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 0-26340
DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
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(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3782232
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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: $45,362,782.29 at January 31,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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DEAN WITTER SPECTRUM GLOBAL BALANCED 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. . . . . . . . . . . . . . . . . . . . . 1-3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . 4
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
Item 6. Selected Financial Data . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . 9-18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . 18-31
Item 8. Financial Statements and Supplementary Data. . . . . 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . 31
Part III.
Item 10. Directors and Executive Officers of the Registrant . 32-36
Item 11. Executive Compensation . . . . . . . . . . . . . . . 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . 37
Item 13. Certain Relationships and Related Transactions . . 37
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . 38
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K
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
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PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Spectrum Global Balanced
L.P. (formerly, Dean Witter Spectrum Balanced L.P.) (the "Partnership") is a
Delaware limited partnership organized to engage in the speculative trading of
futures contracts, forward contracts, physical commodities and other commodities
interests, including foreign currencies, financial instruments, precious and
industrial metals, energy products and agriculturals (collectively "futures
interests"). The Partnership is one of the Dean Witter Spectrum Series of funds,
comprised of the Partnership, Dean Witter Spectrum Strategic L.P., Dean Witter
Spectrum Technical L.P. and Dean Witter Spectrum Select L.P. (Dean Witter
Spectrum Select L.P., formerly "Dean Witter Select Futures Fund L.P." became one
of the Dean Witter Spectrum Series of Funds May 31, 1998.) 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"). RXR, Inc. (the "Trading Advisor"), is the Trading Advisor to the
Partnership.
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Units of limited partnership interest ("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. The Partnership's Net Asset
Value per Unit as of December 31, 1998 was $16.00, representing an increase of
16.36 percent from the Net Asset Value per Unit of $13.75 on 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.
(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 Advisor. 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).
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2. Futures, Options and 2. "The Futures, Options
Forward Markets and Forward Markets"
(Pages 83-87 of the
Prospectus).
3. Partnership's Trading 3. "Investment Programs,
Arrangements and Use of Proceeds and
Policies Trading 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 "The Limited Partnership
Agreements"(Pages 87-91 of the
Prospectus).
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.
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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"), certain other limited
partnership commodity pools of which Demeter is the general partner, and certain
trading advisors to those pools. On June 16, 1997, the plaintiffs in the above
actions filed a consolidated amended complaint, alleging, among other things,
that the defendants committed fraud, deceit, negligent 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
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on November 14, 1996 in the Superior Court of the State of Delaware, New Castle
County, against the Dean Witter Parties and certain trading advisors on behalf
of all purchasers of interests in various limited partnership commodity pools
sold by DWR. A consolidated and amended complaint in the action pending in the
Supreme Court of the State of New York was filed on August 13, 1997, alleging
that 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 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 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
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will not have a material adverse effect on the financial condition or the
results of operations of any of the Dean Witter Parties.
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 5,359. No distributions have been made by the Partnership since it
commenced trading operations on November 2, 1994. 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.
Units are being sold at monthly closings as of the last day of each month
at a price equal to 100% of the Net Asset Value of a Unit as of the date of such
monthly closing.
Through December 31, 1998, 3,568,863.050 Units have been sold, leaving
4,431,136.950 Units unsold as of December 31, 1998. The aggregate price of the
Units sold through December 31, 1998 is $46,870,948.
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.
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Item 6. SELECTED FINANCIAL DATA (in dollars)
<TABLE>
<CAPTION>
For the
Period from
November 2, 1994
(commencement of
For the Years Ended December 31, operations) to
1998 1997 1996 1995 December 31, 1994
--------------------------------------------------------- -------------------
<S> <C> <C> <C> <C> <C>
Total Revenues
(including interest) 8,042,090 5,293,459 893,626 2,329,813 (17,216)
Net Income (Loss) 5,577,888 3,599,516 (357,966) 1,559,664 (52,306)
Net Income (Loss)
Per Unit (Limited
& General Partners) 2.25 2.12 (.44) 2.24 (.17)
Total Assets 46,317,786 25,923,024 19,620,770 14,923,682 3,817,871
Total Limited
Partners' Capital 45,399,750 25,418,875 18,499,873 14,604,689 3,701,277
Net Asset Value Per
Unit of Limited
Partnership Interest 16.00 13.75 11.63 12.07 9.83
</TABLE>
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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 within the limit. Futures interests prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating
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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 $45,913,872, an increase of $20,230,636 from the Partnership's total
capital of $25,683,236 at December 31, 1997. For the year ended December 31,
1998, the Partnership generated net income of $5,577,888, total subscriptions
aggregated $17,637,965 and total redemptions aggregated $2,985,217.
For the year ended December 31, 1998, the Partnership's total
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trading revenues, including interest income, were $8,042,090. The Partnership's
total expenses for the year were $2,464,202, resulting in net income of
$5,577,888. The value of an individual unit in the Partnership increased from
$13.75 at December 31, 1997 to $16.00 at December 31, 1998.
As of December 31, 1997, the Partnership's total capital was $25,683,236,
an increase of $6,976,981 from the Partnership's total capital of $18,706,255,
at December 31, 1996. For the year ended December 31, 1997, the Partnership
generated net income of $3,599,516, total subscriptions aggregated $6,527,261
and total redemptions aggregated $3,149,796.
For the year ended December 31, 1997, the Partnership's total trading
revenues including interest income were $5,293,459. The Partnership's total
expenses for the year were $1,693,943, resulting in net income of $3,599,516.
The value of an individual unit in the Partnership increased from $11.63 at
December 31, 1996 to $13.75 at December 31, 1997.
As of December 31, 1996, the Partnership's total capital was $18,706,255,
an increase of $3,951,755 from the Partnership's total capital of $14,754,500 at
December 31, 1995. For the year ended December 31, 1996, the Partnership
incurred a net loss of $357,966, total subscriptions aggregated $7,259,621 and
redemptions aggregated $2,949,900.
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For the year ended December 31, 1996, the Partnership's total trading
revenues including interest income were $893,626. The Partnership's total
expenses for the year were $1,251,592, resulting in a net loss of $357,966. The
value of an individual unit in the Partnership decreased from $12.07 at December
31, 1995 to $11.63 at December 31, 1996.
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 the 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 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
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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.
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
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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 of the aims of such
trading policies has been to reduce the credit exposure of the Partnership to a
single exchange and, historically, such Partnership's exposure has typically
amounted to only a small percentage
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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.
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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.
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
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through which it trades, Carr, or the Trading Advisor - could result in a
material financial risk to the Partnership. All U.S. futures exchanges are
subject to monitoring by the CFTC of their Year 2000 preparedness and the major
foreign futures exchanges are also expected to be subject to market-wide testing
of their Year 2000 compliance during 1999. Demeter intends to monitor the
progress of Carr and the Trading Advisor throughout 1999 in their Year 2000
compliance and, where applicable, to test its external interface with Carr and
the Trading Advisor.
A worst case scenario would be one in which trading of contracts on behalf
of the Partnership becomes impossible as a result of the Year 2000 problem
encountered by any third parties. A less catastrophic but more likely scenario
would be one in which trading opportunities diminish as a result of technical
problems resulting in illiquidity and fewer opportunities to make profitable
trades. MSDW has begun develop-ing 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 Advisor from trading in certain currencies and thereby
limits its ability to take advantage of potential market opportunities that
might otherwise have existed had separate currencies been available to trade.
This could adversely affect the performance results of the Partnership.
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.
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The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned factors result in frequent changes in the fair value of
the Partnership's open positions, and, consequently, in its earnings and cash
flow.
The Partnership's total market risk is influenced by a wide variety of factors,
including the diversification effects among the Partnership's existing open
positions, the volatility present within the market(s), and the liquidity of the
market(s). At varying times, each of these factors may act to exacerbate or mute
the market risk associated with the Partnership.
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 Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model employed by the Partnership incorporates numerous
variables that could impact the fair value of the Partnership's trading
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portfolio. The Partnership estimates VaR using a model based on historical
simulation with a confidence level of 99%. Historical simulation involves
constructing a distribution of hypothetical daily changes in trading portfolio
value. The VaR model generally takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the VaR model include
equity and commodity prices, interest rates, foreign exchange rates, as well as
correlation that exists among these variables. The hypothetical changes in
portfolio value are based on daily observed percentage changes in key market
indices or other market factors ("market risk factors") to which the portfolio
is sensitive. In the case of the Partnership's VaR, the historical observation
period is approximately four years. The Partnership's one-day 99% VaR
corresponds to the negative change in portfolio value that, based on observed
market risk factor moves, would have been exceeded once in 100 trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either Demeter
or the Trading Advisor in their daily risk management activities.
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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 $ 46 million.
Primary Market December 31, 1998
Risk Category Value at Risk
Interest Rate (.58)%
Currency (.26)
Equity (1.74)
Commodity (.29)
Aggregate Value at Risk (1.70)%
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
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futures interests, the composition of its portfolio of open positions can change
significantly over any given time period or even within a single trading day.
Such changes in open positions could materially impact market risk as measured
by VaR either positively or negatively.
The table below supplements the year end VaR by presenting the Partnership's
high, low and average VaR as a percentage of total net assets for the four
quarterly reporting periods from January 1, 1998 through December 31, 1998.
Primary Market Risk Category High Low Average
Interest Rate (1.36)% (.29)% (.87)%
Currency (.67) (.18) (.39)
Equity (1.74) (.59) (1.11)
Commodity (.29) (.19) (.23)
Aggregate Value at Risk (1.70)% (1.42)% (1.57)%
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
<PAGE>
- 24 -
the Partnership's open positions thus creates a "risk of ruin" not typically
found in other investment vehicles. Due to the relative size of the positions
held, certain market conditions may cause the Partnership to incur losses
greatly in excess of VaR within a short period of time. The foregoing VaR
tables, as well as the past performance of the Partnership, gives no indication
of such "risk of ruin". In addition, VaR risk measures should be interpreted in
light of the methodology's limitations, which include the following: past
changes in market risk factors will not always yield accurate predictions of the
distributions and correlations of future market movements; changes in portfolio
value in response to market movements may differ from the responses implicit in
a VaR model; published VaR results reflect 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 calendar 1998. Since
VaR is based on historical data, VaR should not be viewed as
<PAGE>
- 25 -
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 89%) of its available assets in cash at DWR. A decline in
short-term interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered material.
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>
- 26 -
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market
risk exposures - except for (i) those disclosures that are statements of
historical fact and (ii) the descriptions of how the Partnership manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. The Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisor for managing
such exposures are subject to numerous uncertainties, contingencies and risks,
any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions, defaults and 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.
<PAGE>
- 27 -
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.
Interest Rate. Interest rate risk is the principal market exposure of the
Partnership. Interest rate movements directly affect the price of the sovereign
bond futures positions held by the Partnership and indirectly the value of its
stock index and currency positions. Interest rate movements in one country as
well as relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the government debt of
smaller nations - e.g. Australia. Demeter anticipates that G-7 interest rates
will remain the primary market exposure of the Partnership for the foreseeable
future. The changes in interest rates which have the most effect on the
Partnership are changes in long-term, as opposed to short-term, rates. Most of
the speculative future positions held by the Partnership are in medium-to-long
term instruments. Consequently, even a material change in short-term rates would
have little effect on the Partnership were the medium-to-long term rates to
remain steady.
<PAGE>
- 28 -
Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two currencies other
than the U.S. dollar. However, the 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 Advisor's
currency trading strategies.
