EXHIBIT 10.02
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among XXXX XXXXXX SPECTRUM STRATEGIC L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and WILLOWBRIDGE ASSOCIATES INC., a Delaware 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 Xxxx Xxxxxx Spectrum Series (the "Fund Group") by entering
into an agreement pursuant to which units of limited partnership interest
("Units") of such member partnerships will be sold to investors in a common
offering under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement on Form S-1 (No. 33-80146) (as amended from
time to time, the "Registration Statement") and a final Prospectus dated
September 15, 1994, constituting a part thereof (as amended and supplemented,
the "Prospectus"), and thereafter, pursuant to which such Units can be exchanged
by a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Manager has extensive experience trading
in futures interests and is willing to provide certain services and undertake
certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Manager to act as
a trading manager for the Partnership and to make investment decisions with
respect to futures interests for its allocated share of the Partnership's Net
Assets and the Trading Manager desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Manager wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Manager will
conduct a portion of the Partnership's futures interests trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertaking 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"), 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 on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or provided in
writing to the Trading Manager; provided, however, that the General Partner may
override the instructions of the Trading Manager to the extent necessary (i) to
comply with the trading policies of the Partnership described in writing to the
Trading Manager and with applicable speculative position limits, (ii) to fund
any distributions, redemptions, or reapportionments among other trading managers
to the Partnership, (iii) to pay the Partnership's expenses, (iv) to the extent
the General Partner believes doing so is necessary for the protection of the
Partnership, (v) to terminate the futures interests trading of the Partnership,
or (vi) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions 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).
Notwithstanding the foregoing, if the Trading Manager is using a trading system
subject to its License Agreement with Caxton Corporation and such License
Agreement is terminated, no such prior written consent shall be necessary and
the parties shall mutually agree on a replacement trading approach to be used
for the Partnership. The Partnership and the General Partner acknowledge that in
agreeing to manage an account for the Partnership the Trading Manager makes no
guarantee of profits or of protections against loss.
(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.
(iii) Upon request of the General Partner and subject
to reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Manager other than proprietary information (including,
without limitation, information relating to changes in control, personnel,
trading approach, or financial condition). 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 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 are so designated, the Trading Manager shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Manager and the Trading Profits
attributable to the trading by the Trading Manager.
(b) The General Partner may at any time and from time to
time upon two business days' prior notice reallocate Net Assets allocated to the
Trading Manager to any other trading manager or managers of the Partnership or
allocate additional Net Assets upon two business days' prior notice to the
Trading Manager from such other trading manager or managers; provided that any
such addition to or withdrawal from Net Assets allocated to the Trading Manager
of the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Manager Independent.
----------------------------
For all purposes of this Agreement, the Trading Manager shall
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Manager or any other trading manager or managers for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Manager is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Manager have any
authority 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, Xxxx Xxxxxx Xxxxxxxx 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. The parties acknowledge that the Trading Manager has no
authority or responsibility for selecting the commodity broker or for the
negotiation of brokerage commission rates, and is not responsible for the
execution and clearance of the Partnership's trades once complete orders have
been transmitted to DWR except as provided in Section 2(d) hereof.
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 managers(s) of the
Partnership. The initial incentive period will commence on the date of the
Partnership's initial closing (the "Initial Closing") and shall end on the last
day of the first month ending after such Closing occurs.
