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 0-26338
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DEAN WITTER SPECTRUM TECHNICAL L.P.
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(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3782231
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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: $239,911,839.82 at January 31,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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DEAN WITTER SPECTRUM TECHNICAL L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1998
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1
Part I.
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 2-5
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 5-7
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II.
Item 5. Market for the Registrant's Partnership
Units and Related Security Holder Matters . . . . . 7-8
Item 6. Selected Financial Data . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 10-18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . 18-33
Item 8. Financial Statements and Supplementary Data. . . . . 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . 32
Part III.
Item 10. Directors and Executive Officers of the Registrant . 33-38
Item 11. Executive Compensation . . . . . . . . . . . . . . . 37
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . 38
Item 13. Certain Relationships and Related Transactions . . 38
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . 39
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form l0-K
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Partnership's Prospectus dated
January 21, 1999 I
Annual Report to Dean Witter
Spectrum Series Limited Partners
for the year ended December 31, 1998 II, III and IV
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PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Spectrum Technical
L.P. (the "Partnership") is a Delaware limited partnership organized to engage
in the speculative trading of futures, forward and options contracts on 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 Global Balanced L.P., Dean Witter Spectrum Strategic 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"). The
trading advisors to the Partnership are Campbell & Company, Inc., Chesapeake
Capital Corporation, and John W. Henry & Company, Inc., (collectively, the
"Trading Advisors").
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The Partnership registered 5,000,000 additional Units of Limited
Partnership Interest ("Units") pursuant to a Registration Statement on Form S-1
(SEC File number 333-478311), which became effective May 11, 1998.
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 managing underwriter for the Spectrum Series is DWR.
10,000,000 additional Units were registered pursuant to another
Registration Statement on Form S-1 (SEC File Number 333-68779), which became
effective January 21, 1999.
The Partnership's Net Asset Value per Unit as of December 31, 1998 was
$16.12, representing an increase of 10.18 percent from the Net Asset Value per
Unit of $14.63 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 Advisors. For a detailed description of the
different facets of the Partnership's business, see
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those portions of the Partnership's Prospectus, dated January 21, 1999, (the
"Prospectus") incorporated by reference in this Form 10-K, set forth below.
Facets of Business
------------------
1. Summary 1. "Summary of the Prospectus"
(Pages 1-6 of the
Prospectus).
2. Futures, Options and 2. "The Futures, Options
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 4. "The Trading Advisors -
Partnership The Management Agree-
ments" (Page 49 of the
Prospectus),"The
General Partner"(Pages47-48
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).
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(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
The Partnership has not engaged in any operations in foreign
countries; however, the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks are the contracting party and
trades in futures interests on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the
offices of DWR. The DWR offices utilized by the Partnership are located at Two
World Trade Center, 62nd Floor, New York, NY 10048.
Item 3. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar
purported class actions were filed in the Superior Court of the State of
California, County of Los Angeles, on behalf of all purchasers of interests in
limited partnership commodity pools sold by DWR. Named defendants include DWR,
Demeter, Dean Witter Futures & Currency Management Inc.("DWFCM"), MSDW (all such
parties referred to hereafter as the "Dean Witter Parties"), 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 Corporation
<PAGE>
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Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair
business practices, unjust enrichment, and conversion in the sale and operation
of the various limited partnership commodity pools. Similar purported class
actions were also filed on September 18 and 20, 1996, in the Supreme Court of
the State of New York, New York County, and on November 14, 1996 in the Superior
Court of the State of Delaware, New Castle County, against the Dean Witter
Parties and certain trading advisors on behalf of all purchasers of interests in
various limited partnership commodity pools sold by DWR. A consolidated and
amended complaint in the action pending in the Supreme Court of the State of New
York was filed on August 13, 1997, alleging that 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
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defendants. The Dean Witter Parties believe that they have strong defenses to,
and they will vigorously contest, the actions. Although the ultimate outcome of
legal proceedings cannot be predicted with certainty, it is the opinion of
management of the Dean Witter Parties that the resolution of the actions will
not have a material adverse effect on the financial condition or the results of
operations of any of the Dean Witter Parties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
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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 22,257. 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.
The Partnership registered 5,000,000 additional Units pursuant to a
Registration Statement on Form S-1 (SEC File Number 333-478311), which became
effective May 11, 1998.
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, 18,612,023.384 Units have been sold, leaving
4,387,976.616 Units unsold as of December 31, 1998. The aggregate price of the
Units sold through December 31, 1998 is $239,580,695.
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
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Proceeds and Trading Policies" section of the Prospectus.
10,000,000 additional Units were registered pursuant to another
Registration Statement on Form S-1 (SEC File Number 33-68779), which became
effective January 21, 1999.
<PAGE>
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Item 6. SELECTED FINANCIAL DATA (in dollars)
<TABLE>
<CAPTION>
For the Period from
November 2, 1994
(commencement
For the Years Ended December 31, of operations) to
1998 1997 1996 1995 December 31, 1994
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues
(including interest) 49,940,173 29,527,587 28,025,066 9,239,533 5,935
Net Income (Loss) 22,801,370 11,707,084 15,901,317 4,261,868 (232,179)
Net Income (Loss)
Per Unit (Limited
& General Partners) 1.49 1.02 2.11 1.72 (.22)
Total Assets 258,673,911 184,769,817 114,822,056 60,075,842 15,084,678
Total Limited
Partners' Capital 252,455,045 180,099,271 111,852,280 58,726,495 14,771,789
Net Asset Value Per
Unit of Limited
Partnership Interest 16.12 14.63 13.61 11.50 9.78
</TABLE>
<PAGE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate futures interest
trading accounts. Such assets are held in either non-interest bearing bank
accounts or in securities approved by the Commodity Futures Trading Commission
("CFTC") for investment of customer funds. The Partnership's assets held by DWR
and Carr may be used as margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in futures interests, it is expected that
the Partnership will continue to own such liquid assets for margin purposes.
The Partnership's investment in futures interests may, from time to
time, be illiquid. Most United States futures exchanges limit fluctuations in
certain futures interest prices during a single day by regulations referred to
as "daily price fluctuations limits" or "daily limits". Pursuant to such
regulations, during a single trading day no trades may be executed at prices
beyond the daily limit. If the price for a particular future 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
<PAGE>
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within the limit. Futures interests prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its futures
interests and result in restrictions on redemptions.
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 $255,101,434, an increase of $73,150,927 from the
Partnership's total capital of $181,950,507 at December 31, 1997. For
<PAGE>
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the year ended December 31, 1998, the Partnership generated net income of
$22,801,370, total subscriptions aggregated $70,451,681 and total redemptions
aggregated $20,102,124.
For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $49,940,173. The Partnership's total
expenses for the year were $27,138,803, resulting in net income of $22,801,370.
The value of an individual unit in the Partnership increased from $14.63 at
December 31, 1997 to $16.12 at December 31, 1998.
As of December 31, 1997, the Partnership's total capital was
$181,950,507, an increase of $68,964,878 from the Partnership's total capital of
$112,985,629, at December 31, 1996. For the year ended December 31, 1997, the
Partnership generated net income of $11,707,084, total subscriptions aggregated
$69,682,458 and total redemptions aggregated $12,424,664.
For the year ended December 31, 1997, the Partnership's total trading
revenues including interest income were $29,527,587. The Partnership's total
expenses for the year were $17,820,503, resulting in net income of $11,707,084.
The value of an individual unit in the Partnership increased from $13.61 at
December 31, 1996 to $14.63 at December 31, 1997.
As of December 31, 1996, the Partnership's total capital was
$112,985,629, an increase of $53,659,250 from the Partnership's total
<PAGE>
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capital of $59,326,379 at December 31, 1995. For the year ended December 31,
1996, the Partnership generated net income of $15,901,317, total subscriptions
aggregated $44,442,998 and redemptions aggregated $6,685,065.
For the year ended December 31, 1996, the Partnership's total trading
revenues including interest income were $28,025,066. The Partnership's total
expenses for the year were $12,123,749, resulting in net income of $15,901,317.
The value of an individual unit in the Partnership increased from $11.50 at
December 31, 1995 to $13.61 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.
<PAGE>
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In general, a clearinghouse is backed by the membership of the exchange and will
act in the event of non-performance by one of its members or one of its member's
customers, and, as such, should significantly reduce this credit risk. For
example, a clearinghouse may cover a default by (i) drawing upon a defaulting
member's mandatory contributions and/or non-defaulting members' contributions to
a clearinghouse guarantee fund, established lines or letters of credit with
banks, and/or the clearinghouse's surplus capital and other available assets of
the exchange and clearinghouse, or (ii) assessing its members.
In cases where the Partnership trades on a foreign exchange where the
clearinghouse is not funded or guaranteed by the membership or where the
exchange is a "principals' market" in which performance is the responsibility of
the exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the sole
recourse of the Partnership will be the clearinghouse, the exchange member or
the off-exchange contract counterparty, as the case may be. There can be no
assurance that a clearinghouse, exchange or other exchange member will meet its
obligations to the Partnership, and the Partnership is not indemnified against a
default by such parties from Demeter, MSDW or DWR.
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
<PAGE>
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effected for the broker's customers. Any such obligation on the part of the
broker appears even less clear where the default occurs in a non-US
jurisdiction.
Demeter deals with the credit risks of all partnerships for which it
serves as general partner in several ways. First, it monitors the Partnership's
credit exposure to each exchange on a daily basis, calculating not only the
amount of margin required for it but also the amount of its unrealized gains at
each exchange, if any. The commodity brokers inform the Partnership, as with all
their customers, of its net margin requirements for all its existing open
positions, but do not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the Partnership's
potential margin liability, exchange by exchange. Demeter is then able to
monitor the Partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of its net
assets that can be committed at any given time to futures contracts and require,
in addition, a certain minimum amount of diversification in the Partnership's
trading, usually over several different products. One 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.
<PAGE>
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Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the smooth functioning
of computer systems. Many computer systems in use today cannot recognize the
computer code for the year 2000, but revert to 1900 or some other date. This is
commonly known as the "Year 2000 Problem." The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly process and calculate date-related
information and data concerning dates on or after January 1, 2000. Such a
failure could adversely affect the handling or determination of futures trades
and prices and other services.
MSDW began its planning for the Year 2000 Problem in 1995, and
currently has several hundred employees working on the matter. It has developed
its own Year 2000 compliance plan to deal with the problem and had the plan
approved by the company's executive management, Board of Directors and
Information Technology Department. Demeter is coordinating with MSDW to address
the Year 2000 Problem with respect to Demeter's computer systems that affect the
Partnership. This includes hardware and software upgrades, systems consulting
and computer maintenance.
Beyond the challenge facing internal computer systems, the systems
failure of any of the third parties with whom the Partnership has a material
relationship - the futures exchanges and clearing organizations through which it
trades, Carr, or the Trading Advisors - could result in
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a material financial risk to the Partnership. All U.S. futures exchanges are
subject to monitoring by the CFTC of their Year 2000 preparedness and the major
foreign futures exchanges are also expected to be subject to market-wide testing
of their Year 2000 compliance during 1999. Demeter intends to monitor the
progress of Carr and the Trading Advisors throughout 1999 in their Year 2000
compliance and, where applicable, to test its external interface with Carr and
the Trading Advisors.
A worst case scenario would be one in which trading of contracts on
behalf of the Partnership becomes impossible as a result of the Year 2000
Problem encountered by any third parties. A less catastrophic but more likely
scenario would be one in which trading opportunities diminish as a result of
technical problems resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency plans" in the
event that the systems of such third parties fail. Demeter intends to consult
closely with MSDW in implementing those plans. Despite the best efforts of both
Demeter and MSDW, however, it is possible that these steps will not be
sufficient to avoid any adverse impact to the Partnership.
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 - 19 - sovereign currencies will
continue to exist but only as a fixed denomination of the euro. Conversion to
the euro prevents the Trading Advisors from trading in certain currencies and
thereby limits their ability to take advantage of potential market opportunities
that might otherwise have existed had separate currencies been available to
trade. This could adversely affect the performance results of the Partnership.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the speculative trading
of futures interests. The market sensitive instruments held by the Partnership
are acquired solely for speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's primary business activities.
The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon 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
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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.
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
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Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Partnership accounts for open positions on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of the Partnership's
open positions is directly reflected in the Partnership's earnings, whether
realized or unrealized, and the Partnership's cash flow, as profits and losses
on open positions of exchange-traded futures interests are settled daily through
variation margin.
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisors is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical 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
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prices, interest rates, foreign exchange rates, as well as correlation that
exists among these variables. The hypothetical changes in portfolio value are
based on daily observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is sensitive. In the case
of the Partnership's VaR, the historical observation period is approximately
four years. The Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based on observed market risk factor moves, would have
been exceeded once in 100 trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either Demeter
or the Trading Advisors in their daily risk management activities.
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 $255 million.
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Primary Market December 31, 1998
Risk Category Value at Risk
-------------- ------------------
Interest Rate (1.25)%
Currency (.68)
Equity (.43)
Commodity (.60)
Aggregate Value at Risk (1.60)%
Aggregate value at risk represents the aggregate VaR of the Partnership's open
positions and not the sum of the VaR of the individual categories listed above.
Aggregate VaR will be lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open positions at
December 31, 1998 only and is not necessarily representative of either the
historic or future risk of an investment in the Partnership. As the
Partnership's sole business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can change
significantly over any given time period or even within a single trading day.
Such changes in open positions could materially impact market risk as measured
by VaR either positively or negatively.
<PAGE>
- 24 -
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 (2.08)% (.89)% (1.56)%
Currency (1.92) (.68) (1.51)
Equity (.61) (.43) (.51)
Commodity (.69) (.46) (.57)
Aggregate Value at Risk (3.02)% (1.60)% (2.43)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable margin requirements, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of ruin" not typically found in other
investment vehicles. Due to the relative size of the positions held, certain
market conditions may cause the Partnership to incur losses greatly in excess of
VaR within a short
<PAGE>
- 25 -
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 predictive of the
Partnership's future financial performance or its ability to manage and monitor
risk and there can be no assurance
<PAGE>
- 26 -
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 88%) 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.
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
<PAGE>
- 27 -
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by Demeter and the
Trading Advisors for managing such exposures are subject to numerous
uncertainties, contingencies and risks, any one of which could cause the actual
results of the Partnership's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Partnership. Investors must be prepared to
lose all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of December 31, 1998, by market sector. It may be anticipated
however, that these market exposures will vary materially over time.
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
<PAGE>
- 28 -
indirectly the value of its stock index and currency positions. Interest rate
movements in one country as well as relative interest rate movements between
countries materially impact the Partnership's profitability. The Partnership's
primary interest rate exposure is to interest rate fluctuations in the United
States and the other G-7 countries. However, the Partnership also takes futures
positions in the government debt of smaller nations - e.g. Australia. Demeter
anticipates that G-7 interest rates will remain the primary market exposure of
the Partnership for the foreseeable future. The changes in interest rates which
have the most effect on the Partnership are changes in long-term, as opposed to
short-term, rates. Most of the speculative futures positions held by the
Partnership are in medium-to-long term instruments. Consequently, even a
material change in short-term rates would have little effect on the Partnership
were the medium-to-long term rates to remain steady.
CURRENCY. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two currencies other
than the U.S. dollar. However, the
<PAGE>
- 29 -
Partnership's major exposures have typically been in the dollar/yen, dollar/mark
and dollar/pound positions. Demeter does not anticipate that the risk profile of
the Partnership's currency sector will change significantly in the future,
although it is difficult at this point to predict the effect of the introduction
of the Euro on the Trading Advisors' currency trading strategies.
EQUITY. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 1998, the
Partnership's primary exposures were in the ASE (Australia), 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 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 some of the Trading
Advisors will from time to time trade base metals such as aluminum, copper,
nickel, lead, tin and zinc, the principal market
<PAGE>
- 30 -
exposures of the Partnership have consistently been in the precious metals, gold
and silver. The Trading Advisors' gold trading has been increasingly limited due
to the long-lasting and mainly non-volatile decline in the price of gold over
the last 10-15 years. However, silver prices have remained volatile over this
period, and the Trading Advisors have from time to time taken substantial
positions as they have perceived market opportunities to develop. Demeter
anticipates that gold and silver will remain the primary metals market exposure
for the Partnership.
Soft Commodities. One of the Partnership's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, and
coffee 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 Advisors
will maintain an emphasis on soybeans, grains, and coffee, 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 Advisors trade natural gas to a limited extent, oil
is by far the dominant energy market exposure of
<PAGE>
- 31 -
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 Advisors, severally, attempt
to manage the risk of the Partnership's open positions are essentially the same
in all market categories traded. Demeter attempts to manage the Partnership's
market exposure by (i) diversifying the Partnership's assets among different
Trading Advisors, each of whose strategies focus on different market sectors and
trading approaches, and (ii), monitoring the performance of the Trading Advisors
on a daily
<PAGE>
- 32 -
basis. In addition, the Trading Advisors establish diversification guidelines,
often set in terms of the maximum margin to be committed to positions in any one
market sector or market sensitive instrument. One should be aware that certain
Trading Advisors treat their risk control policies as strict rules, whereas
others treat such policies as general guidelines.
Demeter monitors and controls the risk of the Partnership's non-trading
instrument, cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Advisors.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the Annual Report to
Limited Partners for the year ended December 31, 1998 and is incorporated by
reference in this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
- 33 -
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership. The Partnership
is managed by Demeter.
Directors and Officers of the General Partner
The directors and executive 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.
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
<PAGE>
- 34 -
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 December 31, 1998, Mr. Murray replaced Mr. Hawley as President of
Demeter. Mr. Murray is also a Senior Vice President of DWR's Managed Futures
Department and is the Senior Administrative Officer of DWFCM. Mr. Murray began
his career at DWR in 1984 and is
<PAGE>
- 35 -
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>
- 36 -
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>
- 37 -
President. Mr. Harris received his B.A. degree from Boston College and his
M.B.A. in finance from the University of Chicago.
Richard M. DeMartini, age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31, 1998, Mr. DeMartini resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.
Lawrence Volpe, age 51, served as a Director to Demeter throughout
1998. Effective as of the close of business on December 31, 1998, Mr. Volpe
resigned as a Director of Demeter.
Patti L. Behnke, age 38, served as Vice President and Chief Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of Demeter in order to take on new
responsibilities as Operations Officer - Controllers Division for MSDW, and was
replaced by Mr. Raibley.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a limited
partnership, the business of the Partnership is managed by Demeter, which is
responsible for the administration of the business affairs of the Partnership
but receives no compensation for such services.
<PAGE>
- 38 -
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of December
31, 1998 there were no persons known to be beneficial owners of more than 5
percent of the Units.
(b) Security Ownership of Management - At December 31, 1998, Demeter
owned 164,158.204 Units of General Partnership Interest representing a 1.04
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 $15,543,787 for
the year ended December 31, 1998.
<PAGE>
- 39 -
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and 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>
- 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 TECHNICAL L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 24, 1999 BY: /s/ Robert E. Murray
-----------------------------------
Robert E. Murray, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray March 25, 1999
----------------------------------------
Robert E. Murray, Director and
President
/s/ Mark J. Hawley March 25, 1999
---------------------------------------
Mark J. Hawley, Director
and Chairman of the Board
/s/ Joseph G. Siniscalchi March 25, 1999
----------------------------------------
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 25, 1999
---------------------------------------
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin March 25, 1999
---------------------------------------
Mitchell M. Merin, Director
/s/ Richard A. Beech March 25, 1999
---------------------------------------
Richard A. Beech, Director
/s/ Ray Harris March 25, 1999
---------------------------------------
Ray Harris, Director
/s/ Lewis A. Raibley, III March 25, 1999
---------------------------------------
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal
Accounting Officer
<PAGE>
- 41 -
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.
10.01 Management Agreement, dated as of November 1, 1994, among the
Partnership, Demeter Management Corporation, and Campbell & Company,
Inc. is filed herewith.
10.02 Management Agreement, dated as of November 1, 1994, among the
Partnership, Demeter Management Corporation, and Chesapeake Capital
Corporation is filed herewith.
10.03 Management Agreement, dated as of November 1, 1994, among the
Partnership, Demeter Management Corporation, and John W. Henry & Co.
is filed herewith
10.04 Amended and Restated Customer Agreement, dated as of December 1,
1997, between the Partnership and Dean Witter Reynolds Inc. is filed
herewith.
10.05 Customer Agreement, dated as of December 1, 1997, among the
Partnership, Carr Futures, Inc., and Dean Witter Reynolds Inc. is
filed herewith.
10.06 International Foreign Exchange Master Agreement, dated as of August
1, 1997, between the Partnership and Carr Futures, Inc. is filed
herewith.
10.07 Subscription and Exchange Agreement and Power of Attorney to be
executed by each purchaser of Units is incorporated by reference to
Exhibit B of the Partnership's Prospectus dated January 21, 1999,
filed with the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on January
26, 1999.
10.08 Escrow Agreement, dated September 30, 1994, among 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.
Exhibit 10.01
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among DEAN WITTER SPECTRUM TECHNICAL L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and CAMPBELL & COMPANY, INC., a Maryland 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 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;
<PAGE>
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), any client accounts over which it has
discretionary trading authority (other than the names of any such clients), and
otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA") 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 investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with
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
-2-
<PAGE>
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. In performing services
to the Partnership the Trading Manager may not materially alter the trading
program(s) used by the Trading Manager in investing and reinvesting its
allocable share of the Partnership's Net Assets in futures interests as
described in the Prospectus without prior written notification to the General
Partner and the Trading Manager may implement such change if not timely objected
to by the General Partner, it being understood that changes in the futures
interests traded shall not be deemed an 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 Partner and the Partnership, provide the General
Partner, within 30 days of a request therefor by the General
Partner, with information comparing the performance of the
Partnership's account and the performance of all other client
accounts directed by the Trading 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 experiencing differing inflows
or outflows of equity, accounts which commence trading at different
times, accounts with different fee structures, accounts which have
different portfolios or different fiscal years and that such
differences may cause divergent trading results.
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(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 Trading Manager other than proprietary
information (including, without limitation, information relating to
changes in control, personnel, trading approach, or financial
condition). The General Partner acknowledges that all trading
instructions made by the Trading Manager will be held in confidence
by the General Partner, except to the extent necessary to conduct
the business of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Manager's
open positions maintained by the Trading Manager exceed the Trading
Manager's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading 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
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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 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 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 or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manager shall effect all transactions in commodity
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.
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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 1/3 of 1% (a 4% 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 the month, the incentive fee described above shall be determined as
if such date were the end of the 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 in which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilized 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
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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 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 pro rata portion of the monthly
brokerage fee relating 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 amounts 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 amounts 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 interests 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.
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
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<PAGE>
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 become 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 11 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 nor 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 and Trading Manager certifies to the
General Partner in writing that it believes such changes is in the best
interests of 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 the Partnership will be materially adversely
affected; (iv) the Partnership materially breaches this Agreement and does not
correct the breach within 10 days of receipt of a written notice of such breach
from the Trading 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
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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 facilitate such trading within 30 days of such notice; or
(vi) the assets allocated to the Trading Manager fall below $1,000,000 at any
time.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading 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, 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 Manager, their controlling persons, 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 or a
representation, warranty or covenant herein, the result of bad faith, misconduct
or negligence, or conduct not done in good faith in the reasonable belief that
it was in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities.
The Partnership and the General Partner shall, jointly and severally, indemnify,
defend, and hold harmless the Trading Manager, its controlling persons, 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
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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 judgment finds (or, if no
final judgment is entered, an opinion is rendered to the Partnership by
independent counsel reasonably acceptable to both parties) to the effect that
the action or inaction of such indemnified party that was the subject of the
demand, claim, lawsuit, action, or proceeding did not constitute negligence,
misconduct, or a breach of this Agreement or a representation, warranty or
covenant of the Trading 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.
(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 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 or 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), and
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 and controlling persons
from and against any loss, claim, damage, liability, cost, and expense, joint
and several, to which any indemnified person may become subject under the
Securities Act, the Securities and Exchange Act of 1934, the Commodity Exchange
Act, the securities or Blue
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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 or 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 or the selling material, in light of the circumstances under
which they were made) not misleading, provided that such materially misleading
or untrue statement or alleged misleading or untrue statement or omission or
alleged omission does not relate 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 not 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
indemnities may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the preceding 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,
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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
investors 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 other investors (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. However, under no circumstances
shall the Trading Manager by any act or omission favor any account advised or
managed by the Trading Manager over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Manager agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Manager or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading 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, where such actions do not knowingly or deliberately prefer any of
such accounts over the account of the Partnership.
(b) The Trading Manager shall not be restricted as to the
number or nature of its clients, except that: (i) so long as 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
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
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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, as to which positions are
attributed to the Trading Manager 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 the 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 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
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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 prospects of the Trading Manager or which
would be
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<PAGE>
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.
(xiii) The information relating to the Trading Manager in the
Customer Brochure is factually accurate.
(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 becomes 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.
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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, 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 the 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.
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<PAGE>
(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 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.
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<PAGE>
(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.
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<PAGE>
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.
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<PAGE>
(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 such agreements, 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 of any Trading Manager Principal which
are required to be disclosed in the Registration Statement or
Prospectus.
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<PAGE>
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation
of the transactions contemplated herein and in the Prospectus will
not be in contravention of any of the provisions of the certificate
of incorporation or bylaws of the Trading 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.
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<PAGE>
(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 effect 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
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<PAGE>
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
principles 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
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<PAGE>
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 and 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 the
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.
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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 August 26, 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 Technical 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:
Campbell & Company, Inc.
210 West Pennsylvania Avenue
Baltimore, Maryland 21204
Attn:
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
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proceeding brought by any party to this Agreement to enforce any right, assert
any claim or obtain any relief whatsoever in connection with this Agreement
shall be brought by such party exclusively in the courts of the State of New
York or any Federal court sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading 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.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
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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 TECHNICAL L.P.
by Demeter Management Corporation,
General Partner
By /s/ Mark J. Hawley
--------------------------------
DEMETER MANAGEMENT CORPORATION
By /s/ Mark J. Hawley
--------------------------------
CAMPBELL & COMPANY, INC.
By /s/ William C. Clarke, III
--------------------------------
Executive Vice President
Exhibit 10.02
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among DEAN WITTER SPECTRUM TECHNICAL L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and CHESAPEAKE CAPITAL CORPORATION, an Illinois 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 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;
<PAGE>
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), any client accounts over which it has
discretionary trading authority (other than the names of any such clients), and
otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA") 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 investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with
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
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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. In performing services
to the Partnership the Trading Manager shall utilize the trading program(s)
described in the Prospectus, as modified from time to time. The Trading Manager
shall give the General Partner prior written notice of any change in such
program(s) the Trading Manager considers to be material (and shall not effect
such change on behalf of the Partnership without the General Partner's consent),
it being understood that changes in the futures interests traded shall not be
deemed an 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 Partner and the Partnership, provide the General
Partner, within 30 days of a request therefor by the General
Partner, with information comparing the performance of the
Partnership's account and the performance of all other client
accounts directed by the Trading 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 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.
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(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 Trading Manager requested by the General
Partner other than proprietary information (including, without
limitation, information relating to changes in control, personnel,
trading approach, or financial condition). The General Partner
acknowledges that all trading instructions made by the Trading
Manager will be held in confidence by the General Partner, except to
the extent necessary to conduct the business of the Partnership or
as required by law.
(iv) Inform the General Partner when the Trading Manager's
open positions maintained by the Trading Manager exceed the Trading
Manager's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading 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) Subject to Section 8a(a) hereof, 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, 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 floors 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
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<PAGE>
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 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 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 or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manager shall effect all transactions in commodity
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.
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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 1/3 of 1% (a 4% 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 the month, the incentive fee described above shall be determined as
if such date were the end of the 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 in which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilized 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
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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 on such contract for such day. The market value of a forward
contract or a futures or option contract 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 pro rata portion of the monthly
brokerage fee relating 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 amounts 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 amounts 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 interests 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.
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
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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 become 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 thereof, 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 nor 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 and Trading Manager certifies to the
General Partner in writing that it believes such changes is in the best
interests of 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 the Partnership will be materially adversely
affected; (iv) the Partnership materially breaches this Agreement and does not
correct the breach within 10 days of receipt of a written notice of such breach
from the Trading 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
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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 facilitate such trading within 30 days of such notice; or
(vi) the assets allocated to the Trading Manager fall below $1,000,000 at any
time.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Manager Liability. In connection
with this Agreement, 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. Notwithstanding
anything to the contrary in this Agreement, Mr. R. Jerry Parker, Jr. shall have
no liability to the Partnership, the General Partner or their officers,
shareholders, directors or controlling person under this Agreement or in
connection with the transactions contemplated by this Agreement except in the
case of fraud or willful misconduct by Mr. R. Jerry Parker, Jr. himself.
(b) Trading Manager Indemnity in Respect of Management
Activities. The Trading Manager shall indemnify, defend and hold harmless the
Partnership and the General Manager, 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 or a representation, warranty or covenant herein, the result of bad
faith, misconduct or negligence, or conduct not done in good faith in the
reasonable belief that it was in, or not opposed to, the best interests of the
Partnership.
(c) Partnership Indemnity in Respect of Management Activities.
The Partnership and the General Partner shall, jointly and severally, indemnify,
defend, and hold
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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 this Agreement (except as covered by
paragraph (e) below) or 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 judgment finds (or, if no final
judgment is entered, an opinion is rendered to the Partnership by independent
counsel reasonably acceptable to both parties) to the effect that the action or
inaction of such indemnified party that was the subject of the demand, claim,
lawsuit, action, or proceeding did not constitute negligence, misconduct, or a
breach of this Agreement or a representation, warranty or covenant of the
Trading 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.
(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 certificates
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 or 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 inaccurate historical actual information furnished by
the Trading Manager in connection with the preparation of such pro forma
performance information), and 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 Indemnity in Respect of Sale of Units. The
Partnership and the General Partner agree, jointly and severally, to indemnify,
defend and hold harmless the
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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 or 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 were made) not misleading, provided that such
materially misleading or untrue statement or alleged materially 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 provided that such statement
or omission was based on inaccurate historical actual performance information
furnished by the Trading Manager in connection with the preparation of such pro
forma 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
indemnities may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the preceding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available
hereunder, an indemnified person reasonably
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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
investors 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 other investors (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. However, under no circumstances
shall the Trading Manager by any act or omission favor any account advised or
managed by the Trading Manager over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees).
Subject to the Trading Manager's obligations under applicable law, the Trading
Manager or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading 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, where such actions do not knowingly or deliberately prefer any of
such accounts over the account of the Partnership.
(b) The Trading Manager shall not be restricted as to the
number or nature of its clients, except that: (i) so long as 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 regulations 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
regulation of the CFTC or any other regulatory body, exchange, or board so as to
require the
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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, as to which positions are attributed to the Trading
Manager as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. Representations, Warranties, and Covenants of the Trading
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, 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
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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 prospects of the Trading Manager or which
would be
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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, except as disclosed in the
Prospectus.
(xiii) The information relating to the Trading Manager in the
Customer Brochure is factually accurate.
(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 becomes 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 (subject to the limitation set forth in
Section 1).
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<PAGE>
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, 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 the 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.
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<PAGE>
(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.
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<PAGE>
(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 and will not use any such amendments or supplements as
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to which the Trading Manager in writing has reasonably or timely
objected to the references of the Trading Manager.
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) (but in the case of (b) below not more than once a
year), 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:
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(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 this Agreement, and, to the best of such
counsel's knowledge, after due investigation, 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
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preceding the date of the Prospectus against the Trading Manager of
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 or 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 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 misleadin g; 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.
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<PAGE>
(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) (but in the case of (b) below not more than once a
year), 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 effect 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
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<PAGE>
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
principles 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
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<PAGE>
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 and 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 the
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, 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.
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<PAGE>
(a) 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 August
26, 1994.
(b) The General Partner and the Partnership will not
distribute or supplement any promotional material relating to the Trading
Manager unless the Trading Manager has received reasonable prior notice of and a
copy of such promotional material and has not reasonably objected thereto in
writing.
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 Technical 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:
Mr. John M. Hoade
Chesapeake Capital Corporation
62 Broad Street
Manakin-Sabot, Virginia 23103
With a copy to:
William D. Kerr, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
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<PAGE>
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. If any action or proceeding
shall be brought by a party to this Agreement or to enforce any right or remedy
under this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any Federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any Federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading 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, except that Trading Manager may seek a
declaratory judgment with respect to the indemnification provisions of this
Agreement.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
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<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 TECHNICAL L.P
by Demeter Management Corporation,
General Partner
By /s/ Mark J. Hawley
------------------------------
DEMETER MANAGEMENT CORPORATION
By /s/ Mark J. Hawley
------------------------------
CHESAPEAKE CAPITAL CORPORATION
By /s/ John M. Hoade
------------------------------
Exhibit 10.03
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among DEAN WITTER SPECTRUM TECHNICAL L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and JOHN W.
HENRY & CO., a California 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;
<PAGE>
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 provided that nothing herein shall require the Trading Manager to
disclose any proprietary information concerning such systems, methods, and
strategies), any client accounts over which it has discretionary trading
authority (other than the names of any such clients), and otherwise, as the
Partnership may reasonably require (x) to be made in the Partnership's
Prospectus required by Section 4.21 of the regulations of the CFTC, including
any amendments or supplements thereto, or (y) to comply with any applicable
federal or state law or rule or regulation, including those of the Securities
and Exchange Commission (the "SEC"), the CFTC, the National Futures Association
(the "NFA"), the National Association of Securities Dealers, Inc. (the "NASD")
or any other regulatory body, exchange, or board; and (ii) otherwise to
cooperate with the Partnership and the General Partner by providing information
regarding the Trading 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 investment and reinvestment of its allocable share of the Net
Assets of the Partnership which shall initially be allocated equally among its
Original Investment Program and Financial and Metals Portfolio 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
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<PAGE>
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. In performing services to the Partnership the Trading Manager may not
materially alter the trading program(s) used by the Trading Manager in investing
and reinvesting its allocable share of the Partnership's Net Assets in futures
interests as described in the Prospectus without the prior written consent of
the General Partner, it being understood that changes in the futures interests
traded shall not be deemed an alteration in the Trading 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 Partner and the Partnership, provide the General
Partner, within 30 days of a request therefor by the General
Partner, with information comparing the performance of the
Partnership's account and the performance of all other client
accounts directed by the Trading 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 experiencing differing inflows
or outflows of equity, accounts which commence trading at different
times, accounts which have different portfolios or different fiscal
years, that the Trading Manager offers 10 different portfolios and
that such differences may cause divergent trading results.
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<PAGE>
(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, principals, trading approach or any materially
adverse change in Trading Manager's financial condition). The
General Partner acknowledges that all trading instructions made by
the Trading Manager will be held in confidence by the General
Partner, except to the extent necessary to conduct the business of
the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Manager's
open positions maintained by the Trading Manager exceed the Trading
Manager's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading 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 floors 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
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<PAGE>
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 and the apportionment of Net Assets to any such trading manager
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 Net Assets are
reallocated from the Trading Manager, 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 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. The Trading Manager shall have the right to refuse any additional
allocations to be made pursuant to this Section 3(b).
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 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 or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manager shall effect all transactions in commodity
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.
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<PAGE>
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 on the last day of each month,
without regard to the profitability of the Trading Manager's trading
for the Partnership's account, equal to 1/3 of 1% (a 4% annual rate)
of the "Net Assets" of the Partnership (as defined in Section 6(c))
allocated to the Trading Manager calculated 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 the 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 in which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilized 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
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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 on such contract for such day. The market value of a forward
contract or a futures or option contract 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 pro rata portion of the monthly
brokerage fee relating 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 amounts 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 amounts 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 interests 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) If the Trading Manager's allocated Net Assets are reduced
pursuant to Section 3 hereof on a date other than the last day of the month, the
Trading Manager shall be paid an incentive fee with respect to any Trading
Profits earned as of such date with respect to the Net Assets to be reallocated.
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(g) 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 any
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 John
W. Henry ceases for any reason to be a principal of the Trading Manager; (ii) if
the Trading Manager become 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 thereof, 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; (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 and Trading Manager certifies to the
General Partner in writing that it believes such changes is in the best
interests of 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
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certifies to the General Partner in writing that as a result, the Trading
Manager believes the performance results of the Trading Manager relating to the
Partnership will be materially adversely affected; (iv) the Partnership
materially breaches this Agreement and does not correct the breach within 10
days of receipt of a written notice of such breach from the Trading 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 facilitate such trading within 30 days of such notice; or (vi)
the assets allocated to either the Original Investment Program or the Financial
and Metals Portfolio fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading 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 Manager, 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 business or activities undertaken by the Trading Manager pursuant
to this Agreement; 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 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
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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 business or
activities undertaken by the Trading Manager pursuant to this Agreement or a
breach of this Agreement or a breach of a representation, warranty or covenant
of the General Partner or Partnership; provided that a court of competent
jurisdiction upon entry of a final judgment finds (or, if no final judgment is
entered, an opinion is rendered to the Partnership by independent counsel
reasonably acceptable to both parties) to the effect that the action or inaction
of such indemnified party that was the subject of the demand, claim, lawsuit,
action, or proceeding did not constitute negligence, misconduct, or a breach of
this Agreement or a representation, warranty or covenant of the Trading 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 certificates
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
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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 tables and the notes thereto unless such
statement or omission was based on information furnished by the Trading Manager
for the General Partner's preparation of such pro forma tables), 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 Indemnity 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 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 information and was made in reliance upon, and in
conformity with, information or instructions furnished by the Trading Manager.
(f) Notwithstanding anything in the above to the contrary, John W.
Henry shall have no liability to the General Partner or the Partnership under
this Agreement or in connection with the transactions contemplated by this
Agreement except for fraud and willful misconduct by John W. Henry.
(g) 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.
(h) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action,
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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 preceding 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 or
if there is a final judgment for the plaintiff in any such action, claim, or
proceeding, 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
investors 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 other investors (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. However, under no circumstances
shall the Trading Manager by any act or omission favor any account advised or
managed by the Trading Manager over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Manager agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Manager or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading 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
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compete for the same futures interests as the Partnership or to take positions
opposite to the Partnership, where such actions do not knowingly or deliberately
prefer any of such accounts over the account of the Partnership.
(b) The Trading Manager shall not be restricted as to the number or
nature of its clients, except that: (i) so long as 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
(c) 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 regulations 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 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, as to which positions are attributed to the Trading
Manager as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. Representations, Warranties, and Covenants of the Trading
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 Original
Investment Program and Financial and Metals Portfolio on behalf of the
Partnership as 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 Original Investment Program and Financial and
Metals Portfolio as 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
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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 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 (excluding pro forma performance information unless such
statement or omission was based on information furnished by the Trading
Manager for the preparation of such pro forma performance information),
(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
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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 prospects 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.
(xiii) The information relating to the Trading Manager in the
Customer Brochure is factually accurate.
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(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 becomes 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.
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.
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(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 the 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.
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(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.
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(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.
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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
this Agreement, and, to the best of such counsel's knowledge, after due
investigation, none of such licenses, memberships or registrations have
been rescinded, revoked or suspended.
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(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 of 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 or 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, 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
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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 the
Initial 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
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<PAGE>
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 effect 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
principles 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
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<PAGE>
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 and 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 the
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, officials, officers of the General Partner and
other sources believed by it to be
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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.
(a) 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 May 31,
1994. Failure to provide a disclosure document shall not constitute a breach of
this Agreement unless the Trading Manager fails to provide a document within 7
days of a request.
(b) The General Partner and the Partnership will not
distribute or supplement any promotional material relating to the Trading
Manager unless the Trading Manager has received reasonable prior notice of and a
copy of such promotional material and has not reasonably objected thereto in
writing.
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 Technical L.P.
c/o Demeter Management Corporation
2 World Trade Center
62nd Floor
New York, New York 10048
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<PAGE>
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:
John W. Henry & Co., Inc.
One Glendinning Place
Westport, Connecticut 06880
Attn: [___________________]
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. If any action or proceeding
shall be brought by a party to this Agreement or to enforce any right or remedy
under this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any Federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any Federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading 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.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
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<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 TECHNICAL L.P
by Demeter Management Corporation,
General Partner
By /s/ Mark J. Hawley
----------------------------------
DEMETER MANAGEMENT CORPORATION
By /s/ Mark J. Hawley
----------------------------------
JOHN W. HENRY & CO., INC.
By /s/ Bruce Nemirow
----------------------------------
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 TECHNICAL 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.
<PAGE>
2. Duties of DWR. DWR agrees to act as a non-clearing
commodity broker for the Customer and introduce the Customer's account to Carr
Futures, Inc. ("CFI") for execution and clearing of futures interests
transactions on behalf of the Customer in accordance with instructions provided
by the Trading Advisors, and the Customer agrees to retain DWR as a non-clearing
commodity broker for the term of this Agreement.
DWR agrees to furnish to the Customer as soon as practicable
all of the information from time to time in its possession which Demeter, as the
general partner of the Customer, is required to furnish to the Limited Partners
pursuant to the Limited Partnership Agreement as from time to time in effect and
as required by applicable law, rules, or regulations and to perform such other
services for the Customer as are set forth herein and in the Prospectus.
3. Obligations and Expenses. Except as otherwise set forth
herein and in the Prospectus, the Customer, and not DWR, shall be responsible
for all taxes, management and incentive fees to the Trading Advisors, brokerage
fees to DWR, and all extraordinary expenses incurred by it. DWR shall pay all of
the organizational, initial and continuing offering, and ordinary administrative
expenses of the Customer (including, but not limited to, legal, accounting, and
auditing fees, printing costs, filing fees, escrow fees, marketing costs and
expenses and other related expenses) and all charges of CFI for executing and
clearing the Customer's futures interests trades (as described in paragraph 5
below), and shall not be reimbursed therefor.
4. Agreement Nonexclusive. DWR shall be free to render
services of the nature to be rendered to the Customer hereunder to other persons
or entities in addition to the Customer, and the parties acknowledge that DWR
may render such services to additional entities similar in nature to the
Customer, including other partnerships organized with Demeter as their general
partner. It is expressly understood and agreed that this Agreement is
nonexclusive and that the Customer has no obligation to execute any or all of
its trades for futures interests through DWR. The parties acknowledge that the
Customer may utilize such other broker or brokers as Demeter may direct from
time to time. The Customer's utilization of an additional commodity broker shall
neither terminate this Agreement nor modify in any regard the respective rights
and obligations of the Customer and DWR hereunder.
5. Compensation of DWR. The Customer will pay brokerage fees
to DWR at a monthly flat-rate. The Customer will pay to DWR a monthly flat-rate
fee of 1/12 of 7.25% of the Customer's Net Assets (a 7.25% annual rate) as of
the first day of each month. DWR will receive such brokerage fees irrespective
of the number of trades executed on the Customer's behalf.
DWR will pay, from brokerage fees received by it, all charges
of CFI for executing and clearing trades for the Customer, including floor
brokerage fees, exchange fees, clearinghouse fees, NFA fees, "give up" fees, any
taxes (other than income taxes), any third party clearing costs incurred by CFI,
costs associated with taking delivery of futures interests, and fees for
execution of forward contract transactions.
From time to time, DWR may increase or decrease brokerage fees
to be charged to the Customer; provided, however, that: (i) notice of such
increase is mailed to each Limited Partner at least five business days prior to
the last date on which a "Request for Redemption" must be received by the
General Partner with respect to the applicable Redemption Date; and (ii) such
notice shall describe the redemption and voting rights of Limited Partners.
<PAGE>
Notwithstanding the foregoing, the Customer's expenses are
subject to the following limits: (a) if the Customer were to pay roundturn
brokerage commissions, the brokerage commissions (excluding transaction fees and
costs) payable by the Customer to DWR shall not exceed 80% of DWR's published
non-member rates for speculative accounts and (b) the aggregate of (i) brokerage
commissions (or fees) payable to DWR, (ii) transaction fees and costs payable by
the Customer, and (iii) net excess interest and compensating balance benefits to
DWR (after crediting the Customer with interest as described in the Prospectus)
shall not exceed 14% annually of the Customer's average month-end Net Assets
during each calendar year.
6. Investment Discretion. The parties recognize that DWR shall
have no authority to direct the futures interests investments to be made for the
Customer's account. However, the parties agree that DWR, and not the Trading
Advisors, shall have the authority and responsibility with regard to the
investment, maintenance, and management of the Customer's assets that are held
in segregated or secured accounts, as provided in Section 7 hereof.
7. Investment of Customer Funds. The Customer shall deposit
its assets in accounts with DWR. The Customer's assets deposited with DWR will
be segregated or secured in accordance with the Commodity Exchange Act and CFTC
regulations. DWR will credit the Customer with interest income at month-end at
the rate earned by DWR on its U.S. Treasury Bill investments with customer
segregated funds as if 80% of the Customer's average daily Net Assets for the
month were invested in U.S. Treasury Bills. All of such funds will be available
for margin for the Customer's trading. For the purpose of such interest
payments, Net Assets will not include monies due to the Customer on or with
respect to forward contracts and other futures interests but not actually
received by it from banks, brokers, dealers and other persons. The Customer
understands that it will not receive any other interest income on its assets and
that Broker will receive interest income from CFI, as agreed from time to time
by Broker and CFI, on the Customer's assets deposited as margin with CFI. The
Customer's funds will either be invested along with other customer segregated
and secured funds of DWR or held in non-interest bearing bank accounts. The
Customer's assets held by DWR may be used solely as margin for the Customer's
trading.
Ownership of the right to receive interest on the Customer's
assets pursuant to the preceding paragraph shall be reflected and maintained and
may be transferred only on the books and records of DWR. Any purported transfer
of such ownership shall not be effective or recognized until such transfer shall
have been recorded on the books and records of DWR.
8. Standard of Liability and Indemnity. Subject to Section 2
hereof, DWR and its affiliates (as defined below) shall not be liable to the
Customer, the General Partner or Limited Partners, or any of its or their
respective successors or assigns, for any act, omission, conduct, or activity
undertaken by or on behalf of the Customer pursuant to this Agreement which DWR
determines, in good faith, to be in the best interests of the Customer, unless
such act, omission, conduct, or activity by DWR or its affiliates constituted
misconduct or negligence.
The Customer shall indemnify, defend and hold harmless DWR and
its affiliates from and against any loss, liability, damage, cost or expense
(including attorneys' and accountants' fees and expenses incurred in the defense
of any demands, claims, or lawsuits) actually and reasonably incurred arising
from any act, omission, conduct or activity undertaken by DWR on behalf of the
Customer pursuant to this Agreement, including, without limitation, any demands,
claims or lawsuits initiated by a Limited Partner (or assignee thereof),
provided that (i) DWR has determined, in good faith, that the act, omission,
conduct, or activity giving rise to the claim for indemnification was in the
best interests of the
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<PAGE>
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.
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<PAGE>
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 TECHNICAL 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.
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<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 TECHNICAL 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
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<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.
<PAGE>
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;
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<PAGE>
(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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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,
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<PAGE>
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,
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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
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<PAGE>
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
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<PAGE>
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
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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.
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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 undersinged each hereby acknowledges its separate receipt from DWR, and its
understanding of each of the following documents prior to the opening of the
account:
o Risk Disclosure Statement for o Project A(TM) Customer
Futures and Options (in the form Information Statement
prescribed by CFTC
Regulation 1.55(c))
o LME Risk Warning Notice o Questions & Answers on Flexible
Options Trading at the CBOT
o Dean Witter Order Presumption for o CME Average Pricing System
After Hours Electronic Markets Disclosure Statement
o NYMEX ACCESSSM Risk Disclosure o Special Notice to Foreign
Statement Brokers and Foreign Traders
o Globex(R) Customer Information and
Risk Disclosure Statement
================================================================================
REQUIRED SIGNATURES
The undersigned has received, read, understands and agrees to all the provisions
of this Agreement and the separate risk disclosure statements enumerated above
and agrees to promptly notify DWR in writing if any of the warranties and
representations contained herein become inaccurate or in any way cease to be
true, complete and correct.
DEAN WITTER SPECTRUM TECHNICAl L.P.
- --------------------------------------------------------------------------------
CUSTOMER NAME(S)
By: DEMETER MANAGEMENT CORPORATION
By: /s/ Mark J. Hawley December 1, 1997
- ------------------------------------ --------------------------------
AUTHORIZED SIGNATURE(S) DATE
- ------------------------------------
Mark J. Hawley, President
- --------------------------------------------------------------------------------
(If applicable, print name and title of signatory)
Exhibit 10.05
CUSTOMER AGREEMENT
THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 1st day of
December, 1997, by and among DEAN WITTER SPECTRUM TECHNICAL 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
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
(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
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<PAGE>
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
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<PAGE>
(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):
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if to the Customer:
DEAN WITTER SPECTRUM TECHNICAL 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.
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<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 TECHNICAL 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
--------------------------
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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.
<PAGE>
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)
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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.
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<PAGE>
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
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<PAGE>
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
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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;
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(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:
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(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
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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.
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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
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<PAGE>
(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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
OPTIONAL ELECTIONS/ACKNOWLEDGMENT
The following provisions, which are set forth in this Agreement, need not be
entered into to open the Account. Customer agrees that its optional elections
are as follows:
Signature required for each election
ARBITRATION AGREEMENT ----------------------------------
(Agreement Paragraph 24) (Date)
CONSENT TO TAKE THE OTHER SIDE OF
ORDERS (Agreement Paragraph 25) X /s/ Mark J. Hawley 11-6-98
----------------------------------
(Date)
AUTHORIZATION TO TRANSFER
FUNDS (Agreement Paragraph 26) ----------------------------------
(Date)
CONSENT TO RECEIVE STATEMENTS BY
ELECTRONIC TRANSMISSION ----------------------------------
(Agreement Paragraph 27) (Date)
ACKNOWLEDGMENT OF SUBORDINATION
AGREEMENT (Agreement Paragraph 28) X /s/ Mark J. Hawley 11-6-98
(Required for accounts holding ----------------------------------
non-U.S. currency) (Date)
HEDGE ELECTION
|_| Customer confirms that all transactions in the Account will represent bona
fide hedging transactions, as defined by the Commodity Futures Trading
Commission, unless Carr is notified otherwise not later than the time an
order is placed for the Account:
Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with
respect to hedging transactions in the Account, that in the unlikely event of
Carr's bankruptcy, it prefers that the bankruptcy trustee [check appropriate
box]:
A) |_| Liquidate all open contracts without first seeking
instructions either from or on behalf of Customer.
B) |_| Attempt to obtain instructions with respect to the
disposition of all open contracts.
(If neither box is checked, Customer shall be deemed to elect A).)
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<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 Technical 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, General Counsel Title: Associate General Counsel
- --------------------------------------- --------------------------------
Date: December 1, 1997 Date: December 1, 1997
--------------------------------- --------------------------
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Exhibit 10.06
CARR FUTURES INC.
10 South Wacker Drive, Suite 1100
Chicago, IL 60606
Facsimile (312) 441-4201
INTERNATIONAL FOREIGN EXCHANGE MASTER AGREEMENT
MASTER AGREEMENT dated as of August 1, 1997, by and between CARR
FUTURES INC., a Delaware corporation and DEAN WITTER SPECTRUM TECHNICAL L.P.
SECTION 1. DEFINITIONS
Unless otherwise required by the context, the following terms shall
have the following meanings in the Agreement:
"Agreement" has the meaning given to it in Section 2.2.
"Base Currency", as to a Party, means the Currency agreed to as such
in relation to it in Part VII of the Schedule.
"Business Day" means for purposes of: (i) clauses (i), (viii) and
(xii) of the definition of Event of Default, a day which is a Local
Banking Day for the Non-Defaulting Party; (ii) solely in relation to
delivery of a Currency, a day which is a Local Banking Day in
relation to that Currency; and (iii) any other provision of the
Agreement, a day which is a Local Banking Day for the applicable
Designated Offices of both Parties; provided, however, that neither
Saturday nor Sunday shall be considered a Business Day for any
purpose.
"Close-Out Amount" has the meaning given to it in
Section 5.1.
"Close-Out Date" means a day on which, pursuant to the provisions of
Section 5.1, the Non-Defaulting Party closes out Currency
Obligations or such a close-out
occurs automatically.
"Closing Gain", as to the Non-Defaulting Party, means the difference
described as such in relation to a particular Value Date under the
provisions of Section 5.1.
"Closing Loss", as to the Non-Defaulting Party, means the difference
described as such in relation to a particular Value Date under the
provisions of Section 5.1.
<PAGE>
"Confirmation" means a writing (including telex, facsimile, or other
electronic means from which it is possible to produce a hard copy)
evidencing an FX Transaction, and specifying:
(i) the Parties thereto and their Designated Offices through which
they are respectively acting,
(ii) the amounts of the Currencies being bought or sold and by
which Party,
(iii) the Value Date, and
(iv) any other term generally included in such a writing in
accordance with the practice of the relevant foreign exchange
market.
"Credit Support" has the meaning given to it in Section 5.2.
"Credit Support Document", as to a Party (the "first Party"), means
a guaranty, hypothecation agreement, margin or security agreement or
document, or any other document containing an obligation of a third
party ("Credit Support Provider") or of the first Party in favor of
the other Party supporting any obligations of the first Party under
the Agreement.
"Credit Support Provider" has the meaning given to it in the
definition of Credit Support Document.
"Currency" means money denominated in the lawful currency of any
country or the Ecu.
"Currency Obligation" means any obligation of a Party to deliver a
Currency pursuant to an FX Transaction or the application of Section
3.3(a) or (b).
"Custodian" has the meaning given to it in the definition of
Insolvency Proceeding.
"Defaulting Party" has the meaning given to it in the definition of
Event of Default.
"Designated Office(s)", as to a Party, means the office or offices
specified in Part II of the Schedule.
"Effective Date" means the date of this Master Agreement.
"Event of Default" means the occurrence of any of the following with
respect to a Party (the "Defaulting Party", the other Party being
the "Non-Defaulting Party"):
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(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
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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
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<PAGE>
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
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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.
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"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.
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<PAGE>
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.
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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.
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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
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(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))
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(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-
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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
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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
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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.
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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
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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
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such Party. Nothing in the Agreement precludes either Party from
bringing Proceedings in any other jurisdiction nor will the bringing
of Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.
(b) Each Party irrevocably appoints the agent for service of process
(if any) specified with respect to it in Part XIV of the Schedule.
If for any reason any Party's process agent is unable to act as
such, such Party will promptly notify the other Party and within
thirty (30) days will appoint a substitute process agent acceptable
to the other Party.
9.3 Waiver of Jury Trial. Each Party irrevocably waives any and all
right to trial by jury in any Proceedings.
9.4 Waiver of Immunities. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself
and its revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other similar
grounds from (i) suit, (ii) jurisdiction of any courts, (iii) relief
by way of injunction, order for specific performance or for recovery
of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which
it or its revenues or assets might otherwise be entitled in any
Proceedings in the courts of any jurisdiction and irrevocably
agrees, to the extent permitted by applicable law, that it will not
claim any such immunity in any Proceedings.
IN WITNESS WHEREOF, the Parties have caused the Agreement to be duly
executed by their respective authorized officers as of the date first written
above.
CARR FUTURES INC.
By /s/ Lawrence P. Anderson
------------------------
Name:Lawrence P. Anderson
Title: Executive Vice President
DEAN WITTER SPECTRUM TECHNICAL L.P.
By Demeter Management Corporation
General Partner
By /s/ Mark J. Hawley
------------------
Name: Mark Hawley
Title: President
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SCHEDULE
Schedule to the International Foreign Exchange Master Agreement
dated as of August 1, 1997
between Dean Witter Spectrum Technical 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
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Part III. Notices:
If sent to Party A:
Address: c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Telephone Number: (212) 392-7404
Facsimile Number: (212) 392-2804
Name of Individual or Department to whom Notices are to
be sent: Robert E. Murray
With copies to Party A's designated Trading Advisors.
If sent to Party B:
Address: Carr Futures Inc.
One World Trade Center
New York, New York 10048
Telephone Number: (212) 453-6365
Facsimile Number: (212) 453-6361
Name of Individual or Department to whom Notices are to
be sent: David Mangold
Part IV. Payment Instructions
Name of Bank and Office, Account Number and Reference with respect
to relevant Currencies:
Party A Party B
Citibank, N.A. Harris Trust & Savings Bank, Chicago
ABA: 021-000089 ABA: 071.000.288
Account Name: Dean Witter For the Account of Carr Futures Inc.,
Reynolds, Inc. Chicago Customer Segregated
Account No. 40611164 Account No. 203-908-9
FFC: Dean Witter Spectrum FFC: Dean Witter Spectrum
Technical L.P., Technical L.P.,
Account # (As Party B is Account # (As Party A is notified
notified from time to time) from time to time)
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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.
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Part VI. Cash Settlement of FX Transactions
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include foreign
exchange transactions for the purchase and sale of one Currency
against another but which shall be settled by the delivery of only
one Currency based on the difference between exchange rates as
agreed by the Parties as evidenced in a Confirmation. Section 3.1
is modified so that only one Currency shall be delivered for any
such FX Transaction in accordance with the formula agreed by the
Parties. Section 5.1(b)(i)(A) is modified so that the Close-Out
Amount for any such FX Transaction for which the cash settlement
amount has been fixed on or before the Close-Out Date pursuant to
the terms of such FX Transaction shall be equal to the Currency
Obligation arising therefrom (increased by adding interest in the
manner provided in clause (A)(2) if the Value Date precedes the
Close-Out Date) and for any such FX Transaction for which the cash
settlement amount has not yet been fixed on the Close-Out Date
pursuant to the terms of such FX Transaction, the Close-Out Amount
shall be as determined by the Non-Defaulting Party in good faith
and in a commercially reasonable manner.
Part VII. Base Currency
Party A's Base Currency is the United States dollar.
Party B's Base Currency is the United States dollar.
Part VIII. Threshold Amount
For purposes of clause (x) of the definition of Event of Default:
Party A's Threshold Amount is 3% of Party A's equity capital as
evidenced by Party A's latest financial statements.
Party B's Threshold Amount is 3% of Party B's equity capital as
evidenced by Party B's latest financial statements.
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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.
-23-
<PAGE>
Part XIII. Consent to Jurisdiction
In accordance with Section 9.2 of the Agreement, each Party
irrevocably submits to the non-exclusive jurisdiction of the courts
of the State of New York and the United States District Court
located in the Borough of Manhattan in New York City.
Part XIV. Agent for Service of Process
Not applicable.
Part XV. Certain Regulatory Representations
A. The following FDICIA representation shall not apply:
1. Party A represents and warrants that it qualifies as a
"financial institution" within the meaning of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
by virtue of being a:
[ ] broker or dealer within the meaning of
FDICIA;
[ ] depository institution within the meaning of
FDICIA;
[ ] futures commission merchant within the
meaning of FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
2. Party B hereby represents and warrants that it qualifies as a
"financial institution" by virtue of being a:
[ ] broker or dealer within the meaning of
FDICIA;
[ ] depository institution within the meaning of
FDICIA;
[ ] futures commission merchant within the
meaning of FDICIA;
[ ] "financial institution" within the meaning
of Regulation EE (see below).
-24-
<PAGE>
3. A Party representing that it is a "financial institution" as
that term is defined in 12 C.F.R. Section 231.3 of Regulation EE
issued by the Board of Governors of the Federal Reserve System
("Regulation EE") represents that:
(a) it is willing to enter into financial contracts" as a
counterparty "on both sides of one or more financial
markets" as those terms are used in Section 231.3 of
Regulation EE; and
(b) during the 15-month period immediately preceding the
date it makes or is deemed to make this representation,
it has had on at least one (1) day during such period,
with counterparties that are not its affiliates (as
defined in Section 231.2(b) of Regulation EE) either:
(i) one or more financial contracts of a total gross
notional principal amount of $1 billion
outstanding; or
(ii) total gross mark-to-market positions (aggregated
across counterparties) of $100 million; and
(c) agrees that it will notify the other Party if it no
longer meets the requirements for status as a financial
institution under Regulation EE.
4. If both Parties are financial institutions in accordance with
the above, the Parties agree that the Agreement shall be a
netting contract, as defined in 12 U.S.C. Section 4402(14), and
each receipt or payment or delivery obligation under the
Agreement shall be a covered contractual payment entitlement or
covered contractual payment obligation, respectively, as defined
in FDICIA.
B. The following ERISA representation shall apply:
Each Party represents and warrants that it is neither (i) an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 which is subject to Part 4
of Subtitle B of Title I of such Act; (ii) a "plan" as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986; nor (iii)
an entity the assets of which are deemed to be assets of any such
"employee benefit plan" or "plan" by reason of the U.S. Department
of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101.
<PAGE>
C. The following CFTC eligible swap participant representation shall
apply:
Each Party represents and warrants that it is an "eligible swap
participant" under, and as defined in, 17 C.F.R. Section 35.1.
Part XVI. Additional Covenants
The following covenant[s] shall apply to the Agreement:
A. Party B covenants and agrees that when Party A or an
agent for Party A requests Party B to an FX
Transaction, Party B will do a back-to-back principal
trade and the price of the FX Transaction to Party A
will be the same price at which Party B effects its
back-to-back trade with its counterparty, and Party B
will not profit from any mark-up or spread on the FX
Transaction.
B. With respect to each FX Transaction, Party A shall pay
to Party B a round-turn fee as follows. For FX
Transactions not having a Party B-imposed forward date,
the fee shall be $4.30 per round-turn ($2.15 per side)
for each $85,000 equivalent of the Currency in the FX
Transaction. For FX Transactions with a Party
B-imposed forward date restriction, the fee shall be
$5.00 per round-turn ($2.50 per side) for each $135,000
equivalent of the Currency in the FX Transaction.
C. Party A shall post margin with Party B with respect to
all FX Transactions in an amount equal to 3.0% of the
value of such FX Transactions on major currencies and
5.0% of the value of such FX Transactions on minor
currencies. All calls for margin shall be made by
Party B orally or by written notice to Dean Witter
Reynolds, and each such call for margin shall be met by
Party A within three hours after Dean Witter Reynolds
has received such call by wire transfer (by federal
bank wire system) to the account of Party B. Party B
shall accept as margin any instrument deemed acceptable
as margin under the rules of the Chicago Mercantile
Exchange. Upon oral or written request by Dean Witter
Reynolds, Party B shall, within three hours after
receipt of any such request, wire transfer (by federal
bank wire system) to Dean Witter Reynolds for Party A's
account any margin funds held by Party B in excess of
the margin requirements specified hereby.
Notwithstanding Part VI above, all payments, unless
otherwise agreed to, shall be paid in U.S. dollars.
-25-
Exhibit 10.08
ESCROW AGREEMENT
September 30, 1994
Chemical Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Dean Witter Spectrum Series Escrow Account
Gentlemen:
In accordance with arrangements made by Demeter Management
Corporation, a Delaware corporation (the "General Partner"), on behalf of Dean
Witter Spectrum Balanced L.P. ("Spectrum Balanced"), Dean Witter Spectrum
Strategic L.P. ("Spectrum Strategic"), and Dean Witter Spectrum Technical L.P.
("Spectrum Technical"), each a Delaware corporation (the "Partnerships" or,
individually, a "Partnership"), and Dean Witter Reynolds Inc., the selling agent
for the Partnerships (the "Depositor"; the Partnerships and the Depositor being
herein sometimes collectively referred to as the "Parties" or, individually, as
a "Party"), the Depositor shall: (i) deliver to you, as Escrow Agent, all
subscription funds (by the direct transfer of immediately available funds into a
non-interest bearing escrow account established by you for the Partnerships, for
investment in your interest bearing money market account) received by the
Depositor from each subscriber ("Subscriber" or, collectively, the
"Subscribers") during the "Initial Offering Period" and thereafter during the
"Continuing Offering" (as described in the Partnerships' Prospectus, as the same
may be updated, supplemented, and amended from time to time (the "Prospectus"))
in connection with the offering to the public of Units of Limited Partnership
Interest of the Partnerships (the "Units") and (ii) also promptly transmit to
the General Partner a complete report of all funds deposited with you during the
Initial Offering Period and Continuing Offering. You, as Escrow Agent, shall
hold such subscription funds together with any additions, substitutions, or
other financial instruments in which such funds may be invested or for which
such funds may be exchanged (collectively referred to herein as the "Fund"), IN
ESCROW upon the following terms:
1. (a) Following receipt by you of written notice from the General
Partner that the General Partner has rejected a Subscriber's subscription, in
whole or in part, during either the Initial Offering Period or Continuing
Offering, you shall transmit to the Depositor, as soon as practicable but in no
event later than three business days following receipt by you of such notice,
the amount of such Subscriber's subscription funds that shall have been
deposited with you hereunder and that the General Partner shall have notified
you have been rejected and any interest earned on the Fund and allocated to the
rejected amount of such subscription in accordance with Section 2 hereof. You
shall at the same time give notice to the Depositor of the amount of aggregate
subscription funds and/or interest so returned.
<PAGE>
(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
-2-
<PAGE>
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.
-3-
<PAGE>
(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
-4-
<PAGE>
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
-5-
<PAGE>
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.
-6-
<PAGE>
If the foregoing Agreement is satisfactory to you, please so indicate by signing
at the place provided below.
Sincerely,
DEAN WITTER SPECTRUM BALANCED L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
--------------------------------------
Mark J. Hawley
President
DEAN WITTER SPECTRUM STRATEGIC L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
--------------------------------------
Mark J. Hawley
President
DEAN WITTER SPECTRUM TECHNICAL L.P.
By: Demeter Management Corporation
By: /s/ Mark J. Hawley
--------------------------------------
Mark J. Hawley
President
DEAN WITTER REYNOLDS INC.
By: /s/ Mark J. Hawley
--------------------------------------
Mark J. Hawley
Senior Vice-President
Accepted:
CHEMICAL BANK
By: /s/ P.J. Gilkeson
- -------------------------
P.J. Gilkeson
Vice President
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Spectrum Technical 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> 235,044,325
<SECURITIES> 0
<RECEIVABLES> 4,720,318<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 258,673,911<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 258,673,911<F3>
<SALES> 0
<TOTAL-REVENUES> 49,940,173<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,138,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,801,370
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,801,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,801,370
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $4,002,633 and
interest receivable of $717,685.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $18,909,268.
<F3>Liabilities include redemptions payable of $1,339,311,
accrued brokerage fees of $1,439,151 and accrued management fees of
$794,015.
<F4>Total revenues include realized trading revenue of $35,224,194,
net change in unrealized of $6,612,556 and interest income of
$8,103,423.
</FN>
</TABLE>
