Exhibit 10.01
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the _____ day of ______________, 1999,
among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ SPECTRUM CURRENCY L.P., a Delaware limited
partnership (the "Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware
corporation (the "General Partner"), and ▇▇▇▇ ▇. ▇▇▇▇▇ & COMPANY, INC., a
Florida corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement dated as of __________ (the "Limited Partnership
Agreement"), to trade, buy, sell, spread, or otherwise acquire, hold, or dispose
of, among other things, domestic and foreign futures contracts, forward
contracts, foreign exchange commitments, options on futures contracts, spot
currencies, and any rights pertaining thereto (hereinafter referred to
collectively as "futures interests") and securities (such as United States
Treasury bills) approved by the Commodity Futures Trading Commission (the
"CFTC") for investment of customer funds.
WHEREAS, the Partnership is a member partnership of the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Spectrum Series (the "Fund Group") pursuant to which units
of limited partnership interest ("Units") of such member partnerships will be
sold to investors in a common prospectus. Units of the Partnership are being
offered pursuant to a Registration Statement on Form S-1 (No. 333-_____) (as
amended from time to time, the "Registration Statement") filed under the
Securities Act of 1933, as amended (the "Securities Act"), and a final
Prospectus dated __________, constituting a part thereof (as amended and
supplemented from time to time, the "Prospectus").
WHEREAS, the Trading Advisor engages in trading in futures interests
and is willing to provide certain services and undertake certain obligations as
set forth herein.
WHEREAS, the Partnership desires the Trading Advisor to act as a
trading advisor for the Partnership and to make investment decisions with
respect to futures interests for its allocated share of the Partnership's Net
Assets (as defined in Section 7(c) hereof) and the Trading Advisor desires so to
act.
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Advisor will
conduct a portion of the Partnership's futures interests trading.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Initial and Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the initial and
continuing offering of Units: (i) to make all disclosures regarding itself, its
principals and affiliates, its trading performance, its trading programs,
systems, methods, and strategies provided that nothing herein shall require the
Trading Advisor to disclose any proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership, the General Partner and ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc. ("DWR"), the selling agent for the Partnership, in connection with
their preparation and filing of the Registration Statement and Prospectus,
including any pre- or post-effective amendments or supplements thereto, with the
SEC, CFTC, NFA, NASD, and with appropriate governmental authorities as part of
making application for registration of the Units under the securities or Blue
Sky laws of such jurisdictions as the Partnership may deem appropriate by
providing information regarding the Trading Advisor. As used herein, the term
"principal" shall have the meaning as defined in Section 4.10(e) of the CFTC's
Regulations and the term "affiliate" shall mean an individual or entity that
directly or indirectly controls, is controlled by, or is under common control
with, the Trading Advisor.
(b) The General Partner, in its sole discretion and at any time, may
(i) withdraw the SEC registration of the Units, or (ii) discontinue the offering
of Units.
(c) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, such Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner and agreed to by the
Trading Advisor.
2. Undertakings of the General Partner Relating to the Offering of
Units.
The General Partner shall use its best efforts to consummate the
public offering of the Units (the "Offering") as contemplated by the
Registration Statement. Notwithstanding the foregoing, the General Partner may:
(a) withdraw the Registration Statement from either or both of the SEC and CFTC
(and, if required, so notify the NASD and NFA); (b) withdraw the applications
filed under the securities or Blue Sky laws of the various jurisdictions from
any
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or all of such jurisdictions; and (c) terminate the offering or the registration
of Units with the SEC at any time. The foregoing actions shall have no effect on
the Trading Advisor's obligation to continue providing services to the
Partnership pursuant to the terms hereof.
The General Partner shall use its best efforts to advise the Trading
Advisor of estimated additions and redemptions at least three business days
prior to the end of each month and at the end of each month. The Trading Advisor
shall be authorized to rely on such estimated information in making its trading
decisions for the Partnership. The General Partner shall incur no liability as a
result of any actions taken pursuant to this Section 2; provided, however, that
the General Partner shall not be relieved hereby of any liability that it may
incur under other sections of this Agreement.
3. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a trading advisor
for the Partnership. The Trading Advisor will initially be allocated 50% of the
Partnership Net Assets and 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 be traded pursuant to its International
Foreign Exchange Program on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or the Prospectus
or as otherwise provided in writing to the Trading Advisor; provided, however,
that the General Partner may override the instructions of the Trading Advisor to
the extent necessary (i) to comply with the trading policies of the Partnership
described in writing to the Trading Advisor and with applicable speculative
position limits, (ii) to fund any distributions, redemptions, or
reapportionments among other trading advisors to the Partnership, (iii) to pay
the Partnership's expenses, (iv) to the extent the General Partner believes
doing so is necessary for the protection of the Partnership, (v) to terminate
the futures interests trading of the Partnership, or (vi) to comply with any
applicable law or regulation. The General Partner agrees not to override any
such instructions for the reasons specified in clauses (ii) or (iii) of the
preceding sentence unless the Trading Advisor fails to comply with a request of
the General Partner to make the necessary amount of funds available to the
Partnership within five calendar days of such request. Except as otherwise
provided herein, the Trading Advisor shall not be liable for the consequences of
any decision by the General Partner to override instructions of the Trading
Advisor. In performing services to the Partnership the Trading Advisor may not
materially alter the trading program(s) used by the Trading Advisor in investing
and reinvesting its allocable share of the Partnership's Net Assets in futures
interests as described in the Prospectus without the prior written consent of
the General Partner, it being understood that changes in the futures interests
traded shall not be deemed an alteration in the Trading Advisor's trading
program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures interests
for the account of the Partnership in accordance with the prohibitions and
trading policies of the Partnership described in the Prospectus and as
otherwise provided in writing to the Trading Advisor and the trading
programs, systems, methods, and strategies of the Trading Advisor
described in the Prospectus, with such changes and additions to such
trading programs, systems, methods or strategies as the Trading Advisor,
from time to
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time, incorporates into its trading approach for accounts the size of the
Net Assets allocated to the Trading Advisor.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within
30 calendar days of a request therefor by the General Partner, with
information comparing the performance of the Partnership's account and the
performance of all other client accounts directed by the Trading Advisor
using the trading program used by the Trading Advisor for the Partnership
over a specified period of time. In providing such information, the
Trading Advisor may take such steps as are necessary to assure the
confidentiality of the Trading Advisor's clients' identities. The Trading
Advisor shall, upon the General Partner's request, consult with the
General Partner concerning any discrepancies between the performance of
such other accounts and the Partnership's account. The Trading Advisor
shall promptly inform the General Partner of any material discrepancies of
which the Trading Advisor is aware. The General Partner acknowledges that
different trading programs, systems, methods, and strategies may be
utilized for different 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, accounts with different expense and
interest arrangements, and that the Trading Advisor offers different
trading programs and that such differences may cause divergent trading
results.
(iii) Upon request of the General Partner and subject to reasonable
assurances of confidentiality by the General Partner and the Partnership,
provide the General Partner with all material information concerning the
Trading Advisor other than proprietary information (including, without
limitation, information relating to changes in control, principals,
trading approach or any materially adverse change in the Trading Advisor's
financial condition). The General Partner acknowledges that all trading
instructions made by the Trading Advisor and any other details or other
information regarding the trading systems, strategies, methods or programs
of the Trading Advisor will be held in confidence by the General Partner
and the Partnership, except to the extent necessary, in the reasonable
judgment of the General Partner, to conduct the business of the
Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's open
positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(v) Not trade spot and forward contracts on physical and cash
commodities (other than foreign currencies) without the prior written
consent of the General Partner, which consent the General Partner may
withhold in its sole discretion.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Advisor shall be for the
account of the
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Partnership. The Trading Advisor makes no representations as to whether its
trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any errors committed
or caused by it in transmitting orders for the purchase or sale of futures
interests for the Partnership's account, including payment of the floor
brokerage commissions, exchange and NFA fees, and other transaction charges and
give-up charges incurred on such trades but only for the amount of DWR's
out-of-pocket costs in respect thereof. The Trading Advisor's errors shall
include, but not be limited to, inputting improper trading signals or
communicating incorrect orders for execution. The Trading Advisor shall not be
responsible for errors committed or caused by DWR, any clearing commodity broker
designated by DWR to clear futures interests trades for the Partnership (the
"Clearing Commodity Broker"), or any other floor broker or futures commission
merchant executing trades. Initially, the ▇▇▇▇ Futures Inc. shall serve as the
Non-Clearing Commodity Broker. The Trading Advisor shall have an affirmative
obligation promptly to notify the General Partner of its own errors, and the
Trading Advisor shall use its best efforts to identify and promptly notify the
General Partner of any order or trade which the Trading Advisor reasonably
believes was not executed in accordance with its instructions.
(e) Prior to the commencement of trading, the General Partner on
behalf of the Partnership shall deliver to the Trading Advisor a trading
authorization appointing the Trading Advisor the Partnership's attorney-in-fact
for such purpose.
4. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets as
the General Partner shall determine in its absolute discretion. The designation
of an additional trading advisor or advisors and the apportionment of Net Assets
to such trading advisor(s) pursuant to this Section 4 shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
the Partnership, the General Partner and the Trading Advisor hereunder. In the
event that Net Assets are reallocated from the Trading Advisor, the Trading
Advisor shall thereafter receive management and incentive fees based,
respectively, on that portion of the Net Assets managed by the Trading Advisor
and the Trading Profits (as defined in Section 7(d) hereof) attributable to the
trading by the Trading Advisor.
(b) The General Partner may at any time and from time to time upon
three business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon three business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise. The Trading
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Advisor shall have the right to refuse any additional allocations to be made
pursuant to this Section 4(b).
(c) The General Partner shall not, without the consent of the
Trading Advisor, allocate to the Trading Advisor "notional" assets of the
Partnership.
(d) At any time after the Net Assets of the Partnership allocated to
the Trading Advisor equal or exceed $30,000,000, the TradingAdvisor shall have
the right to reject additional monthly allocations to the extent they exceed 10
percent of the Net Assets of the Partnership allocated to the Trading Advisor.
5. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor as a member of any partnership, joint venture, association,
syndicate or other entity with the Partnership or the General Partner, or be
deemed to confer on any of them any express, implied, or apparent authority to
incur any obligation or liability on behalf of any other. It is expressly agreed
that the Trading Advisor is neither a promoter, sponsor, nor issuer with respect
to the Partnership, nor does the Trading Advisor have any authority or
responsibility with respect to the sale or issuance of Units.
6. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. The
Trading Advisor shall be authorized to rely on the General Partner's and the
Partnership's assessments of the risks of trading on non-U.S. exchanges and the
creditworthiness of such exchanges and their associated clearinghouses, if any.
At the present time, DWR shall act as the non-clearing commodity broker for the
Partnership and all trades will be cleared separately by the Clearing Commodity
Broker. The General Partner shall provide the Trading Advisor with copies of
brokerage statements. Notwithstanding DWR's designation of a Clearing Commodity
Broker, the Trading Advisor may execute trades through floor brokers other than
those employed by the Clearing Commodity Broker so long as arrangements are made
for such floor brokers to "give-up" or transfer the positions to the Clearing
Commodity Broker and provided that the rates charged by such floor brokers have
been approved in writing by DWR. The Trading Advisor will not be responsible for
paying give-up fees at rates approved by DWR.
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7. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the profitability of
the Trading Advisor's trading for the Partnership's account, equal to 1/12
of 4% (a 4% annual rate) of the Net Assets of the Partnership (as defined
in Section 7(c)) allocated to the Trading Advisor calculated as of the
opening of business on the first day of each calendar month, commencing
with the month in which the Partnership begins to receive trading advice
from the Trading Advisor pursuant to this Agreement.
(ii) A monthly incentive fee equal to 15% of the "Trading Profits"
(as defined in Section 7(d)) experienced by the Partnership as of the end
of each calendar month, payable on a non-netted basis vis-a-vis other
trading advisors(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 Initial Closing occurs.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month through the date
of termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents (valued at cost), accrued interest and amortization of original
issue discount, and the market value of all open futures interests positions and
other assets of the Partnership) less the total liabilities of the Partnership
(including, but not limited to, all brokerage, management and incentive 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 interest traded on a U.S. exchange shall mean the
settlement price on the exchange on which the particular futures interest was
traded by the Partnership on the day with respect to which Net Assets are being
determined, provided, however, that if a futures interest could not have been
liquidated on such day due to the operation of daily limits or other rules of
the exchange upon which that future interest shall be traded or otherwise, the
settlement price on the first subsequent day on which the futures interest could
be
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liquidated shall be the market value of such futures interest for such day. The
market value of a forward contract or a futures interest traded on a foreign
exchange or market shall mean its market value as determined by the General
Partner on a basis consistently applied for each different variety of forward
contract or futures interest.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last
calendar month in which an incentive fee was earned by the Trading Advisor or,
if no incentive fee has been earned previously by the Trading Advisor, from the
date that the Partnership commenced trading to the end of the calendar month as
of which such incentive fee calculation is being made. No incentive fee will be
paid on interest income earned by the Partnership.
(e) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits earned by the Partnership on Net Assets allocated
to the Trading Advisor and the Partnership thereafter fails to earn Trading
Profits or experiences losses for any subsequent incentive period with respect
to such amounts so allocated, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits. However, no subsequent incentive fees shall be payable
to the Trading Advisor until the Partnership has again earned Trading Profits on
the Trading Advisor's allocated Net Assets; provided, however, that if the
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations 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 Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
(f) If the Trading Advisor's allocated Net Assets are reduced
because of a reallocation pursuant to Section 4 hereof on a date other than the
last day of the month, the Trading Advisor 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 Advisor as soon as practicable, but in no event later than 30
calendar days, in the case of the management fee, or 45 calendar 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.
8. Term.
This Agreement shall continue in effect until December 31, 2002 (the
"Initial Termination Date"). If this Agreement is not terminated on the Initial
Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least 30 calendar days prior to the
expiration of the Initial Termination Date or any subsequent one-year period, as
the case may be, the Trading Advisor may terminate this Agreement at the end of
the current period by providing written notice to the Partnership indicating
that the Trading Advisor desires to terminate this Agreement at the end of such
period. This Agreement shall also terminate if the Partnership terminates. The
Partnership shall have the right to terminate this Agreement at its discretion
(a) at any month-end upon 5 calendar days' prior written notice to the Trading
Advisor or (b) at any time upon written notice to the Trading Advisor upon the
occurrence of any of the following events: (i) if ▇▇▇▇ ▇. ▇▇▇▇▇ ceases for any
reason to be a principal of the Trading Advisor; (ii) if the Trading Advisor
becomes bankrupt or insolvent; (iii) if the Trading Advisor is unable to use its
trading systems or methods as in effect on the date hereof and as refined and
modified in the future for the benefit of the Partnership; (iv) if the
registration, as a commodity trading advisor, of the Trading Advisor with the
CFTC or its membership in the NFA is revoked, suspended, terminated, or not
renewed, or limited or qualified in any respect; (v) except as provided in
Section 12 hereof, if the Trading Advisor merges or consolidates with, or sells
or otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading systems or methods, or
its goodwill to, any individual or entity not controlled, directly or
indirectly, by ▇▇▇▇ ▇. ▇▇▇▇▇; (vi) if the Trading Advisor's initially allocated
Net Assets, after adjusting for distributions, additions, redemptions, or
reallocations, if any, shall decline by 50% or more as a result of trading
losses; (vii) if, at any time, the Trading Advisor violates any trading or
administrative policy described in writing to the Trading Advisor by the General
Partner, except with the prior express written consent of the General Partner;
or (viii) if the Trading Advisor fails in a material manner to perform any of
its obligations under this Agreement. The Trading Advisor may terminate this
Agreement at any time, upon written notice to the Partnership, in the event: (i)
that the General Partner imposes additional trading limitation(s) (not in effect
on the date hereof) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to Partnership will be
materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct
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the breach within 10 days of receipt of a written notice of such breach from the
Trading Advisor; or (v) the Trading Advisor has amended its trading program to
include a foreign futures or option contract which may lawfully be traded by the
Partnership under CFTC regulations and counsel, mutually acceptable to the
parties, has not opined that such inclusion would cause adverse tax consequences
to Limited Partners and the General Partner does not consent to the Trading
Advisor's trading such contract for the Partnership within 5 business days of a
written request by the Trading Advisor to do so, and, if such consent is given,
does not make arrangements to facilitate such trading within 90 calendar days of
such notice; or (vi) the assets allocated to the Trading Advisor fall below
$1,000,000 at any time.
