Exhibit 10.03
EXECUTION VERSION
 
MANAGEMENT AGREEMENT
 
AGREEMENT made as of the 1st day of January, 2012, among CERES MANAGED FUTURES
LLC, a Delaware limited liability company (“CMF”), MORGAN STANLEY SMITH BARNEY
SPECTRUM CURRENCY AND COMMODITY L.P. (formerly known as Morgan Stanley Smith
Barney Spectrum Currency L.P.), a Delaware limited partnership (the
“Partnership”) and FLINTLOCK CAPITAL ASSET MANAGEMENT, LLC, a Delaware limited
liability company (the “Advisor”).
 
W I T N E S S E T H :
 
WHEREAS, CMF is the general partner of Morgan Stanley Smith Barney Spectrum
Currency and Commodity L.P., a limited partnership organized to trade, buy,
sell, spread, or otherwise acquire, hold, or dispose of commodities (which may
include foreign currencies, mortgage-backed securities, money market
instruments, financial instruments and any other securities or items which are
now, or may hereafter be, the subject of futures contract trading), domestic and
foreign commodity futures contracts, commodity forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as “futures interests”) and securities
(such as United States Treasury bills) approved by the Commodity Futures Trading
Commission (the “CFTC”) for investment of customer funds, and to engage in all
activities incident thereto, such trading and activities to be conducted
directly or through investment in FL Master Fund L.P., a Delaware limited
partnership (the “Master Fund”) of which CMF is the general partner and
Flintlock Capital Asset Management, LLC is the advisor; and
 
WHEREAS, the Limited Partnership Agreement establishing the Partnership (the
“Limited Partnership Agreement”) permits CMF to delegate to one or more
commodity trading advisors CMF’s authority to make trading decisions for the
Partnership; and
 
WHEREAS, the Advisor is registered as a commodity trading advisor with the CFTC
and is a member of the National Futures Association (“NFA”); and
 
WHEREAS, CMF is registered as a commodity trading advisor and a commodity pool
operator with the CFTC and is a member of the NFA; and
 
WHEREAS, CMF, the Partnership and the Advisor wish to enter into this Agreement
in order to set forth the terms and conditions upon which the Advisor will
render and implement advisory services in connection with the conduct by the
Partnership of its futures interest trading activities during the term of this
Agreement;
 
NOW, THEREFORE, the parties agree as follows:
 
1.  DUTIES OF THE ADVISOR.   (a)   For the period and on the terms and
conditions of this Agreement, the Advisor shall have sole authority and
responsibility, as one of the Partnership’s agents and attorneys-in-fact, for
directing the investment and reinvestment of the assets and funds of the
Partnership allocated to the Advisor from time to time by CMF in futures
interests. The Advisor may also engage in swaps transactions and other
derivatives
 
 
 

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transactions on behalf of the Partnership with the prior approval of CMF.  All
such trading on behalf of the Partnership shall be in accordance with the
trading strategies and trading policies set forth in the Partnership’s Limited
Partnership Agreement and as described in Appendix A, and as such trading
policies may be changed from time to time upon receipt by the Advisor of prior
written notice of such change and pursuant to the trading strategy selected by
CMF to be utilized by the Advisor in managing the Partnership’s assets.  CMF has
initially selected the Advisor’s trading program for Flintlock Commodity
Opportunities Partners, LP (the “Program”), attached hereto as Appendix A, to
manage the Partnership’s assets allocated to it, provided that CMF and the
Partnership acknowledge that Advisor intends to manage the assets of the
Partnership utilizing two times the leverage utilized by Flintlock Commodity
Opportunities Master Fund, LP.  Any open positions or other investments at the
time of receipt of such notice of a change in trading policy shall not be deemed
to violate the changed policy and shall be closed or sold in the ordinary course
of trading.  The Advisor may not deviate from the trading policies set forth in
the Limited Partnership Agreement and Appendix A without the prior written
consent of the Partnership given by CMF.  The Advisor makes no representation or
warranty that the trading to be directed by it for the Partnership will be
profitable or will not result in losses.
 
(b)   CMF acknowledges receipt of the description of the Program, attached
hereto as Appendix A.  All trades made by the Advisor for the account of the
Partnership, whether directly or indirectly through the Master Fund, shall be
made through such commodity broker or brokers as CMF shall direct (the
“Commodity Brokers”), and the Advisor shall have no authority or responsibility
for selecting or supervising any such broker in connection with the execution,
clearance or confirmation of transactions for the Partnership or for the
negotiation of brokerage rates charged therefor.  However, the Advisor, with the
prior written permission (by original, fax copy or email copy) of CMF, may
direct any and all trades in futures interests to a futures commission merchant
or independent floor broker it chooses for execution with instructions to
give-up the trades to the broker designated by CMF, provided that the futures
commission merchant or independent floor broker and any give-up or floor
brokerage fees are approved in advance by CMF.  All give-up or similar fees
relating to the foregoing shall be paid by the Partnership after all parties
have executed the relevant give-up agreements (by original, fax copy or email
copy).  CMF and the Partnership each acknowledges that the use of Commodity
Brokers selected by CMF may result in trades being executed at prices that are
less desirable than those that may be available if the Advisor were permitted to
select a different executing broker.
 
