UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required] For the year ended December 31, 1998 or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] For the transition period from
________________to___________________ Commission File Number 0-19511
DEAN WITTER SPECTRUM SELECT L.P.
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(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3619290
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y. 10048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
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___
Indicate by check-mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment of this Form 10-K. [X]
State the aggregate market value of the Units of Limited Partnership
Interest held by non-affiliates of the registrant. The aggregate market value
shall be computed by reference to the price at which units were sold as of a
specified date within 60 days prior to the date of filing: $191,228,087.08 at
January 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
<PAGE>
DEAN WITTER SPECTRUM SELECT L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1998
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1
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Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 2-5
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 4-6
Item 4. Submission of Matters to a Vote of Security Holders . 6
Part II.
Item 5. Market for the Registrant's Partnership Units
and Related Security Holder Matters .. . . . . . . 7-8
Item 6. Selected Financial Data . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 10-19
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk . . . . . . . . . . . . . . . . . . . . 19-32
Item 8. Financial Statements and Supplementary Data. . . . . 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . 32
Part III.
Item 10. Directors and Executive Officers of the Registrant . 3-37
Item 11. Executive Compensation . . . . . . . . . . . . . . 37
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . 38
Item 13. Certain Relationships and Related Transactions . . . 38
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . 39
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K
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Partnership's Prospectus dated
January 21, 1999 I
Annual Report to Dean Witter Spectrum
Series Limited Partners for the
year ended December 31, 1998 II, III and IV
<PAGE>
PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Spectrum Select L.P.
(formerly, Dean Witter Select Futures Fund L.P.) (the "Partnership") is a
Delaware limited partnership organized to engage in the speculative trading of
commodity futures contracts and other commodity interests, including, but not
limited to, forward contracts on foreign currencies and options on futures
contracts and physical commodities (collectively, "futures interests").
Effective May 31, 1998, the Partnership became one of the Dean Witter Spectrum
Series of funds, comprised of the Partnership, Dean Witter Spectrum Global
Balanced L.P., Dean Witter Spectrum Strategic L.P. and Dean Witter Spectrum
Technical L.P. The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds, Inc.
("DWR"), and an unaffiliated clearing commodity broker, Carr Futures Inc.
("Carr"), provides clearing and execution services. Both Demeter and DWR are
wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). The
trading advisors to the Partnership are EMC Capital Management, Inc., Rabar
Market Research, Inc. and Sunrise Capital Management, Inc. (collectively, the
"Trading Advisors").
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The Partnership registered 1,500,000 Units of Limited Partnership
Interest ("Units") pursuant to a Registration Statement on Form S-1, which
became effective on May 11, 1998 (SEC File Number 333-47829). At the April 30,
1998 month-end close, each outstanding Unit was converted into 100 Units. Units
outstanding and Net Asset Value per unit have been adjusted for all reporting
periods to reflect this conversion. Commencing with the May 31, 1998 monthly
closing, Units are offered at monthly closings at a price equal to 100% of the
Net Asset Value per Unit as of the close of business on the last day of each
month.
5,000,000 additional Units were registered pursuant to a Registration
Statement on Form S-1 (File No. 333-68773), which became effective January 21,
1999.
The Partnership's Net Asset Value per Unit as of December 31, 1998 was
$23.80, representing an increase of 14.14 percent from the Net Asset Value per
Unit of $20.85 (on a post-conversion basis) at December 31, 1997. For a more
detailed description of the Partnership's business, see subparagraph (c).
(b) Financial Information about Industry Segments. For financial
information reporting purposes, the Partnership is deemed to engage in one
industry segment, the speculative trading of futures interests. The relevant
financial information is presented in Items 6 and 8.
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(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures interests, pursuant to trading
instructions provided by the Trading Advisors. For a detailed description of the
different facets of the Partnership's business, see those portions of the
Partnership's prospectus, dated January 21, 1999 (the "Prospectus"),
incorporated by reference in this Form 10-K, set forth below.
Facets of Business
1. Summary 1. "Summary of the Prospectus"
(Pages 1-6 of the Prospectus).
2. Futures, Options and 2. "The Futures, Options and
Forward Markets" Forward Markets
(Pages 83-87 of the Prospectus).
3. Partnership's Trading 3. "Investment Programs, Use
Arrangements and of Proceeds and Trading
Policies Policies" (Pages 20-25
of the Prospectus). "The
Trading Advisors"
(Pages 49-79 of the
Prospectus).
4. Management of the Part- 4. "The Trading Advisors -
nership The Management Agree-
ments" (Page 49 of the
Prospectus). "The
General Partner"
(Pages 47-48 of the
Prospectus), "The
Commodity Brokers"
(Page 82 of the Prospectus)
and "TheLimited Partnership
Agreements" (Pages 87-
91 of the Prospectus).
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5. Taxation of the Partner- 5. "Material Federal Income
ship's Limited Partners Tax Considerations" and
"State and Local Income Tax
Aspects" (Pages 96-102
of the Prospectus).
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
The Partnership has not engaged in any operations in foreign countries;
however, the Partnership (through the commodity brokers) enters into forward
contract transactions where foreign banks are the contracting party and trades
in futures interests on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the offices
of DWR. The DWR offices utilized by the Partnership are located at Two World
Trade Center, 62nd Floor, New York, NY 10048.
Item 3. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar
purported class actions were filed in the Superior Court of the State of
California, County of Los Angeles, on behalf of all purchasers of interests in
limited partnership commodity pools sold by DWR. Named defendants include DWR,
Demeter, Dean Witter Futures & Currency Management Inc. ("DWFCM"), MSDW (all
such parties referred to hereafter as the "Dean Witter Parties"), the
Partnership (under its original name), certain other limited partnership
commodity pools of which Demeter is the general partner, and certain trading
advisors to those pools. On June
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16, 1997. the plaintiffs in the above actions filed a consolidated amended
complaint, alleging, among other things, that the defendants committed fraud,
deceit, negligent misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary duty,
fraudulent and unfair business practices, unjust enrichment, and conversion in
the sale and operation of the various limited partnership commodity pools.
Similar purported class actions were also filed on September 18 and 20, 1996, in
the Supreme Court of the State of New York, New York County, and on November 14,
1996 in the Superior Court of the State of Delaware, New Castle County, against
the Dean Witter Parties and certain trading advisors on behalf of all purchasers
of interests in various limited partnership commodity pools, including the
Partnership, sold by DWR. A consolidated and amended complaint in the action
pending in the Supreme Court of the State of New York was filed on August 13,
1997, alleging that the defendants committed fraud, breach of fiduciary duty,
and negligent misrepresentation in the sale and operation of the various limited
partnership commodity pools. On December 16, 1997, upon motion of the
plaintiffs, the action pending in the Superior Court of the State of Delaware
was voluntarily dismissed without prejudice. The New York Supreme Court
dismissed the New York action in November 1998, but granted plaintiffs leave to
file an amended complaint, which they did in early December 1998. The defendants
have filed a motion to dismiss the
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amended complaint with prejudice on February 1, 1999. The complaints seek
unspecified amounts of compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that, in the course of
these actions, other parties could be added as defendants. The Dean Witter
Parties believe that they and the Partnership have strong defenses to, and they
will vigorously contest, the actions. Although the ultimate outcome of legal
proceedings cannot be predicted with certainty, it is the opinion of management
of the Dean Witter Parties that the resolution of the actions will not have a
material adverse effect on the financial condition or the results of operations
of any of the Dean Witter Parties or the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is no established public trading market for Units of the
Partnership. The number of holders of Units at December 31, 1998 was
approximately 12,446. No distributions have been made by the Partnership since
it commenced trading operations on August 1, 1991. Demeter has sole discretion
to decide what distributions, if any, shall be made to investors in the
Partnership. No determination has yet been made as to future distributions.
The Partnership registered additional 1,500,000 Units pursuant to
Registration Statement on Form S-1, which became effective on May 11, 1998 (SEC
File Number 333-47829). At the April 30, 1998 month-end close, each outstanding
Unit was converted into 100 Units. Commencing with the May 31, 1998 monthly
closing, Units are sold at monthly closings as of the last day of each month at
a price equal to 100% of the Net Asset Value per Unit as of the date of such
monthly closing.
Through December 31, 1998, 15,924,320.829 Units have been sold, leaving
189,646.271 Units unsold as of December 31, 1998. The aggregate price of the
Units sold through December 31, 1998 is $229,492,264.
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Since no expenses are chargeable against proceeds, 100% of the proceeds
of the offering have been applied to the working capital of the Partnership for
use in accordance with the "Investment Programs, Use of Proceeds and Trading
Policies" section of the Prospectus.
<PAGE>
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Item 6. SELECTED FINANCIAL DATA (in dollars)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Total Revenues
(including
interest) 41,778,732 26,495,529 22,046,523 69,299,562 17,420,402
Net Income
(Loss) 22,695,060 9,943,717 5,414,041 39,054,115 (9,802,907)
Net Income
(Loss) Per
Unit (Limited
& General
Partners) 2.95 1.22 .98 3.56 (.81)
Total Assets 202,668,038 169,541,807 167,588,012 179,342,999 171,613,080
Total Limited
Partners'
Capital 196,915,644 163,999,307 161,174,820 173,965,425 166,182,436
Net Asset Value
Per Unit of
Limited Partner-
ship Interest 23.80 20.85 19.62 18.64 15.08
</TABLE>
Note: Net Income (Loss) per Unit and Net Asset Value per Unit of Limited
Partnership Interest have been restated for all periods to reflect the
one to 100 Unit conversion.
<PAGE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate futures interest
trading accounts. Such assets are held in either non-interest bearing bank
accounts or in securities approved by the Commodity Futures Trading Commission
("CFTC") for investment of customer funds. The Partnership's assets held by DWR
and Carr may be used as margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in futures interests, it is expected that
the Partnership will continue to own such liquid assets for margin purposes.
The Partnership's investment in futures interests may, from time to
time, be illiquid. Most United States futures exchanges limit fluctuations in
certain futures interest prices during a single day by regulations referred to
as "daily price fluctuations limits" or "daily limits". Pursuant to such
regulations, during a single trading day no trades may be executed at prices
beyond the daily limit. If the price for a particular futures interest has
increased or decreased by an amount equal to the daily limit, positions in such
futures interest can neither be taken nor liquidated unless traders are willing
to effect trades at or
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within the limit. Futures interest prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its futures
interests and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world currencies have low
trading volume and are illiquid, which may prevent the Partnership from trading
in potentially profitable markets or from promptly liquidating unfavorable
positions, subjecting it to substantial losses. Either of these market
conditions could result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it expect to
have, any capital assets. Future redemptions, exchanges and sales of additional
Units will affect the amount of funds available for investment in futures
interests in subsequent periods. Since they are at the discretion of Limited
Partners, it is not possible to estimate the amount and therefore, the impact of
future redemptions, exchanges or sales of additional Units.
Results of Operations. As of December 31, 1998, the Partnership's total
capital was $200,082,516, an increase of $33,309,195 from the Partnership's
total capital of $166,773,321 at December 31, 1997. For the year ended December
31, 1998, the Partnership generated net income of
<PAGE>
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$22,695,060, total subscriptions aggregated $30,297,590 and total redemptions
aggregated $19,683,455.
For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $41,778,732. The Partnership's total
expenses for the year were $19,083,672, resulting in net income of $22,695,060.
The value of an individual unit in the Partnership increased from $20.85 at
December 31, 1997 to $23.80 at December 31, 1998.
As of December 31, 1997, the Partnership's total capital was
$166,773,321, an increase of $2,987,036 from the Partnership's total capital of
$163,786,285, at December 31, 1996. For the year ended December 31, 1997, the
Partnership generated net income of $9,943,717, total subscriptions aggregated
$12,056,614 and total redemptions aggregated $19,013,295.
For the year ended December 31, 1997, the Partnership's total trading
revenues including interest income were $26,495,529. The Partnership's total
expenses for the year were $16,551,812, resulting in net income of $9,943,717.
The value of an individual unit in the Partnership increased from $19.62 at
December 31, 1996 to $20.85 at December 31, 1997.
As of December 31, 1996, the Partnership's total capital was
$163,786,285, a decrease of $12,659,975 from the Partnership's total capital of
$176,446,260 at December 31, 1995. For the year ended
<PAGE>
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December 31, 1996, the Partnership generated net income of $5,414,041, total
subscriptions aggregated $10,251,712 and total redemptions aggregated
$28,325,728.
For the year ended December 31, 1996, the Partnership's total trading
revenues including interest income were $22,046,523. The Partnership's expenses
for the year were $16,632,482, resulting in net income of $5,414,041. The value
of an individual unit in the Partnership increased from $18.64 at December 31,
1995 to $19.62 at December 31, 1996. Note: All periods prior to May 31, 1998
have been restated to reflect the one to 100 Unit conversion.
The Partnership's overall performance record represents varied results
of trading in different futures interests markets. For a further description of
1998 trading results, refer to the letter to the Limited Partners in the
accompanying Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K. The Partnership's gains and
losses are allocated among its partners for income tax purposes.
Credit Risk. In entering into futures and forward contracts there is a
credit risk to the Partnership that the counterparty on a contract will not be
able to meet its obligations to the Partnership. The ultimate counterparty of
the Partnership for futures contracts traded in the United States and most
foreign exchanges on which the Partnership
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trades is the clearinghouse associated with such exchange. In general, a
clearinghouse is backed by the membership of the exchange and will act in the
event of non-performance by one of its members or one of its member's customers,
and, as such, should significantly reduce this credit risk. For example, a
clearinghouse may cover a default by (i) drawing upon a defaulting member's
mandatory contributions and/or non-defaulting members' contributions to a
clearinghouse guarantee fund, established lines or letters of credit with banks,
and/or the clearinghouse's surplus capital and other available assets of the
exchange and clearinghouse, or (ii) assessing its members.
In cases where the Partnership trades on a foreign exchange where the
clearinghouse is not funded or guaranteed by the membership or where the
exchange is a "principals' market" in which performance is the responsibility of
the exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the sole
recourse of the Partnership will be the clearinghouse, the exchange member or
the off-exchange contract counterparty, as the case may be. There can be no
assurance that a clearinghouse, exchange or other exchange member will meet its
obligations to the Partnership, and the Partnership is not indemnified against a
default by such parties from Demeter, MSDW or DWR.
<PAGE>
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Further, the law is unclear as to whether a commodity broker has any
obligation to protect its customers from loss in the event of an exchange,
clearinghouse or other exchange member default on trades effected for the
broker's customers. Any such obligation on the part of the broker appears even
less clear where the default occurs in a non-US jurisdiction.
Demeter deals with the credit risks of all partnerships for which it
serves as general partner in several ways. First, it monitors the Partnership's
credit exposure to each exchange on a daily basis, calculating not only the
amount of margin required for it but also the amount of its unrealized gains at
each exchange, if any. The commodity brokers inform the Partnership, as with all
their customers, of its net margin requirements for all its existing open
positions, but do not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the Partnership's
potential margin liability, exchange by exchange. Demeter is then able to
monitor the Partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of its net
assets that can be committed at any given time to futures contracts and require,
in addition, a certain minimum amount of diversification in the Partnership's
trading, usually over several different products. One
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of the aims of such trading policies has been to reduce the credit exposure of
the Partnership to a single exchange and, historically, the Partnership's
exposure has typically amounted to only a small percentage of its total net
assets. On those relatively few occasions where the Partnership's credit
exposure may climb above that level, Demeter deals with the situation on a case
by case basis, carefully weighing whether the increased level of credit exposure
remains appropriate.
Third, Demeter has secured, with respect to Carr acting as the clearing
broker for the Partnership, a guarantee by Credit Agricole Indosuez, Carr's
parent, of the payment of the "net liquidating value" of the transactions
(futures and forward contracts) in the Partnership's account.
With respect to forward contract trading, the Partnership trades with
only those counterparties which Demeter, together with DWR, have determined to
be creditworthy. At the date of this filing, the Partnership deals only with
Carr as its counterparty on forward contracts. The guarantee by Carr's parent,
discussed above, covers these forward contracts.
See "Financial Instruments" under Notes to Financial Statements in the
Partnership's Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K.
<PAGE>
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Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the smooth functioning
of computer systems. Many computer systems in use today cannot recognize the
computer code for the year 2000, but revert to 1900 or some other date. This is
commonly known as the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly process and calculate date-related
information and data concerning dates on or after January 1, 2000. Such a
failure could adversely affect the handling or determination of futures trades
and prices and other services.
MSDW began its planning for the Year 2000 Problem in 1995, and
currently has several hundred employees working on the matter. It has developed
its own Year 2000 compliance plan to deal with the problem and had the plan
approved by the company's executive management, Board of Directors and
Information Technology Department. Demeter is coordinating with MSDW to address
the Year 2000 Problem with respect to Demeter's computer systems that affect the
Partnership. This includes hardware and software upgrades, systems consulting
and computer maintenance.
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Beyond the challenge facing internal computer systems, the systems
failure of any of the third parties with whom the Partnership has a material
relationship - the futures exchanges and clearing organizations through which it
trades, Carr, or the Trading Advisors - could result in a material financial
risk to the Partnership. All U.S. futures exchanges are subject to monitoring by
the CFTC of their Year 2000 preparedness and the major foreign futures exchanges
are also expected to be subject to market-wide testing of their Year 2000
compliance during 1999. Demeter intends to monitor the progress of Carr and the
Trading Advisors throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the Trading Advisors.
A worst case scenario would be one in which trading of contracts on
behalf of the Partnership becomes impossible as a result of the Year 2000
Problem encountered by any third parties. A less catastrophic, but more likely
scenario would be one in which trading opportunities diminish as a result of
technical problems, resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency plans" in the
event that the systems of such third parties fail. Demeter intends to consult
closely with MSDW in implementing those plans. Despite the best efforts of both
Demeter and MSDW, however, it is possible that these steps will not be
sufficient to avoid any adverse impact to the Partnership.
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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 Advisors from trading in certain currencies and thereby
limits their ability to take advantage of potential market opportunities that
might otherwise have existed had separate currencies been available to trade.
This could adversely affect the performance results of the Partnership.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the speculative trading
of futures interests. The market sensitive instruments held by the Partnership
are acquired solely for speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's primary business activities.
The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon
<PAGE>
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changes in the level or volatility of interest rates, exchange rates, and/or
market values of financial instruments and commodities. Fluctuations in related
market risk based upon the aforementioned factors result in frequent changes in
the fair value of the Partnership's open positions, and, consequently, in its
earnings and cash flow.
The Partnership's total market risk is influenced by a wide variety of factors,
including the diversification effects among the Partnership's existing open
positions, the volatility present within the market(s) and the liquidity of the
market(s). At varying times, each of these factors may act to exacerbate or mute
the market risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative of its future
results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent uncertainty of its speculative trading, which may
cause future losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.
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Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The Partnership accounts for open positions on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of the Partnership's
open positions is directly reflected in the Partnership's earnings, whether
realized or unrealized, and the Partnership's cash flow, as profits and losses
on open positions of exchange traded-futures interests are settled daily through
variation margin.
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisors is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical
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simulation involves constructing a distribution of hypothetical daily changes in
trading portfolio value. The VaR model generally takes into account linear
exposures to price and interest rate risk. Market risks that are incorporated in
the VaR model include equity and commodity prices, interest rates, foreign
exchange rates, as well as correlation that exists among these variables. The
hypothetical changes in portfolio value are based on daily observed percentage
changes in key market indices or other market factors ("market risk factors") to
which the portfolio is sensitive. In the case of the Partnership's VaR, the
historical observation period is approximately four years. The Partnership's
one-day 99% VaR corresponds to the negative change in portfolio value that,
based on observed market risk factor moves, would have been exceeded once in 100
trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either Demeter
or the Trading Advisors in their daily risk management activities.
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The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the Partnership's open
positions as a percentage of total net assets by market category as of December
31, 1998. As of December 31, 1998, the Partnership's total capitalization was
approximately $200 million.
Primary Market December 31, 1998
Risk Category Value at Risk
Interest Rate (1.06)%
Currency (0.51)
Equity (0.37)
Commodity (0.91)
Aggregate Value at Risk (1.28)%
Aggregate value at risk represents the aggregate VaR of the Partnership's open
positions and not the sum of the VaR of the individual categories listed above.
Aggregate VaR will be lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open positions at
December 31, 1998 only and is not necessarily representative of either the
historic or future risk of an investment in the Partnership. As the
Partnership's sole business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can change
significantly over any given time period or even
<PAGE>
- 24 -
within a single trading day. Such changes in open positions could materially
impact market risk as measured by VaR either positively or negatively.
The table below supplements the year end VaR by presenting the
Partnership's high, low and average VaR as a percentage of net assets for the
four quarterly reporting periods from January 1, 1998 through December 31, 1998.
Primary Market Risk Category High Low Average
Interest Rate (2.27)% (0.40)% (1.47)%
Currency (1.70) (0.51) (0.99)
Equity (0.85) (0.21) (0.45)
Commodity (0.92) (0.51) (0.79)
Aggregate Value at Risk (2.68)% (1.28)% (2.18)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable margin requirements, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of
<PAGE>
- 25 -
ruin" not typically found in other investment vehicles. Due to the relative size
of the positions held, certain market conditions may cause the Partnership to
incur losses greatly in excess of VaR within a short period of time. The
foregoing VaR tables, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk measures should be
interpreted in light of the methodology's limitations, which include the
following: past changes in market risk factors will not always yield accurate
predictions of the distributions and correlations of future market movements;
changes in portfolio value in response to market movements may differ from the
responses implicit in a VaR model; published VaR results reflect past trading
positions while future risk depends on future positions; VaR using a one-day
time horizon does not fully capture the market risk of positions that cannot be
liquidated or hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into losses that could
be incurred under certain unusual market movements.
The foregoing VaR tables present the results of the Partnership's VaR for each
of the Partnership's market risk exposures and on an aggregate basis at December
31, 1998 and for the end of quarter periods during
<PAGE>
- 26 -
calendar 1998. Since VaR is based on historical data, VaR should not be viewed
as predictive of the Partnership's future financial performance or its ability
to manage and monitor risk and there can be no assurance that the Partnership's
actual losses on a particular day will not exceed the VaR amounts indicated
below or that such losses will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not
needed for margin. However, such balances, as well as any market risk they may
represent, are immaterial. The Partnership also maintains a substantial portion
(approximately 87%) 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.
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features
of the Partnership's market sensitive instruments.
<PAGE>
- 27 -
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market risk
exposures - except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Partnership manages its primary market
risk exposures - constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. The Partnership's primary market risk exposures as well as the strategies
used and to be used by Demeter and the Trading Advisors 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 December 31, 1998, by market sector. It may be anticipated
however, that these market exposures will vary materially over time.
<PAGE>
- 28 -
Interest Rate. Interest rate risk is the principal market exposure of
the Partnership. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the United States and the other G-7
countries. However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g. Australia. Demeter anticipates that
G-7 interest rates will remain the primary market exposure of the Partnership
for the foreseeable future. The changes in interest rates which have the most
effect on the Partnership are changes in long-term, as opposed to short-term,
rates. Most of the speculative 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.
Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a
<PAGE>
- 29 -
large number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. However, the Partnership's
major exposures have typically been in the dollar/yen, dollar/mark and
dollar/pound positions. Demeter does not anticipate that the risk profile of the
Partnership's currency sector will change significantly in the future, although
it is difficult at this point to predict the effect of the introduction of the
Euro on the Trading Advisors' currency trading strategies.
Equity. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 1998, the
Partnership's primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and DAX (Germany) stock indices. The General Partner anticipates
little, if any, trading in non-G-7 stock indices. The Partnership is primarily
exposed to the risk of adverse price trends or static markets in the major U.S.,
European and Japanese indices. (Static markets would not cause major market
changes but would make it difficult for the Partnership to avoid being
"whipsawed" into numerous small losses).
Commodity. Metals. The Partnership's primary metals market exposure is
to fluctuations in the price of gold and silver. Although certain of the Trading
Advisors will from time to time trade base metals such as
<PAGE>
- 30 -
aluminum, copper, lead, tin, nickel and zinc, the principal market exposures of
the Partnership have consistently been in the precious metals, gold and silver.
The Trading Advisors' gold trading has been increasingly limited due to the
long-lasting and mainly non-volatile decline in the price of gold over the last
10-15 years. However, silver prices have remained volatile over this period, and
the Trading Advisors have from time to time taken substantial positions as they
have perceived market opportunities to develop. Demeter anticipates that gold
and silver will remain the primary metals market exposure for the Partnership.
Soft Commodities. One of the Partnership's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, coffee,
cotton, orange juice, cocoa and sugar accounted for the substantial bulk of the
Partnership's commodities exposure as of December 31, 1998. The Partnership has
had market exposure to lean hogs.
Energy. The Partnership's primary energy market exposure is to gas and
oil price movements, often resulting from political developments in the Middle
East. Although the Trading Advisors trade natural gas to a limited extent, oil
is by far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be
<PAGE>
- 31 -
volatile and substantial profits and losses have been and are expected to
continue to be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the Partnership as of
December 31, 1998:
Foreign Currency Balances. The Partnership's primary foreign currency balances
are in Japanese yen, German marks, British pounds, French francs and euros. The
Partnership controls the non-trading risk of these balances by regularly
converting these balances back into U.S. dollars at varying intervals, depending
upon such factors as size, volatility, etc.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Advisors, severally, attempt
to manage the risk of the Partnership's open positions are essentially the same
in all market categories traded. Demeter attempts to manage the Partnership's
market exposure by (i) diversifying the Partnership's assets among different
Trading Advisors, each of whose strategies focus on different market sectors and
trading approaches, and (ii), monitoring the performance of the Trading Advisors
on a daily
<PAGE>
- 32 -
basis. In addition, the Trading Advisors establish diversification guidelines,
often set in terms of the maximum margin to be committed to positions in any one
market sector or market sensitive instrument. One should be aware that certain
Trading Advisors treat their risk control policies as strict rules, whereas
others treat such policies as general guidelines.
Demeter monitors and controls the risk of the Partnership's non-trading
instrument, cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Advisors.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the Annual Report to
Limited Partners for the year ended December 31, 1998 and is incorporated by
reference in this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
- 33-
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership. The Partnership
is managed by Demeter.
Directors and Officers of the General Partner
The directors and officers of Demeter are as follows:
Mark J. Hawley, age 55, is Chairman of the Board and a Director of
Demeter. Mr. Hawley is also Chairman of the Board and a Director of DWFCM. Mr.
Hawley previously served as President of Demeter throughout 1998. Mr. Hawley
joined DWR in February 1989 as Senior Vice President and is currently the
Executive Vice President and Director of DWR's Product Management for Individual
Asset Management. In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures, Insurance, and Unit Investment Trust
Business. From 1978 to 1989, Mr. Hawley was a member of the senior management
team at Heinold Asset Management, Inc., a CPO, and was responsible for a variety
of projects in public futures funds. From 1972 to 1978, Mr. Hawley was a Vice
President in charge of institutional block trading for the Mid-West at Kuhn Loeb
& Company.
<PAGE>
- 34 -
Joseph G. Siniscalchi, age 53, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting and served as a Senior Vice President and Controller for
DWR's Securities Division through 1997. He is currently Executive Vice President
and Director of the Operations Division of DWR. From February 1980 to July 1984,
Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb,
Inc.
Edward C. Oelsner, III, age 56, is a Director of Demeter. Mr. Oelsner
is currently an Executive Vice President and head of the Product Development
Group at Dean Witter InterCapital Inc., an affiliate of DWR. Mr. Oelsner joined
DWR in 1981 as a Managing Director in DWR's Investment Banking Department
specializing in coverage of regulated industries and, subsequently, served as
head of the DWR Retail Products Group. Prior to joining DWR, Mr. Oelsner held
positions at The First Boston Corporation as a member of the Research and
Investment Banking Departments from 1967 to 1981. Mr. Oelsner received his
M.B.A. in Finance from the Columbia University Graduate School of Business in
1966 and an A.B. in Politics from Princeton University in 1964.
Robert E. Murray, age 38, is President and a Director of Demeter. Mr.
Murray is also President and a Director of DWFCM. Effective as of the close of
December 31, 1998, Mr. Murray replaced Mr. Hawley as President of Demeter. Mr.
Murray is also a Senior Vice President of DWR's Managed Futures Department and
is the Senior Administrative
<PAGE>
- 35 -
Officer of DWFCM. Mr. Murray began his career at DWR in 1984 and is currently
the Director of the Managed Futures Department. In this capacity, Mr. Murray is
responsible for overseeing all aspects of the firm's Managed Futures Department.
Mr. Murray currently serves as a Director of the Managed Funds Association, an
industry association for investment professionals in futures, hedge funds and
other alternative investments. Mr. Murray graduated from Geneseo State
University in May 1983 with a B.A. degree in Finance.
Lewis A. Raibley, III, age 36, is Vice President, Chief Financial
Officer and a Director of Demeter. Effective as of the close of business on
December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors. Mr.
Raibley is currently Senior Vice President and Controller in the Individual
Asset Management Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice President and Director in the Internal Reporting Department of
MSDW and prior to that, from 1992 to 1997, he served as Senior Vice President
and Director in the Financial Reporting and Policy Division of Dean Witter
Discover & Co. He has been with MSDW and its affiliates since June 1986.
Mitchell M. Merin, age 45, became a Director of Demeter on March 17,
1999. Mr. Merin was appointed the Chief Operating Officer of Asset Management
for MSDW in December 1998 and the President and Chief
<PAGE>
- 36 -
Executive Officer of Morgan Stanley Dean Witter Advisors in February 1998. He
has been an Executive Vice President of DWR since 1990, during which time he has
been director of DWR's Taxable Fixed Income and Futures divisions, managing
director in Corporate Finance and corporate treasurer. Mr. Merin received his
Bachelor's degree from Trinity College in Connecticut and his M.B.A. degree in
finance and accounting from the Kellogg Graduate School of Management of
Northwestern University in 1977.
Richard A. Beech, age 47, became a Director of Demeter on March 17,
1999. Mr. Beech has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior Vice President
and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining DWR, Mr. Beech also had
worked at two investment banking firms in Operations, Research, Managed Futures
and Sales Management.
Ray Harris, age 42, became a Director of Demeter on March 17, 1999. Mr.
Harris is currently Senior Vice President, Planning and Administration for
Morgan Stanley Dean Witter Asset Management and has worked at DWR or its
affiliates since July 1982, serving in both financial and administrative
capacities. From August 1994 to January 1999, he worked in two separate DWR
affiliates, Discover Financial
<PAGE>
- 37 -
Services and Novus Financial Corp., culminating as Senior Vice President. Mr.
Harris received his B.A. degree from Boston College and his M.B.A. in finance
from the University of Chicago.
Richard M. DeMartini, age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31, 1998, Mr. DeMartini resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.
Lawrence Volpe, age 51, served as a Director to Demeter throughout
1998. Effective as of the close of business on December 31, 1998, Mr. Volpe
resigned as a Director of Demeter.
Patti L. Behnke, age 38, served as Vice President and Chief Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of Demeter in order to take on new
responsibilities as Operations Officer - Controllers Division for MSDW, and was
replaced by Mr. Raibley.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a limited
partnership, the business of the Partnership is managed by Demeter which is
responsible for the administration of the business affairs of the Partnership
but receives no compensation for such services.
<PAGE>
- 38 -
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of December
31, 1998, there were no persons known to be beneficial owners of more than 5
percent of the Units.
(b) Security Ownership of Management - At December 31, 1998, Demeter
owned 133,076.700 Units of General Partnership Interest representing a 1.58
percent interest in the Partnership.
(c) Changes in Control - None
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to Financial
Statements", in the accompanying Annual Report to Limited Partners for the year
ended December 31, 1998, incorporated by reference in this Form 10-K. In its
capacity as the Partnership's retail commodity broker, DWR received commodity
brokerage commissions (paid and accrued by the Partnership) of $11,360,166 for
the year ended December 31, 1998.