The indemnities set forth in Section 9 hereof shall survive any
termination of this Agreement.
9. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management Activities.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
business or activities undertaken by the Trading Advisor pursuant to this
Agreement; provided that such liability arises from an act or omission of the
Trading Advisor, or any of its controlling persons or affiliates or their
respective directors, officers, partners, shareholders, or employees which is
found by a court of competent jurisdiction upon entry of a final judgment (or,
if no final judgment is entered, by an opinion rendered by counsel who is
approved by the Partnership and the Trading Advisor, such approval not to be
unreasonably withheld) to be a breach of this Agreement or a representation,
warranty or covenant herein, the result of bad faith, misconduct or negligence,
or conduct not done in good faith in the reasonable belief that it was in, or
not opposed to, the best interests of the Partnership. 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.
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(c) Partnership and General Partner Indemnity in Respect of
Management Activities. The Partnership and the General Partner shall, jointly
and severally, indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, 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 Advisor 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 Advisor
herein and was done in good faith and in a manner such indemnified party
reasonably believed to be in, or not opposed to, the best interests of the
Partnership. The termination of any demand, claim, lawsuit, action or proceeding
by settlement shall not, in itself, create a presumption that the conduct in
question was not undertaken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interest of the Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, the Clearing
Commodity Broker, the Partnership, the General Partner, any additional seller of
Units, and their affiliates and each of their officers, directors, principals,
shareholders, and controlling persons from and against any loss, claim, damage,
liability, cost, and expense, joint and several, to which any indemnified person
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Commodity Exchange Act, as amended
and rules promulgated thereunder (the "CEAct") the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Trading Advisor shall have approved such
settlement, and in connection with any administrative proceedings), in respect
of the offer or sale of Units, insofar as such loss, claim, damage, liability,
cost, or expense (or action in respect thereof) arises out of, or is based upon:
(i) a breach by the Trading Advisor of any representation, warranty, or
agreement in this Agreement or any certificate delivered pursuant to this
Agreement or the failure by the Trading Advisor to perform any covenant made by
the Trading Advisor herein; (ii) the factual accuracy of the information
relating to the Trading Advisor in any selling material that has been approved
in writing by the Trading Advisor herein; (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 Advisor, or its
Trading Advisor Principals (as defined below) (including the historical
performance capsules but excluding the pro forma performance
-11-
information, except to the extent the pro forma performance information was
based on information furnished by the Trading Advisor for the General Partner's
preparation of such pro forma capsules), or was made in reliance upon, and in
conformity with, written information or instructions furnished by the Trading
Advisor.
(e) Partnership and General Partner Indemnity in Respect of Sale of
Units. The Partnership and the General Partner agree, jointly and severally, to
indemnify, defend and hold harmless the Trading Advisor 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 Exchange Act, the CEAct, the securities or Blue Sky law of any
jurisdiction, or otherwise (including any reasonable investigatory, legal, and
other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership and the General Partner shall have
approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, 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 Advisor of any representation,
warranty, or agreement in this Agreement or the failure by the Trading Advisor
to perform any covenant made by it herein; (ii) the factual accuracy of the
information relating to the Trading Advisor in any related selling material
approved in writing by the Trading Advisor; or (iii) a misleading or untrue
statement or alleged misleading or untrue statement of a material fact made in
the Registration Statement 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, provided
that such misleading or untrue statement or alleged misleading or untrue
statement or omission or alleged omission relates to the Trading Advisor or its
Trading Advisor Principals (including the historical performance capsules but
excluding the pro forma performance information unless such statement or
omission was based on information furnished by the Trading Advisor 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 Advisor.
(f) Notwithstanding anything in the above to the contrary, ▇▇▇▇ ▇.
▇▇▇▇▇ shall have no liability to the General Partner or the Partnership under
this Agreement or in connection with the transaction contemplated by this
Agreement except for fraud and willful misconduct by ▇▇▇▇ ▇. ▇▇▇▇▇.
(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, claim, or proceeding is brought against an indemnified person and the
indemnified person
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notifies the indemnifying party of the commencement thereof as provided above,
the indemnifying party will be entitled to participate therein and, to the
extent that the indemnifying party desires, to assume the defense thereof with
counsel selected by the indemnifying party and not unreasonably disapproved by
the indemnified person. After notice from the indemnifying party to the
indemnified person of the indemnifying party's election so to assume the defense
thereof as provided above, the indemnifying party will not be liable to the
indemnified person under the indemnity provisions hereof for any legal and other
expenses subsequently incurred by the indemnified person in connection with the
defense thereof, other than reasonable costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding, is settled with the indemnifying party's express written consent 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.
10. Right to Advise Others and Uniformity of Acts and Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading systems, methods, or strategies employed by the Trading Advisor
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
-13-
actions do not knowingly or deliberately prefer any of such accounts over the
account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading systems, methods or
strategies to accommodate the trading of additional funds or accounts. If
applicable speculative position limits are exceeded by the Trading Advisor in
the opinion of (i) independent counsel (who shall be other than counsel to the
Partnership), (ii) the CFTC, or (iii) any other regulatory body, exchange, or
board, the Trading Advisor and its principals and affiliates shall promptly
liquidate positions in all of their accounts, including the Partnership's
account, as to which positions are attributed to the Trading Advisor as nearly
as possible in proportion to the accounts' respective amounts available for
trading (taking into account different degrees of leverage and "notional"
equity) to the extent necessary to comply with the applicable position limits.
11. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations, Warranties, and Agreements of the Trading
Advisor. The Trading Advisor with respect to itself and each of its principals
represents and warrants to and agrees with the General Partner and the
Partnership as follows:
(i) It will exercise good faith and due care in using the
International Foreign Exchange Program 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 Advisor shall follow, at all times, the trading
policies of the Partnership (as described in the Prospectus) and as
amended in writing and furnished to the Trading Advisor from time to time.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the International Foreign Exchange 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 contracts traded with the Clearing Commodity Broker, and
such other futures interests that are approved in writing by the General
Partner.
-14-
(iv) The Trading Advisor is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and
in good standing in each other jurisdiction in which the nature or conduct
of its business requires such qualification and the failure to so qualify
would materially adversely affect the Trading Advisor's ability to perform
its duties under this Agreement. The Trading Advisor has full corporate
power and authority to perform its obligations under this Agreement, and
as described in the Registration Statement and Prospectus. The only
principals (as defined in Rule 4.10(e) under the CEAct) of the Trading
Advisor are those set forth in the Prospectus (the "Trading Advisor
Principals").
(v) All references to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's trading programs, approaches,
systems, and performance, in the Registration Statement and the
Prospectus, are accurate and complete in all material respects, and any
supplemental selling material which has been approved in writing by the
Trading Advisor is accurate in all material respects. With respect to the
information relating to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's and the Trading Advisor
Principals' trading programs, 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 Advisor 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
CEAct, (ii) the Registration Statement as of its effective date will not
contain any misleading or untrue statement of a material fact or omit to
state a material fact which is required to be stated therein or necessary
to make the statements therein not misleading and (iii) the Prospectus at
its date of issue and as of each closing will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Trading Advisor and is a valid and binding
agreement of the Trading Advisor enforceable in accordance with its terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal
and state governmental, regulatory and exchange licenses 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 Advisor is registered as a commodity trading
advisor under the CEAct and is a member of the NFA in such capacity.
(viii) The execution and delivery of this Agreement, the incurrence
of the obligations set forth herein, the consummation of the transactions
contemplated herein and in the Prospectus and the payment of the fees
hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading
-15-
Advisor or any agreement or instrument by which it is bound or of any
order, rule, law or regulation binding on it of any court or any
governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over it.
(ix) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the
Prospectus, there has not been any material adverse change in the
condition, financial or otherwise, business or prospects of the Trading
Advisor or any Trading Advisor Principal.
(x) Except as set forth in the Registration Statement or Prospectus
there has not been in the five years preceding the date of the Prospectus
and there is not pending, or to the best of the Trading Advisor's
knowledge threatened, any action, suit or proceeding before or by any
court or other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the Trading Advisor or any
Trading Advisor Principal is or was a party, or to which any of the assets
of the Trading Advisor or any Trading Advisor Principal is or was subject
and which resulted in or might reasonably be expected to result in any
materially adverse change in the condition, financial or otherwise,
business or prospects of the Trading Advisor or which would be material to
an investor's decision to invest in the Partnership. None of the Trading
Advisor or any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the
Trading Advisor or any of the Trading Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor Principal
has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in
connection with the organization or operation of the Partnership, other
than as described in the Prospectus.
(xii) The actual performance of each discretionary account of a
client directed by the Trading Advisor and the Trading Advisor Principals
since at least the later of (i) the date of commencement of trading for
each such account or (ii) a date five years prior to the effective date of
the Registration Statement, is disclosed in the Prospectus (other than
such discretionary accounts the performance of which are exempt from CEAct
disclosure requirements); all of the information regarding the actual
performance of the accounts of the Trading Advisor and the Trading Advisor
Principals set forth in the Prospectus is complete and accurate in all
material respects and is in accordance with and in compliance with the
disclosure requirements under the CEAct and the Securities Act, including
the Division of Trading and Markets "notional equity" advisories and
interpretations and the rules and regulations of the NFA.
