MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among XXXX XXXXXX SPECTRUM BALANCED L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and RXR, INC., a New York corporation (the "Trading
Manager").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the
Limited Partnership Agreement dated as of May 27, 1994 (the "Limited Partnership
Agreement"), to engage primarily in speculative trading of commodities
(including foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, obligations of or guaranteed by the United
States Government, and any other financial instruments, securities, stock,
financial and economic indexes, and items which are now or may hereafter be the
subject of futures contract trading), futures contracts, forward contracts,
foreign exchange commitments, options on physical commodities and on futures
contracts, spot (cash) commodities and currencies, and any rights pertaining
thereto (hereinafter referred to collectively as "futures interests") and
securities (such as United States Treasury bills) approved by the Commodity
Futures Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership intends to become a member
partnership of the Xxxx Xxxxxx Spectrum Series (the "Fund Group") by entering
into an agreement pursuant to which units of limited partnership interest
("Units") of such member partnerships will be sold to investors in a common
offering under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement on Form S-1 (No. 33-80146) (as amended from
time to time, the "Registration Statement") and a final Prospectus dated
September 15, 1994, constituting a part thereof (as amended and supplemented,
the "Prospectus"), and thereafter, pursuant to which such Units can be exchanged
by a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Manager has extensive experience trading
in futures interests and is willing to provide certain services and undertake
certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Manager to act as
a trading manager for the Partnership and to make investment decisions with
respect to futures interests for its allocated share of the Partnership's Net
Assets and the Trading Manager desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Manager wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Manager will
conduct a portion of the Partnership's futures interests trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing
Offering of Units.
(a) The Trading Manager agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading systems, methods, and
strategies (subject to the need, in the reasonable discretion of the Trading
Manager, to preserve the secrecy of proprietary information concerning such
systems, methods, and strategies), and client accounts over which it has
discretionary trading authority (other than the names of any such clients), and
otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership and the General Partner by providing
information regarding the Trading Manager in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Manager.
(b) If, while Units continue to be offered and sold, the
Trading Manager becomes aware of any materially untrue or misleading statement
or omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, such Trading Manager
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Manager nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2. Duties of the Trading Manager.
(a) Upon the commencement of trading operations by the
Partnership, the Trading Manager hereby agrees to act as a Trading Manager for
the Partnership and, as such, shall have sole authority and responsibility for
directing the trading of the Net Assets of the Partnership pursuant to its
Balanced Portfolio Program at 2.0 standard leverage with no reserve asset
component (as agreed by the Trading Manager and the Partnership) on the terms
and conditions and in accordance with the prohibitions and trading policies set
forth in this Agreement or provided in writing to the Trading Manager; provided,
however, that the General Partner may override the instructions of the Trading
Manager to the extent necessary (i) to comply with the trading policies of the
Partnership described in writing to the Trading Manager and with applicable
speculative position limits, (ii) to fund any distributions, redemptions, or
reapportionments among other trading managers to the Partnership, (iii) to pay
the Partnership's expenses, (iv) to the extent the General Partner believes
doing so is necessary for the protection of the Partnership, (v) to terminate
the futures interests trading of the Partnership, or (vi) to comply with any
applicable law or regulation. The General Partner agrees not to override any
such instructions for the reasons specified in clauses (ii) or (iii) of the
preceding sentence unless the Trading Manager fails to comply with a request of
the General Partner to make the necessary amount of funds available to the
Partnership within five days of such request. The Trading Manager shall not be
liable for the consequences of any decision by the General Partner to override
instructions of the Trading Manager, except to the extent that the Trading
Manager is in breach of this Agreement (as determined by the General Partner in
good faith). In performing services to the Partnership the Trading Manager may
not materially alter the trading program(s) used by the Trading Manager in
trading its allocable share of the Partnership's Net Assets in futures interests
as described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed a material alteration in the Trading Manager's trading program(s).
(b) The Trading Manager shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the
prohibitions and trading policies of the Partnership provided in
writing to the Trading Manager and the trading systems, methods, and
strategies of the Trading Manager described in the Prospectus, with
such changes and additions to such trading systems, methods or
strategies as the Trading Manager, from time to time, incorporates into
its trading approach for accounts the size of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by
the General Partners and the Partnership, provide the General Partner,
within 30 days of a request therefor by the General Partner, with
information comparing the performance of the Partnership's account and
the performance of all other client accounts directed by the Trading
Manager using the trading systems used by the Trading Manager for the
Partnership over a specified period of time. In providing such
information, the Trading Manager may take such steps as are necessary
to assure the confidentiality of the Trading Manager's clients'
identities. The Trading Manager shall, upon the General Partner's
request, consult with the General Partner concerning any discrepancies
between the performance of such other accounts and the Partnership's
account. The Trading Manager shall promptly inform the General Partner
of any material discrepancies of which the Trading Manager is aware.
The General Partner acknowledges that different trading strategies or
methods may be utilized for differing sizes of accounts, accounts with
different trading policies, accounts with different leverage policies,
accounts experiencing differing inflows or outflows of equity, accounts
which commence trading at different times, accounts which have
different portfolios or different fiscal years and that such
differences may cause divergent trading results.
(iii) Upon request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Manager other than proprietary information
(including, without limitation, information relating to changes in
control, personnel, trading approach, or financial condition). Each of
the General Partner and the Partnership acknowledge that all trading
instructions made by the Trading Manager will be held in confidence by
the General Partner and the Partnership, except to the extent necessary
to conduct the business of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Manager's
open positions maintained by the Trading Manager exceed the applicable
speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading Manager or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Manager within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Manager shall be for the
account of the Partnership. The Trading Manager makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the
contrary, the Trading Manager shall assume financial responsibility for any
errors committed or caused by it in transmitting orders for the purchase or sale
of futures interests for the Partnership's account, including payment to DWR of
the floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred by DWR on such trades but only for the
amount of DWR's out-of-pocket costs in respect thereof. The Trading Manager's
errors shall include, but not be limited to, inputting improper trading signals
or communicating incorrect orders to DWR. However, the Trading Manager shall not
be responsible for errors committed or caused by DWR or by floor brokers or
other FCM's. The Trading Manager shall have an affirmative obligation promptly
to notify the General Partner of its own errors, and the Trading Manager shall
use its best efforts to identify and promptly notify the General Partner of any
order or trade which the Trading Manager reasonably believes was not executed in
accordance with its instructions to DWR or such other commodity broker utilized
to execute orders for the Partnership.
(e) Prior to the commencement of trading by the Partnership,
the General Partner on behalf of the Partnership shall deliver to the Trading
Manager a trading authorization appointing the Trading Manager the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Managers and
Reallocation of Net Assets.
(a) If the General Partner at any time deems it to be in the
best interests of the Partnership, the General Partner may designate an
additional trading manager or managers for the Partnership and may apportion to
such additional trading manager(s) the management of such amounts of Net Assets
(as defined in Section 6(c) hereof) as the General Partner shall determine in
its absolute discretion. The designation of an additional trading manager or
managers and the apportionment of Net Assets to any such trading manager(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Manager hereunder. In the event that an additional
trading manager or managers is so designated, the Trading Manager shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Manager and the Trading Profits
attributable to the trading by the Trading Manager.
(b) The General Partner may at any time and from time to time
upon two business days' prior notice reallocate Net Assets allocated to the
Trading Manager to any other trading manager or managers of the Partnership or
allocate additional Net Assets upon two business days' prior notice to the
Trading Manager from such other trading manager or managers; provided that any
such addition to or withdrawal from Net Assets allocated to the Trading Manager
of the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Manager Independent.
For all purposes of this Agreement, the Trading Manager shall
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Manager or any other trading manager or managers for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Manager is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Manager have any
authority of responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manger 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, Xxxx Xxxxxx Xxxxxxxx, Inc. ("DWR") shall act as commodity
broker for the Partnership. The General Partner shall provide the Trading
Manager with copies of brokerage statements. Notwithstanding that DWR shall act
as commodity broker for the Partnership, the Trading Manager may execute trades
through floor brokers other than those employed by DWR so long as arrangements
are made for such floor brokers to "give-up" or transfer the positions to DWR
and provided that the rates charged by such floor brokers have been approved in
advance by DWR.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Manager under this Agreement, the Partnership shall pay the Trading
Manager the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Manager's trading for the Partnership's
account, equal to 5/48 of 1% (a 1.25% annual rate) of the "Net Assets"
of the Partnership allocated to the Trading Manager (as defined in
Section 6(c)) as of the opening of business on the first day of each
calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar
month, payable on a non-netted basis vis-a-vis other trading manager(s)
of the Partnership. The initial incentive period will commence on the
date of the Partnership's initial closing (the "Initial Closing") and
shall end on the last day of the first month ending after such Closing
occurs.
(b) If this Agreement is terminated on a date other than the
last day of a month, the incentive fee described above shall be determined as if
such date were the end of a month. If this Agreement is terminated on a date
other than the end of a month, the management fee described above shall be
determined as if such date were the end of a month, but such fee shall be
prorated based on the ratio of the number of trading days in the month through
the date of termination to the total number of trading days in the month. If,
during any month after the Partnership commences trading operations (including
the month in which the Partnership commences such operations), the Partnership
does not conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Manager, or, as a result of an act or
material failure to act by the Trading Manager, is otherwise unable to utilize
the trading advice of the Trading Manager on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilizes the trading advice of the Trading Manager to the total number of
trading days in the month. The management fee payable to the Trading Manager for
the month in which the Partnership begins to receive trading advice from the
Trading Manager pursuant to this Agreement shall be prorated based on the ratio
of the number of trading days in the month from the day the Partnership begins
to receive such trading advice to the total number of trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest positions and other assets of the
Partnership) less all liabilities of the Partnership (including, but not limited
to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Manager, decreased by the
Trading Manager's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Manager's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Manager or, if no incentive
fee has been earned previously by the Trading Manager, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading
Manager on account of Trading Profits earned by the Partnership on Net Assets
allocated to the Trading Manager and the Partnership thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period with
respect to such amounts so allocated, the Trading Manager shall be entitled to
retain such amounts of incentive fees previously paid to the Trading Manager in
respect of such Trading Profits. However, no subsequent incentive fees shall be
payable to the Trading Manager until the Partnership has again earned Trading
Profits on the Trading Manager's allocated Net Assets; provided, however, that
if the Trading Manager's allocated Net Assets are reduced or increased because
of redemptions, additions or reallocations which occur at the end of, or
subsequent to, an incentive period in which the Partnership experiences a
futures interests trading loss with respect to Net Assets allocated to the
Trading Manager, the trading loss for that incentive period which must be
recovered before the Trading Manager's allocated Net Assets will be deemed to
experience Trading Profits will be equal to the amount determined by (x)
dividing the Trading Manager's allocated Net Assets after such increase or
decrease by the Trading Manager's allocated Net Assets immediately before such
increase or decrease and (y) multiplying that fraction by the amount of the
unrecovered futures interests trading loss experienced in that month prior to
such increase or decrease. In the event that the Partnership experiences a
futures interests trading loss in more than one month with respect to the
Trading Manager's allocated Net Assets without the payment of an intervening
incentive fee and Net Assets are increased or reduced in more than one such
month because of redemptions, additions or reallocations, then the trading loss
for each such month shall be adjusted in accordance with the formula described
above and such increased or reduced amount of futures interests trading loss
shall be carried forward and used to offset subsequent futures interest trading
profits. The portion of redemptions to be allocated to the Net Assets of the
Partnership managed by each of the trading managers to the Partnership shall be
in the sole discretion of the General Partner.
(f) The Partnership will remit the management and incentive
fees to the Trading Manager as soon as practicable, but in no event later than
30 days, in the case of the management fee, or 45 days in the case of the
incentive fee of the month-end as of which they are due, together with an
itemized statement showing the calculations.
7. Term.
This Agreement shall continue in effect for a period of three
years after the end of the month in which the Partnership commences trading
operations. At least thirty days prior to the expiration of such three-year
period, the Trading Manager may terminate this Agreement at the end of the
three-year period by providing written notice to the Partnership indicating that
the Trading Manager desires to terminate such Agreement at the end of such
three-year period. If the Agreement is not terminated upon the expiration of the
three-year period, then upon the expiration of such three-year period, this
Agreement shall automatically renew for an additional one-year period and shall
continue to renew for additional one-year periods until this Agreement is
otherwise terminated, as provided for herein. At least thirty days prior to the
expiration of any such one-year period, the Trading Manager may terminate this
Agreement at the end of the current one-year period by providing written notice
to the Partnership indicating that the Trading Manager desires to terminate such
Agreement at the end of such one-year period. This Agreement shall terminate if
the Partnership terminates. The Partnership shall have the right to terminate
this Agreement at its discretion (a) at any month end upon 5 days' prior written
notice to the Trading Manager or (b) at any time upon written notice to the
Trading Manager upon the occurrence of any of the following events: (i) if any
person described as a "principal" of the Trading Manager in the Prospectus
ceases for any reason to be an active executive officer of the Trading Manager;
(ii) if the Trading Manager becomes bankrupt or insolvent; (iii) if the Trading
Manager is unable to use its trading systems or methods as in effect on the date
hereof and as refined and modified in the future for the benefit of the
Partnership; (iv) if the registration, as a commodity trading advisor, of the
Trading Manager with the CFTC or its membership in the NFA is revoked,
suspended, terminated, or not renewed, or limited or qualified in any respect;
(v) except as provided in Section 12 hereof, if the Trading Manager merges or
consolidates with, or sells or otherwise transfers its advisory business, or all
or a substantial portion of its assets, any portion of its futures interests
trading systems or methods, or its goodwill to, any individual or entity; (vi)
if the Trading Manager's initially allocated Net Assets, after adjusting for
distributions, additions, redemptions, or reallocations, if any, shall decline
by 50% or more as a result of trading losses or if Net Assets allocated to the
Trading Manager fall below $1,000,000.00 at any time; (vii) if, at any time, the
Trading Manager violates any trading or administrative policy described in
writing to the Trading Manager by the General Partner, except with the prior
express written consent of the General Partner; or (viii) if the Trading Manager
fails in a material manner to perform any of its obligations under this
Agreement. The Trading Manager may terminate this Agreement at any time, upon
written notice to the Partnership, in the event: (i) that the General Partner
imposes additional trading limitation(s) in the form of one or more trading
policies or administrative policies which the Trading Manager does not agree to
follow in its management of its allocable share of the Partnership's Net Assets;
(ii) the General Partner objects to the Trading Manager implementing a proposed
material change in the Trading Manager's trading program(s) used by the
Partnership; (iii) the General Partner overrides a trading instruction of the
Trading Manager for reasons unrelated to a determination by the General Partner
that the Trading Manager has violated the Partnership's trading policies and the
Trading Manager certifies to the General Partner in writing that as a result,
the Trading Manager believes the performance results of the Trading Manager
relating to Partnership will be materially adversely affected; (iv) the
Partnership materially breaches this Agreement and does not correct the breach
within 10 days of receipt of a written notice of such breach from the Trading
Manager; or (v) the Trading Manager has amended its trading program to include a
foreign futures or option contract which may lawfully be traded by the
Partnership under CFTC regulations and counsel, mutually acceptable to the
parties, has not opined that such inclusion would cause adverse tax consequences
to Limited Partners and the General Partner does not consent to the Trading
Manager's trading such contract for the Partnership within 5 business days of a
written request by the Trading Manager to do so, and, if such consent is given,
does not make arrangements to do so, and, if such consent is given, does not
make arrangements to facilitate such trading within 30 days of such notice; (vi)
the assets allocated to the Trading Manager fall below $1,000,000 at any time;
(vii) the General Partner reallocates any portion of the Net Assets of the
Partnership pursuant to Section 3 hereof or (viii) the registration of the
General Partner as a commodity pool operator with the CFTC or its membership in
the NFA is revoked, suspended, terminated or not renewed, or limited or
qualified in any respect.
The indemnities set forth in Section 8 hereof shall survive
any termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Manager Liability. In respect of the
Trading Manager's role in the futures interests trading of the Partnership's
assets, none of the Trading Manager, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Manager shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, misconduct or negligence or is the
result of any such person not having acted in good faith and in the reasonable
belief that such actions or omissions were in, or not opposed to, the best
interests of the Partnership.
(b) Trading Manager Indemnity in Respect of Management
Activities. The Trading Manager shall indemnify, defend and hold harmless the
Partnership and the General Partner, their controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Trading Manager shall have
approved such settlement) incurred as a result of any action or omission
involving the Partnership's futures interests trading of the Trading Manager, or
any of its controlling persons or affiliates or their respective directors,
officers, partners, shareholders, or employees; provided that such liability
arises from an act or omission of the Trading Manager, or any of its controlling
persons or affiliates or their respective directors, officers, partners,
shareholders, or employees which is found by a court of competent jurisdiction
upon entry of a final judgment (or, if no final judgment is entered, by an
opinion rendered by counsel who is approved by the Partnership and the Trading
Manager, such approval not to be unreasonably withheld) to be a breach of this
Agreement by the Trading Manager or a representation, warranty or covenant
herein, the result of bad faith, misconduct or negligence, or conduct not done
in good faith in the reasonable belief that it was in, or not opposed to, the
best interests of the Partnership. The termination of any demand, claim,
lawsuit, action or proceeding by settlement shall not, in itself, create a
presumption that the conduct in question was not undertaken in good faith in a
manner reasonably believed to be in, or not opposed to, the best interest of the
Partnership.
(c) Partnership and General Partner Indemnity in Respect of
Management Activities. The Partnership and the General Partner shall, jointly
and severally, indemnify, defend, and hold harmless the Trading Manager, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the futures
interests trading activities of the Partnership undertaken by the Trading
Manager; provided that a court of competent jurisdiction upon entry of a final
judgement finds (or, if no final judgement is entered, an opinion is rendered to
the Partnership by independent counsel reasonably acceptable to both parties) to
the effect that the action or inaction of such indemnified party that was the
subject of the demand, claim, lawsuit, action, or proceeding did not constitute
negligence, misconduct, or a breach of this Agreement or a representation,
warranty or covenant of the Trading Manager herein and was done in good faith
and in a manner such indemnified party reasonably believed to be in, or not
opposed to, the best interests of the Partnership. The termination of any
demand, claim, lawsuit, action or proceeding by settlement shall not, in itself,
create a presumption that the conduct in question was not undertaken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interest of the Partnership.
(d) Trading Manager Indemnity in Respect of Sale of Units. The
Trading Manager shall indemnify, defend and hold harmless DWR, the Partnership,
the General Partner, any Additional Seller, and their affiliates and each of
their officers, directors, principals, shareholders, controlling persons from
and against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified person may become subject under the Securities
Act, the Securities and Exchange Act of 1934, the Commodity Exchange Act, the
securities or Blue Sky law of any jurisdiction, or otherwise (including any
reasonable investigatory, legal, and other expenses incurred in connection with,
and any amounts paid in, any settlement, provided that the Partnership shall
have approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, insofar as such loss,
claim, damage, liability, cost, or expense (or action in respect thereof) arises
out of, or is based upon: (i) a breach by the Trading Manager of any
representation, warranty, or agreement in this Agreement or any certificate
delivered pursuant to this Agreement or the failure by the Trading Manager to
perform any covenant made by the Trading Manager herein; (ii) the factual
accuracy of the information relating to the Trading Manager in the customer
brochure attached hereto as Exhibit A (the "Customer Brochure"); (iii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus or an omission
or alleged omission to state a material fact therein which is required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Manager, or its Trading Manager Principals (including the historical performance
tables but excluding the pro forma performance information unless such statement
or omission was based on information furnished by the Trading Manager in
connection with the preparation of such pro forma performance information), or
was made in reliance upon, and in conformity with, written information or
instructions furnished by the Trading Manager, and, in the case of the Customer
Brochure only, was approved in writing by the Trading Manager.
(e) Partnership and General Partner Indemnity in Respect of
Sale of Units. The Partnership and the General Partner agree, jointly and
severally, to indemnify, defend and hold harmless the Trading Manager and each
of its officers, directors, principals, shareholders, controlling persons from
and against any loss, claim, damage, liability, cost, and expense, joint and
several, to which any indemnified person may become subject under the Securities
Act, the Securities and Exchange Act of 1934, the Commodity Exchange Act, the
securities or Blue Sky law of any jurisdiction, or otherwise (including any
reasonable investigatory, legal, and other expenses incurred in connection with,
and any amounts paid in, any settlement, provided that the Partnership shall
have approved such settlement, and in connection with any administrative
proceedings), in respect of the offer or sale of Units, unless such loss, claim,
damage, liability, cost, or expense (or action in respect thereof) arises out
of, or is based upon: (i) a breach by the Trading Manager of any representation,
warranty, or agreement in this Agreement or the failure by the Trading Manager
to perform any covenant made by it herein; (ii) the factual accuracy of the
information relating to the Trading Manager in the Customer Brochure; or (iii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus or an omission
or alleged omission to state a material fact therein which is required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, provided that such misleading or untrue statement or alleged
misleading or untrue statement or omission or alleged omission relates to the
Trading Manager or its Trading Manager Principals (including the historical
performance tables but excluding the pro forma performance information unless
such statement or omission was based on information furnished by the Trading
Manager in connection with the preparation of such pro forma performance
information) or was made in reliance upon, and in conformity with, information
or instructions furnished by the Trading Manager.
(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
indemnitees may apply, the indemnified person will notify the indemnifying party
in writing of the commencement thereof if a claim in respect thereof is to be
made against the indemnifying party hereunder; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to the indemnified person hereunder,
except where such omission has materially prejudiced the indemnifying party. In
case any action, claim, or proceeding is brought against an indemnified person
and the indemnified person notifies the indemnifying party of the commencement
thereof as provided above, the indemnifying party will be entitled to
participate therein and, to the extent that the indemnifying party desires, to
assume the defense thereof with counsel selected by the indemnifying party and
not unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action,
claim, or proceeding as to which indemnification is or may be available
hereunder, an indemnified person reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees
and expenses of more than one counsel for all indemnified persons in connection
with any one action, claim, or proceeding or in connection with separate but
similar or related actions, claims, or proceedings in the same jurisdiction
arising out of the same general allegations. The indemnifying party will not be
liable for any settlement of any action, claim, or proceeding effected without
the indemnifying party's express written consent, but if any action, claim, or
proceeding, is settled with the indemnifying party's express written consent,
the indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
9. Right to Advise Others and Uniformity of Acts and
Practices.
(a) The Trading Manager is engaged in the business of advising
persons as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Manager, its principals and affiliates, will be
advising others (including affiliates and the stockholders, officers, directors,
and employees of the Trading Manager and its affiliates and their families) and
trading for their own accounts. The Trading Manager hereby agrees that in
connection with making trading decisions for the Partnership and for other
accounts which it manages, the Trading Manager will act in good faith to seek an
equitable treatment of all accounts under management (taking into account, among
other factors, the Trading Manager's responsibilities to all such accounts, and
the fact that the accounts may have different trading programs and strategies,
different investment objectives, different asset bases and portfolio
compositions, different investment and leveraging policies and restrictions,
different trading commencement dates and differing inflows and outflows of
equity), and subject to that standard, the Trading Manager or any of its
principals or affiliates shall be free to advise and manage accounts for other
persons and shall be free to trade on the basis of the same trading systems,
methods, or strategies employed by the Trading Manager for the account of the
Partnership, or trading systems, methods, or strategies which are entirely
independent of, or materially different from, those employed for the account of
the Partnership, and shall be free to compete for the same futures interests as
the Partnership or to take positions opposite to the Partnership.
(b) The Trading Manager shall not be restricted as to the
number or nature of its clients, except that so long as the Trading Manager acts
as Trading Manager for the Partnership: (i) the Trading Manager acts as a
trading manager for the Partnership, neither the Trading Manager nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Manager, or the
principals or affiliates of the Trading Manager to be in violation of the
Commodity Exchange Act or any regulations promulgated thereunder, any applicable
rule or regulation of the CFTC or any other regulatory body, exchange, or board;
and (ii) neither the Trading Manager nor any of its principals or affiliates
shall render futures interests trading advice to any other individual or entity
or otherwise engage in activity which shall knowingly cause positions in futures
interests to be attributed to the Trading Manager under the rules or regulations
of the CFTC or any other regulatory body, exchange, or board so as to require in
the good faith opinion of the Trading Manager the significant modification of
positions taken or intended for the account of the Partnership; provided that
the Trading Manager may modify its trading systems, methods or strategies to
accommodate the trading of additional funds or accounts. If applicable
speculative position limits are exceeded by the Trading Manager in the opinion
of (i) independent counsel (who shall be other than counsel to the Partnership),
(ii) the CFTC, or (iii) any other regulatory body, exchange, or board, the
Trading Manager and its principals and affiliates shall promptly liquidate
positions in all of their accounts, including the Partnership's account, in a
good faith effort to achieve an equitable treatment of all accounts managed by
them consistent with their responsibilities to all such accounts and the fact
that different accounts may have different trading programs and strategies,
different investment objectives, different asset bases and portfolio
compositions, different investment and leverage policies and restrictions and
other differences to the extent necessary to comply with the applicable position
limits.
10. Representations, Warranties, and Covenants of the
Trading Manager.
(a) Representations of the Trading Manager. The Trading
Manager with respect to itself and each of its principals represents and
warrants to and agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading
programs agreed to by the General Partner.
(ii) The Trading Manager shall follow, at all times, the
Trading Policies of the Partnership (as described in the Prospectus)
and as amended in writing and furnished to the Trading Manager from
time to time.
(iii) The Trading Manager shall trade: (A) the Partnership's
Net Assets pursuant to the same trading programs described in the
Prospectus unless the General Partner agrees otherwise and (B) only in
futures and option contracts traded on U.S. contract markets, foreign
currency forward contracts traded with DWR, and such commodity
interests which are approved in writing by the General Partner.
(iv) The Trading Manager is duly organized, validly existing
and in good standing as a corporation under the laws of the state of
its incorporation and is qualified to do business as a foreign
corporation and in good standing in each other jurisdiction in which
the nature or conduct of its business requires such qualification and
the failure to so qualify would materially adversely affect the Trading
Manager's ability to perform its duties under this Agreement. The
Trading Manager has full corporate power and authority to perform its
obligations under this Agreement, and as described in the Registration
Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the Commodity Exchange Act) of the Trading Manager are
those set forth in the Prospectus (the "Trading Manager Principals").
(v) All references to the Trading Manager and each Trading
Manager Principal, including the Trading Manager's trading approaches,
systems, and performance, in the Registration Statement and the
Prospectus, and in the supplemental sales literature which has been
approved in writing by the Trading Manager, are accurate and complete
in all material respects. With respect to the material relating to the
Trading Manager and each Trading Manager Principal, including the
Trading Manager's and the Trading Manager Principals' trading
approaches, systems, and performance information, as applicable, (i)
the Registration Statement and Prospectus contain all statements and
information required to be included therein under the Commodity
Exchange Act, (ii) the Registration Statement as of its effective date
will not contain any misleading or untrue statement of a material fact
or omit to state a material fact which is required to be stated therein
or necessary to make the statements therein not misleading and (iii)
the Prospectus at its date of issue and as of each closing will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Manager and is a valid
and binding agreement of the Trading Manager enforceable in accordance
with its terms.
(vii) Each of the Trading Manager and each "principal" of the
Trading Manager, as defined in Rule 3.1 under the Commodity Exchange
Act, has all federal and state governmental, regulatory and exchange
licenses and approvals and has effected all filings and registrations
with federal and state governmental and regulatory agencies required to
conduct its or his business and to act as described in the Registration
Statement and Prospectus or required to perform its or his obligations
under this Agreement. The Trading Manager is registered as a commodity
trading advisor under the Commodity Exchange Act and is a member of the
NFA in such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment
of the fees hereunder will not violate, or constitute a breach of, or
default under, the certificate of incorporation or bylaws of the
Trading Manager or any agreement or instrument by which it is bound or
of any order, rule, law or regulation binding on it of any court or any
governmental body or administrative agency or panel or self-regulatory
organization having jurisdiction over it.
(ix) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in
the condition, financial or otherwise, business or prospects of the
Trading Manager or any Trading Manager Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of
the Prospectus and there is not pending, or to the best of the Trading
Manager's knowledge threatened, any action, suit or proceeding before
or by any court or other governmental body to which the Trading Manager
or any Trading Manager Principal is or was a party, or to which any of
the assets of the Trading Manager is or was subject and which resulted
in or might reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, business or prospectus
of the Trading Manager or which would be material to an investor's
decision to invest in the Partnership. None of the Trading Manager or
any Trading Manager Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the
Trading Manager or any of the Trading Manager Principals with the
Commodity Exchange Act.
(xi) Neither the Trading Manager nor any Trading Manager
Principal has received, or is entitled to receive, directly or
indirectly, any commission, finder's fee, similar fee, or rebate from
any person in connection with the organization or operation of the
Partnership, other than as described in the Prospectus.
(xii) The actual performance of each discretionary account of
a client directed by the Trading Manager and the Trading Manager
Principals since at least the later of (i) the date of commencement of
trading for each such account or (ii) a date five years prior to the
effective date of the Registration Statement, is disclosed in the
Prospectus (other than such discretionary accounts the performance of
which are exempt from Commodity Exchange Act disclosure requirements);
all of the information regarding the actual performance of the accounts
of the Trading Manager and the Trading Manager Principals set forth in
the Prospectus is complete and accurate in all material respects and is
in accordance with and in compliance with the disclosure requirements
under the Commodity Exchange Act and the Securities Act, including the
Division of Trading and Markets "notional equity" advisories and
interpretations and the rules and regulations of the NFA. The
methodology used in the Prospectus in presenting the actual past
performance of the Trading Manager was developed in consultation with
the Chief Accountant of the CFTC in a series of telephone conversations
in which representatives of the Trading Manager and the General Partner
participated. This methodology differs materially from prior
presentation by the Trading Manager of its past performance.
(b) Covenants of the Trading Manager. The Trading Manager
covenants and agrees that:
(i) The Trading Manager shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Manager to
continue to act as described herein and to at all times comply in all
material respects with all applicable laws, rules, and regulations, to
the extent that the failure to so comply would have a materially
adverse effect on the Trading Manager's ability to act as described
herein.
(ii) The Trading Manager shall inform the General Partner
immediately as soon as the Trading Manager or any of its principals
becomes the subject of any investigation, claim or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
Trading Manager. The Trading Manager shall also inform the General
Partner immediately if the Trading Manager or any of its officers
become aware of any breach of this Agreement by the Trading Manager.
(iii) The Trading Manager agrees reasonably to cooperate by
providing information regarding itself and its performance in the
preparation of any amendments or supplements to the Registration
Statement and the Prospectus.
(c) Limitations on the Trading Manager's Representations. As
of the date of this Agreement, the Trading Manager does not have a commodity
trading advisor disclosure document filed with and accepted by the Division of
Trading and Markets of the CFTC (the "Division") although one is currently under
review by the Division. Consequently, to the extent any of the representations
given in this Agreement by the Trading Manager relate to or can be construed as
relating to a commodity trading advisor disclosure document valid, on file with
and accepted by, the Division none is given.
11. Representations and Warranties of the General
Partner and the Partnership.
The General Partner and the Partnership represent and warrant
to the Trading Manager, as follows:
(i) The Partnership has provided to the Trading Manager, and
filed with the Securities and Exchange Commission (the "SEC"), the
Registration Statement and has filed copies thereof with: (i) the CFTC
under the Commodity Exchange Act and the rules and regulations
promulgated thereunder (collectively, the "Commodity Act"); (ii) the
NASD pursuant to its Rules of Fair Practice; and (iii) the NFA in
accordance with NFA Compliance Rule 2-13. The Partnership will not file
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus unless the Trading Manager has received
reasonable prior notice of and a copy of such amendments or supplements
and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken
by the General Partner and the Partnership as a condition to the sale
of the Units to qualified subscribers therefor has been, or prior to
each Closing as defined in the Prospectus have been taken; and, upon
payment of the consideration therefor specified in each accepted
Subscription Agreement and Power of Attorney or Exchange Agreement and
Power of Attorney, as applicable, in such forms are attached to the
Prospectus (except as otherwise specified herein, the term
"Subscription Agreement and Power of Attorney" shall also mean the
Exchange Agreement and Power of Attorney in case of subscribers
executing same), the Units will constitute valid limited partnership
interests in the partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the Delaware Revised Uniform Limited
Partnership Act ("DRULPA") and is validly existing under the laws of
the State of Delaware with full power and authority to engage in the
trading of futures interests and to engage in its other contemplated
activities as described in the Prospectus; the Partnership has received
a certificate of authority to do business in the State of New York as
provided by Article 8-A of the New York Revised Limited Partnership Act
and is qualified to do business in each jurisdiction in which the
nature or conduct of its business requires such qualification and where
failure to be so qualified could materially adversely affect the
Partnership's ability to perform its obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the
State of Delaware and in good standing and qualified to do business as
a foreign corporation under the laws of the State of New York and is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature or conduct of its
business requires such qualification and where the failure to be so
qualified could materially adversely affect the General Partner's
ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to
conduct their business and to perform their respective obligations
under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the
Commodity Act. When the Registration Statement becomes effective under
the 1933 Act and at all times subsequent thereto up to and including
each Closing, the Registration Statement and Prospectus will comply in
all material respects with the requirements of the 1933 Act, the SEC
Regulations, the rules of the NFA and the Commodity Act. The
Registration Statement as of its effective date will not contain any
misleading or untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus as of its date of
issue and at each Closing will not contain any misleading or untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which such statements were made, not misleading. The supplemental sales
literature, when read in conjunction with the Prospectus, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
The supplemental sales literature will comply with the Commodity Act
and the regulations and rules of the NFA and NASD. This representation
and warranty shall not, however, apply to any statement or omission in
the Registration Statement, Prospectus or supplemental sales literature
made in reliance upon and in conformity with information furnished by
and relating to the Trading Manager, its trading methods or its trading
performance.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition, financial or
otherwise, business or prospects of the General Partner or the
Partnership, whether or not arising in the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the
Partnership and the General Partner and constitutes a valid, binding
and enforceable agreement of the Partnership and the General Partner in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth therein and the consummation of
the transactions contemplated therein and in the Registration Statement
and Prospectus will not violate, or constitute a breach of, or default
under, the General Partner's certificate of incorporation, bylaws, the
Certificate of Limited Partnership, or the Limited Partnership
Agreement or any agreement or instrument by which either the General
Partner or the Partnership, as the case may be, is bound or any order,
rule, law or regulation applicable to the General Partner or the
Partnership of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction
over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of
the Prospectus and there is not pending or, to the best of the General
Partner's knowledge, threatened, any action, suit or proceeding at law
or in equity before or by any court or by any federal, state, municipal
or other governmental body or any administrative, self-regulatory or
commodity exchange organization to which the General Partner or the
Partnership is or was a party, or to which any of the assets of the
General Partner or the Partnership is or was subject; and neither the
General Partner nor any of the principals of the General Partner, as
"principals" is defined under Rule 4.10 under the Commodity Act
("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by
the General Partner or the General Partner Principals or the
Partnership with the Commodity Act or the 1933 Act which is material to
an investor's decision to invest in the Partnership.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the Commodity Act, have all
federal and state governmental, regulatory and exchange approvals and
licenses, and have effected all filings and registrations with federal
and state and foreign governmental agencies required to conduct their
business and to act as described in the Registration Statement and
Prospectus or required to perform their obligations under this
Agreement (including, without limitation, registration as a commodity
pool operator under the Commodity Act and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The
General Partner's principals identified in the Registration Statement
are all of the General Partner Principals.
(b) Covenants of the General Partner. The General Partner
covenants and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to
continue to act as described herein and in the Prospectus and to all
times comply in all material respects with all applicable laws, rules,
and regulations, to the extent that the failure to so comply would have
a materially adverse effect on the General Partner's ability to act as
described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Manager
immediately as soon as the General Partner or any of its principals
becomes the subject of any investigation, claim, or proceeding of any
regulatory authority having jurisdiction over such person or becomes a
named party to any litigation materially affecting the business of the
General Partner. The General Partner shall also inform the Trading
Manager immediately if the General Partner or any of its officers
become aware of any breach of this Agreement by the General Partner.
(iii) The Partnership will furnish to the Trading Manager
copies of the Registration Statement, the Prospectus, and all
amendments and supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Manager.
The Trading Manager may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading systems or methods, or its
goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Manager, provided that
such entity expressly assumes all obligations of the Trading Manager under this
Agreement and agrees to continue to operate the business of the Trading Manager,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
This Agreement constitutes the entire agreement between the
parties with respect to the matters referred to herein, and no other agreement,
verbal or otherwise, shall be binding as between the parties unless in writing
and signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without
the express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written
consent of the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Manager shall, at the Partnership's Initial
Closing and at the request of the General Partner at any Monthly Closing (as
defined in the Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading Manager
in this Agreement are true, accurate, and complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Manager has performed all of its obligations
and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such
closing.
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Manager, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Manager is a corporation duly organized and
validly existing under the laws of the state of its incorporation and
is qualified to do business and in good standing in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and the failure to be duly qualified would
materially adversely affect the Trading Manager's ability to perform
its obligations under this Agreement. The Trading Manager has full
corporate power and authority to conduct its business as described in
the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Manager (including the Trading Manager
Principals) has all governmental, regulatory, self-regulatory and
commodity exchange and clearing association licenses and memberships
required by law, and the Trading Manager (including the Trading Manager
Principals) has received or made all filings and registrations
necessary to perform its obligations under this Agreement and to
conduct its business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings and
registrations, the absence of which would not have a material adverse
effect on its ability to act as described in the Registration Statement
and Prospectus or to perform its obligations under the agreement, and,
to the best of such counsel's knowledge, after due investigations, none
of such licenses, memberships or registrations have been rescinded,
revoked or suspended.
(iii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trading Manager and constitutes a
valid and binding agreement of the Trading Manager enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), and except as
enforceability of the indemnification, exculpation, and contribution
provisions contained in such agreements may be limited by applicable
law or public policy.
(iv) Based upon due inquiry of certain officers of the Trading
Manager, to the best of such counsel's knowledge, except as disclosed
in the Prospectus, there are no material actions, claims or proceedings
known to such counsel either threatened or pending in any court or
before or by any governmental or administrative body nor have there
been any such actions, claims or proceedings at any time within the
five years preceding the date of the Prospectus against the Trading
Manager or any Trading Manager Principal which are required to be
disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of
the transactions contemplated herein and in the Prospectus will not be
in contravention of any of the provisions of the certificate of
incorporation of bylaws of the Trading Manager and, based upon due
inquiry of certain officers of the Trading Manager, to the best of such
counsel's knowledge, will not constitute a breach of, or default under,
or a violation of any instrument or agreement known to such counsel by
which the Trading Manager is bound and will not violate any order, law,
rule or regulation applicable to the Trading Manager of any court or
any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading
Manager.
(vi) Based upon reliance on certain SEC No-Action letters, as
of the closing the performance by the Trading Manager of the
transactions contemplated by this Agreement and as described in the
Prospectus will not require the Trading Manager to be registered as an
"investment adviser" as that term is defined in the Investment Advisers
Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that would
lead them to believe that, (A) the Registration Statement at the time
it became effective, insofar as the Trading Manager and the Trading
Manager Principals are concerned, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
(B) the Prospectus at the time it was issued or at the closing
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein
relating to the Trading Manager or the Trading Manager Principals, in
light of the circumstances under which they were made, not misleading;
provided, however, that such counsel need express no opinion or belief
as to the performance data and notes or descriptions thereto set forth
in the Registration Statement and Prospectus, except that such counsel
shall opine, without rendering any opinion as to the accuracy of the
information in such tables, that the actual performance tables of the
Trading Manager set forth in the Prospectus comply as to form in all
material respects with applicable CFTC rules and all CFTC and NFA
interpretations thereof, except as disclosed in the Prospectus.
In giving the foregoing opinion, counsel may rely
on information obtained from public officials, officers of the Trading Manager,
and other resources believed by it to be responsible and may assume that
signatures on all documents examined by it are genuine.
(c) To DWR, the General Partner and the Partnership, a report
dated the date of the closing which shall present, for the period from the date
after the last day covered by the historical performance records in the
Prospectus to the latest practicable day before closing, figures which shall be
a continuation of such historical performance records and which shall certify
that such figures are, to the best of such Trading Manager's knowledge, accurate
in all material respects.
(2) The General Partner shall, at the Partnership's Initial
Closing and at the request of the Trading Manager at any Monthly Closing (as
defined in the Prospectus), provide the following:
(a) To the Trading Manager a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Manager, to
the effect that:
(i) The representations and warranties by the Partnership and
the General Partner in this Agreement are true, accurate, and complete
on and as of the date of the closing as if made on the date of the
closing.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings
for that purpose have been instituted or are pending or, to the
knowledge of the General Partner, are contemplated or threatened under
the 1933 Act. No order preventing or suspending the use of the
Prospectus has been issued by the SEC, NASD, CFTC, or NFA and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the General Partner, are contemplated or threatened
under the 1933 Act or the Commodity Act.
(iii) The Partnership and the General Partner have performed
all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to
the date of the closing.
(b) Cadwalader, Xxxxxxxxxx & Xxxx, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto at
the Initial Closing, in form and substance satisfactory to the parties hereto,
to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited
Partnership Agreement and the DRULPA and is validly existing under the
laws of the State of Delaware with full partnership power and authority
to conduct the business in which it proposes to engage as described in
the Registration Statement and Prospectus and to perform its
obligations under this Agreement; the Partnership has received a
Certificate of Authority as contemplated under the New York Revised
Limited Partnership Act and is qualified to do business in New York and
need not affect any other filings or qualifications under the laws of
any other jurisdictions to conduct its business as described in the
Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the
State of Delaware with full corporate power and authority to act as
general partner of the Partnership and is qualified to do business and
is in good standing as a foreign corporation in the State of New York
and in each other jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to so qualify
might reasonably be expected to result in material adverse consequences
to the Partnership or the General Partner's ability to perform its
obligations as described in the Registration Statement and Prospectus.
The General Partner has full corporate power and authority to conduct
its business as described in the Registration Statement and Prospectus
and to perform its obligations under this Agreement.
(iii) The General Partner and each of its principals as
defined in Rule 3.1 under the Commodity Act, and the Partnership have
all federal and state governmental and regulatory licenses and
memberships required by law and have received or made all filings and
registrations necessary in order for the General Partner and the
Partnership to perform their obligations under this Agreement to
conduct their business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings, and
registrations, the absence of which would not have a material adverse
effect on their ability to act as described in the Registration
Statement and Prospectus, or to perform their obligations under this
Agreement, and, to the best of such counsel's knowledge, after due
investigation, none of such licenses and memberships or registrations
have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized, executed and
delivered by or on behalf of the General Partner and the Partnership,
and constitutes a valid and binding agreement of the General Partner
and the Partnership, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or similar laws
at the time in effect affecting the enforceability generally of rights
of creditors and by general principals of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
and except as enforceability of indemnification, exculpation and
contribution provisions contained in such agreements may be limited by
applicable law or public policy.
(v) The execution and delivery of this Agreement and the offer
and sale of the Units by the Partnership and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions contemplated herein and therein and in the Prospectus will
not be in contravention of the General Partner's certificate of
incorporation or bylaws, the Certificate of Limited Partnership, or the
Limited Partnership Agreement and, to the best of such counsel's
knowledge based upon due inquiry of certain officers of the General
Partner, will not constitute a breach of, or default under, or a
violation of any agreement or instrument known to such counsel by which
the General Partner or the Partnership is bound and will not violate
any order, law, rule or regulation applicable to the General Partner or
the Partnership of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction
over the General Partner or the Partnership.
(vi) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of the General Partner, there are no
actions, claims or proceedings pending or threatened in any court or
before or by any governmental or administrative body, nor have there
been any such suits, claims or proceedings within the five years
preceding the date of the Prospectus, to which the General Partner, any
General Partner Principal, or the Partnership is or was a party, or to
which any of their assets is or was subject, which would be material to
an investor's decision to invest in the Partnership or which might
reasonably be expected to materially adversely affect the condition,
financial or otherwise, or business of the General Partner, or the
Partnership, whether or not arising in the ordinary course of business,
or impair their ability to discharge their obligations as described in
the Prospectus.
(vii) The Registration Statement is effective under the 1933
Act and, to the best of such counsel's knowledge, no proceedings for a
stop order are pending or threatened under Section 8(d) of the 1933 Act
or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus
was issued and as of the closing, the Prospectus, complied as to form
in all material respects with the requirements of the 1933 Act, the
Securities Regulations, the Commodity Act and the regulations of the
NFA and NASD. Nothing has come to such counsel's attention that would
lead them to believe that the Registration Statement at the time it
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that
Cadwalader, Xxxxxxxxxx & Xxxx need express no opinion or belief (a) as
to information in the Registration Statement or the Prospectus
regarding any Trading Manager or its principals, or (b) as to the
financial statements, notes thereto and other financial or statistical
data set forth in the Registration Statement and Prospectus, or (c) as
to the performance data and notes or descriptions thereto set forth in
the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC No-Action letters, as
of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription Agreement and
Power of Attorney in the forms referred to in the Prospectus have been duly
authorized, completed, dated, executed, and delivered and funds representing the
full subscription price for the Units purchased have been delivered by each
purchaser of Units in accordance with the requirements set forth in the
Prospectus.
18. Inconsistent Filings.
The Trading Manager agrees not to file, participate in the
filing of, or publish any description of the Trading Manager, or of its
respective principals or trading approaches that is materially inconsistent with
those in the Registration Statement and Prospectus, without so informing the
General Partner and furnishing to it copies of all such filings within a
reasonable period prior to the date of filing or publication. No such
description shall be published or filed to which the General Partner reasonably
objects, except as otherwise required by law.
19. Disclosure Documents.
During the term of this Agreement, the Trading Manager shall
furnish to the General Partner promptly copies of all disclosure documents filed
with the CFTC or NFA by the Trading Manager. The General Partner acknowledges
receipt of the Trading Manager's disclosure document dated June 17, 1994.
20. Notices.
All notices required to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the second business day following the day on which
it is so mailed, addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
if to the Partnership:
Xxxx Xxxxxx Spectrum Balanced L.P.
c/o Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
if to the General Partner:
Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
if to the Trading Manager:
RXR, Inc.
Financial Centre
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxx
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING
SHALL BE BROUGHT BY A PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY
UNDER THIS AGREEMENT, EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE COUNTY, CITY AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY
ANY PARTY TO THIS AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY
RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.
22. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading Manager agrees not to seek any
prejudgment equitable or ancillary relief. The Trading Manager agrees that its
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement.
23. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned as of the day and year first above written.
XXXX XXXXXX SPECTRUM BALANCED L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Xxxx X. Xxxxxx
------------------------------
DEMETER MANAGEMENT CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------------------
RXR, INC.
By: /s/ Xxxx Xxxxxxxxx
------------------------------
