SELLING AGENT AGREEMENT

EXHIBIT 1.1

 

THE FRONTIER FUND

 

Denver, Colorado

                    , 20    

 

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 $902,000,000 for the Balanced Series, $110,000,000 for the Graham Series, $65,000,000 for the Beach Series, $300,000,000 for the Campbell/Graham Series, $23,000,000 for the Currency Series, $35,000,000 for the Long Only Commodity Series, $25,000,000 for the Long/Short Commodity Series and $75,000,000 for the Managed Futures Index 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;

 

(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) The financial statements of the Managing Owner and the Trust as of and for the periods ended December 31, 2003 and 2004, have been examined by an independent registered public accounting firm, 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 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;

 

(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 without 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 no later than noon of the first Business Day following the receipt by the Selling Agent of 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 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 actions 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 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. Service Fees. (a) Class 1 and Class 1a Service Fees. (1) Units in the Class 1 of Balanced Series, Beach Series, Campbell/Graham Series, Currency Series and Graham Series. As compensation, the Selling Agent shall receive from the Managing Owner a 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 the Balanced Series, Beach Series, Campbell/Graham Series, Currency Series and Graham Series of Units, the Selling Agent shall also receive a monthly or quarterly on-going service fee of up to 3.0% annually of the Net Asset Value of each Unit in the Class 1 sold by the Selling Agent 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) Units in the Class 1a of Balanced Series and Class 1 of Long/Short Commodity Series. As compensation, the Selling Agent shall receive from the Managing Owner a service fee at an annual rate of up to 3.0% of the subscription amount of each subscription of Units in the Class 1 or Class 1a, as applicable, of the Series sold by it. After the expiration of twelve (12) months following the purchase of Units in the Class 1a of the Balanced Series of Units or the Class 1 of the Long/Short Commodity Series of Units, and continuing until the aggregate initial service fees and on-going service fees received by the Selling Agent with respect to such Units totals ten percent (10%) of the purchase price of such Class 1 Units or Class 1a Units, as applicable, of such Series, the Selling Agent shall also receive a monthly or quarterly on-going service fee of up to 3.0% annually of the Net Asset Value of each Unit in the Class 1 or Class 1a, as applicable, sold by the Selling Agent 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.

 

(3) Units in the Class 1 of Long Only Commodity Series and Managed Futures Index Series. As compensation, the Selling Agent shall receive from the Managing Owner a service fee at an annual rate of up to 2.0% 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 the Long Only Commodity Series and Managed Futures Index Series of Units, and continuing until the aggregate initial service fees and on-going service fees received by the Selling Agent with respect to such Units totals ten percent (10%) of the purchase price of such Class 1 Units of such Series, the Selling Agent shall also receive a monthly or quarterly on-going service fee of up to 2.0% annually of the Net Asset Value of each Unit in the Class 1 sold by the Selling Agent 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.

 

(b) Calculation of service fee. (1) The initial service fee and on-going service fee for Class 1 Units in the Balanced Series, Beach Series, Campbell/Graham Series, Currency Series, Graham Series and Long/Short Commodity Series, as well as Class 1a Units in the Balanced Series, shall be calculated according to the following scale:

 

 

    (2) The initial service fee and on-going service fee for Class 1 Units in the Long Only Commodity Series and Managed Futures Index Series shall be calculated according to the following scale: