EXHIBIT 1.1
THE FRONTIER FUND
Denver, Colorado
__________, 2004
SELLING AGENT AGREEMENT
Equinox Fund Management, LLC, a Delaware limited liability company (the
"Managing Owner"), is the managing owner of The Frontier Fund (the "Trust"), a
statutory trust organized under Chapter 38 of Title 12 of the Delaware Code (the
"Delaware Act"). Wilmington Trust Company, a Delaware banking company (the
"Trustee"), is the trustee of the Trust and has delegated substantially all
responsibility for the management of the Trust's business and affairs to the
Managing Owner. The Trust has been formed primarily for the purpose of trading,
buying, selling, spreading or otherwise acquiring, holding or disposing of a
diversified portfolio of commodity futures, forward and options contracts. Units
of beneficial interest in the Trust (the "Units") will be issuable in multiple
series (the "Series"), each separately managed by one or more different trading
advisors (collectively, the "Trading Advisors"), each of which is registered
with the Commodity Futures Trading Commission (the "CFTC") as a commodity
trading advisor under the Commodity Exchange Act, as amended (the "CE Act"), and
is a member of the National Futures Association (the "NFA") in such capacity.
Each Series of Units will be separately valued and its assets will be segregated
from the assets of the other Series. Holders of Units ("Limited Owners") will
have the right to exchange, through redemption and purchase, Units of one Series
for Units of any other Series. The Trust proposes to offer to the public and to
sell to Subscribers (as hereinafter defined) acceptable to the Managing Owner,
the Units upon the terms and subject to the conditions set forth in this Selling
Agent Agreement (the "Agreement") and the Registration Statement (as hereinafter
defined) and the Prospectus (as hereinafter defined) included therein referred
to below. A maximum of $137,500,000 for the Balanced Series, $50,000,000 for the
Xxxxxx Series, $37,500,000 for the Beach Series, $12,500,000 for the C-View
Currency Series and $12,500,000 for the Xxxx Series will be offered and sold
during the Initial Offering Period for each Series, and thereafter during the
Continuing Offering Period for each Series as such terms are hereinafter
defined. The Units of each Series will be offered at $100 per Unit during the
Initial Offering Period and thereafter at the Net Asset Value per Unit of the
applicable Series ("Series Net Asset Value"). All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Prospectus.
[__________________], a [_____________________________] (the "Selling
Agent"), will act as selling agent for the Trust on a "best efforts" basis.
Section 1. The Managing Owner and the Trust, jointly and severally,
represent and warrant to the Selling Agent that:
(a) A registration statement on Form S-1 for the Trust and as a
part thereof a combined prospectus for all Series with respect to all of the
Units being offered (which registration statement together with all amendments
thereto, at the times and in the forms declared effective by the Securities and
Exchange Commission (the "SEC") shall be referred to herein as the "Registration
Statement", and which prospectus in final form, together with all amendments and
supplements thereto, shall be referred to herein as the "Prospectus"), prepared
in full conformity with the applicable requirements of the Securities Act of
1933, as amended (the "1933 Act"), the CE Act, and the rules, regulations and
instructions promulgated under the 1933 Act and the CE Act, respectively, have
been
filed with the SEC, the National Association of Securities Dealers, Inc. (the
"NASD") and the NFA pursuant to the 1933 Act, the CE Act and the rules and
regulations promulgated, respectively, thereunder, as well as the rules and
regulations of the NASD and the NFA, in the form heretofore delivered to the
Selling Agent;
(b) To the best of their knowledge, no order preventing or
suspending the effectiveness of the Registration Statement or use of the
Prospectus or any previous prospectus with respect to the Units has been issued
by the SEC, the CFTC, the NASD, the NFA or any other federal, state or other
governmental agency or body. The Registration Statement contains all statements
which are required to be made therein, conforms in all material respects to the
requirements of the 1933 Act and the CE Act and the rules and regulations of the
SEC and the CFTC, respectively, thereunder, and does not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein (with respect to the
Prospectus, in light of the circumstances in which they were made) not
misleading; and, when the Registration Statement becomes effective under the
1933 Act and at all times subsequent thereto up to and including the Initial
Closing Date for each Series, and thereafter up to and including each subsequent
closing date during the Continuous Offering Period, as such terms are
hereinafter defined, the Registration Statement and the Prospectus will contain
all material statements and information required to be included therein by the
1933 Act and the CE Act and the rules and regulations, respectively, thereunder,
as well as the rules and regulations of the NASD and the NFA, and will conform
in all material respects to the requirements of the 1933 Act, the CE Act and the
rules and regulations, respectively, thereunder, as well as the rules and
regulations of the NASD and the NFA, and will not include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (with respect to the
Prospectus, in light of the circumstances in which they were made) not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Trust or the Managing Owner by the
Selling Agent, the Trustee or their respective agents or by or on behalf of the
Trading Advisors or any other commodity trading advisor (an "Other Advisor")
engaged by the Managing Owner on behalf of the Trust for use therein, all
without prejudice to any defense that the Selling Agent may have based upon its
"due diligence" investigation under the 1933 Act;
(c) The Trust was duly formed and is validly existing as a statutory
trust in good standing under the Delaware Act, with full power and authority,
and all necessary authorizations, approvals and orders of and from all federal,
state and other governmental or regulatory officials and bodies, to carry out
its obligations under this Agreement, its certificate of trust (the "Trust
Certificate") and its amended and restated Declaration of Trust and Trust
Agreement, dated as of August 8, 2003 (the "Trust Agreement"), and to own its
properties and conduct its business as described in the Prospectus;
(d) On the date hereof, the Managing Owner is and, at all times
through the Initial Closing Date for each Series and thereafter through each
subsequent closing date, will be duly organized and validly existing as a
limited liability company under the laws of the State of Delaware with requisite
limited liability company power and authority, and all necessary authorizations,
approvals and orders of and from all required federal, state and other
governmental or regulatory officials and bodies, to (1) conduct its business,
(2) enter into the agreements, and (3) consummate the transactions, each as
described in the Prospectus; and on the date hereof the Managing Owner is and,
at all times through the Initial Closing Date for each Series and thereafter
through each subsequent closing date, will be duly qualified to conduct business
as a foreign limited liability company in good standing in every jurisdiction in
which the character of such business requires such qualification and the failure
to be so qualified would materially adversely affect its ability to act as
Managing Owner of the Trust and perform its obligations hereunder;
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(e) The offer and sale of the Units for each Series have been duly
authorized by the Managing Owner on behalf of the Trust, and the Units, when
issued, will constitute valid units of beneficial interest in the Trust which
conform to the description thereof contained in the Prospectus. The liability of
each Limited Owner will be limited as set forth in the Prospectus and the Trust
Agreement, and no Limited Owner will be subject to personal liability for the
debts, obligations, or liabilities of the Trust by reason of his being a Limited
Owner of the Trust other than as described in the Prospectus and the Trust
Agreement;
(f) This Agreement has been duly and validly authorized, executed
and delivered by the Managing Owner and the Trust and constitutes a valid and
binding agreement of the Managing Owner and the Trust enforceable in accordance
with its terms. Neither the offer and sale of the Units, the execution and
delivery of this Agreement, nor the compliance by the Trust or the Managing
Owner with all of the provisions of this Agreement will conflict with, or result
in a breach of any of the terms or provisions of, or result in a default under,
the provisions of the Trust Certificate or the Trust Agreement or the limited
liability company agreement of the Managing Owner (the "Limited Liability
Company Agreement") or the terms of any indenture, mortgage, deed of trust, loan
agreement, other evidence of indebtedness or other agreement or instrument to
which the Trust or the Managing Owner is a party or by which the Trust or the
Managing Owner is bound or to which any of the property or assets of the Trust
or the Managing Owner is subject, nor, to the best of their knowledge, any
applicable statute or any order, rule or regulation of any court or of any
federal, state or other governmental or regulatory agency or body having
jurisdiction over the Trust or the Managing Owner or any of their properties,
nor will any such actions result in the imposition of any lien, charge or
encumbrance upon any of the property or assets of the Trust or the Managing
Owner, and subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus and except as set forth or
contemplated therein, neither the Trust nor the Managing Owner has incurred any
material liabilities or obligations (direct or contingent) or entered into any
material transactions not in the ordinary course of its business and no consent,
approval, authorization, order, registration or qualification of or with any
court or any federal, state or other governmental or regulatory agency or body
is required for the issue and sale of the Units or the consummation of the other
transactions contemplated by this Agreement, except the registration of the
Managing Owner under the CE Act as a commodity pool operator, membership by the
Managing Owner in the NFA in such capacity, the registration of the Units under
the 1933 Act, submission of the Prospectus to the NASD, CFTC and NFA, and such
consents, approvals, authorizations, orders, registrations or qualifications as
may be required by securities or Blue Sky laws in connection with the offer and
sale of the Units;
(g) Deloitte and Touche LLP, who has examined certain financial
statements of the Managing Owner and the Trust, is an independent public
accountant, as required by the CE Act and the 1933 Act and the rules and
regulations of the CFTC and SEC, respectively, thereunder;
(h) The Trust has been capitalized as set forth in the Prospectus;
(i) The Trust and the Managing Owner have complied, and will
continue to comply, in all material respects with all laws, rules and
regulations having application to its or their business, including rules and
regulations promulgated by the CFTC and NFA, the violation of which would
materially and adversely affect the business, financial condition or earnings of
the Trust or the Managing Owner; and there are no actions, suits or proceedings
pending or, to the best of the knowledge of the Trust or the Managing Owner,
threatened against it or them, at law or in equity or before or by any federal,
state, municipal or other governmental or regulatory department, commission,
board, bureau, agency or instrumentality, or by any commodity or security
exchange worldwide in which an adverse decision would materially and adversely
affect the business, financial condition, earnings or properties of the Trust
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or the Managing Owner or their ability to comply with, and perform their
obligations under this Agreement, and which are not adequately disclosed in the
Prospectus;
(j) On or before the Initial Closing Date for each Series, and
thereafter, on or before each subsequent closing date, the Managing Owner shall
have purchased or subscribed for the General Units required of it by the Trust
Agreement and shall have a Net Worth (as defined in the Trust Agreement) equal
to or in excess of the requirements therein;
(k) The financial statements of the Managing Owner and the Trust
contained in the Registration Statement and the Prospectus fairly present the
financial condition thereof and the results of operations as of the dates and
for the periods therein specified; and such financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved; and no other
financial statements are required by Form S-1 to be included in the Registration
Statement or the Prospectus;
(l) There are no contracts or other documents which are required to
be filed as Exhibits to the Registration Statement by the 1933 Act or the CE Act
or by the rules and regulations of the SEC or CFTC, respectively, thereunder, or
by the rules and regulations of the NASD or NFA, which have not been filed as
required; and
(m) The Trust has the power and authority to enter into the various
contractual obligations and agreements referred to in the Prospectus, and the
execution and delivery of such agreements by the Trust and by the Managing Owner
on behalf of the Trust, the consummation of the transactions contemplated
therein, and the compliance with all of the terms thereof by the Trust and the
Managing Owner will be in compliance in all material respects with all
applicable legal requirements to which either the Trust or the Managing Owner is
subject and will not conflict with or constitute a breach of or default under,
the terms or provisions of any order of the SEC, the NASD, the CFTC, or the NFA,
the Trust Agreement, the Trust Certificate, the Limited Liability Company
Agreement, or any other agreement or instrument to which either the Trust or the
Managing Owner is a party or by which either is bound.
Section 2. The Selling Agent represents and warrants to the Managing Owner
and the Trust that:
(a) it is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in each State where it
will make offers or sales of Units;
(b) it is a member of the NASD and is in material compliance with
all material rules and regulations applicable to the Selling Agent generally
and, to its knowledge, applicable to the Selling Agent's participation in the
offering of Units;
(c) it is duly organized and validly existing under the laws of the
jurisdiction of its organization;
(d) it has full power and authority to enter into this Agreement and
to perform its obligations under this Agreement;
(e) this Agreement has been duly and validly authorized, executed
and delivered by the Selling Agent and is a valid and binding agreement of the
Selling Agent enforceable in accordance with its terms;
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(f) it will deliver to each purchaser, prior to any submission by
such person of a written offer relating to the purchase of the Units, a copy of
the Prospectus, as it may have been most recently amended or supplemented by the
Managing Owner or the Trust;
(g) it will not intentionally take any action which it reasonably
believes would cause the offering of Units to violate the provisions of the 1933
Act, the Exchange Act, the respective rules and regulations promulgated
thereunder or applicable "blue sky" laws or any state or jurisdiction;
(h) The Selling Agent further represents and warrants that, in
recommending to any person the purchase or sale of Units, it shall:
(1) use commercially reasonable efforts to determine, on the
basis of information obtained from the prospective purchaser concerning the
prospective purchaser's investment objectives, the prospective purchaser's
other investments and the prospective purchaser's financial situation and
needs, and any other information known by the Selling Agent through the
review of its offeree questionnaire completed by such prospective
purchaser; and
(2) maintain in the Selling Agent's files documents disclosing
the basis upon which the determination of suitability was reached as to
each purchaser for at least six (6) years.
(i) In compliance with the NASD Conduct Rules, it will not sell
Units to discretionary accounts with prior specific written approval of the
Customer
Section 3. (a) Subject to the terms and conditions, and on the basis of the
representations, warranties and covenants herein set forth, the Trust hereby
appoints the Selling Agent as its selling agent and the Selling Agent agrees to
use its best efforts to procure Subscribers during the Initial Offering Period
and the Continuous Offering Period on the terms and conditions set forth, and
for the periods described, in the Prospectus.
(b) The Trust acknowledges that the Selling Agent has no present
intention to retain certain selected brokers or dealers ("Additional Sellers")
but that the Selling Agent maintains the right to retain Additional Sellers in
the future, which in such case the Additional Sellers, if located in the United
States, will be members of the NASD and will execute a selected dealers
agreement to be agreed upon between the parties.
(c) During the Initial Offering Period and the Continuous Offering
Period, all Selling Agent branch offices will be required to forward
subscriptions to the Managing Owner no later than noon of the first Business Day
following receipt of an acceptable subscription agreement from a subscriber for
Units (each, a "Subscriber"). The Managing Owner shall have sole responsibility
for determining whether Subscribers are qualified to become Limited Owners in
the Trust and for accepting subscriptions and determining their validity. The
Selling Agent agrees to use its best efforts to cause Subscribers to prepare
their subscriptions in proper form. The Selling Agent shall deposit the
subscription proceeds from the sale of Units in each Series (the "Proceeds")
during the Initial Offering Period in escrow accounts designated by the Series
at U.S. Bank National Association in Denver, Colorado (the "Escrow Agent"), for
the separate benefit of the Subscribers of each Series on the second Business
Day following the receipt by the Managing Owner of completed subscription
agreements accompanied by such Proceeds. Proceeds will be transferred to the
escrow accounts at the Escrow Agent by check from the Subscriber or via wire
transfer from the Subscriber's account. The Managing Owner will determine
whether to accept or reject all subscriptions within two (2) Business Days
following receipt of subscription documents from the Selling Agent. Upon
notification by the Managing Owner to the Escrow Agent that a subscription for
Units of a Subscriber has been rejected, for whatever reason, or in the event
that the Subscriber rescinds its subscription in conformity with the
requirements of the North American Securities Administrators Association Inc.
Guidelines for Registration of Commodity Pool Programs, the Escrow Agent shall
by check or wire transfer return any Proceeds held in escrow, excluding any
interest thereon, to the payor of
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such Proceeds. The Escrow Agent shall make interest payments to the Trust to be
retained by the Trust for the benefit of all investors in the applicable Series
of Units by delivering a check in the amount equal to the interest allocable by
Series to each Subscriber. If subscriptions for the minimum number of Units in a
Series set forth in the Prospectus (after taking into account the Managing
Owner's contribution) have not been made by the conclusion of the Initial
Offering Period for a Series, then all Proceeds deposited in the escrow account
designated for that Series, excluding any interest thereon, shall be returned
(in the same way described above in the case of a rejected or rescinded
subscription) to the payor of such Proceeds on a pro rata basis (and taking into
account the amount and time of deposit), no later than ten (10) Business Days
after the termination of the Initial Offering Period for the affected Series, or
as soon thereafter as practicable if payment cannot be made in such time period.
(d) During the Continuous Offering Period, the Managing Owner also
will determine whether to accept or reject all subscriptions received and will
do so (1) within two (2) Business Days following receipt from the Selling Agent
of a "Request for Exchange" (in the form attached to the Prospectus as Exhibit
C) or the "Subscription Agreement" (in the form attached to the Prospectus as
Exhibit B) with respect to a Limited Owner in an existing Series and (2) within
two (2) Business Days following receipt of subscription documents from the
Selling Agent for a new Subscriber. For subscriptions which are accepted,
Proceeds will be transferred to the Escrow Agent by check from the Subscriber or
via wire transfer from the Subscriber's account. For an existing Limited Owner,
such transfer will occur on the first Business Day which first follows the date
on which the Managing Owner accepts the subscription. For a new Subscriber, such
transfer will occur on the second Business Day after the subscription documents
are delivered by the Subscriber to the Selling Agent (or an Additional Seller).
(e) On the Initial Closing Date for a Series, and thereafter on each
subsequent closing date with respect to that Series, the acceptance, delivery,
and receipt of subscriptions for Units will be subject to the terms and
conditions set forth in this Agreement, including, but not limited to, (1) the
payment of the full subscription price for Units and delivery of a properly
completed Subscription Agreement/Power of Attorney by each Subscriber; (2) the
fact that a new Subscriber's subscription will not be final and binding until
two (2) Business Days following the Subscriber's delivery of his subscription
documents to the Selling Agent (or an Additional Seller), and (3) compliance
with Section 7 hereof. Upon the satisfaction of such terms and conditions, the
aggregate subscription price for Units (inclusive of any interest earned on such
subscriptions while held in escrow which will be retained by the Trust for the
benefit of all investors in the applicable Series of Units) will be paid and
delivered to the Trust in accordance with the Escrow Agreement.
(f) The Selling Agent agrees that it will not take any of the
following action against the Trust: (1) seek a decree or order by a court having
jurisdiction in the premises (A) for relief in respect of the Trust in an
involuntary case or proceeding under the Federal Bankruptcy Code or any other
federal or state bankruptcy, insolvency, reorganization, rehabilitation,
liquidation or similar law or (B) adjudging the Trust a bankrupt or insolvent,
or seeking reorganization, rehabilitation, liquidation, arrangement, adjustment
or composition of or in respect of the Trust under the Federal Bankruptcy Code
or any other applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trust or of any substantial part of any of its properties, or
ordering the winding up or liquidation of any of its affairs, (2) seek a
petition for relief, reorganization or to take advantage of any law referred to
in the preceding clause; or (3) file an involuntary petition for bankruptcy
(collectively "Bankruptcy or Insolvency Action").
(g) In addition, the Selling Agent agrees that for any obligations
due and owing to it by any Series, the Selling Agent will look solely and
exclusively to the assets of such Series or the Managing Owner, if it has
liability in its capacity as Managing Owner, to satisfy its claims and will not
seek to attach or otherwise assert a claim against the other assets of the
Trust, whether or not there is a
6
Bankruptcy or Insolvency Action taken. The parties agree that this provision
will survive the termination of this Agreement, whether terminated in a
Bankruptcy or Insolvency Action or otherwise.
(h) This Agreement has been made and executed by and on behalf of
the Trust and the Managing Owner and the obligations of the Trust and/or the
Managing Owner set forth herein are not binding upon any of the Limited Owners
individually but are binding only upon the assets and property identified above
and no resort shall be had to the assets of other Series issued by the Trust or
the Limited Owners' personal property for the satisfaction of any obligation or
claim hereunder.
Section 4. Selling Commissions. (a) Units in the Class 1 of each Series.
(1) As compensation, the Selling Agent shall receive from the Managing Owner an
initial service fee at an annual rate of up to 3.0% of the subscription amount
of each subscription of Units in the Class 1 of the Series sold by it. After the
expiration of twelve (12) months following the purchase of Units in the Class 1
of any Series of Units, the Selling Agent shall also receive a monthly on-going
service fee of up to 1/12th of 3.0% (approximately 3.0% annually) of the Net
Asset Value of each Unit in the Class 1 sold by them on an on-going basis for
customary on-going services provided to the Trust and its Limited Owners for
commodities related brokerage services. Such on-going services may include,
without limitation, advising Limited Owners of the Net Asset Value of the Trust,
of the relevant Series of the Trust and of their Units in such Series,
responding to Limited Owners' inquiries about monthly statements and annual
reports and tax information provided to them, advising Limited Owners whether to
make additional capital contributions to the Trust or to redeem their Units,
assisting with redemptions of Units, providing information to Limited Owners
with respect to futures and forward market conditions and providing further
services as may be requested by the Limited Owners.
(2) The initial service fee and on-going service fee will be
calculated according to the following scale:
Aggregate Amount of Investment in
Units in the Class 1: Percentage:
$0 - $99,999 3.00%
$100,000- $499,999 2.50%
$500,000 and above 1.25%
(b) Units in the Class 2 of each Series. With respect to Units in the Class
2 of each Series, the Selling Agent will receive no initial service fees for any
Unit in the Class 2 of the Series sold by it. The Managing Owner shall pay the
Selling Agent customary on-going service fees in an amount equal to 0.X% of the
Net Asset Value of such Units in the Class 2 as compensation for certain
on-going services provided to the Trust and its Limited Owners for commodities-
related brokerage services. Such on-going services may include, without
limitation, advising Limited Owners of the Net Asset Value of the Trust, of the
relevant Series of the Trust and of their Units in such Series, responding to
Limited Owners' inquiries about monthly statements and annual reports and tax
information provided to them, advising Limited Owners whether to make additional
capital contributions to the Trust or to redeem their Units, assisting with
redemptions of Units, providing information to Limited Owners with respect to
futures and forward market conditions and providing further services as may be
requested by the Limited Owners.
(c) In the event that the offering of Units of any Series is terminated
prior to the initial escrow break for such Series, the Selling Agent shall not
be entitled to any compensation in connection with the offering of such Series
except for the reimbursement of expenses.
Section 5. Compliance with Rule 2810 and General Laws. (a) It is understood
that the Selling Agent has no commitment with regard to the sale of the Units
other than to use its best efforts. In connection with the offer, sale and
distribution of the Units, the Selling Agent represents and warrants that it
will comply fully with all applicable laws and regulations, and the rules,
policy statements and interpretations of the NASD, the SEC, the CFTC, state
securities administrators and any other regulatory or self-regulatory body. In
particular, and not by way of limitation, the Selling Agent represents and
warrants that it is familiar with Rule 2810 of the NASD Conduct Rules and that
it will comply fully with all the terms thereof in connection with the offering
and sale of the Units. The Selling Agent will not
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execute any sales of Units from a discretionary account over which it has
control without prior written approval of the customer in whose name such
discretionary account is being maintained.
(b) The Selling Agent agrees not to recommend the purchase of Units
to any Subscriber unless the Selling Agent shall have reasonable grounds to
believe, on the basis of information obtained from the Subscriber concerning,
among other things, the Subscriber's investment objectives, other investments,
financial situation and needs, that: (1) (to the extent relevant for the
purposes of Rule 2810 and giving due consideration to the fact that the Trust is
in no respects a "tax shelter") the Subscriber is or will be in a financial
position appropriate to enable the Subscriber to realize to a significant extent
the benefits of the Trust, including the tax benefits (if any) described in the
Prospectus; (2) the Subscriber has a fair market net worth sufficient to sustain
the risks inherent in participating in the Trust; (3) the Subscriber qualifies
as an acceptable Subscriber on the basis set forth in the Prospectus, the
Subscription Agreement and the State Suitability Requirements contained therein;
(4) the Subscriber is not a "Prohibited Investor," as such term is defined in
the Subscription Agreement, and acceptance of the Subscriber's subscription will
not otherwise breach any laws, rules and regulations designed to avoid money
laundering applicable to either the Selling Agent, the Managing Owner or the
Trust; and (5) the Units are otherwise a suitable investment for the Subscriber.
The Selling Agent agrees to maintain such records as are required by the
applicable rules of the NASD and the SEC for purposes of determining investor
suitability for the time periods otherwise required by the NASD and the SEC. In
connection with making the foregoing representations and warranties, the Selling
Agent further represents and warrants that it has, among other things, examined
the Prospectus including, without limitation the sections listed below and
obtained such additional information from the Managing Owner regarding the
information set forth thereunder as the Selling Agent has deemed necessary or
appropriate to determine with the Prospectus adequately and accurately discloses
all material facts relating to an investment in the Trust and provides and
adequate basis to Subscribers for evaluating an investment in the Units:
"RISK FACTORS;"
"DESCRIPTION OF THE TRUST, TRUSTEE, MANAGING OWNER AND
AFFILIATES;"
"PROJECTED TWELVE-MONTH "BREAK-EVEN" ANALYSIS;"
"FEES AND EXPENSES;"
"WHO MAY SUBSCRIBE;"
"THE OFFERING;"
"SUMMARY OF AGREEMENTS;" and
"FEDERAL INCOME TAX CONSEQUENCES."
In connection with making the representations and warranties set forth in this
paragraph, the Selling Agent has not relied on inquiries made by or on behalf of
any other parties.
(c) The Selling Agent agrees to inform all prospective purchasers of
Units of all pertinent facts relating to the liquidity and marketability of the
Units as set forth in the Prospectus.
(d) The Selling Agent shall cause its Additional Sellers to certify
in writing that such Additional Seller has made the required determinations in
each Subscription Agreement submitted by the
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Additional Seller in respect of a Subscriber; provided, however, that such
determinations shall not be binding on the Managing Owner.
(e) Each party agrees that no subscription will be deemed final and
binding on any new Subscriber until at least five (5) Business Days after the
date the Subscriber receives the Prospectus. In connection therewith, the
Selling Agent agrees to indicate in each Subscription Agreement submitted by an
Additional Seller in respect of a Subscriber the date on which the Prospectus
was delivered to that Subscriber.
(f) The Selling Agent represents, warrants and covenants that it:
(1) maintains anti-money laundering policies and procedures that comply with the
Bank Secrecy Act of 1970, as amended, and applicable federal anti-money
laundering regulations, including policies and procedures to verify the identity
of prospective Subscribers ("AML Laws, Regulations and Policies"); (2) complies
with AML Laws, Regulations and Policies; (3) will promptly deliver to the
Managing owner, to the extent permitted by applicable law, notice of any AML
Laws, Regulations and Policies violation, suspicious activity, suspicious
activity investigation or filed suspicious activity report that relates to any
prospective Subscriber for Units; and (4) will cooperate with the Managing owner
and deliver information reasonably requested by the Managing Owner concerning
Subscribers that purchased Units sold by the Selling Agent necessary for the
Managing Owner or the Trust to comply with AML Laws, Regulations and Policies.
Section 6. The Trust and Managing Owner each agree with the Selling Agent:
(a) To advise the Selling Agent, promptly after it receives notice
thereof, of the time when the Registration Statement becomes effective or any
Prospectus has been filed with the SEC, the NASD, the NFA or any other federal,
state or other governmental or regulatory or self-regulatory agency or body, of
the issuance by the SEC, the CFTC, the NASD, the NFA or any other federal, state
or other governmental or regulatory or self-regulatory agency or body of any
stop order or of any order to prevent or suspend the use of the Prospectus, or
the initiation or threat of any proceeding for any such purpose or any request
by the SEC, the CFTC, the NASD, the NFA or any other federal, state or other
governmental or regulatory or self-regulatory agency or body to amend or
supplement the Registration Statement or Prospectus, or for additional
information; and in the event of the issuance of any stop order or of any order
preventing or suspending the use of the Prospectus or suspending any such
qualification, promptly to use its best efforts to obtain its withdrawal;
(b) To furnish the Selling Agent with copies of the Prospectus in
such quantities as Selling Agent may from time to time reasonably request, and
if delivery of a Prospectus is required at any time prior to the expiration of
nine (9) months after the date of any Prospectus and in such time any event
shall have occurred as a result of which such Prospectus would include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus was
delivered to the Selling Agent, not misleading, or if for any other reason it
shall be necessary to amend or supplement the Prospectus in order to comply with
the 1933 Act, the CE Act, or any other law, rule or regulation of any federal,
state or other governmental, regulatory or self-regulatory agency or body,
including, but not limited to, such amendments and supplements as may be
required because of the selection of any Other Advisor, to notify the Selling
Agent and upon the Selling Agent's request to prepare and furnish, without
charge to the Selling Agent, as many copies as the Selling Agent may from time
to time reasonably request of an amended Prospectus or a supplement to such
Prospectus which will correct such misstatement or omission or effect such
compliance;
(c) Promptly from time to time to take such action as the Selling
Agent may reasonably request to use its best efforts to qualify the Units for
offering and sale under the securities or
9
Blue Sky laws of such jurisdictions as the Selling Agent may request and to
comply with such laws so as to permit the continuance of sales in such
jurisdictions for so long as may be necessary to complete the distribution
thereof;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than the fifteenth (15/th/) month
following the month in which the Initial Closing Date occurs, an earnings
statement of the Trust (which need not be audited) complying with Section 11(a)
of the 1933 Act and covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement;
(e) To furnish the Selling Agent with copies of all reports or other
communications (financial or other) furnished to the Limited Owners, and to
deliver to the Selling Agent, as soon as they are available, copies of any
reports and financial statements furnished to or filed with the SEC, the CFTC,
the NASD, the NFA and any other federal, state or other governmental or
regulatory or self-regulatory agency or body; and
(f) To furnish, without charge to the Selling Agent, two (2) signed
copies of the Registration Statement, including all financial statements and
Exhibits thereto, and such number of conformed copies of the Registration
Statement, including all financial statements, as the Selling Agent may
reasonably request.
