Exhibit 1.01
SELLING AGREEMENT
JWH GLOBAL TRUST
(A DELAWARE BUSINESS TRUST)
UNITS OF BENEFICIAL INTEREST
Dated as of April 3, 1997
[The Effective Date of
Reg. No. 333-16825]
JWH GLOBAL TRUST
SELLING AGREEMENT
TABLE OF CONTENTS
Page
Section 1. Representations and Warranties of the Managing Owner . . . . . . . . . . . . . . . . . 2
Section 2. Representations and Warranties of the Lead Selling Agent . . . . . . . . . . . . . . . 6
Section 3. Representations and Warranties of JWH. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Offering and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Covenants of the Managing Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Covenants of JWH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Payment of Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8. Conditions of Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Indemnification and Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10. Status of Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11. Representations, Warranties and Agreements to Survive Delivery . . . . . . . . . . . . 31
Section 12. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13. Notices and Authority to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 14. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 15. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 16. Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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JWH GLOBAL TRUST
(A DELAWARE BUSINESS TRUST)
UNITS OF BENEFICIAL INTEREST
(SUBSCRIPTION PRICE: $100 PER UNIT
DURING THE INITIAL OFFERING PERIOD; NET
ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD)
SELLING AGREEMENT
April 3, 1997
CARGILL INVESTOR SERVICES, INC.
233 S. Wacker Dr., Suite 2300
Chicago, Illinois 60606
Dear Sirs:
Your affiliate, CIS Investments, Inc., a Delaware corporation
(referred to herein in its individual corporate capacity and as managing owner
as "CISI" or the "Managing Owner"), and certain initial beneficial owners have
caused the formation of a business trust pursuant to Business Trust Act (12
DEL.C. Section 3801 ET SEQ.) of the State of Delaware (the "Trust Act") under
the name JWH GLOBAL TRUST (the "Trust"), for the purpose of engaging in
speculative trading of futures contracts on currencies, interest rates, energy,
and agricultural products, metals and stock indices; options on such futures
contracts; and spot and forward contracts on currencies and precious metals. As
described in the Prospectus referred to below, the Trust will enter into a
Trading Advisory Agreement (the "Trading Advisory Agreement") with John W. Henry
& Company, Inc., a California corporation ("JWH"), pursuant to which the Trust
will engage in speculative trading under the direction of JWH pursuant to JWH's
Financial and Metals Portfolio and Original Program and, possibly in the future,
other programs selected by the Managing Owner with the agreement of JWH (the
"JWH Trading Programs"). You (the "Lead Selling Agent" or "Futures Broker")
shall be the principal selling agent for the Trust. Other selling agents (the
"Additional Selling Agents") may be selected by the Lead Selling Agent
(including those introduced by wholesalers ("Wholesalers")), with the consent of
the Managing Owner, in accordance with the terms of this Agreement, the
Additional Selling Agent Agreement attached as Exhibit A hereto and, in the case
of Wholesalers introducing Additional Selling Agents, the Wholesaling Agreement
attached as Exhibit B hereto. In addition, the Additional Selling Agents may
also, with the consent of the Lead Selling Agent and Managing Owner, distribute
Units through the use of "introducing broker" correspondents ("Correspondents"),
pursuant to the terms of the Correspondent Selling Agent Agreement attached as
Exhibit C hereto.
In addition, you have agreed to act as broker for the Trust (in such
capacity, the "Futures Broker") pursuant to a customer agreement (the "Customer
Agreement") between yourself and the Trust and as principal with respect to
certain "exchange of futures for physical" transactions, and CIS Financial
Services, Inc. ("CISFS") has agreed to act as principal with respect to the
Trust's forward and spot currency trades and precious metals transactions
pursuant to a Foreign Exchange Account Agreement and Cash Bullion Account
Agreement (collectively, the "FX Agreement") between CISFS and the Trust.
Capitalized terms used herein, unless otherwise indicated, shall have
the meanings attributed to them in the Prospectus referred to below.
Section 1. REPRESENTATIONS AND WARRANTIES OF THE MANAGING OWNER.
Each of the Managing Owner and the Trust severally as applicable to itself (and
in the case of CISI as applicable to the Trust) represents and warrants to JWH
and the Lead Selling Agent, as follows:
(a) The Trust has provided to JWH and to the Lead Selling Agent
and filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 (Registration No. 333-16825), as
initially filed with the SEC on November 26, 1996 for the registration
of Units of Beneficial Interests (the "Units") in the Trust under the
Securities Act of 1933, as amended (the "1933 Act"), has filed two
copies thereof with the Commodity Futures Trading Commission (the
"CFTC") under the Commodity Exchange Act (the "Commodity Act") and one
copy with National Futures Association ("NFA") in accordance with NFA
Compliance Rule 2-13. The Registration Statement, as amended by
Amendment No. 1 thereto, became effective with the SEC as of the date
hereof. (The Registration Statement, in the form in which it became
effective, and the Prospectus included therein as first filed pursuant
to Rule 424(b) of the rules and regulations of the SEC under the 1933
Act (the "SEC Regulations") are hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively.) If the
Trust files a subsequent post-effective amendment to the Registration
Statement, then the term Registration Statement shall, from and after
the declaration of the effectiveness of such post-effective amendment,
refer to the Registration Statement as amended by such post-effective
amendment thereto, and the term Prospectus shall refer to the amended
prospectus then on file with the SEC as part of the Registration
Statement, or if a subsequent prospectus is filed by the Trust
pursuant to Rule 424 of the SEC Regulations, the term Prospectus shall
refer to the prospectus most recently filed pursuant to such Rule from
and after the date on which it shall have been first used. Except as
required by law, the Trust will not file any amendment to the
Registration Statement or any amendment or supplement to the
Prospectus which shall be reasonably objected to in writing by JWH or
by counsel to JWH, upon reasonable prior notice.
(b) The Trust will not utilize any promotional brochure or other
marketing materials (collectively, "Promotional Material"), including
"Tombstone Ads" or other communications qualifying under Rule 134 of
the SEC Regulations, which are reasonably objected to by the Lead
Selling Agent. No reference to the Lead Selling
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Agent may be made in the Registration Statement, Prospectus or in any
Promotional Material which has not been approved in writing by the Lead
Selling Agent, which approval the Lead Selling Agent may withhold in its
sole and absolute discretion. The Trust will file all Promotional Material
with the National Association of Securities Dealers, Inc. (the "NASD"), and
will not use any such Promotional Material to which the NASD has not stated
in writing that it has no objections. The Trust will file all Promotional
Material in all state jurisdictions where such filing is required, and will
not use any such Promotional Material in any state which has expressed any
objection thereto (except pursuant to agreed-upon modifications to the
Promotional Material).
(c) The Certificate of Trust pursuant to which the Trust has
been formed (the "Certificate of Trust") and the Declaration and
Agreement of Trust of the Trust (the "Declaration and Agreement of
Trust") each provides for the subscription for and sale of the Units;
all action required to be taken by the Managing Owner and the Trust as
a condition to the sale of the Units to qualified subscribers therefor
has been, or prior to the Initial Closing Time and Subsequent Closing
Times, as defined in Section 4 hereof, will have been taken; and, upon
payment of the consideration therefor specified in all accepted
Subscription Agreements and Powers of Attorney, the Units will
constitute valid beneficial interests in the Trust.
(d) The Trust is a business trust duly organized pursuant to the
Certificate of Trust, the Declaration and Agreement of Trust and the
Trust Act and validly existing under the laws of the State of Delaware
with full power and authority to engage in the trading of futures,
options on futures, and spot/forward contracts, as described in the
Prospectus; the Trust has filed (or will receive prior to the Initial
Closing Time, as defined in Section 4(c)) a certificate of assumed
name in the State of Illinois as provided by 805 I.L.C.S. 405/1.
(e) CISI is duly organized and validly existing and in good
standing as a corporation under the laws of the State of Delaware and
in good standing as a foreign corporation under the laws of the State
of Illinois, and in each other jurisdiction in which the nature or
conduct of its businesses requires such qualification and the failure
to so qualify would materially adversely affect the Trust's or the
Managing Owner's ability to perform its obligations hereunder.
(f) The Trust and the Managing Owner have proper power and
authority under applicable law to perform their respective obligations
under the Declaration and Agreement of Trust, the Escrow Agreement
relating to the offering of the Units (the "Escrow Agreement"), the
Customer Agreement, the FX Agreement, the Trading Advisory Agreement
and this Agreement, as described in the Registration Statement and
Prospectus.
(g) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the
Commodity Act and the rules and regulations thereunder. When the
Registration Statement became effective under the
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1933 Act and at all times subsequent thereto up to and including the
Initial Closing Time, the Registration Statement and Prospectus did and
will comply in all material respects with the requirements of the 1933 Act,
the Commodity Act and the rules and regulations under such Acts. The
Registration Statement as of its effective date did not contain 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 not
misleading. The Prospectus as of its date of issue and at the Initial
Closing Time did not and will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which such statements were
made, not misleading. This representation and warranty shall not, however,
apply to any statement or omission in the Registration Statement or
Prospectus made in reliance upon and in conformity with information
relating to JWH and furnished or approved in writing by JWH.
(h) KPMG Peat Marwick, LLP, the accountants who certified the
financial statements filed with the SEC as part of the Registration
Statement, are, with respect to CISI and the Trust, independent public
accountants with respect to the Managing Owner and the Trust as
required by the 1933 Act and the SEC Regulations.
(i) The financial statements filed as part of the Registration
Statement and those included in the Prospectus present fairly the
financial position of the Trust and of the Managing Owner as of the
dates indicated; and said financial statements have been prepared in
conformity with generally accepted accounting principles (as described
therein), or, in the case of unaudited financial statements, in
substantial conformity with generally accepted accounting principles,
applied on a basis which is consistent in all material respects for
each balance sheet date presented.
(j) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any material adverse change in the condition, financial or otherwise,
business or prospects of the Managing Owner or the Trust, whether or
not arising in the ordinary course of business.
(k) The Managing Owner at the Initial Closing Time and each
Subsequent Closing Time will have a net worth sufficient in amount and
satisfactory in form, as set forth in the opinion of Sidley & Austin,
counsel for CISI, for classification of the Trust as a partnership for
Federal income tax purposes under current interpretations of the
Internal Revenue Code of 1954 and the Internal Revenue Code of 1986,
as amended (collectively, the "Code"), and the regulations thereunder.
(l) The Trading Advisory Agreement, the Declaration and
Agreement of Trust, the Escrow Agreement and this Agreement have each
been duly and validly authorized, executed and delivered by the
Managing Owner signatory thereto for itself and on behalf of the
Trust, and each constitutes a legal, valid and binding agreement of
the Trust and the Managing Owner signatory thereto enforceable in
accordance
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with its terms. The Customer Agreement and the FX Agreement have each been
duly and validly authorized, executed and delivered by CISI on behalf of
the Trust.
(m) The execution and delivery of the Declaration and Agreement
of Trust, the Escrow Agreement, the Customer Agreement, the FX
Agreement, the Trading Advisory Agreement and this Agreement, the
incurrence of the obligations set forth in each of such agreements and
the consummation of the transactions contemplated therein and in the
Prospectus will not constitute a breach of, or default under, any
instrument by which either the Managing Owner or the Trust, as the
case may be, is bound or any order, rule or regulation applicable to
the Managing Owner or the Trust of any court or any governmental body
or administrative agency having jurisdiction over the Managing Owner
or the Trust.
(n) There is not pending, or, to the Managing Owner's knowledge
threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Managing Owner or the Trust is a
party, or to which any of the assets of the Managing Owner or the
Trust is subject, which is not referred to in the Prospectus and which
might reasonably be expected to result in any material adverse change
in the condition (financial or otherwise), business or prospects of
the Managing Owner or the Trust or is required to be disclosed in the
Prospectus pursuant to applicable CFTC regulations. The Managing
Owner has not received any notice of an investigation or warning
letter from NFA or the CFTC regarding non-compliance by the Managing
Owner with the Commodity Act or the regulations thereunder.
(o) The Managing Owner has all Federal and state governmental,
regulatory and commodity exchange approvals and licenses, and have
effected all filings and registrations with Federal and state
governmental agencies required to conduct its businesses and to act as
described in the Registration Statement and Prospectus or required to
perform its obligations as described under the Declaration and
Agreement of Trust and this Agreement (including, without limitation,
registration as a commodity pool operator under the Commodity Act and
membership in NFA as a commodity pool operator), and the performance
of such obligations will not contravene or result in a breach of any
provision of its certificate of incorporation, by-laws or any
agreement, order, law or regulation binding upon it. The principals
of the Managing Owner identified in the Registration Statement are all
of the principals of the Managing Owner, as "principals" is defined by
the CFTC regulations. Such principals are duly listed as such on the
Managing Owner's commodity pool operator Form 7-R registration.
(p) The Trust does not require any Federal or state
governmental, regulatory or commodity exchange approvals or licenses,
or need to effect any filings or registrations with any Federal or
state governmental agencies in order to conduct its businesses and to
act as contemplated by the Registration Statement and Prospectus and
to issue and sell the Units (other than filings relating solely to the
offering of the Units), and to trade in the commodity markets.
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(q) Neither the Managing Owner nor any of its principal or
affiliate has "operated," since January 1, 1991, any commodity pool,
within the meaning of the CFTC's Part 4 Regulations, the performance
of which is not included in Appendix I to the Registration Statement
and Prospectus.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT.
The Lead Selling Agent represents and warrants (in its capacities as both Lead
Selling Agent and Futures Broker) to the Trust, the Managing Owner and JWH, as
follows:
(a) The Lead Selling Agent is a corporation duly organized and
validly existing and in good standing under the laws of the State of
Delaware and in good standing and qualified to do business in the
State of Illinois and in each other jurisdiction in which the nature
or conduct of its business requires such qualification and the failure
to be duly qualified would materially adversely affect the Futures
Broker's ability to perform its obligations hereunder or under the
Customer Agreement. The Lead Selling Agent has full corporate power
and authority to perform its obligations under the Customer Agreement
and this Agreement and as described in the Registration Statement and
Prospectus.
(b) All references to the Lead Selling Agent and its principals
in the Registration Statement and Prospectus are accurate and complete
in all material respects, and set forth in all material respects the
information required to be disclosed therein under the Commodity Act
and the rules and regulations thereunder. As to the Lead Selling
Agent and its principals (i) the Registration Statement and Prospectus
contain all statements and information required to be included therein
under the Commodity Act and the rules and regulations thereunder,
(ii) the Registration Statement (with respect to the information
relating to the Lead Selling Agent furnished to the Managing Owner) as
of its effective date did not contain any misleading or untrue
statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements
therein not misleading and (iii) the Prospectus (as approved in
pertinent part by the Lead Selling Agent) at its date of issue and as
of the Initial Closing Time, as supplemented, did not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading,
in light of the circumstances under which such statements were made.
(c) The Lead Selling Agent has all Federal and state
governmental, regulatory and commodity exchange licenses and
approvals, and has effected all filings and registrations with Federal
and state governmental and regulatory agencies required to conduct its
business and to act as described in the Registration Statement and
Prospectus or required to perform its obligations under the Customer
Agreement, the Trading Advisory Agreement and this Agreement
(including, without limitation, membership of the Lead Selling Agent
as a dealer in NASD and registration of the Lead Selling Agent as a
futures commission merchant under the Commodity Act and membership of
the Lead Selling Agent as a futures commission merchant in NFA),
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and the performance of such obligations will not violate or result in a
breach of any provision of the Lead Selling Agent's certificate of
incorporation, by-laws or any agreement, instrument, order, law or
regulation binding upon the Lead Selling Agent.
(d) Each of the Customer Agreement and this Agreement has been
duly authorized, executed and delivered by the Lead Selling Agent, and
this Agreement constitutes a valid, binding and enforceable agreement
of the Lead Selling Agent in accordance with its terms.
(e) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in
the condition, financial or otherwise, business or prospects of the
Lead Selling Agent, whether or not arising in the ordinary course of
business.
(f) In the ordinary course of its business, the Lead Selling
Agent is engaged in civil litigation and subject to administrative
proceedings. Neither the Lead Selling Agent nor any of its
principals have been the subject of any administrative, civil, or
criminal actions within the five years preceding the date hereof that
would be material to an investor's decision to purchase the Units
which are not disclosed in the Prospectus.
(g) The execution and delivery of the Customer Agreement and
this Agreement, the incurrence of the obligations set forth herein and
therein and the consummation of the transactions contemplated herein
and therein and in the Prospectus will not constitute a breach of, or
default under, any instrument by which the Lead Selling Agent is bound
or any order, rule or regulation applicable to the Lead Selling Agent
of any court or any governmental body or administrative agency having
jurisdiction over the Lead Selling Agent.
Section 3. REPRESENTATIONS AND WARRANTIES OF JWH. JWH represents and
warrants to the Trust, the Lead Selling Agent, and the Managing Owner as
follows:
(a) JWH is a corporation duly organized and validly existing and
in good standing under the laws of the State of California and in good
standing as a foreign corporation in each other jurisdiction in which
the nature or conduct of its business requires such qualification and
the failure to be duly qualified would materially affect JWH's ability
to perform its obligations under this Agreement and the Trading
Advisory Agreement. JWH has full corporate power and authority to
perform its obligations under this Agreement, and the Trading Advisory
Agreement as described in the Registration Statement and Prospectus.
(b) All references to JWH and its principals, and its trading
systems, methods and performance in the Registration Statement and the
Prospectus are accurate and
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complete in all material respects. As to JWH, each of the principals of
JWH, the JWH trading programs, and JWH's trading systems, strategies and
performance, (i) the Registration Statement and Prospectus contain all
statements and information required to be included therein under the
Commodity Act and the rules and regulations thereunder, (ii) the
Registration Statement (with respect to the information relating to JWH
furnished to the Managing Owner) as of its effective date did not contain
any misleading or untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or necessary to make
the statements therein not misleading and (iii) the Prospectus (as approved
in pertinent part by JWH) at its date of issue and as of the Initial
Closing Time, as supplemented, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein not misleading, in light of the circumstances
under which such statements were made. Except as otherwise disclosed in
the Prospectus or identified in writing to the Managing Owner on or prior
to the date hereof, the actual performance of each discretionary account
directed by JWH or any principal or affiliate of JWH for the periods
covered by the Performance Summaries or Tables set forth in the Prospectus
is disclosed in accordance with the requirements of the Commodity Act and
the rules and regulations thereunder (or as otherwise permitted by the
Staff of the Division of Trading and Markets of the CFTC). The
information, Performance Summaries and Monthly Rates of Return relating to
the performance of JWH comply in all material respects with the disclosure
requirements of the rules and regulations of the CFTC under the Commodity
Act. The performance records in the Prospectus (as applicable to JWH) have
been calculated in the manner set forth in the notes thereto.
(c) The Trading Advisory Agreement and this Agreement have each
been duly and validly authorized, executed and delivered on behalf of
JWH and each constitutes a valid, binding and enforceable agreement of
JWH in accordance with its terms.
(d) JWH has all Federal and state governmental, regulatory and
commodity exchange licenses and approvals and has effected all filings
and registrations with Federal and state governmental and regulatory
agencies required to conduct its business and to act as described in
the Registration Statement and Prospectus or required to perform its
obligations under this Agreement and the Trading Advisory Agreement
(including, without limitation, registration of JWH as a commodity
trading advisor under the Commodity Act and membership of JWH as a
commodity trading advisor in NFA), and the performance of such
obligations will not violate or result in a breach of any provision of
JWH's Certificate of Incorporation, By-laws or any agreement,
instrument, order, law or regulation binding on JWH. The principals
of JWH are duly listed as such on JWH's commodity trading advisor
Form 7-R registration.
(e) Management by JWH of an account for the Trust in accordance
with the terms hereof and of the Trading Advisory Agreement, and as
described in the
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Prospectus, will not require any registration under, or violate any of the
provisions of, the Investment Advisers Act of 1940.
(f) Neither JWH nor any principal of JWH will use or distribute
any preliminary prospectus, Prospectus, amended or supplemented
Prospectus or selling literature nor engage in any selling activities
whatsoever in connection with the offering of the Units, except as may
be requested by the Managing Owner pursuant to Section 6(c) of this
Agreement.
(g) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in
the condition, financial or otherwise, business or prospects of JWH,
whether or not arising in the ordinary course of business.
(h) The execution and delivery of this Agreement and the Trading
Advisory Agreement, the incurrence of the obligations herein and
therein set forth and the consummation of the transactions
contemplated herein and therein and in the Prospectus will not
constitute a breach of, or default under, any instrument by which JWH
is bound or any order, rule or regulation applicable to JWH of any
court or any governmental body or administrative agency having
jurisdiction over JWH.
(i) Except as disclosed in the Registration Statement and
Prospectus, there is not pending, or to the best of JWH's knowledge
threatened, any action, suit or proceeding before or by any court or
other governmental body to which JWH is a party, or to which any of
the assets of JWH is subject, which might reasonably be expected to
result in any material adverse change in the condition, financial or
otherwise, business or prospects of JWH. JWH has not received any
notice of an investigation or warning letter from NFA or the CFTC
regarding non-compliance by JWH with the Commodity Act or the
regulations thereunder.
(j) JWH has not received, and is not entitled to receive,
directly or indirectly, any commission, finder's fee, similar fee or
rebate from any person in connection with the organization or
operation of the Trust.
Section 4. OFFERING AND SALE OF UNITS.
(a) The Lead Selling Agent is hereby appointed the principal
selling agent of the Trust (although as described herein it is
contemplated that certain Additional Selling Agents, including those
introduced to the Lead Selling Agent by Wholesalers, Wholesalers and
Correspondents may also market Units, provided each of such Additional
Selling Agents, Wholesalers and Correspondents is duly registered as a
broker-dealer in each jurisdiction in which such person markets Units)
during the term herein specified for the purpose of finding acceptable
subscribers for up to $200,000,000 of Units through a public offering.
The Initial Offering Period shall
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continue through July 3, 1997 or such other date not more than three months
thereafter as may be determined by the Managing Owner (the "Initial
Offering Period"; such date being hereafter referred to as the "Initial
Offering Termination Date"). Thereafter, Units may be sold as of the close
of business on the last day of each month, as determined by the Managing
Owner (the "Ongoing Offering Period"; such subsequent sale dates being
hereinafter referred to as "Subsequent Closing Times"). The Initial
Offering Period and the Ongoing Offering Period shall be referred to herein
as the "Offering Period." Subject to the performance by the Managing Owner
of all its obligations to be performed hereunder, and to the completeness
and accuracy in all material respects of all the representations and
warranties of the Managing Owner and JWH contained herein, the Lead Selling
Agent hereby accepts such agency and agrees on the terms and conditions
herein set forth to use its best efforts during the Offering Period to find
acceptable subscribers for the Units at a public offering price of $100 per
Unit during the Initial Offering Period, and at Net Asset Value per Unit
during the Ongoing Offering Period, each subscriber being required to
subscribe for at least $5,000 of Units, $2000 of Units in the case of
trustees or custodians of eligible employee benefit plans and individual
retirement accounts and $1,000 of Units in the case of Unitholders
subscribing for additional Units. It is understood that the Lead Selling
Agent's agreement to use its best efforts to find acceptable subscribers
for the Units shall not prevent it from acting as a selling agent or
underwriter for the securities of other issuers which may be offered or
sold during the Offering Period. The agency of the Lead Selling Agent
hereunder shall continue at least until the close of business on December
31, 1997, as the Lead Selling Agent and the Managing Owner shall agree
upon.
(b) In the event the offering is commenced and acceptable
subscriptions for at least the minimum number of Units specified on
the cover of the Prospectus (the "Minimum Units") shall not have been
received by the Initial Offering Termination Date, all funds received
from subscribers shall be returned in full, with any interest payable
thereon (irrespective of amount) and without deduction for any escrow
or other fee or expense; and thereupon the Lead Selling Agent's duties
as agent and this Agreement shall terminate without further obligation
hereunder on the part of the Lead Selling Agent, the Managing Owner,
the Trust or JWH.
(c) At the Initial Offering Termination Date, or at such earlier
time as subscriptions for all the Units shall have been received, or
at such earlier time the Managing Owner may determine to terminate the
offering, the Managing Owner shall notify the Lead Selling Agent of
the aggregate number of Units for which the Managing Owner has
received acceptable subscriptions and, if at least the Minimum Units
shall have been so subscribed for, then payment of the purchase price
for the Units may, if the Managing Owner so elects, be made at the
office of CISI, Sears Tower, 233 South Wacker Drive, Suite 2300,
Chicago, Illinois 60606, or at such other place as shall be agreed
upon between the Lead Selling Agent and CISI, at 10:00 A.M., Chicago
time, on the fifth full business day after the day on which the
Managing notifies the Lead Selling Agent of the number of Units for
which subscrip-
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tions have been accepted or such other day and time as shall be agreed upon
between the Lead Selling Agent and the Managing Owner (the "Initial Closing
Time").
(d) No selling commissions will be paid from the proceeds of
sales of Units. The Lead Selling Agent will compensate its own
Registered Representatives pursuant to the Lead Selling Agent's
standard compensation procedures. The Lead Selling Agent will pay
Additional Selling Agents selling commissions of up to 4% of the Net
Asset Value of each Unit sold by the Registered Representative of each
such Additional Selling Agent. In the case of an Additional Selling
Agent introduced by a Wholesaler, the Lead Selling Agent will pay such
Wholesaler a portion of the up to 4% per Unit selling commissions
depending upon the Wholesaler's arrangement with the Additional
Selling Agent. Ongoing compensation, of up to 4% per annum of the
month-end Net Asset Value of the Units attributable to Units sold by a
Registered Representative of the Additional Selling Agent which remain
outstanding for more than twelve months (including the month as of the
end of which such Unit is redeemed) will also be paid to each such
Registered Representative who agrees to provide the additional
services described below, who is registered with the CFTC and who has
satisfied all applicable proficiency requirements (including those
imposed by the NASD as a condition of receiving "trailing
commissions") by either passing the Series 3 National Commodity
Futures Exam or the Series 31 exam or being "grandfathered" from
having to do so. In the case of an Additional Selling Agent
introduced by a Wholesaler who meets the eligibility requirements for
receipt of ongoing compensation, the Lead Selling Agent will pay a
portion of the up to 1/3 of 1% monthly ongoing compensation to the
Wholesaler depending upon the Wholesaler's arrangement with the
Additional Selling Agent. For purposes of determining when "trailing
commissions" should begin to accrue, Units sold during the Initial
Offering Period shall not be deemed to be outstanding until the
Initial Closing Time.