(b) If this Agreement is terminated on a date other than the
last day of a month, the incentive fee described above shall be determined as if
such date were the end of a month. If this Agreement is terminated on a date
other than the end of a month, the management fee described above shall be
determined as if such date were the end of a month, but such fee shall be
prorated based on the ratio of the number of trading days in the month through
the date of termination to the total number of trading days in the month. If,
during any month after the Partnership commences trading operations (including
the month in which the Partnership commences such operations), the Partnership
does not conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Manager, or, as a result of an act or
material failure to act by the Trading Manager, is otherwise unable to utilize
the trading advice of the Trading Manager on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilizes the trading advice of the Trading Manager to the total number of
trading days in the month. The management fee payable to the Trading Manager for
the month in which the Partnership begins to receive trading advice from the
Trading Manager pursuant to this Agreement shall be prorated based on the ratio
of the number of trading days in the month from the day the Partnership begins
to receive such trading advice to the total number of trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the
total assets of the Partnership (including, but not limited to, all cash and
cash equivalents, accrued interest and amortization of original issue discount,
and the market value of all open futures interest positions and other assets of
the Partnership) less all liabilities of the Partnership (including, but not
limited to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting, Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Manager, decreased by the
Trading Manager's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Manager's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Manager or, if no incentive
fee has been earned previously by the Trading Manager, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading
Manager on account of Trading Profits earned by the Partnership on Net Assets
allocated to the Trading Manager and the Partnership thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period with
respect to such amounts so allocated, the Trading Manager shall be entitled to
retain such amounts of incentive fees previously paid to the Trading Manager in
respect of such Trading Profits. However, no subsequent incentive fees shall be
payable to the Trading Manager until the Partnership has again earned Trading
Profits on the Trading Manager's allocated Net Assets; provided, however, that
if the Trading Manager's allocated Net Assets are reduced or increased because
of redemptions, additions or reallocations which occur at the end of, or
subsequent to, an incentive period in which the Partnership experiences a
futures interests trading loss with respect to Net Assets allocated to the
Trading Manager, the trading loss for that incentive period which must be
recovered before the Trading Manager's allocated Net Assets will be deemed to
experience Trading Profits will be equal to the amount determined by (x)
dividing the Trading Manager's allocated Net Assets after such increase or
decrease by the Trading Manager's allocated Net Assets immediately before such
increase or decrease and (y) multiplying that fraction by the amount of the
unrecovered futures interests trading loss experienced in that month prior to
such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month with respect to the
Trading Manager's allocated Net Assets without the payment of an intervening
incentive fee and Net Assets are increased or reduced in more than one such
month because of redemptions, additions or reallocations, then the trading loss
for each such month shall be adjusted in accordance with the formula described
above and such increased or reduced amount of futures interests trading loss
shall be carried forward and used to offset subsequent futures interest trading
profits. The portion of redemptions to be allocated to the Net Assets of the
Partnership managed by each of the trading managers to the Partnership shall be
in the sole discretion of the General Partner.
(f) The Partnership will remit the management and incentive fees to the Trading
Manager as soon as practicable, but in no event later than 30 days in the case
of the management fee, and 45 days in the case of the incentive fee, of the
month-end as of which they are due, together with an itemized statement showing
the calculations.
7. Term.
-----
This Agreement shall continue in effect for a period of three
years after the end of the month in which the Partnership commences trading
operations. At least thirty days prior to the expiration of such three-year
period, the Trading Manager may terminate this Agreement at the end of the
three-year period by providing written notice to the Partnership indicating that
the Trading Manager desires to terminate such Agreement at the end of such
three-year period. If the Agreement is not terminated upon the expiration of the
three-year period, then upon the expiration of such three-year period, this
Agreement shall automatically renew for an additional one-year period and shall
continue to renew for additional one-year periods until this Agreement is
otherwise terminated, as provided for herein. At least thirty days prior to the
expiration of any such one-year period, the Trading Manager may terminate this
Agreement at the end of the current one-year period by providing written notice
to the Partnership indicating that the Trading Manager desires to terminate such
Agreement at the end of such one-year period. This Agreement shall terminate if
the Partnership terminates. The Partnership shall have the right to terminate
this Agreement at its discretion (a) at any month end upon 5 days' prior written
notice to the Trading Manager or (b) at any time upon written notice to the
Trading Manager upon the occurrence of any of the following events: (i) if
Xxxxxx X. Xxxx ceases for any reason to be an active executive officer of the
Trading Manager; (ii) if the Trading Manager becomes bankrupt or insolvent:
(iii) if the Trading Manager is unable to use its trading systems or methods as
in effect on the date hereof and as refined and modified in the future for the
benefit of the Partnership; (iv) if the registration, as a commodity trading
advisor, of the Trading Manager with the CFTC or its membership in the NFA is
revoked, suspended, terminated, or not renewed, or limited or qualified in any
respect; (v) except as provided in Section 12 hereof, if the Trading Manager
merges or consolidates with, or sells or otherwise transfers its advisory
business, or all or a substantial portion of its assets, any portion of its
futures interests trading systems or methods, or its goodwill to, any individual
or entity; (vi) if the Trading Manager's initially allocated Net Assets, after
adjusting for distributions, additions, redemptions, or reallocations, if any,
shall decline by 50% or more as a result of trading losses 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 the Trading Manager 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 Manager for reasons unrelated to a determination by the General Partner
that the Trading Manager has violated the Partnership's trading policies and the
Trading Manager certifies to the General Partner in writing that as a result,
the Trading Manager believes the performance results of the Trading Manager
relating to Partnership will be materially adversely affected; (iv) the
Partnership materially breaches this Agreement and does not correct the breach
within 10 days of receipt of a written notice of such breach from the Trading
Manager; (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; (vi) the assets allocated to the Trading Manager fall below $1,000,000
at any time; or (vii) if the registration of the General Partner as a commodity
pool operator with the CFTC or its membership in the NFA is revoked, suspended,
terminated or not renewed, or limited or qualified in any respect.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
----------------------------------------
(a) Limitation of Trading Manager Liability. In respect of
the Trading Manager's role in the futures interests trading of the Partnership's
assets, none of the Trading Manager, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Manager shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Manager Indemnity in Respect of Management
Activities. The Trading Manager shall indemnify, defend and hold harmless the
Partnership and the General Partner, their controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Trading Manager shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading of the Trading Manager,
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 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 and General Partner Indemnity in Respect of
Management Activities. The Partnership and the General Partner shall, jointly
and severally, indemnify, defend, and hold harmless the Trading Manager, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the futures
interests trading activities of the Partnership undertaken by the Trading
Manager; provided that a court of competent jurisdiction upon entry of a final
judgement finds (or, if no final judgement is entered, an opinion is rendered to
the Partnership by independent counsel reasonably acceptable to both parties) to
the effect that the action or inaction of such indemnified party that was the
subject of the demand, claim, lawsuit, action, or proceeding did not constitute
negligence, misconduct, or a breach of this Agreement or a representation,
warranty or covenant of the Trading Manager herein and was done in good faith
and in a manner such indemnified party reasonably believed to be in, or not
opposed to, the best interests of the Partnership.
(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 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 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"); or (iii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus or an omission
or alleged omission to state a material fact therein which is required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Manager, or its Trading Manager Principals (including the historical performance
tables but 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), or was made in reliance
upon, and in conformity with, written information or instructions furnished by
the Trading Manager for use therein, 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 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 (including a breach of a
representation, warranty or covenant of the General Partner or the Partnership),
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 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 they were made) not misleading, provided that such
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 made in
reliance upon, and in conformity with, information or instructions furnished by
the Trading Manager for use therein.
(f) The foregoing agreements of indemnity shall be in
addition to, and shall in no respect limit or restrict, any other remedies which
may be available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice
of the commencement of any action, claim, or proceeding to which any of the
indemnities may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available
hereunder, an indemnified person reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees
and expenses of more than one counsel for all indemnified persons in connection
with any one action, claim, or proceeding or in connection with separate but
similar or related actions, claims, or proceedings in the same jurisdiction
arising out of the same general allegations. The indemnifying party will not be
liable for any settlement of any action, claim, or proceeding effected without
the indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. Right to Advise Others and Uniformity of
Acts and Practices.
----------------------------------------
a) The Trading 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 knowingly or
deliberately favor any account advised or managed by the Trading Manager over
the account of the Partnership in any way or manner. For purposes of this
Agreement, the Trading Manager shall not be deemed to be favoring another
account over the Partnership's account if the Trading Manager trades such
account at a different degree of leverage, pursuant to a different trading
strategy or in accordance with different fee structures, trading policies, or
portfolios, or if in accordance with the Trading Manager's money management
principles, the Trading Manager does not trade certain commodity interest
contracts for an account based on the amount of equity in such account. 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 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 account's 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 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 except for subsequent performance as to which no
representation is made.
(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
in all material respects, 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 materially affecting the business
of the Trading Manager 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.
(iii) The Partnership is a limited partnership duly
organized pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act
("DRULPA") and is validly existing under the laws of the State of Delaware with
full power and authority to engage in the trading of futures interests and to
engage in its other contemplated activities as described in the Prospectus; the
Partnership has received a certificate of authority to do business in the State
of New York as provided by Article 8-A of the New York Revised Limited
Partnership Act and is qualified to do business in each jurisdiction in which
the nature or conduct of its business requires such qualification and where
failure to be so qualified could materially adversely affect the Partnership's
ability to perform its obligations hereunder.
(iv) The General Partner is duly organized and
validly existing and in good standing as a corporation under the laws of the
State of Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
where the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have
full partnership or corporate power and authority under applicable law to
conduct their business and to perform their respective obligations under this
Agreement.
(vi) The Registration Statement and Prospectus
contain all statements and information required to be included therein by the
Commodity Act. When the Registration Statement becomes effective under the 1933
Act and at all times subsequent thereto up to and including each Closing, the
Registration Statement and Prospectus will comply in all material respects with
the requirements of the 1933 Act, the SEC Regulations, the rules of the NFA and
the Commodity Act and CFTC Regulations. 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 for use therein by
and relating to the Trading Manager, its trading methods or its trading
performance.
(vii) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any material adverse change in the condition, financial or otherwise,
business or prospects of the General Partner or the Partnership, whether or not
arising in the ordinary course of business.
(viii) This Agreement has been duly and validly
authorized, executed and delivered by the General Partner on behalf of the
Partnership and the General Partner and constitutes a valid, binding and
enforceable agreement of the Partnership and the General Partner in accordance
with its terms.
(ix) The execution and delivery of this Agreement,
the incurrence of the obligations set forth therein and the consummation of the
transactions contemplated therein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under, the
General Partner's certificate of incorporation, bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the case
may be, is bound or any order, rule, law or regulation applicable to the General
Partner or the Partnership of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration
Statement or Prospectus, there has not been in the five years preceding the date
of the Prospectus and there is not pending or, to the best of the General
Partner's knowledge, threatened, any action, suit or proceeding at law or in
equity before or by any court or by any federal, state, municipal or other
governmental body or any administrative, self-regulatory or commodity exchange
organization to which the General Partner or the Partnership is or was a party,
or to which any of the assets of the General Partner or the Partnership is or
was subject; and neither the General Partner nor any of the principals of the
General Partner, as "principals" is defined under Rule 4.10 under the Commodity
Act ("General Partner Principals") has received any notice of an investigation
by the NFA, NASD, SEC or CFTC regarding non-compliance by the General Partner or
the General Partner Principals or the Partnership with the Commodity Act or the
1933 Act which is material to an investor's decision to invest in the
Partnership.
(xi) The General Partner and each principal of the
General Partner, as defined in Rule 3.1 under the Commodity Act, have all
federal and state governmental, regulatory and exchange approvals and licenses,
and have effected all filings and registrations with federal and state and
foreign governmental agencies required to conduct their business and to act as
described in the Registration Statement and Prospectus or required to perform
their obligations under this Agreement (including, without limitation,
registration as a commodity pool operator under the Commodity Act and membership
in the NFA as a commodity pool operator) and will maintain all such required
approvals, licenses, filings and registrations for the term of this Agreement.
The General Partner's principals identified in the Registration Statement are
all of the General Partner Principals.
(b) Covenants of the General Partner. The General Partner
covenants and agrees that:
(i) The General Partner shall use its best efforts
to maintain all registrations and memberships necessary for the General Partner
to continue to act as described herein and in the Prospectus and to all times
comply in all material respects with all applicable laws, rules, and
regulations, to the extent that the failure to so comply would have a materially
adverse effect on the General Partner's ability to act as described herein and
in the Prospectus.
(ii) The General Partner shall inform the Trading
Manager immediately as soon as the General Partner or any of its principals
becomes the subject of any investigation, claim, or proceeding of any regulatory
authority having jurisdiction over such person or becomes a named party to any
litigation materially affecting the business of the General Partner. The General
Partner shall also inform the Trading Manager immediately if the General Partner
or any of its officers become aware of any breach of this Agreement by the
General Partner.
(iii) The Partnership will furnish to the Trading
Manager copies of the Registration Statement, the Prospectus, and all amendments
and supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading
Manager.
---------------------------------------
The Trading Manager may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading systems or methods, or its
goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Manager, provided that
such entity expressly assumes all obligations of the Trading Manager under this
Agreement and agrees to continue to operate the business of the Trading Manager,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
-------------------
This Agreement constitutes the entire agreement between the
parties with respect to the matters referred to herein, and no other agreement,
verbal or otherwise, shall be binding as between the parties unless in writing
and signed by the party against whom enforcement is sought.
14. Assignment.
-----------
This Agreement may not be assigned by any party hereto without
the express written consent of the other parties hereto.
15. Amendment.
----------
This Agreement may not be amended except by the written
consent of the parties hereto.
16. Severability.
-------------
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
----------------------------------
(1) The Trading Manager shall, at the Partnership's Initial
Closing and at the request of the General Partner at any Monthly Closing (as
defined in the Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the
Trading Manager in this Agreement are true, accurate, and complete on and as of
the date of the closing, as if made on the date of the closing.