Equity. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 1998, the
Partnership's primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and DAX (Germany) stock indices. Demeter anticipates little, if
any, trading in non-G-7 stock indices. The Partnership is primarily exposed to
the risk of adverse price trends or static markets in the major U.S., European
and Japanese indices. (Static markets would not cause major market changes but
would
<PAGE>
- 29 -
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 the Trading Advisor will
from time to time trade base metals such as aluminum, copper, nickel and zinc,
the principal market exposures of the Partnership have consistently been in the
precious metals, gold and silver. The Trading Advisor's 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 Advisor has 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 commodities market exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybean oil, grains, and
cotton accounted for the substantial bulk of the Partnership's commodities
exposure at December 31, 1998. The Partnership has had market exposure to live
cattle and lean hogs. However, Demeter anticipates that the Trading Advisor will
maintain an emphasis on soybean
<PAGE>
- 30 -
oil, grains, and cotton, in which the Partnership has historically taken it's
largest positions.
Energy. The Partnership's primary energy market exposure is to gas
and oil price movements, often resulting from political developments in the
Middle East. Although the Trading Advisor trades natural gas to a limited
extent, oil is by far the dominant energy market exposure of the Partnership.
Oil prices are currently depressed, but they can be volatile and substantial
profits and losses have been and are expected to continue to be experienced in
this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the Partnership at
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 Advisor, severally,
attempt to manage the risk of the Partnership's open positions are
<PAGE>
- 31 -
essentially the same in all market categories traded. Demeter attempts to manage
the Partnership's market exposure by (i) diversifying the Partnership's assets
among different market sectors and trading approaches, and (ii), monitoring the
performance of the Trading Advisor on a daily basis. In addition, the Trading
Advisor establishes diversification guidelines, often set in terms of the
maximum margin to be committed to positions in any one market sector or market
sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-trading
instruments, cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Advisor.
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>
- 32 -
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>
- 33 -
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
business on 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
<PAGE>
- 34 -
Administrative 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 Executive Officer of Morgan Stanley
Dean Witter Advisors in February 1998. He has been an Executive Vice President
of DWR since 1990, during
<PAGE>
- 35 -
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 Services and Novus Financial Corp., culminating
as Senior Vice
<PAGE>
- 36 -
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>
- 37 -
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
32,126.520 Units of General Partnership Interest representing a 1.12 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 $1,591,467 for
the year ended December 31, 1998.
<PAGE>
- 38 -
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 report 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>
- 39 -
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 GLOBAL BALANCED 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>
- 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 GLOBAL BALANCED 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>
- 40 -
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 April 18, 1994, is
incorporated by reference to Exhibit 3.02 of the Partnership's
Registration Statement on Form S-1 (File No. 33-80146) filed with the
Securities and Exchange Commission on June 10, 1994.
3.03 Certificate of Amendment of Certificate of Limited Partnership, dated
April 17, 1998, is filed herewith.
10.01 Management Agreement, dated as of November 1, 1994, among the
Partnership, Demeter Management Corporation, and RXR, Inc. is filed
herewith.
10.02 Amended and Restated Customer Agreement, dated as of December 1, 1997,
between the Partnership and Dean Witter Reynolds Inc. is filed herewith.
10.03 Customer Agreement, dated as of December 1, 1997, among the Partnership,
Carr Futures, Inc., and Dean Witter Reynolds Inc. is filed herewith.
10.04 International Foreign Exchange Master Agreement, dated as of August
1, 1997, between the Partnership and Carr Futures, Inc. is filed
herewith.
10.05 Subscription and Exchange Agreement and Power of Attorney to be executed
by each purchaser of Units is incorporated by reference to Exhibit B of
the Partnership's Prospectus dated 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.
10.06 Escrow Agreement, dated September 30, 1994, among the Partnership,
Demeter Management Corporation, Dean Witter Reynolds Inc., and Chemical
Bank is filed herewith.
13.01 Annual Report to Limited Partners for the year ended December 31, 1998
is filed herewith.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF LIMITED PARTNERSHIP
OF
DEAN WITTER SPECTRUM BALANCED 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 Spectrum Balanced L.P. filed with the
Secretary of State of Delaware on April 29, 1994, does hereby certify as
follows:
First. Name of Limited Partnership. The name of the
limited partnership is Dean Witter Spectrum Balanced 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 Global Balanced L.P."
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Amendment of Certificate of Limited Partnership as of the 17 day
of April, 1998.
By: DEMETER MANAGEMENT
CORPORATION,
General Partner
By /s/ Mark J. Hawley
-------------------------
Mark J. Hawley
President
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among DEAN WITTER SPECTRUM BALANCED L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and RXR, INC., a New York corporation (the "Trading
Manager").
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 May 27, 1994 (the "Limited Partnership
Agreement"), to engage primarily in speculative trading of commodities
(including foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, obligations of or guaranteed by the United
States Government, and any other financial instruments, securities, stock,
financial and economic indexes, and items which are now or may hereafter be the
subject of futures contract trading), 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 bills) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
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 (No. 33-80146) (as amended from
time to time, the "Registration Statement") and a final Prospectus dated
September 15, 1994, constituting a part thereof (as amended and supplemented,
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 Manager has extensive experience trading
in futures interests and is willing to provide certain services and undertake
certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Manager to act as
a trading manager 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 Manager desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Manager wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Manager 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 Manager 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 systems, methods, and
strategies (subject to the need, in the reasonable discretion of the Trading
Manager, to preserve the secrecy of proprietary information concerning such
systems, methods, and strategies), and 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 Manager 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
Manager.
(b) If, while Units continue to be offered and sold, the
Trading Manager 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, such Trading Manager
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 Manager 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 Manager.
(a) Upon the commencement of trading operations by the
Partnership, the Trading Manager hereby agrees to act as a Trading Manager for
the Partnership and, as such, shall have sole authority and responsibility for
directing the trading of the Net Assets of the Partnership pursuant to its
Balanced Portfolio Program at 2.0 standard leverage with no reserve asset
component (as agreed by the Trading Manager and 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 Manager; provided,
however, that the General Partner may override the instructions of the Trading
Manager to the extent necessary (i) to comply with the trading policies of the
Partnership described in writing to the Trading Manager and with applicable
speculative position limits, (ii) to fund any distributions, redemptions, or
reapportionments among other trading managers 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 Manager 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 Manager shall not be
liable for the consequences of any decision by the General Partner to override
instructions of the Trading Manager, except to the extent that the Trading
Manager is in breach of this Agreement (as determined by the General Partner in
good faith). In performing services to the Partnership the Trading Manager may
not materially alter the trading program(s) used by the Trading Manager in
trading 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 a material alteration in the Trading Manager's trading program(s).
(b) The Trading Manager 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 Manager and the trading systems, methods, and
strategies of the Trading Manager described in the Prospectus, with
such changes and additions to such trading systems, methods or
strategies as the Trading Manager, from time to time, incorporates into
its trading approach for accounts the size of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by
the General Partners 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
Manager using the trading systems used by the Trading Manager for the
Partnership over a specified period of time. In providing such
information, the Trading Manager may take such steps as are necessary
to assure the confidentiality of the Trading Manager's clients'
identities. The Trading Manager 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 Manager shall promptly inform the General Partner
of any material discrepancies of which the Trading Manager is aware.
The General Partner acknowledges that different trading strategies or
methods may be utilized for differing sizes of accounts, accounts with
different trading policies, accounts with different leverage policies,
accounts experiencing differing inflows or outflows of equity, accounts
which 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 Manager other than proprietary information
(including, without limitation, information relating to changes in
control, personnel, trading approach, or financial condition). Each of
the General Partner and the Partnership acknowledge that all trading
instructions made by the Trading Manager will be held in confidence by
the General Partner and the Partnership, 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 Manager's
open positions maintained by the Trading Manager exceed the 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 Manager or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Manager within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Manager shall be for the
account of the Partnership. The Trading Manager 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 Manager shall assume financial responsibility for any
errors committed or caused by it in transmitting orders for the purchase or sale
of futures interests for the Partnership's account, including 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. The Trading Manager's
errors shall include, but not be limited to, inputting improper trading signals
or communicating incorrect orders to DWR. However, the Trading Manager shall not
be responsible for errors committed or caused by DWR or by floor brokers or
other FCM's. The Trading Manager shall have an affirmative obligation promptly
to notify the General Partner of its own errors, and the Trading Manager shall
use its best efforts to identify and promptly notify the General Partner of any
order or trade which the Trading Manager reasonably believes was not executed in
accordance with its instructions to DWR or such other commodity broker utilized
to execute orders for the Partnership.
(e) Prior to the commencement of trading by the Partnership,
the General Partner on behalf of the Partnership shall deliver to the Trading
Manager a trading authorization appointing the Trading Manager the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Managers 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 manager or managers for the Partnership and may apportion to
such additional trading manager(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 manager or
managers and the apportionment of Net Assets to any such trading manager(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 Manager hereunder. In the event that an additional
trading manager or managers is so designated, the Trading Manager shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Manager and the Trading Profits
attributable to the trading by the Trading Manager.
(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 Manager to any other trading manager or managers of the Partnership or
allocate additional Net Assets upon two business days' prior notice to the
Trading Manager from such other trading manager or managers; provided that any
such addition to or withdrawal from Net Assets allocated to the Trading Manager
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 Manager Independent.
For all purposes of this Agreement, the Trading Manager 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 Manager or any other trading manager or managers 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 Manager is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Manager have any
authority of responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manger 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 commodity
broker for the Partnership. The General Partner shall provide the Trading
Manager with copies of brokerage statements. Notwithstanding that DWR shall act
as commodity broker for the Partnership, the Trading Manager may execute trades
through floor brokers other than those employed by DWR so long as arrangements
are made for such floor brokers to "give-up" or transfer the positions to DWR
and provided that the rates charged by such floor brokers have been approved in
advance by DWR.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Manager under this Agreement, the Partnership shall pay the Trading
Manager the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Manager's trading for the Partnership's
account, equal to 5/48 of 1% (a 1.25% annual rate) of the "Net Assets"
of the Partnership allocated to the Trading Manager (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 manager(s)
of the Partnership. The initial incentive period will commence on the
date of the Partnership's initial closing (the "Initial Closing") and
shall end on the last day of the first month ending after such Closing
occurs.
(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 Manager, or, as a result of an act or
material failure to act by the Trading Manager, is otherwise unable to utilize
the trading advice of the Trading Manager 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 Manager engaged in trading operations
or utilizes the trading advice of the Trading Manager to the total number of
trading days in the month. The management fee payable to the Trading Manager for
the month in which the Partnership begins to receive trading advice from the
Trading Manager pursuant to this Agreement shall be prorated based on the ratio
of the number of trading days in the month from the day the Partnership begins
to receive such trading advice 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 Manager, decreased by the
Trading Manager's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Manager'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 Manager or, if no incentive
fee has been earned previously by the Trading Manager, 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
Manager on account of Trading Profits earned by the Partnership on Net Assets
allocated to the Trading Manager 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 Manager shall be entitled to
retain such amounts of incentive fees previously paid to the Trading Manager in
respect of such Trading Profits. However, no subsequent incentive fees shall be
payable to the Trading Manager until the Partnership has again earned Trading
Profits on the Trading Manager's allocated Net Assets; provided, however, that
if the Trading Manager's allocated Net Assets are reduced or increased because
of redemptions, additions or reallocations which 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 Manager, the trading loss for that incentive period which must be
recovered before the Trading Manager's allocated Net Assets will be deemed to
experience Trading Profits will be equal to the amount determined by (x)
dividing the Trading Manager's allocated Net Assets after such increase or
decrease by the Trading Manager'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 Manager'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 managers 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 Manager 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 for a period of three
years after the end of the month in which the Partnership commences trading
operations. At least thirty days prior to the expiration of such three-year
period, the Trading Manager may terminate this Agreement at the end of the
three-year period by providing written notice to the Partnership indicating that
the Trading Manager desires to terminate such Agreement at the end of such
three-year period. If the Agreement is not terminated upon the expiration of the
three-year period, then upon the expiration of such three-year period, this
Agreement shall automatically renew for an additional one-year period and shall
continue to renew for additional one-year periods until this Agreement is
otherwise terminated, as provided for herein. At least thirty days prior to the
expiration of any such one-year period, the Trading Manager may terminate this
Agreement at the end of the current one-year period by providing written notice
to the Partnership indicating that the Trading Manager desires to terminate such
Agreement at the end of such one-year period. This Agreement shall 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 Manager or (b) at any time upon written notice to the
Trading Manager upon the occurrence of any of the following events: (i) if any
person described as a "principal" of the Trading Manager in the Prospectus
ceases for any reason to be an active executive officer of the Trading Manager;
(ii) if the Trading Manager becomes bankrupt or insolvent; (iii) if the Trading
Manager is unable to use its trading 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 Manager 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 Manager 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 systems or methods, or its goodwill to, any individual or entity; (vi)
if the Trading Manager'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 Manager fall below $1,000,000.00 at any time; (vii) if, at any time, the
Trading Manager violates any trading or administrative policy described in
writing to the Trading Manager by the General Partner, except with the prior
express written consent of the General Partner; or (viii) if the Trading Manager
fails in a material manner to perform any of its obligations under this
Agreement. The Trading Manager 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 Manager 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 Manager implementing a proposed
material change in the Trading Manager's trading program(s) used by the
Partnership; (iii) the General Partner overrides a trading instruction of the
Trading Manager for reasons unrelated to a determination by the General Partner
that the Trading Manager has violated the Partnership's trading policies and the
Trading Manager certifies to the General Partner in writing that as a result,
the Trading Manager believes the performance results of the Trading Manager
relating to 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
Manager; or (v) the Trading Manager 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
Manager's trading such contract for the Partnership within 5 business days of a
written request by the Trading Manager to do so, and, if such consent is given,
does not make arrangements to do so, and, if such consent is given, does not
make arrangements to facilitate such trading within 30 days of such notice; (vi)
the assets allocated to the Trading Manager fall below $1,000,000 at any time;
(vii) the General Partner reallocates any portion of the Net Assets of the
Partnership pursuant to Section 3 hereof or (viii) the registration of the
General Partner as a commodity pool operator with the CFTC or its membership in
the NFA is revoked, suspended, terminated or not renewed, or limited or
qualified in any respect.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Manager Liability. In respect of the
Trading Manager's role in the futures interests trading of the Partnership's
assets, none of the Trading Manager, 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 Manager shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Manager Indemnity in Respect of Management
Activities. The Trading Manager 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 Manager shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading of the Trading Manager, 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 Manager, 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
Manager, such approval not to be unreasonably withheld) to be a breach of this
Agreement by the Trading Manager 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. The termination of any demand, claim,
lawsuit, action or proceeding by settlement shall not, in itself, create a
presumption that the conduct in question was not undertaken in good faith in a
manner reasonably believed to be in, or not opposed to, the best interest of the
Partnership.
(c) Partnership and General Partner Indemnity in Respect of
Management Activities. The Partnership and the General Partner shall, jointly
and severally, indemnify, defend, and hold harmless the Trading Manager, 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 futures
interests trading activities of the Partnership undertaken by the Trading
Manager; provided that a court of competent jurisdiction upon entry of a final
judgement finds (or, if no final judgement 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 Manager 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, in itself,
create a presumption that the conduct in question was not undertaken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interest of the Partnership.
(d) Trading Manager Indemnity in Respect of Sale of Units. The
Trading Manager shall indemnify, defend and hold harmless DWR, 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, the Commodity Exchange Act, 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 Trading Manager of any
representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by the Trading Manager to
perform any covenant made by the Trading Manager herein; (ii) the factual
accuracy of the information relating to the Trading Manager in the customer
brochure attached hereto as Exhibit A (the "Customer Brochure"); (iii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus 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, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Manager, or its Trading Manager Principals (including the historical performance
tables but excluding the pro forma performance information unless such statement
or omission was based on information furnished by the Trading Manager in
connection with the preparation of such pro forma performance information), or
was made in reliance upon, and in conformity with, written information or
instructions furnished by the Trading Manager, and, in the case of the Customer
Brochure only, was approved in writing by the Trading Manager.
(e) Partnership and General Partner Indemnity in Respect of
Sale of Units. The Partnership and the General Partner agree, jointly and
severally, to indemnify, defend and hold harmless the Trading Manager 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 Securities and Exchange Act of 1934, the Commodity Exchange Act, 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, unless such loss, claim,
damage, liability, cost, or expense (or action in respect thereof) arises out
of, or is based upon: (i) a breach by the Trading Manager of any representation,
warranty, or agreement in this Agreement or the failure by the Trading Manager
to perform any covenant made by it herein; (ii) the factual accuracy of the
information relating to the Trading Manager in the Customer Brochure; or (iii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus or 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, in light of the circumstances under which they were made) not
misleading, provided that such misleading or untrue statement or alleged
misleading or untrue statement or omission or alleged omission relates to the
Trading Manager or its Trading Manager Principals (including the historical
performance tables but excluding the pro forma performance information unless
such statement or omission was based on information furnished by the Trading
Manager in connection with the preparation of such pro forma performance
information) or was made in reliance upon, and in conformity with, information
or instructions furnished by the Trading Manager.
(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
indemnitees 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 Manager is engaged in the business of advising
persons as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Manager, its principals and affiliates, will be
advising others (including affiliates and the stockholders, officers, directors,
and employees of the Trading Manager and its affiliates and their families) and
trading for their own accounts. The Trading Manager hereby agrees that in
connection with making trading decisions for the Partnership and for other
accounts which it manages, the Trading Manager will act in good faith to seek an
equitable treatment of all accounts under management (taking into account, among
other factors, the Trading Manager's responsibilities to all such accounts, and
the fact that the accounts may have different trading programs and strategies,
different investment objectives, different asset bases and portfolio
compositions, different investment and leveraging policies and restrictions,
different trading commencement dates and differing inflows and outflows of
equity), and subject to that standard, the Trading Manager or any of its
principals or affiliates shall be free to advise and manage accounts for other
persons and shall be free to trade on the basis of the same trading systems,
methods, or strategies employed by the Trading Manager for the account of the
Partnership, or trading 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.
(b) The Trading Manager shall not be restricted as to the
number or nature of its clients, except that so long as the Trading Manager acts
as Trading Manager for the Partnership: (i) the Trading Manager acts as a
trading manager for the Partnership, neither the Trading Manager nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Manager, or the
principals or affiliates of the Trading Manager 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 Manager 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 Manager under the rules or regulations
of the CFTC or any other regulatory body, exchange, or board so as to require in
the good faith opinion of the Trading Manager the significant modification of
positions taken or intended for the account of the Partnership; provided that
the Trading Manager may modify its trading systems, methods or strategies to
accommodate the trading of additional funds or accounts. If applicable
speculative position limits are exceeded by the Trading Manager 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 Manager and its principals and affiliates shall promptly liquidate
positions in all of their accounts, including the Partnership's account, in a
good faith effort to achieve an equitable treatment of all accounts managed by
them consistent with their responsibilities to all such accounts and the fact
that different accounts may have different trading programs and strategies,
different investment objectives, different asset bases and portfolio
compositions, different investment and leverage policies and restrictions and
other differences to the extent necessary to comply with the applicable position
limits.
10. Representations, Warranties, and Covenants of the
Trading Manager.
(a) Representations of the Trading Manager. The Trading
Manager 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 Manager 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 Manager from
time to time.
(iii) The Trading Manager 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 DWR, and such commodity
interests which are approved in writing by the General Partner.
(iv) The Trading Manager 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
Manager's ability to perform its duties under this Agreement. The
Trading Manager 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 Commodity Exchange Act) of the Trading Manager are
those set forth in the Prospectus (the "Trading Manager Principals").
(v) All references to the Trading Manager and each Trading
Manager Principal, including the Trading Manager's trading approaches,
systems, and performance, in the Registration Statement and the
Prospectus, and in the supplemental sales literature which has been
approved in writing by the Trading Manager, are accurate and complete
in all material respects. With respect to the material relating to the
Trading Manager and each Trading Manager Principal, including the
Trading Manager's and the Trading Manager Principals' trading
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 Commodity
Exchange Act, (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 Manager and is a valid
and binding agreement of the Trading Manager enforceable in accordance
with its terms.
(vii) Each of the Trading Manager and each "principal" of the
Trading Manager, as defined in Rule 3.1 under the Commodity Exchange
Act, has all federal and state governmental, regulatory and exchange
licenses and approvals and has effected all filings and registrations
with federal and state governmental and regulatory agencies required to
conduct its 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 Manager is registered as a commodity
trading advisor under the Commodity Exchange Act 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 Manager 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 Manager or any Trading Manager 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
Manager's knowledge threatened, any action, suit or proceeding before
or by any court or other governmental body to which the Trading Manager
or any Trading Manager Principal is or was a party, or to which any of
the assets of the Trading Manager 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 prospectus
of the Trading Manager or which would be material to an investor's
decision to invest in the Partnership. None of the Trading Manager or
any Trading Manager Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the
Trading Manager or any of the Trading Manager Principals with the
Commodity Exchange Act.
(xi) Neither the Trading Manager nor any Trading Manager
Principal has received, or is entitled to receive, directly or
indirectly, any commission, finder's fee, similar fee, or rebate from
any person in connection with the organization or operation of the
Partnership, other than as described in the Prospectus.
(xii) The actual performance of each discretionary account of
a client directed by the Trading Manager and the Trading Manager
Principals since at least the later of (i) the date of commencement of
trading for each such account or (ii) a date five years prior to the
effective date of the Registration Statement, is disclosed in the
Prospectus (other than such discretionary accounts the performance of
which are exempt from Commodity Exchange Act disclosure requirements);
all of the information regarding the actual performance of the accounts
of the Trading Manager and the Trading Manager Principals set forth in
the Prospectus is complete and accurate in all material respects and is
in accordance with and in compliance with the disclosure requirements
under the Commodity Exchange Act and the Securities Act, including the
Division of Trading and Markets "notional equity" advisories and
interpretations and the rules and regulations of the NFA. The
methodology used in the Prospectus in presenting the actual past
performance of the Trading Manager was developed in consultation with
the Chief Accountant of the CFTC in a series of telephone conversations
in which representatives of the Trading Manager and the General Partner
participated. This methodology differs materially from prior
presentation by the Trading Manager of its past performance.
(b) Covenants of the Trading Manager. The Trading Manager
covenants and agrees that:
(i) The Trading Manager shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Manager 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 Manager's ability to act as described
herein.
(ii) The Trading Manager shall inform the General Partner
immediately as soon as the Trading Manager 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 Manager. The Trading Manager shall also inform the General
Partner immediately if the Trading Manager or any of its officers
become aware of any breach of this Agreement by the Trading Manager.
(iii) The Trading Manager 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.
(c) Limitations on the Trading Manager's Representations. As
of the date of this Agreement, the Trading Manager does not have a commodity
trading advisor disclosure document filed with and accepted by the Division of
Trading and Markets of the CFTC (the "Division") although one is currently under
review by the Division. Consequently, to the extent any of the representations
given in this Agreement by the Trading Manager relate to or can be construed as
relating to a commodity trading advisor disclosure document valid, on file with
and accepted by, the Division none is given.
11. Representations and Warranties of the General
Partner and the Partnership.
The General Partner and the Partnership represent and warrant
to the Trading Manager, as follows:
(i) The Partnership has provided to the Trading Manager, and
filed with the Securities and Exchange Commission (the "SEC"), the
Registration Statement and has filed copies thereof with: (i) the CFTC
under the Commodity Exchange Act and the rules and regulations
promulgated thereunder (collectively, the "Commodity Act"); (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 Manager 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 have been taken; and, upon
payment of the consideration therefor specified in each accepted
Subscription Agreement and Power of Attorney or Exchange Agreement and
Power of Attorney, as applicable, in such forms are attached to the
Prospectus (except as otherwise specified herein, the term
"Subscription Agreement and Power of Attorney" shall also mean the
Exchange Agreement and Power of Attorney in case of subscribers
executing same), 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
Commodity Act. When the Registration Statement becomes effective under
the 1933 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 1933 Act, the SEC
Regulations, the rules of the NFA and the Commodity Act. 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 sales
literature, 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 sales literature will comply with the Commodity Act
and the regulations and rules of the NFA and NASD. This representation
and warranty shall not, however, apply to any statement or omission in
the Registration Statement, Prospectus or supplemental sales literature
made in reliance upon and in conformity with information furnished by
and relating to the Trading Manager, its trading methods or its trading
performance.
(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 the General Partner and constitutes a valid, binding
and enforceable agreement of the Partnership and the General Partner in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth therein and the consummation of
the transactions contemplated therein 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 neither the
General Partner nor any of the principals of the General Partner, as
"principals" is defined under Rule 4.10 under the Commodity Act
("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 Commodity Act or the 1933 Act which is material to
an investor's decision to invest in the Partnership.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the Commodity Act, have all
federal and state governmental, regulatory and exchange approvals and
licenses, and have effected all filings and registrations with federal
and state and foreign governmental 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 Commodity Act 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 Manager
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
Manager 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 Manager
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 Manager.
The Trading Manager 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 systems or methods, or its
goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Manager, provided that
such entity expressly assumes all obligations of the Trading Manager under this
Agreement and agrees to continue to operate the business of the Trading Manager,
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 Manager shall, at the Partnership's Initial
Closing 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 Manager
in this Agreement are true, accurate, and complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Manager 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 Manager, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Manager 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 Manager's ability to perform
its obligations under this Agreement. The Trading Manager 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 Manager (including the Trading Manager
Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses and memberships
required by law, and the Trading Manager (including the Trading Manager
Principals) has received or made all filings and registrations
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 the 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 Manager and constitutes a
valid and binding agreement of the Trading Manager 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 such agreements may be limited by applicable
law or public policy.
(iv) Based upon due inquiry of certain officers of the Trading
Manager, to the best of such counsel's knowledge, except as disclosed
in the Prospectus, there are no material actions, claims or proceedings
known to such counsel either threatened or pending in any court or
before or by any governmental or administrative body nor have there
been any such actions, claims or proceedings at any time within the
five years preceding the date of the Prospectus against the Trading
Manager or any Trading Manager 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 of bylaws of the Trading Manager and, based upon due
inquiry of certain officers of the Trading Manager, 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 Manager is bound and will not violate any order, law,
rule or regulation applicable to the Trading Manager of any court or
any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading
Manager.
(vi) Based upon reliance on certain SEC No-Action letters, as
of the closing the performance by the Trading Manager of the
transactions contemplated by this Agreement and as described in the
Prospectus will not require the Trading Manager 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 Manager and the Trading
Manager 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 Manager or the Trading Manager Principals, in
light of the circumstances under which they were made, not misleading;
provided, however, that such counsel need express no opinion or belief
as to the performance data and notes or descriptions thereto set forth
in the Registration Statement and Prospectus, except that such counsel
shall opine, without rendering any opinion as to the accuracy of the
information in such tables, that the actual performance tables of the
Trading Manager set forth in the Prospectus comply as to form in all
material respects with applicable CFTC rules and all CFTC and NFA
interpretations thereof, except as disclosed in the Prospectus.
In giving the foregoing opinion, counsel may rely
on information obtained from public officials, officers of the Trading Manager,
and other resources believed by it to be responsible and may assume that
signatures on all documents examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a report
dated the date of the closing which shall present, for the period from the date
after the last day covered by the historical performance records in the
Prospectus to the latest practicable day before closing, figures which shall be
a continuation of such historical performance records and which shall certify
that such figures are, to the best of such Trading Manager's knowledge, accurate
in all material respects.
(2) The General Partner shall, at the Partnership's Initial
Closing and at the request of the Trading Manager at any Monthly Closing (as
defined in the Prospectus), provide the following:
(a) To the Trading Manager a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Manager, 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 1933 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 1933 Act or the Commodity Act.
(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 at
the Initial Closing, 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 with full corporate power and authority to act as
general partner of the Partnership 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 Commodity Act, and the Partnership have
all federal and state governmental and regulatory licenses and
memberships required by law and have received or made all filings and
registrations 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 and therein set forth and the consummation of the
transactions contemplated herein and therein 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, law, rule 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.
(vi) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of the General Partner, there are no
actions, claims or proceedings pending or threatened in any court or
before or by any governmental or administrative body, nor have there
been any such suits, claims or proceedings within the five years
preceding the date of the Prospectus, to which the General Partner, any
General Partner Principal, 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 materially adversely affect the condition,
financial or otherwise, or business of the General Partner, or the
Partnership, whether or not arising in the ordinary course of business,
or impair their ability to discharge their obligations as described in
the Prospectus.
(vii) The Registration Statement is effective under the 1933
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 1933 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 1933 Act, the
Securities Regulations, the Commodity Act 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 were 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 Manager 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 Agreement and
Power of Attorney in the forms referred to in the Prospectus have 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 Manager agrees not to file, participate in the
filing of, or publish any description of the Trading Manager, 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. No such
description shall be published or filed to which the General Partner reasonably
objects, except as otherwise required by law.
19. Disclosure Documents.
During the term of this Agreement, the Trading Manager shall
furnish to the General Partner promptly copies of all disclosure documents filed
with the CFTC or NFA by the Trading Manager. The General Partner acknowledges
receipt of the Trading Manager's disclosure document dated June 17, 1994.
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 second business day following the day on which
it is so mailed, addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
if to the Partnership:
Dean Witter Spectrum Balanced 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 Manager:
RXR, Inc.
Financial Centre
695 East Main Street, Suite 102
Stamford, Connecticut 06880
Attn: Mark Rosenberg
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.
22. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading Manager agrees not to seek any
prejudgment equitable or ancillary relief. The Trading Manager agrees that its
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement.
23. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
<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 BALANCED L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Mark J. Hawley
------------------------------
DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley
------------------------------
RXR, INC.
By: /s/ Mark Rosenberg
------------------------------
AMENDED AND RESTATED CUSTOMER AGREEMENT
THIS AMENDED AND RESTATED CUSTOMER AGREEMENT (this
"Agreement"), made as of the 1st day of December, 1997, by and between DEAN
WITTER SPECTRUM BALANCED 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 April 29, 1994, and a Limited Partnership Agreement dated
as of May 27, 1994, as amended, 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 1.25% of the Customer's Net Assets (a 1.25% 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 100% 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 BALANCED 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 BALANCED
L.P.
By:Demeter Management Corporation,
General Partner
By /s/ Mark J. Hawley
---------------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS, INC.
By /s/ Mark M. 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 |o| Project A(TM) Customer Information
for Futures and Options Statement
(in the form 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 |o| CME Average Pricing System Disclosure
for After Hours Statement
Electronic Markets
|o| NYMEX ACCESS(SM) Risk Disclosure |o| Special Notice to Foreign Brokers
Statement 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 GLOBAL BALANCED 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)
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 1st
day of December, 1997, by and among DEAN WITTER SPECTRUM BALANCED 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 April 29, 1994, and a Limited Partnership Agreement dated
as of May 27, 1994 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 December 1, 1997 (the "DWR
Customer Agreement"), whereby DWR agreed to perform certain non-clearing futures
interests brokerage and other services for the Customer; and
WHEREAS, the Customer, DWR and CFI wish to enter into this
Agreement to set forth the terms and conditions upon which CFI will perform
futures interests execution and clearing services for the Customer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. 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 BALANCED 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 BALANCED 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) /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) (Required for
accounts holding non-U.S. /S/ MARK J. HAWLEY 12/1/97
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 ACCESS (SM) Risk Disclosure Statement
o Globex(R)Customer Information and Risk Disclosure Statement
o Project A(TM)Customer Information Statement
o Questions & Answers on Flexible Options Trading at the CBOT
o CME Average Pricing System Disclosure Statement
o Special Notice to Foreign Brokers and Foreign Traders
REQUIRED SIGNATURES
CUSTOMER
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify Carr in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
Dean Witter Spectrum Global Balanced 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: Bruce A. Beatus Title: Susan Schultz
--------------------------- -------------------------
General Counsel Associate General Counsel
---------------------------
Date: December 1, 1997 Date: December 1, 1997
----------------------------- --------------------------
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 GLOBAL
BALANCED 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.
(a) 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 GLOBAL
BALANCED
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 Global Balanced 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:
With copies to Party A's designated Trading Advisors
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. Murrary
With copies to Party A's designated Trading Advisors
If sent to Party B:
Address: Carr Futures Inc.
One World Trade
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
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,
ABA: 021-000089 Chicago
Account Name: Dean Witter ABA: 071.000.228
Reynolds For the Account of Carr Futures
Account Bi, 40611164 Inc., Chicago
FFC: Dean Witter Customer Segregated
Spectrum Global Account No. 203-908-9
Balanced L.P., FFC: Dean Witter
Account # (As Party B is Spectrum Global
notified from time to time) Balanced L.P.,
Account # (As Party A is
notified from time to time.
Part V. Netting
-------
A. Settlement Netting Offices
--------------------------
Each of the following shall be a Settlement Netting Office:
Party A: Same as in Part II.
Party B: Same as in Part II.
B. Novation Netting Offices
------------------------
Each of the following shall be a Novation Netting Office:
Party A: Same as in Part V-A.
Party B: Same as in Part V-A.
C. Matched Pair Novation Netting Offices
-------------------------------------
Each of the following shall be a Matched Pair Novation
Netting Office:
Party A: Not Applicable.
Party B: Not Applicable.
Part VI Cash Settlement of FX Transactions
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include
foreign exchange transactions for the purchase and sale of
one Currency against another but which shall be settled by
the delivery of only one Currency based on the difference
between exchange rates as agreed by the Parties as
evidenced in a Confirmation. Section 3.1 is modified so
that only one Currency shall be delivered for any such FX
Transaction in accordance with the formula agreed by the
Parties. Section 5.1(b)(I)(A) is modified so that the
Close-Out Amount for any such FX Transaction for which the
cash settlement amount has been fixed on or before the
Close-Out Date pursuant to the terms of such FX Transaction
shall be equal to the Currency Obligation arising therefrom
(increased by adding interest in the manner provided in
clause (A)(2) if the Value Date precedes the Close-Out
Date) and for any such FX Transaction for which the cash
settlement amount has not yet been fixed on the Close-Out
Date pursuant to the terms of such FX Transaction, the
Close-Out Amount shall be as determined by the
Non-Defaulting Party in good faith and in a commercially
reasonable manner.
Part VII Base Currency
-------------
Party A's Base Currency is the United States dollar.
Party B's Base Currency is the United States dollar.
Part VIII Threshold Amount
----------------
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 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.
A. The following FDICIA representations 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 counter parties) 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
--------------------
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.
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) BOOKMARK NOT DEFINED. 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.
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Spectrum Global Balanced 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> 43,020,361
<SECURITIES> 0
<RECEIVABLES> 1,330,238<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,317,786<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,317,786<F3>
<SALES> 0
<TOTAL-REVENUES> 8,042,090<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,464,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,577,888
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,577,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,577,888
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $1,163,097 and
interest receivable of $167,141.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $1,967,187.
<F3>Liabilities include redemptions payable of $118,190, accrued
brokerage fees of $169,841, management fee of $46,153 and
incentive fees payable of $69,730.
<F4>Total revenue includes realized trading revenue of $5,113,920,
net change in unrealized of $1,285,628 and interest income of
$1,642,542.
</FN>
</TABLE>