Section 7. The obligations of the Selling Agent hereunder shall be subject,
in its discretion, to the condition that all representations, warranties,
covenants and other statements of the Trust and the Managing Owner herein are,
at and as of the time of effectiveness of each Registration Statement, true and
correct, the condition that each of the Trust and the Managing Owner shall have
performed all of its and their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Registration Statement shall have become effective, and the
Selling Agent shall have received notice thereof; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that or any similar purpose shall have been initiated or
threatened by the SEC, the CFTC, the NASD or the NFA; and all requests for
additional information on the part of the SEC, the NASD, the NFA and/or the CFTC
shall have been complied with to the reasonable satisfaction of the Selling
Agent and its counsel.
(b) All documents and certificates required to be delivered to the
Selling Agent on the Initial Closing Date of a Series, or on the appropriate
subsequent closing date, as the case may be such agreement being dated on or
about the date of the initial Prospectus, shall have been delivered in form and
substance satisfactory to the Selling Agent and its counsel; and there shall
have been no material changes in the Registration Statement or the Prospectus.
Section 8. (a) This Agreement shall be terminated at the conclusion of the
Continuous Offering Period with respect to each Series.
(b) Until such time as this Agreement shall terminate with respect
to each Series pursuant to subsection (a) of this Section 8, this Agreement may
be terminated by the Selling Agent, at the Selling Agent's option, by giving
thirty (30) days' notice to the Trust and the Managing Owner, if:
(1) there shall have been, since the respective dates as of
which information is given in the Registration Statement, any material
adverse change in the condition, financial or otherwise, of the Trust or
the Managing Owner which change, in the judgment of the Selling Agent,
shall render it inadvisable to proceed with the offer and sale of the
Units; or
10
(2) the Registration Statement and/or the Prospectus is not
amended promptly after written request by the Selling Agent for it to be so
amended because an event has occurred which, in the opinion of counsel for
the Selling Agent, should be set forth in the Registration Statement or the
Prospectus in order to make the statements therein not misleading; or
(3) any of the conditions specified in Section 7 hereof
shall not have been fulfilled when and as required by this Agreement to be
fulfilled; or
(4) there shall have been (A) a general suspension of, or a
general limitation on prices for, trading in (i) commodity futures or
option contracts on commodity exchanges in the United States, or (ii) other
commodities instruments, or (B) any other national or international
calamity or crisis in the financial markets of the United States to the
extent that it is determined by the Selling Agent, in its discretion, that
such limitations would materially impede the Trust's trading activities or
make the offering or delivery of the Units impossible or impractical; or
(5) there shall have been a declaration of a banking
moratorium by federal, New York or Delaware authorities.
(c) In addition to subsection (b) of this Section 8, this
Agreement may be terminated with respect to a Series by written agreement among
the parties hereto. The termination of this Agreement for any reason set forth
in this Section 8 shall not affect the obligations of the Trust contained in
Section 10 hereof; nor shall the termination of this Agreement with respect to
one Series for any reason affect the obligations of the parties with respect to
any other Series.
(d) The Initial Closing Date with respect to a Series shall be a
date selected by the Selling Agent on written notice to the Managing Owner, not
less than five (5) and not more than fifteen (15) Business Days following the
termination of the Initial Offering Period with respect to that Series. Each
subsequent closing date with respect to a Series shall be the date of the first
Business Day during the Continuous Offering Period with respect to that Series.
Notwithstanding anything to the contrary herein, each Closing with respect to a
Series shall be held on such date, at such time and at such place as the
Managing Owner and the Selling Agent may agree upon.
Section 9. Indemnification
(a) The Selling Agent shall not be liable to the Trust, the
Trustee or the Managing Owner for any loss, liability, claim, damage, expense,
fine, penalty, cost or expense (including, without limitation, attorneys' and
accountants' fees and disbursements), judgments and amounts paid in settlement
(collectively, "Losses") caused by any act or omission to act of the Selling
Agent in connection with the performance of services under this Agreement,
except as a result of any acts or omissions to act on the part of the Selling
Agent or its Principals or Affiliates which constitute negligence, misconduct or
a breach of any of the representations, warranties, covenants or agreements of
the Selling Agent contained in this Agreement.
(b) The Managing Owner and the Trust, solely out of the
Contracting Series Assets (as hereinafter defined) shall indemnify and hold
harmless the Selling Agent and its officers, directors, shareholders,
principals, employees, agents or affiliates (collectively, "Principals and
Affiliates") from and against any and all Losses to which such persons may
become subject arising out of or in connection with this Agreement, the
transactions contemplated hereby or the fact that the Selling Agent is or was a
selling agent of the Trust arising out of or based upon (1) any untrue statement
of material fact contained in this Agreement, the Prospectus or any application
or written communication executed by the Managing
11
Owner or the Trust filed in any jurisdiction in order to qualify the Units under
the securities laws thereof (collectively, the "Documents"), (2) any omission
from the Documents of a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (3) any breach of any
representation, warranty, covenant or agreement made by the Managing Owner or
the Trust in this Agreement, except to the extent that any such Losses arise out
of, relate to, or are based upon the Selling Agent's failure to meet the
standard of liability applicable to it under Section 9(a) above.
(c) The Selling Agent agrees to indemnify and hold harmless the
Trust, the Trustee and the Managing Owner and the Principals and Affiliates of
the Trustee and the Managing Owner from and against all Losses incurred by any
of them arising out of or based upon the Selling Agent's failure to meet the
standard of liability set forth in Section 9(a).
(d) Promptly after receipt by any of the indemnified parties under
this Agreement of notice of any Proceeding, the party seeking indemnification
(the "Indemnitee") shall notify the party from which indemnification is sought
(the "Indemnitor") in writing of the commencement thereof if a claim with
respect thereof is to be made under this Agreement. To the extent that the
Indemnitor has actual knowledge of the commencement of such Proceeding, the
failure to notify the Indemnitor shall not relieve such Indemnitor from any
indemnification liability which it may have to such Indemnitee pursuant to this
Section 9, and the omission to notify the Indemnitor shall not relieve the
Indemnitor from any obligation or liability which it may have to any such
Indemnitee otherwise than under this Section 9. The Indemnitor shall be entitled
to participate in the defense of any such Proceeding and to assume the defense
thereof with the assistance of counsel reasonably satisfactory to the
Indemnitee. In any such Proceeding, the Indemnitee shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the Indemnitee's own expense unless (i) otherwise agreed by the Indemnitor and
Indemnitee or (ii) the named parties to any such Proceeding (including any
impleaded parties) include both the Indemnitor and the Indemnitee, and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them or the existence of
different or additional defenses (it being understood, however, that the
Indemnitor shall not be liable for legal fees or other expenses of more than one
separate firm of attorneys for all such Indemnitees, which firm shall be
designated in writing by such Indemnitees and be reasonably acceptable to the
Indemnitor). The Indemnitee shall cooperate with the Indemnitor in connection
with any such Proceeding and shall make all personnel, books and records
relevant to the Proceeding available to the Indemnitor and grant such
authorizations or powers of attorney to the agents, representatives and counsel
of the Indemnitor as the Indemnitor may reasonably consider desirable in
connection with the defense of any such Proceeding.
(e) In the event that a person entitled to indemnification under
this Section 9 is made a party to any 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 incurred in such Proceeding which relates to the matters for which
indemnification can be made.
(f) None of the indemnifications contained in this Section 9 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, or the party
obligated to indemnify such party.
(g) The indemnification provisions of this Agreement shall survive
the termination of this Agreement. The indemnification agreements in this
Section 9 shall be in addition to any liability which the Selling Agent may
otherwise have. Nothing contained in this Section 9 or elsewhere in this
Agreement shall be construed as an admission that the Selling Agent is an
"underwriter" of the Units within the meaning of the 1933 Act.
12
Section 10. Each of the Managing Owner and the Selling Agent agrees and
consents (the "Consent") to look solely to each Series that is being offered
pursuant to this Agreement (the "Contracting Series") and the assets (the
"Contracting Series Assets") of the Contracting Series and to the Managing Owner
and its assets for payment. The Contracting Series Assets include only those
funds and other assets that are paid, held or distributed to the Trust on
account of and for the benefit of the Contracting Series, including, without
limitation, funds delivered to the Trust for the purchase of interests in a
Series. In furtherance of the Consent, each of the Managing Owner and the
Selling Agent agrees that any debts, liabilities, obligations, indebtedness,
expenses and claims of any nature and of all kinds and descriptions
(collectively, "Claims") incurred, contracted for or otherwise existing arising
from, related to or in connection with the Trust and its assets and the
Contracting Series and the Contracting Series Assets, shall be subject to the
following limitations:
(a) Subordination of certain claims and rights. (1) except as set
forth below, the Claims, if any, of the Managing Owner or the Selling Agent (the
"Subordinated Claims") shall be expressly subordinate and junior in right of
payment to any and all other Claims against the Trust and any Series thereof,
and any of their respective assets, which may arise as a matter of law or
pursuant to any contract; provided, however, that the Claims of each of the
Managing Owner and the Selling Agent (if any) against the Contracting Series
shall not be considered Subordinated Claims with respect to enforcement against
and distribution and repayment from the Contracting Series, the Contracting
Series Assets and the Managing Owner and its assets; and provided further that
the valid Claims of either the Managing Owner or the Selling Agent, if any,
against the Contracting Series shall be pari passu and equal in right of
repayment and distribution with all other valid Claims against the Contracting
Series and (2) the Managing Owner and the Selling Agent will not take, demand or
receive from any Series or the Trust or any of their respective assets (other
than the Contracting Series, the Contracting Series Assets and the Managing
Owner and its assets) any payment for the Subordinated Claims;
(b) The Claims of each of the Managing Owner and the Selling Agent
with respect to the Contracting Series shall only be asserted and enforceable
against the Contracting Series, the Contracting Series Assets and the Managing
Owner and its assets; and such Claims shall not be asserted or enforceable for
any reason whatsoever against any other Series, the Trust generally or any of
their respective assets;
(c) If the Claims of the Managing Owner or the Selling Agent
against the Contracting Series or the Trust are secured in whole or in part,
each of the Managing Owner and the Selling Agent hereby waives (under section
1111(b) of the Bankruptcy Code (11 U.S.C. S 1111(b)) any right to have any
deficiency Claims (which deficiency Claims may arise in the event such security
is inadequate to satisfy such Claims) treated as unsecured Claims against the
Trust or any Series (other than the Contracting Series), as the case may be;
(d) In furtherance of the foregoing, if and to the extent that the
Managing Owner and the Selling Agent receives monies in connection with the
Subordinated Claims from a Series or the Trust (or their respective assets),
other than the Contracting Series, the Contracting Series Assets and the
Managing Owner and its assets, the Managing Owner and the Selling Agent shall be
deemed to hold such monies in trust and shall promptly remit such monies to the
Series or the Trust that paid such amounts for distribution by the Series or the
Trust in accordance with the terms hereof; and
(e) The foregoing Consent shall apply at all times notwithstanding
that the Claims are satisfied, and notwithstanding that the agreements in
respect of such Claims are terminated, rescinded or canceled.
13
Section 11. Miscellaneous. (a) Assignment. This Agreement may not be
assigned by any of the parties hereto without the express prior written consent
of the other parties hereto.
(b) Successors. This Agreement is made solely for the benefit of,
and shall be binding upon, the Selling Agent, the Trust and the Managing Owner
and the respective successors and assigns of each of them, and no other person
shall have any right or obligation under this Agreement. The terms "successors"
and "assigns" shall not include any purchasers, as such, of Units from the
Trust.
(c) Amendment or Modification or Waiver. This Agreement may not be
amended or modified, nor may any of its provisions be waived, except upon the
prior written consent of the parties hereto.
(d) Notices. Except as otherwise provided herein, all notices
required to be delivered under this Agreement shall be effective only if in
writing and shall be deemed given by the party required to provide notice when
received by the party to whom notice is required to be given and shall be
delivered personally or by registered mail, postage prepaid, return receipt
requested, or by telecopy, as follows (or to such other address as the party
entitled to notice shall hereafter designate by written notice to the other
parties):
(1) if to the Selling Agent, to it at:
[________________________];
with a copy to:
[________________________];
(2) if to the Trust or the Managing Owner, to it at:
Equinox Fund Management, LLC
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx; and
(3) in either case, with a copy to:
c/o Dorsey & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(e) All representations, warranties, covenants and agreements
contained in this Agreement shall remain operative and in full force and effect
regardless of (1) any investigations made by or on behalf of the Selling Agent,
the Trustee, the Trust or the Managing Owner, (2) delivery of any payment for
the Units or (3) termination of this Agreement.
14
(f) The Selling Agent is not authorized by the Trust to give any
information or to make any representation in connection with the offering of
Units other than those contained in the Prospectus and such sales literature the
use of which has been authorized in writing by the Trust.
(g) This Agreement has been made and executed by and on behalf of
the Trust and the Managing Owner and the obligations of the Trust and/or the
Managing Owner set forth herein are not binding upon any of the Limited Owners
individually but are binding upon the assets and property of each Series of the
Trust individually and exclusively to the extent that the obligations apply to
such Series and, to the extent provided herein, upon the assets and property of
the Managing Owner, and no resort shall be had to the assets of any Series to
which such obligation has no relationship or to the Limited Owners' personal
property for the satisfaction of any obligation or claim herein.
(h) Each party agrees that this Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
conflict of laws principles.
(i) Survival. All representations, warranties and covenants in
this Agreement, or contained in certificates required to be delivered hereunder
shall survive the termination of this Agreement, with respect to any matter
arising while this Agreement was in effect. Furthermore, all representations,
warranties and covenants hereunder shall inure to the benefit of each of the
parties to this Agreement and their respective successors and permitted assigns.
(j) No Waiver. No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver granted hereunder must be in writing
and shall be valid only in the specific instance in which given.
(k) No Liability of Limited Owners. This Agreement has been made
and executed by and on behalf of the Trust, and the obligations of the Trust
and/or the Managing Owner set forth herein are not binding upon any of the
Limited Owners individually, but rather, are binding only upon the assets and
property of the Trust, and, to the extent provided herein, upon the assets and
property of the Managing Owner.
(l) Third-Party Beneficiaries. Wilmington Trust Company, the
trustee of the Trust, shall be a third-party beneficiary of the applicable
provisions of this Agreement. The Principals and Affiliates of each of the
Selling Agent, the Trustee and the Managing Owner shall be third-party
beneficiaries of the applicable provisions of this Agreement.
(m) Headings. Headings to Sections and subsections herein are for
the convenience of the parties only, and are not intended to be or to affect the
meaning or interpretation of this Agreement.
(n) 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 upon the parties
hereto.
(o) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures on this
Agreement may be communicated by facsimile transmission and shall be binding
upon the parties so transmitting their signatures. Counterparts with original
signatures shall be provided to the other parties following the applicable
facsimile transmission; provided, that the failure to
15
provide the original counterpart shall have no effect on the validity or the
binding nature of this Agreement.
(p) Arbitration. Each party hereto agrees that any dispute
relating to the subject matter of this Agreement shall be settled and determined
by arbitration in the City of New York, State of New York, in accordance with
the rules then obtaining of the National Futures Association or, if no such
rules are then obtaining or if jurisdiction is declined, then in accordance with
the rules then obtaining of the American Arbitration Association. Without
limiting the generality of the foregoing, in any such arbitration, each of the
parties hereto agrees to request from the arbitrators that (a) their authority
be limited to construing and enforcing the terms and conditions of the Agreement
as expressly set forth herein, (b) the reasons for their award be stated in a
written opinion, (c) they shall not make any award which shall alter, change,
cancel or rescind any provision of this Agreement, and (d) their award shall be
consistent with the provisions of this Agreement. The award of the arbitrators
shall be final and binding, and judgment may be confirmed and entered thereon in
any court of competent jurisdiction.
(q) Series Disclaimer. The parties hereto acknowledge and agree
that the Trust is organized in series pursuant to Sections 3804(a) and
3806(b)(2) of the Delaware Statutory Trust Act. As such, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to each series of the Trust shall be enforceable against the assets of
such series of the Trust only, and not against the assets of the Trust generally
or the assets of any other series of the Trust or against the Trustee of the
Trust. There may be several series of the Trust created pursuant to the
Declaration of Trust and Trust Agreement of the Trust.
16
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the
undersigned as of the day and year first above written.
THE FRONTIER FUND
By: EQUINOX FUND MANAGEMENT, LLC.
Its: Managing Owner
By:__________________________________
Name
Title
EQUINOX FUND MANAGEMENT, LLC
By:__________________________________
Name
Title
[NAME OF SELLING AGENT]
By:__________________________________
Name
Title
17
