Exhibit 10.16
FORM OF
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 2001 among XXXXXX
XXXXXXX XXXX XXXXXX SPECTRUM SELECT L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and NORTHFIELD TRADING L.P., a Delaware corporation (the
"Trading Advisor").
WITNESSETH:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement dated as of March 21, 1991, as amended and restated as of
August 31, 1993, October 17, 1996, May 31, 1998, and February 28, 2000, (the
"Limited Partnership Agreement"), to trade, buy, sell, spread, or otherwise
acquire, hold, or dispose of commodities (including, but not limited to, foreign
currencies, mortgage-backed securities, money market instruments, financial
instruments, and any other securities or items which are now or may hereafter be
the subject of futures contract trading), domestic and foreign commodity futures
contracts, commodity forward contracts, foreign exchange commitments, options on
physical commodities and on futures contracts, spot (cash) commodities and
currencies, and any rights pertaining thereto (hereinafter referred to
collectively as "futures interests") and securities (such as United States
Treasury bills) approved by the Commodity Futures Trading Commission (the
"CFTC") for investment of customer funds;
WHEREAS, the Partnership became a member partnership of the Xxxxxx
Xxxxxxx 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 are sold to investors in a common offering under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-1 as it may be amended from time to time (the
"Registration Statement") and a final Prospectus, constituting a part thereof as
it may be amended and supplemented from time to time (the "Prospectus"), and
thereafter, pursuant to which such Units can be exchanged by a limited partner
of a member partnership of the Fund Group for six months for Units of other
member partnerships of the Fund Group at 100% of the respective Net Asset Value
(as defined in Section 7(d)(2) of the Limited Partnership Agreement) thereof;
WHEREAS, the Trading Advisor 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 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 6(c) hereof) and the Trading Advisor desires so to
act; and
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 CONTINUING OFFERING OF
UNITS.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the confidentiality of proprietary information concerning
such programs, systems, methods, and strategies), any client accounts over which
it has discretionary trading authority (other than the names of any such
clients), and otherwise, as the Partnership may reasonably require (x) to be
made in the Partnership's Prospectus required by Section 4.21 of the regulations
of the CFTC, including any amendments or supplements thereto, or (y) to comply
with any applicable federal or state law or rule or regulation, including those
of the Securities and Exchange Commission (the "SEC"), the CFTC, the National
Futures Association (the "NFA"), the National Association of Securities Dealers,
Inc. (the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership, the General Partner, and Xxxx
Xxxxxx Xxxxxxxx Inc., the selling agent for the Partnership ("DWR") by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2. DUTIES OF THE TRADING ADVISOR.
(a) The Trading Advisor hereby agrees to act as a Trading Advisor
for the Partnership and, as such, shall have sole authority and responsibility
for directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement, or the Prospectus
or as otherwise provided in writing and consented to by 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 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.
The Trading Advisor shall not be liable for the consequences of any decision by
the General Partner to override instructions of the Trading Advisor, except to
the extent that the Trading Advisor is in breach of this Agreement. In
performing services to the Partnership the Trading Advisor may not materially
alter the trading program(s) used by the Trading Advisor in investing and
reinvesting its allocable share of the Partnership's Net Assets in futures
interests as described in the Prospectus without the prior written consent of
the General Partner, it being understood that changes in the futures interests
or markets 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, Exhibit A hereto, and as otherwise provided in writing and
consented to by the Trading Advisor and the trading programs, systems,
methods, and strategies of the Trading Advisor described in the
Prospectus, with such changes and additions to such trading programs,
systems, methods or strategies as the Trading Advisor, from time to time,
incorporates into its trading programs for accounts the size of the
Partnership.
(ii) Subject to reasonable assurances of confidentiality by
the General Partner and the Partnership, provide the General Partner,
within 30 days of a reasonable request therefor by the General Partner,
with information comparing the performance of the Partnership's account
and the performance of all other client accounts directed by the Trading
Advisor using the trading programs used by the Trading Advisor for the
Partnership over a specified period of time. In providing such
information, the Trading Advisor may take such steps as are necessary to
assure the confidentiality of the Trading Advisor's clients' identities.
The Trading Advisor shall, upon the General Partner's reasonable request,
consult with the General Partner concerning any discrepancies between the
performance of such other accounts and the Partnership's account. The
Trading Advisor shall promptly inform the General Partner of any material
discrepancies of which the Trading Advisor is aware. The General Partner
acknowledges that different trading programs, strategies or implementation
methods may be utilized for different accounts, accounts with different
trading policies, accounts experiencing differing inflows or outflows of
equity, accounts that commence trading at different times, accounts which
have different portfolios or different fiscal years and that such
differences may cause divergent trading results.
(iii) Upon the reasonable request of the General Partner and
subject to reasonable assurances of confidentiality by the General Partner
and the Partnership, provide the General Partner with all material
information concerning the Trading Advisor other than proprietary
information (including, without limitation, information relating to
changes in control, personnel, trading approach, or financial condition).
The General Partner acknowledges that all trading instructions made by the
Trading Advisor will be held in confidence by the General Partner, except
to the extent necessary to conduct the business of the Partnership or as
required by law.
(iv) Inform the General Partner when the Trading Advisor's
open positions maintained by the Trading Advisor exceed the Trading
Advisor's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Advisor shall be for the
account of the Partnership. The Trading Advisor makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any 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 Advisor's errors shall
include, but not be limited to, inputting improper trading signals or
communicating incorrect orders for execution. However, the Trading Advisor shall
not be responsible for errors committed or caused by DWR or by floor brokers or
other futures commission merchants. 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.
3. DESIGNATION OF ADDITIONAL TRADING ADVISORS AND REALLOCATION OF
NET ASSETS.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets as
the General Partner shall determine in its absolute discretion. The designation
of an additional trading advisor or advisors and the apportionment of Net Assets
to any such trading advisor(s) pursuant to this Section 3 shall neither
terminate this Agreement nor modify in any regard the respective rights and
obligations of the Partnership, the General Partner and the Trading Advisor
hereunder. In the event that an additional trading advisor or advisors is so
designated, the Trading Advisor shall thereafter receive management and
incentive fees based, respectively, on that portion of the Net Assets managed by
the Trading Advisor and the Trading Profits attributable to the trading by the
Trading Advisor.
(b) The General Partner may at any time and from time to time upon
two business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon two business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. TRADING ADVISOR INDEPENDENT.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. COMMODITY BROKER.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, DWR shall act as non-clearing commodity broker and Xxxxxx
Xxxxxxx & Co. Incorporated ("MS & Co."), an affiliate of the general partner,
shall act as the clearing commodity broker for the Partnership, with the
exception of trades on the London Metal Exchange which will be cleared by Xxxxxx
Xxxxxxx & Co. International Limited ("MSIL"), also an affiliate of the general
partner. In addition, MS & Co. will act as the counterparty on all of the
foreign currency forward trades for the Partnership. The General Partner shall
provide the Trading Advisor with copies of brokerage statements. Notwithstanding
that MS & Co. and MSIL shall act as the clearing commodity brokers for the
Partnership, the Trading Advisor may execute trades through floor brokers other
than those employed by MS & Co. and MSIL so long as arrangements are made for
such floor brokers to "give-up" or transfer the positions to MS & Co. or MSIL
and provided that the rates charged by such floor brokers have been approved in
writing by DWR. The Trading Advisor will not be responsible for paying give-up
fees.
6. FEES.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's
account, equal to 1/12 of 3% (a 3% annual rate) of the "Net Assets" of the
Partnership allocated to the Trading Advisor (as defined in Section 6(c))
as of the opening of business on the first day of each calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar
month, payable on a non-netted basis vis-a-vis other trading advisors(s)
of the Partnership.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be 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 have the same
meaning ascribed thereto in Section 7(d)(1) of the Limited Partnership
Agreement.
(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 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 that occur at the end of, or subsequent
to, an incentive period in which the Partnership experiences a futures interests
trading loss with respect to Net Assets allocated to the Trading Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
7. TERM.
This Agreement shall continue in effect until May 31, 2004 (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 thirty 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 five 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 any person described as a "principal" of the Trading
Advisor in the Prospectus ceases for any reason to be an active executive
officer of the Trading Advisor; (ii) if the Trading Advisor becomes bankrupt or
insolvent; (iii) if the Trading Advisor is unable to use its trading programs,
systems or methods as in effect on the date hereof and as refined and modified
in the future for the benefit of the Partnership; (iv) if the registration, as a
commodity trading advisor, of the Trading Advisor with the CFTC or its
membership in the NFA is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) except as provided in Section 12
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $5,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
the Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 business 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 five 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 days of such notice. In
addition, the Trading Advisor may terminate this Agreement by providing 30 days
prior written notice to the General Partner if the Partnership's Net Assets
allocated to the Trading Advisor fall below $5,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. STANDARD OF LIABILITY; INDEMNIFICATIONS.
(a) LIMITATION OF TRADING ADVISOR LIABILITY. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) TRADING ADVISOR INDEMNITY IN RESPECT OF MANAGEMENT ACTIVITIES.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading of the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; PROVIDED that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a breach of this Agreement or a
representation, warranty or covenant herein, the result of bad faith, misconduct
or negligence, or conduct not done in good faith in the reasonable belief that
it was in, or not opposed to, the best interests of the Partnership.
(c) PARTNERSHIP INDEMNITY IN RESPECT OF MANAGEMENT Activities. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the futures
interests trading activities of the Partnership undertaken by the Trading
Advisor; 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.
(d) TRADING ADVISOR INDEMNITY IN RESPECT OF SALE OF UNITS. The
Trading Advisor shall indemnify, defend and hold harmless DWR, MS & Co., MSIL,
the Partnership, the General Partner, any additional seller, and their
affiliates and each of their officers, directors, principals, shareholders,
controlling persons from and against any loss, claim, damage, liability, cost,
and expense, joint and several, to which any indemnified person may become
subject under the Securities Act, the Securities 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) a breach of the disclosure requirements under
the CEAct or NFA Rules that relate to the Trading Advisor and the Trading
Advisor Principals; (iii) a misleading or untrue statement or alleged misleading
or untrue statement of a material fact made in the Registration Statement, the
Prospectus, or any related selling material or an omission or alleged omission
to state a material fact therein which is required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus and any
selling material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined in Section 10(a)(iv)
below) (including the historical performance capsules) or was made in reliance
upon, and in conformity with, written information or instructions furnished by
the Trading Advisor (PROVIDED, HOWEVER, that with respect to any related selling
material only such related selling material as shall have been approved in
writing by the Trading Advisor).
(e) PARTNERSHIP INDEMNITY IN RESPECT OF SALE OF UNITS. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the
Prospectus or the selling material, in light of the circumstances under which
they were made) not misleading, provided that such materially misleading or
untrue statement or alleged materially misleading or untrue statement or
omission or alleged omission does not relate to the Trading Advisor or its
Trading Advisor Principals (including the historical performance capsules) or
was not made in reliance upon, and in conformity with, information or
instructions furnished by the Trading Advisor (PROVIDED, HOWEVER, that with
respect to any related selling material, only such related selling material as
shall have been approved in writing by the Trading Advisor), or does not result
from a breach by the Trading Advisor of any representation, warranty, or
agreement in this Agreement or any certificate delivered pursuant to this
Agreement or the failure by the Trading Advisor to materially perform any
covenant made in this Agreement.
(f) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. RIGHT TO ADVISE OTHERS AND UNIFORMITY OF ACTS AND PRACTICES.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE TRADING
ADVISOR.