(ii) The Trading Manager has performed all of its
obligations and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an
opinion of counsel to the Trading Manager, in form and substance satisfactory to
such parties, to the effect that:
(i) The Trading Manager is a corporation duly
organized and validly existing under the laws of the state of its incorporation
and is qualified to do business and in good standing in each other jurisdiction
in which the nature or conduct of its business requires such qualification and
the failure to be duly qualified would materially adversely affect the Trading
Manager's ability to perform its obligations under this Agreement. The Trading
Manager has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Manager (including the Trading
Manager Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses and memberships required by
law, and the Trading Manager (including the Trading Manager Principals) has
received or made all filings and registrations necessary to perform its
obligations under this Agreement and to conduct its business as described in the
Registration Statement and Prospectus, except for such licenses, memberships,
filings and registrations, the absence of which would not have a material
adverse effect on its ability to act as described in the Registration Statement
and Prospectus or to perform its obligations under 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 or any Trading Manager
Principal which are required to be disclosed in the Registration Statement or
Prospectus.
(v) The execution and delivery of this Agreement,
the incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of incorporation 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 of 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 format in all material respects with applicable CFTC rules and all
CFTC and NFA interpretations thereof, except as disclosed in the Prospectus.
In giving the foregoing opinion, counsel may rely on
information obtained from public officials, officers of the Trading Manager, and
other resources believed by it to be responsible and may assume that signatures
on all documents examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a
report dated the date of the closing which shall present, for the period from
the date after the last day covered by the historical performance records in the
Prospectus to the latest practicable day before closing, figures which shall be
a continuation of such historical performance records and which shall certify
that such figures are, to the best of such Trading Manager's knowledge, accurate
in all material respects.
(2) The General Partner shall, at the Partnership's Initial
Closing and at the request of the Trading Manager at any Monthly Closing (as
defined in the Prospectus), provide the following:
(a) To the Trading Manager a certificate, dated the date
of such closing and in form and substance satisfactory to the Trading Manager,
to the effect that:
(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the closing as if made on the date of the
closing.
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued by the SEC and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of the
General Partner, are contemplated or threatened under the 1933 Act. No order
preventing or suspending the use of the Prospectus has been issued by the SEC,
NASD, CFTC, or NFA and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the General Partner, are contemplated or
threatened under the 1933 Act or the Commodity Act.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Xxxxxxxxxx & Xxxx, counsel to the
General Partner and the Partnership, shall deliver its opinion to the parties
hereto at the Initial Closing, in form and substance satisfactory to the parties
hereto, to the effect that:
(i) The Partnership is a limited partnership duly
formed pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the laws of
the State of Delaware with full partnership power and authority to conduct the
business in which it proposes to engage as described in the Registration
Statement and Prospectus and to perform its obligations under this Agreement;
the Partnership has received a Certificate of Authority as contemplated under
the New York Revised Limited Partnership Act and is qualified to do business in
New York and need not affect any other filings or qualifications under the laws
of any other jurisdictions to conduct its business as described in the
Registration Statement and Prospectus.
(ii) The General Partner is duly organized and
validly existing and in good standing as a corporation under the laws of the
State of Delaware with full corporate power and authority to act as general
partner of the Partnership and is qualified to do business and is in good
standing as a foreign corporation in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires such
qualification and the failure to so qualify might reasonably be expected to
result in material adverse consequences to the Partnership or the General
Partner's ability to perform its obligations as described in the Registration
Statement and Prospectus. The General Partner has full corporate power and
authority to conduct its business as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement.
(iii) The General Partner and each of its principals
as defined in Rule 3.1 under the Commodity Act, and the Partnership have all
federal and state governmental and regulatory licenses and memberships required
by law and have received or made all filings and registrations necessary in
order for the General Partner and the Partnership to perform their obligations
under this Agreement, to conduct their business as described in the Registration
Statement and Prospectus, except for such licenses, memberships, filings, and
registrations, the absence of which would not have a material adverse effect on
their ability to act as described in the Registration Statement and Prospectus,
or to perform their obligations under this Agreement, and, to the best of such
counsel's knowledge, after due investigation, none of such licenses and
memberships or registrations have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized,
executed and delivered by or on behalf of the General Partner and the
Partnership, and constitutes a valid and binding agreement of the General
Partner and the Partnership, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or similar laws at the
time in effect affecting the enforceability generally of rights of creditors and
by general principles of equity (regardless or whether such enforceability is
considered in a proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in such
agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and
the offer and sale of the Units by the Partnership and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions contemplated herein and therein and in the Prospectus will not be
in contravention of the General Partner's certificate of incorporation or
bylaws, the Certificate of Limited Partnership, or the Limited Partnership
Agreement and, to the best of such counsel's knowledge based upon due inquiry of
certain officers of the General Partner, will not constitute a breach of, or
default under, or a violation of any agreement or instrument known to such
counsel by which the General Partner or the Partnership is bound and will not
violate any order, law, rule or regulation applicable to the General Partner or
the Partnership of any court or any governmental body or administrative agency
or panel or self-regulatory organization having jurisdiction over the General
Partner or the Partnership.
(vi) To the best of such counsel's knowledge, based
upon due inquiry of certain officers of the General Partner, there are no
actions, claims or proceedings pending or threatened in any court or before or
by any governmental or administrative body, nor have there been any such suits,
claims or proceedings within the five years preceding the date of the
Prospectus, to which the General Partner, any General Partner Principal, or the
Partnership is or was a party, or to which any of their assets is or was
subject, which would be material to an investor's decision to invest in the
Partnership or which might reasonably be expected to materially adversely affect
the condition, financial or otherwise, or business of the General Partner, or
the Partnership, whether or not arising in the ordinary course of business, or
impair their ability to discharge their obligations as described in the
Prospectus.
(vii) The Registration Statement is effective under
the 1933 Act and, to the best of such counsel's knowledge, no proceedings for a
stop order are pending or threatened under Section 8(d) of the 1933 Act or any
similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was issued
and as of the closing, the Prospectus, complied as to form in all material
respects with the requirements of the 1933 Act, the Securities Regulations, the
Commodity Act and the regulations of the NFA and NASD. Nothing has come to such
counsel's attention that would lead them to believe that the Registration
Statement at the time it became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus at the time it was issued or at the closing contained an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
where made, not misleading; provided, however, that Cadwalader, Wicksherman &
Xxxx need express no opinion or belief (a) as to information in the Registration
Statement or the Prospectus regarding any Trading Manager or its principals, or
(b) as to the financial statements, notes thereto and other financial or
statistical data set forth in the Registration Statement and Prospectus, or (c)
as to the performance data and notes or descriptions thereto set forth in the
Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC No-Action
letters, as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on
information obtained from public officials, officers of the General Partner and
other sources believed by it to be responsible and may assume that signatures on
all documents examined by it are genuine, and that a Subscription Agreement and
Power of Attorney in the forms referred to in the Prospectus have been duly
authorized, completed, dated, executed, and delivered and funds representing the
full subscription price for the Units purchased have been delivered by each
purchaser of Units in accordance with the requirements set forth in the
Prospectus.
18. Inconsistent Filings.
---------------------
The Trading Manager agrees not to file, participate in the
filing of, or publish any description of the Trading Manager, or of its
respective principals or trading approaches that is materially inconsistent with
those in the Registration Statement and Prospectus, without so informing the
General Partner and furnishing to it copies of all such filings within a
reasonable period prior to the date of filing or publication. No such
description shall be published or filed to which the General Partner reasonably
objects, except as otherwise required by law or regulation.
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 June 30,
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.
(c) The Partnership, the General Partner and their
respective affiliates acknowledge that the Trading Manager's strategies and
trades constitute proprietary data belonging to the Trading Manager and agree
that they will not disseminate any confidential information regarding any of the
foregoing, except as required by law, and any such information as may be
acquired by the General Partner, the Partnership or their respective affiliates
is to be used solely to monitor the Trading Manager's performance on behalf of
the Partnership.
20. Notices.
All notices required to be delivered under this Agreement
shall be in writing and shall be effective upon actual receipt when delivered
personally, by facsimile, air courier or registered or certified mail, postage
prepaid, return receipt requested, 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:
Xxxx Xxxxxx Spectrum Strategic L.P.
c/o Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
if to the General Partner:
Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
if to the Trading Manager:
Willowbridge Associates Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
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.
IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXX XXXXXX SPECTRUM STRATEGIC L.P.
by Demeter Management Corporation,
General Partner
By /s/ Xxxx X. Xxxxxx
------------------------------
DEMETER MANAGEMENT CORPORATION
By /s/ Xxxx X. Xxxxxx
------------------------------
WILLOWBRIDGE ASSOCIATES INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------