(b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain all
registrations
-16-
and memberships necessary for the Trading Advisor to continue to act as
described herein and to at all times comply in all material respects with
all applicable laws, rules, and regulations, to the extent that the
failure to so comply would have a materially adverse effect on the Trading
Advisor's ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals
becomes the subject of any investigation, claim or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
Trading Advisor. The Trading Advisor shall also inform the General Partner
immediately if the Trading Advisor or any of its officers becomes aware of
any breach of this Agreement by the Trading Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the
preparation of any amendments or supplements to the Registration Statement
and the Prospectus.
12. Representations, Warranties, and Covenants of the General
Partner and the Partnership.
(a) Representations and Warranties of the General Partner and the
Partnership. The General Partner and the Partnership represent and warrant to
the Trading Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and filed
with the SEC, the Registration Statement and has filed copies thereof
with: (i) the CFTC under the CEAct (ii) the NASD pursuant to its Conduct
Rules; and (iii) the NFA in accordance with NFA Compliance Rule 2-13. The
Partnership will not file any amendment to the Registration Statement or
any amendment or supplement to the Prospectus unless the Trading Advisor
has received reasonable prior notice of and a copy of such amendments or
supplements and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required under applicable law 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 and Exchange Agreement and Power of Attorney in such forms as
attached to the Prospectus, the Units will constitute valid limited
partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the Delaware Revised Uniform Limited Partnership
Act ("DRULPA") and is validly existing under the laws of the State of
Delaware with full power and authority to engage in the trading of futures
interests and to engage in its other contemplated activities as described
in the Prospectus; the Partnership has received a certificate of authority
to do business in the State of New York as provided by Article 8-A of the
New York Revised Limited
-17-
Partnership Act and is qualified to do business in each jurisdiction in
which the nature or conduct of its business requires such qualification
and where failure to be so qualified could materially adversely affect the
Partnership's ability to perform its obligations hereunder.
(iv) The General Partner is duly organized and validly existing and
in good standing as a corporation under the laws of the State of Delaware
and in good standing and qualified to do business as a foreign corporation
under the laws of the State of New York and is qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in
which the nature or conduct of its business requires such qualification
and where the failure to be so qualified could materially adversely affect
the General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full partnership or
corporate power and authority under applicable law to conduct their
business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct.
When the Registration Statement becomes effective under the Securities Act
and at all times subsequent thereto up to and including the Initial
Closing and each Closing, the Registration Statement and Prospectus will
comply in all material respects with the requirements of the Securities
Act, the rules and regulations promulgated thereunder (the "SEC
Regulations"), the rules of the NFA and the CEAct. The Registration
Statement as of its effective date will not contain any misleading or
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus as of its date of issue and at the Initial
Closing and each Closing will not contain any misleading or untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental
selling material will comply with the CEAct and the regulations and rules
of the NFA and NASD. The representations and warranties in this clause
(vi) shall not, however, apply to any statement or omission in the
Registration Statement, Prospectus or supplemental selling material
specifically relating to the Trading Advisor, or its Trading Advisor
Principals or its trading programs (other than the pro forma performance
information except to the extent such information was based on information
furnished by the Trading Advisor) or made in reliance upon and in
conformity with information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business
or prospects of the General Partner or the Partnership, whether or not
arising in the ordinary course of business.
-18-
(viii) This Agreement has been duly and validly authorized, executed
and delivered by the General Partner for itself and on behalf of the
Partnership and constitutes a valid, binding and enforceable agreement of
the Partnership and the General Partner in accordance with its terms.
(ix) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein and the consummation of the transactions
contemplated herein and in the Registration Statement and Prospectus will
not violate, or constitute a breach of, or default under, the General
Partner's certificate of incorporation, bylaws, the Certificate of Limited
Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the
case may be, is bound or any order, rule, law or regulation applicable to
the General Partner or the Partnership of any court or any governmental
body or administrative agency or panel or self-regulatory organization
having jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or Prospectus,
there has not been in the five years preceding the date of the Prospectus
and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity
before or by any court or by any federal, state, municipal or other
governmental body or any administrative, self-regulatory or commodity
exchange organization to which the General Partner or the Partnership is
or was a party, or to which any of the assets of the General Partner or
the Partnership is or was subject and which resulted in or might
reasonably be expected to result in any materially adverse change in the
condition, financial or otherwise, of the General Partner or the
Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of
the principals of the General Partner, as "principals" is defined under
Rule 4.10 under the CEAct ("General Partner Principals") has received any
notice of an investigation by the NFA, NASD, SEC or CFTC regarding
non-compliance by the General Partner or the General Partner Principals or
the Partnership with the Securities Act or the CEAct which is required
under the Securities Act or the CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General Partner,
as defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals and licenses, and have
effected all filings and registrations with federal and state and foreign
governmental agencies in order for the General Partner to conduct its
business and to act as described in the Registration Statement and
Prospectus or required to perform its obligations under this Agreement
(including, without limitation, registration as a commodity pool operator
under the CEAct and membership in the NFA as a commodity pool operator)
and will maintain all such required approvals, licenses, filings and
registrations for the term of this Agreement. The General Partner's
principals identified in the Registration Statement are all of the General
Partner Principals.
-19-
(b) Covenants of the General Partner. The General Partner covenants
and agrees that:
(i) The General Partner shall use its best efforts to maintain all
registrations and memberships necessary for the General Partner to
continue to act as described herein and in the Prospectus and to all times
comply in all material respects with all applicable laws, rules, and
regulations, to the extent that the failure to so comply would have a
materially adverse effect on the General Partner's ability to act as
described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals
becomes the subject of any investigation, claim, or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
General Partner. The General Partner shall also inform the Trading Advisor
immediately if the General Partner or any of its officers become aware of
any breach of this Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Advisor copies of
the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
13. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
14. 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.
15. Assignment.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
16. Amendment.
This Agreement may not be amended except by the written consent of
the parties hereto.
-20-
17. 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.
18. Closing Certificates and Opinions.
(a) The Trading Advisor shall, at the Partnership's Initial Closing
and at the request of the General Partner at any Closing, provide the following:
(i) 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:
(A) The representations and warranties by the Trading Advisor
in this Agreement are true, accurate, and complete on and as of the
date of the closing, as if made on the date of the closing.
(B) The Trading Advisor has performed all of its obligations
and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such
closing.
(ii) To DWR, the General Partner and the Partnership an opinion of
counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(A) The Trading Advisor is a corporation duly organized and
validly existing under the laws of the state of its incorporation
and is qualified to do business and in good standing in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to be duly qualified would
materially adversely affect the Trading Advisor's ability to perform
its obligations under this Agreement. The Trading Advisor has full
corporate power and authority to conduct its business as described
in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(B) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, and self-regulatory
registrations and memberships required by law, and the Trading
Advisor (including the Trading Advisor 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,
memberships or registrations have been rescinded, revoked or
suspended.
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(C) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trading Advisor and constitutes a
valid and binding agreement of the Trading Advisor enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law),
and except as enforceability of the indemnification, exculpation,
and contribution provisions contained in such agreements may be
limited by applicable law or public policy.
(D) Based upon due inquiry of certain officers of the Trading
Advisor, to such counsel's knowledge, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in
equity pending or threatened before or by any court, governmental
body, administrative agency, panel or self- regulatory organization,
nor have there been any such actions, suits or proceedings within
the five years preceding the date of the Prospectus against the
Trading Advisor or any Trading Advisor Principal which are required
to be disclosed in the Registration Statement or Prospectus.
(E) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation
of the transactions contemplated herein and in the Prospectus will
not be in contravention of any of the provisions of the certificate
of incorporation or bylaws of the Trading Advisor and, based upon
due inquiry of certain officers of the Trading Advisor, to such
counsel's knowledge, will not constitute a breach of, or default
under, or a violation of any instrument or agreement known to such
counsel by which the Trading Advisor is bound and will not violate
any order, law, rule or regulation applicable to the Trading Advisor
of any court or any governmental body or administrative agency or
panel or self-regulatory organization having jurisdiction over the
Trading Advisor.
(F) Based upon reliance of certain SEC "no-action" letters,
the performance by the Trading Advisor of the transactions
contemplated by this Agreement and as described in the Prospectus
will not require the Trading Advisor to be registered as an
"investment adviser" as that term is defined in the Investment
Advisers Act of 1940, as amended.
(G) Nothing has come to such counsel's attention that would
lead them to believe that, (A) the Registration Statement at the
time it became effective, insofar as the Trading Advisor and the
Trading Advisor Principals are concerned, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (B) the Prospectus at the time it was
issued or at the closing contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make
the statements therein relating to the Trading Advisor or the
Trading Advisor Principals, in light of the circumstances under
which they were made, not misleading; provided, however, that such
counsel need express no
-22-
opinion or belief as to the performance data and notes or
descriptions thereto set forth in the Registration Statement and
Prospectus, except that such counsel shall opine, without rendering
any opinion as to the accuracy of the information in such tables,
that the actual performance tables of the Trading Advisor set forth
in the Prospectus comply as to form in all material respects with
applicable CFTC rules and all CFTC and NFA interpretations thereof,
except as disclosed in the Prospectus.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(iii) To DWR, the General Partner and the Partnership, a report
dated the date of the closing which shall present, for the period from the
date after the last day covered by the historical performance capsules in
the Prospectus to the latest practicable day before closing, updated
performance information which shall certify that such figures are, to the
best of such Trading Advisor's knowledge, accurate in all material
respects.
(b) The General Partner shall, at the Partnership's Initial Closing
and at the request of the Trading Advisor at any Closing, provide the following:
(i) To the Trading Advisor a certificate, dated the date of such
closings and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(A) 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.
(B) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings
for that purpose have been instituted or are pending or, to the
knowledge of the General Partner, are contemplated or threatened
under the Securities Act. No order preventing or suspending the use
of the Prospectus has been issued by the SEC, NASD, CFTC, or NFA and
no proceedings for that purpose have been instituted or are pending
or, to the knowledge of the General Partner, are contemplated or
threatened under the Securities Act or the CEAct.
(C) 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.
(ii) To the parties hereto, an opinion of Cadwalader, ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇, counsel to the General Partner and the Partnership, in form and
substance satisfactory to such parties, to the effect that:
(A) 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
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partnership power and authority to conduct the business in which it
proposes to engage as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement; the
Partnership has received a Certificate of Authority as contemplated
under the New York Revised Limited Partnership Act and is qualified
to do business in New York and need not affect any other filings or
qualifications under the laws of any other jurisdictions to conduct
its business as described in the Registration Statement and
Prospectus.
(B) The General Partner is duly organized and validly existing
and in good standing as a corporation under the laws of the State of
Delaware and is qualified to do business and is in good standing as
a foreign corporation in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to so qualify might reasonably be
expected to result in material adverse consequences to the
Partnership or the General Partner's ability to perform its
obligations as described in the Registration Statement and
Prospectus. The General Partner has full corporate power and
authority to conduct its business as described in the Registration
Statement and Prospectus and to perform its obligations under this
Agreement.
(C) The General Partner, each of its principals as defined in
Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and
memberships required by law and have made all filings necessary in
order for the General Partner and the Partnership to perform their
obligations under this Agreement to conduct their business as
described in the Registration Statement and Prospectus, except for
such licenses, memberships, filings, and registrations, the absence
of which would not have a material adverse effect on the ability of
the Partnership or the General Partner to act as described in the
Registration Statement and Prospectus, or to perform their
obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and
memberships or registrations have been rescinded, revoked or
suspended.
(D) This Agreement has been duly authorized, executed and
delivered by or on behalf of the General Partner and the
Partnership, and constitutes a valid and binding agreement of the
General Partner and the Partnership, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors and by general
principals of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except as
enforceability of indemnification, exculpation and contribution
provisions contained in this Agreement may be limited by applicable
law or public policy.
(E) The execution and delivery of this Agreement and the offer
and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the
transactions contemplated herein and in the
-24-
Prospectus will not be in contravention of the General Partner's
certificate of incorporation or bylaws, the Certificate of Limited
Partnership, and the Limited Partnership Agreement and, to such
counsel's knowledge based upon due inquiry of certain officers of
the General Partner, none of the foregoing will constitute a breach
of, or default under, or a violation of any agreement or instrument
known to such counsel by which the General Partner or the
Partnership is bound or violate any order known to such counsel or
any law, rule or regulation applicable to the General Partner or the
Partnership of any court, governmental body, administrative agency,
panel or self-regulatory organization having jurisdiction over the
General Partner or the Partnership.
(F) To such counsel's knowledge, based upon due inquiry of
certain officers of the General Partner, there are no actions, suits
or proceedings at law or in equity pending or threatened before or
by any court governmental body, administrative agency, panel or self
regulatory organization, nor have there been any such actions, suits
or proceedings within the five years preceding the date of the
Prospectus against the General Partner or the Partnership which are
required to be disclosed in the Registration Statement or
Prospectus.
(G) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no
proceedings for a stop order are pending or threatened under Section
8(d) of the Securities Act or any similar state securities laws.
(H) At the time the Registration Statement became effective,
the Registration Statement, and at the time the Prospectus was
issued and as of the closing, the Prospectus, complied as to form in
all material respects with the requirements of the Securities Act,
the Securities Regulations, the CEAct and the regulations of the NFA
and NASD.
(I) Nothing has come to such counsel's attention that would
lead them to believe that the Registration Statement at the time it
became effective contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they where made, not misleading; provided,
however, that Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ need express no opinion
or belief (a) as to information in the Registration Statement or the
Prospectus regarding any Trading Advisor or its principals, or (b)
as to the financial statements, notes thereto and other financial or
statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or
descriptions thereto set forth in the Registration Statement and
Prospectus.
(J) Based upon reliance on certain SEC "no-action" letters, as
of the closing, the performance of the transactions contemplated by
this Agreement and
-25-
as described in the Prospectus will not require the Partnership to
register as an "investment company" under the Investment Company Act
of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
19. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication. No such description shall be
published or filed to which the General Partner reasonably objects, except as
otherwise required by law.
20. Disclosure Documents.
(a) During the term of this Agreement, the Trading Advisor shall
furnish to the General Partner promptly copies of all disclosure documents filed
with the CFTC or NFA by the Trading Advisor. The General Partner acknowledges
receipt of the Trading Advisor's disclosure document dated June 30, 1999.
Failure to provide a disclosure document shall not constitute breach of this
Agreement unless the Trading Advisor fails to provide a document within 7
calendar days of a request.
(b) The General Partner and the Partnership will not distribute or
supplement any promotional material relating to the Trading Advisor unless the
Trading Advisor has received reasonable prior notice of and a copy of such
promotional material and has not reasonably objected thereto in writing.
21. Notices.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
-26-
if to the Partnership:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Spectrum Currency L.P.
c/o Demeter Management Corporation
Two World ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
if to the General Partner:
Demeter Management Corporation
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
if to the Trading Advisor:
▇▇▇▇ ▇. ▇▇▇▇▇ & Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
22. 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.
23. 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.
24. Remedies.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
-27-
25. 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.
-28-
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ SPECTRUM
CURRENCY L.P.
By: Demeter Management Corporation,
General Partner
By: ______________________________
Name:
Its:
DEMETER MANAGEMENT CORPORATION
By:__________________________________
Name:
Its:
▇▇▇▇ ▇. ▇▇▇▇▇ & COMPANY, INC.
By:__________________________________
Name:
Its: