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.
<PAGE>
The Partnership also has non-trading risk on the Zero-Coupon U.S.
Treasury Securities it holds to support the guaranteed Net Asset
Value per Unit at the Guaranteed Redemption Date of August 31,
2003. The fair value of these securities is subject to interest
rate risk.
For non-trading securities, the Partnership measures its market
risk using sensitivity analysis. The sensitivity analysis
estimates the potential change in fair value based on a
hypothetical 10% change in interest rates. Based on the current
valuation of the Zero-Coupon U.S. Treasury Securities, such a
change in interest rates will cause an approximately 4.68% decline
in their fair value. Such a change will not have a material effect
on the Net Asset Value per Unit.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, 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 (A) those disclosures that are
statements of historical fact and (B) 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
<PAGE>
Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Manager
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 expropriations, 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.
The following were the primary trading risk exposures of the
Partnership as of March 31, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate - The primary market exposure in the Partnership
at March 31, 2000 was in the interest rate sector. Exposure was
spread across the U.S., European, Japanese and Australian
interest rate sectors. Interest rate movements directly affect
the price of the sovereign bond futures positions held by the
Partnership and indirectly affect the value of its stock index
<PAGE>
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 generally 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 and Australian interest rates will
remain the primary interest rate 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 futures
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.
Equity - The second largest market exposure at March 31, 2000
was in the global stock index complex. The 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, 2000, the
Partnership's primary exposures were in the S&P 500 (U.S.) and
Nikkei (Japan) stock indices. The Partnership is primarily
exposed to the risk of adverse price trends or static markets in
<PAGE>
the U.S. 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).
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. Interest rate changes as well as political and
general economic conditions influence these fluctuations. The
Partnership trades in a large number of currencies, including
cross-rates - i.e., positions between two currencies other than
the U.S. dollar. For the first quarter of 2000, the
Partnership's major exposures were in the euro currency crosses
and outright U.S. dollar positions. (Outright positions consist
of the U.S. dollar vs. other currencies. These other currencies
include the major and minor currencies). Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
<PAGE>
Commodity
Soft Commodities and Agriculturals - On March 31, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the soybean oil,
livestock and corn markets. Supply and demand inequalities,
severe weather disruption and market expectations affect price
movements in these markets.
Energy - On March 31, 2000, the Partnership's energy exposure
was shared by futures contracts in the oil and natural gas
markets. Price movements in these markets result from political
developments in the Middle East, weather patterns, and other
economic fundamentals. It is possible that volatility will
remain high and that significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and is expected to continue in this choppy pattern.
Metals - The Partnership's metals market exposure is to
fluctuations in the price of base metals. During periods of
volatility, base metals will affect performance dramatically.
Demeter anticipates that the base metals will remain the primary
metals market exposure of the Partnership.
<PAGE>
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the
Partnership as of March 31, 2000:
Foreign Currency Balances - The Partnership's primary foreign
currency balances are in Australian dollars and euros. The
Partnership controls the non-trading risk of these balances by
regularly converting these balances back into dollars upon
liquidation of the respective position.
Zero-Coupon U.S. Treasury Securities
It is the Partnership's intention to hold the Zero-coupon U.S.
Treasury Securities until their August 15, 2003 maturity date
except as needed to fund quarterly redemptions. Consequently,
the period to period interest rate risk these securities are
subject to is not considered material.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Manager, separately, attempt to
manage the risk of the Partnership's open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership's assets
among different market sectors and trading approaches, and
monitoring the performance of the Trading Manager daily. In
addition, the Trading Manager establishes diversification
guidelines, often set in terms of the maximum margin to be
committed
<PAGE>
to positions in any one market sector or market-sensitive
instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instruments, cash and Zero-Coupon U.S. Treasury Securities.
Cash and Zero-Coupon U.S. Treasury Securities are the only
Partnership investments directed by Demeter, rather than the
Trading Manager.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion).
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and DWFCM and Robert E.
Murray replaced him as Chairman of the Board of Demeter and Dean
Witter Futures and Currency Management Inc. ("DWFCM").
Demeter has determined, commencing in May 2000, to transfer the
Partnership's futures and options clearing from Carr Futures Inc.
to Morgan Stanley & Co. Incorporated ("MS & Co."), an affiliate
of Demeter, while trades on the London Metal Exchange will be
cleared by Morgan Stanley & co. International Limited ("MSIL"),
also an affiliate of Demeter. In addition, MS & Co. and MSIL
rather than Carr Futures, will act as the counterparty on all of
the Partnership's foreign currency forward trades. DWR will
continue to act as the non-clearing commodity broker for the
Partnership.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.03 Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean Witter
Reynolds Inc. is filed herewith.
10.04 Customer Agreement, dated as of December 1, 1997, among
the Partnership, Carr Futures, Inc., and Dean Witter Reynolds
Inc. is filed herewith.
10.05 International Foreign Exchange Master Agreement,
dated as of August 1, 1997, between the Partnership and
Carr Futures, Inc. is filed herewith.
(B) Reports on Form 8-K. - None.
<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.
Dean Witter Principal Plus
Fund L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 12, 2000 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Dean Witter Principal Plus Fund 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,962,880
<SECURITIES> 39,681,140
<RECEIVABLES> 24,706
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,161,862<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 45,161,862<F2>
<SALES> 0
<TOTAL-REVENUES> 1,328,247<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 609,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 717,732<F4>
<INCOME-TAX> 0
<INCOME-CONTINUING> 717,732<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 717,732<F4>
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash, securities and receivables, total assets include
net unrealized gain on open contracts of $1,342,982 and unrealized
loss on Zero-Coupon U.S. Treasury Securities of $849,846.
<F2>Liabilities include redemptions payable of $2,607,495, accrued
brokerage fee of $152,903, accrued administrative expenses of
$140,720, and accrued management fee of $38,226.
<F3>Total revenue includes realized trading revenue of $(424,587), net
change in unrealized of $962,246, interest income of $622,044 and
change in valuation of Yield Pool of $168,544.
<F4>Income-Pretax, Income Continuing and Net Income includes minority
interest in income of $1,484.
</FN>
</TABLE>
- 3 -
<PAGE>
AMENDED AND RESTATED CUSTOMER AGREEMENT
THIS AMENDED AND RESTATED CUSTOMER AGREEMENT (this
"Agreement"), made as of the 1st day of December, 1997, by and
between DEAN WITTER PRINCIPAL PLUS FUND MANAGEMENT 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 August 24, 1989,
(with Dean Witter Principal Plus Fund L.P. as the limited
partner; referred to herein as the "Limited Partner"), and a
Limited Partnership Agreement dated as of August 24, 1989, as
amended and restated as of August 29, 1995, with Demeter
Management Corporation, a Delaware corporation ("Demeter"),
acting as general partner (in such capacity, the "General
Partner"), to trade, buy, sell, spread or otherwise acquire,
hold, or dispose of commodities (including foreign currencies,
mortgage-backed securities, money market instruments, and any
other securities or items which are now or may hereafter be, the
subject of futures contract trading), commodity futures
contracts, commodity forward contracts, foreign exchange
commitments, and any options on physical commodities and on
futures contracts, spot (cash) commodities, and any rights
pertaining thereto, and to engage in all activities incident
thereto (hereinafter referred to collectively as "futures
interests");
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 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 entered into that certain
Amended and Restated Customer Agreement dated as of September 1,
1996 (the "Customer Agreement"), whereby DWR agreed to perform
futures interests brokerage and certain other services for the
Customer; and
WHEREAS, the Customer and DWR wish to amend and restate
the Customer Agreement to set forth the terms and conditions upon
which DWR will continue to 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 Limited
Partner's most recent prospectus as filed with the Securities and
Exchange Commission (the "Prospectus") relating to the offering
of units of <PAGE>limited partnership interest of the Limited
Partner (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 Partner pursuant to the
Customer's Amended and Restated 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.
(a) Except as otherwise set forth herein, the
Customer, and not DWR, shall be responsible for all taxes,
management and incentive fees to the Trading Advisor, brokerage
commissions to DWR, and all extraordinary expenses incurred by
it. In addition, the Customer, and not DWR, shall pay the
charges of CFI for executing and clearing the Customer's futures
interests trades (as described in paragraph 5(b) below).
(b) The Customer will pay its and the Limited
Partner's ordinary administrative expenses during the period that
the Customer is actively trading. If the Company should cease
trading or terminate, such administrative expenses will be paid
out of the remaining assets of the Customer, or, if no such
assets remain, such administrative expenses shall be paid by the
Limited Partner out of assets other than those held in the Yield
Pool. If the only remaining assets are those held in the Yield
Pool, DWR and/or the Trading Advisor will pay and will not be
reimbursed for the Limited Partner's ordinary administrative
expenses until the end of the Guarantee Period. Such expenses
shall include legal, accounting, auditing, recordkeeping,
administration, and clerical expenses (including expenses
incurred in preparing reports and tax information to limited
partners of the Limited Partner and regulatory authorities and
expenses for specialized administrative services), printing and
duplication expenses, mailing expenses, and filing fees.
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. (a) Compensation of DWR. The Customer will pay
brokerage commissions to DWR at a monthly flat-rate. The
Customer will pay to DWR a monthly flat-rate fee of 1/3 of 1% (a
4% annual rate) of the Limited Partner's Adjusted Net Assets (as
defined below) as of the last day of each month. DWR will
receive such brokerage fees irrespective of the number of trades
executed on the Customer's behalf. For the purpose of
calculating this brokerage fee, the term "Net Assets" shall have
the same meaning as in Section 7(d) of the <PAGE>Limited
Partner's limited partnership agreement (except that assets held
in the Yield Pool will be valued at cost plus accrued interest).
"Adjusted Net Assets" shall equal Net Assets, increased by the
current monthly brokerage fee, the current monthly management
fee, any accrued incentive fee due the Trading Advisor, and any
redemptions or distributions as of the end of the month for which
brokerage fees are being calculated.
(b) Compensation of CFI. The Customer will pay
certain charges of CFI for executing and clearing trades for the
Customer pursuant to that certain Customer Agreement dated as of
December 1, 1997, among the Customer, CFI and DWR. In addition,
DWR shall pay CFI certain charges with respect to the execution
and clearance of trades for the Customer as agreed from time to
time between DWR and CFI.
(c) During the Guarantee period, the brokerage fees
and the aggregate cap on brokerage fees, transaction fees and
costs, ordinary administrative expenses and net excess interest
and compensating balance benefits to DWR as set forth herein and
in the Prospectus, may not be increased. Thereafter, no increase
may take effect until the first business day following a
Redemption Date, provided that: (i) notice of such increase is
mailed to each limited partner of the Limited Partner at least
five business days prior to the last date on which a "Request for
Redemption" must be received by Demeter, as general partner of
the Limited Partner, with respect to the applicable Redemption
Date; and (ii) such notice shall describe the redemption and
voting rights of the limited partners of the Limited Partner.
(d) Notwithstanding the foregoing, the Customer's
expenses are subject to the following limits: (a) if the Customer
or the Limited Partner 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 or the Limited Partner, and (iii) net excess interest
and compensation balance benefits to DWR (after crediting the
Customer or the Limited Partner with interest as described in the
Prospectus) shall not exceed 14% annually of the Limited
Partner'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. DWR will
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 an amount equal to 90% of the Customer's
average daily Net Assets for the month were invested in U.S.
Treasury bills. All of such funds will be available for margin
for the Customer's trading. For the purpose of such interest
payments, Net Assets will not include monies due to the Customer
on or with respect to forward contracts and other futures
interests but not actually received by it from banks, brokers,
dealers and other persons. The Customer understands that it will
not receive any other interest income on its assets and that DWR
will receive interest income from CFI, as agreed from time to
time by DWR and CFI, on the Customer's assets deposited as margin
with CFI. 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. The Customer's assets
held by DWR may be used solely as margin for the Customer's
trading.
<PAGE>
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, the Limited
Partner, 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 the
Limited Partner (or a limited partner of the 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 the Limited Partner (or a limited
partner of the 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 the Delaware Revised Uniform Limited
Partnership Act, as amended, and 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
or Limited Partner; (ii) such demand, claim, lawsuit, or legal
action is not initiated by the Limited Partner (or a limited
partner of the 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.
<PAGE>
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 Limited Partnership Agreement.
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:
DEAN WITTER PRINCIPAL PLUS FUND MANAGEMENT L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
President
<PAGE>
if to DWR:
DEAN WITTER REYNOLDS INC.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
Executive 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.
IN WITNESS WHEREOF, this Agreement has been executed
for and on behalf of the undersigned as of the day and year first
above written.
DEAN WITTER PRINCIPAL PLUS FUND
MANAGEMENT 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
<PAGE>
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.
<PAGE>
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
<PAGE>
(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.
<PAGE>
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;
<PAGE>
(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;
<PAGE>
(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;
<PAGE>
(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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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) X /s/ Mark J. Hawley
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:
Risk Disclosure Statement for Project ATM Customer
Futures and Options (in the form Information Statement
prescribed by CFTC
Regulation 1.55(c))
LME Risk Warning Notice Questions & Answers on Flexible
Options Trading at the CBOT
Dean Witter Order Presumption CME Average Pricing System
for After Hours Electronic Markets Disclosure Statement
NYMEX ACCESSSM Risk Disclosure Special Notice to Foreign
Statement Brokers and Foreign Traders
Globexr 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.
DEAN WITTER PRINCIPAL PLUS FUND MANAGEMENT L.P.
CUSTOMER NAME(S)
By: DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley December 1, 1997
AUTHORIZED SIGNATURE(S) DATE
Mark J. Hawley, President
(If applicable, print name and title
of signatory)
<PAGE>
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of
the 1st day of December, 1997, by and among DEAN WITTER PRINCIPAL
PLUS FUND MANAGEMENT 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 August 24, 1989
(with Dean Witter Principal Plus Fund L.P. as the limited
partner; referred to herein as the "Limited Partner"), and a
Limited Partnership Agreement dated as of August 24, 1989, as
amended and restated as of August 29, 1995 with Demeter
Management Corporation, a Delaware corporation ("Demeter"),
acting as general partner (in such capacity, the "General
Partner"), to trade, buy, sell, spread, or otherwise acquire,
hold, or dispose of commodities (including foreign currencies,
mortgage-backed securities, money market instruments, and any
other securities or items which are now or may hereafter be, the
subject of futures contract trading), commodity futures
contracts, commodity forward contracts, foreign exchange
commitments, and any options on physical commodities and on
futures contracts, spot (cash) commodities, and any rights
pertaining thereto, and to engage in all activities incident
thereto (hereinafter referred to collectively as "futures
interests");
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 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 Amended and Restated Customer Agreement, dated as of
December 1, 1997 (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. 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, Demeter
or the Trading Advisor, and the Customer agrees to retain CFI as
its clearing <PAGE>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 Partner pursuant to the
Customer's Amended and Restated Limited Partnership Agreement as
from time to time in effect and as required by applicable law,
rules, or regulations. 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.
2. 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.
3. Obligations and Expenses. Except as otherwise set
forth herein, the Customer, and not CFI, shall be responsible for
all taxes, management and incentive fees to the Trading Advisor,
the brokerage commissions to DWR pursuant to the DWR Customer
Agreement, and all extraordinary expenses incurred by it.
4. 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.
<PAGE>
5. Compensation of CFI. In compensation of CFI's
services pursuant to this Agreement, the Customer shall pay CFI
all NFA fees, clearinghouse fees, exchange fees or other
regulatory fees, taxes (other than income taxes), floor brokerage
fees, third-party clearing fees and give-up fees. DWR shall pay
to CFI such charges with respect to the execution and clearance
of trades for the Customer as DWR and CFI shall agree from time
to time. Subject to the brokerage commission and transaction
fees and costs caps set forth in the DWR Customer Agreement, DWR
shall have no obligation to reimburse the Customer for any
payments made by the Customer to CFI. The Customer shall have no
obligation to reimburse DWR for any payments made by DWR to CFI.
6. 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 7 hereof.
7. 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. CFI shall pay to DWR such interest income on the
Customer's assets held by CFI as CFI and DWR shall agree from
time to time. The Customer understands that it will not receive
any interest income on its assets held by CFI other than that
paid by DWR pursuant to the DWR Customer Agreement. The
Customer's assets held by CFI may be used solely as margin for
the Customer's trading.
8. 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.
<PAGE>
9. 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.
10. Standard of Liability and Indemnity. Subject to
Section 1 hereof, CFI and its affiliates (as defined below) shall
not be liable to the Customer, the General Partner, the Limited
Partner, 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 the
Limited Partner (or a limited partner of the 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 the Limited Partner (or a limited
partner of the 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 the Delaware Revised Uniform Limited
Partnership Act, as amended, and this Section 10. 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 <PAGE>duties or services by such persons to the
Customer; (ii) such demand, claim, lawsuit, or legal action is
not initiated by the Limited Partner (or a limited partner of the
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 10 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 10 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 10, 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 10 shall include only those persons
acting on behalf of CFI within the scope of the authority of CFI,
as set forth in this Agreement.
11. 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 <PAGE>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.
12. 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.
13. Assignment. This Agreement may not be assigned by
any party without the express written consent of the other
parties.
<PAGE>
14. Amendment. This Agreement may not be amended
except by the written consent of the parties.
15. 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:
DEAN WITTER PRINCIPAL PLUS FUND MANAGEMENT L.P.
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
President
if to DWR:
DEAN WITTER REYNOLDS INC.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
Executive Vice President
if to CFI:
CARR FUTURES INC
10 South Wacker Drive, Suite 1125
Chicago, Illinois 60606
Attn: Legal/Compliance Department
16. 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.
17. 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.
18. 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.
19. 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 <PAGE>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.
DEAN WITTER PRINCIPAL PLUS FUND
MANAGEMENT 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
<PAGE>
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.
<PAGE>
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
<PAGE>
(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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
(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, <PAGE>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.
<PAGE>
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).
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 August 1, 1997, by and
between CARR FUTURES INC., a Delaware corporation and DEAN WITTER
PRINCIPAL PLUS FUND MANAGEMENT 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.
<PAGE>
"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"):
<PAGE>
(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;
<PAGE>
(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
<PAGE>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.
<PAGE>
"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 <PAGE>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 <PAGE>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.
<PAGE>
(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.
3.4General.
(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.
<PAGE>
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:
<PAGE>
(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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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
<PAGE>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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
DEAN WITTER PRINCIPAL PLUS FUND
MANAGEMENT L.P.
By Demeter Management Corporation
General Partner
By /s/ Mark J. Hawley
Name: Mark Hawley
Title: President
SCHEDULE
Schedule to the International Foreign Exchange Master Agreement
dated as of August 1, 1997
between Dean Witter Principal Plus Fund Management 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: Dean Witter Principal Plus FFC: Dean Witter
Principal Plus
Fund Management L.P., Fund Management L.P.,
Account # (As Party B is notified Account # (As Party
A is notified
from time to time) from
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 Threshold Amount
VIII.
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 Consent to Jurisdiction
XIII.
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.
