Exhibit 10.04
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 7th day of October, 2004, among
XXXXXX XXXXXXX SPECTRUM STRATEGIC L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and FX CONCEPTS (TRADING ADVISOR), INC., a New York
corporation (the "Trading Advisor").
W I T N E S S E T H:
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WHEREAS, the Partnership has been organized pursuant to the Amended
and Restated Limited Partnership Agreement dated as of February 28, 2000 (as may
be amended from time to time, the "Limited Partnership Agreement"), to trade,
buy, sell, spread, or otherwise acquire, hold, or dispose of commodities (which
may include 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 is a member partnership of the Xxxxxx
Xxxxxxx Spectrum Series (the "Fund Group") pursuant to which units of limited
partnership interest ("Units") of such member partnerships are sold to investors
in a common prospectus. Units of the Partnership are being offered pursuant to a
Registration Statement on Form S-1 (as it may be amended from time to time, the
"Registration Statement") filed under the Securities Act of 1933, as amended
(the "Securities Act"), and a final Prospectus constituting a part thereof (as
it may be amended and supplemented from time to time) (the "Prospectus"). Such
Units can be exchanged by a limited partner of a member partnership of the Fund
Group 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 principals of the Trading Advisor have extensive
experience trading in futures interests and the Trading Advisor is willing to
provide certain services and undertake certain obligations as set forth herein;
WHEREAS, the Partnership and the General Partner desire 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 portion of the
Partnership's Net Assets (as defined in Section 7(d)(1) of the Limited
Partnership Agreement) 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 for the
Partnership;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing Offering of
Units.
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(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 General Partner may reasonably require (x) to be
made in the Partnership's Prospectus required by Section 4.21 of the CFTC's
Regulations, 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 Xxxxxx
Xxxxxxx XX Inc., an affiliate of the General Partner and the selling agent for
the Partnership ("Xxxxxx Xxxxxxx XX"), by providing information regarding the
Trading Advisor in connection with the preparation and filing of the
Registration Statement and Prospectus, including any pre-or post-effective
amendments or supplements thereto, with the SEC, CFTC, NFA, NASD, and with
appropriate governmental authorities as part of making application for
registration of the Units under the securities or Blue Sky laws of such
jurisdictions as the Partnership may deem appropriate. As used herein, the term
"principal" shall have the meaning as defined in Rule 3.1(a) of the CFTC's
Regulations and the term "affiliate" shall mean any individual or entity that
directly or indirectly controls, is controlled by, or is under common control
with the Trading Advisor.
(b) The General Partner, in its sole discretion and at any time may
(i) withdraw the SEC registration of the Units, or (ii) discontinue the offering
of Units.
(c) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, 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
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connection with the continuing offering of Units except as may be specifically
requested by the General Partner.
2. Duties of the Trading Advisor.
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(a) The Trading Advisor hereby agrees to act as 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 which shall initially be traded pursuant to its
Developed Markets Currency Program as described in the Prospectus, and may be
subsequently traded pursuant to such other of the Trading Advisor's trading
programs described in the Prospectus as the General Partner may instruct (with
such changes and additions to such trading programs as the Trading Advisor, from
time to time, incorporates into its trading program(s) for accounts the size of
the Partnership), (collectively, the "Trading Program") on the terms and
conditions and in accordance with the prohibitions and trading policies set
forth in Exhibit A hereto, the Prospectus, and as otherwise provided in writing
to the Trading Advisor; provided, however, that the General Partner may override
the instructions of the Trading Advisor to the extent necessary (i) to comply
with the trading policies of the Partnership, as described in the Prospectus and
the Limited Partnership Agreement, and with applicable speculative position
limits, (ii) to fund any distributions, redemptions or reappointments 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 clause (iii) of the preceding sentence unless the
Trading Advisor fails to comply with a request of the General Partner to make
the necessary amount of funds available to the Partnership within five calendar
days of such request. Except as otherwise provided herein, the Trading Advisor
shall not be liable for the consequences of any decision by the General Partner
to override instructions of the Trading Advisor. In performing services for the
Partnership, the Trading Advisor may not materially alter or change the Trading
Program 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 Program.
(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
Exhibit A hereto, the Prospectus and as otherwise provided in
writing to the Trading Advisor. The Trading Advisor shall trade its
allocated portion of the Partnership's Net Assets pursuant to the
Trading Program.
(ii) Subject to reasonable assurances of confidentiality by
the General Partner and the Partnership, provide the General
Partner, within 30 calendar days of a request therefor by the
General Partner, with information comparing the performance of the
Partnership's account and the performance of all other client
accounts directed by the Trading Advisor using the Trading Program
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,
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upon the General Partner's request, consult with the General Partner
concerning any discrepancies between the performance of such other
accounts and the Partnership's account. The Trading Advisor shall
promptly inform the General Partner of any material discrepancies of
which the Trading Advisor becomes 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 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.
(v) In performing services to the Partnership, the Trading
Advisor shall utilize the Trading Program. The Trading Advisor shall
give the General Partner prior written notice of any change in the
Trading Program that the Trading Advisor deems to be material (and
shall not effect such change on behalf of the Partnership without
the General Partner's consent), it being understood that changes in
the futures interests traded, provided that such futures interests
are listed in Exhibit B hereto, shall not be deemed an alteration in
the Trading Program.
(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 fee, including give-up fees at rates approved by Xxxxxx Xxxxxxx XX
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, but not limited to, payment
of the commissions, exchange and NFA fees, and other transaction charges and
give-up charges incurred on such trades. The Trading Advisor's errors shall
include, but not be limited to, inputting improper trading signals or
communicating incorrect orders for execution. The Trading Advisor shall not be
responsible for errors committed or caused by Xxxxxx Xxxxxxx XX, Xxxxxx Xxxxxxx
& Co., Incorporated ("MS&Co.")
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or any other floor broker or futures commission merchant executing trades. The
Trading Advisor shall have an affirmative obligation to promptly 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 in the form attached hereto as Exhibit C hereto, appointing the
Trading Advisor the Partnership's attorney-in-fact for such purpose.
3. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
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(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 or replacement of any trading
advisor for the Partnership by the General Partner shall not require any
approval of any existing trading advisor (including the Trading Advisor). The
designation and retention of an additional trading advisor or replacement
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 with respect
to the assets that remain under the management of the Trading Advisor. In the
event that an additional trading advisor 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 that portion
of the Trading Profits (as defined in Section 6(c) hereof) properly attributable
to the trading done 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 interest of the Partnership require
otherwise.
4. Trading Advisor Independent.
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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 or
General Partner. Nothing contained herein shall be deemed to require the
Partnership or General Partner to take any action contrary to the Limited
Partnership Agreement,
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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 and any other trading advisor or
advisors for the Partnership, the General Partner, or other member partnership
of the Fund Group or their trading advisors as a member of any partnership,
joint venture, association, syndicate or other entity with the Partnership or
the General Partner, or, except as otherwise specifically provided in this
Agreement, be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, nor
issuer with respect to the Partnership.
5. Commodity Brokers.
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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, Xxxxxx Xxxxxxx XX, shall act as the non-clearing commodity
broker and 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"), all of which are affiliates of the General Partner. In
addition, MS&Co. will act as the counterparty on all of the foreign currency
forward trades and Xxxxxx Xxxxxxx Capital Group Inc. ("MSCG") will act as the
counterparty on all of the options on foreign currency forward trades for the
clearing commodity broker. The General Partner shall provide the Trading Advisor
with copies of brokerage statements. Notwithstanding that MS&Co. shall act as
the counterparty on all of the foreign currency forward trades and MSCG shall
act as the counterparty on all of the options on foreign currency forward trades
for the clearing commodity broker for the Partnership, the Trading Advisor may
execute trades through floor brokers other than those employed by MS&Co. and
MSCG so long as arrangements are made for such floor brokers to "give-up" or
transfer the positions to MS&Co. and MSCG and provided that the rates charged by
such floor brokers have been approved in writing by Xxxxxx Xxxxxxx XX. The
Trading Advisor will not enter into any Soft Commission Agreements (as such term
is defined by FSA rules).
6. Fees.
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(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 2% (a 2% annual rate) of the Partnership's
"Net Assets" allocated to the Trading Advisor (as defined in Section
7(d)(1) of the Limited Partnership Agreement) as of the opening of
business on the first day of each calendar month, commencing with
the month in which the Partnership begins to receive trading advice
from the Trading Advisor pursuant to this Agreement.
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(ii) A monthly incentive fee equal to 20% of the "Trading
Profits" (as defined in Section 6(c)) experienced by the Partnership
as of the end of each calendar month, payable on a non-netted basis
vis a vis other trading advisor(s) or 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, 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 that 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 "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 brokerage
fees and any transaction fees and costs relating to the Trading Advisor's
allocated Net Assets, if any, not included in the brokerage fees; 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. Extraordinary expenses of the
Partnership, if any, will not be deducted in determining Trading Profits. No
incentive fee will be paid on interest income earned by the Partnership.
(d) 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 or 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 the month prior to
such increase or decrease. In the event that the Partnership experiences a
futures
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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 Trading Advisor's allocated Net Assets are increased or reduced in more
than one such month because of redemptions or 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
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 sole discretion of the General Partner.
7. Term.
(a) This Agreement shall continue in effect for a period of three
(3) years from the date of this Agreement (the "Initial Termination Date"). If
this Agreement is not terminated on the Initial Termination Date, as provided
for herein, then, this Agreement shall automatically renew for an additional
one-year period and shall continue to renew for additional one-year periods
until this Agreement is otherwise terminated, as provided for herein. At least
30 calendar days prior to the expiration of the Initial Termination Date or any
subsequent one-year period, as the case may be, the Trading Advisor may
terminate this Agreement at the end of the current period by providing written
notice to the Partnership indicating that the Trading Advisor desires to
terminate this Agreement at the end of such period. This Agreement shall also
terminate if the Partnership terminates. The Partnership shall have the right to
terminate this Agreement at its discretion (a) at any month-end upon 5 calendar
days' prior written notice to the Trading Advisor or (b) at any time upon
written notice to the Trading Advisor upon the occurrence of any of the
following events: (i) if 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 Program,
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
materially violates any trading or administrative policy described in the
Prospectus or the Limited Partnership Agreement or otherwise provided 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.
(b) The Trading Advisor may terminate this Agreement at any time,
upon written notice to the Partnership, in the event: (i) that the General
Partner imposes additional trading limitation(s) (not in effect on the date
hereof) in the form of one or more trading policies or administrative policies
that the Trading Advisor does not agree to follow in its management of
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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 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 5 business days of a written request by the Trading Advisor to do so, or,
if such consent is given, does not make arrangements to facilitate such trading
within 90 calendar days of such notice; or (vi) the Partnership's Net Assets
fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. Standard of Liability; Indemnifications.
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(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of its allocated portion
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 by 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
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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, or
the result of 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 shall indemnify, defend, and hold
harmless the Trading Advisor, its controlling persons, their affiliates and
their respective directors, officers, shareholders, partners, 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, a breach of
this Agreement by the General Partner or the Partnership that relates to futures
interests trading activities or a breach of a representation, warranty or
covenant herein by the General Partner or the Partnership that relates to the
futures interests trading activities of the Partnership; provided that a court
of competent jurisdiction upon entry of a final judgment finds (or, if no final
judgment is entered, an opinion is rendered to the Partnership by independent
counsel reasonably acceptable to both parties) to the effect that the action or
inaction of such indemnified party that was the subject of the demand, claim,
lawsuit, action, or proceeding did not constitute negligence, misconduct, or a
breach of this Agreement by the Trading Advisor or such indemnified party 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 Xxxxxx Xxxxxxx XX, MS&
Co., MSIL, 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 and all losses,
claims, damages, liabilities, costs and expenses, 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 (as defined below); 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 any related
-10-
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 (including the historical performance capsules, but
excluding the pro forma performance information except to the extent the pro
forma performance information was based on information furnished by the Trading
Advisor) 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 and General Partner Indemnity in Respect of Sale of
Units. The Partnership and the General Partner agree, to indemnify, defend and
hold harmless the Trading Advisor and each of its officers, directors,
principals, partners, shareholders, and controlling persons from and against any
loss, claim, damage, liability, cost, and expense, joint and several, to which
any indemnified person may become subject under the Securities Act, the Exchange
Act, the CEAct, the securities or Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement, provided that the
Partnership 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 specifically relate to the Trading Advisor
or its Trading Advisor Principals (including the historical performance
capsules, but excluding the pro forma performance information except to the
extent the pro forma performance information was based on information furnished
by the Trading Advisor) or was not 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), 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. This indemnity shall not
relate to any matter for which the Partnership would be indemnified under
Section 8(d).
(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,
-11-
the indemnified person will notify the indemnifying party in writing of the
commencement thereof if a claim in respect thereof is to be made against the
indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the preceding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, 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 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 or any of its principals or affiliates by any act or
omission favor any account advised or managed by the Trading Advisor or any of
its principals or affiliates over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor and its principals and affiliates agrees to treat the
Partnership in a fiduciary capacity to the extent recognized by applicable law,
but, subject to that standard, the
-12-
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 Program, 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 and its principals and affiliates 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 that 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 Program, 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, Warranties, and Agreements of the Trading
Advisor. The Trading Advisor with respect to itself and each of its principals
represents and warrants to and agrees with the General Partner and the
Partnership as follows:
(i) It will exercise good faith and due care in using the
Trading Program on behalf of the Partnership.
(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.
(iii) The Trading Advisor shall trade: (A) its allocated
portion of the Partnership's Net Assets pursuant to the Trading Program;
and (B) only in futures and option contracts traded on U.S. contract
markets, foreign currency forward contracts
-13-
traded with MS&Co. (which may include forward contracts initially executed
with financial institutions other than MS&Co.) Xxxxxx Xxxxxxx XX, and such
other futures interests that are approved in writing by the General
Partner and have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing
and in good standing as a corporation under the laws of the jurisdiction
of its incorporation and is qualified to do business as a foreign
corporation and in good standing in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the
failure to so qualify would materially adversely affect the Trading
Advisor's ability to perform its duties under this Agreement. The Trading
Advisor has full corporate power and authority to perform its obligations
under this Agreement, and as described in the Registration Statement and
Prospectus. The only principals (as defined in Rule 4.10(e) under the
CEAct) of the Trading Advisor are those set forth in the Prospectus (the
"Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's Trading Program,
approaches, systems and performance, in the Registration Statement and the
Prospectus, and in any 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 information relating to the
Trading Advisor and each Trading Advisor Principal, including the Trading
Advisor's and each 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 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 as of each monthly 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 4.10(e)(2)(ii) 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
-14-
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 Advisor or any other agreement
or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any federal, state, municipal or
other 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 at law or
in equity before or by any court or by any governmental body or any
administrative, self-regulatory or commodity exchange organization to
which the Trading Advisor or any Trading Advisor Principal is or was a
party, or to which any of the assets of the Trading Advisor or any Trading
Advisor Principal is or was subject and which resulted in or might
reasonably be expected to result in any material adverse change in the
condition, financial or otherwise, 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 or the CFTC
regarding noncompliance by the Trading Advisor or any of the Trading
Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly,
any commission, finder's fee, similar fee, or rebate from any person in
connection with the organization or operation of the Partnership, other
than as described in the Prospectus.
(xii) The actual performance of each discretionary account of
a client directed by the Trading Advisor and the Trading Advisor
Principals since at least the later of (i) the date of commencement of
trading for each such account or (ii) a date five years prior to the
effective date of the Registration Statement, is disclosed in the
Prospectus (other than such discretionary accounts the performance of
which are exempt from 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.
-15-
(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 condition,
financial or otherwise, business or prospects of the Trading Advisor. The
Trading Advisor shall also inform the General Partner immediately if the
Trading Advisor or any of its officers become 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 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 (ii) 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 monthly
closing will have been, taken; and, upon payment of the
-16-
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 the first monthly
closing following the date in which the Partnership begins to receive
trading advice from the Trading Advisor pursuant to this Agreement (the
"Initial Closing") and each monthly closing thereafter, 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 and as of the date of
each monthly closing 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 monthly 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
-17-
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 for itself and on behalf of
the Partnership and constitutes a valid, binding and enforceable agreement
of the Partnership and the General Partner in accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under,
the General Partner's certificate of incorporation or bylaws, the
Certificate of Limited Partnership, the Limited Partnership Agreement, or
any agreement or instrument by which either the General Partner or the
Partnership, as the case may be, is bound or any order, rule, law or
regulation applicable to the General Partner or the Partnership of any
court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the General Partner
or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General
Partner's knowledge, threatened, any action, suit or proceeding at law or
in equity before or by any court or by any federal, state, municipal or
other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the General Partner or the
Partnership is or was a party, or to which any of the assets of the
General Partner or the Partnership is or was subject and which resulted in
or might reasonably be expected to result in any materially adverse change
in the condition, financial or otherwise, of the General Partner or the
Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of
the principals of the General Partner, as "trading principals" is defined
under Rule 4.10(e)(i) under the CEAct ("General Partner Principals") has
received any notice of an investigation by the NFA, NASD, SEC or CFTC
regarding non-compliance by the General Partner or the General Partner
Principals or the Partnership with the Securities Act or the CEAct which
is required under the Securities Act or the CEAct to be disclosed in the
Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and
state governmental, regulatory
-18-
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.
(xii) The Partnership is a "qualified eligible person" for the
purposes of Rule 4.7 under the CEAct. The Partnership and the General
Partner consent to the account being treated by the Trading Advisor as an
exempt account under Rule 4.7 under the CEAct.
(b) Covenants of the General Partner and the Partnership. The
General Partner for itself and the Partnership 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 condition,
financial or otherwise, business or prospects 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.
(iv) The Partnership and the General Partner will keep
confidential and not disseminate any information regarding the trading
systems, strategies, methods and programs of the Trading Advisor or
specific trades made by the Trading Advisor for the account of the
Partnership to any of the limited partners of the Partnership or the
customers, employees, agents, shareholders, officers, directors or
affiliates of the General Partner or Xxxxxx Xxxxxxx XX or any other person
or entity, except such details as may be, in the reasonable judgment of
the General Partner, necessary or appropriate for the conduct of the
business of the Partnership or as required by law.
-19-
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 Initial Closing and at the
request of the General Partner at any monthly closing thereafter, provide the
following:
(a) To Xxxxxx Xxxxxxx XX, 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.
-20-
(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 Xxxxxx Xxxxxxx XX, 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 corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation
and is qualified to do business and in good standing in each other
jurisdiction in which the nature or conduct of its business requires such
qualification and the failure to be duly qualified would materially
adversely affect the Trading Advisor's ability to perform its obligations
under this Agreement. The Trading Advisor has full corporate power and
authority to conduct its business as described in the Registration
Statement and Prospectus and to perform its obligations under this
Agreement.
(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
investigation, none of such licenses, memberships or registrations have
been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trading Advisor and constitutes a legal,
valid and binding agreement of the Trading Advisor, enforceable against
the Trading Advisor in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
receivership or other laws relating to or affecting creditors' rights
generally, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and except
that the enforcement of rights with respect to indemnification and
contribution obligations and provisions (a) purporting to waive or limit
rights to trial by jury, oral amendments to written agreements or rights
of set off or (b) relating to submission to jurisdiction, venue or service
of process, may be limited by applicable law or considerations of public
policy.
(iv) To such counsel's knowledge, based upon due inquiry of
certain officers of the Trading Advisor, 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
-21-
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 by the Trading Advisor of this
Agreement, and the performance by the Trading Advisor of its obligations
hereunder and in the Prospectus (a) do not require any Governmental
Approval (as defined below) to be obtained on the part of the Trading
Advisor, except those that have been obtained and, to such counsel's
knowledge, are in effect, (b) do not result in a violation of any
provision of the certificate or incorporation of bylaws of the Trading
Advisor or any Applicable Laws (as defined below) applicable to the
Trading Advisor, and (c) do not breach or result in a violation of, or
default under, (i) any indenture, mortgage, deed of trust, agreement or
instrument known by us to which the Trading Advisor or any of its
subsidiaries is a party or by which the Trading Advisor or any of its
subsidiaries is bound or to which any of the property or assets of the
Trading Advisor or any of its subsidiaries is subject, or (ii) any
judgment, decree or order known to such counsel which is applicable to the
Trading Advisor and, pursuant to any Applicable Laws, is issued by any
Governmental Authority (as defined below) having jurisdiction over the
Trading Advisor or its properties. "Applicable Laws" means those laws,
rules and regulations of the State of New York and of the United States of
America which, in such counsel's experience, are normally applicable to
transactions of the type contemplated by this Agreement. "Governmental
Authorities" means executive, legislative, judicial, administrative or
regulatory bodies of the State of New York or the United States of
America. "Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with,
any Governmental Authority pursuant to Applicable Laws.
(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 Advisors
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.
-22-
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(c) To Xxxxxx Xxxxxxx XX, the General Partner and the Partnership, a
report dated the date of the closing that shall present, for the period from the
date after the last day covered by the historical performance capsules in the
Prospectus to the latest practicable day before closing, updated performance
information, and which shall certify that such information is, to the best of
such Trading Advisor's knowledge, accurate in all material respects.
(2) The General Partner shall, at the Initial Closing, 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) To the parties hereto, an opinion of Cadwalader, Xxxxxxxxxx &
Xxxx LLP, counsel to the General Partner and the Partnership, in form and
substance satisfactory to such parties, 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.
(ii) The General Partner is a corporation validly existing and
in good standing as a corporation under the laws of the State of Delaware
and is duly qualified as a foreign corporation to do business and is in
good standing in the State of New York and in each other jurisdiction in
which the nature or conduct of its business requires such
-23-
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 and the Limited Partnership Agreement have
been duly authorized, executed and delivered by or on behalf of the
General Partner and this Agreement has been duly authorized, executed and
delivered by or on behalf of the Partnership, and each constitutes a
legal, valid and binding agreement of the General Partner and/or the
Partnership, as applicable, enforceable against the General Partner and/or
the Partnership, as applicable, in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, receivership or other laws relating to or affecting creditors'
rights generally, and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity), and
except that the enforcement of rights with respect to indemnification and
contribution obligations and provisions (a) purporting to waive or limit
rights to trial by jury, oral amendments to written agreements or rights
of set off or (b) relating to submission to jurisdiction, venue or service
of process, may be limited by applicable law or considerations of public
policy.
(v) The execution and delivery by each of the General Partner
and the Partnership of this Agreement, the offer and sale of the Units by
the Partnership and the performance by the General Partner and the
Partnership of its respective obligations hereunder and in the Prospectus
(a) do not require any Governmental Approval to be obtained on the part of
the General Partner or the Partnership, except those that have been
obtained and, to such counsel's knowledge, are in effect, (b) do not
result in a violation of any provision of the General Partner's
certificate of incorporation or bylaws, the Certificate of Limited
Partnership or the Limited Partnership Agreement of the Partnership or any
Applicable Laws applicable to the General Partner and the Partnership, and
(c) do not breach or result in a violation of, or default under, (i) any
indenture, mortgage, deed of trust, agreement or instrument known by us to
which it or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound or to which any of the property or assets of it
or any of its subsidiaries is subject, or (ii) any
-24-
judgment, decree or order known to such counsel which is applicable to the
General Partner or the Partnership and, pursuant to any Applicable Laws,
is issued by any Governmental Authority having jurisdiction over it or its
properties.
(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.
(ix) Based upon reliance on certain SEC "no-action" letters,
as of the closing, the performance by the Partnership of the transactions
contemplated by this Agreement and as described in the Prospectus will not
require the Partnership to register as an "investment company" under the
Investment Company Act of 1940, as amended.
(x) 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 LLP 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.
(xi) The General Partner and its "principals," as defined in
CFTC Rule 3.1(a), and the Partnership have all federal and state
governmental, regulatory, self-regulatory and exchange approvals,
licenses, registrations, and memberships, and have effected all filings
with federal and state governmental regulators, self-regulatory
organizations and exchanges required to conduct their business and to act
as described in the Prospectus, or required to perform their obligations
under this Agreement and the
-25-
Limited Partnership Agreement, except for such approvals, licenses,
registrations, memberships, and filings the absence of which would not
have a material adverse effect on their ability to act as described in the
Prospectus, or to perform their obligations under such agreements, and, to
the best of such counsel's knowledge, after due investigation, none of
such approvals, licenses, registrations, memberships, or filings has been
rescinded, revoked, or suspended.
(xii) The information in the Prospectus under the captions
"Summary of the Prospectus--Tax Considerations," "Risk Factors--Taxation
and Regulatory Risks," "Purchases by Employee Benefit Plans--ERISA
Considerations," "Material Federal Income Tax Considerations," "State and
Local Income Tax Aspects," and "The Limited Partnership Agreements," to
the extent that such information constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct.
(xiii) 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 subscription
for and sale of the Units to qualified subscribers therefor has been
taken; and, upon payment of the consideration therefor specified in the
accepted Subscription and Exchange Agreement and Power of Attorney, the
Units will constitute valid limited partnership interests in the
Partnership and each subscriber who purchases Units will become a Limited
Partner, subject to the requirement that each such purchaser shall have
duly completed, executed and delivered to the Partnership a Subscription
and Exchange Agreement and Power of Attorney relating to the Units
purchased by such purchaser, that such purchaser meets all applicable
suitability standards and that the representations and warranties of such
purchaser in the Subscription and Exchange Agreement and Power of Attorney
are true and correct and that such purchaser is included as a Limited
Partner in the Partnership's records.
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.
-26-
19. Disclosure Document.
-------------------
During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents, information
documents or similar documents used by the Trading Advisor. The General Partner
acknowledges receipt of the Trading Advisor's information document dated April,
2004.
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 Spectrum Strategic L.P.
c/o Demeter Management Corporation
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, President
if to the General Partner:
Demeter Management Corporation
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, President
if to the Trading Advisor:
FX Concepts (Trading Advisor), Inc.
000 X. 00xx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx
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.
-27-
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. Successors.
----------
This Agreement, including the representations, warranties and
covenants contained herein shall be binding upon and inure to the benefit of the
parties hereto, their successors and permitted assigns, and not other person
shall have any right or obligation under this Agreement.
26. Waiver of Breach.
----------------
The waiver by any party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
or of a breach by any other party. The Failure of a party to insist upon strict
adherence to any provision of the Agreement shall not constitute a waiver or
thereafter deprive such party o g the right to insist upon strict adherence.
27. 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.
-28-
XXXXXX XXXXXXX SPECTRUM STRATEGIC L.P.
by Demeter Management Corporation,
General Partner
By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
DEMETER MANAGEMENT CORPORATION
By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
FX CONCEPTS (TRADING ADVISOR), INC.
By /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Secretary
-29-
EXHIBIT A
---------
Trading Policies
1. Futures Trade Execution through Clearing Commodity Broker:
---------------------------------------------------------
o When placing orders for futures trades with the clearing commodity
broker designated in this Agreement or by the General Partner (the
"Clearing Commodity Broker"), the Trading Advisor must follow the
Clearing Commodity Broker's order entry procedures, of which the
Trading Advisor has been advised.
o For futures trades at exchanges where give-up execution is not
allowed, the Trading Advisor must use the execution facilities
provided by the Clearing Commodity Broker.
o The Partnership will not incur an execution service fee from the
Clearing Commodity Broker when the Trading Advisor uses the Clearing
Commodity Broker's execution facilities.
2. FX Trade Execution through FX Counterparties:
--------------------------------------------
o When placing orders for foreign currency forward contracts ("FX
Trades") with a dealer ("FX Counterparty"), the Trading Advisor must
follow the FX Counterparty's order entry procedures, of which the
Trading Advisor has been advised.
o When executing FX Trades on behalf of the Partnership, the Trading
Advisor must use the execution facilities of the FX
Counterparty(ies) designated by the General Partner for such FX
Trades, unless the General Partner otherwise agrees in writing.
3. "Give-Up" Futures Trade Execution:
---------------------------------
o The Trading Advisor shall ensure that a "give-up" execution
agreement is in place prior to the execution of any trade through a
floor broker in accordance with this Agreement or as otherwise
provided in writing to the Trading Advisor by the General Partner.
o The Trading Advisor may authorize payment of an execution service
fee ("Give-Up Fee") only to the executing clearing firm or the floor
broker (the "Executing Broker") that directly gives the futures
trade to the Clearing Commodity Broker for such clearance, and in an
amount not greater than the amount permitted by the General Partner
from time to time (the "Execution Allowance"). The Execution
Allowance shall be based on the General Partner's assessment for
prevailing competitive rates for Give-Up Fees.
o Give-Up Fee bills in amounts up to the Execution Allowance will be
processed by the Clearing Commodity Broker, with notice provided to
the Trading Advisor. To the extent that such bills will be greater
than the Execution Allowance, the Trading Advisor will obtain the
prior written consent of the General Partner.
o The Trading Advisor shall provide that information which may
reasonably be requested by the General Partner to verify the Give-Up
Fees processed by the Clearing Commodity Broker.
4. Trade Allocations:
-----------------
o The Trading Advisor shall be responsible for determining the
procedure(s) used to allocate trades to all customer accounts it
manages, including the Partnership's account(s), in accordance with
CFTC regulations. In the event that either of the Clearing Commodity
Broker or the Executing Broker agrees to perform any step(s)
necessary to such allocation procedure, it remains the Trading
Advisor's responsibility to ensure that the procedure(s) are
performed correctly and that the allocated trades are correctly
booked to he Partnership's account(s).