(a) REPRESENTATIONS OF THE TRADING ADVISOR. The Trading Advisor with
respect to itself and each of its principals represents and warrants to and
agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading programs
agreed to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus and as
set forth in Exhibit A hereto) and as amended in writing and furnished to
the Trading Advisor from time to time, provided, that the General Partner
has notified the Trading Advisor of these trading policies and the Trading
Advisor has consented thereto.
(iii) The Trading Advisor shall trade: (A) the Partnership's
Net Assets pursuant to the same trading programs described in the
Prospectus unless the General Partner agrees otherwise and (B) only in
futures and option contracts traded on U.S. contract markets, foreign
currency forward contracts traded with MS & Co., and such other futures
interests which are approved in writing by the General Partner.
(iv) The Trading Advisor is duly organized, validly existing
and in good standing as a limited partnership under the laws of the state
of its formation and is qualified to do business and is in good standing
in each other jurisdiction in which the nature or conduct of its business
requires such qualification and the failure to so qualify would materially
adversely affect the Trading Advisor's ability to perform its duties under
this Agreement. The Trading Advisor has full corporate power and authority
to perform its obligations under this Agreement, and as described in the
Registration Statement and Prospectus. The only principals (as defined in
Rule 4.10(e) under the CEAct) of the Trading Advisor are those set forth
in the Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs,
approaches, systems and performance, in the Registration Statement and the
Prospectus, and in the supplemental selling material which has been
approved in writing by the Trading Advisor, are accurate and complete in
all material respects. With respect to the material relating to the
Trading Advisor and each Trading Advisor Principal, including the Trading
Advisor's and the Trading Advisor Principals' trading programs,
approaches, systems, and performance information, as applicable, (i) the
Registration Statement and Prospectus contain all statements and
information required to be included therein under the CEAct, (ii) the
Registration Statement as of its effective date will not contain any
misleading or untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or necessary to make
the statements therein not misleading and (iii) the Prospectus at its date
of issue and as of each closing will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid and
binding agreement of the Trading Advisor enforceable in accordance with
its terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal
and state governmental, regulatory and exchange licenses, registrations
and approvals and has effected all filings with federal and state
governmental and regulatory agencies required to conduct its or his
business and to act as described in the Registration Statement and
Prospectus or required to perform its or his obligations under this
Agreement. The Trading Advisor is registered as a commodity trading
advisor under the CEAct and is a member of the NFA in such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment of
the fees hereunder will not violate, or constitute a breach of, or default
under, the certificate of limited partnership or the limited partnership
agreement of the Trading Advisor or any agreement or instrument by which
it is bound or of any order, rule, law or regulation binding on it of any
court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over it.
(ix) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement and
the Prospectus, there has not been any material adverse change in the
condition, financial or otherwise, business or prospects of the Trading
Advisor or any Trading Advisor Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of the
Prospectus and there is not pending, or to the best of the Trading
Advisor's knowledge threatened, any action, suit or proceeding before or
by any court or other governmental body to which the Trading Advisor or
any Trading Advisor Principal is or was a party, or to which any of the
assets of the Trading Advisor is or was subject and which resulted in or
might reasonably be expected to result in any material adverse change in
the condition, financial or otherwise, business or prospects of the
Trading Advisor or which is required under the Securities Act or CEAct to
be disclosed in the Prospectus. Neither the Trading Advisor nor any
Trading Advisor Principal has received any notice of an investigation by
the NFA nor 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 the 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 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.
(iv) The Trading Advisor agrees to participate, to the extent
that the General Partner may reasonably request, in "road shows" and other
promotional activities relating to the marketing of the Units, provided
that such participation shall not in the reasonable judgment of the
Trading Advisor require the registration of the Trading Advisor or any of
its principals or agents as a broker-dealer or salesman or interfere
materially with the trading activities of the Trading Advisor. The Trading
Advisor shall pay the costs of its reasonably requested participation in
such road shows.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE GENERAL
PARTNER AND THE PARTNERSHIP.
(a) REPRESENTATIONS OF THE PARTNERSHIP AND THE GENERAL
PARTNER. 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 to be taken by
the General Partner and the Partnership as a condition to the sale of the
Units to qualified subscribers therefor has been, or prior to each Closing
(as defined in the Prospectus) will have been taken; and, upon payment of
the consideration therefor specified in each accepted Subscription and
Exchange Agreement and Power of Attorney, in such form as attached to the
Prospectus, the Units will constitute valid limited partnership interests
in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the Delaware Revised Uniform Limited Partnership
Act ("DRULPA") and is validly existing under the laws of the State of
Delaware with full power and authority to engage in the trading of futures
interests and to engage in its other contemplated activities as described
in the Prospectus; the Partnership has received a certificate of authority
to do business in the State of New York as provided by Article 8-A of the
New York Revised Limited Partnership Act and is qualified to do business
in each jurisdiction in which the nature or conduct of its business
requires such qualification and where failure to be so qualified could
materially adversely affect the Partnership's ability to perform its
obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State
of Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature or conduct of its business requires such
qualification and where the failure to be so qualified could materially
adversely affect the General Partner's ability to perform its obligations
hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to
conduct their business and to perform their respective obligations under
this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct.
When the Registration Statement becomes effective under the Securities Act
and at all times subsequent thereto up to and including each Closing, the
Registration Statement and Prospectus will comply in all material respects
with the requirements of the Securities Act, the rules and regulations
promulgated thereunder (the "SEC Regulations"), the rules of the NFA and
the CEAct. The Registration Statement as of its effective date will not
contain any misleading or untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus as of its date of
issue and at each Closing will not contain any misleading or untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental
selling material will comply with the CEAct and the regulations and rules
of the NFA and NASD. The representation, and warranties in this clause
(vi) shall not, however, apply to any statement or omission in the
Registration Statement, Prospectus or supplemental selling material
relating to the Trading Advisor, or its Trading Advisor Principals or its
trading programs or made in reliance upon and in conformity with
information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been
any material adverse change in the condition, financial or otherwise,
business or prospects of the General Partner or the Partnership, whether
or not arising in the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Partnership
and constitutes a valid, binding and enforceable agreement of the
Partnership in accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under,
the General Partner's certificate of incorporation, bylaws, the
Certificate of Limited Partnership, or the Limited Partnership Agreement
or any agreement or instrument by which either the General Partner or the
Partnership, as the case may be, is bound or any order, rule, law or
regulation applicable to the General Partner or the Partnership of any
court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the General Partner
or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General
Partner's knowledge, threatened, any action, suit or proceeding at law or
in equity before or by any court or by any federal, state, municipal
1
or other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the General Partner or the
Partnership is or was a party, or to which any of the assets of the
General Partner or the Partnership is or was subject and which resulted in
or might reasonably be expected to result in any materially adverse change
in the condition, financial or otherwise, of the General Partner or the
Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of
the principals of the General Partner, as "principals" is defined under
Rule 4.10 under the CEAct ("General Partner Principals") has received any
notice of an investigation by the NFA, NASD, SEC or CFTC regarding
non-compliance by the General Partner or the General Partner Principals or
the Partnership with the CEAct or the Securities Act which is required
under the Securities Act or the CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and
state governmental, regulatory and exchange approvals, registrations, and
licenses, and have effected all filings with federal and state
governmental agencies and regulatory agencies required to conduct their
business and to act as described in the Registration Statement and
Prospectus or required to perform their obligations under this Agreement
(including, without limitation, registration as a commodity pool operator
under the CEAct and membership in the NFA as a commodity pool operator)
and will maintain all such required approvals, licenses, filings and
registrations for the term of this Agreement. The General Partner's
principals identified in the Registration Statement are all of the General
Partner Principals.
(b) COVENANTS OF THE GENERAL PARTNER AND THE PARTNERSHIP.
The General Partner covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to
continue to act as described herein and in the Prospectus and to all times
comply in all material respects with all applicable laws, rules, and
regulations, to the extent that the failure to so comply would have a
materially adverse effect on the General Partner's ability to act as
described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals
becomes the subject of any investigation, claim, or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
General Partner. The General Partner shall also inform the Trading Advisor
immediately if the General Partner or any of its officers become aware of
any breach of this Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Advisor
copies of the Registration Statement, the Prospectus, and all amendments
and supplements thereto, in each case as soon as available.
12. MERGER OR TRANSFER OF ASSETS OF TRADING ADVISOR.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.
14. ASSIGNMENT.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
15. AMENDMENT.
This Agreement may not be amended except by the written consent of
the parties hereto.
16. SEVERABILITY.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. CLOSING CERTIFICATES AND OPINIONS.
(1) The Trading Advisor shall, at the Partnership's first Monthly
Closing (as defined in the Prospectus), following the effective date of the
Registration Statement and at the request of the General Partner at any Monthly
Closing, provide the following:
(a) To DWR, the General Partner and the Partnership a certificate,
dated the date of any such closing and in form and substance satisfactory to
such parties, to the effect that:
(i) The representations and warranties by the Trading Advisor
in this Agreement are true, accurate, and complete on and as of the date
of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its obligations
and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion of
counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a limited partnership duly formed
and validly existing under the laws of the State of Delaware 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 power and authority to conduct its business
as described in the Registration Statement and Prospectus and to perform
its obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses, registrations, and
memberships required by law, and the Trading Advisor (including the
Trading Advisor Principals) has made all filings necessary to perform its
obligations under this Agreement and to conduct its business as described
in the Registration Statement and Prospectus, except for such licenses,
memberships, filings and registrations, the absence of which would not
have a material adverse effect on its ability to act as described in the
Registration Statement and Prospectus or to perform its obligations under
this Agreement, and, to the best of such counsel's knowledge, after due
investigations, none of such licenses, memberships or registrations have
been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trading Advisor and constitutes a valid
and binding agreement of the Trading Advisor enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, reorganization,
moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and except as enforceability of the
indemnification, exculpation, and contribution provisions contained in
this Agreement may be limited by applicable law or public policy and the
enforcement of specific terms or remedies may be unavailable.
(iv) Based upon due inquiry of certain officers of the Trading
Advisor, to the best of such counsel's knowledge, except as disclosed in
the Prospectus, there are no material actions, suits or proceedings at law
or in equity either threatened or pending in any court or before or by any
governmental or administrative body nor have there been any such actions,
suits or proceedings at any time within the five years preceding the date
of the Prospectus against the Trading Advisor or any Trading Advisor
Principal which are required to be disclosed in the Registration Statement
or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of limited
partnership or limited partnership agreement of the Trading Advisor and,
based upon due inquiry of certain officers of the Trading Advisor, to the
best of such counsel's knowledge, will not constitute a breach of, or
default under, or a violation of any instrument or agreement known to such
counsel by which the Trading Advisor is bound and will not violate any
order, law, rule or regulation applicable to the Trading Advisor of any
court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action" letters,
as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the
Prospectus will not require the Trading Advisor to be registered as an
"investment adviser" as that term is defined in the Investment Advisers
Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that would
lead them to believe that, (A) the Registration Statement at the time it
became effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (B) the
Prospectus at the time it was issued or at the closing contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein relating to the Trading Advisor or
the Trading Advisor Principals, in light of the circumstances under which
they were made, not misleading; 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 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 or as otherwise permitted by the CFTC staff.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
resources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(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 Advisor's knowledge, accurate in all material
respects.
(2) The General Partner shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor a certificate, dated the date of such
closing and in form and substance satisfactory to the Trading Advisor, to the
effect that:
(i) The representations and warranties by the Partnership and
the General Partner in this Agreement are true, accurate, and complete on
and as of the date of the closing as if made on the date of the closing.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of
the General Partner, are contemplated or threatened under the Securities
Act. No order preventing or suspending the use of the Prospectus has been
issued by the SEC, NASD, CFTC, or NFA and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act or the
CEAct.