<PAGE>
- 39 -
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and reports of independent auditors,
all appearing in the accompanying Annual Report to Limited Partners for the year
ended December 31, 1998 are incorporated by reference in this Form 10-K:
- Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 1998, 1997 and 1996.
- Statements of Financial Condition as of December 31, 1998 and
1997.
- Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1998, 1997 and
1996.
- Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the Annual Report to Limited
Partners for the year ended December 31, 1998 is not deemed to be filed with
this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with this
report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during the
last quarter of the period covered
by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
<PAGE>
- 40 -
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 SPECTRUM SELECT L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 25, 1999 BY: /s/ Robert E. Murray
-----------------------------------
Robert E. Murray, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray March 25, 1999
------------------------------------------
Robert E. Murray, Director and
President
/s/ Mark J. Hawley March 25, 1999
------------------------------------------
Mark J. Hawley, Director
and Chairman of the Board
/s/ Joseph G. Siniscalchi March 25, 1999
------------------------------------------
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 25, 1999
------------------------------------------
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin March 25, 1999
------------------------------------------
Mitchell M. Merin, Director
/s/ Richard A. Beech March 25, 1999
------------------------------------------
Richard A. Beech, Director
/s/ Ray Harris March 25, 1999
Ray Harris, Director
/s/ Lewis A. Raibley, III March 25, 1999
--------------------------------------------
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal Accounting
Officer
<PAGE>
- 41 -
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 SPECTRUM SELECT L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 25, 1999 BY:
---------------------------------
Robert E. Murray, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: March 25, 1999
----------------------------------------
Robert E. Murray, Director and
President
March 25, 1999
----------------------------------------
Mark J. Hawley, Director
and Chairman of the Board
March 25, 1999
----------------------------------------
Joseph G. Siniscalchi, Director
March 25, 1999
----------------------------------------
Edward C. Oelsner III, Director
__________________________________________ March 25, 1999
----------------------------------------
Mitchell M. Merin, Director
March 25, 1999
----------------------------------------
Richard A. Beech, Director
March 25, 1999
----------------------------------------
Ray Harris, Director
March 25, 1999
----------------------------------------
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal Accounting
Officer
<PAGE>
- 41 -
EXHIBIT INDEX
ITEM
3.01 Form of Amended and Restated Limited Partnership Agreement of the
Partnership, dated as of May 31, 1998, is incorporated by reference
to Exhibit A of the Partnership's Prospectus, dated January 21, 1999,
filed with the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on January
26, 1999.
3.02 Certificate of Limited Partnership, dated March 21, 1991, is
incorporated by reference to Exhibit 3.02 of the Partnership's
Registration Statement on Form S-1 (File No. 33-39667) filed with the
Securities and Exchange Commission on March 27, 1991.
3.03 Amended Certificate of Limited Partnership, dated April 28, 1998, is
filed herewith.
10.01 Amended and Restated Management Agreement, dated as of June 1, 1998,
among the Partnership, Demeter Management Corporation, and Rabar
Market Research, Inc. is filed herewith.
10.02 Amended and Restated Management Agreement, dated as of June 1, 1998,
among the Partnership, Demeter Management Corporation, and EMC
Capital Management, Inc. is filed herewith
10.03 Amended and Restated Management Agreement, dated as of June 1, 1998,
among the Partnership, Demeter Management Corporation, and Sunrise
Capital Management, Inc. is filed herewith
10.04 Amended and Restated Customer Agreement, dated as of December 1,
1997, between the Partnership and Dean Witter Reynolds Inc. is filed
herewith.
10.05 Customer Agreement, dated as of December 1, 1997, among the
Partnership, Carr Futures, Inc., and Dean Witter Reynolds Inc. is
filed herewith.
10.06 International Foreign Exchange Master Agreement, dated as of August
1, 1997, between the Partnership and Carr Futures, Inc. is filed
herewith.
10.07 Subscription and Exchange Agreement and Power of Attorney to be
executed by each purchaser of Units is incorporated by reference to
Exhibit B of the Partnership's Prospectus, dated January 21, 1999,
filed with the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on January
26, 1999.
10.08 Escrow Agreement, dated September 30, 1994, among Dean Witter
Spectrum Strategic L.P., Dean Witter Spectrum Global Balanced L.P.,
Dean Witter Spectrum Technical L.P., Demeter Management Corporation,
Dean Witter Reynolds Inc., and Chemical Bank.
10.09 Amendment to the Escrow Agreement, dated May 11, 1998, among the
Partnership, Demeter Management Corporation, Dean Witter Reynolds
Inc., and Chemical Bank is filed herewith.
13.01 December 31, 1998 Annual Report to Limited Partners is filed herewith.
Exhibit 3.03
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF LIMITED PARTNERSHIP
OF
DEAN WITTER SELECT FUTURES FUND L.P.
---------------------------------------------------
Pursuant to Section 17-202 of the Delaware Revised
Uniform Limited Partnership Act
---------------------------------------------------
The undersigned, for the purpose of amending the Certificate of
Limited Partnership of Dean Witter Select Futures Fund L.P. filed with the
Secretary of State of Delaware on March 21, 1991, does hereby certify as
follows:
First. Name of Limited Partnership. The name of the limited
partnership is Dean Witter Select Futures Fund L.P.
Second. Amendment. Article First of the Certificate of Limited
Partnership is amended to read in full as follows:
"First. Name of Limited Partnership. The name of the
limited partnership is Dean Witter Spectrum Select L.P."
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment of Certificate of Limited Partnership as of the 28th day of April,
1998.
By: Demeter Management Corporation
General Partner
By: /s/ Mark J. Hawley
----------------------------
Mark J. Hawley
President
Exhibit 10.01
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 1998, among DEAN
WITTER SPECTRUM SELECT L.P., a Delaware limited partnership (the "Partnership,"
formerly Dean Witter Select Futures Fund L.P.), DEMETER MANAGEMENT CORPORATION,
a Delaware corporation (the "General Partner"), and RABAR MARKET RESEARCH, INC.,
an Illinois corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement, dated as of March 21, 1991, as amended from time to time,
and as further amended and restated as of May 31, 1998, 1998 (the "Limited
Partnership Agreement"), to engage primarily in speculative trading of
commodities (including, but not limited to, foreign currencies, mortgage-backed
securities, money market instruments, financial instruments, and any other
securities or items which are now, or may hereafter be, the subject of futures
contract trading), domestic and foreign futures contracts, forward contracts,
foreign exchange commitments, options on physical commodities and on futures
contracts, spot (cash) commodities and currencies, and any rights pertaining
thereto (hereinafter referred to collectively as "futures interests") and
securities (such as United States Treasury securities) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership and the Trading Advisor have entered into
that certain Management Agreement dated May 17, 1991, as amended by Amendment
No. 1 to such agreement, dated July 22, 1992, as amended by Amendment No. 2 to
such agreement dated as of August 31, 1993, and as further amended by Amendment
No. 3 to such agreement, dated November ______, 1996 (together, the "Original
Management Agreement");
WHEREAS, the Partnership and the Trading Advisor wish to amend and
restate the Original Management Agreement upon the terms and conditions set
forth herein;
WHEREAS, the Partnership intends to become a member partnership of
the Dean Witter Spectrum Series (the "Fund Group") by entering into an agreement
pursuant to which units of limited partnership interest ("Units") of such member
partnerships will be sold to investors in a common offering under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-1, as it may be amended from time to time (the "Registration
Statement"), and a final Prospectus, dated_May 11, 1998, constituting a part
thereof as it may be amended and supplemented from time to time (the
"Prospectus"), and thereafter, pursuant to which such Units can be exchanged by
a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Advisor has extensive experience trading in
futures interests and is willing to continue to provide certain services and
undertake certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to continue to
act as a trading advisor for the Partnership and to make investment decisions
with respect to futures interests for its allocated share of the Partnership's
Net Assets and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Amended and Restated Management Agreement which,
among other things, sets forth certain terms and conditions upon which the
Trading Advisor will conduct a portion of the Partnership's futures interests
trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership and the General Partner by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a Trading Advisor
for the Partnership and, as such, shall have sole authority and responsibility
for directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or provided in
writing to the Trading Advisor; provided, however, that the General Partner may
override the instructions of the Trading Advisor to the extent necessary (i) to
comply with the trading policies of the Partnership described in writing to the
Trading Advisor and with applicable speculative position limits, (ii) to fund
any distributions, redemptions, or reapportionments among other trading advisors
to the Partnership, (iii) to pay the Partnership's expenses, (iv) to the extent
the General Partner believes doing so is necessary for the protection of the
Partnership, (v) to terminate the futures interests trading of the Partnership,
or (vi) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions for the reasons specified in
clauses (ii) or (iii) of the preceding sentence unless the Trading Advisor fails
to comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five days of such request. The Trading
Advisor shall not be liable for the consequences of any decision by the General
Partner to override instructions of the Trading Advisor, except to the extent
that the Trading Advisor is in breach of this Agreement. In performing services
to the Partnership the Trading Advisor may not materially alter the trading
program(s) used by the Trading Advisor in investing and reinvesting its
allocable share of the Partnership's Net Assets in futures interests as
described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed an alteration in the Trading Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the prohibitions
and trading policies of the Partnership provided in writing to the Trading
Advisor and the trading programs, systems, methods, and strategies of the
Trading Advisor described in the Prospectus, with such changes and additions to
such trading programs, systems, methods or strategies as the Trading Advisor,
from time to time, incorporates into its trading programs for accounts the size
of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30 days
of a request therefor by the General Partner, with information comparing the
performance of the Partnership's account and the performance of all other client
accounts directed by the Trading Advisor using the trading programs used by the
Trading Advisor for the Partnership over a specified period of time. In
providing such information, the Trading Advisor may take such steps as are
necessary to assure the confidentiality of the Trading Advisor's clients'
identities. The Trading Advisor shall, upon the General Partner's request,
consult with the General Partner concerning any discrepancies between the
performance of such other accounts and the Partnership's account. The Trading
Advisor shall promptly inform the General Partner of any material discrepancies
of which the Trading Advisor is aware. The General Partner acknowledges that
different trading programs, strategies or implementation methods may be utilized
for different accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity, accounts that commence
trading at different times, accounts which have different portfolios or
different fiscal years and that such differences may cause divergent trading
results.
(iii) Upon request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Advisor other than proprietary information (including,
without limitation, information relating to changes in control, personnel,
trading approach, or financial condition). The General Partner acknowledges that
all trading instructions made by the Trading Advisor will be held in confidence
by the General Partner, except to the extent necessary to conduct the business
of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's
open positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Advisor shall be for the
account of the Partnership. The Trading Advisor makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Prior to the commencement of trading by the Partnership, the
General Partner on behalf of the Partnership shall deliver to the Trading
Advisor a trading authorization appointing the Trading Advisor the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets (as
defined in Section 6(c) hereof) as the General Partner shall determine in its
absolute discretion. The designation of an additional trading advisor or
advisors and the apportionment of Net Assets to any such trading advisor(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Advisor hereunder. In the event that an additional
trading advisor or advisors is so designated, the Trading Advisor shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Advisor and the Trading Profits
attributable to the trading by the Trading Advisor.
(b) The General Partner may at any time and from time to time upon
two business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon two business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Dean Witter Reynolds Inc. ("DWR") shall act as non-clearing
commodity broker and Carr Futures, Inc. ("CFI") shall act as the clearing
commodity broker for the Partnership. The General Partner shall provide the
Trading Advisor with copies of brokerage statements. Notwithstanding that CFI
shall act as the clearing commodity broker for the Partnership, the Trading
Advisor may execute trades through floor brokers other than those employed by
CFI so long as arrangements are made for such floor brokers to "give-up" or
transfer the positions to CFI and provided that the rates charged by such floor
brokers have been approved in writing by DWR. The Trading Advisor will not be
responsible for paying give-up fees.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's account,
equal to 1/4 of 1% (a 3% annual rate) of the "Net Assets" of the Partnership
allocated to the Trading Advisor (as defined in Section 6(c)) as of the opening
of business on the first day of each calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar month,
payable on a non-netted basis vis-a-vis other trading advisors(s) of the
Partnership.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be determined
as if such date were the end of a month, but such fee shall be prorated based on
the ratio of the number of trading days in the month through the date of
termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilizes the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest positions and other assets of the
Partnership) less all liabilities of the Partnership (including, but not limited
to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Advisor or, if no incentive
fee has been earned previously by the Trading Advisor, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits earned by the Partnership on Net Assets allocated
to the Trading Advisor and the Partnership thereafter fails to earn Trading
Profits or experiences losses for any subsequent incentive period with respect
to such amounts so allocated, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits. However, no subsequent incentive fees shall be payable
to the Trading Advisor until the Partnership has again earned Trading Profits on
the Trading Advisor's allocated Net Assets; provided, however, that if the
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations that occur at the end of, or subsequent
to, an incentive period in which the Partnership experiences a futures interests
trading loss with respect to Net Assets allocated to the Trading Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
(f) The Partnership will remit the management and incentive fees to
the Trading Advisor as soon as practicable, but in no event later than 30 days,
in the case of the management fee, or 45 days in the case of the incentive fee
of the month-end as of which they are due, together with an itemized statement
showing the calculations. All management and incentive fees may be paid by
wiring such amounts to an account designated in writing by the Trading Advisor.
7. Term.
This Agreement shall continue in effect until December 1, 1998 (the
"Initial Termination Date"). At least thirty days prior to the Initial
Termination Date, the Trading Advisor may terminate this Agreement upon 30 days'
prior written notice to the Partnership. If this Agreement is not terminated on
the Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least thirty days prior to the expiration
of any such one-year period, the Trading Advisor may terminate this Agreement at
the end of the current one-year period by providing written notice to the
Partnership indicating that the Trading Advisor desires to terminate this
Agreement at the end of such one-year period. This Agreement shall also
terminate if the Partnership terminates. The Partnership shall have the right to
terminate this Agreement at its discretion (a) at any month end upon 5 days'
prior written notice to the Trading Advisor or (b) at any time upon written
notice to the Trading Advisor upon the occurrence of any of the following
events: (i) if any person described as a "principal" of the Trading Advisor in
the Prospectus ceases for any reason to be an active executive officer of the
Trading Advisor; (ii) if the Trading Advisor becomes bankrupt or insolvent;
(iii) if the Trading Advisor is unable to use its trading programs, systems or
methods as in effect on the date hereof and as refined and modified in the
future for the benefit of the Partnership; (iv) if the registration, as a
commodity trading advisor, of the Trading Advisor with the CFTC or its
membership in the NFA is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) except as provided in Section 12
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $1,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, and, if such consent is given, does not make arrangements to
facilitate such trading within 30 days of such notice; or (vi) the assets
allocated to the Trading Advisor fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a material breach of this
Agreement or a representation, warranty or covenant herein, misconduct or
negligence or is the result of any such person not having acted in good faith
and in the reasonable belief that such actions or omissions were in, or not
opposed to, the best interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management Activities.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading of the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a breach of this Agreement or a
representation, warranty or covenant herein, the result of bad faith, misconduct
or negligence, or conduct not done in good faith in the reasonable belief that
it was in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the business or
activities of the Partnership undertaken by the Trading Advisor pursuant to this
Agreement or a breach of this Agreement or a representation, warranty or
covenant herein by the General Partner or the Partnership; provided that a court
of competent jurisdiction upon entry of a final judgment finds (or, if no final
judgment is entered, an opinion is rendered to the Partnership by independent
counsel reasonably acceptable to both parties) to the effect that the action or
inaction of such indemnified party that was the subject of the demand, claim,
lawsuit, action, or proceeding did not constitute negligence, misconduct, or a
breach of this Agreement or a representation, warranty or covenant of the
Trading Advisor herein and was done in good faith and in a manner such
indemnified party reasonably believed to be in, or not opposed to, the best
interests of the Partnership. The termination of any demand, claim, lawsuit,
action, or proceeding by settlement shall not, of itself, create a presumption
that the conduct in question was not undertaken in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, CFI the
Partnership, the General Partner, any Additional Seller, and their affiliates
and each of their officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Securities and Exchange Act of 1934 Act, as amended (the
"Exchange Act") the Commodity Exchange Act, and rules promulgated thereunder the
("CEAct") the securities or Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement, provided that the
Trading Advisor shall have approved such settlement, and in connection with any
administrative proceedings), in respect of the offer or sale of Units, insofar
as such loss, claim, damage, liability, cost, or expense (or action in respect
thereof) arises out of, or is based upon: (i) a material breach by the Trading
Advisor of any representation, warranty, or agreement in this Agreement or any
certificate delivered pursuant to this Agreement or the failure by the Trading
Advisor to materially perform any covenant made by the Trading Advisor herein;
(ii) a misleading or untrue statement or alleged misleading or untrue statement
of a material fact made in the Registration Statement, the Prospectus, or any
related selling material or an omission or alleged omission to state a material
fact therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus and any selling material, in
light of the circumstances under which they were made) not misleading, and such
statement or omission relates specifically to the Trading Advisor, or its
Trading Advisor Principals (as defined below) or was made in reliance upon, and
in conformity with, written information or instructions furnished by the Trading
Advisor (provided, however, that with respect to any related selling material
only such related selling material as shall have been approved in writing by the
Trading Advisor) and, such statement or the omission of a statement, was
approved in writing by the Trading Advisor.
(e) Partnership Indemnity in Respect of Sale of Units. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not relate
to the Trading Advisor or its Trading Advisor Principals or was not made in
reliance upon, and in conformity with, information or instructions furnished by
the Trading Advisor (provided, however, that with respect to any related selling
material, only such related selling material as shall have been approved in
writing by the Trading Advisor), or does not result from a material breach by
the Trading Advisor of any representation, warranty, or agreement in this
Agreement or any certificate delivered pursuant to this Agreement or the failure
by the Trading Advisor to materially perform any covenant made in this
Agreement.
(f) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. Right to Advise Others and Uniformity of Acts and
Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the
Commodity Exchange Act or any regulations promulgated thereunder, any applicable
rule or regulation of the CFTC or any other regulatory body, exchange, or board;
and (ii) neither the Trading Advisor nor any of its principals or affiliates
shall render futures interests trading advice to any other individual or entity
or otherwise engage in activity which shall knowingly cause positions in futures
interests to be attributed to the Trading Advisor under the rules or regulations
of the CFTC or any other regulatory body, exchange, or board so as to require
the significant modification of positions taken or intended for the account of
the Partnership; provided that the Trading Advisor may modify its trading
programs, systems, methods or strategies to accommodate the trading of
additional funds or accounts. If applicable speculative position limits are
exceeded by the Trading Advisor in the opinion of (i) independent counsel (who
shall be other than counsel to the Partnership), (ii) the CFTC, or (iii) any
other regulatory body, exchange, or board, the Trading Advisor and its
principals and affiliates shall promptly liquidate positions in all of their
accounts, including the Partnership's account, as to which positions are
attributed to the Trading Advisor as nearly as possible in proportion to the
accounts' respective amounts available for trading (taking into account
different degrees of leverage and "notional" equity) to the extent necessary to
comply with the applicable position limits.
10. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations of the Trading Advisor. The Trading Advisor with
respect to itself and each of its principals represents and warrants to and
agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading programs agreed
to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus) and as
amended in writing and furnished to the Trading Advisor from time to time,
provided, that the General Partner has notified the Trading Advisor of these
trading policies.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the same trading programs described in the Prospectus unless
the General Partner agrees otherwise and (B) only in futures and option
contracts traded on U.S. contract markets, foreign currency forward contracts
traded with CFI, and such other futures interests which are approved in writing
by the General Partner or have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing and
in good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to so qualify would
materially adversely affect the Trading Advisor's ability to perform its duties
under this Agreement. The Trading Advisor has full corporate power and authority
to perform its obligations under this Agreement, and as described in the
Registration Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in the
Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs, approaches,
systems and performance, in the Registration Statement and the Prospectus, and
in the supplemental selling material which has been approved in writing by the
Trading Advisor, are accurate and complete in all material respects. With
respect to the material relating to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's and the Trading Advisor Principals'
trading programs, approaches, systems , and performance information, as
applicable, (i) the Registration Statement and Prospectus contain all statements
and information required to be included therein under the CEAct,(ii) the
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements therein not
misleading and (iii) the Prospectus at its date of issue and as of each closing
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal and
state governmental, regulatory and exchange licenses, registrations and
approvals and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to perform
its or his obligations under this Agreement. The Trading Advisor is registered
as a commodity trading advisor under the CEAct and is a member of the NFA in
such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment of the
fees hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over it.
(ix) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or any Trading Advisor
Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of the
Prospectus and there is not pending, or to the best of the Trading Advisor's
knowledge threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Trading Advisor or any Trading Advisor
Principal is or was a party, or to which any of the assets of the Trading
Advisor is or was subject and which resulted in or might reasonably be expected
to result in any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or which is required
under the Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the Trading
Advisor or any of the Trading Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in connection
with the organization or operation of the Partnership, other than as described
in the Prospectus.
(b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Advisor to continue
to act as described herein and to at all times comply in all material respects
with all applicable laws, rules, and regulations, to the extent that the failure
to so comply would have a materially adverse effect on the Trading Advisor's
ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals becomes the
subject of any investigation, claim or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the Trading Advisor. The Trading Advisor
shall also inform the General Partner immediately if the Trading Advisor or any
of its officers becomes aware of any breach of this Agreement by the Trading
Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the preparation of
any amendments or supplements to the Registration Statement and the Prospectus.
11. Representations and Warranties of the General Partner and the
Partnership.
The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and
filed with SEC, the Registration Statement and has filed copies thereof with:
(i) the CFTC under the CEAct; (ii) the NASD pursuant to its Rules of Fair
Practice; and (iii) the NFA in accordance with NFA Compliance Rule 2-13. The
Partnership will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus unless the Trading Advisor has
received reasonable prior notice of and a copy of such amendments or supplements
and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken by the
General Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as defined in
the Prospectus will have been taken; and, upon payment of the consideration
therefor specified in each accepted Subscription and Exchange Agreement and
Power of Attorney, in such form as attached to the Prospectus, the Units will
constitute valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and is validly existing under the laws of the State of Delaware with full power
and authority to engage in the trading of futures interests and to engage in its
other contemplated activities as described in the Prospectus; the Partnership
has received a certificate of authority to do business in the State of New York
as provided by Article 8-A of the New York Revised Limited Partnership Act and
is qualified to do business in each jurisdiction in which the nature or conduct
of its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
where the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to conduct
their business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct. When
the Registration Statement becomes effective under the Securities Act and at all
times subsequent thereto up to and including each Closing, the Registration
Statement and Prospectus will comply in all material respects with the
requirements of the Securities Act, the rules and regulations promulgated
thereunder (the "SEC Regulations"), the rules of the NFA and the CEAct. The
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus as of its date of issue and at each Closing will not contain any
misleading or untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material will
comply with the CEAct and the regulations and rules of the NFA and NASD. The
representation, and warranties in this clause (vi) shall not, however, apply to
any statement or omission in the Registration Statement, Prospectus or
supplemental selling material relating to the Trading Advisor, or its Trading
Advisor Principals or its trading programs or made in reliance upon and in
conformity with information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the General Partner or the Partnership, whether or not arising in
the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Partnership and
constitutes a valid, binding and enforceable agreement of the Partnership in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under, the
General Partner's certificate of incorporation, bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the case
may be, is bound or any order, rule, law or regulation applicable to the General
Partner or the Partnership of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity before
or by any court or by any federal, state, municipal or other governmental body
or any administrative, self-regulatory or commodity exchange organization to
which the General Partner or the Partnership is or was a party, or to which any
of the assets of the General Partner or the Partnership is or was subject and
which resulted in or might reasonably be expected to result in any materially
adverse change in the condition, financial or otherwise, of the General Partner
or the Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of the
principals of the General Partner, as "principals" is defined under Rule 4.10
under the CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with the
CEAct or the Securities Act which is required under the Securities Act or the
CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and licenses,
and have effected all filings with federal and state governmental agencies and
regulatory agencies required to conduct their business and to act as described
in the Registration Statement and Prospectus or required to perform their
obligations under this Agreement (including, without limitation, registration as
a commodity pool operator under the CEAct and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The General
Partner's principals identified in the Registration Statement are all of the
General Partner Principals.
(b) Covenants of the General Partner. The General Partner covenants
and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in all
material respects with all applicable laws, rules, and regulations, to the
extent that the failure to so comply would have a materially adverse effect on
the General Partner's ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals becomes the
subject of any investigation, claim, or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the General Partner. The General Partner
shall also inform the Trading Advisor immediately if the General Partner or any
of its officers become aware of any breach of this Agreement by the General
Partner.
(iii) The Partnership will furnish to the Trading Advisor copies
of the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written consent of
the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement and at the
request of the General Partner at any Monthly Closing (as defined in the
Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading
Advisor in this Agreement are true, accurate, and a complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its
obligations and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a corporation duly organized
and validly existing under the laws of the state of its incorporation and is
qualified to do business and in good standing in each other jurisdiction in
which the nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect the Trading
Advisor's ability to perform its obligations under this Agreement. The Trading
Advisor has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, self-regulatory and commodity
exchange and clearing association licenses, registrations, and memberships
required by law, and the Trading Advisor (including the Trading Advisor
Principals) has made all filings necessary to perform its obligations under this
Agreement and to conduct its business as described in the Registration Statement
and Prospectus, except for such licenses, memberships, filings and
registrations, the absence of which would not have a material adverse effect on
its ability to act as described in the Registration Statement and Prospectus or
to perform its obligations under this Agreement, and, to the best of such
counsel's knowledge, after due investigations, none of such licenses,
memberships or registrations have been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed
and delivered by or on behalf of the Trading Advisor and constitutes a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally of
rights of creditors and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification, exculpation, and contribution
provisions contained in this Agreement may be limited by applicable law or
public policy and the enforcement of specific terms or remedies may be
unavailable.
(iv) Based upon due inquiry of certain officers of the
Trading Advisor, to the best of such counsel's knowledge, except as disclosed in
the Prospectus, there are no material actions, suits or proceedings at law or in
equity either threatened or pending in any court or before or by any
governmental or administrative body nor have there been any such actions, suits
or proceedings at any time within the five years preceding the date of the
Prospectus against the Trading Advisor or any Trading Advisor Principal which
are required to be disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of incorporation or
bylaws of the Trading Advisor and, based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument or
agreement known to such counsel by which the Trading Advisor is bound and will
not violate any order, law, rule or regulation applicable to the Trading Advisor
of any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action"
letters, as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the Prospectus
will not require the Trading Advisor to be registered as an "investment adviser"
as that term is defined in the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that
would lead them to believe that, (A) the Registration Statement at the time it
became effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (B) the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein relating to the Trading Advisor or the Trading Advisor Principals, in
light of the circumstances under which they were made, not misleading.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
resources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(2) The General Partner shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the closing as if made on the date of the
closing.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act. No order
preventing or suspending the use of the Prospectus has been issued by the SEC,
NASD, CFTC, or NFA and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the General Partner, are contemplated or
threatened under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Wickersham & Taft, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto, in
form and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the DRULPA and is validly existing under the laws of the State of
Delaware with full partnership power and authority to conduct the business in
which it proposes to engage as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement; the Partnership
has received a Certificate of Authority as contemplated under the New York
Revised Limited Partnership Act and is qualified to do business in New York and
need not affect any other filings or qualifications under the laws of any other
jurisdictions to conduct its business as described in the Registration Statement
and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the failure to
so qualify might reasonably be expected to result in material adverse
consequences to the Partnership or the General Partner's ability to perform its
obligations as described in the Registration Statement and Prospectus. The
General Partner has full corporate power and authority to conduct its business
as described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(iii) The General Partner and each of its principals as
defined in Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the General
Partner and the Partnership to perform their obligations under this Agreement to
conduct their business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings, and registrations,
the absence of which would not have a material adverse effect on their ability
to act as described in the Registration Statement and Prospectus, or to perform
their obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships or
registrations have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized, executed
and delivered by or on behalf of the General Partner and the Partnership, and
constitutes a valid and binding agreement of the General Partner and the
Partnership, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in such
agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and the
offer and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of the
General Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement and, to the best of
such counsel's knowledge based upon due inquiry of certain officers of the
General Partner, will not constitute a breach of, or default under, or a
violation of any agreement or instrument known to such counsel by which the
General Partner or the Partnership is bound and will not violate any order known
to such counsel or any law, rule or regulation applicable to the General Partner
or the Partnership of any court, governmental body, administrative agency, panel
or self-regulatory organization having jurisdiction over the General Partner or
the Partnership.
(vi) To such counsel's knowledge, based upon due inquiry
of certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in equity
pending or threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
suits or proceedings within the five years preceding the date of the Prospectus,
to which the General Partner or the Partnership is or was a party, or to which
any of their assets is or was subject, which would be material to an investor's
decision to invest in the Partnership or which might reasonably be expected to
result in a materially adverse change in the condition, financial or otherwise,
business or prospects of the General Partner, or the Partnership, whether or not
arising in the ordinary course of business.
(vii) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no proceedings for
a stop order are pending or threatened under Section 8(d) of the Securities Act
or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was issued
and as of the closing, the Prospectus, complied as to form in all material
respects with the requirements of the Securities Act, the Securities
Regulations, the CEAct and the regulations of the NFA and NASD. Nothing has come
to such counsel's attention that would lead them to believe that the
Registration Statement at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they where made, not misleading; provided, however, that Cadwalader,
Wickersham & Taft need express no opinion or belief (a) as to information in the
Registration Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions thereto
set forth in the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC "no-action"
letters, as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication.
19. Disclosure Documents.
During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents filed with
the CFTC or NFA by the Trading Advisor. The General Partner acknowledges receipt
of the Trading Advisor's disclosure document dated __________________.
20. Notices.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
if to the Partnership:
Dean Witter Spectrum Select L.P.
c/o Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
if to the General Partner:
Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
if to the Trading Advisor:
Rabar Market Research, Inc.
10 Bank Street, Suite 830
White Plains, New York 10606-1933
Attn: John Dreyer
with a copy to:
Adam Cooper, Esq.
Katten, Muchin & Zavis
525 W. Monroe, Suite 1600
Chicago, Illinois 60661
21. Survival.
The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
<PAGE>
22. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York. If any action or proceeding shall be
brought by a party to this Agreement or to enforce any right or remedy under
this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
DEAN WITTER SPECTRUM SELECT L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Mark J. Hawley
--------------------------------
Mark J. Hawley
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley
--------------------------------
Mark J. Hawley
RABAR MARKET RESEARCH, INC.
By: /s/ Mark Rosenberg
--------------------------------
Mark Rosenberg
Exhibit 10.02
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 1998, among DEAN
WITTER SPECTRUM SELECT L.P., a Delaware limited partnership (the "Partnership,"
formerly Dean Witter Select Futures Fund L.P.), DEMETER MANAGEMENT CORPORATION,
a Delaware corporation (the "General Partner"), and EMC CAPITAL MANAGEMENT,
INC., an Illinois corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement, dated as of March 21, 1991, as amended from time to time,
and as further amended and restated as of May 31, 1998, 1998 (the "Limited
Partnership Agreement"), to engage primarily in speculative trading of
commodities (including, but not limited to, foreign currencies, mortgage-backed
securities, money market instruments, financial instruments, and any other
securities or items which are now, or may hereafter be, the subject of futures
contract trading), domestic and foreign futures contracts, forward contracts,
foreign exchange commitments, options on physical commodities and on futures
contracts, spot (cash) commodities and currencies, and any rights pertaining
thereto (hereinafter referred to collectively as "futures interests") and
securities (such as United States Treasury securities) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership and the Trading Advisor have entered into
that certain Management Agreement dated May 17, 1991, as amended by Amendment
No. 1 to such agreement, dated July 22, 1992, as amended by Amendment No. 2 to
such agreement dated as of August 31, 1993, and as further amended by Amendment
No. 3 to such agreement, dated November 29, 1996 (together, the "Original
Management Agreement");
WHEREAS, the Partnership and the Trading Advisor wish to amend and
restate the Original Management Agreement upon the terms and conditions set
forth herein;
WHEREAS, the Partnership intends to become a member partnership of
the Dean Witter Spectrum Series (the "Fund Group") by entering into an agreement
pursuant to which units of limited partnership interest ("Units") of such member
partnerships will be sold to investors in a common offering under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-1, as it may be amended from time to time (the "Registration
Statement"), and a final Prospectus, dated May 11, 1998, constituting a part
thereof as it may be amended and supplemented from time to time (the
"Prospectus"), and thereafter, pursuant to which such Units can be exchanged by
a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Advisor has extensive experience trading in
futures interests and is willing to continue to provide certain services and
undertake certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to continue to
act as a trading advisor for the Partnership and to make investment decisions
with respect to futures interests for its allocated share of the Partnership's
Net Assets and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Amended and Restated Management Agreement which,
among other things, sets forth certain terms and conditions upon which the
Trading Advisor will conduct a portion of the Partnership's futures interests
trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership and the General Partner by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a Trading Advisor
for the Partnership and, as such, shall have sole authority and responsibility
for directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or provided in
writing to the Trading Advisor; provided, however, that the General Partner may
override the instructions of the Trading Advisor to the extent necessary (i) to
comply with the trading policies of the Partnership described in writing to the
Trading Advisor and with applicable speculative position limits, (ii) to fund
any distributions, redemptions, or reapportionments among other trading advisors
to the Partnership, (iii) to pay the Partnership's expenses, (iv) to the extent
the General Partner believes doing so is necessary for the protection of the
Partnership, (v) to terminate the futures interests trading of the Partnership,
or (vi) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions for the reasons specified in
clauses (ii) or (iii) of the preceding sentence unless the Trading Advisor fails
to comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five days of such request. The Trading
Advisor shall not be liable for the consequences of any decision by the General
Partner to override instructions of the Trading Advisor, except to the extent
that the Trading Advisor is in breach of this Agreement. In performing services
to the Partnership the Trading Advisor may not materially alter the trading
program(s) used by the Trading Advisor in investing and reinvesting its
allocable share of the Partnership's Net Assets in futures interests as
described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed an alteration in the Trading Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the prohibitions
and trading policies of the Partnership provided in writing to the Trading
Advisor and the trading programs, systems, methods, and strategies of the
Trading Advisor described in the Prospectus, with such changes and additions to
such trading programs, systems, methods or strategies as the Trading Advisor,
from time to time, incorporates into its trading programs for accounts the size
of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30 days
of a request therefor by the General Partner, with information comparing the
performance of the Partnership's account and the performance of all other client
accounts directed by the Trading Advisor using the trading programs used by the
Trading Advisor for the Partnership over a specified period of time. In
providing such information, the Trading Advisor may take such steps as are
necessary to assure the confidentiality of the Trading Advisor's clients'
identities. The Trading Advisor shall, upon the General Partner's request,
consult with the General Partner concerning any discrepancies between the
performance of such other accounts and the Partnership's account. The Trading
Advisor shall promptly inform the General Partner of any material discrepancies
of which the Trading Advisor is aware. The General Partner acknowledges that
different trading programs, strategies or implementation methods may be utilized
for different accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity, accounts that commence
trading at different times, accounts which have different portfolios or
different fiscal years and that such differences may cause divergent trading
results.
(iii) Upon request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Advisor other than proprietary information (including,
without limitation, information relating to changes in control, personnel,
trading approach, or financial condition). The General Partner acknowledges that
all trading instructions made by the Trading Advisor will be held in confidence
by the General Partner, except to the extent necessary to conduct the business
of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's open
positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Advisor shall be for the
account of the Partnership. The Trading Advisor makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any negligent errors
committed or caused by it in transmitting orders for the purchase or sale of
futures interests for the Partnership's account, including payment to DWR of the
floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give up charges incurred by DWR on such trades but only for the
amount of DWR's out of pocket costs in respect thereof. However, the Trading
Advisor shall not be responsible for errors committed or caused by DWR or by
floor brokers or other FCM's. The Trading Advisor shall have an affirmative
obligation promptly to notify the General Partner of its negligent errors.
(e) Prior to the commencement of trading by the Partnership, the
General Partner on behalf of the Partnership shall deliver to the Trading
Advisor a trading authorization appointing the Trading Advisor the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets (as
defined in Section 6(c) hereof) as the General Partner shall determine in its
absolute discretion. The designation of an additional trading advisor or
advisors and the apportionment of Net Assets to any such trading advisor(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Advisor hereunder. In the event that an additional
trading advisor or advisors is so designated, the Trading Advisor shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Advisor and the Trading Profits
attributable to the trading by the Trading Advisor.
(b) The General Partner may at any time and from time to time upon
two business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon two business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Dean Witter Reynolds Inc. ("DWR") shall act as non-clearing
commodity broker and Carr Futures, Inc. ("CFI") shall act as the clearing
commodity broker for the Partnership. The General Partner shall provide the
Trading Advisor with copies of brokerage statements. Notwithstanding that CFI
shall act as the clearing commodity broker for the Partnership, the Trading
Advisor may execute trades through floor brokers other than those employed by
CFI so long as arrangements are made for such floor brokers to "give-up" or
transfer the positions to CFI and provided that the rates charged by such floor
brokers have been approved in writing by DWR. The Trading Advisor will not be
responsible for paying give-up fees.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's account,
equal to 1/4 of 1% (a 3% annual rate) of the "Net Assets" of the Partnership
allocated to the Trading Advisor (as defined in Section 6(c)) as of the opening
of business on the first day of each calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar month,
payable on a non-netted basis vis-a-vis other trading advisors(s) of the
Partnership.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be determined
as if such date were the end of a month, but such fee shall be prorated based on
the ratio of the number of trading days in the month through the date of
termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilizes the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest positions and other assets of the
Partnership) less all liabilities of the Partnership (including, but not limited
to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Advisor or, if no incentive
fee has been earned previously by the Trading Advisor, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits earned by the Partnership on Net Assets allocated
to the Trading Advisor and the Partnership thereafter fails to earn Trading
Profits or experiences losses for any subsequent incentive period with respect
to such amounts so allocated, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits. However, no subsequent incentive fees shall be payable
to the Trading Advisor until the Partnership has again earned Trading Profits on
the Trading Advisor's allocated Net Assets; provided, however, that if the
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations that occur at the end of, or subsequent
to, an incentive period in which the Partnership experiences a futures interests
trading loss with respect to Net Assets allocated to the Trading Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
(f) The Partnership will remit the management and incentive fees to
the Trading Advisor as soon as practicable, but in no event later than 30 days,
in the case of the management fee, or 45 days in the case of the incentive fee
of the month-end as of which they are due, together with an itemized statement
showing the calculations. All management and incentive fees may be paid by
wiring such amounts to an account designated in writing by the Trading Advisor.
7. Term.
This Agreement shall continue in effect until May 1, 2000 (the
"Initial Termination Date"). At least thirty days prior to the Initial
Termination Date, the Trading Advisor may terminate this Agreement upon 30 days'
prior written notice to the Partnership. If this Agreement is not terminated on
the Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least thirty days prior to the expiration
of any such one-year period, the Trading Advisor may terminate this Agreement at
the end of the current one-year period by providing written notice to the
Partnership indicating that the Trading Advisor desires to terminate this
Agreement at the end of such one-year period. This Agreement shall also
terminate if the Partnership terminates. The Partnership shall have the right to
terminate this Agreement at its discretion (a) at any month end upon 5 days'
prior written notice to the Trading Advisor or (b) at any time upon written
notice to the Trading Advisor upon the occurrence of any of the following
events: (i) if any person described as a "principal" of the Trading Advisor in
the Prospectus ceases for any reason to be an active executive officer of the
Trading Advisor; (ii) if the Trading Advisor becomes bankrupt or insolvent;
(iii) if the Trading Advisor is unable to use its trading programs, systems or
methods as in effect on the date hereof and as refined and modified in the
future for the benefit of the Partnership; (iv) if the registration, as a
commodity trading advisor, of the Trading Advisor with the CFTC or its
membership in the NFA is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) except as provided in Section 12
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $1,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, and, if such consent is given, does not make arrangements to
facilitate such trading within 30 days of such notice; or (vi) the assets
allocated to the Trading Advisor fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a material breach of this
Agreement or a representation, warranty or covenant herein, misconduct or
negligence or is the result of any such person not having acted in good faith
and in the reasonable belief that such actions or omissions were in, or not
opposed to, the best interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management Activities.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading of the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a material breach of this
Agreement or a representation, warranty or covenant herein, the result of,
misconduct or negligence, or conduct not done in good faith in the reasonable
belief that it was in, or not opposed to, the best interests of the Partnership.
The termination of any demand, claim, lawsuit, action, or proceeding by
settlement shall not, of itself, create a presumption that the conduct in
question was not undertaken in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the business or
activities of the Partnership undertaken by the Trading Advisor pursuant to this
Agreement or a material breach of this Agreement or a representation, warranty
or covenant herein by the General Partner or the Partnership; provided that a
court of competent jurisdiction upon entry of a final judgment finds (or, if no
final judgment is entered, an opinion is rendered to the Partnership by
independent counsel reasonably acceptable to both parties) to the effect that
the action or inaction of such indemnified party that was the subject of the
demand, claim, lawsuit, action, or proceeding did not constitute negligence,
misconduct, or a material breach of this Agreement or a representation, warranty
or covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership. The termination of any demand, claim,
lawsuit, action, or proceeding by settlement shall not, of itself, create a
presumption that the conduct in question was not undertaken in good faith and in
a manner reasonably believed to be in, or not opposed to, the best interests of
the Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, CFI the
Partnership, the General Partner, any Additional Seller, and their affiliates
and each of their officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Securities and Exchange Act of 1934 Act, as amended (the
"Exchange Act") the Commodity Exchange Act, and rules promulgated thereunder the
("CEAct") the securities or Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement, provided that the
Trading Advisor shall have approved such settlement, and in connection with any
administrative proceedings), in respect of the offer or sale of Units, but only
to the extent such loss, claim, damage, liability, cost, or expense (or action
in respect thereof) arises out of, or is based upon: (i) a material breach by
the Trading Advisor of any representation, warranty, or agreement in this
Agreement or any certificate delivered pursuant to this Agreement or the failure
by the Trading Advisor to materially perform any covenant made by the Trading
Advisor herein; (ii) a misleading or untrue statement or alleged misleading or
untrue statement of a material fact made in the Registration Statement, the
Prospectus, or any related selling material or an omission or alleged omission
to state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus and any
selling material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined below) or was made in
reliance upon, and in conformity with, written information or instructions
furnished by the Trading Advisor (provided, however, that with respect to any
related selling material only such related selling material as shall have been
approved in writing by the Trading Advisor).
(e) Partnership Indemnity in Respect of Sale of Units. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
material breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not relate
to the Trading Advisor or its Trading Advisor Principals or was not made in
reliance upon, and in conformity with, information or instructions furnished by
the Trading Advisor (provided, however, that with respect to any related selling
material, only such related selling material as shall have been approved in
writing by the Trading Advisor), or does not result from a material breach by
the Trading Advisor of any representation, warranty, or agreement in this
Agreement or any certificate delivered pursuant to this Agreement or the failure
by the Trading Advisor to materially perform any covenant made in this
Agreement.
(f) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. Right to Advise Others and Uniformity of Acts
and Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the
Commodity Exchange Act or any regulations promulgated thereunder, any applicable
rule or regulation of the CFTC or any other regulatory body, exchange, or board;
and (ii) neither the Trading Advisor nor any of its principals or affiliates
shall render futures interests trading advice to any other individual or entity
or otherwise engage in activity which shall knowingly cause positions in futures
interests to be attributed to the Trading Advisor under the rules or regulations
of the CFTC or any other regulatory body, exchange, or board so as to require
the significant modification of positions taken or intended for the account of
the Partnership; provided that the Trading Advisor may modify its trading
programs, systems, methods or strategies to accommodate the trading of
additional funds or accounts. If applicable speculative position limits are
exceeded by the Trading Advisor in the opinion of (i) independent counsel (who
shall be other than counsel to the Partnership), (ii) the CFTC, or (iii) any
other regulatory body, exchange, or board, the Trading Advisor and its
principals and affiliates shall promptly liquidate positions in all of their
accounts, including the Partnership's account, as to which positions are
attributed to the Trading Advisor as nearly as possible in proportion to the
accounts' respective amounts available for trading (taking into account
different degrees of leverage and "notional" equity) to the extent necessary to
comply with the applicable position limits.
10. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations of the Trading Advisor. The Trading Advisor with
respect to itself and each of its principals represents and warrants to and
agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading programs agreed
to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus) and as
amended in writing and furnished to the Trading Advisor from time to time,
provided, that the General Partner has notified the Trading Advisor of these
trading policies.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the same trading programs described in the Prospectus unless
the General Partner agrees otherwise and (B) only in futures and option
contracts traded on U.S. contract markets, foreign currency forward contracts
traded with CFI, and such other futures interests which are approved in writing
by the General Partner or have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing and
in good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to so qualify would
materially adversely affect the Trading Advisor's ability to perform its duties
under this Agreement. The Trading Advisor has full corporate power and authority
to perform its obligations under this Agreement, and as described in the
Registration Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in the
Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs, approaches,
systems and performance, in the Registration Statement and the Prospectus, and
in the supplemental selling material which has been approved in writing by the
Trading Advisor, are accurate and complete in all material respects. With
respect to the material relating to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's and the Trading Advisor Principals'
trading programs, approaches, systems , and performance information, as
applicable, (i) the Registration Statement and Prospectus contain all statements
and information required to be included therein under the CEAct,(ii) the
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements therein not
misleading and (iii) the Prospectus at its date of issue and as of each closing
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal and
state governmental, regulatory and exchange licenses, registrations and
approvals and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to perform
its or his obligations under this Agreement. The Trading Advisor is registered
as a commodity trading advisor under the CEAct and is a member of the NFA in
such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment of the
fees hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over it.
(ix) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or any Trading Advisor
Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of the
Prospectus and there is not pending, or to the best of the Trading Advisor's
knowledge threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Trading Advisor or any Trading Advisor
Principal is or was a party, or to which any of the assets of the Trading
Advisor is or was subject and which resulted in or might reasonably be expected
to result in any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or which is required
under the Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the Trading
Advisor or any of the Trading Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in connection
with the organization or operation of the Partnership, other than as described
in the Prospectus.
(b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Advisor to continue
to act as described herein and to at all times comply in all material respects
with all applicable laws, rules, and regulations, to the extent that the failure
to so comply would have a materially adverse effect on the Trading Advisor's
ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals becomes the
subject of any investigation, claim or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the Trading Advisor. The Trading Advisor
shall also inform the General Partner immediately if the Trading Advisor or any
of its officers becomes aware of any breach of this Agreement by the Trading
Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the preparation of
any amendments or supplements to the Registration Statement and the Prospectus.
11. Representations and Warranties of the General Partner and the
Partnership.
The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and
filed with SEC, the Registration Statement and has filed copies thereof with:
(i) the CFTC under the CEAct; (ii) the NASD pursuant to its Rules of Fair
Practice; and (iii) the NFA in accordance with NFA Compliance Rule 2-13. The
Partnership will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus unless the Trading Advisor has
received reasonable prior notice of and a copy of such amendments or supplements
and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken by the
General Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as defined in
the Prospectus will have been taken; and, upon payment of the consideration
therefor specified in each accepted Subscription and Exchange Agreement and
Power of Attorney, in such form as attached to the Prospectus, the Units will
constitute valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and is validly existing under the laws of the State of Delaware with full power
and authority to engage in the trading of futures interests and to engage in its
other contemplated activities as described in the Prospectus; the Partnership
has received a certificate of authority to do business in the State of New York
as provided by Article 8-A of the New York Revised Limited Partnership Act and
is qualified to do business in each jurisdiction in which the nature or conduct
of its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
where the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to conduct
their business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct. When
the Registration Statement becomes effective under the Securities Act and at all
times subsequent thereto up to and including each Closing, the Registration
Statement and Prospectus will comply in all material respects with the
requirements of the Securities Act, the rules and regulations promulgated
thereunder (the "SEC Regulations"), the rules of the NFA and the CEAct. The
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus as of its date of issue and at each Closing will not contain any
misleading or untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material will
comply with the CEAct and the regulations and rules of the NFA and NASD. The
representation, and warranties in this clause (vi) shall not, however, apply to
any statement or omission in the Registration Statement, Prospectus or
supplemental selling material relating to the Trading Advisor, or its Trading
Advisor Principals or its trading programs or made in reliance upon and in
conformity with information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the General Partner or the Partnership, whether or not arising in
the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Partnership and
constitutes a valid, binding and enforceable agreement of the Partnership in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under, the
General Partner's certificate of incorporation, bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the case
may be, is bound or any order, rule, law or regulation applicable to the General
Partner or the Partnership of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity before
or by any court or by any federal, state, municipal or other governmental body
or any administrative, self-regulatory or commodity exchange organization to
which the General Partner or the Partnership is or was a party, or to which any
of the assets of the General Partner or the Partnership is or was subject and
which resulted in or might reasonably be expected to result in any materially
adverse change in the condition, financial or otherwise, of the General Partner
or the Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of the
principals of the General Partner, as "principals" is defined under Rule 4.10
under the CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with the
CEAct or the Securities Act which is required under the Securities Act or the
CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and licenses,
and have effected all filings with federal and state governmental agencies and
regulatory agencies required to conduct their business and to act as described
in the Registration Statement and Prospectus or required to perform their
obligations under this Agreement (including, without limitation, registration as
a commodity pool operator under the CEAct and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The General
Partner's principals identified in the Registration Statement are all of the
General Partner Principals.
(b) Covenants of the General Partner. The General Partner covenants
and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in all
material respects with all applicable laws, rules, and regulations, to the
extent that the failure to so comply would have a materially adverse effect on
the General Partner's ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals becomes the
subject of any investigation, claim, or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the General Partner. The General Partner
shall also inform the Trading Advisor immediately if the General Partner or any
of its officers become aware of any breach of this Agreement by the General
Partner.
(iii) The Partnership will furnish to the Trading Advisor copies
of the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written consent of
the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement and at the
request of the General Partner at any Monthly Closing (as defined in the
Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the
Trading Advisor in this Agreement are true, accurate, and a complete on and as
of the date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its
obligations and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a corporation duly
organized and validly existing under the laws of the state of its incorporation
and is qualified to do business and in good standing in each other jurisdiction
in which the nature or conduct of its business requires such qualification and
the failure to be duly qualified would materially adversely affect the Trading
Advisor's ability to perform its obligations under this Agreement. The Trading
Advisor has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading
Advisor Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses, registrations, and
memberships required by law, and the Trading Advisor (including the Trading
Advisor Principals) has made all filings necessary to perform its obligations
under this Agreement and to conduct its business as described in the
Registration Statement and Prospectus, except for such licenses, memberships,
filings and registrations, the absence of which would not have a material
adverse effect on its ability to act as described in the Registration Statement
and Prospectus or to perform its obligations under this Agreement, and, to the
best of such counsel's knowledge, after due investigations, none of such
licenses, memberships or registrations have been rescinded, revoked or
suspended.
(iii) This Agreement has been duly authorized,
executed and delivered by or on behalf of the Trading Advisor and constitutes a
valid and binding agreement of the Trading Advisor enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, reorganization,
moratorium or similar laws at the time in effect affecting the enforceability
generally of rights of creditors and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law), and except as enforceability of the indemnification, exculpation, and
contribution provisions contained in this Agreement may be limited by applicable
law or public policy and the enforcement of specific terms or remedies may be
unavailable.
(iv) Based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, except as
disclosed in the Prospectus, there are no material actions, suits or proceedings
at law or in equity either threatened or pending in any court or before or by
any governmental or administrative body nor have there been any such actions,
suits or proceedings at any time within the five years preceding the date of the
Prospectus against the Trading Advisor or any Trading Advisor Principal which
are required to be disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement
the incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of incorporation or
bylaws of the Trading Advisor and, based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument or
agreement known to such counsel by which the Trading Advisor is bound and will
not violate any order, law, rule or regulation applicable to the Trading Advisor
of any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action"
letters, as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the Prospectus
will not require the Trading Advisor to be registered as an "investment adviser"
as that term is defined in the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention
that would lead them to believe that, (A) the Registration Statement at the time
it became effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (B) the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein relating to the Trading Advisor or the Trading Advisor Principals, in
light of the circumstances under which they were made, not misleading.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
resources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(2) The General Partner shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the closing as if made on the date of the
closing.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act. No order
preventing or suspending the use of the Prospectus has been issued by the SEC,
NASD, CFTC, or NFA and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the General Partner, are contemplated or
threatened under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Wickersham & Taft, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto, in
form and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly
formed pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the laws of
the State of Delaware with full partnership power and authority to conduct the
business in which it proposes to engage as described in the Registration
Statement and Prospectus and to perform its obligations under this Agreement;
the Partnership has received a Certificate of Authority as contemplated under
the New York Revised Limited Partnership Act and is qualified to do business in
New York and need not affect any other filings or qualifications under the laws
of any other jurisdictions to conduct its business as described in the
Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the failure to
so qualify might reasonably be expected to result in material adverse
consequences to the Partnership or the General Partner's ability to perform its
obligations as described in the Registration Statement and Prospectus. The
General Partner has full corporate power and authority to conduct its business
as described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(iii) The General Partner and each of its principals
as defined in Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the General
Partner and the Partnership to perform their obligations under this Agreement to
conduct their business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings, and registrations,
the absence of which would not have a material adverse effect on their ability
to act as described in the Registration Statement and Prospectus, or to perform
their obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships or
registrations have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized, executed
and delivered by or on behalf of the General Partner and the Partnership, and
constitutes a valid and binding agreement of the General Partner and the
Partnership, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in such
agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and
the offer and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of the
General Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement and, to the best of
such counsel's knowledge based upon due inquiry of certain officers of the
General Partner, will not constitute a breach of, or default under, or a
violation of any agreement or instrument known to such counsel by which the
General Partner or the Partnership is bound and will not violate any order known
to such counsel or any law, rule or regulation applicable to the General Partner
or the Partnership of any court, governmental body, administrative agency, panel
or self-regulatory organization having jurisdiction over the General Partner or
the Partnership.
(vi) To such counsel's knowledge, based upon due
inquiry of certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in equity
pending or threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
suits or proceedings within the five years preceding the date of the Prospectus,
to which the General Partner or the Partnership is or was a party, or to which
any of their assets is or was subject, which would be material to an investor's
decision to invest in the Partnership or which might reasonably be expected to
result in a materially adverse change in the condition, financial or otherwise,
business or prospects of the General Partner, or the Partnership, whether or not
arising in the ordinary course of business.
(vii) The Registration Statement is effective under
the Securities Act and, to the best of such counsel's knowledge, no proceedings
for a stop order are pending or threatened under Section 8(d) of the Securities
Act or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was issued
and as of the closing, the Prospectus, complied as to form in all material
respects with the requirements of the Securities Act, the Securities
Regulations, the CEAct and the regulations of the NFA and NASD. Nothing has come
to such counsel's attention that would lead them to believe that the
Registration Statement at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they where made, not misleading; provided, however, that Cadwalader,
Wickersham & Taft need express no opinion or belief (a) as to information in the
Registration Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions thereto
set forth in the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC "no-action"
letters, as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication.
19. Disclosure Documents.
During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents filed with
the CFTC or NFA by the Trading Advisor. The General Partner acknowledges receipt
of the Trading Advisor's disclosure document dated November 30, 1997.
20. Notices.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
if to the Partnership:
Dean Witter Spectrum Select L.P.
c/o Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
if to the General Partner:
Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
if to the Trading Advisor:
EMC Capital Management, Inc.
2201 Waukegan Road, Suite 240
Bannockburn, IL 60015
Attn: Jeffrey D. Izenman, Esq.
with a copy to:
Adam Cooper, Esq.
Katten, Muchin & Zavis
525 W. Monroe, Suite 1600
Chicago, Illinois 60661
21. Survival.
The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York. If any action or proceeding shall be
brought by a party to this Agreement or to enforce any right or remedy under
this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
DEAN WITTER SPECTRUM SELECT L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
EMC CAPITAL MANAGEMENT, INC.
By: /s/ Jeffrey D. Izenman
----------------------------------
- --------------------------- Jeffrey D. Izenman
Exhibit 10.03
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 1998, among DEAN
WITTER SPECTRUM SELECT L.P., a Delaware limited partnership (the "Partnership,"
formerly Dean Witter Select Futures Fund L.P.), DEMETER MANAGEMENT CORPORATION,
a Delaware corporation (the "General Partner"), and SUNRISE CAPITAL MANAGEMENT,
INC., a California corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement, dated as of March 21, 1991, as amended from time to time,
and as further amended and restated as of May 31, 1998 (the "Limited Partnership
Agreement"), to engage primarily in speculative trading of commodities
(including, but not limited to, foreign currencies, mortgage-backed securities,
money market instruments, financial instruments, and any other securities or
items which are now, or may hereafter be, the subject of futures contract
trading), domestic and foreign futures contracts, forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests") and securities
(such as United States Treasury securities) approved by the Commodity Futures
Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership and the Trading Advisor have entered into
that certain Management Agreement dated May 17, 1991, as amended by Amendment
No. 1 to such agreement, dated July 22, 1992, as amended by Amendment No. 2 to
such agreement dated as of August 31, 1993, and as further amended by Amendment
No. 3 to such agreement, dated November 29, 1996 (together, the "Original
Management Agreement");
WHEREAS, the Partnership and the Trading Advisor wish to amend and
restate the Original Management Agreement upon the terms and conditions set
forth herein;
WHEREAS, the Partnership intends to become a member partnership of
the Dean Witter Spectrum Series (the "Fund Group") by entering into an agreement
pursuant to which units of limited partnership interest ("Units") of such member
partnerships will be sold to investors in a common offering under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-1, as it may be amended from time to time (the "Registration
Statement"), and a final Prospectus, dated May 11, 1998, constituting a part
thereof as it may be amended and supplemented from time to time (the
"Prospectus"), and thereafter, pursuant to which such Units can be exchanged by
a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Advisor has extensive experience trading in
futures interests and is willing to continue to provide certain services and
undertake certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to continue to
act as a trading advisor for the Partnership and to make investment decisions
with respect to futures interests for its allocated share of the Partnership's
Net Assets and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Amended and Restated Management Agreement which,
among other things, sets forth certain terms and conditions upon which the
Trading Advisor will conduct a portion of the Partnership's futures interests
trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership and the General Partner by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner; provided that, the
Trading Advisor shall not be required to engage in any activity that may, in its
reasonable judgment, require the Trading Advisor to register as a broker or
dealer with the NASD or any State or that it reasonably believes would be
disruptive to its trading activities.
2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a Trading Advisor
for the Partnership and, as such, shall have sole authority and responsibility
for directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or provided in
writing to the Trading Advisor; provided, however, that the General Partner may
override the instructions of the Trading Advisor to the extent necessary (i) to
comply with the trading policies of the Partnership described in writing to the
Trading Advisor and with applicable speculative position limits, (ii) to fund
any distributions, redemptions, or reapportionments among other trading advisors
to the Partnership, (iii) to pay the Partnership's expenses, (iv) to the extent
the General Partner believes doing so is necessary for the protection of the
Partnership, (v) to terminate the futures interests trading of the Partnership,
or (vi) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions for the reasons specified in
clauses (ii) or (iii) of the preceding sentence unless the Trading Advisor fails
to comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five days of such request. The Trading
Advisor shall not be liable for the consequences of any decision by the General
Partner to override instructions of the Trading Advisor, except to the extent
that the Trading Advisor is in breach of this Agreement. In performing services
to the Partnership the Trading Advisor may not materially alter the trading
program(s) used by the Trading Advisor in investing and reinvesting its
allocable share of the Partnership's Net Assets in futures interests as
described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed an alteration in the Trading Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the prohibitions
and trading policies of the Partnership provided in writing to the Trading
Advisor and the trading programs, systems, methods, and strategies of the
Trading Advisor described in the Prospectus, with such changes and additions to
such trading programs, systems, methods or strategies as the Trading Advisor,
from time to time, incorporates into its trading programs for accounts the size
of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30 days
of a request therefor by the General Partner, with information comparing the
performance of the Partnership's account and the performance of all other client
accounts directed by the Trading Advisor using the trading programs used by the
Trading Advisor for the Partnership over a specified period of time. In
providing such information, the Trading Advisor may take such steps as are
necessary to assure the confidentiality of the Trading Advisor's clients'
identities. The Trading Advisor shall, upon the General Partner's request,
consult with the General Partner concerning any discrepancies between the
performance of such other accounts using the same trading programs used by the
Trading Advisor for the Partnership and the Partnership's account. The Trading
Advisor shall promptly inform the General Partner of any such material
discrepancies of which the Trading Advisor is aware, other than discrepancies
resulting from different fees or client trading restrictions or relating to the
opening or closing of accounts. The General Partner acknowledges that different
trading programs, strategies or implementation methods may be utilized for
different accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity, accounts that commence
trading at different times, accounts which have different portfolios or
different fiscal years and that such differences may cause divergent trading
results.
(iii) Upon request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Advisor other than proprietary information (including,
without limitation, information relating to changes in control, personnel,
trading approach, or financial condition). The General Partner acknowledges that
all trading instructions made by the Trading Advisor will be held in confidence
by the General Partner, except to the extent necessary to conduct the business
of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's
open positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its affiliates
or its or their stockholders, directors, officers, or employees, or any other
person, if any, who controls the Trading Advisor within the meaning of the
Securities Act. All brokerage fees, commissions and related expenses arising
from trading by the Trading Advisor on behalf of the Partnership shall be for
the account of the Partnership. The Trading Advisor makes no representations as
to whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any negligent errors
committed or caused by it in transmitting orders for the purchase or sale of
futures interests for the Partnership's account, including payment to DWR of the
floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred by DWR on such trades but only for the
amount of DWR's out-of-pocket costs in respect thereof. However, the Trading
Advisor shall not be responsible for errors committed or caused by DWR or by
floor brokers or other FCM's. The Trading Advisor shall have an affirmative
obligation promptly to notify the General Partner of its negligent errors.
(e) Prior to the commencement of trading by the Partnership, the
General Partner on behalf of the Partnership shall deliver to the Trading
Advisor a trading authorization appointing the Trading Advisor the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets (as
defined in Section 6(c) hereof) as the General Partner shall determine in its
absolute discretion. The designation of an additional trading advisor or
advisors and the apportionment of Net Assets to any such trading advisor(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Advisor hereunder. In the event that an additional
trading advisor or advisors is so designated, the Trading Advisor shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Advisor and the Trading Profits
attributable to the trading by the Trading Advisor.
(b) The General Partner may at any time and from time to time upon
two business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon two business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Dean Witter Reynolds Inc. ("DWR") shall act as non-clearing
commodity broker and Carr Futures, Inc. ("CFI") shall act as the clearing
commodity broker for the Partnership. The General Partner shall provide the
Trading Advisor with copies of brokerage statements. Notwithstanding that CFI
shall act as the clearing commodity broker for the Partnership, the Trading
Advisor may execute trades through floor brokers other than those employed by
CFI so long as arrangements are made for such floor brokers to "give-up" or
transfer the positions to CFI and provided that the rates charged by such floor
brokers have been approved in writing by DWR. The Trading Advisor will not be
responsible for paying give-up fees.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's account,
equal to 1/4 of 1% (a 3% annual rate) of the "Net Assets" of the Partnership
allocated to the Trading Advisor (as defined in Section 6(c)) as of the opening
of business on the first day of each calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar month,
payable on a non-netted basis vis-a-vis other trading advisors(s) of the
Partnership.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be determined
as if such date were the end of a month, but such fee shall be prorated based on
the ratio of the number of trading days in the month through the date of
termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilizes the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest positions and other assets of the
Partnership) less all liabilities of the Partnership (including, but not limited
to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Advisor or, if no incentive
fee has been earned previously by the Trading Advisor, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits earned by the Partnership on Net Assets allocated
to the Trading Advisor and the Partnership thereafter fails to earn Trading
Profits or experiences losses for any subsequent incentive period with respect
to such amounts so allocated, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits. However, no subsequent incentive fees shall be payable
to the Trading Advisor until the Partnership has again earned Trading Profits on
the Trading Advisor's allocated Net Assets; provided, however, that if the
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations that occur at the end of, or subsequent
to, an incentive period in which the Partnership experiences a futures interests
trading loss with respect to Net Assets allocated to the Trading Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
(f) The Partnership will remit the management and incentive fees to
the Trading Advisor as soon as practicable, but in no event later than 30 days,
in the case of the management fee, or 45 days in the case of the incentive fee
of the month-end as of which they are due, together with an itemized statement
showing the calculations.
7. Term.
This Agreement shall continue in effect until May 1, 2000 (the
"Initial Termination Date"). At least thirty days prior to the Initial
Termination Date, the Trading Advisor may terminate this Agreement upon 30 days'
prior written notice to the Partnership. If this Agreement is not terminated on
the Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least thirty days prior to the expiration
of any such one-year period, the Trading Advisor may terminate this Agreement at
the end of the current one-year period by providing written notice to the
Partnership indicating that the Trading Advisor desires to terminate this
Agreement at the end of such one-year period. This Agreement shall also
terminate if the Partnership terminates. The Partnership shall have the right to
terminate this Agreement at its discretion (a) at any month end upon 5 days'
prior written notice to the Trading Advisor or (b) at any time upon written
notice to the Trading Advisor upon the occurrence of any of the following
events: (i) if any person described as a "principal" of the Trading Advisor in
the Prospectus (other than Elissa Davis) ceases for any reason to be a principal
of the Trading Advisor; (ii) if the Trading Advisor becomes bankrupt or
insolvent; (iii) if the Trading Advisor is unable to use its trading programs,
systems or methods as in effect on the date hereof and as refined and modified
in the future for the benefit of the Partnership; (iv) if the registration, as a
commodity trading advisor, of the Trading Advisor with the CFTC or its
membership in the NFA is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) except as provided in Section 12
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $1,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, and, if such consent is given, does not make arrangements to
facilitate such trading within 30 days of such notice; or (vi) the assets
allocated to the Trading Advisor fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a material breach of this
Agreement or a representation, warranty or covenant herein, misconduct or
negligence or is the result of any such person not having acted in good faith
and in the reasonable belief that such actions or omissions were in, or not
opposed to, the best interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management Activities.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading of the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a material breach of this
Agreement or a representation, warranty or covenant herein, the result of
misconduct or negligence, or conduct not done in good faith in the reasonable
belief that it was in, or not opposed to, the best interests of the Partnership.
The termination of any demand, claim, lawsuit, action, or proceeding by
settlement shall not, of itself, create a presumption that the conduct in
question was not undertaken in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the business or
activities of the Partnership undertaken by the Trading Advisor pursuant to this
Agreement or a material breach of this Agreement or a representation, warranty
or covenant Advisorherein by the General Partner or the Partnership; provided
that a court of competent jurisdiction upon entry of a final judgment finds (or,
if no final judgment is entered, an opinion is rendered to the Partnership by
independent counsel reasonably acceptable to both parties) to the effect that
the action or inaction of such indemnified party that was the subject of the
demand, claim, lawsuit, action, or proceeding did not constitute negligence,
misconduct, or a material breach of this Agreement or a representation, warranty
or covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership. The termination of any demand, claim,
lawsuit, action, or proceeding by settlement shall not, of itself, create a
presumption that the conduct in question was not undertaken in good faith and in
a manner reasonably believed to be in, or not opposed to, the best interests of
the Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, CFI the
Partnership, the General Partner, any Additional Seller, and their affiliates
and each of their officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Securities and Exchange Act of 1934 Act, as amended (the
"Exchange Act") the Commodity Exchange Act, and rules promulgated thereunder the
("CEAct") the securities or Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement, provided that the
Trading Advisor shall have approved such settlement, and in connection with any
administrative proceedings), in respect of the offer or sale of Units, insofar
as such loss, claim, damage, liability, cost, or expense (or action in respect
thereof) arises directly out of, or is based upon: (i) a material breach by the
Trading Advisor of any representation, warranty, or agreement in this Agreement
or any certificate delivered pursuant to this Agreement or the failure by the
Trading Advisor to materially perform any covenant made by the Trading Advisor
herein; (ii) a misleading or untrue statement or alleged misleading or untrue
statement of a material fact made in the Registration Statement, the Prospectus,
or any related selling material or an omission or alleged omission to state a
material fact therein which is required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus and any selling
material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined below) or was made in
reliance upon, and in conformity with, written information or instructions
furnished by the Trading Advisor (provided, however, that with respect to any
related selling material only such related selling material as shall have been
approved in writing by the Trading Advisor).
(e) Partnership Indemnity in Respect of Sale of Units. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
material breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not relate
to the Trading Advisor or its Trading Advisor Principals or was not made in
reliance upon, and in conformity with, information or instructions furnished by
the Trading Advisor (provided, however, that with respect to any related selling
material, only such related selling material as shall have been approved in
writing by the Trading Advisor), or does not result from a material breach by
the Trading Advisor of any representation, warranty, or agreement in this
Agreement or any certificate delivered pursuant to this Agreement or the failure
by the Trading Advisor to materially perform any covenant made in this
Agreement.
(f) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
Notwithstanding any other provision herein to the contrary, neither
Gary B. Davis nor John V. Forrest shall have any liability to the Partnership,
the General Partner or any other person, or their controlling persons,
directors, officers, shareholders or employees under this Agreement except for
fraud or willful misconduct by Gary B. Davis or John V. Forrest, as applicable.
9. Right to Advise Others and Uniformity of Acts and Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations of the Trading Advisor. The Trading Advisor with
respect to itself and each of its principals represents and warrants to and
agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading programs agreed
to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus) and as
amended in writing and furnished to the Trading Advisor from time to time,
provided, that the General Partner has notified the Trading Advisor of these
trading policies.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the same trading programs described in the Prospectus unless
the General Partner agrees otherwise and (B) only in futures and option
contracts traded on U.S. contract markets, foreign currency forward contracts
traded with CFI, and such other futures interests which are approved in writing
by the General Partner or have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing and
in good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to so qualify would
materially adversely affect the Trading Advisor's ability to perform its duties
under this Agreement. The Trading Advisor has full corporate power and authority
to perform its obligations under this Agreement, and as described in the
Registration Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in the
Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs, approaches,
systems and performance, in the Registration Statement and the Prospectus, and
in the supplemental selling material which has been approved in writing by the
Trading Advisor, are accurate and complete in all material respects. With
respect to the material relating to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's and the Trading Advisor Principals'
trading programs, approaches, systems , and performance information, as
applicable, (i) the Registration Statement and Prospectus contain all statements
and information required to be included therein under the CEAct,(ii) the
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements therein not
misleading and (iii) the Prospectus at its date of issue and as of each closing
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal and
state governmental, regulatory and exchange licenses, registrations and
approvals and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to perform
its or his obligations under this Agreement. The Trading Advisor is registered
as a commodity trading advisor under the CEAct and is a member of the NFA in
such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment of the
fees hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over it.
(ix) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or any Trading Advisor
Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of the
Prospectus and there is not pending, or to the best of the Trading Advisor's
knowledge threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Trading Advisor or any Trading Advisor
Principal is or was a party, or to which any of the assets of the Trading
Advisor is or was subject and which resulted in or might reasonably be expected
to result in any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or which is required
under the Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the Trading
Advisor or any of the Trading Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in connection
with the organization or operation of the Partnership, other than as described
in the Prospectus.
(b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Advisor to continue
to act as described herein and to at all times comply in all material respects
with all applicable laws, rules, and regulations, to the extent that the failure
to so comply would have a materially adverse effect on the Trading Advisor's
ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals becomes the
subject of any investigation, claim or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the Trading Advisor. The Trading Advisor
shall also inform the General Partner immediately if the Trading Advisor or any
of its officers becomes aware of any breach of this Agreement by the Trading
Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the preparation of
any amendments or supplements to the Registration Statement and the Prospectus.
11. Representations, Warranties and Covenants of the General
Partner and the Partnership.
(a) Representations of the General Partner and the Partnership. The
General Partner and the Partnership represent and warrant to the Trading
Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and
filed with SEC, the Registration Statement and has filed copies thereof with:
(i) the CFTC under the CEAct; (ii) the NASD pursuant to its Rules of Fair
Practice; and (iii) the NFA in accordance with NFA Compliance Rule 2-13. The
Partnership will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus unless the Trading Advisor has
received reasonable prior notice of and a copy of such amendments or supplements
and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken by the
General Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as defined in
the Prospectus will have been taken; and, upon payment of the consideration
therefor specified in each accepted Subscription and Exchange Agreement and
Power of Attorney, in such form as attached to the Prospectus, the Units will
constitute valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and is validly existing under the laws of the State of Delaware with full power
and authority to engage in the trading of futures interests and to engage in its
other contemplated activities as described in the Prospectus; the Partnership
has received a certificate of authority to do business in the State of New York
as provided by Article 8-A of the New York Revised Limited Partnership Act and
is qualified to do business in each jurisdiction in which the nature or conduct
of its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
where the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to conduct
their business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct. When
the Registration Statement becomes effective under the Securities Act and at all
times subsequent thereto up to and including each Closing, the Registration
Statement and Prospectus will comply in all material respects with the
requirements of the Securities Act, the rules and regulations promulgated
thereunder (the "SEC Regulations"), the rules of the NFA and the CEAct. The
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus as of its date of issue and at each Closing will not contain any
misleading or untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material will
comply with the CEAct and the regulations and rules of the NFA and NASD. The
representation, and warranties in this clause (vi) shall not, however, apply to
any statement or omission in the Registration Statement, Prospectus or
supplemental selling material relating to the Trading Advisor, or its Trading
Advisor Principals or its trading programs or made in reliance upon and in
conformity with information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the General Partner or the Partnership, whether or not arising in
the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Partnership and
constitutes a valid, binding and enforceable agreement of the Partnership in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under, the
General Partner's certificate of incorporation, bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the case
may be, is bound or any order, rule, law or regulation applicable to the General
Partner or the Partnership of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity before
or by any court or by any federal, state, municipal or other governmental body
or any administrative, self-regulatory or commodity exchange organization to
which the General Partner or the Partnership is or was a party, or to which any
of the assets of the General Partner or the Partnership is or was subject and
which resulted in or might reasonably be expected to result in any materially
adverse change in the condition, financial or otherwise, of the General Partner
or the Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of the
principals of the General Partner, as "principals" is defined under Rule 4.10
under the CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with the
CEAct or the Securities Act which is required under the Securities Act or the
CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and licenses,
and have effected all filings with federal and state governmental agencies and
regulatory agencies required to conduct their business and to act as described
in the Registration Statement and Prospectus or required to perform their
obligations under this Agreement (including, without limitation, registration as
a commodity pool operator under the CEAct and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The General
Partner's principals identified in the Registration Statement are all of the
General Partner Principals.
(b) Covenants of the General Partner. The General Partner covenants
and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in all
material respects with all applicable laws, rules, and regulations, to the
extent that the failure to so comply would have a materially adverse effect on
the General Partner's ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals becomes the
subject of any investigation, claim, or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the General Partner. The General Partner
shall also inform the Trading Advisor immediately if the General Partner or any
of its officers become aware of any breach of this Agreement by the General
Partner.
(iii) The Partnership will furnish to the Trading Advisor copies
of the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written consent of
the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement and at the
request of the General Partner at any Monthly Closing (as defined in the
Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading
Advisor in this Agreement are true, accurate, and a complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its
obligations and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a corporation duly organized
and validly existing under the laws of the state of its incorporation and is
qualified to do business and in good standing in each other jurisdiction in
which the nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect the Trading
Advisor's ability to perform its obligations under this Agreement. The Trading
Advisor has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, self-regulatory and commodity
exchange and clearing association licenses, registrations, and memberships
required by law, and the Trading Advisor (including the Trading Advisor
Principals) has made all filings necessary to perform its obligations under this
Agreement and to conduct its business as described in the Registration Statement
and Prospectus, except for such licenses, memberships, filings and
registrations, the absence of which would not have a material adverse effect on
its ability to act as described in the Registration Statement and Prospectus or
to perform its obligations under this Agreement, and, to the best of such
counsel's knowledge, after due investigations, none of such licenses,
memberships or registrations have been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed
and delivered by or on behalf of the Trading Advisor and constitutes a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally of
rights of creditors and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification, exculpation, and contribution
provisions contained in this Agreement may be limited by applicable law or
public policy and the enforcement of specific terms or remedies may be
unavailable.
(iv) Based upon due inquiry of certain officers of the
Trading Advisor, to the best of such counsel's knowledge, except as disclosed in
the Prospectus, there are no material actions, suits or proceedings at law or in
equity either threatened or pending in any court or before or by any
governmental or administrative body nor have there been any such actions, suits
or proceedings at any time within the five years preceding the date of the
Prospectus against the Trading Advisor or any Trading Advisor Principal which
are required to be disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of incorporation or
bylaws of the Trading Advisor and, based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument or
agreement known to such counsel by which the Trading Advisor is bound and will
not violate any order, law, rule or regulation applicable to the Trading Advisor
of any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action"
letters, as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the Prospectus
will not require the Trading Advisor to be registered as an "investment adviser"
under the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that
would lead them to believe that, (A) the Registration Statement at the time it
became effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (B) the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein relating to the Trading Advisor or the Trading Advisor Principals, in
light of the circumstances under which they were made, not misleading; provided
that such counsel need express no opinion or belief as to any Trading Advisor
performance data or notes or descriptions thereto set forth in the Registration
Statement and Prospectus.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
resources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(2) The General Partner shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor, a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the closing as if made on the date of the
closing.
(ii)No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act. No order
preventing or suspending the use of the Prospectus has been issued by the SEC,
NASD, CFTC, or NFA and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the General Partner, are contemplated or
threatened under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Wickersham & Taft, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto, in
form and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the DRULPA and is validly existing under the laws of the State of
Delaware with full partnership power and authority to conduct the business in
which it proposes to engage as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement; the Partnership
has received a Certificate of Authority as contemplated under the New York
Revised Limited Partnership Act and is qualified to do business in New York and
need not affect any other filings or qualifications under the laws of any other
jurisdictions to conduct its business as described in the Registration Statement
and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the failure to
so qualify might reasonably be expected to result in material adverse
consequences to the Partnership or the General Partner's ability to perform its
obligations under this Agreement or as described in the Registration Statement
and Prospectus. The General Partner has full corporate power and authority to
conduct its business as described in the Registration Statement and Prospectus
and to perform its obligations under this Agreement.
(iii) The General Partner and each of its principals as
defined in Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the General
Partner and the Partnership to perform their obligations under this Agreement to
conduct their business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings, and registrations,
the absence of which would not have a material adverse effect on their ability
to act as described in the Registration Statement and Prospectus, or to perform
their obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships or
registrations have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized, executed
and delivered by or on behalf of the General Partner and the Partnership, and
constitutes a valid and binding agreement of the General Partner and the
Partnership, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in such
agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and the
offer and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of the
General Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement and, to the best of
such counsel's knowledge based upon due inquiry of certain officers of the
General Partner, will not constitute a breach of, or default under, or a
violation of any agreement or instrument known to such counsel by which the
General Partner or the Partnership is bound and will not violate any order known
to such counsel or any law, rule or regulation applicable to the General Partner
or the Partnership of any court, governmental body, administrative agency, panel
or self-regulatory organization having jurisdiction over the General Partner or
the Partnership.
(vi) To such counsel's knowledge, based upon due inquiry
of certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in equity
pending or threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
suits or proceedings within the five years preceding the date of the Prospectus,
to which the General Partner or the Partnership is or was a party, or to which
any of their assets is or was subject, which would be material to an investor's
decision to invest in the Partnership or which might reasonably be expected to
result in a materially adverse change in the condition, financial or otherwise,
business or prospects of the General Partner, or the Partnership, whether or not
arising in the ordinary course of business.
(vii) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no proceedings for
a stop order are pending or threatened under Section 8(d) of the Securities Act
or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was issued
and as of the closing, the Prospectus, complied as to form in all material
respects with the requirements of the Securities Act, the Securities
Regulations, the CEAct and the regulations of the NFA and NASD. Nothing has come
to such counsel's attention that would lead them to believe that the
Registration Statement at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they where made, not misleading; provided, however, that Cadwalader,
Wickersham & Taft need express no opinion or belief (a) as to information in the
Registration Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions thereto
set forth in the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC "no-action"
letters, as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication.
19. Disclosure Documents.
During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents filed in
final form with the CFTC or NFA by the Trading Advisor. The General Partner
acknowledges receipt of the Trading Advisor's disclosure document dated February
28, 1998.
20. Notices.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
if to the Partnership:
Dean Witter Spectrum Select L.P.
c/o Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
if to the General Partner:
Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
Attn: Mark J. Hawley
if to the Trading Advisor:
Sunrise Capital Management, Inc.
990 Highland Drive, Suite 303
Solana Beach, California 92075-2472
Attn: Martin P. Klitzner
21. Survival.
The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York. If any action or proceeding shall be
brought by a party to this Agreement or to enforce any right or remedy under
this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
DEAN WITTER SPECTRUM SELECT L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Mark J. Hawley
------------------------------
Mark J. Hawley
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley
------------------------------
Mark J. Hawley
SUNRISE CAPITAL MANAGEMENT, INC.
By: /s/ Martin P. Klitzner
------------------------------
Martin P. Klitzner
President
Exhibit 10.04
AMENDED AND RESTATED CUSTOMER AGREEMENT
THIS AMENDED AND RESTATED CUSTOMER AGREEMENT (this "Agreement"),
made as of the 1st day of June, 1998, by and between DEAN WITTER SPECTRUM SELECT
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 March 21, 1991, as amended, and a Limited Partnership Agreement
dated as of March 21, 1991, as amended from time to time, and as further amended
and restated as of May 31, 1998, between Demeter Management Corporation, a
Delaware corporation ("Demeter"), acting as general partner (in such capacity,
the "General Partner"), and the limited partners of the Customer to trade, buy,
sell, spread or otherwise acquire, hold, or dispose of commodities (including,
but not limited, to foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, and any other securities or items which are,
or may become, the subject of futures contract trading), domestic and foreign
commodity futures contracts, commodity forward contracts, foreign exchange
commitments, options on physical commodities and on futures contracts, spot
(cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests") and securities
(such as United States Treasury bills) approved by the Commodity Futures Trading
Commission (the "CFTC") for investment of customer funds and other securities on
a limited basis, and to engage in all activities incident thereto;
WHEREAS, the Customer (which is a commodity pool) and the General
Partner (which is a registered commodity pool operator) have entered into
management agreements (the "Management Agreements") with certain trading
advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"),
which provide that the Trading Advisors have 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 Agreements;
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 Customer's most recent prospectus as filed with
the Securities and Exchange Commission (the "Prospectus") relating to the
offering of units of limited partnership interest of the Customer (the "Units")
and in any amendment or supplement to the Prospectus.
2. Duties of DWR. DWR agrees to act as a non-clearing commodity
broker for the Customer and introduce the Customer's account to Carr Futures,
Inc. ("CFI") for execution and clearing of futures interests transactions on
behalf of the Customer in accordance with instructions provided by the Trading
Advisors, and the Customer agrees to retain DWR as a non-clearing commodity
broker for the term of this Agreement.
DWR agrees to furnish to the Customer as soon as practicable all of
the information from time to time in its possession which Demeter, as the
general partner of the Customer, is required to furnish to the Limited Partners
pursuant to the Limited Partnership Agreement as from time to time in effect and
as required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus.
3. Obligations and Expenses. Except as otherwise set forth herein
and in the Prospectus, the Customer, and not DWR, shall be responsible for all
taxes, management and incentive fees to the Trading Advisors, brokerage fees to
DWR, and all extraordinary expenses incurred by it. DWR shall pay all of the
organizational, initial and continuing offering, and ordinary administrative
expenses of the Customer (including, but not limited to, legal, accounting, and
auditing fees, printing costs, filing fees, escrow fees, marketing costs and
expenses and other related expenses) and all charges of CFI for executing and
clearing the Customer's futures interests trades (as described in paragraph 5
below), and shall not be reimbursed therefor.
4. Agreement Nonexclusive. DWR shall be free to render services of
the nature to be rendered to the Customer hereunder to other persons or entities
in addition to the Customer, and the parties acknowledge that DWR may render
such services to additional entities similar in nature to the Customer,
including other partnerships organized with Demeter as their general partner. It
is expressly understood and agreed that this Agreement is nonexclusive and that
the Customer has no obligation to execute any or all of its trades for futures
interests through DWR. The parties acknowledge that the Customer may utilize
such other broker or brokers as Demeter may direct from time to time. The
Customer's utilization of an additional commodity broker shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
the Customer and DWR hereunder.
5. Compensation of DWR. The Customer will pay brokerage fees to DWR
at a monthly flat-rate. The Customer will pay to DWR a monthly flat-rate fee of
1/12 of 7.25% of the Customer's Net Assets (a 7.25% annual rate) as of the first
day of each month. DWR will receive such brokerage fees irrespective of the
number of trades executed on the Customer's behalf.
DWR will pay, from brokerage fees received by it, all charges of CFI
for executing and clearing trades for the Customer, including floor brokerage
fees, exchange fees, clearinghouse fees, NFA fees, "give up" fees, any taxes
(other than income taxes), any third party clearing costs incurred by CFI, costs
associated with taking delivery of futures interests, and fees for execution of
forward contract transactions.
From time to time, DWR may increase or decrease brokerage fees to be
charged to the Customer; provided, however, that: (i) notice of such increase is
mailed to each Limited Partner at least five business days prior to the last
date on which a "Request for Redemption" must be received by the General Partner
with respect to the applicable Redemption Date; and (ii) such notice shall
describe the redemption and voting rights of Limited Partners.
Notwithstanding the foregoing, the Customer's expenses are subject
to the following limits: (a) if the Customer were to pay roundturn brokerage
commissions, the brokerage commissions (excluding transaction fees and costs)
payable by the Customer to DWR shall not exceed 80% of DWR's published
non-member rates for speculative accounts and (b) the aggregate of (i) brokerage
commissions (or fees) payable to DWR, (ii) transaction fees and costs payable by
the Customer, and (iii) net excess interest and compensating balance benefits to
DWR (after crediting the Customer with interest as described in the Prospectus)
shall not exceed 14% annually of the Customer's average month-end Net Assets
during each calendar year.
6. Investment Discretion. The parties recognize that DWR shall have
no authority to direct the futures interests investments to be made for the
Customer's account. However, the parties agree that DWR, and not the Trading
Advisors, 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 80% 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 Broker will receive interest income from CFI, as agreed from time to time
by Broker 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.
Ownership of the right to receive interest on the Customer's assets
pursuant to the preceding paragraph shall be reflected and maintained and may be
transferred only on the books and records of DWR. Any purported transfer of such
ownership shall not be effective or recognized until such transfer shall have
been recorded on the books and records of DWR.
8. Standard of Liability and Indemnity. Subject to Section 2 hereof,
DWR and its affiliates (as defined below) shall not be liable to the Customer,
the General Partner or Limited Partners, or any of its or their respective
successors or assigns, for any act, omission, conduct, or activity undertaken by
or on behalf of the Customer pursuant to this Agreement which DWR determines, in
good faith, to be in the best interests of the Customer, unless such act,
omission, conduct, or activity by DWR or its affiliates constituted misconduct
or negligence.
The Customer shall indemnify, defend and hold harmless DWR and its
affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct or activity undertaken by DWR on behalf of the
Customer pursuant to this Agreement, including, without limitation, any demands,
claims or lawsuits initiated by a Limited Partner (or assignee thereof),
provided that (i) DWR has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in the
best interests of the Customer, and (ii) the act, omission, conduct, or activity
that was the basis for such loss, liability, damage, cost, or expense was not
the result of misconduct or negligence. Notwithstanding anything to the contrary
contained in the foregoing, neither DWR nor any of its affiliates shall be
indemnified by the Customer for any losses, liabilities, or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(b) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (c) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, provided, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC, and the positions
of the respective securities administrators of Massachusetts, Missouri,
Tennessee and/or those other states and jurisdictions in which the plaintiffs
claim they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
Furthermore, in any action or proceeding brought by a Limited Partner in the
right of the Customer to which DWR or any affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in this Section 8. The Customer shall make advances
to DWR or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or
legal action relates to the performance of duties or services by such persons to
the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated
by a Limited Partner; and (iii) such advances are repaid, with interest at the
legal rate under Delaware law, if the person receiving such advance is
ultimately found not to be entitled to indemnification hereunder.
DWR shall indemnify, defend and hold harmless the Customer and its
successors or assigns from and against any losses, liabilities, damages, costs,
or expenses (including in connection with the defense or settlement of claims;
provided DWR has approved such settlement) incurred as a result of the
activities of DWR or its affiliates, provided, further, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence.
The indemnities provided in this Section 8 by the Customer to DWR
and its affiliates shall be inapplicable in the event of any losses,
liabilities, damages, costs, or expenses arising out of, or based upon, any
material breach of any warranty, covenant, or agreement of DWR contained in this
Agreement to the extent caused by such breach. Likewise, the indemnities
provided in this Section 8 by DWR to the Customer and any of its successors and
assigns shall be inapplicable in the event of any losses, liabilities, damages,
costs, or expenses arising out of, or based upon, any material breach of any
warranty, covenant, or agreement of the Customer contained in this Agreement to
the extent caused by such breach.
As used in this Section 8, the term "affiliate" of DWR shall mean:
(i) any natural person, partnership, corporation, association, or other legal
entity directly or indirectly owning, controlling, or holding with power to vote
10% or more of the outstanding voting securities of DWR; (ii) any partnership,
corporation, association, or other legal entity 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held with
power to vote by DWR; (iii) any natural person, partnership, corporation,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with, DWR; or (iv) any officer or
director of DWR. Notwithstanding the foregoing, "affiliates" for purposes of
this Section 8 shall include only those persons acting on behalf of DWR within
the scope of the authority of DWR, as set forth in this Agreement.
9. Term. This Agreement shall continue in effect until terminated by
either party giving not less than 60 days' prior written notice of termination
to the other party. Any such termination by either party shall be without
penalty.
10. Complete Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the matters referred to herein,
and no other agreement, verbal or otherwise, shall be binding as between the
parties unless in writing and signed by the party against whom enforcement is
sought.
11. Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party.
12. Amendment. This Agreement may not be amended except by the
written consent of the parties and provided such amendment is consistent with
the Prospectus.
13. Notices. All notices required or desired to be delivered under
this Agreement shall be in writing and shall be effective when delivered
personally on the day delivered, or when given by registered or certified mail,
postage prepaid, return receipt requested, on the day of receipt, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):
if to the Customer:
DEAN WITTER SPECTRUM SELECT 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
14. Survival. The provisions of this Agreement shall survive the
termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
15. Headings. Headings of Sections herein are for the convenience of
the parties only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
16. Incorporation by Reference. The Futures Customer Agreement
annexed hereto is hereby incorporated by reference herein and made a part hereof
to the same extent as if such document were set forth in full herein. If any
provision of this Agreement is or at any time becomes inconsistent with the
annexed document, the terms of this Agreement shall control.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
DEAN WITTER SPECTRUM SELECT L.P.
By: Demeter Management Corporation,
General Partner
By: /s/ Mark J. Hawley
--------------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
--------------------------------
Mark J. Hawley
Executive Vice President
<PAGE>
Futures Customer Agreement
In consideration of the acceptance by Dean Witter Reynolds Inc. ("DWR") of one
or more accounts of the undersigned ("Customer") (if more than one account is
carried by DWR, all are covered by this Agreement and are referred to
collectively as the "Account") and DWR's agreement to act as Customer's broker
for the execution, clearance and/or carrying of transactions for the purchase
and sale of commodity interests, including commodities, commodity futures
contracts and commodity options, Customer agrees as follows:
1. APPLICABLE RULES AND REGULATIONS - The Account and each transaction therein
shall be subject to the terms of this Agreement and to (a) all applicable
laws and the regulations, rules and orders (collectively "regulations") of
all regulatory and self-regulatory organizations having jurisdiction and
(b) the constitution, by-laws, rules, regulations, orders, resolutions,
interpretations and customs and usages (collectively "rules") of the market
and any associated clearing organization (each an "exchange") on or subject
to the rules of which such transaction is executed and/or cleared. The
reference in the preceding sentence to exchange rules is solely for DWR's
protection and DWR's failure to comply therewith shall not constitute a
breach of this Agreement or relieve Customer of any obligation or
responsibility under this Agreement. DWR shall not be liable to Customer as
a result of any action by DWR, its officers, directors, employees or agents
to comply with any rule or regulation.
2. PAYMENTS TO DWR - Customer agrees to pay to DWR immediately on request (a)
commissions, fees and service charges as are in effect from time to time
together with all applicable regulatory and self-regulatory organization
and exchange fees, charges and taxes; (b) the amount of any debit balance
or any other liability that may result from transactions executed for the
account; and (c) interest on such debit balance or liability at the
prevailing rate charged by DWR at the time such debit balance or liability
arises and service charges on any such debit balance or liability together
with any reasonable costs and attorney's fees incurred in collecting any
such debit balance or liability. Customer acknowledges that DWR may charge
commissions at other rates to other customers.
3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN - Customer shall at all times
and without prior notice or demand from DWR maintain adequate margins in
the account so as continually to meet the original and maintenance margin
requirements established by DWR for Customer. DWR may change such
requirements from time to time at DWR's discretion. Such margin
requirements may exceed the margin requirements set by any exchange or
other regulatory authority and may vary from DWR's requirements for other
customers. Customer agrees, when so requested, immediately to wire transfer
margin funds and to furnish DWR with names of bank officers for immediate
verification of such transfers. Customer acknowledges and agrees that DWR
may receive and retain as its own any interest, increment, profit, gain or
benefit directly or indirectly, accruing from any of the funds DWR receives
from Customer.
4. DELIVERY; OPTION EXERCISE
(a) Customer acknowledges that the making or accepting of delivery
pursuant to a futures contract may involve a much higher degree of
risk than liquidating a position by offset. DWR has no control over
and makes no warranty with respect to grade, quality or tolerances of
any commodity delivered in fulfillment of a contract.
(b) Customer agrees to give DWR timely notice and immediately on request
to inform DWR if Customer intends to make or take delivery under a
futures contract or to exercise an option contract. If so requested,
Customer shall provide DWR with satisfactory assurances that Customer
can fulfill Customer's obligation to make or take delivery under any
contract. Customer shall furnish DWR with property deliverable by it
under any contract in accordance with DWR's instructions.
(c) DWR shall not have any obligation to exercise any long option contract
unless Customer has furnished DWR with timely exercise instructions
and sufficient initial margin with respect to each underlying futures
contract.
5. FOREIGN CURRENCY - If DWR enters into any transaction for Customer effected
in a currency other than U.S. dollars: (a) any profit or loss caused by
changes in the rate of exchange for such currency shall be for Customer's
account and risk and (b) unless another currency is designated in DWR's
confirmation of such transaction, all margin for such transaction and the
profit or loss on the liquidation of such transaction shall be in U.S.
dollars at a rate of exchange determined by DWR in its discretion on the
basis of then prevailing market rates of exchange for such foreign
currency.
6. DWR MAY LIMIT POSITIONS HELD - Customer agrees that DWR, at its discretion,
may limit the number of open positions (net or gross) which Customer may
execute, clear and/or carry with or acquire through it. Customer agrees (a)
not to make any trade which would have the effect of exceeding such limits,
(b) that DWR may require Customer to reduce open positions carried with DWR
and (c) that DWR may refuse to accept orders to establish new positions.