5. Daily Trade Reporting and Checkout:
----------------------------------
o The Trading Advisor shall be responsible for the timely reporting of
those futures trades not executed by, and subsequently given-up to,
the Clearing Commodity Broker, and shall be responsible for ensuring
that the Executing Broker(s) transmit such futures trades to the
Clearing Commodity Broker for clearance within a timely basis.
o The Trading Advisor shall be responsible for daily checkout of all
of the Partnership's futures, options, and FX Trades. Such checkout
shall be administered according to the procedures set forth by the
Clearing Commodity Broker's and/or FX Counterparty's designated
checkout area, of which the Trading Advisor has been advised.
6. Reconciliations:
---------------
o The Trading Advisor shall be responsible for trade reconciliation
and account balancing with the Clearing Commodity Broker and/or FX
Counterparty's designated trade reconciliation area. The Trading
Advisor shall use best efforts to provide to the General Partner a
daily reconciliation for each Partnership account by no later than
10:00 a.m. EST/EDT. Such reconciliation will specify those trades to
be added to and/or canceled from an account, provide a valuation
versus current settlement prices of such trades, and advise of any
other pending cash adjustments due from Executing Brokers. The 10:00
a.m. time requirement is contingent upon the Clearing Commodity
Broker fulfilling its balancing obligations on an equally timely
basis.
-2-
o The Trading Advisor shall report to the General Partner any
incorrect settlement and/or closing price of which it becomes aware
with regard to the Clearing Commodity Broker's account statement(s)
for the Partnership.
7. Foreign Currency Conversions:
----------------------------
o The Trading Advisor shall be responsible for the conversion of
foreign currency balances to U.S. dollars. The Trading Advisor may,
at its discretion, place such foreign currency conversion trades as
may be necessary. Such trades must be executed with such party as
the General Partner may, from time to time, specifically designate,
or otherwise with either of the Clearing Commodity Broker or FX
Counterparty as the Trading Advisor ay prefer. Conversion trades
should be verified in the Trading Advisor's daily checkout, account
balancing, and reconciliation procedures.
8. Monitoring of Delivery Periods, Option Expirations and Trade Settlement:
-----------------------------------------------------------------------
o The Trading Advisor shall be responsible for monitoring first notice
(delivery) dates, last trading dates, option expiration dates, and
forward settlement and/or maturity dates. The Trading Advisor shall
also take appropriate steps to ensure that it has exited positions
prior to delivery, expiration and settlement. With regard to option
positions, the Trading Advisor must, in a timely fashion,
communicate to the Clearing Commodity Broker's and/or FX
Counterparty's designated area proper notice of its intentions
regarding all such open positions that are due to expire.
9. Trading Errors:
--------------
o The Trading Advisor must inform the General Partner and Clearing
Commodity Broker of any such occasion in which trades are placed in
error. The provisions of Section 2(d) of this Agreement shall be
interpreted to mean that the benefit of profitable trading errors
made by the Trading Advisor when trading on behalf of the Trading
Company shall be awarded to the Partnership, whereas the detriment
of unprofitable trading errors made by the Trading Advisor when
trading on behalf of the Partnership must be borne by the Trading
Advisor.
-3-
EXHIBIT B
---------
Futures Interests Traded
Developed Markets Currency Program
----------------------------------
Norwegian krone NOK
Swedish krona SEK
British pound GBP
Euroland euro EUR
Swiss franc CHF
Australian dollar AUD
New Zealand dollar NZD
Canadian dollar CAD
Singapore dollar SGD
Japanese yen JPY
EXHIBIT C
---------
TRADING AUTHORIZATION
FX Concepts (Trading Advisor), Inc.
000 X. 00xx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
XXXXXX XXXXXXX SPECTRUM STRATEGIC L.P., a Delware limited
partnership (the "Partnership"), does hereby make, constitute, and appoint FX
CONCEPTS (TRADING ADVISOR), INC., (the "Trading Advisor") as the Partnership's
agent and attorney-in-fact to purchase and sell commodity interests through
Xxxxxx Xxxxxxx & Co. Incorporated and Xxxxxx Xxxxxxx & Co. International
Limited, as commodity brokers, as described in and in accordance with the terms
of the Management Agreement dated as of October 7, 2004 among the Partnership,
Demeter Management Corporation and the Trading Advisor, until further notice to
the Trading Advisor.
This authorization shall terminate and be null, void, and of no
further effect simultaneously with the termination of the said Management
Agreement.
Very truly yours,
XXXXXX XXXXXXX SPECTRUM STRATEGIC L.P.
by Demeter Management Corporation,
General Partner
By: _________________________________
Xxxxxxx X. Xxxxxxx, President
Dated: [_______], 2004