(iii) The Partnership and the General Partner have performed
all of their obligations and satisfied all of the conditions on their part
to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Xxxxxxxxxx & Xxxx, counsel to the General Partner
and the Partnership, shall deliver its opinion to the parties hereto, in form
and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the
laws of the State of Delaware with full partnership power and authority to
conduct the business in which it proposes to engage as described in the
Registration Statement and Prospectus and to perform its obligations under
this Agreement; the Partnership has received a Certificate of Authority as
contemplated under the New York Revised Limited Partnership Act and is
qualified to do business in New York and need not affect any other filings
or qualifications under the laws of any other jurisdictions to conduct its
business as described in the Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State
of Delaware and is qualified to do business and is in good standing as a
foreign corporation in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires such
qualification and the failure to so qualify might reasonably be expected
to result in material adverse consequences to the Partnership or the
General Partner's ability to perform its obligations as described in the
Registration Statement and Prospectus. The General Partner has full
corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus and to perform its obligations under
this Agreement.
(iii) The General Partner, 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.
(iv) This Agreement has been duly authorized, executed and
delivered by or on behalf of the General Partner and the Partnership, and
constitutes a valid and binding agreement of the General Partner and the
Partnership, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws at the
time in effect affecting the enforceability generally of rights of
creditors and by general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
except as enforceability of indemnification, exculpation and contribution
provisions contained in such agreements may be limited by applicable law
or public policy.
(v) The execution and delivery of this Agreement and the offer
and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of
the General Partner's certificate of incorporation or bylaws, the
Certificate of Limited Partnership, or the Limited Partnership Agreement
and, to the best of such counsel's knowledge based upon due inquiry of
certain officers of the General Partner, will not constitute a breach of,
or default under, or a violation of any agreement or instrument known to
such counsel by which the General Partner or the Partnership is bound and
will not violate any order known to such counsel or any law, rule or
regulation applicable to the General Partner or the Partnership of any
court, governmental body, administrative agency, panel or self-regulatory
organization having jurisdiction over the General Partner or the
Partnership.
(vi) To such counsel's knowledge, based upon due inquiry of
certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in equity
pending or threatened before or by any court, governmental body,
administrative agency, panel or self-regulatory organization, nor have
there been any such 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.
(vii) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no
proceedings for a stop order are pending or threatened under Section 8(d)
of the Securities Act or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was
issued and as of the closing, the Prospectus, complied as to form in all
material respects with the requirements of the Securities Act, the
Securities Regulations, the CEAct and the regulations of the NFA and NASD.
Nothing has come to such counsel's attention that would lead them to
believe that the Registration Statement at the time it became effective
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they where made, not
misleading; provided, however, that Cadwalader, Xxxxxxxxxx & Xxxx need
express no opinion or belief (a) as to information in the Registration
Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions
thereto set forth in the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC "no-action" letters,
as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. INCONSISTENT FILINGS.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication.
19. DISCLOSURE DOCUMENT.
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 April 1, 2000.
20. NOTICES.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally or by telecopy on
the day delivered, or when given by registered or certified mail, postage
prepaid, return receipt requested, on the day actually received, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):
if to the Partnership:
Xxxxxx Xxxxxxx Xxxx Xxxxxx Spectrum Select L.P.
c/o Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the General Partner:
Demeter Management Corporation
Two World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
if to the Trading Advisor:
Northfield Trading L.P.
0000 X. Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxxx Xxxxxxxxxx
21. SURVIVAL.
The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
22. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE
BROUGHT BY A PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER
THIS AGREEMENT, EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE COUNTY, CITY AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY
ANY PARTY TO THIS AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY
RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.
23. REMEDIES.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. HEADINGS.
Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
25. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute the
same 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.
XXXXXX XXXXXXX XXXX XXXXXX SPECTRUM
SELECT L.P.
by Demeter Management Corporation,
General Partner
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President
DEMETER MANAGEMENT CORPORATION
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President
NORTHFIELD TRADING L.P.
By:
------------------------------------------
Name:
Its:
