-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RSlVoTgeGHxLymQ5q6jainPYqMS+hwJz8qEOgLz0kDpMG9DoxlCSiVkAfOpUJyGx DgkwA4aUK8duhNBmscjjnA== 0000914121-99-000310.txt : 19990409 0000914121-99-000310.hdr.sgml : 19990409 ACCESSION NUMBER: 0000914121-99-000310 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITTER DEAN WORLD CURRENCY FUND L P CENTRAL INDEX KEY: 0000895239 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 133700691 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-23826 FILM NUMBER: 99583903 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FLR STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123925454 MAIL ADDRESS: STREET 1: C/O DEMETER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FL CITY: NEW YORK STATE: NY ZIP: 10048 10-K405 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the year ended December 31, 1998 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ________________to___________________ Commission File Number 0-23826 DEAN WITTER WORLD CURRENCY FUND L.P. - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its Limited Partnership Agreement) DELAWARE 13-3700691 (State or other jurisdiction of (I.R.S. Employer -------------------------------- ----------------- incorporation or organization) Identification No.) c/o Demeter Management Corporation Two World Trade Center - 62nd Flr., New York, N.Y. 10048 (Address of principal executive offices) (Zip Code) --------------------------------------------- ----------- Registrant's telephone number, including area code (212) 392-5454 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest - - ------------------------------------------------------------------------------- (Title of Class) Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check-mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.[X ] State the aggregate market value of the Units of Limited Partnership Interest held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which units were sold as of a specified date within 60 days prior to the date of filing: $24,138,339.90 at January 31, 1999. DOCUMENTS INCORPORATED BY REFERENCE (See Page 1) DEAN WITTER WORLD CURRENCY FUND L.P. INDEX TO ANNUAL REPORT ON FORM 10-K DECEMBER 31, 1998 Page No. DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . 1 ----------------------------------- Part I . ------ Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 2-4 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 4 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 4-6 Item 4. Submission of Matters to a Vote of Security Holders . 6 Part II. Item 5. Market for the Registrant's Partnership Units and Related Security Holder Matters . . . . . 7 Item 6. Selected Financial Data . . . . . . . . . . . . . . . 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . 9-17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . 18-27 Item 8. Financial Statements and Supplementary Data . . . . . 27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . 27 Part III. Item 10. Directors and Executive Officers of the Registrant . 28-32 Item 11. Executive Compensation . . . . . . . . . . . . . . . 32 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . 32 Item 13. Certain Relationships and Related Transactions . . . 33 Part IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . 34 DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference as follows: Documents Incorporated Part of Form 10-K Partnership's Prospectus dated June 2, 1993 I Annual Report to Dean Witter World Currency Fund L.P. Limited Partners for the year ended December 31, 1998 II, III and IV - 1 - PART I Item 1. BUSINESS (a) General Development of Business. Dean Witter World Currency Fund L.P. (the "Partnership") is a Delaware limited partnership organized to engage in the speculative trading of futures contracts and forward contracts on foreign currencies (collectively, "futures interests"). The general partner for the Partnership is Demeter Management Corporation ("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc. ("DWR") and an unaffiliated clearing commodity broker, Carr Futures Inc. ("Carr"), provides clearing and execution services. Both Demeter and DWR are wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). John W. Henry & Company and Millburn Ridgefield Corporation are the trading advisors (the "Trading Advisors") to the Partnership. The Partnership's net asset value per unit, as of December 31, 1998 was $967.90, representing a decrease of 2.61 percent from the net asset value per unit of $993.79 at December 31, 1997. (b) Financial Information about Industry Segments. For financial information reporting purposes the Partnership is deemed to engage in one industry segment, the speculative trading of futures interests. The relevant financial information is presented in Items 6 and 8. - 2 - (c) Narrative Description of Business. The Partnership is in the business of speculative trading of futures interests, pursuant to trading instructions provided by the Trading Advisors. For a detailed description of the different facets of the Partnership's business, see those portions of the Partnership's prospectus, dated June 2, 1993, (the "Prospectus") incorporated by reference in this Form 10-K, set forth below. Facets of Business 1. Summary 1. "Summary of the Prospectus" (Pages 1-8). 2. Currency Markets 2. "The Currency Markets" (Pages 80-88). 3. Partnership's Trading 3. "Trading Policies" (Page Arrangements and 75). "The Trading Policies Advisors" (Pages 34-74). 4. Management of the Part- 4. "The Management Agree- nership ments" (Pages 77-80). "The General Partner" (Pages 30-33) and "The Commodity Broker" (Page 76-77). "The Limited Partnership Agreement" (Pages 89-93). 5. Taxation of the Partner- 5. "Federal Income Tax nership's Limited Partners Aspects" and "State and Local Income Tax Aspects" (Pages 97-104). - 3 - (d) Financial Information About Foreign and Domestic Operations and Export Sales. The Partnership has not engaged in any operations in foreign countries; however, the Partnership (through the commodity brokers) enters into forward contract transactions where foreign banks are the contracting party and trades in futures interests on foreign exchanges. Item 2. PROPERTIES The executive and administrative offices are located within the offices of DWR. The DWR offices utilized by the Partnership are located at Two World Trade Center, 62nd Floor, New York, NY 10048. Item 3. LEGAL PROCEEDINGS On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class actions were filed in the Superior Court of the State of California, County of Los Angeles, on behalf of all purchasers of interests in limited partnership commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean Witter Futures & Currency Management Inc. ("DWFCM"), MSDW (all such parties referred to hereafter as the "Dean Witter Parties"), the Partnership, certain other limited partnership commodity pools of which Demeter is the general partner, and certain trading advisors to those pools. On June 16, 1997, the plaintiffs in the above actions filed a consolidated amended complaint, alleging, among other things, that the defendants committed fraud, deceit, negligent misrepresentation, various violations of the - 4 - California Corporations Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair business practices, unjust enrichment, and conversion in the sale and operation of the various limited partnership commodity pools. Similar purported class actions were also filed on September 18 and 20, 1996, in the Supreme Court of the State of New York, New York County, and on November 14, 1996 in the Superior Court of the State of Delaware, New Castle County, against the Dean Witter Parties and certain trading advisors on behalf of all purchasers of interests in various limited partnership commodity pools, including the Partnership, sold by DWR. A consolidated and amended complaint in the action pending in the Supreme Court of the State of New York was filed on August 13, 1997, alleging that the defendants committed fraud, breach of fiduciary duty, and negligent misrepresentation in the sale and operation of the various limited partnership commodity pools. On December 16, 1997, upon motion of the plaintiffs, the action pending in the Superior Court of the State of Delaware was voluntarily dismissed without prejudice. The New York Supreme Court dismissed the New York action in November 1998, but granted plaintiffs leave to file an amended complaint, which they did in early December 1998. The defendants have filed a motion to dismiss the amended complaint with prejudice on February 1, 1999. The complaints seek unspecified amounts of compensatory and punitive damages and other relief. It is possible that additional similar actions may be filed and - 5 - that, in the course of these actions, other parties could be added as defendants. The Dean Witter Parties believe that they and the Partnership have strong defenses to, and they will vigorously contest the actions. Although the ultimate outcome of legal proceedings cannot be predicted with certainty, it is the opinion of management of the Dean Witter Parties that the resolution of the actions will not have a material adverse effect on the financial condition or the results of operations of any of the Dean Witter Parties and the Partnership. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. - 6 - PART II Item 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS There is no established public trading market for the Units of Limited Partnership Interest ("Units") in the Partnership. The number of holders of Units at December 31, 1998 was approximately 3,384. No distributions have been made by the Partnership since it commenced operations on April 2, 1993. Demeter has sole discretion to decide what distributions, if any, shall be made to investors in the Partnership. No determination has yet been made as to future distributions. - 7 - Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years Ended December 31, ------------------------------------------------------------ 1998 1997 1996 1995 1994 ---------- ---------- ---------- --------- ----------- Total Revenues (including interest) 1,274,004 12,366,515 5,746,636 4,814,020 (12,285,075) Net Income (Loss) (682,212) 9,849,370 3,438,844 1,480,810 (19,768,097) Net Income (Loss) Per Unit (Limited & General Partners) (25.89) 280.62 81.88 12.50 (207.71) Total Assets 25,105,387 32,260,016 27,427,364 31,591,379 49,603,246 Total Limited Partners' Capital 24,485,689 30,674,029 25,668,776 29,734,237 46,629,315 Net Asset Value Per Unit of Limited Partnership Interest 967.90 993.79 713.17 631.29 618.79
- 8 - Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity. Assets of the Partnership are deposited with DWR as non-clearing broker and Carr as clearing broker in separate futures interest trading accounts. Such assets are held in either non-interest bearing bank accounts or in securities approved by the Commodity Futures Trading Commission ("CFTC") for investment of customer funds. The Partnership's assets held by DWR and Carr may be used as margin solely for the Partnership's trading. Since the Partnership's sole purpose is to trade in futures interests, it is expected that the Partnership will continue to own such liquid assets for margin purposes. The Partnership's investment in futures interests may, from time to time, be illiquid. Most United States futures exchanges limit fluctuations in certain futures interest prices during a single day by regulations referred to as "daily price fluctuations limits" or "daily limits". Pursuant to such regulations, during a single trading day no trades may be executed at prices beyond the daily limit. If the price for a particular futures interest has increased or decreased by an amount equal to the daily limit, positions in such futures interests can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures interests prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Partnership from promptly liquidating - 9 - its futures interests and result in restrictions on redemptions. There is no limitation on daily price moves in trading forward contracts on foreign currency. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership from trading in potentially profitable markets or from promptly liquidating unfavorable positions, subjecting it to substantial losses. Either of these market conditions could results in restrictions on redemptions. Capital Resources. The Partnership does not have, nor does it expect to have, any capital assets. Future redemptions of Units will affect the amount of funds available for investment in futures interests in subsequent periods. Since they are at the discretion of Limited Partners, it is not possible to estimate the amount and therefore, the impact of future redemptions. Results of Operations. As of December 31, 1998, the Partnership's total capital was $24,788,163, a decrease of $7,085,868 from the Partnership's total capital of $31,874,031 at December 31, 1997. For the year ended December 31, 1998, the Partnership generated a net loss of $682,212, and total redemptions aggregated $6,403,656. For the year ended December 31, 1998, the Partnership's total trading revenues, including interest income, were $1,274,004. The Partnership's total expenses for the year were $1,956,216, resulting in a - 10 - net loss of $682,212. The value of an individual Unit in the Partnership decreased from $993.79 at December 31, 1997 to $967.90 at December 31, 1998. As of December 31, 1997, the Partnership's total capital was $31,874,031, an increase of $5,344,100 from the Partnership's total capital of $26,529,931, at December 31, 1996. For the year ended December 31, 1997, the Partnership generated net income of $9,849,370 and total redemptions aggregated $4,505,270. For the year ended December 31, 1997, the Partnership's total trading revenues including interest income were $12,366,515. The Partnership's total expenses for the year were $2,517,145, resulting in net income of $9,849,370. The value of an individual unit in the partnership increased from $713.17 at December 31, 1996 to $993.79 at December 31, 1997. As of December 31, 1996, the Partnership's total capital was $26,529,931, a decrease of $3,966,591 from the Partnership's total capital of $30,496,522 at December 31, 1995. For the year ended December 31, 1996, the Partnership generated net income of $3,438,844, and total redemptions aggregated $7,405,435. For the year ended December 31, 1996, the Partnership's total trading revenues including interest income were $5,746,636. The Partnership's total expenses for the year were $2,307,792, resulting in - 11 - net income of $3,438,844. The value of an individual Unit in the Partnership increased from $631.29 at December 31, 1995 to $713.17 at December 31, 1996. The Partnership's overall performance record represents varied results of trading in different futures interests markets. For a further description of trading results, refer to the letter to the Limited Partners in the accompanying Annual Report to Limited Partners for the year ended December 31, 1998, incorporated by reference in this Form 10-K. The Partnership's gains and losses are allocated among its partners for income tax purposes. Credit Risk. In entering into futures, options and forward contracts there is a credit risk to the Partnership that the counterparty on the contract will not be able to meet its obligations to the Partnership. The ultimate counterparty of the Partnership for futures contracts traded in the United States and most foreign exchanges on which the Partnership trades is the clearinghouse associated with such exchange. In general, a clearinghouse is backed by the membership of the exchange and will act in the event of non-performance by one of its members or one of its member's customers, and, as such, should significantly reduce this credit risk. For example, a clearinghouse may cover a default by (i) drawing upon a defaulting member's mandatory contributions and/or non-defaulting members' contributions to a clearinghouse guarantee fund, established lines or letters of credit - 12 - with banks, and/or the clearinghouse's surplus capital and other available assets of the exchange and clearinghouse, or (ii) assessing its members. In cases where the Partnership trades on a foreign exchange where the clearinghouse is not funded or guaranteed by the membership or where the exchange is a "principals' market" in which performance is the responsibility of the exchange member and not the exchange or a clearinghouse, or when the Partnership enters into off-exchange-traded contracts with a counterparty, the sole recourse of the Partnership will be the clearinghouse, the exchange member or the off-exchange-traded contract counterparty, as the case may be. There can be no assurance that a clearinghouse, exchange or other exchange member will meet its obligations to the Partnership, and the Partnership is not indemnified against a default by such parties from Demeter, MSDW or DWR. Further, the law is unclear as to whether a commodity broker has any obligation to protect its customers from loss in the event of an exchange, clearinghouse or other exchange member default on trades effected for the broker's customers. Any such obligation on the part of the broker appears even less clear where the default occurs in a non-US jurisdiction. Demeter deals with the credit risks of the partnerships for which it serves as general partner in several ways. First, it monitors the Partnership's credit exposure to each exchange on a daily basis, - 13 - calculating not only the amount of margin required for it but also the amount of its unrealized gains at each exchange, if any. The commodity brokers inform the Partnership, as with all their customers, of its net margin requirements for all its existing open positions, but do not break that net figure down, exchange by exchange. Demeter, however, has installed a system which permits it to monitor the Partnership's potential margin liability, exchange by exchange. Demeter is then able to monitor the Partnership's potential net credit exposure to each exchange by adding the unrealized trading gains on that exchange, if any, to the Partnership's margin liability thereon. Second, the Partnership's trading policies limit the amount of its net assets that can be committed at any given time to futures contracts and require, in addition, a certain minimum amount of diversification in the Partnership's trading, usually over several different products. One of the aims of such trading policies has been to reduce the credit exposure of the Partnership to a single exchange and, historically, such Partnership's exposure has typically amounted to only a small percentage of its total net assets. On those relatively few occasions where the Partnership's credit exposure may climb above that level, Demeter deals with the situation on a case by case basis, carefully weighing whether the increased level of credit exposure remains appropriate. - 14 - Third, Demeter has secured, with respect to Carr acting as the clearing broker for the Partnership, a guarantee by Credit Agricole Indosuez, Carr's parent, of the payment of the "net liquidating value" of the transactions (futures, and forward contracts) in the Partnership's account. With respect to forward contract trading, the Partnership trades with only those counterparties which Demeter, together with DWR, have determined to be creditworthy. At the date of this filing, the Partnership deals only with Carr as its counterparty on forward contracts. The guarantee by Carr's parent, discussed above, covers these forward contracts. See "Financial Instruments" under Notes to Financial Statements in the Partnership's Annual Report to Limited Partners for the year ended December 31, 1998, incorporated by reference in this Form 10-K. Year 2000 Problem. Commodity pools, like financial and business organizations and individuals around the world, depend on the smooth functioning of computer systems. Many computer systems in use today cannot recognize the computer code for the year 2000, but revert to 1900 or some other date. This is commonly known as the "Year 2000 Problem". The Partnership could be adversely affected if computer systems used by it or any third party with whom it has a material relationship do not properly process and calculate date-related information and data - 15 - concerning dates on or after January 1, 2000. Such a failure could adversely affect the handling or determination of futures trades and prices and other services. MSDW began its planning for the Year 2000 Problem in 1995, and currently has several hundred employees working on the matter. It has developed its own Year 2000 compliance plan to deal with the problem and had the plan approved by the company's executive management, Board of Directors and Information Technology Department. Demeter is coordinating with MSDW to address the Year 2000 Problem with respect to Demeter's computer systems that affect the Partnership. This includes hardware and software upgrades, systems consulting and computer maintenance. Beyond the challenge facing internal computer systems, the systems failure of any of the third parties with whom the Partnership has a material relationship - the futures exchanges and clearing organizations through which it trades, Carr, or the Trading Advisors - could result in a material financial risk to the Partnership. All U.S. futures exchanges are subject to monitoring by the CFTC of their Year 2000 preparedness and the major foreign futures exchanges are also expected to be subject to market-wide testing of their Year 2000 compliance during 1999. Demeter intends to monitor the progress of Carr and the Trading Advisors throughout 1999 in their Year 2000 compliance and, - 16 - where applicable, to test its external interface with Carr and the Trading Advisors. A worst case scenario would be one in which trading of contracts on behalf of the Partnership becomes impossible as a result of the Year 2000 Problem encountered by any third parties. A less catastrophic but more likely scenario would be one in which trading opportunities diminish as a result of technical problems resulting in illiquidity and fewer opportunities to make profitable trades. MSDW has begun developing various "contingency plans" in the event that the systems of such third parties fail. Demeter intends to consult closely with MSDW in implementing those plans. Despite the best efforts of both Demeter and MSDW, however, it is possible that these steps will not be sufficient to avoid any adverse impact to the Partnership. Risks Associated with the Euro. On January 1, 1999, eleven countries in the European Union established fixed conversion rates on their sovereign currencies and converted to a common single currency (the "euro"). During a three-year transition period, the sovereign currencies will continue to exist but only as a fixed denomination of the euro. Conversion to the euro prevents the Trading Advisors from trading in certain currencies and thereby limit their ability to take advantage of potential market opportunities that might otherwise have existed had separate currencies been available to trade. This could adversely affect the performance results of the Partnership. - 17 - Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Introduction The Partnership is a commodity pool engaged primarily in the speculative trading of futures interests. The market sensitive instruments held by the Partnership are acquired solely for speculative trading purposes and, as a result, all or substantially all of the Partnership's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership's primary business activities. The futures interests traded by the Partnership involve varying degrees of related market risk. Such market risk is often dependent upon changes in the level or volatility of interest rates, exchange rates, and/or market values of financial instruments and commodities. Fluctuations in related market risk based upon the aforementioned factors result in frequent changes in the fair value of the Partnership's open positions, and, consequently, in its earnings and cash flow. The Partnership's total market risk is influenced by a wide variety of factors, including the diversification effects among the Partnership's existing open positions, the volatility present within the market(s) and the liquidity of the market(s). At varying times, each of these factors may act to exacerbate or mute the market risk associated with the Partnership. - 18 - The Partnership's past performance is not necessarily indicative of its future results. Any attempt at quantifying the Partnership's market risk must be qualified by the inherent uncertainty of its speculative trading, which may cause future losses and volatility (i.e. "risk of ruin") far in excess of the Partnership's experience to date and/or any reasonable expectation premised upon historical changes in the fair value of its market sensitive instruments. Quantifying the Partnership's Trading Value at Risk The following quantitative disclosures regarding the Partnership's market risk exposures contain "forward-looking statements" within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact. The Partnership accounts for open positions on the basis of mark-to-market accounting principles. As such, any loss in the fair value of the Partnership's open positions is directly reflected in the Partnership's earnings, whether realized or unrealized, and the Partnership's cash flow, as profits and losses on open positions of exchange traded futures interests are settled daily through variation margin. - 19 - The Partnership's risk exposure in the various market sectors traded by the Trading Advisors is estimated below in terms of Value at Risk ("VaR"). The VaR model employed by the Partnership incorporates numerous variables that could impact the fair value of the Partnership's trading portfolio. The Partnership estimates VaR using a model based on historical simulation with a confidence level of 99%. Historical simulation involves constructing a distribution of hypothetical daily changes in trading portfolio value. The VaR model generally takes into account linear exposures to price and interest rate risk. Market risks that are incorporated in the VaR model include equity and commodity prices, interest rates, foreign exchange rates, as well as correlation that exists among these variables. The hypothetical changes in portfolio value are based on daily observed percentage changes in key market indices or other market factors ("market risk factors") to which the portfolio is sensitive. In the case of the Partnership's VaR, the historical observation period is approximately four years. The Partnership's one-day 99% VaR corresponds to the negative change in portfolio value that, based on observed market risk factor moves, would have been exceeded once in 100 trading days. VaR models such as the Partnership's are continually evolving as trading portfolios become more diverse and modeling techniques and systems capabilities improve. It must also be noted that the VaR model is used to - 20 - quantify market risk for historic reporting purposes only and is not utilized by either Demeter or the Trading Advisors in their daily risk management activities. The Partnership's Value at Risk in Different Market Sectors The following table indicates the VaR associated with the Partnership's open positions as a percentage of total net assets by market category as of December 31, 1998. As of December 31, 1998, the Partnership's total capitalization was approximately $25 million. Primary Market December 31, 1998 Risk Category Value at Risk Currency (1.41)% The table above represents the VaR of the Partnership's open positions at December 31, 1998 only and is not necessarily representative of either the historic or future risk of an investment in the Partnership. As the Partnership's sole business is the speculative trading of primarily futures interests, the composition of its portfolio of open positions can change significantly over any given time period or even within a single trading day. Such changes in open positions could materially impact market risk as measured by VaR either positively or negatively. The table below supplements the year end VaR by presenting the Partnership's high, low and average VaR as a percentage of total net assets for the four - 21 - quarterly reporting periods from January 1, 1998 through December 31, 1998. Primary Market Risk Category High Low Average - - ---------------------------- ---- --- ------- Currency (3.36)% (1.41)% (2.63)% Limitations on Value at Risk as an Assessment of Market Risk The face value of the market sector instruments held by the Partnership is typically many times the applicable margin requirements, as such margin requirements generally range between 2% and 15% of contract face value. Additionally, due to the use of leverage, the face value of the market sector instruments held by the Partnership is typically many times the total capitalization of the Partnership. The financial magnitude of the Partnership's open positions thus creates a "risk of ruin" not typically found in other investment vehicles. Due to the relative size of the positions held, certain market conditions, may cause the Partnership to incur losses greatly in excess of VaR within a short period of time. The foregoing VaR tables, as well as the past performance of the Partnership, gives no indication of such "risk of ruin". In addition, VaR risk measures should be interpreted in light of the methodology's limitations, which include the following: past changes in market risk factors will not always yield accurate predictions of the distributions and correlations of future market movements; changes in - 22 - portfolio value in response to market movements may differ from the responses implicit in a VaR model; published VaR results reflect past trading positions while future risk depends on future positions; VaR using a one-day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and the historical market risk factor data used for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements. The foregoing VaR tables present the results of the Partnership's VaR for each of the Partnership's market risk exposures at December 31, 1998 and for the end of quarter periods during calendar 1998. Since VaR is based on historical data, VaR should not be viewed as predictive of the Partnership's future financial performance or its ability to manage and monitor risk and there can be no assurance that the Partnership's actual losses on a particular day will not exceed the VaR amounts indicated or that such losses will not occur more than 1 in 100 trading days. Non-Trading Risk The Partnership has non-trading market risk on its foreign cash balances not needed for margin. However, such balances, as well as any market risk they may represent, are immaterial. The Partnership also maintains a substantial portion (approximately 93%) of its available assets in cash - 23 - at DWR. A decline in short-term interest rates will result in a decline in the Partnership's cash management income. This cash flow risk is not considered material. Materiality, as used throughout this section, is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Partnership's market sensitive instruments. Qualitative Disclosures Regarding Primary Trading Risk Exposures The following qualitative disclosures regarding the Partnership's market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Partnership manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Partnership's primary market risk exposures as well as the strategies used and to be used by Demeter and the Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price - 24 - relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Partnership. Investors must be prepared to lose all or substantially all of their investment in the Partnership. The following were the primary trading risk exposures of the Partnership as of December 31, 1998, by market sector. It may be anticipated however, that these market exposures will vary materially over time. Currency. The Partnership's only exposure is currency exposure which is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Partnership trades in a large number of currencies, including cross-rates - i.e., positions between two currencies other than the U.S. dollar. However, the Partnership's major exposures have typically been in the dollar/yen, dollar/mark, dollar/South African rand and dollar/pound positions. Demeter does not anticipate that the risk profile of the Partnership's currency sector will change significantly in the future, although it is difficult at this point to predict the effect of the introduction of the euro on the Trading Advisors' currency trading strategies. - 25 - Qualitative Disclosures Regarding Non-Trading Risk Exposure The following was the only non-trading risk exposure of the Partnership as of December 31, 1998: Foreign Currency Balances. The Partnership's primary foreign currency balances are in Japanese yen, German marks, British pounds, French francs and euros. The Partnership controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars at varying intervals, depending upon such factors as size, volatility, etc. Qualitative Disclosures Regarding Means of Managing Risk Exposure The means by which the Partnership and the Trading Advisors, severally, attempt to manage the risk of the Partnership's open positions are essentially the same in all market categories traded. Demeter attempts to manage the Partnership's market exposure by (i) diversifying the Partnership's assets among different Trading Advisors, each of whose strategies focus on different market sectors and trading approaches, and (ii), monitoring the performance of the Trading Advisors on a daily basis. In addition, the Trading Advisors establish diversification guidelines, often set in terms of the maximum margin to be committed to positions in any one market sector or market sensitive instrument. One should be aware that certain Trading Advisors treat their risk control - 26 - policies as strict rules, whereas others treat such policies as general guidelines. Demeter monitors and controls the risk of the Partnership's non-trading instruments, cash, which is the only Partnership investment directed by Demeter, rather than the Trading Advisors. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item appears in the Annual Report to Limited Partners for the year ended December 31, 1998 and is incorporated by reference in this Annual Report on Form 10-K. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 27 - PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There are no directors or executive officers of the Partnership. The Partnership is managed by Demeter. Directorsand Officers of the General Partner The directors and officers of Demeter are as follows: Mark J. Hawley, age 55, is Chairman of the Board and a Director of Demeter. Mr. Hawley is also Chairman of the Board and a Director of DWFCM. Mr. Hawley previously served as President of Demeter throughout 1998. Mr. Hawley joined DWR in February 1989 as Senior Vice President and is currently the Executive Vice President and Director of DWR's Product Management for Individual Asset Management. In this capacity, Mr. Hawley is responsible for directing the activities of the firm's Managed Futures, Insurance, and Unit Investment Trust Business. From 1978 to 1989, Mr. Hawley was a member of the senior management team at Heinold Asset Management, Inc., a CPO, and was responsible for a variety of projects in public futures funds. From 1972 to 1978, Mr. Hawley was a Vice President in charge of institutional block trading for the Mid-West at Kuhn Loeb & Company. Joseph G. Siniscalchi, age 53, is a Director of Demeter. Mr. Siniscalchi joined DWR in July 1984 as a First Vice President, Director of General Accounting and served as a Senior Vice President and Controller for - 28 - DWR's Securities Division through 1997. He is currently Executive Vice President and Director of the Operations Division of DWR. From February 1980 to July 1984, Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb, Inc. Edward C. Oelsner, III, age 56, is a Director of Demeter. Mr. Oelsner is currently an Executive Vice President and head of the Product Development Group at Dean Witter InterCapital Inc., an affiliate of DWR. Mr. Oelsner joined DWR in 1981 as a Managing Director in DWR's Investment Banking Department specializing in coverage of regulated industries and, subsequently, served as head of the DWR Retail Products Group. Prior to joining DWR, Mr. Oelsner held positions at The First Boston Corporation as a member of the Research and Investment Banking Departments from 1967 to 1981. Mr. Oelsner received his M.B.A. in Finance from the Columbia University Graduate School of Business in 1966 and an A.B. in Politics from Princeton University in 1964. Robert E. Murray, age 38, is President and a Director of Demeter. Mr. Murray is also President and a Director of DWFCM. Effective as of the close of business on December 31, 1998, Mr. Murray replaced Mr. Hawley as President of Demeter. Mr. Murray is also a Senior Vice President of DWR's Managed Futures Department and is the Senior Administrative Officer of DWFCM. Mr. Murray began his career at DWR in 1984 and is currently the Director of the Managed Futures Department. In this capacity, Mr. Murray is responsible for overseeing all aspects of the firm's Managed Futures Department. Mr. Murray currently serves as a Director of the Managed Funds Association, an industry - 29 - association for investment professionals in futures, hedge funds and other alternative investments. Mr. Murray graduated from Geneseo State University in May 1983 with a B.A. degree in Finance. Lewis A. Raibley, III, age 36, is Vice President, Chief Financial Officer and a Director of Demeter. Effective as of the close of business on December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors. Mr. Raibley is currently Senior Vice President and Controller in the Individual Asset Management Group of MSDW. From July 1997 to May 1998, Mr. Raibley served as Senior Vice President and Director in the Internal Reporting Department of MSDW and prior to that, from 1992 to 1997, he served as Senior Vice President and Director in the Financial Reporting and Policy Division of Dean Witter Discover & Co. He has been with MSDW and its affiliates since June 1986. Mitchell M. Merin, age 45, became a Director of Demeter on March 17, 1999. Mr. Merin was appointed the Chief Operating Officer of Asset Management for MSDW in December 1998 and the President and Chief Executive Officer of Morgan Stanley Dean Witter Advisors in February 1998. He has been an Executive Vice President of DWR since 1990, during which time he has been director of DWR's Taxable Fixed Income and Futures divisions, managing director in Corporate Finance and corporate treasurer. Mr. Merin received his Bachelor's degree from Trinity College in Connecticut and his M.B.A. degree in finance and accounting from the Kellogg Graduate School of Management of Northwestern University in 1977. - 30 - Richard A. Beech, age 47, became a Director of Demeter on March 17, 1999. Mr. Beech has been associated with the futures industry for over 23 years. He has been at DWR since August 1984 where he is presently Senior Vice President and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile Exchange, where he became the Chief Agricultural Economist doing market analysis, marketing and compliance. Prior to joining DWR, Mr. Beech also had worked at two investment banking firms in Operations, Research, Managed Futures and Sales Management. Ray Harris, age 42, became a Director of Demeter on March 17, 1999. Mr. Harris is currently Senior Vice President, Planning and Administration for Morgan Stanley Dean Witter Asset Management and has worked at DWR or its affiliates since July 1982, serving in both financial and administrative capacities. From August 1994 to January 1999, he worked in two separate DWR affiliates, Discover Financial Services and Novus Financial Corp., culminating as Senior Vice President. Mr. Harris received his B.A. degree from Boston College and his M.B.A. in finance from the University of Chicago. Richard M. DeMartini, age 46, previously served as the Chairman of the Board and as a Director of Demeter throughout 1998. Effective as of the close of business on December 31, 1998, Mr. DeMartini resigned as the Chairman of the Board and as a Director of Demeter due to changes in his responsibilities within MSDW. - 31 - Lawrence Volpe, age 51, served as a Director to Demeter throughout 1998. Effective as of the close of business on December 31, 1998, Mr. Volpe resigned as a Director of Demeter. Patti L. Behnke, age 38, served as Vice President and Chief Financial Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned as Vice President and Chief Financial Officer of Demeter in order to take on new responsibilities as Operations Officer - Controllers Division for MSDW, and was replaced by Mr. Raibley. Item 11. EXECUTIVE COMPENSATION The Partnership has no directors and executive officers. As a limited partnership, the business of the Partnership is managed by Demeter, which is responsible for the administration of the business affairs of the Partnership but receives no compensation for such services. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners - As of December 31, 1998, there were no persons known to be beneficial owners of more than 5 percent of the Units. (b) Security Ownership of Management - At December 31, 1998, Demeter owned 312.506 Units of General Partnership Interest representing a 1.22 percent interest in the Partnership. (c) Changes in Control - None - 32 - Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Refer to Note 2 - "Related Party Transactions" of "Notes to Financial Statements", in the accompanying Annual Report to Limited Partners for the year ended December 31, 1998, incorporated by reference in this Form 10-K. In its capacity as the Partnership's retail commodity broker, DWR received commodity brokerage commissions (paid and accrued by the Partnership) of $955,692 for the year ended December 31, 1998. - 33 - PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Listing of Financial Statements The following financial statements and report of independent auditors, all appearing in the accompanying Annual Report to Limited Partners for the year ended December 31, 1998, are incorporated by reference in this Form 10-K: - Report of Deloitte & Touche LLP, independent auditors, for the years ended December 31, 1998, 1997 and 1996. - Statements of Financial Condition as of December 31, 1998 and 1997. - Statements of Operations, Changes in Partners' Capital, and Cash Flows for the years ended December 31, 1998, 1997 and 1996. - Notes to Financial Statements. With the exception of the aforementioned information and the information incorporated in Items 7, 8 and 13, the Annual Report to Limited Partners for the year ended December 31, 1998 is not deemed to be filed with this report. 2. Listing of Financial Statement Schedules No financial statement schedules are required to be filed with this report. (b) Reports on Form 8-K No reports on Form 8-K have been filed by the Partnership during the last quarter of the period covered by this report. (c) Exhibits Refer to Exhibit Index on Page E-1. - 34 - SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEAN WITTER WORLD CURRENCY FUND L.P. (Registrant) BY: Demeter Management Corporation, General Partner March 29, 1999 BY: /s/ Robert E. Murray ----------------------------------- Robert E. Murray, Director and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Demeter Management Corporation. BY: /s/ Robert E. Murray March 29, 1999 --------------------------------------- Robert E. Murray, Director and President /s/ Mark J. Hawley March 29, 1999 --------------------------------------- Mark J. Hawley, Director and Chairman of the Board /s/ Joseph G. Siniscalchi March 29, 1999 ---------------------------------------- Joseph G. Siniscalchi, Director /s/ Edward C. Oelsner III March 29, 1999 ---------------------------------------- Edward C. Oelsner III, Director /s/ Mitchell M. Merin March 29, 1999 ---------------------------------------- Mitchell M. Merin, Director /s/ Richard A. Beech March 29, 1999 ---------------------------------------- Richard A. Beech, Director /s/ Ray Harris March 29, 1999 ---------------------------------------- Ray Harris, Director /s/ Lewis A. Raibley, III March 29, 1999 ----------------------------------------- Lewis A. Raibley, III, Director, Chief Financial Officer and Principal Accounting Officer - 35 - EXHIBIT INDEX ITEM METHOD OF FILING -3.01 Limited Partnership Agreement of the Partnership, dated as of December 8, 1992. (1) - - -10.01 Customer Agreement, dated as of December 1, 1997, among the Partnership, Carr Futures Inc., and Dean Witter Reynolds Inc. (4) - - -10.02 International Foreign Exchange Master Agreement, dated as of August 1, 1997, between the Partnership and Carr Futures, Inc. (4) - - -10.03 Amended and Restated Customer Agreement, dated as of December 1, 1997, between the Partnership and Dean Witter Reynolds Inc. (4) - - -10.04 Management Agreement among the Partnership, Demeter and JWH dated as of June 1, 1995. (3) - - -10.05 Form of the Management Agreements among the Partnership, Demeter and CCA Capital Management (2) Inc., Colorado Commodities Management Corporation, Ezra Zask Associates Inc. and Millburn Ridgefield Corporation dated as of March 1, 1993. - - -13.01 December 31, 1998 Annual Report to Limited Partners. (4) (1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the Partnership's Registration Statement on Form S-1 (File No. 33-55806). (2) Incorporated by reference to Exhibit 10.02 of the Partnership's Registration Statement on Form S-1 (File No. 33-55806). (3) Incorporated by reference to Exhibit 10.03 of the Partnership's Annual Report on Form 10K for the fiscal year ended December 31, 1995. (4) Filed herewith. E-1 EX-10.01 2 CUSTOMER AGREEMENT CUSTOMER AGREEMENT THIS CUSTOMER AGREEMENT (this "Agreement"), made as of the 1st day of December, 1997, by and among DEAN WITTER WORLD CURRENCY FUND L.P., a Delaware limited partnership (the "Customer"), CARR FUTURES INC., a Delaware corporation ("CFI"), and DEAN WITTER REYNOLDS INC., a Delaware corporation ("DWR"); W I T N E S S E T H : WHEREAS, the Customer was organized pursuant to a Certificate of Limited Partnership filed in the office of the Secretary of State of the State of Delaware on December 8, 1992, and a Limited Partnership Agreement dated as of December 8, 1992, between Demeter Management Corporation, a Delaware corporation ("Demeter"), acting as general partner (in such capacity, the "General Partner"), and the limited partners of the Customer, to trade, buy, sell, spread, or otherwise acquire, hold, or dispose of commodities (including, but not limited to, foreign currencies, and any other securities or items which are, or may become, the subject of futures contract trading), domestic and foreign commodity futures contracts, commodity forward contracts, foreign exchange commitments, options on physical commodities and on futures contracts, spot (cash) commodities and currencies, and any rights pertaining thereto (hereinafter referred to collectively as "futures interests"), and securities (such as United States Treasury bills) approved by the Commodity Futures Trading Commission (the "CFTC") for investment of customer funds, and to engage in all activities incident thereto; WHEREAS, the Customer (which is a commodity pool) and the General Partner (which is a registered commodity pool operator) have entered into management agreements (the "Management Agreements") with certain trading advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"), which provide that the Trading Advisors have authority and responsibility, except in certain limited situations, to direct the investment and reinvestment of the assets of the Customer in futures interests under the terms set forth in the Management Agreements; WHEREAS, the Customer and DWR have entered into that certain Amended and Restated Customer Agreement, dated as of December 1, 1997 (the "DWR Customer Agreement"), whereby DWR agreed to perform certain non-clearing futures interests brokerage and other services for the Customer; and WHEREAS, the Customer, DWR and CFI wish to enter into this Agreement to set forth the terms and conditions upon which CFI will perform futures interests execution and clearing services for the Customer; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Duties of CFI. CFI agrees to execute and clear all futures interests brokerage transactions on behalf of the Customer in accordance with instructions provided by DWR, Demeter or the Trading Advisors, and the Customer agrees to retain CFI as its clearing broker for the term of this Agreement. CFI agrees to maintain such number of subaccounts for the Customer as DWR reasonably shall request. The execution and clearing services of CFI provided hereunder shall be in accordance with applicable exchange rules. CFI agrees to furnish to the Customer as soon as practicable all of the information from time to time in its possession which Demeter, as the general partner of the Customer, is required to furnish to the Limited Partners pursuant to the Limited Partnership Agreement as from time to time in effect and as required by applicable law, rules, or regulations. CFI shall disclose such information (including, without limitation, financial statements) regarding itself and its affiliates as may be required by the Customer for SEC, CFTC and state blue sky disclosure purposes. CFI agrees to notify the applicable Trading Advisor and DWR immediately upon discovery of any error committed by CFI or any of its agents with respect to a trade executed or cleared by CFI on behalf of the Customer and to notify DWR promptly of any order or trade for the Customer's account which CFI believes was not executed or cleared in accordance with proper instructions given by DWR, Demeter or any Trading Advisor or other agent for the Customer's account. Notwithstanding any provision of this Agreement to the contrary, CFI shall assume financial responsibility for any errors committed or caused by it in executing or clearing orders for the purchase or sale of futures interests for the Customer's account and shall credit the Customer's account with any profit resulting from an error of CFI. Errors made by floor brokers appointed or selected by CFI shall constitute errors made by CFI. However, CFI shall not be responsible for errors committed by the Trading Advisors. CFI acknowledges that other partnerships of which the General Partner is the general partner are not affiliates of the Customer. 2. Margins. The futures and futures option trades for the Customer's account shall be margined at the applicable exchange or clearinghouse minimum rates for speculative accounts; all subaccounts shall be combined for determining such margin requirements. All margin calls for the Customer's account shall be made to DWR by CFI, and each such call for margin shall be met by Customer within three hours after DWR has received such call. CFI shall accept as margin for the Customer's account any instrument deemed acceptable under exchange or clearinghouse rules pertaining to such account. Upon oral or written request by DWR, CFI shall, within three hours after receipt of any such request, wire transfer (by federal bank wire system) to DWR for Customer's account any funds in the Customer's account with CFI in excess of the margin requirements for such account. 3. Obligations and Expenses. Except as otherwise set forth herein, the Customer, and not CFI, shall be responsible for all taxes, management and incentive fees to the Trading Advisors, the brokerage commissions to DWR pursuant to the DWR Customer Agreement, and all extraordinary expenses incurred by it. 4. Agreement Nonexclusive. CFI shall be free to render services of the nature to be rendered to the Customer hereunder to other persons or entities in addition to the Customer, and the parties acknowledge that CFI may render such services to additional entities similar in nature to the Customer, including other partnerships organized with Demeter as their general partner. It is expressly understood and agreed that this Agreement is nonexclusive and that the Customer has no obligation to execute any or all of its trades for futures interests through CFI. The parties acknowledge that the Customer may execute and clear trades for futures interests through such other broker or brokers as Demeter may direct from time to time. The Customer's utilization of an additional commodity broker shall neither terminate this Agreement nor modify in any regard the respective rights and obligations of the Customer and CFI hereunder. 5. Compensation of CFI. In compensation of CFI's services pursuant to this Agreement, the Customer shall pay CFI all NFA fees, clearinghouse fees, exchange fees or other regulatory fees, taxes (other than income taxes), floor brokerage fees, third-party clearing fees and give-up fees. DWR shall pay to CFI such charges with respect to the execution and clearance of trades for the Customer as DWR and CFI shall agree from time to time. Subject to the brokerage commission and transaction fees and costs caps set forth in the DWR Customer Agreement, DWR shall have no obligation to reimburse the Customer for any payments made by the Customer to CFI. The Customer shall have no obligation to reimburse DWR for any payments made by DWR to CFI. 6. Investment Discretion. The parties recognize that CFI shall have no authority to direct the futures interests investments to be made for the Customer's account, but shall execute only such orders for the Customer's account as DWR, Demeter or the Trading Advisors may direct from time to time. However, the parties agree that CFI, and not the Trading Advisors, shall have the authority and responsibility with regard to the investment, maintenance, and management of the Customer's assets that are held in segregated or secured accounts, as provided in Section 7 hereof. 7. Interest on Customer Funds. The Customer's assets deposited with CFI will be segregated or secured in accordance with the Commodity Exchange Act and CFTC regulations. All of such funds will be available for margin for the Customer's trading. CFI shall pay to DWR such interest income on the Customer's assets held by CFI as CFI and DWR shall agree from time to time. The Customer understands that it will not receive any interest income on its assets held by CFI other than that paid by DWR pursuant to the DWR Customer Agreement. The Customer's assets held by CFI may be used solely as margin for the Customer's trading. 8. Recording Conversations. CFI consents to the electronic recording, at the discretion of the Customer, Customer's agents or DWR, of any or all telephone conversations with CFI (without automatic tone warning device), the use of same as evidence by either party in any action or proceeding arising out of this Agreement, and in the Customer's, Customer's agents' or DWR's erasure, at its discretion, of any recording as a part of its regular procedure for handling of recordings. 9. Delivery; Option Exercise. (a) The Customer acknowledges that the making or accepting of delivery pursuant to a futures contract may involve a much higher degree of risk than liquidating a position by offset. CFI has no control over and makes no warranty with respect to grade, quality or tolerances of any commodity delivered in fulfillment of a contract. (b) The Customer agrees to give CFI timely notice and immediately on request to inform CFI if the Customer intends to make or take delivery under a futures contract or to exercise an option contract. If so requested, the Customer shall provide CFI with satisfactory assurances that the Customer can fulfill the Customer's obligation to make or take delivery under any contract. The Customer shall furnish CFI with property deliverable by it under any contract in accordance with CFI's instructions. (c) CFI shall not have any obligation to exercise any long option contract unless the Customer has furnished CFI with timely exercise instructions and sufficient initial margin with respect to each underlying futures contract. 10. Standard of Liability and Indemnity. Subject to Section 1 hereof, CFI and its affiliates (as defined below) shall not be liable to the Customer, the General Partner or Limited Partners, or any of its or their respective successors or assigns, for any act, omission, conduct, or activity undertaken by or on behalf of the Customer pursuant to this Agreement which CFI determines, in good faith, to be in the best interests of the Customer, unless such act, omission, conduct, or activity by CFI or its affiliates constituted misconduct or negligence. The Customer shall indemnify, defend and hold harmless CFI and its affiliates from and against any loss, liability, damage, cost or expense (including attorneys' and accountants' fees and expenses incurred in the defense of any demands, claims, or lawsuits) actually and reasonably incurred arising from any act, omission, conduct, or activity undertaken by CFI on behalf of the Customer pursuant to this Agreement, including, without limitation, any demands, claims or lawsuits initiated by a Limited Partner (or assignee thereof), provided that (i) CFI has determined, in good faith, that the act, omission, conduct, or activity giving rise to the claim for indemnification was in the best interests of the Customer, and (ii) the act, omission, conduct, or activity that was the basis for such loss, liability, damage, cost, or expense was not the result of misconduct or negligence. Notwithstanding anything to the contrary contained in the foregoing, neither CFI nor any of its affiliates shall be indemnified by the Customer for any losses, liabilities, or expenses arising from or out of an alleged violation of federal or state securities laws unless (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (c) a court of competent jurisdiction approves a settlement of the claims against the particular indemnitee and finds that indemnification of the settlement and related costs should be made, provided, with regard to such court approval, the indemnitee must apprise the court of the position of the SEC, and the positions of the respective securities administrators of Massachusetts, Missouri, Tennessee and/or those other states and jurisdictions in which the plaintiffs claim they were offered or sold Units, with respect to indemnification for securities laws violations before seeking court approval for indemnification. Furthermore, in any action or proceeding brought by a Limited Partner in the right of the Customer to which CFI or any affiliate thereof is a party defendant, any such person shall be indemnified only to the extent and subject to the conditions specified in the Delaware Revised Uniform Limited Partnership Act, as amended, and this Section 10. The Customer shall make advances to CFI or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or legal action relates to the performance of duties or services by such persons to the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated by a Limited Partner; and (iii) such advances are repaid, with interest at the legal rate under Delaware law, if the person receiving such advance is ultimately found not to be entitled to indemnification hereunder. CFI shall indemnify, defend and hold harmless the Customer and its successors or assigns from and against any losses, liabilities, damages, costs or expenses (including in connection with the defense or settlement of claims; provided CFI has approved such settlement) incurred as a result of the activities of CFI or its affiliates, provided, further, that the act, omission, conduct, or activity giving rise to the claim for indemnification was the result of bad faith, misconduct or negligence. The indemnities provided in this Section 10 by the Customer to CFI and its affiliates shall be inapplicable in the event of any losses, liabilities, damages, costs, or expenses arising out of, or based upon, any material breach of any warranty, covenant, or agreement of CFI contained in this Agreement to the extent caused by such breach. Likewise, the indemnities provided in this Section 10 by CFI to the Customer and any of its successors and assigns shall be inapplicable in the event of any losses, liabilities, damages, costs, or expenses arising out of, or based upon, any material breach of any warranty, covenant, or agreement of the Customer contained in this Agreement to the extent caused by such breach. As used in this Section 10, the term "affiliate" of CFI shall mean: (i) any natural person, partnership, corporation, association, or other legal entity directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of CFI; (ii) any partnership, corporation, association, or other legal entity 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by CFI; (iii) any natural person, partnership, corporation, association, or other legal entity directly or indirectly controlling, controlled by, or under common control with, CFI; or (iv) any officer or director of CFI. Notwithstanding the foregoing, "affiliates" for purposes of this Section 10 shall include only those persons acting on behalf of CFI within the scope of the authority of CFI, as set forth in this Agreement. 11. Term. This Agreement shall continue in effect until terminated by any party giving not less than 60 days' prior written notice of termination to the other parties. The Customer shall have the right to terminate this Agreement (i) at any time, effective upon thirty (30) days' prior written notice to CFI, in the event that: (A) CFI announces plans to discontinue the provision of execution and clearing services with respect to futures contracts, options on futures contracts or acting as a dealer counterparty for foreign exchange cash and forward contracts; or (B) CFI merges or consolidates with or into or acquires or is acquired by, another entity or entities acting in concert (excluding any intergroup reorganizations with any affiliates of CFI or any capital contributions by, or sale of CFI stock to any affiliates of CFI, provided that the guarantee agreement between DWR and Credit Agricole Indosuez S.A. dated as of July 31, 1997 remains in place or a comparable guaranty is substituted by a bank with a net worth and credit rating equal to Credit Agricole Indosuez S.A.) in a transaction involving the purchase or sale of stock or substantially all of the assets of the acquired entity or which involves a capital contribution to or by such entity or entities (in an amount representing fifty percent (50%) or more of the book value of CFI's or such entity's (or their respective affiliate's) net worth), or the purchase or sale of stock representing fifty percent (50%) or more of CFI's or such entity's (or their respective affiliate's) outstanding equity securities; and (ii) at any time effective immediately upon written notice to CFI in the event: (A) CFI ceases to be registered or conduct business as a futures commission merchant or discontinues its membership or clearing membership on any major futures interest exchange in the United States (or any affiliated clearing corporation) or in the NFA; or (B) a receiver, liquidator or trustee of CFI is appointed by court order and such order remains in effect for more than thirty (30) days; or CFI is adjudicated bankrupt or insolvent; or any of CFI's property is sequestered by court order and such order remains in effect for more than thirty (30) days; or a petition is filed against CFI under any bankruptcy, reorganization, arrangement, insolvency, readjustment or debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed within thirty (30) days after such filing; or CFI files a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any petition against it under any such law; or (C) CFI, DWR or the Customer is ordered or otherwise directed to terminate this Agreement by any governmental, regulatory, or self-regulatory authority. Any such termination by any party shall be without penalty. 12. Complete Agreement. This Agreement constitutes the entire agreement among the parties with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as among the parties unless in writing and signed by the party against whom enforcement is sought. 13. Assignment. This Agreement may not be assigned by any party without the express written consent of the other parties. 14. Amendment. This Agreement may not be amended except by the written consent of the parties. 15. Notices. All notices required or desired 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 day of receipt, 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 Customer: DEAN WITTER WORLD CURRENCY FUND L.P. c/o Demeter Management Corporation Two World Trade Center, 62nd Floor New York, New York 10048 Attn: Mark J. Hawley President if to DWR: DEAN WITTER REYNOLDS INC. Two World Trade Center, 62nd Floor New York, New York 10048 Attn: Mark J. Hawley Executive Vice President if to CFI: CARR FUTURES INC 10 South Wacker Drive, Suite 1125 Chicago, Illinois 60606 Attn: Legal/Compliance Department 16. 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. 17. Headings. Headings of Sections herein are for the convenience of the parties only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 18. Incorporation by Reference. The Futures Account Agreement annexed hereto is hereby incorporated by reference herein and made a part hereof to the same extent as if such document were set forth in full herein. If any provision of this Agreement is or at any time becomes inconsistent with the annexed document, the terms of this Agreement shall control. 19. Governing Law; Venue. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York (without regard to its choice of law principles). 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. IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first above written. DEAN WITTER WORLD CURRENCY FUND L.P. By: Demeter Management Corporation, General Partner By: /s/ Mark J. Hawley -------------------------------- Mark J. Hawley President DEAN WITTER REYNOLDS INC. By: /s/ Mark J. Hawley -------------------------------- Mark J. Hawley Executive Vice President CARR FUTURES INC. By: /s/ Bruce A. Beatus ----------------------------- Name: Bruce A. Beatus ----------------------------- Title: General Counsel ----------------------------- CARR FUTURES INC. FUTURES ACCOUNT AGREEMENT In consideration of the acceptance by Carr Futures Inc. ("Carr") of one or more accounts of the undersigned ("Customer") (if more than one account is at any time opened or reopened with Carr, all are covered by this Agreement and are referred to individually and collectively as the "Account"), and Carr's agreement to act as broker, directly or indirectly, or as dealer, for the execution, clearance and/or carrying of transactions for the purchase and sale of commodity interests, including commodities, forward contracts, commodity futures contracts, options on commodity futures contracts and transaction involving the exchange of futures for cash commodities or the exchange of futures in connection with cash commodity transactions, Customer agrees as follows: 1. APPLICABLE RULES AND REGULATIONS The Account and each transaction therein shall be subject to the terms of this Agreement and to (a) all applicable laws and the regulations, rules and orders (collectively "regulations") of all regulatory and self-regulatory organizations having jurisdiction and (b) the constitution, by-laws, rules, regulations, orders, resolutions, interpretations and customs and usages (collectively "rules") of the market and any associated clearing organization (each an "exchange") on or subject to the rules of which such transaction is executed and/or cleared. The reference in the preceding sentence to exchange rules is solely for Carr's protection and Carr's failure to comply therewith shall not constitute a breach of this Agreement or relieve Customer of any obligation or responsibility under this Agreement. Carr shall not be liable to Customer as a result of any action by Carr, its officers, directors, employees or agents to comply with any rule or regulation. 2. PAYMENTS TO CARR Customer agrees to pay to Carr immediately on request (a) commissions, give-up charges, fees and service charges as are in effect from time to time, together with all applicable regulatory and self-regulatory organization and exchange fees, charges and taxes; (b) the amount of any debit balance or any other liability that may result from transactions executed for the Account; and (c) interest on such debit balance or liability at the prevailing rate charged by Carr at the time such debit balance or liability arises and service charges on any such debit balance or liability together with any reasonable costs and attorneys' fees incurred in collecting any such debit balance or liability. Customer acknowledges that Carr may charge commissions at other rates to other customers. 3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN Customer shall at all times, and without prior notice or demand from Carr, maintain adequate margin (also known as "performance bond") in the Account so as to continually to meet the original and maintenance margin requirements established by Carr for Customer. Carr may change such requirements from time to time at Carr's discretion. Such margin requirements may exceed the margin requirements set by any exchange or other regulatory authority and may vary from Carr's requirements for other customers. Customer agrees, when so requested, orally or by written notice, immediately (in no less than one hour) to wire transfer (by federal bank wire system to the account of Carr) margin funds, and to furnish Carr with names of bank officers for immediate verification of such transfers. Customer acknowledges and agrees that Carr may receive and retain as its own any interest, increment, profit, gain or benefit, directly or indirectly, accruing from any of the funds Carr receives from Customer. 4. DELIVERY; OPTION EXERCISE Liquidating instructions on open positions maturing in a current delivery month must be given to Carr at least five business days prior to the first notice day in the case of long positions, and at least five business days prior to the last trading day in the case of short positions. Alternatively, sufficient funds to take delivery or the necessary delivery documents must be delivered to Carr within the same period described above. If funds, documents or instructions are not received, Carr may, without notice, either liquidate Customer's position or make or receive delivery on behalf of Customer upon such terms and by such methods as Carr, in its sole discretion, determines. If, at any time, Customer fails to deliver to Carr any property previously sold by Carr on Customer's behalf in compliance with commodity interest contracts, or Carr shall deem it necessary (whether by reason of the requirements of any exchange, clearing house or otherwise) to replace any securities, commodity interest contracts, financial instruments, or other property previously delivered by Carr for the Account of Customer with other property of like or equivalent kind or amount, Customer hereby authorizes Carr, in its sole judgment, to borrow or to buy any property necessary to make delivery thereof, or to replace any such property previously delivered, or to deliver the same to such other party or to whom delivery is to be made. Carr may subsequently repay any borrowing or purchase thereof with property purchased or otherwise acquired for the amount of Customer. Customer shall pay Carr for any cost, loss and damages from the foregoing, including, but not limited to, consequential damages, penalties and fines which Carr may incur or which Carr may sustain from its inability to borrow or buy any such property. Customer understands that some exchanges and clearing houses have established cut-off times for the tender of exercise instructions, and that an option will become worthless if instructions are not delivered before such expiration time. Customer also understands that certain exchanges and clearing houses automatically will exercise some "in-the-money" options unless instructed otherwise. Customer acknowledges full responsibility for taking action either to exercise or to prevent the exercise of an option contract, as the case may be, and Carr is not required to take any action with respect to an option contract, including without limitations any action to exercise an option prior to its expiration date, or to prevent the automatic exercise of an option, except upon Customer's express instructions. Customer further understands that Carr may establish exercise cut-off times which may be different from the times established by exchanges and clearing houses. Customer understands that (a) all short option positions are subject to assignment at any time, including positions established on the same day that exercises are assigned, and (b) exercised assignment notices are allocated randomly from among all Carr customer's short options positions which are subject to exercise. A more detailed description of Carr's allocation procedures is available upon request. 5. FOREIGN CURRENCY If Carr enters into any transaction for Customer effected in a currency other than U.S. dollars: (a) any profit or loss caused by changes in the rate of exchange for such currency shall be for Customer's Account and risk and (b) unless another currency is designated in Carr's confirmation of such transaction, all margin for such transaction and the profit or loss on the liquidation of such transaction shall be in U.S. dollars at a rate of exchange determined by Carr in its discretion on the basis of then prevailing market rates of exchange for such foreign currency. 6. CARR MAY LIMIT POSITIONS HELD Customer agrees that Carr, at its discretion, may limit the number of open positions (net or gross) which Customer may execute, clear and/or carry with or acquire through it. Customer agrees (a) not to make any trade which would have the effect or exceeding such limits, (b) that Carr may require Customer to reduce open positions carried with Carr and (c) that Carr may refuse to accept orders to establish new positions. Carr may impose and enforce such limits, reduction or refusal whether or not they are required by applicable law, regulations or rules. Customer shall comply with all position limits established by any regulatory or self-regulatory organization or any exchange. In addition, Customer agrees to notify Carr promptly if Customer is required to file position reports with any regulatory or self-regulatory organization or with any exchange. 7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION Customer acknowledges that: (a) Any market recommendations and information Carr may communicate to Customer, although based upon information obtained from sources believed by Carr to be reliable, may be incomplete and not subject to verification; (b) Carr makes no representation, warranty or guarantee as to, and shall not be responsible for, the accuracy or completeness of any information or trading recommendation furnished to Customer; (c) Recommendations to Customer as to any particular transaction at any given time may differ among Carr's personnel due to diversity in analysis of fundamental and technical factors and may vary from any standard recommendation made by Carr in its research reports or otherwise; and (d) Carr has no obligation or responsibility to update any market recommendations, research or information it communicates to Customer. Customer understands that Carr and its officers, directors, affiliates, stockholders, representatives or associated persons may have positions in and may intend to buy or sell commodity interests that are the subject of market recommendations furnished to Customer, and that the market positions of Carr or any such officer, director, affiliate, stockholder, representative or associated person may or may not be consistent with the recommendations furnished to Customer by Carr. 8. LIMITS ON CARR DUTIES; LIABILITY Customer agrees: (a) That Carr has no duty to apprise Customer of news or of the value of any commodity interests or collateral pledged or in any way to advise Customer with respect to the market; (b) That the commissions which Carr receives are consideration solely for the execution, reporting and carrying of Customer's trades; (c) If there is an Account Manager, an Account Manager's Agreement for the Account Manager will be provided to Carr. Customer represents it has received: (1) a disclosure document concerning such Account Manager's trading advice, including, in the event the Account Manager will trade options, the options strategies to be utilized, or (2) a written statement explaining why Account Manager is not required under applicable law to provide such a disclosure document to Customer; and (d) Customer acknowledges, understands and agrees that Carr is in no way responsible for any loss to Customer occasioned by the actions of the Account Manager and Carr does not by implication or otherwise endorse the operating methods or trading strategies or programs of the Account Manager. 9. EXTRAORDINARY EVENTS Customer agrees that Carr shall have no liability for damages, claims, losses or expenses caused by any errors, omissions or delays resulting from an act, condition or cause beyond the reasonable control of Carr, including, but not limited to: war; insurrection; riot; strike; act of God; fire; flood; extraordinary weather conditions; accident; action of government authority; action of exchange, clearinghouse or clearing organization; communications or power failure; equipment or software malfunction; error, omission or delay in the report of transactions; prices, exchange rates or other market or transaction information; or the insolvency, bankruptcy, receivership, liquidation or other financial difficulty of any bank, clearing broker, exchange, market, clearinghouse or clearing organization. 10. INDEMNIFICATION OF CARR, CONTRIBUTION AND REIMBURSEMENT (a) To the extent permitted by law, Customer agrees to indemnify and hold harmless Carr and its shareholders, directors, officers, employees, agents, affiliates and controlling persons against any liability for damages, claims, losses or expenses which they may incur as the result of: (x) Customer's violation of federal or state laws or regulations, or of rules of any exchange or self-regulatory organization; (y) any other breach of this Agreement by Customer; or (z) any breach by Carr of federal or state laws or regulations, or of the charter provisions, by-laws, rules, margin or other requirements, of the exchanges or self-regulatory organizations, provided that such violation was caused by Carr's acting in good faith on Customer's behalf. Such damages, claims, losses or expenses shall include legal fees and expenses, costs of settling claims, interest, and fines or penalties imposed by the exchanges, self-regulatory organization or governmental authority. (b) Customer agrees that if the indemnification provided in paragraph (a) above is held to be unavailable to Carr, the parties hereto shall share in and contribute to such damages, claims, losses or expenses in proportion to their relative benefits from the transactions involved and their relative degree of fault in causing the liability. (c) Customer agrees to reimburse Carr and its shareholders, directors, officers, employees, agents, affiliates and controlling persons on demand for any costs incurred in collecting any sums Customer owes under this Agreement and any costs of successfully defending against claims asserted against them by Customer. 11. NOTICES; TRANSMITTALS Carr shall transmit all communications to Customer at Customer's address, facsimile or telephone number set forth below or to such other address as Customer may hereafter direct in writing. Customer shall transmit all communications to Carr regarding this Agreement (except routine inquiries concerning the Account) to 10 South Wacker Drive, Suite 1100, Chicago, Illinois 60606; facsimile (312) 441-4201, Attention: Legal/Compliance Department. All payments and deliveries to Carr shall be made as instructed by Carr from time to time and shall be deemed received only when actually received by Carr. 12. CONFIRMATION CONCLUSIVE Confirmation of trades and any other notices sent to Customer shall be conclusive and binding on Customer unless customer or Customer's agent notifies Carr to the contrary (a) in the case of an oral report, orally at the time received by Customer or its agent; or (b) in the case of a written report or notice, in writing prior to opening of trading on the business day next following receipt of the report. In addition, if Customer has not received a written confirmation that a commodity interest transaction has been executed within three business days after Customer has placed an order with Carr to effect such transaction, and has been informed or believes that such order has been or should have been executed, then Customer immediately shall notify Carr thereof. Absent such notice, Customer conclusively shall be deemed estopped to object and to have waived any such objection to the failure to execute or cause to be executed such transaction. Anything in this Section 12 notwithstanding, neither Customer nor Carr shall be bound by any transaction or price reported in error. 13. SECURITY INTEREST Customer hereby grants to Carr a first lien upon and a security interest in any and all cash, securities, whether certificated or uncertificated, security entitlements, investment property, financial assets, foreign currencies, commodity interests and other property (including securities and options) and the proceeds of all of the foregoing (together the "Collateral") belonging to Customer or in which Customer may have an interest, now or in the future, and held by Carr or in Carr's control or carried in any of Customer's Accounts, or in Customer's accounts carried under other agreements with Carr or its affiliates. Such security interest is granted as security for the performance by Customer of its obligations hereunder and for the payment of all loans and other liabilities which Customer has or may in the future have to Carr, whether under this Agreement or any other agreement between the parties hereto. Customer agrees to execute such further instruments, documents, filings and agreements as may be requested at any time by Carr in order to perfect and maintain perfected the foregoing lien and security interest. Carr, in its discretion, may liquidate any Collateral to satisfy any margin or Account deficiencies or to transfer the Collateral to the general ledger account of Carr. In the event that the provisions of Section 13, which relate to Collateral in any account carried by Carr for Customer other than an Account instituted hereunder, conflict with the agreement under which such other account was instituted, such other agreement between Carr and Customer shall take precedence over the provisions of this Section 13. 14. TRANSFER OF FUNDS At any time and from time to time and without prior notice to Customer, Carr may transfer from one Account to another Account in which Customer has any interest, such excess funds, equities, securities or other property as in Carr's judgment may be required for margin, or to reduce any debit balance or to reduce or satisfy any deficits in such other Accounts except that no such transfer may be made from a segregated Account subject to the Commodity Exchange Act to another Account maintained by Customer unless either Customer has authorized such transfer in writing or Carr is effecting such transfer to enforce Carr's security interest pursuant to Section 13. Carr promptly shall confirm all transfers of funds made pursuant hereto to Customer in writing. 15. CARR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS In addition to all other rights of Carr set forth in this Agreement: (a) When directed or required by a regulatory or self-regulatory organization or exchange having jurisdiction over Carr or the Account; (b) Whenever Carr reasonably considers it necessary for its protection because of margin requirements or otherwise; (c) If Customer or any affiliate of Customer repudiates, violates, breaches or fails to perform on a timely basis any term, covenant or condition on its part to be performed under this Agreement or another agreement with Carr; (d) If a case in bankruptcy is commenced or if a proceeding under any insolvency or other law for the protection of creditors or for the appointment of a receiver, liquidator, trustee, conservator, custodian or similar officer is filed by or against Customer or any affiliate of Customer, or if Customer or any affiliate of Customer makes or proposes to make any arrangement or composition for the benefit of its creditors, or if Customer (or any such affiliate) or any or all of its property is subject to any agreement, order, judgment or decree providing for Customer's dissolution, winding-up, liquidation, merger, consolidation, reorganization or for the appointment of a receiver, liquidator, trustee, conservator, custodian or similar officer of Customer, such affiliate or such property; (e) Carr is informed of Customer's death or mental incapacity; or (f) If an attachment or similar order is levied against the Account or any other account maintained by a Customer or any affiliate of Customer with Carr; Carr shall have the right to (i) satisfy any obligations due Carr out of any Customer's property (also referred to as "Collateral") in Carr's custody or control, (ii) liquidate any or all of Customer's commodity interest positions, such liquidation shall include transactions involving the exchange of futures for cash commodities or the exchange of futures in connection with cash commodity transactions, (iii) cancel any or all of Customer's outstanding orders, (iv) treat any or all of Customer's obligations due Carr as immediately due and payable, (v) sell any or all of Customer's property in Carr's custody or control in such manner as Carr determines to be commercially reasonable, and/or (vi) terminate any or all of Carr's obligations for future performance to Customer, all without any notice to or demand on Customer if deemed necessary by Carr. Any sale hereunder may be made in any commercially reasonable manner. Customer agrees that a prior demand, call or notice shall not be considered a waiver of Carr's right to act without demand or notice as herein provided, that Customer shall at all times be liable for the payment of any debit balance owing in each Account upon demand whether occurring upon a liquidation as provided under this Section 15 or otherwise under this Agreement, and that in all cases Customer shall be liable for any deficiency remaining in each Account in the event of liquidation thereof in whole or in part together with interest thereon and all costs relating to liquidation and collection (including reasonable attorneys' fees). In the event that the provisions of Section 15, which relate to Collateral in any account carried by Carr for Customer other than an Account instituted hereunder, conflict with the agreement under which such other account was instituted, such other agreement between Carr and Customer shall take precedence over the provisions of this Section 15. 16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS Customer represents and warrants to and agrees with Carr that: (a) Customer has full power and authority to enter into this Agreement and to engage in the transactions and perform its obligations hereunder and contemplated hereby, and: (1) If Customer is a corporation or partnership, Customer represents and warrants that (a) it is duly organized and in good standing under the laws of the jurisdiction in which it is established and in every state in which it does business; (b) is empowered to enter into and perform this Agreement and to effectuate transactions in commodity interests, financial instruments and foreign currency as contemplated hereby; (c) that Customer has determined that trading in commodity interests is appropriate for Customer, is prudent in all respects and does not and will not violate any statute, rule, regulation, judgment or decree to which Customer is subject or bound; (d) that Customer has had at least one year's prior experience in effectuating transactions in commodity interests, financial instruments, and foreign currency as contemplated hereby; and (e) no person or entity has any interest in or control of the Account to which this Agreement pertains except as disclosed by Customer to Carr in writing. (2) If Customer is a trust, Customer represents and warrants that (a) it is a duly formed and existing trust under the laws of the state of its formation or such other laws as are applicable, including ERISA or similar state law, and the party or parties designated as trustee or trustees by Customer to Carr in writing submitted herewith constitute the only or all of the proper trustees thereof; (b) the trustee or trustees are empowered to enter into and perform this Agreement and to effectuate transactions in commodity interests, financial instruments, and foreign currency as contemplated hereby; (c) the trustee or trustees make the representations set forth in Section 1 hereof as if the term trustee(s) were substituted for the term Customer therein; and (d) no person or entity has any interest in or control of the Account to which this Agreement pertains except as disclosed by Customer to Carr in writing. (b) Neither Customer nor any partner, director, officer, member, manager or employee of Customer nor any affiliate of Customer is a partner, director, officer, member, manager or employee of a futures commission merchant, introducing broker, bank, broker-dealer, exchange or self-regulatory organization or an employee or commissioner of the Commodity Futures Trading Commission (the "CFTC"), except as previously disclosed in writing to Carr; (c) Any financial statements or other information furnished in connection therewith are true, correct and complete. Except as disclosed in writing, (i) Customer is not a commodity pool or is exempt from registration under the rules of the CFTC, and (ii) Customer is acting solely as principal and no one other than Customer has any interest in any Account of Customer. Customer hereby authorizes Carr to contact such banks, financial institutions and credit agencies as Carr shall deem appropriate for verification of the information contained herein; (d) Customer has determined that trading in commodity interests is appropriate for Customer, is prudent in all respects and does not and will not violate Customer's charter or by-laws (or other comparable governing document) or any law, rule, regulation, judgment, decree, order or agreement to which Customer or its property is subject or bound; (e) As required by CFTC regulations, Customer shall create, retain and produce upon request of the applicable contract market, the CFTC or other regulatory authority documents (such as contracts, confirmations, telex printouts, invoices and documents of title) with respect to cash transactions underlying exchanges of futures for cash commodities or exchange of futures in connection with cash commodity transactions; (f) Customer consents to the electronic recording, at Carr's discretion, of any or all telephone conversations with Carr (without automatic tone warning device); the use of same as evidence by either party in any action or proceeding arising out of the Agreement and in Carr's erasure, at its discretion, of any recording as part of its regular procedure for handling of recordings; (g) Absent a separate written agreement between Customer and Carr with respect to give-ups, Carr, in its discretion, may, but shall have no obligation to, accept from other brokers commodity interest transactions executed by such brokers on an exchange for Customer and proposed to be "given-up" to Carr for clearance and/or carrying in the Account; (h) Carr, for and on behalf of Customer, is authorized and empowered to place orders for commodity interest transactions through one or more electronic or automated trading systems maintained or operated by or under the auspices of an exchange, that Carr shall not be liable or obligated to Customer for any loss, damage, liability, cost or expense (including but not limited to loss of profits, loss of use, incidental or consequential damages) incurred or sustained by Customer and arising in whole or in part, directly or indirectly, from any fault, delay, omission, inaccuracy or termination of a system or Carr's inability to enter, cancel or modify an order on behalf of Customer on or through a system. The provisions of this Section 16(h) shall apply regardless of whether any customer claim arises in contract, negligence, tort, strict liability, breach or fiduciary obligations or otherwise; and (i) If Customer is subject to the Financial Institution Reform, Recovery and Enforcement Act of 1989, the certified resolutions set forth following this Agreement have been caused to be reflected in the minutes of Customer's Board of Directors (or other comparable governing body) and this Agreement is and shall be, continuously from the date hereof, an official record of Customer. Customer agrees to promptly notify Carr in writing if any of the warranties and representations contained in this Section 16 become inaccurate or in any way cease to be true, complete and correct. 17. SUCCESSORS AND ASSIGNS This Agreement shall inure to the benefit of the parties hereto, their successors and assigns, and shall be binding upon the parties hereto, their successors and assigns, provided, however, that this Agreement is not assignable by any party without the prior written consent of the other parties. 18. MODIFICATION OF AGREEMENT BY CARR; NON-WAIVER PROVISION This Agreement may only be altered, modified or amended by mutual written consent of the parties. The rights and remedies conferred upon Carr shall be cumulative, and its forbearance to take any remedial action available to it under this Agreement shall not waive its right at any time or from time to time thereafter to take such action. 19. SEVERABILITY If any term or provision hereof or the application thereof to any persons or circumstances shall to any extent be contrary to any exchange, government or self-regulatory regulation or contrary to any federal, state or local law or otherwise be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is contrary, invalid or unenforceable, shall not be affected thereby. 20. CAPTIONS All captions used herein are for convenience only, are not a part of this Agreement, and are not to be used in construing or interpreting any aspect of this Agreement. 21. TERMINATION This Agreement shall continue in force until written notice of termination is given by Customer or Carr. Termination shall not relieve either party of any liability or obligation incurred prior to such notice. Upon giving or receiving notice of termination, Customer will promptly take all action necessary to transfer all open positions in each Account to another futures commission merchant. 22. ENTIRE AGREEMENT This Agreement (as amended by the attached Customer Agreement dated the date hereof into which this Agreement is incorporated by reference) constitutes the entire agreement between Customer and Carr with respect to the subject matter hereof and supersedes any prior agreements between the parties with respect to such subject matter. 23. GOVERNING LAW; CONSENT TO JURISDICTION (a) In case of a dispute between Customer and Carr arising out of or relating to the making or performance of this Agreement or any transaction pursuant to this Agreement (i) this Agreement and its enforcement shall be governed by the laws of the State of Illinois without regard to principles of conflicts of laws, and (ii) Customer will bring any legal proceeding against Carr in, and Customer hereby consents in any legal proceeding by Carr to the jurisdiction of, any state or federal court located within Chicago, Illinois, in connection with all legal proceedings arising directly, indirectly or otherwise in connection with, out of, related to or from Customer's Account, transactions contemplated by this Agreement or the breach thereof. Customer hereby waives all objections Customer, at any time, may have as to the propriety of the court in which any such legal proceedings may be commenced. Customer also agrees that any service of process mailed to Customer at any address specified to Carr shall be deemed a proper service of process on the undersigned. Customer agrees that venue of all proceedings shall be in Chicago, Illinois. (b) Notwithstanding the provisions of Section 23(a)(ii), Customer may elect at this time to have all disputes described in this Section resolved by arbitration. To make such election, Customer must sign the Arbitration Agreement set forth in Section 24. Notwithstanding such election, any question relating to whether Customer or Carr has commenced an arbitration proceeding in a timely manner, whether a dispute is within the scope of the Arbitration Agreement or whether a party (other than Customer or Carr) has consented to arbitration and all proceedings to compel arbitration shall be determined by a court as specified in Section 23(a)(ii). 24. ARBITRATION AGREEMENT (OPTIONAL) Every dispute between Customer and Carr arising out of or relating to the making or performance of this Agreement or any transaction pursuant to this Agreement, shall be settled by arbitration in accordance with the rules, then in effect, of the National Futures Association, the contract market upon which the transacting giving rise to the claim was executed, or the National Association of Securities Dealers as Customer may elect. If Customer does not make such election by registered mail addressed to Carr at 10 South Wacker Drive, Suite 1100, Chicago, Illinois 60606, Attention: Legal/Compliance Department, within 45 days after demand by Carr that the Customer make such election, then Carr may make such election. Carr agrees to pay any incremental fees which may be assessed by a qualified forum for making available a "mixed panel" of arbitrators, unless the arbitrators determine that Customer has acted in bad faith in initiating or conducting the proceedings. Judgment upon any aware rendered by the arbitrators may be entered in any court having jurisdiction thereof. THREE FORUMS EXIST FOR THE RESOLUTION OF COMMODITY DISPUTES: CIVIL COURT LITIGATION, REPARATIONS AT THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND ARBITRATION CONDUCTED BY A SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION. THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE ABILITY TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT INCURRING SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH CUSTOMER INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT YOUR CONSENT OF THIS ARBITRATION AGREEMENT BE VOLUNTARY. BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY CLAIMS OR COUNTERCLAIMS WHICH YOU OR CARR MAY SUBMIT TO ARBITRATION UNDER THIS AGREEMENT. YOU ARE NOT HOWEVER, WAIVING YOUR RIGHT TO ELECT INSTEAD TO PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER SECTION 14 OF THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE WHICH MAY BE ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A DISPUTE ARISES, YOU WILL BE NOTIFIED IF CARR INTENDS TO SUBMIT THE DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION OF THE COMMODITY EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A SECTION 14 "REPARATIONS" PROCEEDINGS BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM THE DATE OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION. YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT WITH CARR. See 17 CFR 1890.1-180.5. Acceptance of this arbitration agreement requires a separate signature on page 15. 25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL) Without its prior notice, Customer agrees that when Carr executes sell or buy orders on Customer's behalf, Carr, its directors, officers, employees, agents, affiliates, and any floor broker may take the other side of customer's transaction through any Account of such person subject to its being executed at prevailing prices in accordance with and subject to the limitations and conditions, if any, contained in applicable rules and regulations. 26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL) Without limiting other provisions herein, Carr is authorized to transfer from any segregated Account subject to the Commodity Exchange Act carried by Carr for the Customer to any other Account carried by Carr for the Customer such amount of excess funds as in Carr's judgment may be necessary at any time to avoid a margin call or to reduce a debit balance in said Account. It is understood that Carr will confirm in writing each such transfer of funds made pursuant to this authorization within a reasonable time after such transfer. 27. ELECTRONIC TRANSMISSION OF STATEMENTS (OPTIONAL) Customer elects and consents to receive transmission of statements of transactions and statements of account solely by electronic means, including without limitation, by electronic mail or facsimile. Customer shall not incur any costs or fees in connection with the receipt of such statements by electronic transmission. Customer shall receive such statements by electronic transmission until such time as it revokes its consent in writing to Carr. 28. SUBORDINATION AGREEMENT (Applies only to Accounts with funds held in foreign currencies) Funds of customers trading on United States contract markets may be held in accounts denominated in a foreign currency with depositories located outside or inside the United States or its territories if the customer is domiciled in a foreign country or if the funds are held in connection with contracts priced and settled in a foreign currency. Such accounts are subject to the risk that events could occur which hinder or prevent the availability of these funds for distribution to customers. Such accounts also may be subject to foreign currency exchange rate risks. If authorized below, Customer authorizes the deposit of funds into such depositories. For customer domiciled in the United States, this authorization permits the holding of funds in regulated accounts only if such funds are used to margin, guarantee, or secure positions in such contracts or accrue as a result of such positions. In order to avoid the possible dilution of other customer funds, a customer agrees by accepting this subordination agreement that his claims based on such funds will be subordinated as described below in the unlikely event both of the following conditions are met: (1) Carr is placed in receivership or bankruptcy, and (2) there are insufficient funds available for distribution denominated in the foreign currency as to which the customer has a claim to satisfy all claims against those funds. By initialing the Subordination Agreement below, Customer agrees that if both of the conditions listed above occur, its claim against Carr's assets attributable to funds held overseas in a particular foreign currency may be satisfied out of segregated customer funds held in accounts denominated in dollars or other foreign currencies only after each customer whose funds are held in dollars or in such other foreign currencies receives its pro-rata portion of such funds. It is further agreed that in no event may a customer whose funds are so held receive more than its pro-rata share of the aggregate pool consisting of funds held in dollars, funds held in the particular foreign currency, and non-segregated assets of Carr. OPTIONAL ELECTIONS/ACKNOWLEDGMENT The following provisions, which are set forth in this Agreement, need not be entered into to open the Account. Customer agrees that its optional elections are as follows: SIGNATURE REQUIRED FOR EACH ELECTION ARBITRATION AGREEMENT --------------------------------------- (Agreement Paragraph 24) (Date) CONSENT TO TAKE THE OTHER SIDE OF ORDERS (Agreement Paragraph 25) X /S/ MARK J. HAWLEY 12-1-97 --------------------------------------- (Date) AUTHORIZATION TO TRANSFER FUNDS (Agreement Paragraph 26) --------------------------------------- (Date) CONSENT TO RECEIVE STATEMENTS BY ELECTRONIC TRANSMISSION --------------------------------------- (Agreement Paragraph 27) (Date) ACKNOWLEDGMENT OF SUBORDINATION AGREEMENT (Agreement Paragraph 28) X /S/ MARK J. HAWLEY 12-1-97 ------------------------------------- (Required for accounts holding non-U.S. (Date) currency) HEDGE ELECTION [ ] Customer confirms that all transactions in the Account will represent bona fide hedging transactions, as defined by the Commodity Futures Trading Commission, unless Carr is notified otherwise not later than the time an order is placed for the Account: Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with respect to hedging transactions in the Account, that in the unlikely event of Carr's bankruptcy, it prefers that the bankruptcy trustee [check appropriate box]: A) [ ] Liquidate all open contracts without first seeking instructions either from or on behalf of Customer. B) [ ] Attempt to obtain instructions with respect to the disposition of all open contracts. (If neither box is checked, Customer shall be deemed to elect A).) ACKNOWLEDGMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS The undersigned hereby acknowledges its separate receipt from Carr, and its understanding of each of the following documents prior to opening of the Account: o Risk Disclosure Statement for Futures and Options o LME Risk Warning Notice o NYMEX ACCESS(SM) Risk Disclosure Statement o Globex(R)Customer Information and Risk Disclosure Statement o Project A(TM)Customer Information Statement o Questions & Answers on Flexible Options Trading at the CBOT o CME Average Pricing System Disclosure Statement o Special Notice to Foreign Brokers and Foreign Traders REQUIRED SIGNATURES CUSTOMER The undersigned has received, read, understands and agrees to all the provisions of this Agreement and the separate risk disclosure statements enumerated above and agrees to promptly notify Carr in writing if any of the warranties and representations contained herein become inaccurate or in any way cease to be true, complete and correct. Dean Witter World Currency Fund L.P. - - -------------------------------------------------------------------------------- Customer name(s) By: DEMETER MANAGEMENT CORPORATION By: /s/ Mark J. Hawley December 1, 1997 - - -------------------------------------------------------------------------------- Authorized signature(s) Date Mark J. Hawley, President - - -------------------------------------------------------------------------------- [If applicable, print name and title of signatory] CARR FUTURES INC. Accepted and Agreed: Carr Futures Inc. By: /s/ Bruce A. Beatus By: /s/ Susan Schultz -------------------------------- -------------------------------- Title: Bruce A. Beatus, General Counsel Title: Associate General Counsel -------------------------------- -------------------------------- Date: December 1, 1997 Date: December 1, 1997 -------------------------------- -------------------------------- EX-10.02 3 INTERNATIONAL FOREIGN EXCHANGE MASTER AGREEMENT CARR FUTURES INC. 10 South Wacker Drive, Suite 1100 Chicago, IL 60606 Facsimile (312) 441-4201 INTERNATIONAL FOREIGN EXCHANGE MASTER AGREEMENT MASTER AGREEMENT dated as of August 1, 1997, by and between CARR FUTURES INC., a Delaware corporation and DEAN WITTER WORLD CURRENCY FUND L.P. SECTION 1. DEFINITIONS Unless otherwise required by the context, the following terms shall have the following meanings in the Agreement: "Agreement" has the meaning given to it in Section 2.2. "Base Currency", as to a Party, means the Currency agreed to as such in relation to it in Part VII of the Schedule. "Business Day" means for purposes of: (i) clauses (i), (viii) and (xii) of the definition of Event of Default, a day which is a Local Banking Day for the Non-Defaulting Party; (ii) solely in relation to delivery of a Currency, a day which is a Local Banking Day in relation to that Currency; and (iii) any other provision of the Agreement, a day which is a Local Banking Day for the applicable Designated Offices of both Parties; provided, however, that neither Saturday nor Sunday shall be considered a Business Day for any purpose. "Close-Out Amount" has the meaning given to it in Section 5.1. "Close-Out Date" means a day on which, pursuant to the provisions of Section 5.1, the Non-Defaulting Party closes out Currency Obligations or such a close-out occurs automatically. "Closing Gain", as to the Non-Defaulting Party, means the difference described as such in relation to a particular Value Date under the provisions of Section 5.1. "Closing Loss", as to the Non-Defaulting Party, means the difference described as such in relation to a particular Value Date under the provisions of Section 5.1. "Confirmation" means a writing (including telex, facsimile, or other electronic means from which it is possible to produce a hard copy) evidencing an FX Transaction, and specifying: (i) the Parties thereto and their Designated Offices through which they are respectively acting, (ii) the amounts of the Currencies being bought or sold and by which Party, (iii) the Value Date, and (iv) any other term generally included in such a writing in accordance with the practice of the relevant foreign exchange market. "Credit Support" has the meaning given to it in Section 5.2. "Credit Support Document", as to a Party (the "first Party"), means a guaranty, hypothecation agreement, margin or security agreement or document, or any other document containing an obligation of a third party ("Credit Support Provider") or of the first Party in favor of the other Party supporting any obligations of the first Party under the Agreement. "Credit Support Provider" has the meaning given to it in the definition of Credit Support Document. "Currency" means money denominated in the lawful currency of any country or the Ecu. "Currency Obligation" means any obligation of a Party to deliver a Currency pursuant to an FX Transaction or the application of Section 3.3(a) or (b). "Custodian" has the meaning given to it in the definition of Insolvency Proceeding. "Defaulting Party" has the meaning given to it in the definition of Event of Default. "Designated Office(s)", as to a Party, means the office or offices specified in Part II of the Schedule. "Effective Date" means the date of this Master Agreement. "Event of Default" means the occurrence of any of the following with respect to a Party (the "Defaulting Party", the other Party being the "Non-Defaulting Party"): (i) the Defaulting Party shall (A) default in any payment when due under the Agreement to the Non-Defaulting Party with respect to any Currency Obligation and such failure shall continue for two (2) Business Days after the Non-Defaulting Party has given the Defaulting Party written notice of non-payment, or (B) fail to perform or comply with any other obligation assumed by it under the Agreement and such failure is continuing thirty (30) days after the Non-Defaulting Party has given the Defaulting Party written notice thereof; (ii) the Defaulting Party shall commence a voluntary Insolvency Proceeding or shall take any corporate action to authorize any such Insolvency Proceeding; (iii) a governmental authority or self-regulatory organization having jurisdiction over either the Defaulting Party or its assets in the country of its organization or principal office (A) shall commence an Insolvency Proceeding with respect to the Defaulting Party or its assets or (B) shall take any action under any bankruptcy, insolvency or other similar law or any banking, insurance or similar law or regulation governing the operation of the Defaulting Party which may prevent the Defaulting Party from performing its obligations under the Agreement as and when due; (iv) an involuntary Insolvency Proceeding shall be commenced with respect to the Defaulting Party or its assets by a person other than a governmental authority or self-regulatory organization having jurisdiction over either the Defaulting Party or its assets in the country of its organization or principal office and such Insolvency Proceeding (A) results in the appointment of a Custodian or a judgment of insolvency or bankruptcy or the entry of an order for winding-up, liquidation, reorganization or other similar relief, or (B) is not dismissed within five (5) days of its institution or presentation; (v) the Defaulting Party is bankrupt or insolvent, as defined under any bankruptcy or insolvency law applicable to it; (vi) the Defaulting Party fails, or shall otherwise be unable, to pay its debts as they become due; (vii) the Defaulting Party or any Custodian acting on behalf of the Defaulting Party shall disaffirm, disclaim or repudiate any Currency Obligation; (viii) any representation or warranty made or given or deemed made or given by the Defaulting Party pursuant to the Agreement or any Credit Support Document shall prove to have been false or misleading in any material respect as at the time it was made or given or deemed made or given and one (1) Business Day has elapsed after the Non-Defaulting Party has given the Defaulting Party written notice thereof; (ix) the Defaulting Party consolidates or amalgamates with or merges into or transfers all or substantially all its assets to another entity and (A) the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of the Defaulting Party prior to such action, or (B) at the time of such consolidation, amalgamation, merger or transfer the resulting, surviving or transferee entity fails to assume all the obligations of the Defaulting Party under the Agreement by operation of law or pursuant to an agreement satisfactory to the Non-Defaulting Party; (x) by reason of any default, or event of default or other similar condition or event, any Specified Indebtedness (being Specified Indebtedness of an amount which, when expressed in the Currency of the Threshold Amount, is in aggregate equal to or in excess of the Threshold Amount) of the Defaulting Party or any Credit Support Provider in relation to it: (A) is not paid on the due date therefor and remains unpaid after any applicable grace period has elapsed, or (B) becomes, or becomes capable at any time of being declared, due and payable under agreements or instruments evidencing such Specified Indebtedness before it would otherwise have been due and payable; (xi) the Defaulting Party is in breach of or default under any Specified Transaction and any applicable grace period has elapsed, and there occurs any liquidation or early termination of, or acceleration of obligations under, that Specified Transaction or the Defaulting Party (or any Custodian on its behalf) disaffirms, disclaims or repudiates the whole or any part of a Specified Transaction; (xii) (A) any Credit Support Provider of the Defaulting Party or the Defaulting Party itself fails to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with the applicable Credit Support Document and such failure is continuing after any applicable grace period has elapsed; (B) any Credit Support Document relating to the Defaulting Party expires or ceases to be in full force and effect prior to the satisfaction of all obligations of the Defaulting Party under the Agreement, unless otherwise agreed in writing by the Non-Defaulting Party; (C) the Defaulting Party or any Credit Support Provider of the Defaulting Party (or, in either case, any Custodian acting on its behalf) disaffirms, disclaims or repudiates, in whole or in part, or challenges the validity of, any Credit Support Document; (D) any representation or warranty made or given or deemed made or given by any Credit Support Provider of the Defaulting Party pursuant to any Credit Support Document shall prove to have been false or misleading in any material respect as at the time it was made or given or deemed made or given and one (1) Business Day has elapsed after the Non-Defaulting Party has given the Defaulting Party written notice thereof; or (E) any event set out in (ii) to (vii) or (ix) to (xi) above occurs in respect of any Credit Support Provider of the Defaulting Party; or (xiii) any other condition or event specified in Part IX of the Schedule or in Section 8.14 if made applicable to the Agreement in Part XI of the Schedule. "FX Transaction" means any transaction between the Parties for the purchase by one Party of an agreed amount in one Currency against the sale by it to the other of an agreed amount in another Currency, both such amounts either being deliverable on the same Value Date or, if the Parties have so agreed in Part VI of the Schedule, being cash-settled in a single Currency, which is or shall become subject to the Agreement and in respect of which transaction the Parties have agreed (whether orally, electronically or in writing): the Currencies involved, the amounts of such Currencies to be purchased and sold, which Party will purchase which Currency and the Value Date. "Insolvency Proceeding" means a case or proceeding seeking a judgment of or arrangement for insolvency, bankruptcy, composition, rehabilitation, reorganization, administration, winding-up, liquidation or other similar relief with respect to the Defaulting Party or its debts or assets, or seeking the appointment of a trustee, receiver, liquidator, conservator, administrator, custodian or other similar official (each, a "Custodian") of the Defaulting Party or any substantial part of its assets, under any bankruptcy, insolvency or other similar law or any banking, insurance or similar law governing the operation of the Defaulting Party. "LIBOR", with respect to any Currency and date, means the average rate at which deposits in the Currency for the relevant amount and time period are offered by major banks in the London interbank market as of 11:00 a.m. (London time) on such date, or, if major banks do not offer deposits in such Currency in the London interbank market on such date, the average rate at which deposits in the Currency for the relevant amount and time period are offered by major banks in the relevant foreign exchange market at such time on such date as may be determined by the Party making the determination. "Local Banking Day" means (i) for any Currency, a day on which commercial banks effect deliveries of that Currency in accordance with the market practice of the relevant foreign exchange market, and (ii) for any Party, a day in the location of the applicable Designated Office of such Party on which commercial banks in that location are not authorized or required by law to close. "Master Agreement" means the terms and conditions set forth in this Master Agreement, including the Schedule. "Matched Pair Novation Netting Office(s)", in respect of a Party, means the Designated Office(s) specified in Part V of the Schedule. "Non-Defaulting Party" has the meaning given to it in the definition of Event of Default. "Novation Netting Office(s)", in respect of a Party, means the Designated Office(s) specified in Part V of the Schedule. "Parties" means the parties to the Agreement, including their successors and permitted assigns (but without prejudice to the application of clause (ix) of the definition Event of Default); and the term "Party" shall mean whichever of the Parties is appropriate in the context in which such expression may be used. "Proceedings" means any suit, action or other proceedings relating to the Agreement or any FX Transaction. "Schedule" means the Schedule attached to and part of this Master Agreement, as it may be amended from time to time by agreement of the Parties. "Settlement Netting Office(s)", in respect of a Party, means the Designated Office(s) specified in Part V of the Schedule. "Specified Indebtedness" means any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money, other than in respect of deposits received. "Specified Transaction" means any transaction (including an agreement with respect thereto) between one Party to the Agreement (or any Credit Support Provider of such Party) and the other Party to the Agreement (or any Credit Support Provider of such Party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity linked swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination of any of the foregoing transactions. "Spot Date" means the spot delivery day for the relevant pair of Currencies as generally used by the relevant foreign exchange market. "Threshold Amount" means the amount specified as such for each Party in Part VIII of the Schedule. "Value Date" means, with respect to any FX Transaction, the Business Day (or where market practice in the relevant foreign exchange market in relation to the two Currencies involved provides for delivery of one Currency on one date which is a Local Banking Day in relation to that Currency but not to the other Currency and for delivery of the other Currency on the next Local Banking Day in relation to that other Currency ("Split Settlement") the two (2) Local Banking Days in accordance with that market practice) agreed by the Parties for delivery of the Currencies to be purchased and sold pursuant to such FX Transaction, and, with respect to any Currency Obligation, the Business Day (or, in the case of Split Settlement, Local Banking Day) upon which the obligation to deliver Currency pursuant to such Currency Obligation is to be performed. SECTION 2. FX TRANSACTIONS 2.1 Scope of the Agreement. The Parties (through their respective Designated Offices) may enter into FX Transactions, for such quantities of such Currencies, as may be agreed subject to the terms of the Agreement; provided that neither Party shall be required to enter into any FX Transaction with the other Party. Unless otherwise agreed in writing by the Parties, each FX Transaction entered into between Designated Offices of the Parties on or after the Effective Date shall be governed by the Agreement. Each FX Transaction between any two Designated Offices of the Parties outstanding on the Effective Date which is identified in Part I of the Schedule shall also be governed by the Agreement. 2.2 Single Agreement. This Master Agreement, the terms agreed between the Parties with respect to each FX Transaction (and, to the extent recorded in a Confirmation, each such Confirmation), and all amendments to any of such items shall together form the agreement between the Parties (the "Agreement") and shall together constitute a single agreement between the Parties. The Parties acknowledge that all FX Transactions are entered into in reliance upon such fact, it being understood that the Parties would not otherwise enter into any FX Transaction. 2.3 Confirmations. FX Transactions shall be promptly confirmed by the Parties by Confirmations exchanged by mail, telex, facsimile or other electronic means from which it is possible to produce a hard copy. The failure by a Party to issue a Confirmation shall not prejudice or invalidate the terms of any FX Transaction. 2.4 Inconsistencies. In the event of any inconsistency between the provisions of the Schedule and the other provisions of the Agreement, the Schedule will prevail. In the event of any inconsistency between the terms of a Confirmation and the other provisions of the Agreement, the other provisions of the Agreement shall prevail, and the Confirmation shall not modify the other terms of the Agreement. SECTION 3. SETTLEMENT AND NETTING 3.1 Settlement. Subject to Sections 3.2 and 3.3, each Party shall deliver to the other Party the amount of the Currency to be delivered by it under each Currency Obligation on the Value Date for such Currency Obligation. 3.2 Settlement Netting. If, on any date, more than one delivery of a particular Currency under Currency Obligations is to be made between a pair of Settlement Netting Offices, then each Party shall aggregate the amounts of such Currency deliverable by it and only the difference between these aggregate amounts shall be delivered by the Party owing the larger aggregate amount to the other Party, and, if the aggregate amounts are equal, no delivery of the Currency shall be made. 3.3 Novation Netting. (a) By Currency. If the Parties enter into an FX Transaction through a pair of Novation ------------ Netting Offices giving rise to a Currency Obligation for the same Value Date and in the same Currency as a then existing Currency Obligation between the same pair of Novation Netting Offices, then immediately upon entering into such FX Transaction, each such Currency Obligation shall automatically and without further action be individually canceled and simultaneously replaced by a new Currency Obligation for such Value Date determined as follows: the amounts of such Currency that would otherwise have been deliverable by each Party on such Value Date shall be aggregated and the Party with the larger aggregate amount shall have a new Currency Obligation to deliver to the other Party the amount of such Currency by which its aggregate amount exceeds the other Party's aggregate amount, provided that if the aggregate amounts are -------- equal, no new Currency Obligation shall arise. This Section 3.3 shall not affect any other Currency Obligation of a Party to deliver any different Currency on the same Value Date. (b) By Matched Pair. If the Parties enter into an FX Transaction between a pair of Matched Pair Novation Netting Offices then the provisions of Section 3.3(a) shall apply only in respect of Currency Obligations arising by virtue of FX Transactions entered into between such pair of Matched Pair Novation Netting Offices and involving the same pair of Currencies and the same Value Date. 3.4 General. (a) Inapplicability of Sections 3.2 and 3.3. The provisions of Sections 3.2 and 3.3 shall not apply if a Close-Out Date has occurred or a voluntary or involuntary Insolvency Proceeding or action of the kind described in clause (ii), (iii) or (iv) of the definition of Event of Default has occurred without being dismissed in relation to either Party. (b) Failure to Record. The provisions of Section 3.3 shall apply notwithstanding that either Party may fail to record the new Currency Obligations in its books. (c) Cutoff Date and Time. The provisions of Section 3.3 are subject to any cut-off date and cut-off time agreed between the applicable Novation Netting Offices and Matched Pair Novation Netting Offices of the Parties. SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS 4.1 Representations and Warranties. Each Party represents and warrants to the other Party as of the Effective Date and as of the date of each FX Transaction that: (i) it has authority to enter into the Agreement (including such FX Transaction); (ii) the persons entering into the Agreement (including such FX Transaction) on its behalf have been duly authorized to do so; (iii) the Agreement (including such FX Transaction) is binding upon it and enforceable against it in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and applicable principles of equity) and does not and will not violate the terms of any agreements to which such Party is bound; (iv) no Event of Default, or event which, with notice or lapse of time or both, would constitute and Event of Default, has occurred and is continuing with respect to it; and (v) it acts as principal in entering into each FX Transaction; and (vi) if the Parties have so specified in Part XV of the Schedule, it makes the representations and warranties set forth in such Part XV. 4.2 Covenants. Each Party covenants to the other Party that: (i) it will at all times obtain and comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required to enable it lawfully to perform its obligations under the Agreement; (ii) it will promptly notify the other Party of the occurrence of any Event of Default with respect to itself or any Credit Support Provider in relation to it; and (iii) if the Parties have set forth additional covenants in Part XVI of the Schedule, it makes the covenants set forth in such Part XVI. SECTION 5 CLOSE-OUT AND LIQUIDATION 5.1 Manner of Close-Out and Liquidation. (a) Close-Out. If an Event of Default has occurred and is continuing, then the Non-Defaulting Party shall have the right to close-out all, but not less than all, outstanding Currency Obligations (including any Currency Obligation which has not been performed and in respect of which the Value Date is on or precedes the Close-Out Date) except to the extent that in the good faith opinion of the Non-Defaulting Party certain of such Currency Obligations may not be closed-out under applicable law. Such close-out shall be effective upon receipt by the Defaulting Party of notice that the Non-Defaulting Party is terminating such Currency Obligations. Notwithstanding the foregoing, unless otherwise agreed by the Parties in Part X of the Schedule, in the case of an Event of Default in clause (ii), (iii) or (iv) of the definition thereof with respect to a Party and, if agreed by the Parties in Part IX of the Schedule, in the case of any other Event of Default specified and so agreed in Part IX with respect to a Party, close-out shall be automatic as to all outstanding Currency Obligations, as of the time immediately preceding the institution of the relevant Insolvency Proceeding or action. The Non-Defaulting Party shall have the right to liquidate such closed-out Currency Obligations as provided below. (b) Liquidation. Liquidation of Currency Obligations terminated by close-out shall be effected as follows: (i) Calculating Closing Gain or Loss. The Non-Defaulting Party shall calculate in good faith, with respect to each such terminated Currency Obligation, except to the extent that in the good faith opinion of the Non-Defaulting Party certain of such Currency Obligations may not be liquidated as provided herein under applicable law, as of the Close-Out Date or as soon thereafter as reasonably practicable, the Closing Gain, or, as appropriate, the Closing Loss, as follows: (A) for each Currency Obligation calculate a "Close-Out Amount" as follows: (1) in the case of a Currency Obligation whose Value Date is the same as or is later than the Close-Out Date, the amount of such Currency Obligation; or (2) in the case of a Currency Obligation whose Value Date precedes the Close-Out Date, the amount of such Currency Obligation increased, to the extent permitted by applicable law, by adding interest thereto from and including the Value Date to but excluding the Close-Out Date at overnight LIBOR; and (3) for each such amount in a Currency other than the Non-Defaulting Party's Base Currency, convert such amount into the Non-Defaulting Party's Base Currency at the rate of exchange at which, at the time of the calculation, the Non-Defaulting Party can buy such Base Currency with or against the Currency of the relevant Currency Obligation for delivery (x) if the Value Date of such Currency Obligation is on or after the Spot Date as of such time of calculation for the Base Currency, on the Value Date of that Currency Obligation or (y) if such Value Date precedes such Spot Date, for delivery on such Spot Date (or, in either case, if such rate of exchange is not available, conversion shall be accomplished by the Non-Defaulting Party using any commercially reasonable method); and (B) determine in relation to each Value Date: (1) the sum of all Close-Out Amounts relating to Currency Obligations under which the Non-Defaulting Party would otherwise have been entitled to receive the relevant amount on that Value Date; and (2) the sum of all Close-Out Amounts relating to Currency Obligations under which the Non-Defaulting Party would otherwise have been obliged to deliver the relevant amount to the Defaulting Party on that Value Date; and (C) if the sum determined under (B)(1) is greater than the sum determined under (B)(2), the difference shall be the Closing Gain for such Value Date; if the sum determined under (B)(1) is less than the sum determined under (B)(2), the difference shall be the Closing Loss for such Value Date. (ii) Determining Present Value. To the extent permitted by applicable law, the Non-Defaulting Party shall adjust the Closing Gain or Closing Loss for each Value Date falling after the Close-Out Date to present value by discounting the Closing Gain or Closing Loss from and including the Value Date to but excluding the Close-Out Date, at LIBOR with respect to the Non-Defaulting Party's Base Currency as at the Close-Out Date or at such other rate as may be prescribed by applicable law. (iii) Netting. The Non-Defaulting Party shall aggregate the following amounts so that all such amounts are netted into a single liquidated amount payable to or by the Non-Defaulting Party: (x) the sum of the Closing Gains for all Value Dates (discounted to present value, where appropriate, in accordance with the provisions of Section 5.1(b)(ii)) (which for the purposes of this aggregation shall be a positive figure); and (y) the sum of the Closing Losses for all Value Dates (discounted to present value, where appropriate, in accordance with the provisions of Section 5.1(b)(ii)) (which for the purposes of the aggregation shall be a negative figure). (iv) Settlement Payment. If the resulting net amount is positive, it shall be payable by the Defaulting Party to the Non-Defaulting Party, and if it is negative, then the absolute value of such amount shall be payable by the Non-Defaulting Party to the Defaulting Party. 5.2 Set-Off Against Credit Support. Where close-out and liquidation occurs in accordance with Section 5.1, the Non-Defaulting Party shall also be entitled (i) to set off the net payment calculated in accordance with Section 5.1(b)(iv) which the Non-Defaulting Party owes to the Defaulting Party, if any, against any credit support or other collateral ("Credit Support") held by the Defaulting Party pursuant to a Credit Support Document or otherwise (including the liquidated value of any non-cash Credit Support) in respect of the Non-Defaulting Party's obligations under the Agreement or (ii) to set off the net payment calculated in accordance with Section 5.1(b)(iv) which the Defaulting Party owes to the Non-Defaulting Party, if any, against any Credit Support held by the Non-Defaulting Party (including the liquidated value of any non-cash Credit Support) in respect of the Defaulting Party's obligations under the Agreement; provided that, for purposes of either such set-off, any Credit Support denominated in a Currency other than the Non-Defaulting Party's Base Currency shall be converted into such Base Currency at the spot price determined by the Non-Defaulting Party at which, at the time of calculation, the Non-Defaulting Party could enter into a contract in the foreign exchange market to buy the Non-Defaulting Party's Base Currency in exchange for such Currency. 5.3 Other Foreign Exchange Transactions. Where close-out and liquidation occurs in accordance with Section 5.1, the Non-Defaulting Party shall also be entitled to close-out and liquidate, to the extent permitted by applicable law, any other foreign exchange transaction entered into between the Parties which is then outstanding in accordance with provisions of Section 5.1, with each obligation of a Party to deliver a Currency under such a foreign exchange transaction being treated as if it were a Currency Obligation under the Agreement. 5.4 Payment and Late Interest. The net amount payable by one Party to the other Party pursuant to the provisions of Sections 5.1 and 5.3 above shall be paid by the close of business on the Business Day following the receipt by the Defaulting Party of notice of the Non-Defaulting Party's settlement calculation, with interest at overnight LIBOR from and including the Close-Out Date to but excluding such Business Day (and converted as required by applicable law into any other Currency, any costs of conversion to be borne by, and deducted from any payment to, the Defaulting Party). To the extent permitted by applicable law, any amounts owed but not paid when due under this Section 5 shall bear interest at overnight LIBOR (or, if conversion is required by applicable law into some other Currency, either overnight LIBOR with respect to such other Currency or such other rate as may be prescribed by such applicable law) for each day for which such amount remains unpaid. Any addition of interest or discounting required under this Section 5 shall be calculated on the basis of a year of such number of days as is customary for transactions involving the relevant Currency in the relevant foreign exchange market. 5.5 Suspension of Obligations. Without prejudice to the foregoing, so long as a Party shall be in default in payment or performance to the other Party under the Agreement and the other Party has not exercised its rights under this Section 5, or, if "Adequate Assurances" is specified as applying to the Agreement in Part XI of the Schedule, during the pendency of a reasonable request to a Party for adequate assurances of its ability to perform its obligations under the Agreement, the other Party may, at its election and without penalty, suspend its obligation to perform under the Agreement. 5.6 Expenses. The Defaulting Party shall reimburse the Non-Defaulting Party in respect of all out-of-pocket expenses incurred by the Non-Defaulting Party (including fees and disbursements of counsel, including attorneys who may be employees of the Non-Defaulting Party) in connection with any reasonable collection or other enforcement proceedings related to the payments required under the Agreement. 5.7 Reasonable Pre-Estimate. The Parties agree that the amounts recoverable under this Section 5 are a reasonable pre-estimate of loss and not a penalty. Such amounts are payable for the loss of bargain and the loss of protection against future risks and, except as otherwise provided in the Agreement, neither Party will be entitled to recover any additional damages as a consequence of such losses. 5.8 No Limitation of Other Rights; Set-Off. The Non-Defaulting Party's rights under this Section 5 shall be in addition to, and not in limitation or exclusion of, any other rights which the Non-Defaulting Party may have (whether by agreement, operation of law or otherwise), and, to the extent not prohibited by law, the Non-Defaulting Party shall have a general right of set-off with respect to all amounts owed by each Party to the other Party, whether due and payable or not due and payable (provided that any amount not due and payable at the time of such set-off shall, if appropriate, be discounted to present value in a commercially reasonable manner by the Non-Defaulting Party). The Non-Defaulting Party's rights under this Section 5.8 are subject to Section 5.7. SECTION 6. FORCE MAJEURE, ACT OF STATE, ILLEGALITY OR IMPOSSIBILITY 6.1 Force Majeure, Act of State, Illegality or Impossibility. If either Party is prevented from or hindered or delayed by reason of force majeure or act of state in the delivery or receipt of any Currency in respect of a Currency Obligation or if it becomes or, in the good faith judgment of one of the Parties, may become unlawful or impossible for either Party to make or receive any payment in respect of a Currency Obligation, then the Party for whom such performance has been prevented, hindered or delayed or has become illegal or impossible shall promptly give notice thereof to the other Party and either Party may, by notice to the other Party, require the close-out and liquidation of each affected Currency Obligation in accordance with the provisions of Sections 5.1 and, for such purposes, the Party unaffected by such force majeure, act of state, illegality or impossibility (or, if both Parties are so affected, whichever Party gave the relevant notice) shall perform the calculation required under Section 5.1 as if it were the Non-Defaulting Party. Nothing in this Section 6.1 shall be taken as indicating that the Party treated as the Defaulting Party for the purpose of calculations required by Section 5.1 has committed any breach or default. 6.2 Transfer to Avoid Force Majeure, Act of State, Illegality or Impossibility. If Section 6.1 becomes applicable, unless prohibited by law, the Party which has been prevented, hindered or delayed from performing shall, as a condition to its right to designate a close-out and liquidation of any affected Currency Obligation, use all reasonable efforts (which will not require such Party to incur a loss, excluding immaterial, incidental expenses) to transfer as soon as practicable, and in any event before twenty (20) days after it gives notice under Section 6.1, all its rights and obligations under the Agreement in respect of the affected Currency Obligations to another of its Designated Offices so that such force majeure, act of state, illegality or impossibility ceases to exist. Any such transfer will be subject to the prior written consent of the other Party, which consent will not be withheld if such other Party's policies in effect at such time would permit it to enter into transactions with the transferee Designated Office on the terms proposed, unless such transfer would cause the other Party to incur a material tax or other cost. SECTION 7. PARTIES TO RELY ON THEIR OWN EXPERTISE Each Party will be deemed to represent to the other Party on the date on which it enters into an FX Transaction that (absent a written agreement between the Parties that expressly imposes affirmative obligations to the contrary for that FX Transaction): (i)(A) it is acting for its own account, and it has made its own independent decisions to enter into that FX Transaction and as to whether that FX Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary; (B) it is not relying on any communication (written or oral) of the other Party as investment advice or as a recommendation to enter into that FX Transaction, it being understood that information and explanations related to the terms and conditions of an FX Transaction shall not be considered investment advice or a recommendation to enter into that FX Transaction; and (C) it has not received from the other Party any assurance or guarantee as to the expected results of that FX Transaction; (ii) it is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that FX Transaction; and (iii) the other Party is not acting as a fiduciary or an advisor for it in respect of that FX Transaction. SECTION 8. MISCELLANEOUS 8.1 Currency Indemnity. The receipt or recovery by either Party (the "first Party") of any amount in respect of an obligation of the other Party (the "second Party") in a Currency other than that in which such amount was due, whether pursuant to a judgment of any court or pursuant to Section 5 or 6, shall discharge such obligation only to the extent that, on the first day on which the first Party is open for business immediately following such receipt or recovery, the first Party shall be able, in accordance with normal banking practice, to purchase the Currency in which such amount was due with the Currency received or recovered. If the amount so purchasable shall be less than the original amount of the Currency in which such amount was due, the second Party shall, as a separate obligation and notwithstanding any judgment of any court, indemnify the first Party against any loss sustained by it. The second Party shall in any event indemnify the first Party against any costs incurred by it in making any such purchase of Currency. 8.2 Assignment. Neither Party may assign, transfer or charge or purport to assign, transfer or charge its rights or its obligations under the Agreement to a third party without the prior written consent of the other Party and any purported assignment, transfer or charge in violation of this Section 8.2 shall be void. 8.3 Telephonic Recording. The Parties agree that each Party and its agents may electronically record all telephonic conversations between them and that any such recordings may be submitted in evidence to any court or in any Proceedings for the purpose of establishing any matters pertinent to the Agreement. 8.4 Notices. Unless otherwise agreed, all notices, instructions and other communications to be given to a Party under the Agreement shall be given to the address, telex (if confirmed by the appropriate answerback), facsimile (confirmed if requested) or telephone number and to the individual or department specified by such Party in Part III of the Schedule. Unless otherwise specified, any notice, instruction or other communication given in accordance with this Section 8.4 shall be effective upon receipt. 8.5 Termination. Each of the Parties may terminate the Agreement at any time by seven (7) days' prior written notice to the other Party delivered as prescribed in Section 8.4, and termination shall be effective at the end of such seventh day; provided, however, that any such termination shall not affect any outstanding Currency Obligations, and the provisions of the Agreement shall continue to apply until all the obligations of each Party to the other under the Agreement have been fully performed. 8.6 Severability. In the event any one or more of the provisions contained in the Agreement should be held invalid, illegal or unenforceable in any respect under the law of any jurisdiction, the validity, legality and enforceability of the remaining provisions contained in the Agreement under the law of such jurisdiction, and the validity, legality and enforceability of such and any other provisions under the law of any other jurisdiction shall not in any way be affected or impaired thereby. The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 8.7 No Waiver. No indulgence or concession granted by a Party and no omission or delay on the part of a Party in exercising any right, power or privilege under the Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 8.8 Master Agreement. Where one of the Parties to the Agreement is domiciled in the United States, the Parties intend that the Agreement shall be a master agreement, as referred to in 11 U.S.C. Section 101(53B)(C) and 12 U.S.C. Section 1821(e)(8)(D)(vii). 8.9 Time of Essence. Time shall be of the essence in the Agreement. 8.10 Headings. Headings in the Agreement are for ease of reference only. 8.11 Payments Generally. All payments to be made under the Agreement shall be made in same day (or immediately available) and freely transferable funds and, unless otherwise specified, shall be delivered to such office of such bank, and in favor of such account as shall be specified by the Party entitled to receive such payment in Part IV of the Schedule or in a notice given in accordance with Section 8.4. 8.12 Amendments. No amendment, modification or waiver of the Agreement will be effective unless in writing executed by each of the Parties. 8.13 Credit Support. A Credit Support Document between the Parties may apply to obligations governed by the Agreement. If the Parties have executed a Credit Support Document, such Credit Support Document shall be subject to the terms of the Agreement and is hereby incorporated by reference in the Agreement. In the event of any conflict between a Credit Support Document and the Agreement, the Agreement shall prevail, except for any provision in such Credit Support Document in respect of governing law. 8.14 Adequate Assurances. If the Parties have so agreed in Part XI of the Schedule, the failure by a Party to give adequate assurances of its ability to perform any of its obligations under the Agreement within two (2) Business Days of a written request to do so when the other Party has reasonable grounds for insecurity shall be an Event of Default under the Agreement. 8.15 Correction of Confirmations. Unless either Party objects to the terms contained in any Confirmation sent by the other Party or sends a corrected Confirmation within three (3) Business Days of receipt of such Confirmation, or such shorter time as may be appropriate given the Value Date of the FX Transaction, the terms of such Confirmation shall be deemed correct and accepted absent manifest error. If the Party receiving a Confirmation sends a corrected Confirmation within such three (3) Business Days, or shorter period, as appropriate, then the Party receiving such corrected Confirmation shall have three (3) Business Days, or shorter period, as appropriate, after receipt thereof to object to the terms contained in such corrected Confirmation. SECTION 9. LAW AND JURISDICTION 9.1 Governing Law. The Agreement shall be governed by, and construed in accordance with the laws of the jurisdiction set forth in Part XII of the Schedule without giving effect to conflict of laws principles. 9.2 Consent to Jurisdiction. (a) With respect to any Proceedings, each Party irrevocably (i) submits to the non-exclusive jurisdiction of the courts of the jurisdiction set forth in Part XIII of the Schedule and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have jurisdiction over such Party. Nothing in the Agreement precludes either Party from bringing Proceedings in any other jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (b) Each Party irrevocably appoints the agent for service of process (if any) specified with respect to it in Part XIV of the Schedule. If for any reason any Party's process agent is unable to act as such, such Party will promptly notify the other Party and within thirty (30) days will appoint a substitute process agent acceptable to the other Party. 9.3 Waiver of Jury Trial. Each Party irrevocably waives any and all right to trial by jury in any Proceedings. 9.4 Waiver of Immunities. Each Party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any courts, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. IN WITNESS WHEREOF, the Parties have caused the Agreement to be duly executed by their respective authorized officers as of the date first written above. CARR FUTURES INC. By /s/ Lawrence P. Anderson --------------------------------------------- Name: Lawrence P. Anderson Title: Executive Vice President DEAN WITTER WORLD CURRENCY FUND L.P. By Demeter Management Corporation General Partner By /s/ Mark Hawley ------------------------------------------- Name: Mark Hawley Title: President SCHEDULE Schedule to the International Foreign Exchange Master Agreement dated as of August 1, 1997 between Dean Witter World Currency Fund L.P. ("Party A") and Carr Futures Inc. ("Party B"). Part I. Scope of Agreement The Agreement shall apply to all foreign exchange transactions outstanding between any two Designated Offices of the Parties on the Effective Date. It shall be understood that Party A shall typically be conducting its foreign exchange transactions under the Agreement through its Trading Advisors who shall be disclosed by Party A to Party B from time to time by notice. The Trading Advisors will act as Party A's agents for all purposes hereunder until further notice. Part II. Designated Offices Each of the following shall be a Designated Office: Party A: c/o Demeter Management Corporation Two World Trade Center 62nd Floor New York, NY 10048 Attn: Robert E. Murray Telephone No.: (212) 392-7404 Facsimile No.: (212) 392-2804 Party B: Carr Futures Inc. One World Trade Center 92nd Floor New York, NY 10048 Attn: David Mangold Telephone No.: (212) 453-6365 Facsimile No.: (212) 453-6361 Part III. Notices: If sent to Party A: Address: c/o Demeter Management Corporation Two World Trade Center, 62nd Floor New York, New York 10048 Telephone Number: (212) 392-7404 Facsimile Number: (212) 392-2804 Name of Individual or Department to whom Notices are to be sent: Robert E. Murray With copies to Party A's designated Trading Advisors. If sent to Party B: Address: Carr Futures Inc. One World Trade Center New York, New York 10048 Telephone Number: (212) 453-6365 Facsimile Number: (212) 453-6361 Name of Individual or Department to whom Notices are to be sent: David Mangold Part IV. Payment Instructions Name of Bank and Office, Account Number and Reference with respect to relevant Currencies:
Party A Party B Citibank, N.A. Harris Trust & Savings Bank, Chicago ABA: 021-000089 ABA: 071.000.288 Account Name: Dean Witter For the Account of Carr Futures Inc., Reynolds, Inc. Chicago Customer Segregated Account No. 40611164 Account No. 203-908-9 FFC: Dean Witter World FFC: Dean Witter World Currency Fund L.P., Currency Fund L.P., Account # (As Party B is notified Account # (As Party A is notified from time to time) from time to time)
Part V. Netting A. Settlement Netting Offices Each of the following shall be a Settlement Netting Office: Party A: Same as in Part II. Party B: Same as in Part II. B. Novation Netting Offices Each of the following shall be a Novation Netting Office: Party A: Same as in Part V-A. Party B: Same as in Part V-A. . C. Matched Pair Novation Netting Offices Each of the following shall be a Matched Pair Novation Netting Office: Party A: Not Applicable. Party B: Not Applicable. . Part VI. Cash Settlement of FX Transactions The following provision shall apply: The definition of FX Transaction in Section 1 shall include foreign exchange transactions for the purchase and sale of one Currency against another but which shall be settled by the delivery of only one Currency based on the difference between exchange rates as agreed by the Parties as evidenced in a Confirmation. Section 3.1 is modified so that only one Currency shall be delivered for any such FX Transaction in accordance with the formula agreed by the Parties. Section 5.1(b)(i)(A) is modified so that the Close-Out Amount for any such FX Transaction for which the cash settlement amount has been fixed on or before the Close-Out Date pursuant to the terms of such FX Transaction shall be equal to the Currency Obligation arising therefrom (increased by adding interest in the manner provided in clause (A)(2) if the Value Date precedes the Close-Out Date) and for any such FX Transaction for which the cash settlement amount has not yet been fixed on the Close-Out Date pursuant to the terms of such FX Transaction, the Close-Out Amount shall be as determined by the Non-Defaulting Party in good faith and in a commercially reasonable manner. Part VII. Base Currency Party A's Base Currency is the United States dollar. Party B's Base Currency is the United States dollar. Part VIII. Threshold Amount For purposes of clause (x) of the definition of Event of Default: Party A's Threshold Amount is 3% of Party A's equity capital as evidenced by Party A's latest financial statements. Party B's Threshold Amount is 3% of Party B's equity capital as evidenced by Party B's latest financial statements. Part IX. Additional Events of Default The following provisions which are checked shall constitute Events of Default: None. [ ] (a) occurrence of garnishment or provisional garnishment against a claim against the Defaulting Party acquired by the Non-Defaulting Party. The automatic termination provisions of Section 5.1 [shall] [shall not] apply to either Party that is a Defaulting Party in respect of this Event of Default. [ ] (b) suspension of payment by the Defaulting Party or any Credit Support provider in accordance with the Bankruptcy Law or the Corporate Reorganization Law in Japan. The automatic termination provision of Section 5.1 [shall] [shall not] apply to either Party that is a Defaulting Party in respect of this Event of Default. [ ] (c) disqualification of the Defaulting Party or any Credit Support Provider by any relevant bill clearing house located in Japan. The automatic termination provision of Section 5.2 [shall][shall not] apply to either Party that is a Defaulting Party in respect of this Event of Default. Part X. Automatic Termination The automatic termination provision of Section 5.1 shall not apply to Party A as Defaulting Party in respect of clause (ii), (iii) or (iv) of the definition of Event of Default. The automatic termination provision of Section 5.1 shall not apply to Party B as Defaulting Party in respect of clause (ii), (iii) or (iv) of the definition of Event of Default. Part XI. Adequate Assurances Adequate Assurances under Section 8.14 shall apply to the Agreement. Part XII. Governing Law In accordance with Section 9.1 of the Agreement, the Agreement shall be governed by the laws of the State of New York. Part XIII. Consent to Jurisdiction In accordance with Section 9.2 of the Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City. Part XIV. Agent for Service of Process Not applicable. Part XV. Certain Regulatory Representations A. The following FDICIA representation shall not apply: 1. Party A represents and warrants that it qualifies as a "financial institution" within the meaning of the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") by virtue of being a: [ ] broker or dealer within the meaning of FDICIA; [ ] depository institution within the meaning of FDICIA; [ ] futures commission merchant within the meaning of FDICIA; [ ] "financial institution" within the meaning of Regulation EE (see below). 2. Party B hereby represents and warrants that it qualifies as a "financial institution" by virtue of being a: [ ] broker or dealer within the meaning of FDICIA; [ ] depository institution within the meaning of FDICIA; [ ] futures commission merchant within the meaning of FDICIA; [ ] "financial institution" within the meaning of Regulation EE (see below). 3. A Party representing that it is a "financial institution" as that term is defined in 12 C.F.R. Section 231.3 of Regulation EE issued by the Board of Governors of the Federal Reserve System ("Regulation EE") represents that: (a) it is willing to enter into financial contracts" as a counterparty "on both sides of one or more financial markets" as those terms are used in Section 231.3 of Regulation EE; and (b) during the 15-month period immediately preceding the date it makes or is deemed to make this representation, it has had on at least one (1) day during such period, with counterparties that are not its affiliates (as defined in Section 231.2(b) of Regulation EE) either: (i) one or more financial contracts of a total gross notional principal amount of $1 billion outstanding; or (ii) total gross mark-to-market positions (aggregated across counterparties)of $100 million; and (c) agrees that it will notify the other Party if it no longer meets the requirements for status as a financial institution under Regulation EE. 4. If both Parties are financial institutions in accordance with the above, the Parties agree that the Agreement shall be a netting contract, as defined in 12 U.S.C. Section 4402(14), and each receipt or payment or delivery obligation under the Agreement shall be a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in FDICIA. B. The following ERISA representation shall apply: Each Party represents and warrants that it is neither (i) an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (ii) a "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; nor (iii) an entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the U.S. Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. C. The following CFTC eligible swap participant representation shall apply: Each Party represents and warrants that it is an "eligible swap participant" under, and as defined in, 17 C.F.R. Section 35.1. Part XVI. Additional Covenants The following covenant[s] shall apply to the Agreement: A. Party B covenants and agrees that when Party A or an agent for Party A requests Party B to an FX Transaction, Party B will do a back-to-back principal trade and the price of the FX Transaction to Party A will be the same price at which Party B effects its back-to-back trade with its counterparty, and Party B will not profit from any mark-up or spread on the FX Transaction. B. With respect to each FX Transaction, Party A shall pay to Party B a round-turn fee as follows. For FX Transactions not having a Party B-imposed forward date, the fee shall be $4.30 per round-turn ($2.15 per side) for each $85,000 equivalent of the Currency in the FX Transaction. For FX Transactions with a Party B-imposed forward date restriction, the fee shall be $5.00 per round-turn ($2.50 per side) for each $135,000 equivalent of the Currency in the FX Transaction. C. Party A shall post margin with Party B with respect to all FX Transactions in an amount equal to 3.0% of the value of such FX Transactions on major currencies and 5.0% of the value of such FX Transactions on minor currencies. All calls for margin shall be made by Party B orally or by written nohtice to Dean Witter Reynolds, and each such call for margin shall be met by Party A within three hours after Dean Witter Reynolds has received such call by wire transfer (by federal bank wire system) to the account of Party B. Party B shall accept as margin any instrument deemed acceptable as margin under the rules of the Chicago Mercantile Exchange. Upon oral or written request by Dean Witter Reynolds, Party B shall, within three hours after receipt of any such request, wire transfer (by federal bank wire system) to Dean Witter Reynolds for Party A's account any margin funds held by Party B in excess of the margin requirements specified hereby. Notwithstanding Part VI above, all payments, unless otherwise agreed to, shall be paid in U.S. dollars. EX-10.03 4 AMENDED AND RESTATED CUSTOMER AGREEMENT AMENDED AND RESTATED CUSTOMER AGREEMENT THIS AMENDED AND RESTATED CUSTOMER AGREEMENT (this "Agreement"), made as of the 1st day of December, 1997, by and between DEAN WITTER WORLD CURRENCY FUND L.P., a Delaware limited partnership (the "Customer"), and DEAN WITTER REYNOLDS INC., a Delaware corporation ("DWR"); W I T N E S S E T H : WHEREAS, the Customer was organized pursuant to a Certificate of Limited Partnership filed in the office of the Secretary of State of the State of Delaware on December 8, 1992, and a Limited Partnership Agreement dated as of December 8, 1992, between Demeter Management Corporation, a Delaware corporation ("Demeter"), acting as general partner (in such capacity, the "General Partner"), and the limited partners of the Customer to trade, buy, sell, spread or otherwise acquire, hold, or dispose of commodities (including, but not limited, to foreign currencies, and any other securities or items which are, or may become, the subject of futures contract trading), domestic and foreign commodity futures contracts, commodity forward contracts, foreign exchange commitments, options on physical commodities and on futures contracts, spot (cash) commodities and currencies, and any rights pertaining thereto (hereinafter referred to collectively as "futures interests") and securities (such as United States Treasury bills) approved by the Commodity Futures Trading Commission (the "CFTC") for investment of customer funds, and to engage in all activities incident thereto; WHEREAS, the Customer (which is a commodity pool) and the General Partner (which is a registered commodity pool operator) have entered into management agreements (the "Management Agreements") with certain trading advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"), which provide that the Trading Advisors have authority and responsibility, except in certain limited situations, to direct the investment and reinvestment of the assets of the Customer in futures interests under the terms set forth in the Management Agreements; WHEREAS, the Customer and DWR entered into that certain Amended and Restated Customer Agreement dated as of September 1, 1996 (the "Customer Agreement"), whereby DWR agreed to perform futures interests brokerage and certain other services for the Customer; and WHEREAS, the Customer and DWR wish to amend and restate the Customer Agreement to set forth the terms and conditions upon which DWR will continue to perform certain non-clearing futures interests brokerage and certain other services for the Customer; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Definitions. All capitalized terms not defined herein shall have the meaning given to them in the Customer's most recent prospectus as filed with the Securities and Exchange Commission (the "Prospectus") relating to the offering of units of limited partnership interest of the Customer (the "Units") and in any amendment or supplement to the Prospectus. 2. Duties of DWR. DWR agrees to act as a non-clearing commodity broker for the Customer and introduce the Customer's account to Carr Futures, Inc. ("CFI") for execution and clearing of futures interests transactions on behalf of the Customer in accordance with instructions provided by the Trading Advisors, and the Customer agrees to retain DWR as a non-clearing commodity broker for the term of this Agreement. DWR agrees to furnish to the Customer as soon as practicable all of the information from time to time in its possession which Demeter, as the general partner of the Customer, is required to furnish to the Limited Partners pursuant to the Limited Partnership Agreement as from time to time in effect and as required by applicable law, rules, or regulations and to perform such other services for the Customer as are set forth herein and in the Prospectus. 3. Obligations and Expenses. (a) Except as otherwise set forth herein, the Customer, and not DWR, shall be responsible for all taxes, management and incentive fees to the Trading Advisors, brokerage commissions to DWR, and all extraordinary expenses incurred by it. In addition, the Customer, and not DWR, shall pay the charges of CFI for executing and clearing the Customer's futures interests trades (as described in paragraph 5(b) below). (b) The Customer will pay its ordinary administrative expenses, subject to a cap of 0.25% per year of the Customer's average month-end Net Assets, including expenses for services provided by third parties selected by the General Partner and reimbursement of all out-of-pocket expenses incurred by such persons and by the General Partner and its affiliates in providing services to the Customer. Such expenses shall include legal, accounting and auditing expenses (including expenses incurred in preparing reports and tax information to Limited Partners and regulatory authorities and expenses for specialized administrative services), printing and duplication expenses, mailing expenses, and filing fees. The General Partner or its affiliates shall pay any ordinary administrative expenses which exceed the cap. 4. Agreement Nonexclusive. DWR shall be free to render services of the nature to be rendered to the Customer hereunder to other persons or entities in addition to the Customer, and the parties acknowledge that DWR may render such services to additional entities similar in nature to the Customer, including other partnerships organized with Demeter as their general partner. It is expressly understood and agreed that this Agreement is nonexclusive and that the Customer has no obligation to execute any or all of its trades for futures interests through DWR. The parties acknowledge that the Customer may utilize such other broker or brokers as Demeter may direct from time to time. The Customer's utilization of an additional commodity broker shall neither terminate this Agreement nor modify in any regard the respective rights and obligations of the Customer and DWR hereunder. 5. (a) Compensation of DWR. The Customer will pay brokerage commissions to DWR at a roundturn rate (but charged on a half-turn basis) of 80% of DWR's published non-member rates for speculative accounts (which covers both the taking and liquidation of a position), and substantially equivalent rates for currency forward contract transactions in the forward contract and interbank markets. The Customer will pay DWR brokerage commissions for currency forward contract transactions at rates established with reference to the brokerage commission rate charged on exchange-traded currency futures contracts. DWR may from time to time adjust the United States dollar size of currency forward contracts so that the brokerage commission rate charged on such contracts will approximate the rate charged on exchange-traded currency futures contracts of similar United States dollar value. DWR shall also charge the Partnership brokerage commissions for rollovers of forward contract positions. (b) Compensation of CFI. The Customer will pay certain charges of CFI for executing and clearing trades for the Customer pursuant to that certain Customer Agreement dated as of December 1, 1997, among the Customer, CFI and DWR. In addition, DWR shall pay CFI certain charges with respect to the execution and clearance of trades for the Customer as agreed from time to time between DWR and CFI. (c) Notwithstanding the foregoing, brokerage commissions, together with transaction fees and costs including those paid by the Customer to CFI, with respect to each Trading Advisor's allocated Net Assets will be capped at 13/20 of 1% per month (in the case of Trading Advisors that employ multiple trading systems in trading on behalf of the Customer, the foregoing cap is applied on a per trading system basis) of the Customer's Net Assets allocated to such Trading Advisor or trading system as of the last day of each month (a maximum 7.8% annual rate). In addition, the aggregate of (i) brokerage commissions and transaction fees and costs payable by the Customer, and (ii) net excess interest and compensating balance benefits to DWR (after crediting the Customer with interest) shall not exceed 14% annually of the Customer's average month-end Net Assets during each calendar year. (d) Any brokerage commissions, and transaction fees and costs in excess of such caps shall be borne or paid by DWR or an affiliate and shall not be reimbursed by the Customer. The foregoing caps may not be increased except as permitted in the Customer's Limited Partnership Agreement, as amended from time to time. 6. Investment Discretion. The parties recognize that DWR shall have no authority to direct the futures interests investments to be made for the Customer's account. However, the parties agree that DWR, and not the Trading Advisors, shall have the authority and responsibility with regard to the investment, maintenance, and management of the Customer's assets that are held in segregated or secured accounts, as provided in Section 7 hereof. 7. Investment of Customer Funds. The Customer shall deposit its assets in accounts with DWR. The Customer's assets deposited with DWR will be segregated or secured in accordance with the Commodity Exchange Act and CFTC regulations. DWR will credit the Customer with interest income at month-end in an amount equal to 80% of the Customer's average daily Net Assets for the month at at rate equal to the average yield on the 13-week U.S. Treasury Bills issued during such month. All of such funds will be available for margin for the Customer's trading. For the purpose of such interest payments, Net Assets will not include monies due to the Customer on or with respect to forward contracts and other futures interests but not actually received by it from banks, brokers, dealers and other persons. The Customer understands that it will not receive any other interest income on its assets and that DWR will receive interest income from CFI, as agreed from time to time by DWR and CFI, on the Customer's assets deposited as margin with CFI. The Customer's funds will either be invested along with other customer segregated and secured funds of DWR or held in non-interest bearing bank accounts. The Customer's assets held by DWR may be used solely as margin for the Customer's trading. Ownership of the right to receive interest on the Customer's assets pursuant to the preceding paragraph shall be reflected and maintained and may be transferred only on the books and records of DWR. Any purported transfer of such ownership shall not be effective or recognized until such transfer shall have been recorded on the books and records of DWR. 8. Standard of Liability and Indemnity. Subject to Section 2 hereof, DWR and its affiliates (as defined below) shall not be liable to the Customer, the General Partner or Limited Partners, or any of its or their respective successors or assigns, for any act, omission, conduct, or activity undertaken by or on behalf of the Customer pursuant to this Agreement which DWR determines, in good faith, to be in the best interests of the Customer, unless such act, omission, conduct, or activity by DWR or its affiliates constituted misconduct or negligence. The Customer shall indemnify, defend and hold harmless DWR and its affiliates from and against any loss, liability, damage, cost or expense (including attorneys' and accountants' fees and expenses incurred in the defense of any demands, claims, or lawsuits) actually and reasonably incurred arising from any act, omission, conduct or activity undertaken by DWR on behalf of the Customer pursuant to this Agreement, including, without limitation, any demands, claims or lawsuits initiated by a Limited Partner (or assignee thereof), provided that (i) DWR has determined, in good faith, that the act, omission, conduct, or activity giving rise to the claim for indemnification was in the best interests of the Customer, and (ii) the act, omission, conduct, or activity that was the basis for such loss, liability, damage, cost, or expense was not the result of misconduct or negligence. Notwithstanding anything to the contrary contained in the foregoing, neither DWR nor any of its affiliates shall be indemnified by the Customer for any losses, liabilities, or expenses arising from or out of an alleged violation of federal or state securities laws unless (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (c) a court of competent jurisdiction approves a settlement of the claims against the particular indemnitee and finds that indemnification of the settlement and related costs should be made, provided, with regard to such court approval, the indemnitee must apprise the court of the position of the SEC, and the positions of the respective securities administrators of Massachusetts, Missouri, Tennessee and/or those other states and jurisdictions in which the plaintiffs claim they were offered or sold Units, with respect to indemnification for securities laws violations before seeking court approval for indemnification. Furthermore, in any action or proceeding brought by a Limited Partner in the right of the Customer to which DWR or any affiliate thereof is a party defendant, any such person shall be indemnified only to the extent and subject to the conditions specified in the Delaware Revised Uniform Limited Partnership Act, as amended, and this Section 8. The Customer shall make advances to DWR or its affiliates hereunder only if: (i) the demand, claim, lawsuit, or legal action relates to the performance of duties or services by such persons to the Customer; (ii) such demand, claim, lawsuit, or legal action is not initiated by a Limited Partner; and (iii) such advances are repaid, with interest at the legal rate under Delaware law, if the person receiving such advance is ultimately found not to be entitled to indemnification hereunder. DWR shall indemnify, defend and hold harmless the Customer and its successors or assigns from and against any losses, liabilities, damages, costs, or expenses (including in connection with the defense or settlement of claims; provided DWR has approved such settlement) incurred as a result of the activities of DWR or its affiliates, provided, further, that the act, omission, conduct, or activity giving rise to the claim for indemnification was the result of bad faith, misconduct or negligence. The indemnities provided in this Section 8 by the Customer to DWR and its affiliates shall be inapplicable in the event of any losses, liabilities, damages, costs, or expenses arising out of, or based upon, any material breach of any warranty, covenant, or agreement of DWR contained in this Agreement to the extent caused by such breach. Likewise, the indemnities provided in this Section 8 by DWR to the Customer and any of its successors and assigns shall be inapplicable in the event of any losses, liabilities, damages, costs, or expenses arising out of, or based upon, any material breach of any warranty, covenant, or agreement of the Customer contained in this Agreement to the extent caused by such breach. As used in this Section 8, the term "affiliate" of DWR shall mean: (i) any natural person, partnership, corporation, association, or other legal entity directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of DWR; (ii) any partnership, corporation, association, or other legal entity 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by DWR; (iii) any natural person, partnership, corporation, association, or other legal entity directly or indirectly controlling, controlled by, or under common control with, DWR; or (iv) any officer or director of DWR. Notwithstanding the foregoing, "affiliates" for purposes of this Section 8 shall include only those persons acting on behalf of DWR within the scope of the authority of DWR, as set forth in this Agreement. 9. Term. This Agreement shall continue in effect until terminated by either party giving not less than 60 days' prior written notice of termination to the other party. Any such termination by either party shall be without penalty. 10. 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. 11. Assignment. This Agreement may not be assigned by either party without the express written consent of the other party. 12. Amendment. This Agreement may not be amended except by the written consent of the parties and provided such amendment is consistent with the Limited Partnership Agreement. 13. Notices. All notices required or desired 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 day of receipt, 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 Customer: DEAN WITTER WORLD CURRENCY FUND L.P. c/o Demeter Management Corporation Two World Trade Center, 62nd Floor New York, New York 10048 Attn: Mark J. Hawley President if to DWR: DEAN WITTER REYNOLDS INC. Two World Trade Center, 62nd Floor New York, New York 10048 Attn: Mark J. Hawley Executive Vice President 14. 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. 15. Headings. Headings of Sections herein are for the convenience of the parties only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 16. Incorporation by Reference. The Futures Customer Agreement annexed hereto is hereby incorporated by reference herein and made a part hereof to the same extent as if such document were set forth in full herein. If any provision of this Agreement is or at any time becomes inconsistent with the annexed document, the terms of this Agreement shall control. IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first above written. DEAN WITTER WORLD CURRENCY FUND L.P. By: Demeter Management Corporation, General Partner By: /s/ Mark J. Hawley -------------------------------- Mark J. Hawley President DEAN WITTER REYNOLDS INC. By: /s/ Mark J. Hawley -------------------------------- Mark J. Hawley Executive Vice President FUTURES CUSTOMER AGREEMENT In consideration of the acceptance by Dean Witter Reynolds Inc. ("DWR") of one or more accounts of the undersigned ("Customer") (if more than one account is carried by DWR, all are covered by this Agreement and are referred to collectively as the "Account") and DWR's agreement to act as Customer's broker for the execution, clearance and/or carrying of transactions for the purchase and sale of commodity interests, including commodities, commodity futures contracts and commodity options, Customer agrees as follows: 1. APPLICABLE RULES AND REGULATIONS - The Account and each transaction therein shall be subject to the terms of this Agreement and to (a) all applicable laws and the regulations, rules and orders (collectively "regulations") of all regulatory and self-regulatory organizations having jurisdiction and (b) the constitution, by-laws, rules, regulations, orders, resolutions, interpretations and customs and usages (collectively "rules") of the market and any associated clearing organization (each an "exchange") on or subject to the rules of which such transaction is executed and/or cleared. The reference in the preceding sentence to exchange rules is solely for DWR's protection and DWR's failure to comply therewith shall not constitute a breach of this Agreement or relieve Customer of any obligation or responsibility under this Agreement. DWR shall not be liable to Customer as a result of any action by DWR, its officers, directors, employees or agents to comply with any rule or regulation. 2. PAYMENTS TO DWR - Customer agrees to pay to DWR immediately on request (a) commissions, fees and service charges as are in effect from time to time together with all applicable regulatory and self-regulatory organization and exchange fees, charges and taxes; (b) the amount of any debit balance or any other liability that may result from transactions executed for the account; and (c) interest on such debit balance or liability at the prevailing rate charged by DWR at the time such debit balance or liability arises and service charges on any such debit balance or liability together with any reasonable costs and attorney's fees incurred in collecting any such debit balance or liability. Customer acknowledges that DWR may charge commissions at other rates to other customers. 3. CUSTOMER'S DUTY TO MAINTAIN ADEQUATE MARGIN - Customer shall at all times and without prior notice or demand from DWR maintain adequate margins in the account so as continually to meet the original and maintenance margin requirements established by DWR for Customer. DWR may change such requirements from time to time at DWR's discretion. Such margin requirements may exceed the margin requirements set by any exchange or other regulatory authority and may vary from DWR's requirements for other customers. Customer agrees, when so requested, immediately to wire transfer margin funds and to furnish DWR with names of bank officers for immediate verification of such transfers. Customer acknowledges and agrees that DWR may receive and retain as its own any interest, increment, profit, gain or benefit directly or indirectly, accruing from any of the funds DWR receives from Customer. 4. DELIVERY; OPTION EXERCISE (a) Customer acknowledges that the making or accepting of delivery pursuant to a futures contract may involve a much higher degree of risk than liquidating a position by offset. DWR has no control over and makes no warranty with respect to grade, quality or tolerances of any commodity delivered in fulfillment of a contract. (b) Customer agrees to give DWR timely notice and immediately on request to inform DWR if Customer intends to make or take delivery under a futures contract or to exercise an option contract. If so requested, Customer shall provide DWR with satisfactory assurances that Customer can fulfill Customer's obligation to make or take delivery under any contract. Customer shall furnish DWR with property deliverable by it under any contract in accordance with DWR's instructions. (c) DWR shall not have any obligation to exercise any long option contract unless Customer has furnished DWR with timely exercise instructions and sufficient initial margin with respect to each underlying futures contract. 5. FOREIGN CURRENCY - If DWR enters into any transaction for Customer effected in a currency other than U.S. dollars: (a) any profit or loss caused by changes in the rate of exchange for such currency shall be for Customer's account and risk and (b) unless another currency is designated in DWR's confirmation of such transaction, all margin for such transaction and the profit or loss on the liquidation of such transaction shall be in U.S. dollars at a rate of exchange determined by DWR in its discretion on the basis of then prevailing market rates of exchange for such foreign currency. 6. DWR MAY LIMIT POSITIONS HELD - Customer agrees that DWR, at its discretion, may limit the number of open positions (net or gross) which Customer may execute, clear and/or carry with or acquire through it. Customer agrees (a) not to make any trade which would have the effect of exceeding such limits, (b) that DWR may require Customer to reduce open positions carried with DWR and (c) that DWR may refuse to accept orders to establish new positions. DWR may impose and enforce such limits, reduction or refusal whether or not they are required by applicable law, regulations or rules. Customer shall comply with all position limits established by any regulatory or self-regulatory organization or any exchange. In addition, Customer agrees to notify DWR promptly if customer is required to file position reports with any regulatory or self-regulatory organization or with any exchange. 7. NO WARRANTY AS TO INFORMATION OR RECOMMENDATION - Customer acknowledges that: (a) Any market recommendations and information DWR may communicate to Customer, although based upon information obtained from sources believed by DWR to be reliable, may be incomplete and not subject to verification; (b) DWR makes no representation, warranty or guarantee as to, and shall not be responsible for, the accuracy or completeness of any information or trading recommendation furnished to Customer; (c) recommendations to Customer as to any particular transaction at any given time may differ among DWR's personnel due to diversity in analysis of fundamental and technical factors and may vary from any standard recommendation made by DWR in its market letters or otherwise; and (d) DWR has no obligation or responsibility to update any market recommendations or information it communicates to Customer. Customer understands that DWR and its officers, directors, affiliates, stockholders, representatives or associated persons may have positions in and may intend to buy or sell commodity interests which are the subject of market recommendations furnished to Customer, and that the market positions of DWR or any such officer, director, affiliate, stockholder, representative or associated person may or may not be consistent with the recommendations furnished to Customer by DWR. 8. LIMITS ON DWR DUTIES; LIABILITY - Customer agrees: (a) that DWR has no duty to apprise Customer of news or of the value of any commodity interests or collateral pledged or in any way to advise Customer with respect to the market; (b) that the commissions which DWR receives are consideration solely for the execution, reporting and carrying of Customer's trades; (c) that if Customer has authorized any third party or parties to place orders or effect transactions on behalf of Customer in any Account, each such party has been selected by Customer based on its own evaluation and assessment of such party and that such party is solely the agent of Customer, and if any such party allocates commodity interests among its customers, Customer has reviewed each such party's commodity interest allocation system, has satisfied itself that such allocation system is fair and will seek recovery solely from such party to recover any damages sustained by Customer as the result of any allocation made by such party; and (d) to waive any and all claims, rights or causes of action which Customer has or may have against DWR or its officers, employees and agents (i) arising in whole or in part, directly or indirectly, out of any act or omission of any person, whether or not legally deemed an agent of DWR, who refers or introduces Customer to DWR or places orders for Customer and (ii) for any punitive damages and to limit any claims arising out of this Agreement or the Account to Customer's direct out-of-pocket damages. 9. EXTRAORDINARY EVENTS - Customer shall have no claim against DWR for any loss, damage, liability, cost, charge, expense, penalty, fine or tax caused directly or indirectly by (a) governmental, court, exchange, regulatory or self-regulatory organization restrictions, regulations, rules, decisions or orders, (b) suspension or termination of trading, (c) war or civil or labor disturbance, (d) delay or inaccuracy in the transmission or reporting of orders due to a breakdown or failure of computer services, transmission or communication facilities, (e) the failure or delay by any exchange to enforce its rules or to pay to DWR any margin due in respect of Customer's Account, (f) the failure or delay by any bank, trust company, clearing organization or other person which, pursuant to applicable exchange rules, is holding Customer funds, securities or other property to pay or deliver the same to DWR or (g) any other cause or causes beyond DWR's control. 10. INDEMNIFICATION OF DWR - Customer agrees to indemnify, defend and hold harmless DWR and its officers, employees and agents from and against any loss, cost, claim, damage (including any consequential cost, loss or damage), liability or expense (including reasonable attorneys' fees) and any fine, sanction or penalty made or imposed by any regulatory or self-regulatory authority or any exchange as the result, directly or indirectly, of: (a) Customer's failure or refusal to comply with any provision of this Agreement or perform any obligation on its part to be performed pursuant to this Agreement; and (b) Customer's failure to timely deliver any security, commodity or other property previously sold by DWR on Customer's behalf. 11 NOTICES; TRANSMITTALS - DWR shall transmit all communications to Customer at Customer's address, telefax or telephone number set forth in the accompanying Futures Account Application or to such other address as Customer may hereafter direct in writing. Customer shall transmit all communications to DWR (except routine inquiries concerning the Account) to 130 Liberty Street, New York, NY 10006, Attention: Futures Compliance Officer. All payments and deliveries to DWR shall be made as instructed by DWR from time to time and shall be deemed received only when actually received by DWR. 12. CONFIRMATION CONCLUSIVE - Confirmation of trades and any other notices sent to Customer shall be conclusive and binding on Customer unless Customer or Customer's agent notifies DWR to the contrary (a) in the case of an oral report, orally at the time received by Customer or its agent or (b) in the case of a written report or notice, in writing prior to opening of trading on the business day next following receipt of the report. In addition, if Customer has not received a written confirmation that a commodity interest transaction has been executed within three business days after Customer has placed an order with DWR to effect such transaction, and has been informed or believes that such order has been or should have been executed, then Customer immediately shall notify DWR thereof. Absent such notice, Customer conclusively shall be deemed estopped to object and to have waived any such objection to the failure to execute or cause to be executed such transaction. Anything in this Section 12 withstanding, neither Customer nor DWR shall be bound by any transaction or price reported in error. 13. SECURITY INTEREST - All money and property ("collateral") now or at any future time held in Customer's Account, or otherwise held by DWR for Customer, is subject to a security interest in DWR's favor to secure any indebtedness at any time owing to it by Customer. DWR, in its discretion, may liquidate any collateral to satisfy any margin or Account deficiencies or to transfer the collateral to the general ledger account of DWR. 14. TRANSFER OF FUNDS - At any time and from time to time and without prior notice to Customer, DWR may transfer from one account to another account in which Customer has any interest, such excess funds, equities, securities or other property as in DWR's judgment may be required for margin, or to reduce any debit balance or to reduce or satisfy any deficits in such other accounts except that no such transfer may be made from a segregated account subject to the Commodity Exchange Act to another account maintained by Customer unless either Customer has authorized such transfer in writing or DWR is effecting such transfer to enforce DWR's security interest pursuant to Section 13. DWR promptly shall confirm all transfers of funds made pursuant hereto to Customer in writing. 15. DWR'S RIGHT TO LIQUIDATE CUSTOMER POSITIONS - In addition to all other rights of DWR set forth in this Agreement: (a) when directed or required by a regulatory or self-regulatory organization or exchange having jurisdiction over DWR or the Account; (b) whenever, in its discretion, DWR considers it necessary for its protection because of margin requirements or otherwise; (c) if Customer or any affiliate of Customer repudiates, violates, breaches or fails to perform on a timely basis any term, covenant or condition on its part to be performed under this Agreement or another agreement with DWR; (d) if a case in bankruptcy is commenced or if a proceeding under any insolvency or other law for the protection of creditors or for the appointment of a receiver, liquidator, trustee, conservator, custodian or similar officer is filed by or against Customer or any affiliate of Customer, or if Customer or any affiliate of Customer makes or proposes to make any arrangement or composition for the benefit of its creditors, or if Customer (or any such affiliate) or any or all of its property is subject to any agreement, order, judgment or decree providing for Customer's dissolution, winding-up, liquidation, merger, consolidation, reorganization or for the appointment of a receiver, liquidator, trustee, conservator, custodian or similar officer of Customer, such affiliate or such property; (e) DWR is informed of Customer's death or mental incapacity; or (f) if an attachment or similar order is levied against the Account or any other account maintained by Customer or any affiliate of Customer with DWR; DWR shall have the right to (i) satisfy any obligations due DWR out of any Customer's property in DWR's custody or control, (ii) liquidate any or all of Customer's commodity interest positions, (iii) cancel any or all of Customer's outstanding orders, (iv) treat any or all of Customer's obligations due DWR as immediately due and payable, (v) sell any or all of Customer's property in DWR's custody or control in such manner as DWR determines to be commercially reasonable, and/or (vi) terminate any or all of DWR's obligations for future performance to Customer, all without any notice to or demand on Customer. Any sale hereunder may be made in any commercially reasonable manner. Customer agrees that a prior demand, call or notice shall not be considered a waiver of DWR's right to act without demand or notice as herein provided, that Customer shall at all times be liable for the payment of any debit balance owing in each account upon demand whether occurring upon a liquidation as provided under this Section 15 or otherwise under this Agreement, and that in all cases Customer shall be liable for any deficiency remaining in each Account in the event of liquidation thereof in whole or in part together with interest thereon and all costs relating to liquidation and collection (including reasonable attorneys' fees). 16. CUSTOMER REPRESENTATIONS, WARRANTIES AND AGREEMENTS - Customer represents and warrants to and agrees with DWR that: (a) Customer has full power and authority to enter into this Agreement and to engage in the transactions and perform its obligations hereunder and contemplated hereby and (i) if a corporation or a limited liability company, is duly organized under the laws of the jurisdiction set forth in the accompanying Futures Account Application, or (ii) if a partnership, is duly organized pursuant to a written partnership agreement and the general partner executing this Agreement is duly authorized to do so under the partnership agreement; (b) Neither Customer nor any partner, director, officer, member, manager or employee of Customer nor any affiliate of Customer is a partner, director, officer, member, manager or employee of a futures commission merchant introducing broker, exchange or self-regulatory organization or an employee or commissioner of the Commodity Futures Trading Commission (the "CFTC"), except as previously disclosed in writing to DWR; (c) The accompanying Futures Account Application and Personal Financial Statements, if applicable, (including any financial statements furnished in connection therewith) are true, correct and complete. Except as disclosed on the accompanying Futures Account Application or otherwise provided in writing, (i) Customer is not a commodity pool or is exempt from registration under the rules of the Commission, and (ii) Customer is acting solely as principal and no one other than Customer has any interest in any Account of Customer. Customer hereby authorizes DWR to contact such banks, financial institutions and credit agencies as DWR shall deem appropriate for verification of the information contained herein. (d) Customer has determined that trading in commodity interests is appropriate for Customer, is prudent in all respects and does not and will not violate Customer's charter or by-laws (or other comparable governing document) or any law, rule, regulation, judgment, decree, order or agreement to which Customer or its property is subject or bound; (e) As required by CFTC regulations, Customer shall create, retain and produce upon request of the applicable contract market, the CFTC or the United States Department of Justice documents (such as contracts, confirmations, telex printouts, invoices and documents of title) with respect to cash transactions underlying exchanges of futures for cash commodities or exchange of futures in connection with cash commodity transactions; (f) Customer consents to the electronic recording, at DWR's discretion, of any or all telephone conversations with DWR (without automatic tone warning device), the use of same as evidence by either party in any action or proceeding arising out of the Agreement and in DWR's erasure, at its discretion, of any recording as part of its regular procedure for handling of recordings; (g) Absent a separate written agreement between Customer and DWR with respect to give-ups, DWR, in its discretion, may, but shall have no obligation to, accept from other brokers commodity interest transactions executed by such brokers on an exchange for Customer and proposed to be "given-up" to DWR for clearance and/or carrying in the Account; (h) DWR, for and on behalf of Customer, is authorized and empowered to place orders for commodity interest transactions through one or more electronic or automated trading systems maintained or operated by or under the auspices of an exchange, that DWR shall not be liable or obligated to Customer for any loss, damage, liability, cost or expense (including but not limited to loss of profits, loss of use, incidental or consequential damages) incurred or sustained by Customer and arising in whole or in part, directly or indirectly, from any fault, delay, omission, inaccuracy or termination of a system or DWR's inability to enter, cancel or modify an order on behalf of Customer on or through a system. The provisions of this Section 16(h) shall apply regardless of whether any customer claim arises in contract, negligence, tort, strict liability, breach of fiduciary obligations or otherwise; and (i) If Customer is subject to the Financial Institution Reform, Recovery and Enforcement Act of 1989, the certified resolutions set forth following this Agreement have been caused to be reflected in the minutes of Customer's Board of Directors (or other comparable governing body) and this Agreement is and shall be, continuously from the date hereof, an official record of Customer. Customer agrees to promptly notify DWR in writing if any of the warranties and representations contained in this Section 16 becomes inaccurate or in any way ceases to be true, complete and correct. 17. SUCCESSORS AND ASSIGNS - This Agreement shall inure to the benefit of DWR, its successors and assigns, and shall be binding upon Customer and Customer's executors, trustees, administrators, successors and assigns, provided, however, that this Agreement is not assignable by Customer without the prior written consent of DWR. 18. MODIFICATION OF AGREEMENT BY DWR; NON-WAIVER PROVISION - This Agreement may only be altered, modified or amended by mutual written consent of the parties, except that if DWR notifies Customer of a change in this Agreement and Customer thereafter effects a commodity interest transaction in an account, Customer agrees that such action by Customer will constitute consent by Customer to such change. No employee of DWR other than DWR's General Counsel or his or her designee, has any authority to alter, modify, amend or waive in any respect any of the terms of this Agreement. The rights and remedies conferred upon DWR shall be cumulative, and its forbearance to take any remedial action available to it under this Agreement shall not waive its right at any time or from time to time thereafter to take such action. 19. SEVERABILITY - If any term or provision hereof or the application thereof to any persons or circumstances shall to any extent be contrary to any exchange, government or self-regulatory regulation or contrary to any federal, state or local law or otherwise be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is contrary, invalid or unenforceable, shall not be affected thereby. 20. CAPTIONS - All captions used herein are for convenience only, are not a part of this Agreement, and are not to be used in construing or interpreting any aspect of this Agreement. 21. TERMINATION - This Agreement shall continue in force until written notice of termination is given by Customer or DWR. Termination shall not relieve either party of any liability or obligation incurred prior to such notice. Upon giving or receiving notice of termination, Customer will promptly take all action necessary to transfer all open positions in each account to another futures commission merchant. 22. ENTIRE AGREEMENT - This Agreement constitutes the entire agreement between Customer and DWR with respect to the subject matter hereof and supersedes any prior agreements between the parties with respect to such subject matter. 23. GOVERNING LAW; CONSENT TO JURISDICTION - (a) In case of a dispute between Customer and DWR arising out of or relating to the making or performance of this Agreement or any transaction pursuant to this Agreement (i) this Agreement and its enforcement shall be governed by the laws of the State of New York without regard to principles of conflicts of laws, and (ii) Customer will bring any legal proceeding against DWR in, and Customer hereby consents in any legal proceeding by DWR to the jurisdiction of, any state or federal court located within the State and City of New York in connection with all legal proceedings arising directly, indirectly or otherwise in connection with, out of, related to or from Customer's Account, transactions contemplated by this Agreement or the breach thereof. Customer hereby waives all objections Customer, at any time, may have as to the propriety of the court in which any such legal proceedings may be commenced. Customer also agrees that any service of process mailed to Customer at any address specified to DWR shall be deemed a proper service of process on the undersigned. (b) Notwithstanding the provisions of Section 23 (a)(ii), Customer may elect at this time to have all disputes described in this Section resolved by arbitration. To make such election, Customer must sign the Arbitration Agreement set forth in Section 24. Notwithstanding such election, any question relating to whether Customer or DWR has commenced an arbitration proceeding in a timely manner, whether a dispute is within the scope of the Arbitration Agreement or whether a party (other than Customer or DWR) has consented to arbitration and all proceedings to compel arbitration shall be determined by a court as specified in Section 23 (a)(ii). 24. ARBITRATION AGREEMENT (OPTIONAL) - Every dispute between Customer and DWR arising out of or relating to the making or performance of this Agreement or any transaction pursuant to this Agreement, shall be settled by arbitration in accordance with the rules, then in effect, of the National Futures Association, the contract market upon which the transaction giving rise to the claim was executed, or the National Association of Securities Dealers as Customer may elect. If Customer does not make such election by registered mail addressed to DWR at 130 Liberty Street, 29th Floor, New York, NY 10006; Attention: Deputy General Counsel, within 45 days after demand by DWR that the Customer make such election, then DWR may make such election. DWR agrees to pay any incremental fees which may be assessed by a qualified forum for making available a "mixed panel" of arbitrators, unless the arbitrators determine that Customer has acted in bad faith in initiating or conducting the proceedings. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof. IN ADDITION TO FOREIGN FORUMS, THREE FORUMS EXIST FOR THE RESOLUTION OF COMMODITY DISPUTES: CIVIL COURT LITIGATION, REPARATIONS AT THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") AND ARBITRATION CONDUCTED BY A SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION. THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION MAY IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE ABILITY TO OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT INCURRING SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH CUSTOMER INDIVIDUALLY EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT YOUR CONSENT TO THIS ARBITRATION AGREEMENT BE VOLUNTARY. BY SIGNING THIS AGREEMENT, YOU (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A COURT OF LAW AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY CLAIMS OR COUNTERCLAIMS WHICH YOU OR DWR MAY SUBMIT TO ARBITRATION UNDER THIS AGREEMENT. YOU ARE NOT, HOWEVER, WAIVING YOUR RIGHT TO ELECT INSTEAD TO PETITION THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER SECTION 14 OF THE COMMODITY EXCHANGE ACT WITH RESPECT TO ANY DISPUTE WHICH MAY BE ARBITRATED PURSUANT TO THIS AGREEMENT. IN THE EVENT A DISPUTE ARISES, YOU WILL BE NOTIFIED IF DWR INTENDS TO SUBMIT THE DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION OF THE COMMODITY EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A SECTION 14 "REPARATIONS" PROCEEDINGS BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM THE DATE OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION. YOU NEED NOT AGREE TO THIS ARBITRATION AGREEMENT TO OPEN AN ACCOUNT WITH DWR. See 17 CFR 180.1-180.5. ACCEPTANCE OF THIS ARBITRATION AGREEMENT REQUIRES A SEPARATE SIGNATURE ON PAGE 8. 25. CONSENT TO TAKE THE OTHER SIDE OF ORDERS (OPTIONAL) - Without its prior notice, Customer agrees that when DWR executes sell or buy orders on Customer's behalf, DWR, its directors, officers, employees, agents, affiliates, and any floor broker may take the other side of Customer's transaction through any account of such person subject to its being executed at prevailing prices in accordance with and subject to the limitations and conditions, if any, contained in applicable rules and regulations. 26. AUTHORIZATION TO TRANSFER FUNDS (OPTIONAL) - Without limiting other provisions herein, DWR is authorized to transfer from any segregated account subject to the Commodity Exchange Act carried by DWR for the Customer to any other account carried by DWR for the Customer such amount of excess funds as in DWR's judgment may be necessary at any time to avoid a margin call or to reduce a debit balance in said account. It is understood that DWR will confirm in writing each such transfer of funds made pursuant to this authorization within a reasonable time after such transfer. 27. SUBORDINATION AGREEMENT (APPLIES ONLY TO ACCOUNTS WITH FUNDS HELD IN FOREIGN COUNTRIES) - Funds of customers trading on United States contract markets may be held in accounts denominated in a foreign currency with depositories located outside the United States or its territories if the customer is domiciled in a foreign country or if the funds are held in connection with contracts priced and settled in a foreign currency. Such accounts are subject to the risk that events could occur which hinder or prevent the availability of these funds for distribution to customers. Such accounts also may be subject to foreign currency exchange rate risks. If authorized below, Customer authorizes the deposit of funds into such foreign depositories. For customers domiciled in the United States, this authorization permits the holding of funds in regulated accounts offshore only if such funds are used to margin, guarantee, or secure positions in such contracts or accrue as a result of such positions. In order to avoid the possible dilution of other customer funds, a customer who has funds held outside the United States agrees by accepting this subordination agreement that his claims based on such funds will be subordinated as described below in the unlikely event both of the following conditions are met: (1) DWR is placed in receivership or bankruptcy, and (2) there are insufficient funds available for distribution denominated in the foreign currency as to which the customer has a claim to satisfy all claims against those funds. By initialing the Subordination Agreement below, Customer agrees that if both of the conditions listed above occur, its claim against DWR's assets attributable to funds held overseas in a particular foreign currency may be satisfied out of segregated customer funds held in accounts denominated in dollars or other foreign currencies only after each customer whose funds are held in dollars or in such other foreign currencies receives its pro-rata portion of such funds. It is further agreed that in no event may a customer whose funds are held overseas receive more than its pro-rata share of the aggregate pool consisting of funds held in dollars, funds held in the particular foreign currency, and non-segregated assets of DWR. OPTIONAL ELECTIONS The following provisions, which are set forth in this agreement, need not be entered into to open the Account. Customer agrees that its optional elections are as follows: SIGNATURE REQUIRED FOR EACH ELECTION ARBITRATION AGREEMENT: (Agreement Paragraph 24) -------------------------------- CONSENT TO TAKE THE OTHER SIDE OF ORDERS: (Agreement Paragraph 25) X /s/ Mark J. Hawley -------------------------------- AUTHORIZATION TO TRANSFER FUNDS: (Agreement Paragraph 26) -------------------------------- ACKNOWLEDGEMENT TO SUBORDINATION AGREEMENT (Agreement Paragraph 27) X /s/ Mark J. Hawley -------------------------------- (Required for accounts holding non-U.S. currency) - - -------------------------------------------------------------------------------- HEDGE ELECTION Customer confirms that all transactions in the Account will [ ] represent bona fide hedging transactions, as defined by the Commodity Futures Trading Commission, unless DWR is notified otherwise not later than the time an order is placed for the Account [check box if applicable]: Pursuant to CFTC Regulation 190.06(d), Customer specifies and agrees, with respect to hedging transactions in the Account, that in the unlikely event of DWR's bankruptcy, it prefers that the bankruptcy trustee [check appropriate box]: A. Liquidate all open contracts without first seeking [ ] instructions either from or on behalf of Customer. B. Attempt to obtain instructions with respect to the [ ] disposition of all open contracts. (IF NEITHER BOX IS CHECKED, CUSTOMER SHALL BE DEEMED TO ELECT A) - - -------------------------------------------------------------------------------- ACKNOWLEDGEMENT OF RECEIPT OF RISK DISCLOSURE STATEMENTS The undersigned each hereby acknowledges its separate receipt from DWR, and its understanding of each of the following documents prior to the opening of the account: o Risk Disclosure Statement for o Project A(TM) Customer Futures and Options (in the form Information Statement prescribed by CFTC Regulation 1.55(c)) o LME Risk Warning Notice o Questions & Answers on Flexible Options Trading at the CBOT o Dean Witter Order Presumption for o CME Average Pricing System After Hours Electronic Markets Disclosure Statement o NYMEX ACCESS(SM) Risk Disclosure o Special Notice to Foreign Statement Brokers and Foreign Traders o Globex(R) Customer Information and Risk Disclosure Statement - - -------------------------------------------------------------------------------- REQUIRED SIGNATURES The undersigned has received, read, understands and agrees to all the provisions of this Agreement and the separate risk disclosure statements enumerated above and agrees to promptly notify DWR in writing if any of the warranties and representations contained herein become inaccurate or in any way cease to be true, complete and correct. DEAN WITTER WORLD CURRENCY FUND L.P. - - -------------------------------------------------------------------------------- CUSTOMER NAME(S) By: DEMETER MANAGEMENT CORPORATION By: /s/ Mark J. Hawley December 1, 1997 - - ------------------------------------ ------------------------------------ AUTHORIZED SIGNATURE(S) DATE Mark J. Hawley, President - - -------------------------------------------------------------------------------- (If applicable, print name and title of signatory) EX-27 5 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from Dean Witter World Currency Fund L.P. and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1998 DEC-31-1998 26,130,701 0 76,126 0 0 0 0 0 25,105,387 0 0 0 0 0 0 25,105,387 0 1,274,004 0 0 1,956,216 0 0 (682,212) 0 (682,212) 0 0 0 (682,212) 0 0 Receivables include interest receivable of $76,126. In addition to cash and receivables, total assets include net unrealized loss on open contracts of $1,101,440. Liabilities include redemptions payable of $248,498, accrued management fees of $62,749, and accrued administrative expenses of $5,977. Total revenue includes realized trading revenue of $2,059,332, net change in unrealized of $(1,876,969) and interest income of $1,091,641.
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