Exhibit 10.03
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1994,
among XXXX XXXXXX SPECTRUM TECHNICAL L.P., a Delaware limited partnership (the
"Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and XXXX X.
XXXXX & CO., a California 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 provided that nothing herein shall require the Trading Manager to
disclose any proprietary information concerning such systems, methods, and
strategies), any client accounts over which it has discretionary trading
authority (other than the names of any such clients), and otherwise, as the
Partnership may reasonably require (x) to be made in the Partnership's
Prospectus required by Section 4.21 of the regulations of the CFTC, including
any amendments or supplements thereto, or (y) to comply with any applicable
federal or state law or rule or regulation, including those of the Securities
and Exchange Commission (the "SEC"), the CFTC, the National Futures Association
(the "NFA"), the National Association of Securities Dealers, Inc. (the "NASD")
or any other regulatory body, exchange, or board; and (ii) otherwise to
cooperate with the Partnership and the General Partner by providing information
regarding the Trading Manager in connection with the preparation and filing of
the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Manager.
(b) If, while Units continue to be offered and sold, the
Trading Manager becomes aware of any materially untrue or misleading statement
or omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, such Trading Manager
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Manager nor any of its principals,
or affiliates, or any Stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner.
2. Duties of the Trading Manager.
(a) Upon the commencement of trading operations by the
Partnership, the Trading Manager hereby agrees to act as a Trading Manager for
the Partnership and, as such, shall have sole authority and responsibility for
directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership which shall initially be allocated equally among its
Original Investment Program and Financial and Metals Portfolio 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
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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. In performing services to the Partnership the Trading Manager may not
materially alter the trading program(s) used by the Trading Manager in investing
and reinvesting its allocable share of the Partnership's Net Assets in futures
interests as described in the Prospectus without the prior written consent of
the General Partner, it being understood that changes in the futures interests
traded shall not be deemed an alteration in the Trading Manager's trading
program(s).
(b) The Trading Manager shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the
prohibitions and trading policies of the Partnership provided in
writing to the Trading Manager and the trading systems, methods, and
strategies of the Trading Manager described in the Prospectus, with
such changes and additions to such trading systems, methods or
strategies as the Trading Manager, from time to time, incorporates
into its trading approach for accounts the size of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by
the General Partner and the Partnership, provide the General
Partner, within 30 days of a request therefor by the General
Partner, with information comparing the performance of the
Partnership's account and the performance of all other client
accounts directed by the Trading Manager using the trading systems
used by the Trading Manager for the Partnership over a specified
period of time. In providing such information, the Trading Manager
may take such steps as are necessary to assure the confidentiality
of the Trading Manager's clients' identities. The Trading Manager
shall, upon the General Partner's request, consult with the General
Partner concerning any discrepancies between the performance of such
other accounts and the Partnership's account. The Trading Manager
shall promptly inform the General Partner of any material
discrepancies of which the Trading Manager is aware. The General
Partner acknowledges that different trading strategies or methods
may be utilized for differing sizes of accounts, accounts with
different trading policies, accounts experiencing differing inflows
or outflows of equity, accounts which commence trading at different
times, accounts which have different portfolios or different fiscal
years, that the Trading Manager offers 10 different portfolios and
that such differences may cause divergent trading results.
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(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, principals, trading approach or any materially
adverse change in Trading Manager's financial condition). The
General Partner acknowledges that all trading instructions made by
the Trading Manager will be held in confidence by the General
Partner, except to the extent necessary to conduct the business of
the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Manager's
open positions maintained by the Trading Manager exceed the Trading
Manager's applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to
this Agreement shall be for the account, and at the risk, of the Partnership and
not for the account, or at the risk, of the Trading Manager or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Manager within the meaning of the Securities Act. All
brokerage fees arising from trading by the Trading Manager shall be for the
account of the Partnership. The Trading Manager makes no representations as to
whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the
contrary, the Trading Manager shall assume financial responsibility for any
errors committed or caused by it in transmitting orders for the purchase or sale
of futures interests for the Partnership's account including payment to DWR of
the floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred by DWR on such trades but only for the
amount of DWR's out-of-pocket costs in respect thereof. The Trading Manager's
errors shall include, but not be limited to, inputting improper trading signals
or communicating incorrect orders to DWR. However, the Trading Manager shall not
be responsible for errors committed or caused by DWR or by floors 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
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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 and the apportionment of Net Assets to any such trading manager
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 Net Assets are
reallocated from the Trading Manager, 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 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. The Trading Manager shall have the right to refuse any additional
allocations to be made pursuant to this Section 3(b).
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 applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Manager or any other trading manager or managers for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Manager is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Manager have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Manager shall effect all transactions in commodity
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Xxxx Xxxxxx Xxxxxxxx Inc. ("DWR") shall act as commodity
broker for the Partnership. The General Partner shall provide the Trading
Manager with copies of brokerage statements. Notwithstanding that DWR shall act
as commodity broker for the Partnership, the Trading Manager may execute trades
through floor brokers other than those employed by DWR so long as arrangements
are made for such floor brokers to "give-up" or transfer the positions to DWR
and provided that the rates charged by such floor brokers have been approved in
advance by DWR.
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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 on the last day of each month,
without regard to the profitability of the Trading Manager's trading
for the Partnership's account, equal to 1/3 of 1% (a 4% annual rate)
of the "Net Assets" of the Partnership (as defined in Section 6(c))
allocated to the Trading Manager calculated 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 the 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 in which the
Partnership account managed by the Trading Manager engaged in trading operations
or utilized 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
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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 on such contract for such day. The market value of a forward
contract or a futures or option contract 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 pro rata portion of the monthly
brokerage fee relating 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 amounts 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 amounts 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 interests 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) If the Trading Manager's allocated Net Assets are reduced
pursuant to Section 3 hereof on a date other than the last day of the month, the
Trading Manager shall be paid an incentive fee with respect to any Trading
Profits earned as of such date with respect to the Net Assets to be reallocated.
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(g) The Partnership will remit the management and incentive
fees to the Trading 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 any
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 Xxxx
X. Xxxxx ceases for any reason to be a principal of the Trading Manager; (ii) if
the Trading Manager become 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 thereof, 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; (vii) if, at any time, the Trading Manager violates any
trading or administrative policy described in writing to the Trading Manager by
the General Partner, except with the prior express written consent of the
General Partner; or (viii) if the Trading Manager fails in a material manner to
perform any of its obligations under this Agreement. The Trading Manager may
terminate this Agreement at any time, upon written notice to the Partnership, in
the event: (i) that the General Partner imposes additional trading limitation(s)
in the form of one or more trading policies or administrative policies which the
Trading Manager does not agree to follow in its management of its allocable
share of the Partnership's Net Assets; (ii) the General Partner objects to the
Trading Manager implementing a proposed material change in the Trading Manager's
trading program(s) used by the Partnership and Trading Manager certifies to the
General Partner in writing that it believes such changes is in the best
interests of the Partnership; (iii) the General Partner overrides a trading
instruction of the Trading Manager for reasons unrelated to a determination by
the General Partner that the Trading Manager has violated the Partnership's
trading policies and the Trading Manager
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certifies to the General Partner in writing that as a result, the Trading
Manager believes the performance results of the Trading Manager relating to the
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 facilitate such trading within 30 days of such notice; or (vi)
the assets allocated to either the Original Investment Program or the Financial
and Metals Portfolio 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.
(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 Manager, 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 business or activities undertaken by the Trading Manager pursuant
to this Agreement; 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 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
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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 business or
activities undertaken by the Trading Manager pursuant to this Agreement or a
breach of this Agreement or a breach of a representation, warranty or covenant
of the General Partner or Partnership; provided that a court of competent
jurisdiction upon entry of a final judgment finds (or, if no final judgment is
entered, an opinion is rendered to the Partnership by independent counsel
reasonably acceptable to both parties) to the effect that the action or inaction
of such indemnified party that was the subject of the demand, claim, lawsuit,
action, or proceeding did not constitute negligence, misconduct, or a breach of
this Agreement or a representation, warranty or covenant of the Trading 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 certificates
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
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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 tables and the notes thereto unless such
statement or omission was based on information furnished by the Trading Manager
for the General Partner's preparation of such pro forma tables), 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 Indemnity 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 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 information and was made in reliance upon, and in
conformity with, information or instructions furnished by the Trading Manager.
(f) Notwithstanding anything in the above to the contrary, Xxxx X.
Xxxxx shall have no liability to the General Partner or the Partnership under
this Agreement or in connection with the transactions contemplated by this
Agreement except for fraud and willful misconduct by Xxxx X. Xxxxx.
(g) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(h) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action,
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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 or
if there is a final judgment for the plaintiff in any such action, claim, or
proceeding, the indemnifying party will indemnify, defend, and hold harmless an
indemnified person as provided in this Section 8.
9. Right to Advise Others and Uniformity of Acts and Practices.
(a) The Trading Manager is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Manager, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Manager and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Manager by any act or omission favor any account advised or
managed by the Trading Manager over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Manager agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Manager or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading systems, methods, or strategies employed by the Trading Manager
for the account of the Partnership, or trading systems, methods, or strategies
which are entirely independent of, or materially different from, those employed
for the account of the Partnership, and shall be free to
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compete for the same futures interests as the Partnership or to take positions
opposite to the Partnership, where such actions do not knowingly or deliberately
prefer any of such accounts over the account of the Partnership.
(b) The Trading Manager shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Manager acts as a
trading manager for the Partnership, neither the Trading Manager nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which
(c) 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 regulations of the CFTC or any other regulatory body, exchange, or
board; and (ii) neither the Trading Manager nor any of its principals or
affiliates shall render futures interests trading advice to any other individual
or entity or otherwise engage in activity which shall knowingly cause positions
in futures interests to be attributed to the Trading Manager under the rules or
regulations of the CFTC or any other regulatory body, exchange, or board so as
to require the significant modification of positions taken or intended for the
account of the Partnership; provided that the Trading Manager may modify its
trading systems, methods or strategies to accommodate the trading of additional
funds or accounts. If applicable speculative position limits are exceeded by the
Trading Manager in the opinion of (i) independent counsel (who shall be other
than counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory
body, exchange, or board, the Trading Manager and its principals and affiliates
shall promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Manager as nearly as possible in proportion to the 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
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 Original
Investment Program and Financial and Metals Portfolio on behalf of the
Partnership as described in the Prospectus (as modified from time to time)
or any other trading programs agreed to by the General Partner.
(ii) The Trading 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 Original Investment Program and Financial and
Metals Portfolio as described in the Prospectus unless the General Partner
agrees otherwise and (B) only in futures and option contracts traded on
U.S. contract markets, foreign currency forward
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contracts traded with DWR, and such commodity interests which are approved
in writing by the General Partner.
(iv) The Trading Manager is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and
in good standing in each other jurisdiction in which the nature or conduct
of its business requires such qualification and the failure to so qualify
would materially adversely affect the Trading Manager's ability to perform
its duties under this Agreement. The Trading Manager has full corporate
power and authority to perform its obligations under this Agreement, and
as described in the Registration Statement and Prospectus. The only
principals (as defined in Rule 4.10(e) under the Commodity Exchange Act)
of the Trading Manager are those set forth in the Prospectus (the "Trading
Manager Principals").
(v) All references to the Trading Manager and each Trading Manager
Principal, including the Trading Manager's trading approaches, systems,
and performance, in the Registration Statement and the Prospectus are
accurate and complete in all material respects. With respect to the
material relating to the Trading Manager and each Trading Manager
Principal, including the Trading Manager's and the Trading Manager
Principals' trading approaches, systems, and performance information, as
applicable (excluding pro forma performance information unless such
statement or omission was based on information furnished by the Trading
Manager for the preparation of such pro forma performance information),
(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
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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 prospects of the Trading
Manager or which would be material to an investor's decision to invest in
the Partnership. None of the Trading Manager or any Trading Manager
Principal has received any notice of an investigation by the NFA or the
CFTC regarding noncompliance by the Trading Manager or any of the Trading
Manager Principals with the Commodity Exchange Act.
(xi) Neither the Trading Manager nor any Trading Manager Principal
has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in
connection with the organization or operation of the Partnership, other
than as described in the Prospectus.
(xii) The actual performance of each discretionary account of a
client directed by the Trading Manager and the Trading Manager Principals
since at least the later of (i) the date of commencement of trading for
each such account or (ii) a date five years prior to the effective date of
the Registration Statement, is disclosed in the Prospectus (other than
such discretionary accounts the performance of which are exempt from
Commodity Exchange Act disclosure requirements); all of the information
regarding the actual performance of the accounts of the Trading Manager
and the Trading Manager Principals set forth in the Prospectus is complete
and accurate in all material respects and is in accordance with and in
compliance with the disclosure requirements under the Commodity Exchange
Act and the Securities Act, including the Division of Trading and Markets
"notional equity" advisories and interpretations and the rules and
regulations of the NFA.
(xiii) The information relating to the Trading Manager in the
Customer Brochure is factually accurate.
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(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 becomes aware of
any breach of this Agreement by the Trading Manager.
(iii) The Trading Manager agrees reasonably to cooperate by
providing information regarding itself and its performance in the
preparation of any amendments or supplements to the Registration Statement
and the Prospectus.
11. Representations and Warranties of the General Partner and the
Partnership.
The General Partner and the Partnership represent and warrant to the
Trading Manager, as follows:
(i) The Partnership has provided to the Trading Manager, and filed
with the Securities and Exchange Commission (the "SEC"), the Registration
Statement and has filed copies thereof with: (i) the CFTC under the
Commodity Exchange Act and the rules and regulations promulgated
thereunder (collectively, the "Commodity Act"); (ii) the NASD pursuant to
its Rules of Fair Practice; and (iii) the NFA in accordance with NFA
Compliance Rule 2-13. The Partnership will not file any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
unless the Trading Manager has received reasonable prior notice of and a
copy of such amendments or supplements and has not reasonably objected
thereto in writing.
(ii) The Limited Partnership Agreement provides for the subscription
for and sale of the Units; all action required to be taken by the General
Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as
defined in the Prospectus have been taken; and, upon payment of the
consideration therefor specified in each accepted Subscription Agreement
and Power of Attorney or Exchange Agreement and Power of Attorney, as
applicable, in such forms are attached to the Prospectus (except as
otherwise specified herein, the term "Subscription Agreement and Power of
Attorney" shall also mean the Exchange Agreement and Power of Attorney in
case of subscribers executing same), the Units will constitute valid
limited partnership interests in the Partnership.
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(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 the 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.
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(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.
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(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.
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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
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.
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(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 of any Trading
Manager Principal which are required to be disclosed in the Registration
Statement or Prospectus.
(v) The execution and delivery of this Agreement, the incurrence of
the obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of
any of the provisions of the certificate of incorporation or bylaws of the
Trading Manager and, based upon due inquiry of certain officers of the
Trading Manager, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument
or agreement known to such counsel by which the Trading Manager is bound
and will not violate any order, law, rule or regulation applicable to the
Trading Manager of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over
the Trading Manager.
(vi) Based upon reliance on certain SEC No-Action letters, 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
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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 the
Initial 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
-22-
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 effect any other filings or qualifications under the laws of any
other jurisdictions to conduct its business as described in the
Registration Statement and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the
State of Delaware with full corporate power and authority to act as
general partner of the Partnership and is qualified to do business
and is in good standing as a foreign corporation in the State of New
York and in each other jurisdiction in which the nature or conduct
of its business requires such qualification and the failure to so
qualify might reasonably be expected to result in material adverse
consequences to the Partnership or the General Partner's ability to
perform its obligations as described in the Registration Statement
and Prospectus. The General Partner has full corporate power and
authority to conduct its business as described in the Registration
Statement and Prospectus and to perform its obligations under this
Agreement.
(iii) The General Partner and each of its principals as
defined in Rule 3.1 under the Commodity Act, and the Partnership
have all federal and state governmental and regulatory licenses and
memberships required by law and have received or made all filings
and registrations necessary in order for the General Partner and the
Partnership to perform their obligations under this Agreement, to
conduct their business as described in the Registration Statement
and Prospectus, except for such licenses, memberships, filings, and
registrations, the absence of which would not have a material
adverse effect on their ability to act as described in the
Registration Statement and Prospectus, or to perform their
obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and
memberships or registrations have been rescinded, revoked or
suspended.
(iv) This Agreement has been duly authorized, executed and
delivered by or on behalf of the General Partner and the
Partnership, and constitutes a valid and binding agreement of the
General Partner and the Partnership, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors and by general
principles of equity (regardless 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
-23-
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 and 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 the
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, officials, officers of the General Partner and
other sources believed by it to be
-24-
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.
(a) During the term of this Agreement, the Trading Manager
shall furnish to the General Partner promptly copies of all disclosure documents
filed with the CFTC or NFA by the Trading Manager. The General Partner
acknowledges receipt of the Trading Manager's disclosure document dated May 31,
1994. Failure to provide a disclosure document shall not constitute a breach of
this Agreement unless the Trading Manager fails to provide a document within 7
days of a request.
(b) The General Partner and the Partnership will not
distribute or supplement any promotional material relating to the Trading
Manager unless the Trading Manager has received reasonable prior notice of and a
copy of such promotional material and has not reasonably objected thereto in
writing.
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 Technical L.P.
c/o Demeter Management Corporation
2 World Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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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:
Xxxx X. Xxxxx & Co., Inc.
Xxx Xxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: [___________________]
21. Survival.
The provisions of this Agreement shall survive the termination
of this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. If any action or proceeding
shall be brought by a party to this Agreement or to enforce any right or remedy
under this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any Federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any Federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the
provisions of this Agreement, the Trading Manager agrees not to seek any
prejudgment equitable or ancillary relief. The Trading Manager agrees that its
sole remedy in any such action or proceeding shall be to seek actual monetary
damages for any breach of this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
-26-
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 TECHNICAL L.P
by Demeter Management Corporation,
General Partner
By /s/ Xxxx X. Xxxxxx
----------------------------------
DEMETER MANAGEMENT CORPORATION
By /s/ Xxxx X. Xxxxxx
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XXXX X. XXXXX & CO., INC.
By /s/ Xxxxx Xxxxxxx
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