(c)   The initial allocation of the Partnership’s assets to the Advisor will be
made to the Program.  In the event the Advisor wishes to use a trading system or
methodology other than or in addition to the Program or system or methodology
outlined in Appendix A in connection with its trading for the Partnership,
either in whole or in part, it may not do so unless the Advisor gives CMF prior
written notice of its intention to utilize such different trading system or
methodology and CMF consents thereto in writing.  In addition, the Advisor will
provide five days’ prior written notice to CMF of any change in the trading
system or methodology to be utilized for the Partnership which the Advisor deems
material.  If the Advisor deems such change in system or methodology or in
markets traded to be material, the changed system or methodology or markets
traded will not be utilized for the Partnership without the prior written
consent of CMF.  In addition, the Advisor will notify CMF of any changes to the
trading system or methodology that would require a change in the description of
the trading
 
 
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strategy or methods described in Appendix A.  Further, the Advisor will provide
the Partnership with a current list of all futures interests to be traded for
the Partnership’s account and the Advisor will not trade any additional futures
interests for such account without providing notice thereof to CMF and receiving
CMF’s written (including email) approval.  The Advisor also agrees to provide
CMF, on a monthly basis, with a written (including email) report of the assets
under the Advisor’s management together with all other matters deemed by the
Advisor to be material changes to its business not previously reported to
CMF.  The Advisor further agrees that it will convert foreign currency balances
(not required to margin positions denominated in a foreign currency) to U.S.
dollars no less frequently than monthly.  To the extent commercially
practicable, U.S. dollar equivalents in individual foreign currencies of more
than $100,000 will be converted to U.S. dollars within one business day after
such funds are no longer needed to margin foreign positions.
 
(d)   The Advisor agrees to make all material disclosures to the Partnership
regarding itself and its principals as defined in Part 4 of the CFTC’s
regulations (“principals”), members, directors, officers and employees, their
trading performance and general trading methods, its customer accounts (but not
the identities of or identifying information with respect to its customers) and
otherwise as are required in the reasonable judgment of CMF to be made in any
filings required by Federal or state law or NFA rule or order.  Notwithstanding
Paragraphs 1(d) and 4(d) of this Agreement, the Advisor is not required to
disclose the actual trading results of proprietary accounts of the Advisor or
its principals unless CMF reasonably determines that such disclosure is required
in order to fulfill its fiduciary obligations to the Partnership or the
reporting, filing or other obligations imposed on it by Federal or state law or
NFA rule or order.  The Partnership and CMF acknowledge that the trading advice
and all other information to be provided by the Advisor pursuant to this
Agreement constitutes proprietary and confidential information of the Advisor
and that they will keep all such information confidential and not use such
information for any purpose other than evaluating the performance of the Advisor
and further agree not to use such information to guide their own trading or that
of any other person.   Further, CMF agrees to treat as confidential any results
of proprietary accounts and/or proprietary information with respect to trading
systems.
 
(e)   The Advisor understands and agrees that CMF may designate other trading
advisors for the Partnership and apportion or reapportion to such other trading
advisors the management of an amount of Net Assets (as defined in Paragraph 3(b)
hereof) as it shall determine in its absolute discretion.  The designation of
other trading advisors and the apportionment or reapportionment of Net Assets to
any such trading advisors pursuant to this Paragraph 1 shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
the parties hereunder.
 
(f)   CMF may, from time to time, in its absolute discretion, select additional
trading advisors and reapportion funds among such other trading advisors for the
Partnership as it deems appropriate.  CMF shall use its best efforts to make
reapportionments, if any, as of the last day of a month.  The Advisor agrees
that it may be called upon at any time promptly to liquidate positions in CMF’s
sole discretion so that CMF may reallocate the Partnership’s assets, meet margin
calls on the Partnership’s account, fund redemptions, or for any other reason,
except that CMF will not require the liquidation of specific positions by the
Advisor.  CMF will use its best efforts to give two days’ prior notice to the
Advisor of any reallocations or liquidations.
 
 
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(g)   The Advisor shall assume financial responsibility for any errors
(“Errors”) committed or caused by its negligence, fraud or misconduct in
transmitting orders for the purchase or sale of futures interests for the
Partnership’s account including payment to the Commodity Brokers (as defined
above) of the floor brokerage commissions, exchange, NFA fees, and other
transaction charges and give-up charges incurred by the Commodity Broker on such
trades but only for the amount of the Commodity Brokers’ out-of-pocket costs in
respect thereof.  The Advisor shall have an affirmative obligation to promptly
notify CMF and the Partnership upon discovery of such Errors with respect to the
account and the Advisor shall use its best efforts to identify and promptly
notify CMF and the Partnership of any order or trade which the Advisor
reasonably believes was not executed in accordance with its instructions to any
Commodity Broker or such other commodity broker utilized to execute orders for
the Partnership.
 
2.    INDEPENDENCE OF THE ADVISOR.  For all purposes herein, the Advisor shall
be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Partnership in any way and shall not be deemed an agent, promoter or sponsor of
the Partnership, CMF, or any other trading advisor.  The Advisor shall not be
responsible to the Partnership, CMF, any trading advisor or any limited partners
for any acts or omissions of any other trading advisor to the Partnership.
 
3.    COMPENSATION.  (a) In consideration of and as compensation for all of the
services to be rendered by the Advisor to the Partnership under this Agreement,
the Partnership shall pay the Advisor (i) an incentive fee payable quarterly
equal to 20% of New Trading Profits (as such term is defined below) earned by
the Advisor for the Partnership and (ii) a monthly fee for professional
management services equal to 1/12 of 1.5% (1.5% per year) of the Net Assets of
the Partnership allocated to the Advisor as of the opening of business on the
first day of each calendar month, commencing with the month in which the
Partnership begins to receive trading advice from the Advisor pursuant to this
Agreement.
 
(b)   “Net Assets” shall have the meaning set forth in Section 7(d)(1) of the
Limited Partnership Agreement and without regard to further amendments thereto,
provided that in determining the Net Assets of the Partnership on any date, no
adjustment shall be made to reflect any distributions, redemptions or incentive
fees payable as of the date of such determination.
 
(c)   “New Trading Profits” shall mean the excess, if any, of Net Assets managed
by the Advisor at the end of the quarter over Net Assets managed by the Advisor
at the end of the highest previous quarter, or Net Assets allocated to the
Advisor at the date trading commences by the Advisor for the Partnership,
whichever is higher, and as further adjusted to eliminate the effect on Net
Assets resulting from redemptions, reallocations or capital distributions, if
any, made during the fiscal quarter decreased by interest or other income, not
directly related to trading activity, earned on the Partnership’s assets during
the fiscal quarter, whether the assets are held separately or in margin
accounts.  Ongoing expenses shall be attributed to the Advisor based on the
Advisor’s proportionate share of Net Assets.  Ongoing expenses shall not include
expenses of litigation not involving the activities of the Advisor on behalf of
the Partnership.  No incentive fee shall be paid to the Advisor until the end of
the first
 
 
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full calendar quarter of the Advisor’s trading for the Partnership, which fee
shall be based on New Trading Profits (if any) earned from the commencement of
trading by the Advisor on behalf of the Partnership through the end of the first
full calendar quarter of such trading.  Interest income earned, if any, will not
be taken into account in computing New Trading Profits earned by the
Advisor.  If Net Assets allocated to the Advisor are reduced due to redemptions,
distributions or reallocations (net of additions), there will be a corresponding
proportional reduction in the related loss carryforward amount that must be
recouped before the Advisor is eligible to receive another incentive fee.
 
(d)   Quarterly incentive fees and monthly management fees shall be paid within
twenty (20) business days following the end of the period for which such fee is
payable.  In the event of the termination of this Agreement as of any date which
shall not be the end of a calendar quarter or a calendar month, as the case may
be, the quarterly incentive fee shall be computed as if the effective date of
termination were the last day of the then current quarter and the monthly
management fee shall be prorated to the effective date of termination.  If,
during any month, the Partnership cannot conduct business operations (provided,
that neither CMF nor the Partnership may rely on this provision solely for the
purpose of avoiding paying fees to the Advisor) or the Advisor is unable to
provide the services contemplated herein (provided, that the Advisor not trading
the account as part of the Program shall not be deemed to be a failure by the
Advisor to provide such services), the monthly management fee shall be prorated
by the ratio which the number of business days during which the Partnership’s
business operations were conducted and/or the Advisor provided services to the
Partnership bears in the month to the total number of business days in such
month.
 
(e)   The provisions of this Paragraph 3 shall survive the termination of this
Agreement.
 
4.   RIGHT TO ENGAGE IN OTHER ACTIVITIES.  (a) The services provided by the
Advisor hereunder are not to be deemed exclusive.  CMF on its own behalf and on
behalf of the Partnership acknowledges that, subject to the terms of this
Agreement, the Advisor and its officers, directors, employees and members, may
render advisory, consulting and management services to other clients and
accounts.  The Advisor and its officers, directors, employees and members shall
be free to trade for their own accounts and to advise other investors and manage
other commodity accounts during the term of this Agreement and to use the same
information, computer programs and trading strategies, programs or formulas
which they obtain, produce or utilize in the performance of services to CMF for
the Partnership.  However, the Advisor represents, warrants and agrees that it
believes the rendering of such consulting, advisory and management services to
other accounts and entities will not require any material change in the
Advisor’s basic trading strategies for the Partnership and will not affect the
capacity of the Advisor to continue to render services to CMF for the
Partnership of the quality and nature contemplated by this Agreement.
 
(b)   If, at any time during the term of this Agreement, the Advisor is required
to aggregate the Partnership’s futures interest positions with the positions of
any other person for purposes of applying CFTC- or exchange-imposed speculative
position limits, the Advisor agrees that it will promptly notify CMF in writing,
including electronic copy, if the Partnership’s positions are included in an
aggregate amount which exceeds the applicable speculative position limit.  The
Advisor agrees that, if its trading recommendations are altered because of the
application of any speculative position
 
 
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limits, it will not modify the trading instructions with respect to the
Partnership’s account in such manner as to affect the Partnership substantially
disproportionately as compared with the Advisor’s other accounts.  The Advisor
further represents, warrants and agrees that under no circumstances will it
knowingly or deliberately use trading programs, strategies or methods for the
Partnership that are inferior to strategies or methods employed for any other
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account in any manner,
it being acknowledged, however, that different trading programs, strategies or
methods may be utilized for differing sizes of accounts, accounts with different
trading policies or risk parameters, accounts experiencing differing inflows or
outflows of equity, accounts that commence trading at different times, accounts
that have different portfolios or different fiscal years, accounts utilizing
different executing brokers and accounts with other differences, and that such
differences may cause divergent trading results.
 
(c)   It is acknowledged that the Advisor and/or its officers, employees,
directors and members presently act, and it is agreed that they may continue to
act, as advisor for other accounts managed by them, and may continue to receive
compensation with respect to services for such accounts in amounts which may be
more or less than the amounts received from the Partnership.
 
(d)   The Advisor agrees that it shall make such information available to CMF
respecting the performance of the Partnership’s account as compared to the
performance of other accounts managed by the Advisor or its principals, if any,
as shall be reasonably requested by CMF.  The Advisor presently believes and
represents that existing speculative position limits will not materially
adversely affect its ability to manage the Partnership’s account given the
potential size of the Partnership’s account and the Advisor’s and its
principals’ current accounts and all proposed accounts for which they have
contracted to act as trading manager.  CMF and the Partnership each acknowledges
that the Advisor’s present belief and representation regarding speculative
position limits may be affected by rules or regulations that go into effect
after the date hereof.
 
5.   TERM.    (a) This Agreement shall continue in effect until June 30,
2012.  CMF may, in its sole discretion, renew this Agreement for additional
one-year periods upon notice to the Advisor not less than 30 days prior to the
expiration of the previous period.  At any time during the term of this
Agreement, CMF may terminate this Agreement at any month-end upon 30 days’
notice to the Advisor.  At any time during the term of this Agreement, CMF may
elect to immediately terminate this Agreement upon 5 days’ notice to the Advisor
if (i) the Net Asset Value per Unit shall decline as of the close of business on
any day to $4.00 or less; (ii) the Partnership’s aggregate net assets decline to
less than $1,000,000; (iii) the Net Assets allocated to the Advisor (adjusted
for redemptions, distributions, withdrawals or reallocations, if any) decline by
20% or more as of the end of a trading day from such Net Assets’ previous
highest value; (iv) the Advisor fails to comply with the terms of this
Agreement; (v) CMF, in good faith, reasonably determines, as advised by counsel,
that the performance of the Advisor has been such that CMF’s fiduciary duties to
the Partnership require CMF to terminate this Agreement; (vi) CMF reasonably
believes that the application of speculative position limits will substantially
affect the performance of the Partnership; or (vii) the Advisor fails to conform
to the trading
 
 
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policies set forth in the Partnership Agreement or Appendix A as they may be
changed from time to time, provided however, that the Advisor has been given
prior notice of any such change.  At any time during the term of this Agreement,
CMF may elect immediately to terminate this Agreement if (i) the Advisor merges,
consolidates with another entity, sells a substantial portion of its assets, or
becomes bankrupt or insolvent, (ii) Steven Mathews dies, becomes incapacitated,
leaves the employ of the Advisor or is otherwise not managing the Program, (iii)
the Advisor’s registration as a commodity trading advisor with the CFTC or its
membership in the NFA or any other regulatory authority, is terminated or
suspended, or (iv) CMF reasonably believes that the Advisor has or may
contribute to any material operational, business, or reputational risk to CMF or
CMF’s affiliates.  This Agreement will immediately terminate upon dissolution of
the Partnership or upon cessation of trading by the Partnership prior to
dissolution.
 
(b)   The Advisor may terminate this Agreement by giving not less than 30 days’
notice to CMF (i) in the event that the trading policies of the Partnership as
set forth in the Limited Partnership Agreement and Appendix A are changed in
such manner that the Advisor reasonably believes will adversely affect the
performance of its trading strategies; (ii) after June 30, 2012; or (iii) in the
event that CMF or the Partnership fails to comply with the terms of this
Agreement.  The Advisor may immediately terminate this Agreement if CMF’s
registration as a commodity trading advisor, commodity pool operator or its
membership in the NFA is terminated or suspended.
 
(c)   Except as otherwise provided in this Agreement, any termination of this
Agreement in accordance with this Paragraph 5 shall be without penalty or
liability to any party, except for any fees due to the Advisor pursuant to
Paragraph 3 hereof.
 
6.   INDEMNIFICATION.   (a) (i) In any threatened, pending or completed action,
suit, or proceeding to which the Advisor was or is a party or is threatened to
be made a party arising out of or in connection with this Agreement or the
management of the Partnership’s assets by the Advisor, CMF shall, subject to
subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the
Advisor against any loss, liability, damage, cost, expense (including, without
limitation, attorneys’ and accountants’ fees, and including any reasonable
attorneys’ fees incurred in connection with enforcing this indemnification),
judgments and amounts paid in settlement actually and reasonably incurred by it
in connection with such action, suit, or proceeding if the Advisor acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Partnership, and provided that its conduct did not constitute
negligence, intentional misconduct, or a breach of its fiduciary obligations to
the Partnership as a commodity trading advisor, unless and only to the extent
that the court or administrative forum in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, the Advisor is fairly and reasonably
entitled to indemnity for such expenses which such court or administrative forum
shall deem proper; and further provided that no indemnification shall be
available from the Partnership if such indemnification is prohibited by Section
14 of the Limited Partnership Agreement.  The termination of any action, suit or
proceeding by judgment, order or settlement shall not, of itself, create a
presumption that the Advisor did not act in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Partnership.
 
 
 
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(ii)   To the extent that the Advisor has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subparagraph (i) above, or in defense of any claim, issue or matter therein, CMF
shall indemnify it against the expenses (including, without limitation,
attorneys’ and accountants’ fees, and including any reasonable attorneys’ fees
incurred in connection with enforcing this indemnification) actually and
reasonably incurred by it in connection therewith.
 
(iii)   Any indemnification under subparagraph (i) above, unless ordered by a
court or administrative forum, shall be made by CMF only as authorized in the
specific case and only upon a determination by independent legal counsel in a
written opinion that such indemnification is proper in the circumstances because
the Advisor has met the applicable standard of conduct set forth in subparagraph
(i) above.  Such independent legal counsel shall be selected by CMF in a timely
manner, subject to the Advisor’s approval, which approval shall not be
unreasonably withheld.  The Advisor will be deemed to have approved CMF’s
selection unless the Advisor notifies CMF in writing, received by CMF within
five business days of CMF’s telecopying to the Advisor of the notice of CMF’s
selection, that the Advisor does not approve the selection.
 
(iv)   In the event the Advisor is made a party to any claim, dispute or
litigation or otherwise incurs any loss or expense as a result of, or in
connection with, the Partnership’s or CMF’s activities or claimed activities
unrelated to the Advisor, CMF shall indemnify, defend and hold harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys’ and accountants’ fees, and including any reasonable
attorneys’ fees incurred in connection with enforcing this indemnification)
incurred in connection therewith.
 
(v)   As used in this Paragraph 6(a), the term “Advisor” shall include the
Advisor, its principals, officers, directors, members and employees and the term
“CMF” shall include the Partnership.
 
(b)   (i)    The Advisor agrees to indemnify, defend and hold harmless CMF, the
Partnership and their affiliates against any loss, liability, damage, fine,
penalty, obligation, cost or expense (including, without limitation, attorneys’
and accountants’ fees, collection fees, court costs and other legal expenses,
including any reasonable attorneys’ fees incurred in connection with enforcing
this indemnification), judgments and awards and amounts paid in settlement
reasonably incurred by them (A) as a result of the material breach of any
material representations and warranties or covenants made by the Advisor in this
Agreement, or (B) as a result of any act or omission of the Advisor relating to
the Partnership if there has been a final judicial or regulatory determination
or, in the event of a settlement of any action or proceeding with the prior
written consent of the Advisor, a written opinion of an arbitrator pursuant to
Paragraph 14 hereof, to the effect that such acts or omissions violated the
terms of this Agreement in any material respect or involved negligence, bad
faith, recklessness or intentional misconduct on the part of the Advisor (except
as otherwise provided in Paragraph 1(g)).
 
(ii)   In the event CMF, the Partnership or any of their affiliates is made a
party to any claim, dispute or litigation or otherwise incurs any loss or
expense as a result of, or in connection with, the activities or claimed
activities of the Advisor or its principals, officers,
 
 
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directors, members or employees unrelated to CMF’s or the Partnership’s
business, the Advisor shall indemnify, defend and hold harmless CMF, the
Partnership or any of their affiliates against any loss, liability, damage, cost
or expense (including, without limitation, attorneys’ and accountants’ fees, and
including any reasonable attorneys’ fees incurred in connection with enforcing
this indemnification) incurred in connection therewith.
 
(iii)   Any indemnification under subsection (i) above, unless ordered by a
court or administrative forum, shall be made by the Advisor only as authorized
in the specific case and only upon a determination by independent legal counsel
in a written opinion that such indemnification is proper in the circumstances
because the Advisor has failed to met the applicable standard of conduct set
forth in subsection (i) above.  Such independent legal counsel shall be selected
by the Advisor in a timely manner, subject to CMF’s approval, which approval
shall not be unreasonably withheld.  CMF will be deemed to have approved the
Advisor’s selection unless CMF notifies the Advisor in writing, received by the
Advisor within five business days of the Advisor’s telecopying to CMF of the
notice of the Advisor’s selection, that CMF does not approve the selection.
 
(c)   In the event that a person entitled to indemnification under this
Paragraph 6 is made a party to an action, suit or proceeding alleging both
matters for which indemnification can be made hereunder and matters for which
indemnification may not be made hereunder, such person shall be indemnified only
for that portion of the loss, liability, damage, cost or expense incurred in
such action, suit or proceeding which relates to the matters for which
indemnification can be made.
 
(d)   None of the indemnifications contained in this Paragraph 6 shall be
applicable with respect to default judgments, confessions of judgment or
settlements entered into by the party claiming indemnification without the prior
written consent, which shall not be unreasonably withheld, of the party
obligated to indemnify such party.
 
(e)   The provisions of this Paragraph 6 shall survive the termination of this
Agreement.
 
7.   REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
 
(a)   The Advisor represents and warrants that:
 
(i)   All references to the Advisor and its principals in materials, provided to
CMF and the limited partners of the Partnership, including, without limitation,
the Advisor’s Disclosure Document, if any (the “Partnership Reports”) are
accurate in all material respects and as to them, the Partnership Reports do not
contain any untrue statement of a material fact or omit to state a material fact
which is necessary to make the statements therein not misleading, except that
with respect to any pro forma or hypothetical performance information in the
Partnership Reports, if any, this representation and warranty extends only to
the underlying data made available by the Advisor for the preparation thereof
and not to any hypothetical or pro forma adjustments.
 
(ii)   The information with respect to the Advisor set forth in the actual
performance tables in the Partnership Reports, if any, is based on all of the
customer accounts
 
 
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managed on a discretionary basis by the Advisor’s principals and/or the Advisor
during the period covered by such tables and required to be disclosed
therein.  The Advisor’s performance tables have been examined by an independent
certified public accountant and the report thereon has been provided to
CMF.  The Advisor will have its performance tables so examined no less
frequently than annually during the term of this Agreement.
 
(iii)   The Advisor will be acting as a commodity trading advisor with respect
to the Partnership and not as a securities investment adviser and is duly
registered with the CFTC as a commodity trading advisor, is a member of the NFA,
and is in compliance with any such other registration and licensing requirements
as shall be necessary to enable it to perform its obligations hereunder, and
agrees to maintain and renew such registrations and licenses during the term of
this Agreement.
 
(iv)   The Advisor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full limited liability company power and authority to enter into this Agreement
and to provide the services required of it hereunder.
 
(v)   The Advisor will not, by acting as a commodity trading advisor to the
Partnership, breach or cause to be breached any undertaking, agreement,
contract, statute, rule or regulation to which it is a party or by which it is
bound.
 
(vi)   This Agreement has been duly and validly authorized, executed and
delivered by the Advisor and is a valid and binding agreement enforceable in
accordance with its terms.
 
(b)   CMF represents and warrants for itself and the Partnership that:
 
(i)   CMF is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full limited
liability company power and authority to perform its obligations under this
Agreement.
 
(ii)   CMF and the Partnership have the capacity and authority to enter into
this Agreement on behalf of the Partnership.
 
(iii)   This Agreement has been duly and validly authorized, executed and
delivered on CMF’s and the Partnership’s behalf and is a valid and binding
agreement of CMF and the Partnership enforceable in accordance with its terms.
 
(iv)   CMF will not, by acting as general partner to the Partnership and the
Partnership will not, breach or cause to be breached any undertaking, agreement,
contract, statute, rule or regulation to which it is a party or by which it is
bound which would materially limit or affect the performance of its duties under
this Agreement.
 
(v)   CMF is registered as a commodity trading advisor and a commodity pool
operator and is a member of the NFA, and it will maintain and renew such
registrations and membership during the term of this Agreement.
 
 
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(vi)   The Partnership is a limited partnership duly organized and validly
existing under the laws of the State of Delaware and has full limited
partnership power and authority to enter into this Agreement and to perform its
obligations under this Agreement.
 
(vii)   The Partnership is a qualified eligible person as defined in CFTC Rule
4.7.
 
8.   COVENANTS OF THE ADVISOR, CMF AND THE PARTNERSHIP.
 
(a)   The Advisor agrees as follows:
 
(i)   In connection with its activities on behalf of the Partnership, the
Advisor will comply with all applicable laws, including rules and regulations of
the CFTC, NFA and/or the commodity exchange on which any particular transaction
is executed.
 
(ii)   The Advisor will promptly notify CMF of the commencement of any material
investigation, suit, action or proceeding involving the Advisor or any of its
affiliates, officers, manager(s), employees, agents or representatives;
regardless of whether such investigation, suit, action or proceeding also
involves CMF.  The Advisor will provide CMF with copies of any correspondence
(including, but not limited to, any notice or correspondence regarding the
violation, or potential violation, of position limits) from or to the CFTC, NFA
or any commodity exchange in connection with an investigation or audit of the
Advisor’s business activities.
 
(iii)   In the placement of orders for the Partnership’s account and for the
accounts of any other client, the Advisor will utilize a pre-determined,
systematic, fair and reasonable order entry system, which shall, on an overall
basis, be no less favorable to the Partnership than to any other account managed
by the Advisor.  The Advisor acknowledges its obligation to review the
Partnership’s positions, prices and equity in the account managed by the Advisor
daily and within two business days to notify, in writing, CMF and the
Partnership’s brokers of (A) any error committed by the Advisor or its
principals or employees; (B) any trade which the Advisor believes was not
executed in accordance with its instructions; and (C) any discrepancy with a
value of $10,000 or more (due to differences in the positions, prices or equity
in the account) between its records and the information reported on the
account’s daily and monthly broker statements.
 
(iv)   The Advisor will maintain a net worth of not less than $100,000 during
the term of this Agreement.
 
(v)   The Advisor intends to use its commercially reasonable best efforts to
close out all futures interest positions prior to any applicable delivery
period, and will use its best efforts to avoid causing the Partnership to take
delivery of any commodity.
 
(vi)   CMF shall have the right for a period of 24 months following the date of
this Agreement to allocate up to $150,000,000 in funded assets to the Advisor’s
Program on behalf of any collective investment vehicle or account operated or
managed by CMF and the Advisor represents that such allocation will not exceed
the capacity limits of the Program.
 
 
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(b)   CMF agrees for itself and the Partnership that:
 
(i)   CMF and the Partnership will comply with all applicable laws, including
rules and regulations of the CFTC, NFA and/or the commodity exchange on which
any particular transaction is executed.
 
(ii)   CMF will promptly notify the Advisor of the commencement of any material
suit, action or proceeding involving it or the Partnership, whether or not such
suit, action or proceeding also involves the Advisor.
 
(iii)   CMF will be responsible for compliance with the USA Patriot Act and
related anti-money-laundering regulations with respect to the Partnership and
its limited partners.
 
9.      COMPLETE AGREEMENT.  This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof.
 
10.   ASSIGNMENT.  This Agreement may not be assigned by any party without the
express written consent of the other parties.
 
11.   AMENDMENT.  This Agreement may not be amended except by the written
consent of the parties.
 
12.   NOTICES.  All notices, demands or requests required to be made or
delivered under this Agreement shall be made either by electronic mail (email)
copy or in writing and delivered personally or by registered or certified mail
or expedited courier, return receipt requested, postage prepaid, to the
addresses below or to such other addresses as may be designated by the party
entitled to receive the same by notice similarly given:
 
If to CMF or to the Partnership:
 
Ceres Managed Futures LLC
522 Fifth Avenue, 14th Floor
New York, New York  10036
Attention:  Walter Davis
email:  walter.davis@morganstanleysmithbarney.com
 
If to the Advisor:
 
Flintlock Capital Asset Management, LLC
515 Madison Ave, 34th Floor
New York, NY 10022
Attention:  David J. Walker
email:  David.Walker@flintlockcap.com
 

 
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with a copy to:
 
Kleinberg Kaplan Wolff & Cohen
551 Fifth Avenue
New York, NY 10176
Attention: Jamie L. Nash
email:  jnash@kkwc.com
 
13.   GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
 
14.   ARBITRATION.  The parties agree that any dispute or controversy arising
out of or relating to this Agreement or the interpretation thereof, shall be
settled by arbitration in accordance with the rules, then in effect, of the
National Futures Association or, if the National Futures Association shall
refuse jurisdiction, then in accordance with the rules, then in effect, of the
American Arbitration Association; provided, however, that the power of the
arbitrator shall be limited to interpreting this Agreement as written and the
arbitrator shall state in writing his reasons for his award, and further
provided, that any such arbitration shall occur within the Borough of Manhattan
in New York City.  Judgment upon any award made by the arbitrator may be entered
in any court of competent jurisdiction.
 
15.   NO THIRD PARTY BENEFICIARIES.  There are no third party beneficiaries to
this Agreement, except that certain persons not parties to this Agreement may
have rights under Paragraph 6 hereof.
 
16.   COUNTERPART ORIGINALS.  This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one agreement.  The delivery of a signed
counterpart by facsimile or email shall be binding on the signatory.
 
17.   SURVIVAL.  The last two sentences of Section 1(d) and Sections 3, 6, 12,
13 and 14 shall survive the termination of this Agreement.
 