DWR may impose and enforce such limits, reduction or refusal whether or not
they are required by applicable law, regulations or rules. Customer shall
comply with all position limits established by any regulatory or
self-regulatory organization or any exchange. In addition, Customer agrees
to notify DWR promptly if customer is required to file position reports
with any regulatory or self-regulatory organization or with any exchange.
7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION - Customer acknowledges
that:
(a) Any market recommendations and information DWR may communicate to
Customer, although based upon information obtained from sources
believed by DWR to be reliable, may be incomplete and not subject to
verification;
(b) DWR makes no representation, warranty or guarantee as to, and shall
not be responsible for, the accuracy or completeness of any
information or trading recommendation furnished to Customer;
(c) recommendations to Customer as to any particular transaction at any
given time may differ among DWR's personnel due to diversity in
analysis of fundamental and technical factors and may vary from any
standard recommendation made by DWR in its market letters or
otherwise; and
(d) DWR has no obligation or responsibility to update any market
recommendations or information it communicates to Customer.
Customer understands that DWR and its officers, directors, affiliates,
stockholders, representatives or associated persons may have positions in and
may intend to buy or sell commodity interests which are the subject of market
recommendations furnished to Customer, and that the market positions of DWR or
any such officer, director, affiliate, stockholder, representative or associated
person may or may not be consistent with the recommendations furnished to
Customer by DWR.
8. LIMITS ON DWR DUTIES; LIABILITY - Customer agrees:
(a) that DWR has no duty to apprise Customer of news or of the value of
any commodity interests or collateral pledged or in any way to advise
Customer with respect to the market;
(b) that the commissions which DWR receives are consideration solely for
the execution, reporting and carrying of Customer's trades;
(c) that if Customer has authorized any third party or parties to place
orders or effect transactions on behalf of Customer in any Account,
each such party has been selected by Customer based on its own
evaluation and assessment of such party and that such party is solely
the agent of Customer, and if any such party allocates commodity
interests among its customers, Customer has reviewed each such party's
commodity interest allocation system, has satisfied itself that such
allocation system is fair and will seek recovery solely from such
party to recover any damages sustained by Customer as the result of
any allocation made by such party; and
(d) to waive any and all claims, rights or causes of action which Customer
has or may have against DWR or its officers, employees and agents (i)
arising in whole or in part, directly or indirectly, out of any act or
omission of any person, whether or not legally deemed an agent of DWR,
who refers or introduces Customer to DWR or places orders for Customer
and (ii) for any punitive damages and to limit any claims arising out
of this Agreement or the Account to Customer's direct out-of-pocket
damages.
9. EXTRAORDINARY EVENTS - Customer shall have no claim against DWR for any
loss, damage, liability, cost, charge, expense, penalty, fine or tax caused
directly or indirectly by (a) governmental, court, exchange, regulatory or
self-regulatory organization restrictions, regulations, rules, decisions or
orders, (b) suspension or termination of trading, (c) war or civil or labor
disturbance, (d) delay or inaccuracy in the transmission or reporting of
orders due to a breakdown or failure of computer services, transmission or
communication facilities, (e) the failure or delay by any exchange to
enforce its rules or to pay to DWR any margin due in respect of Customer's
Account, (f) the failure or delay by any bank, trust company, clearing
organization or other person which, pursuant to applicable exchange rules,
is holding Customer funds, securities or other property to pay or deliver
the same to DWR or (g) any other cause or causes beyond DWR's control.
10. INDEMNIFICATION OF DWR - Customer agrees to indemnify, defend and hold
harmless DWR and its officers, employees and agents from and against any
loss, cost, claim, damage (including any consequential cost, loss or
damage), liability or expense (including reasonable attorneys' fees) and
any fine, sanction or penalty made or imposed by any regulatory or
self-regulatory authority or any exchange as the result, directly or
indirectly, of:
(a) Customer's failure or refusal to comply with any provision of this
Agreement or perform any obligation on its part to be performed
pursuant to this Agreement; and
(b) Customer's failure to timely deliver any security, commodity or other
property previously sold by DWR on Customer's behalf.
11. NOTICES; TRANSMITTALS - DWR shall transmit all communications to Customer
at Customer's address, telefax or telephone number set forth in the
accompanying Futures Account Application or to such other address as
Customer may hereafter direct in writing. Customer shall transmit all
communications to DWR (except routine inquiries concerning the Account) to
130 Liberty Street, New York, NY 10006, Attention: Futures Compliance
Officer. All payments and deliveries to DWR shall be made as instructed by
DWR from time to time and shall be deemed received only when actually
received by DWR.
12. CONFIRMATION CONCLUSIVE - Confirmation of trades and any other notices sent
to Customer shall be conclusive and binding on Customer unless Customer or
Customer's agent notifies DWR to the contrary (a) in the case of an oral
report, orally at the time received by Customer or its agent or (b) in the
case of a written report or notice, in writing prior to opening of trading
on the business day next following receipt of the report. In addition, if
Customer has not received a written confirmation that a commodity interest
transaction has been executed within three business days after Customer has
placed an order with DWR to effect such transaction, and has been informed
or believes that such order has been or should have been executed, then
Customer immediately shall notify DWR thereof. Absent such notice, Customer
conclusively shall be deemed estopped to object and to have waived any such
objection to the failure to execute or cause to be executed such
transaction. Anything in this Section 12 withstanding, neither Customer nor
DWR shall be bound by any transaction or price reported in error.
13. SECURITY INTEREST - All money and property ("collateral") now or at any
future time held in Customer's Account, or otherwise held by DWR for
Customer, is subject to a security interest in DWR's favor to secure any
indebtedness at any time owing to it by Customer. DWR, in its discretion,
may liquidate any collateral to satisfy any margin or Account deficiencies
or to transfer the collateral to the general ledger account of DWR.
14. TRANSFER OF FUNDS - At any time and from time to time and without prior
notice to Customer, DWR may transfer from one account to another account in
which Customer has any interest, such excess funds, equities, securities or
other property as in DWR's judgment may be required for margin, or to
reduce any debit balance or to reduce or satisfy any deficits in such other
accounts except that no such transfer may be made from a segregated account
subject to the Commodity Exchange Act to another account maintained by
Customer unless either Customer has authorized such transfer in writing or
DWR is effecting such transfer to enforce DWR's security interest pursuant
to Section 13. DWR promptly shall confirm all transfers of funds made
pursuant hereto to Customer in writing.
15. DWR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS - In addition to all other
rights of DWR set forth in this Agreement:
(a) when directed or required by a regulatory or self-regulatory
organization or exchange having jurisdiction over DWR or the Account;
(b) whenever, in its discretion, DWR considers it necessary for its
protection because of margin requirements or otherwise;
(c) if Customer or any affiliate of Customer repudiates, violates,
breaches or fails to perform on a timely basis any term, covenant or
condition on its part to be performed under this Agreement or another
agreement with DWR;
(d) if a case in bankruptcy is commenced or if a proceeding under any
insolvency or other law for the protection of creditors or for the
appointment of a receiver, liquidator, trustee, conservator, custodian
or similar officer is filed by or against Customer or any affiliate of
Customer, or if Customer or any affiliate of Customer makes or
proposes to make any arrangement or composition for the benefit of its
creditors, or if Customer (or any such affiliate) or any or all of its
property is subject to any agreement, order, judgment or decree
providing for Customer's dissolution, winding-up, liquidation, merger,
consolidation, reorganization or for the appointment of a receiver,
liquidator, trustee, conservator, custodian or similar officer of
Customer, such affiliate or such property;
(e) DWR is informed of Customer's death or mental incapacity; or
(f) if an attachment or similar order is levied against the Account or any
other account maintained by Customer or any affiliate of Customer with
DWR;
DWR shall have the right to (i) satisfy any obligations due DWR out of any
Customer's property in DWR's custody or control, (ii) liquidate any or all
of Customer's commodity interest positions, (iii) cancel any or all of
Customer's outstanding orders, (iv) treat any or all of Customer's
obligations due DWR as immediately due and payable, (v) sell any or all of
Customer's property in DWR's custody or control in such manner as DWR
determines to be commercially reasonable, and/or (vi) terminate any or all
of DWR's obligations for future performance to Customer, all without any
notice to or demand on Customer. Any sale hereunder may be made in any
commercially reasonable manner. Customer agrees that a prior demand, call
or notice shall not be considered a waiver of DWR's right to act without
demand or notice as herein provided, that Customer shall at all times be
liable for the payment of any debit balance owing in each account upon
demand whether occurring upon a liquidation as provided under this Section
15 or otherwise under this Agreement, and that in all cases Customer shall
be liable for any deficiency remaining in each Account in the event of
liquidation thereof in whole or in part together with interest thereon and
all costs relating to liquidation and collection (including reasonable
attorneys' fees).
16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS - Customer represents
and warrants to and agrees with DWR that:
(a) Customer has full power and authority to enter into this Agreement and
to engage in the transactions and perform its obligations hereunder
and contemplated hereby and (i) if a corporation or a limited
liability company, is duly organized under the laws of the
jurisdiction set forth in the accompanying Futures Account
Application, or (ii) if a partnership, is duly organized pursuant to a
written partnership agreement and the general partner executing this
Agreement is duly authorized to do so under the partnership agreement;
(b) Neither Customer nor any partner, director, officer, member, manager
or employee of Customer nor any affiliate of Customer is a partner,
director, officer, member, manager or employee of a futures commission
merchant introducing broker, exchange or self-regulatory organization
or an employee or commissioner of the Commodity Futures Trading
Commission (the "CFTC"), except as previously disclosed in writing to
DWR;
(c) The accompanying Futures Account Application and Personal Financial
Statements, if applicable, (including any financial statements
furnished in connection therewith) are true, correct and complete.
Except as disclosed on the accompanying Futures Account Application or
otherwise provided in writing, (i) Customer is not a commodity pool or
is exempt from registration under the rules of the Commission, and
(ii) Customer is acting solely as principal and no one other than
Customer has any interest in any Account of Customer. Customer hereby
authorizes DWR to contact such banks, financial institutions and
credit agencies as DWR shall deem appropriate for verification of the
information contained herein.
(d) Customer has determined that trading in commodity interests is
appropriate for Customer, is prudent in all respects and does not and
will not violate Customer's charter or by-laws (or other comparable
governing document) or any law, rule, regulation, judgment, decree,
order or agreement to which Customer or its property is subject or
bound;
(e) As required by CFTC regulations, Customer shall create, retain and
produce upon request of the applicable contract market, the CFTC or
the United States Department of Justice documents (such as contracts,
confirmations, telex printouts, invoices and documents of title) with
respect to cash transactions underlying exchanges of futures for cash
commodities or exchange of futures in connection with cash commodity
transactions;
(f) Customer consents to the electronic recording, at DWR's discretion, of
any or all telephone conversations with DWR (without automatic tone
warning device), the use of same as evidence by either party in any
action or proceeding arising out of the Agreement and in DWR's
erasure, at its discretion, of any recording as part of its regular
procedure for handling of recordings;
(g) Absent a separate written agreement between Customer and DWR with
respect to give-ups, DWR, in its discretion, may, but shall have no
obligation to, accept from other brokers commodity interest
transactions executed by such brokers on an exchange for Customer and
proposed to be "given-up" to DWR for clearance and/or carrying in the
Account;
(h) DWR, for and on behalf of Customer, is authorized and empowered to
place orders for commodity interest transactions through one or more
electronic or automated trading systems maintained or operated by or
under the auspices of an exchange, that DWR shall not be liable or
obligated to Customer for any loss, damage, liability, cost or expense
(including but not limited to loss of profits, loss of use, incidental
or consequential damages) incurred or sustained by Customer and
arising in whole or in part, directly or indirectly, from any fault,
delay, omission, inaccuracy or termination of a system or DWR's
inability to enter, cancel or modify an order on behalf of Customer on
or through a system. The provisions of this Section 16(h) shall apply
regardless of whether any customer claim arises in contract,
negligence, tort, strict liability, breach of fiduciary obligations or
otherwise; and
(i) If Customer is subject to the Financial Institution Reform, Recovery
and Enforcement Act of 1989, the certified resolutions set forth
following this Agreement have been caused to be reflected in the
minutes of Customer's Board of Directors (or other comparable
governing body) and this Agreement is and shall be, continuously from
the date hereof, an official record of Customer.
Customer agrees to promptly notify DWR in writing if any of the warranties
and representations contained in this Section 16 becomes inaccurate or in
any way ceases to be true, complete and correct.
17. SUCCESSORS AND ASSIGNS - This Agreement shall inure to the benefit of DWR,
its successors and assigns, and shall be binding upon Customer and
Customer's executors, trustees, administrators, successors and assigns,
provided, however, that this Agreement is not assignable by Customer
without the prior written consent of DWR.
18. MODIFICATION OF AGREEMENT BY DWR; NON-WAIVER PROVISION - This Agreement may
only be altered, modified or amended by mutual written consent of the
parties, except that if DWR notifies Customer of a change in this Agreement
and Customer thereafter effects a commodity interest transaction in an
account, Customer agrees that such action by Customer will constitute
consent by Customer to such change. No employee of DWR other than DWR's
General Counsel or his or her designee, has any authority to alter, modify,
amend or waive in any respect any of the terms of this Agreement. The
rights and remedies conferred upon DWR shall be cumulative, and its
forbearance to take any remedial action available to it under this
Agreement shall not waive its right at any time or from time to time
thereafter to take such action.
19. SEVERABILITY - If any term or provision hereof or the application thereof
to any persons or circumstances shall to any extent be contrary to any
exchange, government or self-regulatory regulation or contrary to any
federal, state or local law or otherwise be invalid or unenforceable, the
remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those as to which it is contrary,
invalid or unenforceable, shall not be affected thereby.
20. CAPTIONS - All captions used herein are for convenience only, are not a
part of this Agreement, and are not to be used in construing or
interpreting any aspect of this Agreement.
21. TERMINATION - This Agreement shall continue in force until written notice
of termination is given by Customer or DWR. Termination shall not relieve
either party of any liability or obligation incurred prior to such notice.
Upon giving or receiving notice of termination, Customer will promptly take
all action necessary to transfer all open positions in each account to
another futures commission merchant.
22. ENTIRE AGREEMENT - This Agreement constitutes the entire agreement between
Customer and DWR with respect to the subject matter hereof and supersedes
any prior agreements between the parties with respect to such subject
matter.
23. GOVERNING LAW; CONSENT TO JURISDICTION -
(a) In case of a dispute between Customer and DWR arising out of or
relating to the making or performance of this Agreement or any
transaction pursuant to this Agreement (i) this Agreement and its
enforcement shall be governed by the laws of the State of New York
without regard to principles of conflicts of laws, and (ii) Customer
will bring any legal proceeding against DWR in, and Customer hereby
consents in any legal proceeding by DWR to the jurisdiction of, any
state or federal court located within the State and City of New York
in connection with all legal proceedings arising directly, indirectly
or otherwise in connection with, out of, related to or from Customer's
Account, transactions contemplated by this Agreement or the breach
thereof. Customer hereby waives all objections Customer, at any time,
may have as to the propriety of the court in which any such legal
proceedings may be commenced. Customer also agrees that any service of
process mailed to Customer at any address specified to DWR shall be
deemed a proper service of process on the undersigned.
(b) Notwithstanding the provisions of Section 23 (a)(ii), Customer may
elect at this time to have all disputes described in this Section
resolved by arbitration. To make such election, Customer must sign the
Arbitration Agreement set forth in Section 24. Notwithstanding such
election, any question relating to whether Customer or DWR has
commenced an arbitration proceeding in a timely manner, whether a
dispute is within the scope of the Arbitration Agreement or whether a
party (other than Customer or DWR) has consented to arbitration and
all proceedings to compel arbitration shall be determined by a court
as specified in Section 23 (a)(ii).
24. ARBITRATION AGREEMENT (OPTIONAL) - Every dispute between Customer and DWR
arising out of or relating to the making or performance of this Agreement
or any transaction pursuant to this Agreement, shall be settled by
arbitration in accordance with the rules, then in effect, of the National
Futures Association, the contract market upon which the transaction giving
rise to the claim was executed, or the National Association of Securities
Dealers as Customer may elect. If Customer does not make such election by
registered mail addressed to DWR at 130 Liberty Street, 29th Floor, New
York, NY 10006; Attention: Deputy General Counsel, within 45 days after
demand by DWR that the Customer make such election, then DWR may make such
election. DWR agrees to pay any incremental fees which may be assessed by a
qualified forum for making available a "mixed panel" of arbitrators, unless
the arbitrators determine that Customer has acted in bad faith in
initiating or conducting the proceedings. Judgment upon any award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
IN ADDITION TO FOREIGN FORUMS, THREE FORUMS EXIST FOR THE RESOLUTION OF
COMMODITY DISPUTES: CIVIL COURT LITIGATION, REPARATIONS AT THE COMMODITY
FUTURES TRADING COMMISSION ("CFTC") AND ARBITRATION CONDUCTED BY A
SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION
MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE ABILITY
TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT INCURRING
SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH CUSTOMER
INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT YOUR
CONSENT TO THIS ARBITRATION AGREEMENT BE VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A
COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY CLAIMS
OR COUNTERCLAIMS WHICH YOU OR DWR MAY SUBMIT TO ARBITRATION UNDER THIS
AGREEMENT. YOU ARE NOT, HOWEVER, WAIVING YOUR RIGHT TO ELECT INSTEAD TO
PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER SECTION 14 OF
THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE WHICH MAY BE
ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A DISPUTE ARISES, YOU
WILL BE NOTIFIED IF DWR INTENDS TO SUBMIT THE DISPUTE TO ARBITRATION. IF
YOU BELIEVE A VIOLATION OF THE COMMODITY EXCHANGE ACT IS INVOLVED AND IF
YOU PREFER TO REQUEST A SECTION 14 "REPARATIONS" PROCEEDINGS BEFORE THE
CFTC, YOU WILL HAVE 45 DAYS FROM THE DATE OF SUCH NOTICE IN WHICH TO MAKE
THAT ELECTION.
YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT WITH
DWR. See 17 CFR 180.1-180.5. ACCEPTANCE OF THIS ARBITRATION AGREEMENT
REQUIRES A SEPARATE SIGNATURE ON PAGE 8.
25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL) - Without its prior
notice, Customer agrees that when DWR executes sell or buy orders on
Customer's behalf, DWR, its directors, officers, employees, agents,
affiliates, and any floor broker may take the other side of Customer's
transaction through any account of such person subject to its being
executed at prevailing prices in accordance with and subject to the
limitations and conditions, if any, contained in applicable rules and
regulations.
26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL) - Without limiting other
provisions herein, DWR is authorized to transfer from any segregated
account subject to the Commodity Exchange Act carried by DWR for the
Customer to any other account carried by DWR for the Customer such amount
of excess funds as in DWR's judgment may be necessary at any time to avoid
a margin call or to reduce a debit balance in said account. It is
understood that DWR will confirm in writing each such transfer of funds
made pursuant to this authorization within a reasonable time after such
transfer.
27. SUBORDINATION AGREEMENT (APPLIES ONLY TO ACCOUNTS WITH FUNDS HELD IN
FOREIGN COUNTRIES) - Funds of customers trading on United States contract
markets may be held in accounts denominated in a foreign currency with
depositories located outside the United States or its territories if the
customer is domiciled in a foreign country or if the funds are held in
connection with contracts priced and settled in a foreign currency. Such
accounts are subject to the risk that events could occur which hinder or
prevent the availability of these funds for distribution to customers. Such
accounts also may be subject to foreign currency exchange rate risks.
If authorized below, Customer authorizes the deposit of funds into such
foreign depositories. For customers domiciled in the United States, this
authorization permits the holding of funds in regulated accounts offshore
only if such funds are used to margin, guarantee, or secure positions in
such contracts or accrue as a result of such positions. In order to avoid
the possible dilution of other customer funds, a customer who has funds
held outside the United States agrees by accepting this subordination
agreement that his claims based on such funds will be subordinated as
described below in the unlikely event both of the following conditions are
met: (1) DWR is placed in receivership or bankruptcy, and (2) there are
insufficient funds available for distribution denominated in the foreign
currency as to which the customer has a claim to satisfy all claims against
those funds.
By initialing the Subordination Agreement below, Customer agrees that if
both of the conditions listed above occur, its claim against DWR's assets
attributable to funds held overseas in a particular foreign currency may be
satisfied out of segregated customer funds held in accounts denominated in
dollars or other foreign currencies only after each customer whose funds
are held in dollars or in such other foreign currencies receives its
pro-rata portion of such funds. It is further agreed that in no event may a
customer whose funds are held overseas receive more than its pro-rata share
of the aggregate pool consisting of funds held in dollars, funds held in
the particular foreign currency, and non-segregated assets of DWR.
<PAGE>
OPTIONAL ELECTIONS
The following provisions, which are set forth in this agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
SIGNATURE REQUIRED FOR
EACH ELECTION
ARBITRATION AGREEMENT:
(Agreement Paragraph 24)
-----------------------------------
CONSENT TO TAKE THE OTHER SIDE OF ORDERS:
(Agreement Paragraph 25) X /s/ Mark J. Hawley
-----------------------------------
AUTHORIZATION TO TRANSFER FUNDS:
(Agreement Paragraph 26)
-----------------------------------
ACKNOWLEDGEMENT TO SUBORDINATION AGREEMENT
(Agreement Paragraph 27)
X /s/ Mark J. Hawley
-----------------------------------
(Required for accounts holding
non-U.S. currency)
- --------------------------------------------------------------------------------
HEDGE ELECTION
Customer confirms that all transactions in the Account will [ ]
represent bona fide hedging transactions, as defined by the
Commodity Futures Trading Commission, unless DWR is notified
otherwise not later than the time an order is placed for the
Account [check box if applicable]:
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
DWR's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A. Liquidate all open contracts without first seeking [ ]
instructions either from or on behalf of Customer.
B. Attempt to obtain instructions with respect to the [ ]
disposition of all open contracts.
(if neither box is checked, customer shall be deemed to elect a)
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS
The undersigned each hereby acknowledges its separate receipt from DWR, and
its understanding of each of the following documents prior to the opening of
the account:
o Risk Disclosure Statement for o Project A(TM) Customer
Futures and Options (in the form Information Statement
prescribed by CFTC
Regulation 1.55(c))
o LME Risk Warning Notice o Questions & Answers on Flexible
Options Trading at the CBOT
o Dean Witter Order Presumption for o CME Average Pricing System
After Hours Electronic Markets Disclosure Statement
o NYMEX ACCESS(SM) Risk Disclosure o Special Notice to Foreign
Statement Brokers and Foreign Traders
o Globex(R)Customer Information and
Risk Disclosure Statement
- --------------------------------------------------------------------------------
REQUIRED SIGNATURES
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify DWR in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
Dean Witter Spectrum Select 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)
Exhibit 10.05
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 1st day
of June, 1998, by and among DEAN WITTER SPECTRUM SELECT 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 March 21, 1991, as amended, and a Limited Partnership Agreement
dated as of March 21, 1991, as amended from time to time, and as further amended
and restated as of May 31, 1998, between Demeter Management Corporation, a
Delaware corporation ("Demeter"), acting as general partner (in such capacity,
the "General Partner"), and the limited partners of the Customer, to trade, buy,
sell, spread, or otherwise acquire, hold, or dispose of commodities (including,
but not limited to, foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, and any other securities or items which are,
or may become, the subject of futures contract trading), domestic and foreign
commodity futures contracts, commodity forward contracts, foreign exchange
commitments, options on physical commodities and on futures contracts, spot
(cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests"), and securities
(such as United States Treasury bills) approved by the Commodity Futures Trading
Commission (the "CFTC") for investment of customer funds and other securities on
a limited basis, and to engage in all activities incident thereto;
WHEREAS, the Customer (which is a commodity pool) and the General
Partner (which is a registered commodity pool operator) have entered into
management agreements (the "Management Agreements") with certain trading
advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"),
which provide that the Trading Advisors have 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 Agreements;
WHEREAS, the Customer and DWR have entered into that certain Amended
and Restated Customer Agreement, dated as of June 1, 1998 (the "DWR Customer
Agreement"), whereby DWR agreed to perform certain non-clearing futures
interests brokerage and other services for the Customer; and
WHEREAS, the Customer, DWR and CFI wish to enter into this Agreement
to set forth the terms and conditions upon which CFI will perform futures
interests execution and clearing services for the Customer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not defined herein shall have
the meaning given to them in the Customer's most recent prospectus as filed with
the Securities and Exchange Commission (the "Prospectus") relating to the
offering of units of limited partnership interest of the Customer (the "Units")
and in any amendment or supplement to the Prospectus.
2. Duties of CFI. CFI agrees to execute and clear all futures
interests brokerage transactions on behalf of the Customer in accordance with
instructions provided by DWR or the Trading Advisors, and the Customer agrees to
retain CFI as its clearing broker for the term of this Agreement. CFI agrees to
maintain such number of subaccounts for the Customer as DWR reasonably shall
request. The execution and clearing services of CFI provided hereunder shall be
in accordance with applicable exchange rules.
CFI agrees to furnish to the Customer as soon as practicable all of
the information from time to time in its possession which Demeter, as the
general partner of the Customer, is required to furnish to the Limited Partners
pursuant to the Limited Partnership Agreement as from time to time in effect and
as required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus. CFI
shall disclose such information (including, without limitation, financial
statements) regarding itself and its affiliates as may be required by the
Customer for SEC, CFTC and state blue sky disclosure purposes.
CFI agrees to notify the applicable 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 any 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 Advisors.
CFI acknowledges that other partnerships of which the General
Partner is the general partner are not affiliates of the Customer.
3. Margins. The futures and futures option trades for the Customer's
account shall be margined at the applicable exchange or clearinghouse minimum
rates for speculative accounts; all subaccounts shall be combined for
determining such margin requirements. All margin calls for the Customer's
account shall be made to DWR by CFI, and each such call for margin shall be met
by Customer within three hours after DWR has received such call. CFI shall
accept as margin for the Customer's account any instrument deemed acceptable
under exchange or clearinghouse rules pertaining to such account. Upon oral or
written request by DWR, CFI shall, within three hours after receipt of any such
request, wire transfer (by federal bank wire system) to DWR for Customer's
account any funds in the Customer's account with CFI in excess of the margin
requirements for such account.
4. Obligations and Expenses. Except as otherwise set forth herein
and in the Prospectus, the Customer, and not CFI, shall be responsible for all
taxes, management and incentive fees to the Trading Advisors, the brokerage fees
to DWR pursuant to the DWR Customer Agreement, and all extraordinary expenses
incurred by it. DWR shall pay all of the organizational, initial and continuing
offering, and ordinary administrative expenses of the Customer (including, but
not limited to, legal, accounting, and auditing fees, printing costs, filing
fees, escrow fees, marketing costs and expenses, and other related expenses),
and all charges of CFI (as described in paragraph 6 below), and shall not be
reimbursed therefor.
5. Agreement Nonexclusive. CFI shall be free to render services of
the nature to be rendered to the Customer hereunder to other persons or entities
in addition to the Customer, and the parties acknowledge that CFI may render
such services to additional entities similar in nature to the Customer,
including other partnerships organized with Demeter as their general partner. It
is expressly understood and agreed that this Agreement is nonexclusive and that
the Customer has no obligation to execute any or all of its trades for futures
interests through CFI. The parties acknowledge that the Customer may execute and
clear trades for futures interests through such other broker or brokers as
Demeter may direct from time to time. The Customer's utilization of an
additional commodity broker shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Customer and CFI
hereunder.
6. Compensation of CFI. In compensation of CFI's services pursuant
to this Agreement, DWR shall pay to CFI such fees and costs as DWR and CFI shall
agree from time to time, and the Customer shall pay CFI all floor brokerage
fees, exchange fees, clearinghouse fees, NFA fees, "give-up" fees, any taxes
(other than income taxes), any third party clearing costs incurred by CFI, costs
associated with taking delivery of futures interests, fees for execution of
forward contract transactions (in the aggregate, "Transaction Costs"). DWR shall
reimburse the Customer at each month-end for all Transaction Costs incurred by
the Customer. The Customer shall have no obligation to reimburse DWR for any
payments made by DWR to CFI.
7. Investment Discretion. The parties recognize that CFI shall have
no authority to direct the futures interests investments to be made for the
Customer's account, but shall execute only such orders for the Customer's
account as DWR, Demeter or the Trading Advisors may direct from time to time.
However, the parties agree that CFI, and not the Trading Advisors, shall have
the authority and responsibility with regard to the investment, maintenance, and
management of the Customer's assets that are held in segregated or secured
accounts, as provided in Section 8 hereof.
8. Interest on Customer Funds. The Customer's assets deposited with
CFI will be segregated or secured in accordance with the Commodity Exchange Act
and CFTC regulations. All of such funds will be available for margin for the
Customer's trading. 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.
9. Recording Conversations. CFI consents to the electronic
recording, at the discretion of the Customer, Customer's agents or DWR, of any
or all telephone conversations with CFI (without automatic tone warning device),
the use of same as evidence by either party in any action or proceeding arising
out of this Agreement, and in the Customer's, Customer's agents' or DWR's
erasure, at its discretion, of any recording as a part of its regular procedure
for handling of recordings.
10. Delivery; Option Exercise.
(a) The Customer acknowledges that the making or accepting of
delivery pursuant to a futures contract may involve a much higher degree of risk
than liquidating a position by offset. CFI has no control over and makes no
warranty with respect to grade, quality or tolerances of any commodity delivered
in fulfillment of a contract.
(b) The Customer agrees to give CFI timely notice and immediately on
request to inform CFI if the Customer intends to make or take delivery under a
futures contract or to exercise an option contract. If so requested, the
Customer shall provide CFI with satisfactory assurances that the Customer can
fulfill the Customer's obligation to make or take delivery under any contract.
The Customer shall furnish CFI with property deliverable by it under any
contract in accordance with CFI's instructions.
(c) CFI shall not have any obligation to exercise any long option
contract unless the Customer has furnished CFI with timely exercise instructions
and sufficient initial margin with respect to each underlying futures contract.
11. Standard of Liability and Indemnity. Subject to Section 2
hereof, CFI and its affiliates (as defined below) shall not be liable to the
Customer, the General Partner or Limited Partners, or any of its or their
respective successors or assigns, for any act, omission, conduct, or activity
undertaken by or on behalf of the Customer pursuant to this Agreement which CFI
determines, in good faith, to be in the best interests of the Customer, unless
such act, omission, conduct, or activity by CFI or its affiliates constituted
misconduct or negligence.
The Customer shall indemnify, defend and hold harmless CFI and its
affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct, or activity undertaken by CFI on behalf of the
Customer pursuant to this Agreement, including, without limitation, any demands,
claims or lawsuits initiated by a Limited Partner (or assignee thereof),
provided that (i) CFI has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in the
best interests of the Customer, and (ii) the act, omission, conduct, or activity
that was the basis for such loss, liability, damage, cost, or expense was not
the result of misconduct or negligence. Notwithstanding anything to the contrary
contained in the foregoing, neither CFI nor any of its affiliates shall be
indemnified by the Customer for any losses, liabilities, or expenses arising
from or out of an alleged violation of federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(b) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (c) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee and finds that indemnification of the settlement and
related costs should be made, provided, with regard to such court approval, the
indemnitee must apprise the court of the position of the SEC, and the positions
of the respective securities administrators of Massachusetts, Missouri,
Tennessee and/or those other states and jurisdictions in which the plaintiffs
claim they were offered or sold Units, with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
Furthermore, in any action or proceeding brought by a Limited Partner in the
right of the Customer to which CFI or any affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in this Section 11. The Customer shall make advances
to CFI or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or
legal action relates to the performance of duties or services by such persons to
the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated
by a Limited Partner; and (iii) such advances are repaid, with interest at the
legal rate under Delaware law, if the person receiving such advance is
ultimately found not to be entitled to indemnification hereunder.
CFI shall indemnify, defend and hold harmless the Customer and its
successors or assigns from and against any losses, liabilities, damages, costs
or expenses (including in connection with the defense or settlement of claims;
provided CFI has approved such settlement) incurred as a result of the
activities of CFI or its affiliates, provided, further, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was the result
of bad faith, misconduct or negligence.
The indemnities provided in this Section 11 by the Customer to CFI
and its affiliates shall be inapplicable in the event of any losses,
liabilities, damages, costs, or expenses arising out of, or based upon, any
material breach of any warranty, covenant, or agreement of CFI contained in this
Agreement to the extent caused by such breach. Likewise, the indemnities
provided in this Section 11 by CFI to the Customer and any of its successors and
assigns shall be inapplicable in the event of any losses, liabilities, damages,
costs, or expenses arising out of, or based upon, any material breach of any
warranty, covenant, or agreement of the Customer contained in this Agreement to
the extent caused by such breach.
As used in this Section 11, the term "affiliate" of CFI shall mean:
(i) any natural person, partnership, corporation, association, or other legal
entity directly or indirectly owning, controlling, or holding with power to vote
10% or more of the outstanding voting securities of CFI; (ii) any partnership,
corporation, association, or other legal entity 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held with
power to vote by CFI; (iii) any natural person, partnership, corporation,
association, or other legal entity directly or indirectly controlling,
controlled by, or under common control with, CFI; or (iv) any officer or
director of CFI. Notwithstanding the foregoing, "affiliates" for purposes of
this Section 11 shall include only those persons acting on behalf of CFI within
the scope of the authority of CFI, as set forth in this Agreement.
12. Term. This Agreement shall continue in effect until terminated
by any party giving not less than 60 days' prior written notice of termination
to the other parties. The Customer shall have the right to terminate this
Agreement
(i) at any time, effective upon thirty (30) days' prior
written notice to CFI, in the event that:
(A) CFI announces plans to discontinue the provision
of execution and clearing services with respect to
futures contracts, options on futures contracts or
acting as a dealer counterparty for foreign
exchange cash and forward contracts; or
(B) CFI merges or consolidates with or into or
acquires or is acquired by, another entity or
entities acting in concert (excluding any
intergroup reorganizations with any affiliates of
CFI or any capital contributions by, or sale of
CFI stock to any affiliates of CFI, provided that
the guarantee agreement between DWR and Credit
Agricole Indosuez S.A. dated as of July 31, 1997
remains in place or a comparable guaranty is
substituted by a bank with a net worth and credit
rating equal to Credit Agricole Indosuez S.A.) in
a transaction involving the purchase or sale of
stock or substantially all of the assets of the
acquired entity or which involves a capital
contribution to or by such entity or entities (in
an amount representing fifty percent (50%) or more
of the book value of CFI's or such entity's (or
their respective affiliate's) net worth), or the
purchase or sale of stock representing fifty
percent (50%) or more of CFI's or such entity's
(or their respective affiliate's) outstanding
equity securities; and
(ii) at any time effective immediately upon written notice to
CFI in the event:
(A) CFI ceases to be registered or conduct business as
a futures commission merchant or discontinues its
membership or clearing membership on any major
futures interest exchange in the United States (or
any affiliated clearing corporation) or in the
NFA; or
(B) a receiver, liquidator or trustee of CFI is
appointed by court order and such order remains in
effect for more than thirty (30) days; or CFI is
adjudicated bankrupt or insolvent; or any of CFI's
property is sequestered by court order and such
order remains in effect for more than thirty (30)
days; or a petition is filed against CFI under any
bankruptcy, reorganization, arrangement,
insolvency, readjustment or debt, dissolution or
liquidation law of any jurisdiction, whether now
or hereafter in effect, and is not dismissed
within thirty (30) days after such filing; or CFI
files a petition in voluntary bankruptcy or
seeking relief under any provision of any
bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now
or hereafter in effect, or consents to the filing
of any petition against it under any such law; or
(C) CFI, DWR or the Customer is ordered or otherwise
directed to terminate this Agreement by any
governmental, regulatory, or self-regulatory
authority.
Any such termination by any party shall be without penalty.
13. Complete Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters referred to herein, and
no other agreement, verbal or otherwise, shall be binding as among the parties
unless in writing and signed by the party against whom enforcement is sought.
14. Assignment. This Agreement may not be assigned by any party
without the express written consent of the other parties.
15. Amendment. This Agreement may not be amended except by the
written consent of the parties and provided such amendment is consistent with
the Prospectus.
16. Notices. All notices required or desired to be delivered under
this Agreement shall be in writing and shall be effective when delivered
personally on the day delivered, or when given by registered or certified mail,
postage prepaid, return receipt requested, on the day of receipt, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):
if to the Customer:
DEAN WITTER SPECTRUM SELECT 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
17. Survival. The provisions of this Agreement shall survive the
termination of this Agreement with respect to any matter arising while this
Agreement was in effect.
18. Headings. Headings of Sections herein are for the convenience of
the parties only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
19. Incorporation by Reference. The Futures Account Agreement
annexed hereto is hereby incorporated by reference herein and made a part hereof
to the same extent as if such document were set forth in full herein. If any
provision of this Agreement is or at any time becomes inconsistent with the
annexed document, the terms of this Agreement shall control.
20. Governing Law; Venue. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York (without regard
to its choice of law principles). If any action or proceeding shall be brought
by a party to this Agreement or to enforce any right or remedy under this
Agreement, each party hereto hereby consents and will submit to the jurisdiction
of the courts of the State of New York or any federal court sitting in the
County, City and State of New York. Any action or proceeding brought by any
party to this Agreement to enforce any right, assert any claim, or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
DEAN WITTER SPECTRUM SELECT 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/ Bruce A. Beatus
--------------------------
Name: Bruce A. Beatus
Title: General Counsel
<PAGE>
CARR FUTURES INC.
FUTURES ACCOUNT AGREEMENT
In consideration of the acceptance by Carr Futures Inc. ("Carr") of one or more
accounts of the undersigned ("Customer") (if more than one account is at any
time opened or reopened with Carr, all are covered by this Agreement and are
referred to individually and collectively as the "Account"), and Carr's
agreement to act as broker, directly or indirectly, or as dealer, for the
execution, clearance and/or carrying of transactions for the purchase and sale
of commodity interests, including commodities, forward contracts, commodity
futures contracts, options on commodity futures contracts and transaction
involving the exchange of futures for cash commodities or the exchange of
futures in connection with cash commodity transactions, Customer agrees as
follows:
1. APPLICABLE RULES AND REGULATIONS
The Account and each transaction therein shall be subject to the terms of
this Agreement and to (a) all applicable laws and the regulations, rules
and orders (collectively "regulations") of all regulatory and
self-regulatory organizations having jurisdiction and (b) the
constitution, by-laws, rules, regulations, orders, resolutions,
interpretations and customs and usages (collectively "rules") of the
market and any associated clearing organization (each an "exchange") on or
subject to the rules of which such transaction is executed and/or cleared.
The reference in the preceding sentence to exchange rules is solely for
Carr's protection and Carr's failure to comply therewith shall not
constitute a breach of this Agreement or relieve Customer of any
obligation or responsibility under this Agreement. Carr shall not be
liable to Customer as a result of any action by Carr, its officers,
directors, employees or agents to comply with any rule or regulation.
2. PAYMENTS TO CARR
Customer agrees to pay to Carr immediately on request (a) commissions,
give-up charges, fees and service charges as are in effect from time to
time, together with all applicable regulatory and self-regulatory
organization and exchange fees, charges and taxes; (b) the amount of any
debit balance or any other liability that may result from transactions
executed for the Account; and (c) interest on such debit balance or
liability at the prevailing rate charged by Carr at the time such debit
balance or liability arises and service charges on any such debit balance
or liability together with any reasonable costs and attorneys' fees
incurred in collecting any such debit balance or liability. Customer
acknowledges that Carr may charge commissions at other rates to other
customers.
3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN
Customer shall at all times, and without prior notice or demand from Carr,
maintain adequate margin (also known as "performance bond") in the Account
so as to continually to meet the original and maintenance margin
requirements established by Carr for Customer. Carr may change such
requirements from time to time at Carr's discretion. Such margin
requirements may exceed the margin requirements set by any exchange or
other regulatory authority and may vary from Carr's requirements for other
customers. Customer agrees, when so requested, orally or by written
notice, immediately (in no less than one hour) to wire transfer (by
federal bank wire system to the account of Carr) margin funds, and to
furnish Carr with names of bank officers for immediate verification of
such transfers. Customer acknowledges and agrees that Carr may receive and
retain as its own any interest, increment, profit, gain or benefit,
directly or indirectly, accruing from any of the funds Carr receives from
Customer.
4. DELIVERY; OPTION EXERCISE
Liquidating instructions on open positions maturing in a current delivery
month must be given to Carr at least five business days prior to the first
notice day in the case of long positions, and at least five business days
prior to the last trading day in the case of short positions.
Alternatively, sufficient funds to take delivery or the necessary delivery
documents must be delivered to Carr within the same period described
above. If funds, documents or instructions are not received, Carr may,
without notice, either liquidate Customer's position or make or receive
delivery on behalf of Customer upon such terms and by such methods as
Carr, in its sole discretion, determines.
If, at any time, Customer fails to deliver to Carr any property previously
sold by Carr on Customer's behalf in compliance with commodity interest
contracts, or Carr shall deem it necessary (whether by reason of the
requirements of any exchange, clearing house or otherwise) to replace any
securities, commodity interest contracts, financial instruments, or other
property previously delivered by Carr for the Account of Customer with
other property of like or equivalent kind or amount, Customer hereby
authorizes Carr, in its sole judgment, to borrow or to buy any property
necessary to make delivery thereof, or to replace any such property
previously delivered, or to deliver the same to such other party or to
whom delivery is to be made. Carr may subsequently repay any borrowing or
purchase thereof with property purchased or otherwise acquired for the
amount of Customer. Customer shall pay Carr for any cost, loss and damages
from the foregoing, including, but not limited to, consequential damages,
penalties and fines which Carr may incur or which Carr may sustain from
its inability to borrow or buy any such property.
Customer understands that some exchanges and clearing houses have
established cut-off times for the tender of exercise instructions, and
that an option will become worthless if instructions are not delivered
before such expiration time. Customer also understands that certain
exchanges and clearing houses automatically will exercise some
"in-the-money" options unless instructed otherwise. Customer acknowledges
full responsibility for taking action either to exercise or to prevent the
exercise of an option contract, as the case may be, and Carr is not
required to take any action with respect to an option contract, including
without limitations any action to exercise an option prior to its
expiration date, or to prevent the automatic exercise of an option, except
upon Customer's express instructions. Customer further understands that
Carr may establish exercise cut-off times which may be different from the
times established by exchanges and clearing houses.
Customer understands that (a) all short option positions are subject to
assignment at any time, including positions established on the same day
that exercises are assigned, and (b) exercised assignment notices are
allocated randomly from among all Carr customer's short options positions
which are subject to exercise. A more detailed description of Carr's
allocation procedures is available upon request.
5. FOREIGN CURRENCY
If Carr enters into any transaction for Customer effected in a currency
other than U.S. dollars: (a) any profit or loss caused by changes in the
rate of exchange for such currency shall be for Customer's Account and
risk and (b) unless another currency is designated in Carr's confirmation
of such transaction, all margin for such transaction and the profit or
loss on the liquidation of such transaction shall be in U.S. dollars at a
rate of exchange determined by Carr in its discretion on the basis of then
prevailing market rates of exchange for such foreign currency.
6. CARR MAY LIMIT POSITIONS HELD
Customer agrees that Carr, at its discretion, may limit the number of open
positions (net or gross) which Customer may execute, clear and/or carry
with or acquire through it. Customer agrees (a) not to make any trade
which would have the effect or exceeding such limits, (b) that Carr may
require Customer to reduce open positions carried with Carr and (c) that
Carr may refuse to accept orders to establish new positions. Carr may
impose and enforce such limits, reduction or refusal whether or not they
are required by applicable law, regulations or rules. Customer shall
comply with all position limits established by any regulatory or
self-regulatory organization or any exchange. In addition, Customer agrees
to notify Carr promptly if Customer is required to file position reports
with any regulatory or self-regulatory organization or with any exchange.
7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION
Customer acknowledges that:
(a) Any market recommendations and information Carr may communicate to
Customer, although based upon information obtained from sources
believed by Carr to be reliable, may be incomplete and not subject to
verification;
(b) Carr makes no representation, warranty or guarantee as to, and shall
not be responsible for, the accuracy or completeness of any
information or trading recommendation furnished to Customer;
(c) Recommendations to Customer as to any particular transaction at any
given time may differ among Carr's personnel due to diversity in
analysis of fundamental and technical factors and may vary from any
standard recommendation made by Carr in its research reports or
otherwise; and
(d) Carr has no obligation or responsibility to update any market
recommendations, research or information it communicates to Customer.
Customer understands that Carr and its officers, directors, affiliates,
stockholders, representatives or associated persons may have positions in
and may intend to buy or sell commodity interests that are the subject of
market recommendations furnished to Customer, and that the market
positions of Carr or any such officer, director, affiliate, stockholder,
representative or associated person may or may not be consistent with the
recommendations furnished to Customer by Carr.
8. LIMITS ON CARR DUTIES; LIABILITY
Customer agrees:
(a) That Carr has no duty to apprise Customer of news or of the value of
any commodity interests or collateral pledged or in any way to advise
Customer with respect to the market;
(b) That the commissions which Carr receives are consideration solely for
the execution, reporting and carrying of Customer's trades;
(c) If there is an Account Manager, an Account Manager's Agreement for the
Account Manager will be provided to Carr. Customer represents it has
received: (1) a disclosure document concerning such Account Manager's
trading advice, including, in the event the Account Manager will trade
options, the options strategies to be utilized, or (2) a written
statement explaining why Account Manager is not required under
applicable law to provide such a disclosure document to Customer; and
(d) Customer acknowledges, understands and agrees that Carr is in no way
responsible for any loss to Customer occasioned by the actions of the
Account Manager and Carr does not by implication or otherwise endorse
the operating methods or trading strategies or programs of the Account
Manager.
9. EXTRAORDINARY EVENTS
Customer agrees that Carr shall have no liability for damages, claims,
losses or expenses caused by any errors, omissions or delays resulting
from an act, condition or cause beyond the reasonable control of Carr,
including, but not limited to: war; insurrection; riot; strike; act of
God; fire; flood; extraordinary weather conditions; accident; action of
government authority; action of exchange, clearinghouse or clearing
organization; communications or power failure; equipment or software
malfunction; error, omission or delay in the report of transactions;
prices, exchange rates or other market or transaction information; or the
insolvency, bankruptcy, receivership, liquidation or other financial
difficulty of any bank, clearing broker, exchange, market, clearinghouse
or clearing organization.
10. INDEMNIFICATION OF CARR, CONTRIBUTION AND REIMBURSEMENT
(a) To the extent permitted by law, Customer agrees to indemnify and hold
harmless Carr and its shareholders, directors, officers, employees,
agents, affiliates and controlling persons against any liability for
damages, claims, losses or expenses which they may incur as the result
of: (x) Customer's violation of federal or state laws or regulations,
or of rules of any exchange or self-regulatory organization; (y) any
other breach of this Agreement by Customer; or (z) any breach by Carr
of federal or state laws or regulations, or of the charter provisions,
by-laws, rules, margin or other requirements, of the exchanges or
self-regulatory organizations, provided that such violation was caused
by Carr's acting in good faith on Customer's behalf. Such damages,
claims, losses or expenses shall include legal fees and expenses,
costs of settling claims, interest, and fines or penalties imposed by
the exchanges, self-regulatory organization or governmental authority.
(b) Customer agrees that if the indemnification provided in paragraph (a)
above is held to be unavailable to Carr, the parties hereto shall
share in and contribute to such damages, claims, losses or expenses in
proportion to their relative benefits from the transactions involved
and their relative degree of fault in causing the liability.
(c) Customer agrees to reimburse Carr and its shareholders, directors,
officers, employees, agents, affiliates and controlling persons on
demand for any costs incurred in collecting any sums Customer owes
under this Agreement and any costs of successfully defending against
claims asserted against them by Customer.
11. NOTICES; TRANSMITTALS
Carr shall transmit all communications to Customer at Customer's address,
facsimile or telephone number set forth below or to such other address as
Customer may hereafter direct in writing. Customer shall transmit all
communications to Carr regarding this Agreement (except routine inquiries
concerning the Account) to 10 South Wacker Drive, Suite 1100, Chicago,
Illinois 60606; facsimile (312) 441-4201, Attention: Legal/Compliance
Department. All payments and deliveries to Carr shall be made as
instructed by Carr from time to time and shall be deemed received only
when actually received by Carr.
12. CONFIRMATION CONCLUSIVE
Confirmation of trades and any other notices sent to Customer shall be
conclusive and binding on Customer unless customer or Customer's agent
notifies Carr to the contrary (a) in the case of an oral report, orally at
the time received by Customer or its agent; or (b) in the case of a
written report or notice, in writing prior to opening of trading on the
business day next following receipt of the report. In addition, if
Customer has not received a written confirmation that a commodity interest
transaction has been executed within three business days after Customer
has placed an order with Carr to effect such transaction, and has been
informed or believes that such order has been or should have been
executed, then Customer immediately shall notify Carr thereof. Absent such
notice, Customer conclusively shall be deemed estopped to object and to
have waived any such objection to the failure to execute or cause to be
executed such transaction. Anything in this Section 12 notwithstanding,
neither Customer nor Carr shall be bound by any transaction or price
reported in error.
13. SECURITY INTEREST
Customer hereby grants to Carr a first lien upon and a security interest
in any and all cash, securities, whether certificated or uncertificated,
security entitlements, investment property, financial assets, foreign
currencies, commodity interests and other property (including securities
and options) and the proceeds of all of the foregoing (together the
"Collateral") belonging to Customer or in which Customer may have an
interest, now or in the future, and held by Carr or in Carr's control or
carried in any of Customer's Accounts, or in Customer's accounts carried
under other agreements with Carr or its affiliates. Such security interest
is granted as security for the performance by Customer of its obligations
hereunder and for the payment of all loans and other liabilities which
Customer has or may in the future have to Carr, whether under this
Agreement or any other agreement between the parties hereto. Customer
agrees to execute such further instruments, documents, filings and
agreements as may be requested at any time by Carr in order to perfect and
maintain perfected the foregoing lien and security interest. Carr, in its
discretion, may liquidate any Collateral to satisfy any margin or Account
deficiencies or to transfer the Collateral to the general ledger account
of Carr.
In the event that the provisions of Section 13, which relate to Collateral
in any account carried by Carr for Customer other than an Account
instituted hereunder, conflict with the agreement under which such other
account was instituted, such other agreement between Carr and Customer
shall take precedence over the provisions of this Section 13.
14. TRANSFER OF FUNDS
At any time and from time to time and without prior notice to Customer,
Carr may transfer from one Account to another Account in which Customer
has any interest, such excess funds, equities, securities or other
property as in Carr's judgment may be required for margin, or to reduce
any debit balance or to reduce or satisfy any deficits in such other
Accounts except that no such transfer may be made from a segregated
Account subject to the Commodity Exchange Act to another Account
maintained by Customer unless either Customer has authorized such transfer
in writing or Carr is effecting such transfer to enforce Carr's security
interest pursuant to Section 13. Carr promptly shall confirm all transfers
of funds made pursuant hereto to Customer in writing.
15. CARR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS
In addition to all other rights of Carr set forth in this Agreement:
(a) When directed or required by a regulatory or self-regulatory
organization or exchange having jurisdiction over Carr or the Account;
(b) Whenever Carr reasonably considers it necessary for its protection
because of margin requirements or otherwise;
(c) If Customer or any affiliate of Customer repudiates, violates,
breaches or fails to perform on a timely basis any term, covenant or
condition on its part to be performed under this Agreement or another
agreement with Carr;
(d) If a case in bankruptcy is commenced or if a proceeding under any
insolvency or other law for the protection of creditors or for the
appointment of a receiver, liquidator, trustee, conservator, custodian
or similar officer is filed by or against Customer or any affiliate of
Customer, or if Customer or any affiliate of Customer makes or
proposes to make any arrangement or composition for the benefit of its
creditors, or if Customer (or any such affiliate) or any or all of its
property is subject to any agreement, order, judgment or decree
providing for Customer's dissolution, winding-up, liquidation, merger,
consolidation, reorganization or for the appointment of a receiver,
liquidator, trustee, conservator, custodian or similar officer of
Customer, such affiliate or such property;
(e) Carr is informed of Customer's death or mental incapacity; or
(f) If an attachment or similar order is levied against the Account or any
other account maintained by a Customer or any affiliate of Customer
with Carr;
Carr shall have the right to (i) satisfy any obligations due Carr out of
any Customer's property (also referred to as "Collateral") in Carr's
custody or control, (ii) liquidate any or all of Customer's commodity
interest positions, such liquidation shall include transactions involving
the exchange of futures for cash commodities or the exchange of futures in
connection with cash commodity transactions, (iii) cancel any or all of
Customer's outstanding orders, (iv) treat any or all of Customer's
obligations due Carr as immediately due and payable, (v) sell any or all
of Customer's property in Carr's custody or control in such manner as Carr
determines to be commercially reasonable, and/or (vi) terminate any or all
of Carr's obligations for future performance to Customer, all without any
notice to or demand on Customer if deemed necessary by Carr. Any sale
hereunder may be made in any commercially reasonable manner. Customer
agrees that a prior demand, call or notice shall not be considered a
waiver of Carr's right to act without demand or notice as herein provided,
that Customer shall at all times be liable for the payment of any debit
balance owing in each Account upon demand whether occurring upon a
liquidation as provided under this Section 15 or otherwise under this
Agreement, and that in all cases Customer shall be liable for any
deficiency remaining in each Account in the event of liquidation thereof
in whole or in part together with interest thereon and all costs relating
to liquidation and collection (including reasonable attorneys' fees). In
the event that the provisions of Section 15, which relate to Collateral in
any account carried by Carr for Customer other than an Account instituted
hereunder, conflict with the agreement under which such other account was
instituted, such other agreement between Carr and Customer shall take
precedence over the provisions of this Section 15.
16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Customer represents and warrants to and agrees with Carr that:
(a) Customer has full power and authority to enter into this Agreement and
to engage in the transactions and perform its obligations hereunder
and contemplated hereby, and:
(1) If Customer is a corporation or partnership, Customer represents
and warrants that (a) it is duly organized 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 at
least one year's prior experience in effectuating transactions in
commodity interests, financial instruments, and foreign currency
as contemplated hereby; and (e) no person or entity has any
interest in or control of the Account to which this Agreement
pertains except as disclosed by Customer to Carr in writing.
(2) If Customer is a trust, Customer represents and warrants that (a)
it is a duly formed and existing trust under the laws of the
state of its formation or such other laws as are applicable,
including ERISA or similar state law, and the party or parties
designated as trustee or trustees by Customer to Carr in writing
submitted herewith constitute the only or all of the proper
trustees thereof; (b) the trustee or trustees are empowered to
enter into and perform this Agreement and to effectuate
transactions in commodity interests, financial instruments, and
foreign currency as contemplated hereby; (c) the trustee or
trustees make the representations set forth in Section 1 hereof
as if the term trustee(s) were substituted for the term Customer
therein; and (d) no person or entity has any interest in or
control of the Account to which this Agreement pertains except as
disclosed by Customer to Carr in writing.
(b) Neither Customer nor any partner, director, officer, member, manager
or employee of Customer nor any affiliate of Customer is a partner,
director, officer, member, manager or employee of a futures commission
merchant, introducing broker, bank, broker-dealer, exchange or
self-regulatory organization or an employee or commissioner of the
Commodity Futures Trading Commission (the "CFTC"), except as
previously disclosed in writing to Carr;
(c) Any financial statements or other information furnished in connection
therewith are true, correct and complete. Except as disclosed in
writing, (i) Customer is not a commodity pool or is exempt from
registration under the rules of the CFTC, and (ii) Customer is acting
solely as principal and no one other than Customer has any interest in
any Account of Customer. Customer hereby authorizes Carr to contact
such banks, financial institutions and credit agencies as Carr shall
deem appropriate for verification of the information contained herein;
(d) Customer has determined that trading in commodity interests is
appropriate for Customer, is prudent in all respects and does not and
will not violate Customer's charter or by-laws (or other comparable
governing document) or any law, rule, regulation, judgment, decree,
order or agreement to which Customer or its property is subject or
bound;
(e) As required by CFTC regulations, Customer shall create, retain and
produce upon request of the applicable contract market, the CFTC or
other regulatory authority documents (such as contracts,
confirmations, telex printouts, invoices 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 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 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 Carr shall not be liable or
obligated to Customer for any loss, damage, liability, cost or expense
(including but not limited to loss of profits, loss of use, incidental
or consequential damages) incurred or sustained by Customer and
arising in whole or in part, directly or indirectly, from any fault,
delay, omission, inaccuracy or termination of a system or Carr's
inability to enter, cancel or modify an order on behalf of Customer on
or through a system. The provisions of this Section 16(h) shall apply
regardless of whether any customer claim arises in contract,
negligence, tort, strict liability, breach or fiduciary obligations or
otherwise; and
(i) If Customer is subject to the Financial Institution Reform, Recovery
and Enforcement Act of 1989, the certified resolutions set forth
following this Agreement have been caused to be reflected in the
minutes of Customer's Board of Directors (or other comparable
governing body) and this Agreement is and shall be, continuously from
the date hereof, an official record of Customer.
Customer agrees to promptly notify Carr in writing if any of the
warranties and representations contained in this Section 16 become
inaccurate or in any way cease to be true, complete and correct.
17. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of the parties hereto, their
successors and assigns, and shall be binding upon the parties hereto,
their successors and assigns, provided, however, that this Agreement is
not assignable by any party without the prior written consent of the other
parties.
18. MODIFICATION OF AGREEMENT BY CARR; NON-WAIVER PROVISION
This Agreement may only be altered, modified or amended by mutual written
consent of the parties. The rights and remedies conferred upon Carr shall
be cumulative, and its forbearance to take any remedial action available
to it under this Agreement shall not waive its right at any time or from
time to time thereafter to take such action.
19. SEVERABILITY
If any term or provision hereof or the application thereof to any persons
or circumstances shall to any extent be contrary to any exchange,
government or self-regulatory regulation or contrary to any federal, state
or local law or otherwise be invalid or unenforceable, the remainder of
this Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is contrary, invalid or
unenforceable, shall not be affected thereby.
20. CAPTIONS
All captions used herein are for convenience only, are not a part of this
Agreement, and are not to be used in construing or interpreting any aspect
of this Agreement.
21. TERMINATION
This Agreement shall continue in force until written notice of termination
is given by Customer or Carr. Termination shall not relieve either party
of any liability or obligation incurred prior to such notice. Upon giving
or receiving notice of termination, Customer will promptly take all action
necessary to transfer all open positions in each Account to another
futures commission merchant.
22. ENTIRE AGREEMENT
This Agreement (as amended by the attached Customer Agreement dated the
date hereof into which this Agreement is incorporated by reference)
constitutes the entire agreement between Customer and Carr with respect to
the subject matter hereof and supersedes any prior agreements between the
parties with respect to such subject matter.
23. GOVERNING LAW; CONSENT TO JURISDICTION
(a) In case of a dispute between Customer and Carr arising out of or
relating to the making or performance of this Agreement or any
transaction pursuant to this Agreement (i) this Agreement and its
enforcement shall be governed by the laws of the State of Illinois
without regard to principles of conflicts of laws, and (ii) Customer
will bring any legal proceeding against Carr in, and Customer hereby
consents in any legal proceeding by Carr to the jurisdiction of, any
state or federal court located within Chicago, Illinois, in connection
with all legal proceedings arising directly, indirectly or otherwise
in connection with, out of, related to or from Customer's Account,
transactions contemplated by this Agreement or the breach thereof.
Customer hereby waives all objections Customer, at any time, may have
as to the propriety of the court in which any such legal proceedings
may be commenced. Customer also agrees that any service of process
mailed to Customer at any address specified to Carr shall be deemed a
proper service of process on the undersigned. Customer agrees that
venue of all proceedings shall be in Chicago, Illinois.
(b) Notwithstanding the provisions of Section 23(a)(ii), Customer may
elect at this time to have all disputes described in this Section
resolved by arbitration. To make such election, Customer must sign the
Arbitration Agreement set forth in Section 24. Notwithstanding such
election, any question relating to whether Customer or Carr has
commenced an arbitration proceeding in a timely manner, whether a
dispute is within the scope of the Arbitration Agreement or whether a
party (other than Customer or Carr) has consented to arbitration and
all proceedings to compel arbitration shall be determined by a court
as specified in Section 23(a)(ii).
24. ARBITRATION AGREEMENT (OPTIONAL)
Every dispute between Customer and Carr arising out of or relating to the
making or performance of this Agreement or any transaction pursuant to
this Agreement, shall be settled by arbitration in accordance with the
rules, then in effect, of the National Futures Association, the contract
market upon which the transacting giving rise to the claim was executed,
or the National Association of Securities Dealers as Customer may elect.
If Customer does not make such election by registered mail addressed to
Carr at 10 South Wacker Drive, Suite 1100, Chicago, Illinois 60606,
Attention: Legal/Compliance Department, within 45 days after demand by
Carr that the Customer make such election, then Carr may make such
election. Carr agrees to pay any incremental fees which may be assessed by
a qualified forum for making available a "mixed panel" of arbitrators,
unless the arbitrators determine that Customer has acted in bad faith in
initiating or conducting the proceedings. Judgment upon any aware rendered
by the arbitrators may be entered in any court having jurisdiction
thereof.
THREE FORUMS EXIST FOR THE RESOLUTION OF COMMODITY DISPUTES: CIVIL
COURT LITIGATION, REPARATIONS AT THE COMMODITY FUTURES TRADING
COMMISSION ("CFTC") AND ARBITRATION CONDUCTED BY A SELF-REGULATORY OR
OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION
MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE
ABILITY TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT
INCURRING SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH
CUSTOMER INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT
YOUR CONSENT OF THIS ARBITRATION AGREEMENT BE VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A
COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY CLAIMS
OR COUNTERCLAIMS WHICH YOU OR CARR MAY SUBMIT TO ARBITRATION UNDER THIS
AGREEMENT. YOU ARE NOT HOWEVER, WAIVING YOUR RIGHT TO ELECT INSTEAD TO
PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER SECTION 14 OF
THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE WHICH MAY BE
ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A DISPUTE ARISES, YOU
WILL BE NOTIFIED IF CARR INTENDS TO SUBMIT THE DISPUTE TO ARBITRATION. IF
YOU BELIEVE A VIOLATION OF THE COMMODITY EXCHANGE ACT IS INVOLVED AND IF
YOU PREFER TO REQUEST A SECTION 14 "REPARATIONS" PROCEEDINGS BEFORE THE
CFTC, YOU WILL HAVE 45 DAYS FROM THE DATE OF SUCH NOTICE IN WHICH TO MAKE
THAT ELECTION.
YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT WITH
CARR.
See 17 CFR 1890.1-180.5.
Acceptance of this arbitration agreement requires a separate signature on
page 15.
25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL)
Without its prior notice, Customer agrees that when Carr executes sell or
buy orders on Customer's behalf, Carr, its directors, officers, employees,
agents, affiliates, and any floor broker may take the other side of
customer's transaction through any Account of such person subject to its
being executed 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, Carr is authorized to transfer
from any segregated Account subject to the Commodity Exchange Act carried
by Carr for the Customer to any other Account carried by Carr for the
Customer such amount of excess funds as in Carr's judgment may be
necessary at any time to avoid a margin call or to reduce a debit balance
in said Account. It is understood that Carr will confirm in writing each
such transfer of funds made pursuant to this authorization within a
reasonable time after such transfer.
27. ELECTRONIC TRANSMISSION OF STATEMENTS (OPTIONAL)
Customer elects and consents to receive transmission of statements of
transactions and statements of account solely by electronic means,
including without limitation, by electronic mail or facsimile. Customer
shall not incur any costs or fees in connection with the receipt of such
statements by electronic transmission. Customer shall receive such
statements by electronic transmission until such time as it revokes its
consent in writing to Carr.
28. SUBORDINATION AGREEMENT
(Applies only to Accounts with funds held in foreign currencies)
Funds of customers trading on United States contract markets may be held
in accounts denominated in a foreign currency with depositories located
outside or inside the United States or its territories if the customer is
domiciled in a foreign country or if the funds are held in connection with
contracts priced and settled in a foreign currency. Such accounts are
subject to the risk that events could occur which hinder or prevent the
availability of these funds for distribution to customers. Such accounts
also may be subject to foreign currency exchange rate risks.
If authorized below, Customer authorizes the deposit of funds into such
depositories. For customer domiciled in the United States, this
authorization permits the holding of funds in regulated accounts only if
such funds are used to margin, guarantee, or secure positions in such
contracts or accrue as a result of such positions. In order to avoid the
possible dilution of other customer funds, a customer agrees by accepting
this subordination agreement that his claims based on such funds will be
subordinated as described below in the unlikely event both of the
following conditions are met: (1) Carr is placed in receivership or
bankruptcy, and (2) there are insufficient funds available for
distribution denominated in the foreign currency as to which the customer
has a claim to satisfy all claims against those funds.
By initialing the Subordination Agreement below, Customer agrees that if
both of the conditions listed above occur, its claim against Carr's assets
attributable to funds held overseas in a particular foreign currency may
be satisfied out of segregated customer funds held in accounts denominated
in dollars or other foreign currencies only after each customer whose
funds are held in dollars or in such other foreign currencies receives its
pro-rata portion of such funds. It is further agreed that in no event may
a customer whose funds are so held receive more than its pro-rata share of
the aggregate pool consisting of funds held in dollars, funds held in the
particular foreign currency, and non-segregated assets of Carr.
<PAGE>
OPTIONAL ELECTIONS/ACKNOWLEDGMENT
The following provisions, which are set forth in this Agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
SIGNATURE REQUIRED FOR EACH ELECTION
ARBITRATION AGREEMENT
(Agreement Paragraph 24) ---------------------------------------
(Date)
CONSENT TO TAKE THE OTHER SIDE OF
ORDERS (Agreement Paragraph 25) X /s/ Mark J. Hawley 12-1-97
---------------------------------------
(Date)
AUTHORIZATION TO TRANSFER
FUNDS (Agreement Paragraph 26) ---------------------------------------
(Date)
CONSENT TO RECEIVE STATEMENTS BY
ELECTRONIC TRANSMISSION
(Agreement Paragraph 27) ---------------------------------------
(Date)
ACKNOWLEDGMENT OF SUBORDINATION
AGREEMENT (Agreement Paragraph 28) X /s/ Mark J. Hawley 12-1-97
(Required for accounts holding non-U.S. ---------------------------------------
currency) (Date)
HEDGE ELECTION
[] Customer confirms that all transactions in the Account will represent bona
fide hedging transactions, as defined by the Commodity Futures Trading
Commission, unless Carr is notified otherwise not later than the time an
order is placed for the Account:
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
Carr's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A)[] Liquidate all open contracts without first seeking instructions either
from or on behalf of Customer.
B)[] Attempt to obtain instructions with respect to the disposition of all
open contracts.
(If neither box is checked, Customer shall be deemed to elect A).)
<PAGE>
ACKNOWLEDGMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS
The undersigned hereby acknowledges its separate receipt from Carr, and its
understanding of each of the following documents prior to opening of the
Account:
o Risk Disclosure Statement for Futures and Options
o LME Risk Warning Notice
o NYMEX ACCESSSM Risk Disclosure Statement
o Globex(R)Customer Information and Risk Disclosure Statement
o Project A(TM)Customer Information Statement
o Questions & Answers on Flexible Options Trading at the CBOT
o CME Average Pricing System Disclosure Statement
o Special Notice to Foreign Brokers and Foreign Traders
REQUIRED SIGNATURES
CUSTOMER
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify Carr in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
DEAN WITTER SPECTRUM SELECT 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]
CARR FUTURES INC.
Accepted and Agreed:
Carr Futures Inc.
By: /s/ Bruce A. Beatus By: /s/ Susan Schultz
--------------------------------- -------------------------------
Title:General Counsel Title: Assistant General Counsel
------------------------------- ----------------------------
Date: December 1, 1997 Date: December 1, 1997
------------------------------- -----------------------------
Exhibit 10.06
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 SPECTRUM SELECT L.P.
SECTION 1. DEFINITIONS
Unless otherwise required by the context, the following terms
shall have the following meanings in the Agreement:
"Agreement" has the meaning given to it in Section 2.2.
"Base Currency", as to a Party, means the Currency agreed to as
such in relation to it in Part VII of the Schedule.
"Business Day" means for purposes of: (i) clauses (i), (viii) and
(xii) of the definition of Event of Default, a day which is a
Local Banking Day for the Non-Defaulting Party; (ii) solely in
relation to delivery of a Currency, a day which is a Local Banking
Day in relation to that Currency; and (iii) any other provision of
the Agreement, a day which is a Local Banking Day for the
applicable Designated Offices of both Parties; provided, however,
that neither Saturday nor Sunday shall be considered a Business
Day for any purpose.
"Close-Out Amount" has the meaning given to it in Section 5.1.
"Close-Out Date" means a day on which, pursuant to the provisions
of Section 5.1, the Non-Defaulting Party closes out Currency
Obligations or such a close-out occurs automatically.
"Closing Gain", as to the Non-Defaulting Party, means the
difference described as such in relation to a particular Value
Date under the provisions of Section 5.1.
"Closing Loss", as to the Non-Defaulting Party, means the
difference described as such in relation to a particular Value
Date under the provisions of Section 5.1.
"Confirmation" means a writing (including telex, facsimile, or
other electronic means from which it is possible to produce a hard
copy) evidencing an FX Transaction, and specifying:
(i) the Parties thereto and their Designated Offices through
which they are respectively acting,
(ii) the amounts of the Currencies being bought or sold and by
which Party,
(iii) the Value Date, and
(iv) any other term generally included in such a writing in
accordance with the practice of the relevant foreign
exchange market.
"Credit Support" has the meaning given to it in Section 5.2.
"Credit Support Document", as to a Party (the "first Party"),
means a guaranty, hypothecation agreement, margin or
security agreement or document, or any other document
containing an obligation of a third party ("Credit Support
Provider") or of the first Party in favor of the other Party
supporting any obligations of the first Party under the
Agreement.
"Credit Support Provider" has the meaning given to it in the
definition of Credit Support Document.
"Currency" means money denominated in the lawful currency of
any country or the Ecu.
"Currency Obligation" means any obligation of a Party to deliver a
Currency pursuant to an FX Transaction or the application of
Section 3.3(a) or (b).
"Custodian" has the meaning given to it in the definition of
Insolvency Proceeding.
"Defaulting Party" has the meaning given to it in the
definition of Event of Default.
"Designated Office(s)", as to a Party, means the office or offices
specified in Part II of the Schedule.
"Effective Date" means the date of this Master Agreement.
"Event of Default" means the occurrence of any of the following
with respect to a Party (the "Defaulting Party", the other Party
being the "Non-Defaulting Party"):
(i) the Defaulting Party shall (A) default in any payment when
due under the Agreement to the Non-Defaulting Party with
respect to any Currency Obligation and such failure shall
continue for two (2) Business Days after the Non-Defaulting
Party has given the Defaulting Party written notice of
non-payment, or (B) fail to perform or comply with any
other obligation assumed by it under the Agreement and such
failure is continuing thirty (30) days after the
Non-Defaulting Party has given the Defaulting Party written
notice thereof;
(ii) the Defaulting Party shall commence a voluntary Insolvency
Proceeding or shall take any corporate action to authorize
any such Insolvency Proceeding;
(iii) a governmental authority or self-regulatory organization
having jurisdiction over either the Defaulting Party or its
assets in the country of its organization or principal
office (A) shall commence an Insolvency Proceeding with
respect to the Defaulting Party or its assets or (B) shall
take any action under any bankruptcy, insolvency or other
similar law or any banking, insurance or similar law or
regulation governing the operation of the Defaulting Party
which may prevent the Defaulting Party from performing its
obligations under the Agreement as and when due;
(iv) an involuntary Insolvency Proceeding shall be commenced
with respect to the Defaulting Party or its assets by a
person other than a governmental authority or
self-regulatory organization having jurisdiction over
either the Defaulting Party or its assets in the country of
its organization or principal office and such Insolvency
Proceeding (A) results in the appointment of a Custodian or
a judgment of insolvency or bankruptcy or the entry of an
order for winding-up, liquidation, reorganization or other
similar relief, or (B) is not dismissed within five (5)
days of its institution or presentation;
(v) the Defaulting Party is bankrupt or insolvent, as defined
under any bankruptcy or insolvency law applicable to it;
(vi) the Defaulting Party fails, or shall otherwise be unable,
to pay its debts as they become due;
(vii) the Defaulting Party or any Custodian acting on behalf of
the Defaulting Party shall disaffirm, disclaim or repudiate
any Currency Obligation;
(viii)any representation or warranty made or given or deemed
made or given by the Defaulting Party pursuant to the
Agreement or any Credit Support Document shall prove to
have been false or misleading in any material respect as at
the time it was made or given or deemed made or given and
one (1) Business Day has elapsed after the Non-Defaulting
Party has given the Defaulting Party written notice
thereof;
(ix) the Defaulting Party consolidates or amalgamates with or
merges into or transfers all or substantially all its
assets to another entity and (A) the creditworthiness of
the resulting, surviving or transferee entity is materially
weaker than that of the Defaulting Party prior to such
action, or (B) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving
or transferee entity fails to assume all the obligations of
the Defaulting Party under the Agreement by operation of
law or pursuant to an agreement satisfactory to the
Non-Defaulting Party;
(x) by reason of any default, or event of default or other
similar condition or event, any Specified Indebtedness
(being Specified Indebtedness of an amount which, when
expressed in the Currency of the Threshold Amount, is in
aggregate equal to or in excess of the Threshold Amount) of
the Defaulting Party or any Credit Support Provider in
relation to it: (A) is not paid on the due date therefor
and remains unpaid after any applicable grace period has
elapsed, or (B) becomes, or becomes capable at any time of
being declared, due and payable under agreements or
instruments evidencing such Specified Indebtedness before
it would otherwise have been due and payable;
(xi) the Defaulting Party is in breach of or default under any
Specified Transaction and any applicable grace period has
elapsed, and there occurs any liquidation or early
termination of, or acceleration of obligations under, that
Specified Transaction or the Defaulting Party (or any
Custodian on its behalf) disaffirms, disclaims or
repudiates the whole or any part of a Specified
Transaction;
(xii) (A) any Credit Support Provider of the Defaulting Party or
the Defaulting Party itself fails to comply with or perform
any agreement or obligation to be complied with or
performed by it in accordance with the applicable Credit
Support Document and such failure is continuing after any
applicable grace period has elapsed; (B) any Credit Support
Document relating to the Defaulting Party expires or ceases
to be in full force and effect prior to the satisfaction of
all obligations of the Defaulting Party under the
Agreement, unless otherwise agreed in writing by the
Non-Defaulting Party; (C) the Defaulting Party or any
Credit Support Provider of the Defaulting Party (or, in
either case, any Custodian acting on its behalf)
disaffirms, disclaims or repudiates, in whole or in part,
or challenges the validity of, any Credit Support Document;
(D) any representation or warranty made or given or deemed
made or given by any Credit Support Provider of the
Defaulting Party pursuant to any Credit Support Document
shall prove to have been false or misleading in any
material respect as at the time it was made or given or
deemed made or given and one (1) Business Day has elapsed
after the Non-Defaulting Party has given the Defaulting
Party written notice thereof; or (E) any event set out in
(ii) to (vii) or (ix) to (xi) above occurs in respect of
any Credit Support Provider of the Defaulting Party; or
(xiii)any other condition or event specified in Part IX of the
Schedule or in Section 8.14 if made applicable to the
Agreement in Part XI of the Schedule.
"FX Transaction" means any transaction between the Parties for the
purchase by one Party of an agreed amount in one Currency against
the sale by it to the other of an agreed amount in another
Currency, both such amounts either being deliverable on the same
Value Date or, if the Parties have so agreed in Part VI of the
Schedule, being cash-settled in a single Currency, which is or
shall become subject to the Agreement and in respect of which
transaction the Parties have agreed (whether orally,
electronically or in writing): the Currencies involved, the
amounts of such Currencies to be purchased and sold, which Party
will purchase which Currency and the Value Date.
"Insolvency Proceeding" means a case or proceeding seeking a
judgment of or arrangement for insolvency, bankruptcy,
composition, rehabilitation, reorganization, administration,
winding-up, liquidation or other similar relief with respect to
the Defaulting Party or its debts or assets, or seeking the
appointment of a trustee, receiver, liquidator, conservator,
administrator, custodian or other similar official (each, a
"Custodian") of the Defaulting Party or any substantial part of
its assets, under any bankruptcy, insolvency or other similar law
or any banking, insurance or similar law governing the operation
of the Defaulting Party.
"LIBOR", with respect to any Currency and date, means the average
rate at which deposits in the Currency for the relevant amount and
time period are offered by major banks in the London interbank
market as of 11:00 a.m. (London time) on such date, or, if major
banks do not offer deposits in such Currency in the London
interbank market on such date, the average rate at which deposits
in the Currency for the relevant amount and time period are
offered by major banks in the relevant foreign exchange market at
such time on such date as may be determined by the Party making
the determination.
"Local Banking Day" means (i) for any Currency, a day on which
commercial banks effect deliveries of that Currency in accordance
with the market practice of the relevant foreign exchange market,
and (ii) for any Party, a day in the location of the applicable
Designated Office of such Party on which commercial banks in that
location are not authorized or required by law to close.
"Master Agreement" means the terms and conditions set forth in
this Master Agreement, including the Schedule.
"Matched Pair Novation Netting Office(s)", in respect of a Party,
means the Designated Office(s) specified in Part V of the
Schedule.
"Non-Defaulting Party" has the meaning given to it in the
definition of Event of Default.
"Novation Netting Office(s)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"Parties" means the parties to the Agreement, including their
successors and permitted assigns (but without prejudice to the
application of clause (ix) of the definition Event of Default);
and the term "Party" shall mean whichever of the Parties is
appropriate in the context in which such expression may be used.
"Proceedings" means any suit, action or other proceedings relating
to the Agreement or any FX Transaction.
"Schedule" means the Schedule attached to and part of this Master
Agreement, as it may be amended from time to time by agreement of
the Parties.
"Settlement Netting Office(s)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money, other than in respect of
deposits received.
"Specified Transaction" means any transaction (including an
agreement with respect thereto) between one Party to the Agreement
(or any Credit Support Provider of such Party) and the other Party
to the Agreement (or any Credit Support Provider of such Party)
which is a rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
linked swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of
these transactions) or any combination of any of the foregoing
transactions.
"Spot Date" means the spot delivery day for the relevant pair of
Currencies as generally used by the relevant foreign exchange
market.
"Threshold Amount" means the amount specified as such for each
Party in Part VIII of the Schedule.
"Value Date" means, with respect to any FX Transaction, the
Business Day (or where market practice in the relevant foreign
exchange market in relation to the two Currencies involved
provides for delivery of one Currency on one date which is a Local
Banking Day in relation to that Currency but not to the other
Currency and for delivery of the other Currency on the next Local
Banking Day in relation to that other Currency ("Split
Settlement") the two (2) Local Banking Days in accordance with
that market practice) agreed by the Parties for delivery of the
Currencies to be purchased and sold pursuant to such FX
Transaction, and, with respect to any Currency Obligation, the
Business Day (or, in the case of Split Settlement, Local Banking
Day) upon which the obligation to deliver Currency pursuant to
such Currency Obligation is to be performed.
SECTION 2. FX TRANSACTIONS
2.1 Scope of the Agreement. The Parties (through their respective
Designated Offices) may enter into FX Transactions, for such
quantities of such Currencies, as may be agreed subject to the
terms of the Agreement; provided that neither Party shall be
required to enter into any FX Transaction with the other Party.
Unless otherwise agreed in writing by the Parties, each FX
Transaction entered into between Designated Offices of the Parties
on or after the Effective Date shall be governed by the Agreement.
Each FX Transaction between any two Designated Offices of the
Parties outstanding on the Effective Date which is identified in
Part I of the Schedule shall also be governed by the Agreement.
2.2 Single Agreement. This Master Agreement, the terms agreed
between the Parties with respect to each FX Transaction (and, to
the extent recorded in a Confirmation, each such Confirmation),
and all amendments to any of such items shall together form the
agreement between the Parties (the "Agreement") and shall together
constitute a single agreement between the Parties. The Parties
acknowledge that all FX Transactions are entered into in reliance
upon such fact, it being understood that the Parties would not
otherwise enter into any FX Transaction.
2.3 Confirmations. FX Transactions shall be promptly confirmed by
the Parties by Confirmations exchanged by mail, telex, facsimile
or other electronic means from which it is possible to produce a
hard copy. The failure by a Party to issue a Confirmation shall
not prejudice or invalidate the terms of any FX Transaction.
2.4 Inconsistencies. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of the
Agreement, the Schedule will prevail. In the event of any
inconsistency between the terms of a Confirmation and the other
provisions of the Agreement, the other provisions of the Agreement
shall prevail, and the Confirmation shall not modify the other
terms of the Agreement.
SECTION 3. SETTLEMENT AND NETTING
3.1 Settlement. Subject to Sections 3.2 and 3.3, each Party shall
deliver to the other Party the amount of the Currency to be
delivered by it under each Currency Obligation on the Value Date
for such Currency Obligation.
3.2 Settlement Netting. If, on any date, more than one delivery of
a particular Currency under Currency Obligations is to be made
between a pair of Settlement Netting Offices, then each Party
shall aggregate the amounts of such Currency deliverable by it and
only the difference between these aggregate amounts shall be
delivered by the Party owing the larger aggregate amount to the
other Party, and, if the aggregate amounts are equal, no delivery
of the Currency shall be made.
3.3 Novation Netting.
(a) By Currency. If the Parties enter into an FX Transaction
through a pair of Novation Netting Offices giving rise to a
Currency Obligation for the same Value Date and in the same
Currency as a then existing Currency Obligation between the
same pair of Novation Netting Offices, then immediately upon
entering into such FX Transaction, each such Currency
Obligation shall automatically and without further action be
individually canceled and simultaneously replaced by a new
Currency Obligation for such Value Date determined as follows:
the amounts of such Currency that would otherwise have been
deliverable by each Party on such Value Date shall be
aggregated and the Party with the larger aggregate amount
shall have a new Currency Obligation to deliver to the other
Party the amount of such Currency by which its aggregate
amount exceeds the other Party's aggregate amount, provided
that if the aggregate amounts are equal, no new Currency
Obligation shall arise. This Section 3.3 shall not affect any
other Currency Obligation of a Party to deliver any different
Currency on the same Value Date.
(b) By Matched Pair. If the Parties enter into an FX Transaction
between a pair of Matched Pair Novation Netting Offices then
the provisions of Section 3.3(a) shall apply only in respect
of Currency Obligations arising by virtue of FX Transactions
entered into between such pair of Matched Pair Novation
Netting Offices and involving the same pair of Currencies and
the same Value Date.
3.4 General.
(a) Inapplicability of Sections 3.2 and 3.3. The provisions of
Sections 3.2 and 3.3 shall not apply if a Close-Out Date has
occurred or a voluntary or involuntary Insolvency Proceeding
or action of the kind described in clause (ii), (iii) or (iv)
of the definition of Event of Default has occurred without
being dismissed in relation to either Party.
(b) Failure to Record. The provisions of Section 3.3 shall apply
notwithstanding that either Party may fail to record the new
Currency Obligations in its books.
(c) Cutoff Date and Time. The provisions of Section 3.3 are
subject to any cut-off date and cut-off time agreed between
the applicable Novation Netting Offices and Matched Pair
Novation Netting Offices of the Parties.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Representations and Warranties. Each Party represents and
warrants to the other Party as of the Effective Date and as of the
date of each FX Transaction that: (i) it has authority to enter
into the Agreement (including such FX Transaction); (ii) the
persons entering into the Agreement (including such FX
Transaction) on its behalf have been duly authorized to do so;
(iii) the Agreement (including such FX Transaction) is binding
upon it and enforceable against it in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally
and applicable principles of equity) and does not and will not
violate the terms of any agreements to which such Party is bound;
(iv) no Event of Default, or event which, with notice or lapse of
time or both, would constitute and Event of Default, has occurred
and is continuing with respect to it; and (v) it acts as principal
in entering into each FX Transaction; and (vi) if the Parties have
so specified in Part XV of the Schedule, it makes the
representations and warranties set forth in such Part XV.
4.2 Covenants. Each Party covenants to the other Party that: (i)
it will at all times obtain and comply with the terms of and do
all that is necessary to maintain in full force and effect all
authorizations, approvals, licenses and consents required to
enable it lawfully to perform its obligations under the Agreement;
(ii) it will promptly notify the other Party of the occurrence of
any Event of Default with respect to itself or any Credit Support
Provider in relation to it; and (iii) if the Parties have set
forth additional covenants in Part XVI of the Schedule, it makes
the covenants set forth in such Part XVI.
SECTION 5 CLOSE-OUT AND LIQUIDATION
5.1 Manner of Close-Out and Liquidation. (a) Close-Out. If an
Event of Default has occurred and is continuing, then the
Non-Defaulting Party shall have the right to close-out all, but
not less than all, outstanding Currency Obligations (including any
Currency Obligation which has not been performed and in respect of
which the Value Date is on or precedes the Close-Out Date) except
to the extent that in the good faith opinion of the Non-Defaulting
Party certain of such Currency Obligations may not be closed-out
under applicable law. Such close-out shall be effective upon
receipt by the Defaulting Party of notice that the Non-Defaulting
Party is terminating such Currency Obligations. Notwithstanding
the foregoing, unless otherwise agreed by the Parties in Part X of
the Schedule, in the case of an Event of Default in clause (ii),
(iii) or (iv) of the definition thereof with respect to a Party
and, if agreed by the Parties in Part IX of the Schedule, in the
case of any other Event of Default specified and so agreed in Part
IX with respect to a Party, close-out shall be automatic as to all
outstanding Currency Obligations, as of the time immediately
preceding the institution of the relevant Insolvency Proceeding or
action. The Non-Defaulting Party shall have the right to liquidate
such closed-out Currency Obligations as provided below.
(b) Liquidation. Liquidation of Currency Obligations terminated by
close-out shall be effected as follows:
(i) Calculating Closing Gain or Loss. The Non-Defaulting Party
shall calculate in good faith, with respect to each such
terminated Currency Obligation, except to the extent that in
the good faith opinion of the Non-Defaulting Party certain
of such Currency Obligations may not be liquidated as
provided herein under applicable law, as of the Close-Out
Date or as soon thereafter as reasonably practicable, the
Closing Gain, or, as appropriate, the Closing Loss, as
follows:
(A) for each Currency Obligation calculate a "Close-Out
Amount" as follows:
(1) in the case of a Currency Obligation whose Value
Date is the same as or is later than the Close-Out
Date, the amount of such Currency Obligation; or
(2) in the case of a Currency Obligation whose Value
Date precedes the Close-Out Date, the amount of
such Currency Obligation increased, to the extent
permitted by applicable law, by adding interest
thereto from and including the Value Date to but
excluding the Close-Out Date at overnight LIBOR;
and
(3) for each such amount in a Currency other than the
Non-Defaulting Party's Base Currency, convert such
amount into the Non-Defaulting Party's Base
Currency at the rate of exchange at which, at the
time of the calculation, the Non-Defaulting Party
can buy such Base Currency with or against the
Currency of the relevant Currency Obligation for
delivery (x) if the Value Date of such Currency
Obligation is on or after the Spot Date as of such
time of calculation for the Base Currency, on the
Value Date of that Currency Obligation or (y) if
such Value Date precedes such Spot Date, for
delivery on such Spot Date (or, in either case, if
such rate of exchange is not available, conversion
shall be accomplished by the Non-Defaulting Party
using any commercially reasonable method); and
(B) determine in relation to each Value Date: (1) the sum of
all Close-Out Amounts relating to Currency Obligations
under which the Non-Defaulting Party would otherwise
have been entitled to receive the relevant amount on
that Value Date; and (2) the sum of all Close-Out
Amounts relating to Currency Obligations under which the
Non-Defaulting Party would otherwise have been obliged
to deliver the relevant amount to the Defaulting Party
on that Value Date; and
(C) if the sum determined under (B)(1) is greater than the
sum determined under (B)(2), the difference shall be the
Closing Gain for such Value Date; if the sum determined
under (B)(1) is less than the sum determined under
(B)(2), the difference shall be the Closing Loss for
such Value Date.
(ii) Determining Present Value. To the extent permitted by
applicable law, the Non-Defaulting Party shall adjust the
Closing Gain or Closing Loss for each Value Date falling
after the Close-Out Date to present value by discounting the
Closing Gain or Closing Loss from and including the Value
Date to but excluding the Close-Out Date, at LIBOR with
respect to the Non-Defaulting Party's Base Currency as at
the Close-Out Date or at such other rate as may be
prescribed by applicable law.
(iii) Netting. The Non-Defaulting Party shall aggregate the
following amounts so that all such amounts are netted into a
single liquidated amount payable to or by the Non-Defaulting
Party: (x) the sum of the Closing Gains for all Value Dates
(discounted to present value, where appropriate, in
accordance with the provisions of Section 5.1(b)(ii)) (which
for the purposes of this aggregation shall be a positive
figure); and (y) the sum of the Closing Losses for all Value
Dates (discounted to present value, where appropriate, in
accordance with the provisions of Section 5.1(b)(ii)) (which
for the purposes of the aggregation shall be a negative
figure).
(iv) Settlement Payment. If the resulting net amount is positive,
it shall be payable by the Defaulting Party to the
Non-Defaulting Party, and if it is negative, then the
absolute value of such amount shall be payable by the
Non-Defaulting Party to the Defaulting Party.
5.2 Set-Off Against Credit Support. Where close-out and
liquidation occurs in accordance with Section 5.1, the
Non-Defaulting Party shall also be entitled (i) to set off the net
payment calculated in accordance with Section 5.1(b)(iv) which the
Non-Defaulting Party owes to the Defaulting Party, if any, against
any credit support or other collateral ("Credit Support") held by
the Defaulting Party pursuant to a Credit Support Document or
otherwise (including the liquidated value of any non-cash Credit
Support) in respect of the Non-Defaulting Party's obligations
under the Agreement or (ii) to set off the net payment calculated
in accordance with Section 5.1(b)(iv) which the Defaulting Party
owes to the Non-Defaulting Party, if any, against any Credit
Support held by the Non-Defaulting Party (including the liquidated
value of any non-cash Credit Support) in respect of the Defaulting
Party's obligations under the Agreement; provided that, for
purposes of either such set-off, any Credit Support denominated in
a Currency other than the Non-Defaulting Party's Base Currency
shall be converted into such Base Currency at the spot price
determined by the Non-Defaulting Party at which, at the time of
calculation, the Non-Defaulting Party could enter into a contract
in the foreign exchange market to buy the Non-Defaulting Party's
Base Currency in exchange for such Currency.
5.3 Other Foreign Exchange Transactions. Where close-out and
liquidation occurs in accordance with Section 5.1, the
Non-Defaulting Party shall also be entitled to close-out and
liquidate, to the extent permitted by applicable law, any other
foreign exchange transaction entered into between the Parties
which is then outstanding in accordance with provisions of Section
5.1, with each obligation of a Party to deliver a Currency under
such a foreign exchange transaction being treated as if it were a
Currency Obligation under the Agreement.
5.4 Payment and Late Interest. The net amount payable by one Party
to the other Party pursuant to the provisions of Sections 5.1 and
5.3 above shall be paid by the close of business on the Business
Day following the receipt by the Defaulting Party of notice of the
Non-Defaulting Party's settlement calculation, with interest at
overnight LIBOR from and including the Close-Out Date to but
excluding such Business Day (and converted as required by
applicable law into any other Currency, any costs of conversion to
be borne by, and deducted from any payment to, the Defaulting
Party). To the extent permitted by applicable law, any amounts
owed but not paid when due under this Section 5 shall bear
interest at overnight LIBOR (or, if conversion is required by
applicable law into some other Currency, either overnight LIBOR
with respect to such other Currency or such other rate as may be
prescribed by such applicable law) for each day for which such
amount remains unpaid. Any addition of interest or discounting
required under this Section 5 shall be calculated on the basis of
a year of such number of days as is customary for transactions
involving the relevant Currency in the relevant foreign exchange
market.
5.5 Suspension of Obligations. Without prejudice to the foregoing,
so long as a Party shall be in default in payment or performance
to the other Party under the Agreement and the other Party has not
exercised its rights under this Section 5, or, if "Adequate
Assurances" is specified as applying to the Agreement in Part XI
of the Schedule, during the pendency of a reasonable request to a
Party for adequate assurances of its ability to perform its
obligations under the Agreement, the other Party may, at its
election and without penalty, suspend its obligation to perform
under the Agreement.
5.6 Expenses. The Defaulting Party shall reimburse the
Non-Defaulting Party in respect of all out-of-pocket expenses
incurred by the Non-Defaulting Party (including fees and
disbursements of counsel, including attorneys who may be employees
of the Non-Defaulting Party) in connection with any reasonable
collection or other enforcement proceedings related to the
payments required under the Agreement.
5.7 Reasonable Pre-Estimate. The Parties agree that the amounts
recoverable under this Section 5 are a reasonable pre-estimate of
loss and not a penalty. Such amounts are payable for the loss of
bargain and the loss of protection against future risks and,
except as otherwise provided in the Agreement, neither Party will
be entitled to recover any additional damages as a consequence of
such losses.
5.8 No Limitation of Other Rights; Set-Off. The Non-Defaulting
Party's rights under this Section 5 shall be in addition to, and
not in limitation or exclusion of, any other rights which the
Non-Defaulting Party may have (whether by agreement, operation of
law or otherwise), and, to the extent not prohibited by law, the
Non-Defaulting Party shall have a general right of set-off with
respect to all amounts owed by each Party to the other Party,
whether due and payable or not due and payable (provided that any
amount not due and payable at the time of such set-off shall, if
appropriate, be discounted to present value in a commercially
reasonable manner by the Non-Defaulting Party). The Non-Defaulting
Party's rights under this Section 5.8 are subject to Section 5.7.
SECTION 6. FORCE MAJEURE, ACT OF STATE, ILLEGALITY OR IMPOSSIBILITY
6.1 Force Majeure, Act of State, Illegality or Impossibility. If
either Party is prevented from or hindered or delayed by reason of
force majeure or act of state in the delivery or receipt of any
Currency in respect of a Currency Obligation or if it becomes or,
in the good faith judgment of one of the Parties, may become
unlawful or impossible for either Party to make or receive any
payment in respect of a Currency Obligation, then the Party for
whom such performance has been prevented, hindered or delayed or
has become illegal or impossible shall promptly give notice
thereof to the other Party and either Party may, by notice to the
other Party, require the close-out and liquidation of each
affected Currency Obligation in accordance with the provisions of
Sections 5.1 and, for such purposes, the Party unaffected by such
force majeure, act of state, illegality or impossibility (or, if
both Parties are so affected, whichever Party gave the relevant
notice) shall perform the calculation required under Section 5.1
as if it were the Non-Defaulting Party. Nothing in this Section
6.1 shall be taken as indicating that the Party treated as the
Defaulting Party for the purpose of calculations required by
Section 5.1 has committed any breach or default.
6.2 Transfer to Avoid Force Majeure, Act of State, Illegality or
Impossibility. If Section 6.1 becomes applicable, unless
prohibited by law, the Party which has been prevented, hindered or
delayed from performing shall, as a condition to its right to
designate a close-out and liquidation of any affected Currency
Obligation, use all reasonable efforts (which will not require
such Party to incur a loss, excluding immaterial, incidental
expenses) to transfer as soon as practicable, and in any event
before twenty (20) days after it gives notice under Section 6.1,
all its rights and obligations under the Agreement in respect of
the affected Currency Obligations to another of its Designated
Offices so that such force majeure, act of state, illegality or
impossibility ceases to exist. Any such transfer will be subject
to the prior written consent of the other Party, which consent
will not be withheld if such other Party's policies in effect at
such time would permit it to enter into transactions with the
transferee Designated Office on the terms proposed, unless such
transfer would cause the other Party to incur a material tax or
other cost.
SECTION 7. PARTIES TO RELY ON THEIR OWN EXPERTISE
Each Party will be deemed to represent to the other Party on the
date on which it enters into an FX Transaction that (absent a
written agreement between the Parties that expressly imposes
affirmative obligations to the contrary for that FX Transaction):
(i)(A) it is acting for its own account, and it has made its own
independent decisions to enter into that FX Transaction and as to
whether that FX Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such advisors as it has
deemed necessary; (B) it is not relying on any communication
(written or oral) of the other Party as investment advice or as a
recommendation to enter into that FX Transaction, it being
understood that information and explanations related to the terms
and conditions of an FX Transaction shall not be considered
investment advice or a recommendation to enter into that FX
Transaction; and (C) it has not received from the other Party any
assurance or guarantee as to the expected results of that FX
Transaction; (ii) it is capable of evaluating and understanding
(on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of
that FX Transaction; and (iii) the other Party is not acting as a
fiduciary or an advisor for it in respect of that FX Transaction.
SECTION 8. MISCELLANEOUS
8.1 Currency Indemnity. The receipt or recovery by either Party
(the "first Party") of any amount in respect of an obligation of
the other Party (the "second Party") in a Currency other than that
in which such amount was due, whether pursuant to a judgment of
any court or pursuant to Section 5 or 6, shall discharge such
obligation only to the extent that, on the first day on which the
first Party is open for business immediately following such
receipt or recovery, the first Party shall be able, in accordance
with normal banking practice, to purchase the Currency in which
such amount was due with the Currency received or recovered. If
the amount so purchasable shall be less than the original amount
of the Currency in which such amount was due, the second Party
shall, as a separate obligation and notwithstanding any judgment
of any court, indemnify the first Party against any loss sustained
by it. The second Party shall in any event indemnify the first
Party against any costs incurred by it in making any such purchase
of Currency.
8.2 Assignment. Neither Party may assign, transfer or charge or
purport to assign, transfer or charge its rights or its
obligations under the Agreement to a third party without the prior
written consent of the other Party and any purported assignment,
transfer or charge in violation of this Section 8.2 shall be void.
8.3 Telephonic Recording. The Parties agree that each Party and
its agents may electronically record all telephonic conversations
between them and that any such recordings may be submitted in
evidence to any court or in any Proceedings for the purpose of
establishing any matters pertinent to the Agreement.
8.4 Notices. Unless otherwise agreed, all notices, instructions
and other communications to be given to a Party under the
Agreement shall be given to the address, telex (if confirmed by
the appropriate answerback), facsimile (confirmed if requested) or
telephone number and to the individual or department specified by
such Party in Part III of the Schedule. Unless otherwise
specified, any notice, instruction or other communication given in
accordance with this Section 8.4 shall be effective upon receipt.
8.5 Termination. Each of the Parties may terminate the Agreement
at any time by seven (7) days' prior written notice to the other
Party delivered as prescribed in Section 8.4, and termination
shall be effective at the end of such seventh day; provided,
however, that any such termination shall not affect any
outstanding Currency Obligations, and the provisions of the
Agreement shall continue to apply until all the obligations of
each Party to the other under the Agreement have been fully
performed.
8.6 Severability. In the event any one or more of the provisions
contained in the Agreement should be held invalid, illegal or
unenforceable in any respect under the law of any jurisdiction,
the validity, legality and enforceability of the remaining
provisions contained in the Agreement under the law of such
jurisdiction, and the validity, legality and enforceability of
such and any other provisions under the law of any other
jurisdiction shall not in any way be affected or impaired thereby.
The Parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible
to that of the invalid, illegal or unenforceable provisions.
8.7 No Waiver. No indulgence or concession granted by a Party and
no omission or delay on the part of a Party in exercising any
right, power or privilege under the Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
8.8 Master Agreement. Where one of the Parties to the Agreement is
domiciled in the United States, the Parties intend that the
Agreement shall be a master agreement, as referred to in 11 U.S.C.
Section 101(53B)(C) and 12 U.S.C. Section 1821(e)(8)(D)(vii).
8.9 Time of Essence. Time shall be of the essence in the
Agreement.
8.10 Headings. Headings in the Agreement are for ease of
reference only.
8.11 Payments Generally. All payments to be made under the
Agreement shall be made in same day (or immediately available) and
freely transferable funds and, unless otherwise specified, shall
be delivered to such office of such bank, and in favor of such
account as shall be specified by the Party entitled to receive
such payment in Part IV of the Schedule or in a notice given in
accordance with Section 8.4.
8.12 Amendments. No amendment, modification or waiver of the
Agreement will be effective unless in writing executed by each of
the Parties.
8.13 Credit Support. A Credit Support Document between the Parties
may apply to obligations governed by the Agreement. If the Parties
have executed a Credit Support Document, such Credit Support
Document shall be subject to the terms of the Agreement and is
hereby incorporated by reference in the Agreement. In the event of
any conflict between a Credit Support Document and the Agreement,
the Agreement shall prevail, except for any provision in such
Credit Support Document in respect of governing law.
8.14 Adequate Assurances. If the Parties have so agreed in Part XI
of the Schedule, the failure by a Party to give adequate
assurances of its ability to perform any of its obligations under
the Agreement within two (2) Business Days of a written request to
do so when the other Party has reasonable grounds for insecurity
shall be an Event of Default under the Agreement.
8.15 Correction of Confirmations. Unless either Party objects to
the terms contained in any Confirmation sent by the other Party or
sends a corrected Confirmation within three (3) Business Days of
receipt of such Confirmation, or such shorter time as may be
appropriate given the Value Date of the FX Transaction, the terms
of such Confirmation shall be deemed correct and accepted absent
manifest error. If the Party receiving a Confirmation sends a
corrected Confirmation within such three (3) Business Days, or
shorter period, as appropriate, then the Party receiving such
corrected Confirmation shall have three (3) Business Days, or
shorter period, as appropriate, after receipt thereof to object to
the terms contained in such corrected Confirmation.
SECTION 9. LAW AND JURISDICTION
9.1 Governing Law. The Agreement shall be governed by, and
construed in accordance with the laws of the jurisdiction set
forth in Part XII of the Schedule without giving effect to
conflict of laws principles.
9.2 Consent to Jurisdiction. (a) With respect to any Proceedings,
each Party irrevocably (i) submits to the non-exclusive
jurisdiction of the courts of the jurisdiction set forth in Part
XIII of the Schedule and (ii) waives any objection which it may
have at any time to the laying of venue of any Proceedings brought
in any such court, waives any claim that such Proceedings have
been brought in an inconvenient forum and further waives the right
to object, with respect to such Proceedings, that such court does
not have jurisdiction over such Party. Nothing in the Agreement
precludes either Party from bringing Proceedings in any other
jurisdiction nor will the bringing of Proceedings in any one or
more jurisdictions preclude the bringing of Proceedings in any
other jurisdiction.
(b) Each Party irrevocably appoints the agent for service of
process (if any) specified with respect to it in Part XIV of the
Schedule. If for any reason any Party's process agent is unable to
act as such, such Party will promptly notify the other Party and
within thirty (30) days will appoint a substitute process agent
acceptable to the other Party.
9.3 Waiver of Jury Trial. Each Party irrevocably waives any and
all right to trial by jury in any Proceedings.
9.4 Waiver of Immunities. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself
and its revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other similar
grounds from (i) suit, (ii) jurisdiction of any courts, (iii)
relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether
before or after judgment) and (v) execution or enforcement of any
judgment to which it or its revenues or assets might otherwise be
entitled in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law,
that it will not claim any such immunity in any Proceedings.
<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 SPECTRUM SELECT L.P.
By Demeter Management Corporation
General Partner
By: /s/ Mark J. Hawley
--------------------------
Name: Mark J.Hawley
Title: President
<PAGE>
SCHEDULE
Schedule to the International Foreign Exchange Master Agreement
dated as of August 1, 1997
between Dean Witter Spectrum Select 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 Spectrum FFC: Dean Witter Spectrum
Select L.P., Select L.P.,
Account # (As Party B is Account # (As Party A is notified
notified from from time to time)
time to time)
Part V. Netting
A. Settlement Netting Offices
Each of the following shall be a Settlement Netting Office:
Party A: Same as in Part II.
Party B: Same as in Part II.
B. Novation Netting Offices
Each of the following shall be a Novation Netting Office:
Party A: Same as in Part V-A.
Party B: Same as in Part V-A.
C. Matched Pair Novation Netting Offices
Each of the following shall be a Matched Pair Novation Netting
Office:
Party A: Not Applicable.
Party B: Not Applicable.
Part VI. Cash Settlement of FX Transactions
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include
foreign exchange transactions for the purchase and sale of one
Currency against another but which shall be settled by the
delivery of only one Currency based on the difference between
exchange rates as agreed by the Parties as evidenced in a
Confirmation. Section 3.1 is modified so that only one Currency
shall be delivered for any such FX Transaction in accordance with
the formula agreed by the Parties. Section 5.1(b)(i)(A) is
modified so that the Close-Out Amount for any such FX Transaction
for which the cash settlement amount has been fixed on or before
the Close-Out Date pursuant to the terms of such FX Transaction
shall be equal to the Currency Obligation arising therefrom
(increased by adding interest in the manner provided in clause
(A)(2) if the Value Date precedes the Close-Out Date) and for any
such FX Transaction for which the cash settlement amount has not
yet been fixed on the Close-Out Date pursuant to the terms of such
FX Transaction, the Close-Out Amount shall be as determined by the
Non-Defaulting Party in good faith and in a commercially
reasonable manner.
Part VII. Base Currency
Party A's Base Currency is the United States dollar.
Party B's Base Currency is the United States dollar.
Part VIII. Threshold Amount
For purposes of clause (x) of the definition of Event of Default:
Party A's Threshold Amount is 3% of Party A's equity capital as
evidenced by Party A's latest financial statements.
Party B's Threshold Amount is 3% of Party B's equity capital as
evidenced by Party B's latest financial statements.
Part IX. Additional Events of Default
The following provisions which are checked shall constitute Events
of Default:
None.
[ ](a) occurrence of garnishment or provisional garnishment
against a claim against the Defaulting Party acquired by
the Non-Defaulting Party. The automatic termination
provisions of Section 5.1 [shall] [shall not] apply to
either Party that is a Defaulting Party in respect of this
Event of Default.
[ ](b) suspension of payment by the Defaulting Party or any
Credit Support provider in accordance with the Bankruptcy
Law or the Corporate Reorganization Law in Japan. The
automatic termination provision of Section 5.1 [shall]
[shall not] apply to either Party that is a Defaulting
Party in respect of this Event of Default.
[ ](c) disqualification of the Defaulting Party or any Credit
Support Provider by any relevant bill clearing house
located in Japan. The automatic termination provision of
Section 5.2 [shall][shall not] apply to either Party that
is a Defaulting Party in respect of this Event of Default.
Part X. Automatic Termination
The automatic termination provision of Section 5.1 shall not apply
to Party A as Defaulting Party in respect of clause (ii), (iii) or
(iv) of the definition of Event of Default.
The automatic termination provision of Section 5.1 shall not apply
to Party B as Defaulting Party in respect of clause (ii), (iii) or
(iv) of the definition of Event of Default.
Part XI. Adequate Assurances
Adequate Assurances under Section 8.14 shall apply to the
Agreement.
Part XII. Governing Law
In accordance with Section 9.1 of the Agreement, the Agreement
shall be governed by the laws of the State of New York.
Part XIII. Consent to Jurisdiction
In accordance with Section 9.2 of the Agreement, each Party
irrevocably submits to the non-exclusive jurisdiction of the
courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City.
Part XIV. Agent for Service of Process
Not applicable.
Part XV. Certain Regulatory Representations
A. The following FDICIA representation shall not apply:
1. Party A represents and warrants that it qualifies as a
"financial institution" within the meaning of the Federal
Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
2. Party B hereby represents and warrants that it qualifies as a
"financial institution" by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
3. A Party representing that it is a "financial institution" as
that term is defined in 12 C.F.R. Section 231.3 of Regulation
EE issued by the Board of Governors of the Federal Reserve
System ("Regulation EE") represents that:
(a) it is willing to enter into financial contracts" as a
counterparty "on both sides of one or more financial
markets" as those terms are used in Section 231.3 of
Regulation EE; and
(b) during the 15-month period immediately preceding the
date it makes or is deemed to make this representation,
it has had on at least one (1) day during such period,
with counterparties that are not its affiliates (as
defined in Section 231.2(b) of Regulation EE) either:
(i) one or more financial contracts of a total gross
notional principal amount of $1 billion
outstanding; or
(ii) total gross mark-to-market positions (aggregated
across counterparties) of $100 million; and
(c) agrees that it will notify the other Party if it no
longer meets the requirements for status as a financial
institution under Regulation EE.
4. If both Parties are financial institutions in accordance with
the above, the Parties agree that the Agreement shall be a
netting contract, as defined in 12 U.S.C. Section 4402(14), and
each receipt or payment or delivery obligation under the
Agreement shall be a covered contractual payment entitlement or
covered contractual payment obligation, respectively, as
defined in FDICIA.
B. The following ERISA representation shall apply:
Each Party represents and warrants that it is neither (i) an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 which is subject to Part 4
of Subtitle B of Title I of such Act; (ii) a "plan" as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986; nor (iii)
an entity the assets of which are deemed to be assets of any such
"employee benefit plan" or "plan" by reason of the U.S. Department
of Labor's plan asset regulation, 29 C.F.R.
Section 2510.3-101.
C. The following CFTC eligible swap participant representation shall
apply:
Each Party represents and warrants that it is an "eligible swap
participant" under, and as defined in, 17 C.F.R. Section 35.1.
Part XVI. Additional Covenants
The following covenant[s] shall apply to the Agreement:
A. Party B covenants and agrees that when Party A or an agent for
Party A requests Party B to an FX Transaction, Party B will do a
back-to-back principal trade and the price of the FX Transaction
to Party A will be the same price at which Party B effects its
back-to-back trade with its counterparty, and Party B will not
profit from any mark-up or spread on the FX Transaction.
B. With respect to each FX Transaction, Party A shall pay to Party B
a round-turn fee as follows. For FX Transactions not having a
Party B-imposed forward date, the fee shall be $4.30 per
round-turn ($2.15 per side) for each $85,000 equivalent of the
Currency in the FX Transaction. For FX Transactions with a Party
B-imposed forward date restriction, the fee shall be $5.00 per
round-turn ($2.50 per side) for each $135,000 equivalent of the
Currency in the FX Transaction.
C. Party A shall post margin with Party B with respect to all FX
Transactions in an amount equal to 3.0% of the value of such FX
Transactions on major currencies and 5.0% of the value of such FX
Transactions on minor currencies. All calls for margin shall be
made by Party B orally or by written notice to Dean Witter
Reynolds, and each such call for margin shall be met by Party A
within three hours after Dean Witter Reynolds has received such
call by wire transfer (by federal bank wire system) to the
account of Party B. Party B shall accept as margin any
instrument deemed acceptable as margin under the rules of the
Chicago Mercantile Exchange. Upon oral or written request by
Dean Witter Reynolds, Party B shall, within three hours after
receipt of any such request, wire transfer (by federal bank wire
system) to Dean Witter Reynolds for Party A's account any margin
funds held by Party B in excess of the margin requirements
specified hereby. Notwithstanding Part VI above, all payments,
unless otherwise agreed to, shall be paid in U.S. dollars.
Exhibit 10.08
ESCROW AGREEMENT
September 30, 1994
Chemical Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Dean Witter Spectrum Series Escrow Account
Gentlemen:
In accordance with arrangements made by Demeter Management
Corporation, a Delaware corporation (the "General Partner"), on behalf of Dean
Witter Spectrum Balanced L.P. ("Spectrum Balanced"), Dean Witter Spectrum
Strategic L.P. ("Spectrum Strategic"), and Dean Witter Spectrum Technical L.P.
("Spectrum Technical"), each a Delaware corporation (the "Partnerships" or,
individually, a "Partnership"), and Dean Witter Reynolds Inc., the selling agent
for the Partnerships (the "Depositor"; the Partnerships and the Depositor being
herein sometimes collectively referred to as the "Parties" or, individually, as
a "Party"), the Depositor shall: (i) deliver to you, as Escrow Agent, all
subscription funds (by the direct transfer of immediately available funds into a
non-interest bearing escrow account established by you for the Partnerships, for
investment in your interest bearing money market account) received by the
Depositor from each subscriber ("Subscriber" or, collectively, the
"Subscribers") during the "Initial Offering Period" and thereafter during the
"Continuing Offering" (as described in the Partnerships' Prospectus, as the same
may be updated, supplemented, and amended from time to time (the "Prospectus"))
in connection with the offering to the public of Units of Limited Partnership
Interest of the Partnerships (the "Units") and (ii) also promptly transmit to
the General Partner a complete report of all funds deposited with you during the
Initial Offering Period and Continuing Offering. You, as Escrow Agent, shall
hold such subscription funds together with any additions, substitutions, or
other financial instruments in which such funds may be invested or for which
such funds may be exchanged (collectively referred to herein as the "Fund"), IN
ESCROW upon the following terms:
1. (a) Following receipt by you of written notice from the General
Partner that the General Partner has rejected a Subscriber's subscription, in
whole or in part, during either the Initial Offering Period or Continuing
Offering, you shall transmit to the Depositor, as soon as practicable but in no
event later than three business days following receipt by you of such notice,
the amount of such Subscriber's subscription funds that shall have been
deposited with you hereunder and that the General Partner shall have notified
you have been rejected and any interest earned on the Fund and allocated to the
rejected amount of such subscription in accordance with Section 2 hereof. You
shall at the same time give notice to the Depositor of the amount of aggregate
subscription funds and/or interest so returned.
(b) On the second business day before the scheduled day of each
closing, the General Partner shall notify you of the portion of the Fund that
represents subscriptions to be accepted by the General Partner for each
Partnership. Upon receipt by you of joint written notice from the General
Partner and the Depositor on the date of each such closing to the effect that
all of the terms and conditions with respect to the release of subscription
funds from escrow set forth in the Prospectus have been fulfilled, you shall
promptly pay and deliver to each of the Partnerships that portion of the Fund
specified for such Partnership in the General Partner's prior instructions
(excluding any interest earned on the Fund and funds relating to rejected
subscription); provided, however, that in the case of the Initial Closing (as
defined in the Prospectus) you will only pay and deliver funds to the
Partnerships after a minimum of 400,000 Units of each of Spectrum Strategic and
Spectrum Technical and 200,000 Units of Spectrum Balanced (1,000,000 Units in
the aggregate) have been subscribed for in the aggregate and not rejected by the
General Partner and a minimum amount of $10,000,000 has cleared the U.S. banking
system (the subscription for each Unit to be $10.00 at the Partnerships' Initial
Closing and at each subsequent closing, if any, at 100% of the net asset value
per Unit as of the close of business on the day of the closing).
(c) On the date of each closing, or as soon thereafter as
practicable, you shall transmit to the Depositor an amount representing: (i) for
each Subscriber whose subscription shall be accepted by the General Partner in
whole or in part, any interest earned on the Fund and allocated to the accepted
portion of such Subscriber's subscription in accordance with Section 2 hereof,
and (ii) for each Subscriber whose subscription shall have been rejected by the
General Partner in whole or in part but whose subscription funds shall not have
been previously returned to the Depositor by you in accordance with Section 1(a)
hereof, such Subscriber's subscription funds that shall have been deposited with
you hereunder and that shall have been rejected by the General Partner, and any
interest earned on the Fund and allocated to the rejected amount of such
subscription in accordance with Section 2 hereof. You shall at the same time
give notice to the Depositor of the aggregate amount of subscription funds
and/or interest so returned.
(d) Notwithstanding Section 1(a) hereof, upon receipt by you of
written notice from the General Partner that a Subscriber has been rejected or
because such Subscriber has provided bad funds in the form of a bad check,
draft, or otherwise to the Depositor), you shall transmit to the Depositor,
within three business days following receipt by you of such notice, the amount
of subscription funds deposited with you hereunder relating to that amount (the
portion of such Subscriber's subscription for which good funds have not been
provided) together with any interest earned on the Fund and allocated to such
portion of such a subscription in accordance with Section 2 hereof to the date
of such return, and shall immediately notify the General Partner of the return
of such funds.
2. You shall hold the Fund (including any interest earned thereon)
for the account of the Partnerships pending delivery to either the Partnerships
or the Depositor, pursuant to Paragraphs 1 or 3 hereof, as the case may be. On
each day that subscription funds are transferred to you hereunder in immediately
available funds and receipt is confirmed before 2:00 P.M., New York City time,
you shall immediately invest such subscription funds solely in your interest
bearing money market account. If subscription funds are transferred to you in
immediately available funds and receipt is confirmed after 2:00 P.M., New York
City time, you shall so invest such funds on the next day. Interest earned on
the Fund shall be allocated by the Depositor among the Subscribers
proportionately based on (A) the amount of their respective subscriptions on
deposit in the Fund and (B) the period of time from the date that their
respective subscriptions shall have been deposited in the Fund to the earlier of
the delivery of the Fund to the Partnerships at a closing or the Depositor in
accordance with Sections 1 or 3 hereof, as the case may be.
3. If, during the Partnerships' Initial Offering Period, you are
notified in writing jointly by the Parties that subscriptions for fewer than
400,000 Units of each of Spectrum Strategic and Spectrum Technical and 200,000
Units of Spectrum Balanced (1,000,000 Units in the aggregate) have been
subscribed for and not rejected by the General Partner, that the offering of
Units has been terminated, and that no Initial Closing will be held, you shall
transmit to the Depositor, as soon as practicable but in no event later than
three business days after receipt by you of such notice, an amount representing
the full amount of all subscription funds that shall have been deposited with
you hereunder, together with any interest earned on the Fund in accordance with
Section 2 hereof. You shall at the same time give notice to the Depositor of the
aggregate amounts of subscription funds and/or interest so returned.
4. The Parties further agree with you as follows:
(a) Your duties and responsibilities shall be limited solely to
those expressly set forth in this Agreement and are ministerial in nature. You
shall neither be subject to nor obliged to recognize any other agreement
between, or other direction or instruction of, any or all of the Parties or any
Subscriber even though reference thereto may be made herein; provided, however,
that with your written consent, this Agreement may be amended at any time or
times by an instrument in writing signed by the Parties.
(b) You are authorized, in your sole discretion, to disregard any
and all notices or instructions given by any of the Parties or by any other
person, firm, or corporation, except only such notices or instructions as are
hereunder provided for and orders or process of any court entered or issued with
or without jurisdiction. If the Fund or any part thereof is at any time
attached, garnished, or levied upon under any court order or in case the
payment, assignment, transfer, conveyance, or delivery of the Fund shall be
stayed or enjoined by any court order, or in case any order, judgment, or decree
shall be made or entered by any court affecting the Fund or any part thereof,
then and in any such event you are authorized, in your sole discretion, to rely
upon and comply with any such order, writ, judgment, or decree that you are
advised by legal counsel of your own choosing is binding upon you, and if you
comply with any such order, writ, judgment, or decree you shall not be liable to
any of the Parties or to any other person, firm, or corporation by reason of
such compliance even though such order, writ, judgment, or decree may be
subsequently reversed, modified, annulled, set aside, or vacated.
(c) You shall be fully protected in relying upon any written
notice, demand, certificate, document, or instrument believed by you in good
faith to be genuine and to have been signed or presented by the proper person or
persons or Party or Parties. The Parties shall provide you with a list of
officers and employees who shall be authorized to deliver instructions
hereunder. You shall not be liable for any action taken or omitted by you in
connection herewith in good faith and in the exercise of your own best judgment.
(d) Should any dispute arise with respect to the delivery,
ownership, right of possession, and/or disposition of the subscription funds
deposited with you hereunder, or should any claim be made upon any such
subscription funds by a third party, you, upon receipt of written notice of such
dispute by any of the Parties or by a third party, are authorized and directed
to retain in your possession all or any of such subscription funds until such
dispute shall have been settled either by mutual agreement of the parties
involved or by final order, decree, or judgment of any court in the United
States.
(e) If for any reason funds are deposited in the escrow account
other than by transfer of immediately available funds, you shall proceed as soon
as practicable to collect checks, drafts, and other collection items at any time
deposited with you hereunder. All such collections shall be subject to the usual
collection agreement regarding items received by your commercial banking
department for deposit or collection; provided, however, that if any check,
draft, or other collection item at any time deposited with you hereunder is
returned to you as being uncollectable (except by reasons of an account
closing), you shall attempt a second time to collect such item before returning
such item to the Depositor as uncollectable. Subject to the foregoing, you shall
promptly notify the Parties of any uncollectable check, draft, or other
collection item deposited with you hereunder and shall promptly return such
uncollectable item to the Depositor, in which case you shall not be liable to
pay any interest on the subscription funds represented by such uncollectable
item. In no event, however, shall you be required or have a duty to take any
legal action to enforce payment of any check or note deposited hereunder.
(f) You shall not be responsible for the sufficiency or accuracy
of the form, execution, validity, or genuineness of documents now or hereafter
deposited with you hereunder, or for any lack of endorsement thereon or for any
description therein, nor shall you be responsible or liable in any respect on
account of the identity, authority, or rights of the persons executing or
delivering or purporting to execute or deliver any such document, or endorsement
or this Agreement. You shall not be liable for any loss sustained as a result of
any investment made pursuant to the instructions of the Parties or as a result
of any liquidation of an investment prior to its maturity or the failure of the
Parties to give you any instructions to invest or reinvest the Fund or any
earnings thereon.
(g) All notices required or desired to be delivered hereunder
shall be in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day of receipt, addressed as follows (or to
such other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):
if to a Partnership, the Partnerships or the General
Partner:
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
President
if to the Depositor:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Mark J. Hawley
Senior Vice-President
in either case with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Edwin L. Lyon, Esq.
if to you:
Chemical Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Whenever, under the terms hereof, the time for giving a notice or performing an
act falls on a Saturday, Sunday, or legal holiday, such time shall be extended
to the next business day.
(h) The Depositor agrees to indemnify, defend, and hold you
harmless from and against, any and all loss, damage, tax, liability, and expense
that may be incurred by you arising out of or in connection with your duties
hereunder, except as caused by your gross negligence, bad faith, or willful
misconduct, including the legal costs and expenses of defending yourself against
any claim or liability in connection with your performance hereunder.
(i) You shall be paid by the Depositor for your services a fee of
$3,000 in advance for each Fee Period (as defined below) and such other fees
relating to the administration of the Fund that shall be agreed upon by you and
the General Partner, including, but not limited to, a fee for (a) investment of
funds and (b) transmission of funds due to a rejection of a Subscriber pursuant
to Section 1(d) hereof. "Fee Period" shall mean each consecutive twelve month
period during the term of this Agreement with the first such period beginning
from the date of this Agreement.
(j) It is understood that you may at any time resign hereunder as
Escrow Agent by giving written notice of your resignation to the Parties at
their address set forth above at least 20 days prior to the date specified for
such resignation to take effect, and upon the effective date of such
resignation, all property then held by you hereunder shall be delivered by you
to such person as may be designated jointly by the Parties in writing, whereupon
all your obligations hereunder shall cease and terminate. If you shall resign
prior to the conclusion of any Fee Period you shall pay to the Depositor an
amount equal to the product of $3,000 and a fraction, the numerator of which
shall be the number of days remaining in the Fee Period and the denominator of
which shall be 365. If no successor Escrow Agent has been appointed or has
accepted such appointment by such date, all your obligations hereunder shall
nevertheless cease and terminate. Your sole responsibility thereafter shall be
to keep safely all property then held by you and to deliver the same to a person
designated by the Parties hereto or in accordance with the directions of a final
order or judgment of a court of competent jurisdiction.
5. This Agreement shall be governed by and construed in accordance
with the law of the State of New York and any action brought hereunder shall be
brought in the courts of the State of New York, sitting in the County of New
York.
6. The undersigned Escrow Agent hereby acknowledges and agrees to
hold, deal with, and dispose of, the Fund (including any interest earned
thereon) and any other property at any time held by the Escrow Agent hereunder
in accordance with this Agreement.
<PAGE>
If the foregoing Agreement is satisfactory to you, please so indicate by signing
at the place provided below.
Sincerely,
DEAN WITTER SPECTRUM BALANCED L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
President
DEAN WITTER SPECTRUM STRATEGIC L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
President
DEAN WITTER SPECTRUM TECHNICAL L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
----------------------------------
Mark J. Hawley
Senior Vice-President
Accepted:
CHEMICAL BANK
By: /s/ P.J. Gilkeson
------------------------
P.J. Gilkeson
Vice President
Exhibit 10.09
Demeter Management Corporation Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor Two World Trade Center, 62nd Floor
New York, New York 10048 New York, New York 10048
May 11, 1998
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Dean Witter Spectrum Series Escrow Agreement (Amendment)
Gentlemen:
Reference is made to the Escrow Agreement (the "Escrow Agreement")
dated September 30, 1994 among The Chase Manhattan Bank (formerly, Chemical
Bank), Dean Witter Reynolds Inc., and Demeter Management Corporation
("Demeter"), on behalf of Dean Witter Spectrum Balanced L.P., Dean Witter
Spectrum Strategic L.P. and Dean Witter Spectrum Technical L.P. Demeter has
added Dean Witter Spectrum Select L.P. ("Spectrum Select," formerly Dean Witter
Select Futures Fund L.P.), as one of the Partnerships in the Continuing
Offering. As such, Spectrum Select will offer Units to the public as described
in the Partnerships' Prospectus. Capitalized terms not defined herein shall have
the meaning ascribed thereto in the Escrow Agreement.
Accordingly, the Escrow Agreement is hereby amended to reflect the
addition of Spectrum Select as a "Partnership" for all purposes in the Escrow
Agreement. Units of Spectrum Select will be offered in the Continuing Offering
in accordance with the terms described in the Escrow Agreement. In all respects,
funds received from Subscribers to Spectrum Select during the Continuing
Offering will be held and released from escrow in accordance with the terms of
the Escrow Agreement.
<PAGE>
If the foregoing is satisfactory to you, please so indicate by signing
in the space provided below.
Sincerely,
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J Hawley
------------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
------------------------------
Mark J. Hawley
Executive Vice-President
ACCEPTED:
THE CHASE MANHATTAN BANK:
By: /s/ P. J. Gilkesen
---------------------------
P.J. Gilkesen
Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Spectrum Select L.P. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 187,619,419
<SECURITIES> 0
<RECEIVABLES> 6,613,565<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 202,668,038<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 202,668,038<F3>
<SALES> 0
<TOTAL-REVENUES> 41,778,732<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,083,672
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,695,060
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,695,060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,695,060
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $591,858 and
subscriptions receivable of $6,021,707.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $8,435,054.
<F3>Liabilities include redemptions payable of $939,381,
accrued brokerage fees of $1,164,344 and acrued management fees
of $481,797.
<F4>Total revenue includes realized trading revenue of $36,087,729,
net change in unrealized of $(1,192,107) and interest income of
$6,883,110.
</FN>
</TABLE>