 
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PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN
CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS ACCOUNT DOCUMENT IS
NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION.  THE COMMODITY
FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A
TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR
DISCLOSURE.  CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT
REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS ACCOUNT DOCUMENT.
 
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the
undersigned as of the day and year first above written.
 

 
CERES MANAGED FUTURES LLC
                 
 
By
/s/ Walter Davis       Walter Davis       President and Director          

 

 
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.
     
(formerly known as Morgan Stanley Smith Barney Spectrum Currency L.P.)  
                    By: Ceres Managed Futures LLC
(General Partner)                  
 
By
/s/ Walter Davis       Walter Davis       President and Director          

 

 
FLINTLOCK CAPITAL ASSET MANAGEMENT, LLC
                 
 
By
/s/ David J. Walker       David J. Walker        Chief Operating Officer        
 

 
 
 
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Appendix A
 
Trading Program of 2X Flintlock Commodity Opportunities Partners, LP
 
Objective
 
The objective of the managed account is to generate attractive risk-adjusted
returns while preserving capital, regardless of market conditions, by investing
primarily in commodities futures involved in macro-fundamental or
catalyst-driven situations.  Derivatives, such as options, futures and forwards
approved by the investor, may be used whenever the Advisor, in its sole
discretion, deems it appropriate to do so.  Such instruments will primarily be
used for hedging purposes; however, the Advisor may also use such instruments to
express a certain view.  The managed account is expected to have two times
leverage pari passu to Flintlock Commodity Opportunities Master Fund, LP in
addition to the inherent leverage of futures contracts and other derivative
instruments.
 
Trading Program
 
The managed account will seek to generate attractive risk-adjusted returns,
while preserving capital and minimizing the correlation of the account’s returns
to the U.S. commodity and equity markets.  The Advisor believes that this
fundamental-focused strategy will be effective in most business and economic
climates.  In general, the market for thematic, pattern and event-driven
parameters are used to form a fundamental view of global commodities.  Rigorous
research and disciplined analysis are used to test and formulate a fundamental
view of a certain commodity.  This fundamental view is then combined with
technical indicators, market sentiment and flow analysis to gain a complete
picture of a likely commodity price behavior.
 
Additionally, it is widely understood that there are serious imbedded
imperfections in the structure of commodity indices.  Because of their
simplicity, however, many investors are attracted to the security of these
indices.  The managed account will seek to generate additional attractive
risk-adjusted returns exploiting these imbedded imperfections.
 
Risk Management
 
The managed account aims to achieve its return on invested capital with lower
volatility and market correlation than a traditional long commodity fund.  A
traditional long commodity fund is fully exposed to the commodity market and
thus bears full market risk.  The managed account, however, intends to reduce
its exposure to the market by adhering to strict risk discipline rules
including, but not limited to: hard stops on positions, not using portfolio
level leverage, investing in only highly liquid securities, limiting position
sizes and risk weighting positions.  The managed account will also use
value-at-risk analysis, stress testing and scenario analysis to ensure the
portfolio is within its risk guidelines.
 
Research Process
 
The Advisor will begin its trading process by identifying a group of commodities
undergoing changes in their fundamentals.  Both macro and micro fundamental
research is conducted to support the initial trading thesis.  Additionally, an
extensive database of over 4000
 
 
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industry contacts has been developed over the past twelve years, which will be
used for further fundamental research.
 
The Advisor will continue to refine its trading thesis by using technical
indicators and analysis as well as a comprehensive evaluation of market
sentiment and flow analysis.  The Advisor will generally invest in an
opportunity only if it perceives there to be a 3:1 trade advantage and will also
seek opportunistic entry and exit points.  Furthermore, the Advisor will
generally place a stop loss and trailing stop losses on all trades.
 
The Advisor will generally exit a position based on a target price or when an
effect of a market catalyst has caused the market price to converge towards the
commodity’s intrinsic value.  However, as commodities do trend, the Advisor may,
in some instances, leave a position on that has done well, but will generally
move its trailing stop up to protect the gains that already have occurred.
 
The managed account may make its decisions with a view or expectation of how the
overall market will perform.  The managed account may attempt to time its
trading decisions with respect to possible movements in the overall market.  To
the extent that risk management dictates a shift in net exposure, however, the
managed account may increase or decrease the size of certain of its positions as
long as these positions stay within the managed account’s overall risk
management provisions.
 
General
 
The Advisor intends to pursue the managed account’s objective described above
and will generally follow the outlined trading strategies as long as such
strategies are in accord with Flintlock Commodity Opportunities Master Fund,
LP’s trading approaches and may also formulate new approaches to carry out the
overall objective of Flintlock Commodity Opportunities Master Fund, LP (i.e.,
the achievement of attractive risk-adjusted returns).  Generally, no portfolio
leverage will be employed by Flintlock Commodity Opportunities Master Fund, LP.
 
 
 
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