The ongoing compensation described in the foregoing paragraph
shall only be paid to any otherwise eligible Registered
Representatives, provided that the Additional Selling Agent with which
such Registered Representative is associated continues to be
registered with the CFTC as a futures commission merchant or
introducing broker and continues to be a member in good standing of
NFA in such capacity, and is contingent upon the provision by a
Registered Representative (duly registered and qualified as to
proficiency with the CFTC and NFA as described above) who sold
outstanding Units in his capacity as a registered representative of an
Additional Selling Agent of additional services in connection with
such Units, including: (i) inquiring of the Managing Owner from time
to time, at the request of an owner of such Units, as to the Net Asset
Value of a Unit; (ii) inquiring of the Managing Owner from time to
time, at the request of an owner of such Units, regarding the
commodities markets and the Trust; (iii) assisting, at the request of
the Managing Owner, in the redemption of Units sold by such Registered
Representative; and (iv) providing such other services to the owners
of such Units as the Managing Owner may, from time to time, reasonably
request.
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Ongoing compensation shall be credited and paid only in respect
of Units sold by Registered Representatives who are eligible to
receive such ongoing compensation as described above. No ongoing
compensation whatsoever shall be credited, paid or accrued on any
Units sold by Registered Representatives not then eligible to receive
such ongoing compensation. With respect to particular Units
substitute Registered Representatives who are appropriately registered
and who agree in writing to perform the services described in this
Section 4(d) above with respect to such Units ("Substitute Registered
Representatives") may also receive ongoing compensation with respect
to such Units. Such ongoing compensation shall be paid monthly.
In the event that the payment of ongoing compensation is
restricted by the NASD, the Lead Selling Agent's payments of such
ongoing compensation shall be limited to the maximum amount
permissible pursuant to such restrictions.
In the case of Units sold by Registered Representatives who are
not qualified to receive ongoing compensation as set forth above, the
Lead Selling Agent will pay such Registered Representatives
installment selling commissions at the same rate as in the case of
ongoing compensation, but the sum of such installment selling
commissions and the initial selling commission payable to each such
Registered Representative is limited in amount, pursuant to applicable
NASD policy, to 9.0% of the initial subscription price of the Units
sold by such Registered Representatives and remaining outstanding.
In respect of Correspondents selected by an Additional Selling
Agent (with the consent of the Managing Owner and the Lead Selling
Agent), the Lead Selling Agent shall pay such Additional Selling Agent
selling commissions and ongoing compensation or installment sales
commissions as set forth above, a portion (as agreed between such
Additional Selling Agent and each such Correspondent) of which shall
be passed on by the Additional Selling Agent to such Correspondents.
Ongoing compensation which cannot be paid because an Additional
Selling Agent or a Correspondent (or a Registered Representative of
either) has not met the eligibility requirements shall be retained by
the Lead Selling Agent.
Selling Commissions and ongoing compensation payable in respect
of Units sold to any investor eligible to be charged a Special
Brokerage Fee Rate as described in the Registration Statement and
Prospectus shall be reduced by the difference between the standard
rate Brokerage Fee and the applicable Special Brokerage Fee Rate.
(e) The Lead Selling Agent will use its best efforts to find
eligible persons to purchase the Units on the terms stated herein and
in the Registration Statement and Prospectus. It is understood that
the Lead 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 and sale of the Units, the Lead Selling Agent represents that it
will comply
- 12 -
fully with all applicable laws, and the rules of the NASD, the SEC, the
CFTC, state securities administrators and any other regulatory body. In
particular, and not by way of limitation, the Lead Selling Agent represents
and warrants that it is aware of Rule 2810 of the NASD (formerly Appendix
F of the NASD Rules of Fair Practice) and that it will comply fully with
all the terms thereof in connection with the offering and sale of the
Units. The Lead Selling Agent shall not 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
maintained.
The Lead Selling Agent agrees not to recommend the purchase of
Units to any subscriber unless the Lead 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 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 tax benefits described in
the Prospectus; the subscriber has a fair market net worth sufficient
to sustain the risks inherent in participating in the Trust, including
loss of investment and lack of liquidity; and the Units are otherwise
a suitable investment for the subscriber. The Lead Selling Agent
agrees to maintain files of information disclosing the basis upon
which the Lead Selling Agent determined that the suitability
requirements of Section (b)(2) of Rule 2810 of the NASD were met as to
each subscriber (the basis for determining suitability may include the
Subscription Agreements and Powers of Attorney and other certificates
submitted by subscribers). The Lead Selling Agent represents and
warrants that it has reasonable grounds to believe, based on
information in the Prospectus and information to which the Lead
Selling Agent has had access due to its affiliation with CISI, that
all material facts relating to an investment in the Units are
adequately and accurately disclosed in the Prospectus. In connection
with making the foregoing representations and warranties, the Lead
Selling Agent further represents and warrants that it has, among other
things, examined the following sections in the Prospectus and obtained
such additional information from CISI regarding the information set
forth thereunder as the Lead Selling Agent has deemed necessary or
appropriate to determine whether the Prospectus adequately and
accurately discloses all material facts relating to an investment in
the Trust and provides an adequate basis to subscribers for evaluating
an investment in the Units:
"Summary"
"Risk Factors"
"Investment Factors"
"The Trust and Its Objectives"
"John W. Henry & Company, Inc."
"The Managing Owner"
"Fiduciary Obligations of the Managing Owner"
"Use of Proceeds"
"Charges"
- 13 -
"Conflicts of Interest"
"Redemptions; Net Asset Value"
"The Trust and the Trustee"
"Federal Income Tax Aspects"
In connection with making the representations and warranties set forth
in this paragraph, the Lead Selling Agent has not relied on inquiries
made by or on behalf of any other parties.
The Lead 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.
(f) None of the Lead Selling Agent, the Trust or the Managing
Owner shall, directly or indirectly, pay or award any finder's fees,
commissions or other compensation to any person engaged by a potential
investor for investment advice as an inducement to such advisor to
advise the purchase of Units; provided, however, the normal sales
commissions payable to a registered broker-dealer or other properly
licensed person for selling Units shall not be prohibited hereby.
(g) As contemplated by Section 7 hereof, CISI will advance the
Trust's organization and initial offering costs.
(h) All payments for subscriptions shall be made by transfer of
funds to the escrow account of the Trust as described in the
Prospectus, provided that any such arrangements must comply in all
relevant respects with SEC Regulations 10b-9 and 15c2-4.
(i) CISI agrees to cause its counsel to prepare and deliver to
the Lead Selling Agent a Blue Sky Survey which shall set forth, for
the guidance of the Lead Selling Agent, in which United States
jurisdictions the Units may be offered and sold (both before and after
the Trust commences operations). It is understood and agreed that the
Lead Selling Agent may rely, in connection with the offering and sale
of Units in any jurisdiction, on advice given by such counsel as to
the legality of the offer or sale of the Units in such jurisdiction;
provided, however, that the Lead Selling Agent and each Wholesaler,
Additional Selling Agent or Correspondent shall be responsible for
compliance with all applicable laws, rules and regulations with
respect to the actions of its employees, acting as such, in connection
with sales of Units in any jurisdiction.
Section 5. COVENANTS OF THE MANAGING OWNER.
(a) The Managing Owner will notify the Lead Selling Agent and
JWH immediately and confirm such notification in writing (i) when any
amendment to the Registration Statement shall have become effective,
(ii) of the receipt of any comments from the SEC, CFTC or any other
Federal or state regulatory body with
- 14 -
respect to the Registration Statement, (iii) of any request by the SEC,
CFTC or any other Federal or state regulatory body for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information relating thereto and (iv) of the issuance by the
SEC, CFTC or any other Federal or state regulatory body of any order
suspending the effectiveness of the Registration Statement under the 1933
Act, the CFTC registration or NFA membership of the Managing Owner as a
commodity pool operator, or the registration of Units under the Blue Sky or
securities laws of any state or other jurisdiction or any order or decree
enjoining the offering or the use of the then current Prospectus or of the
institution, or notice of the intended institution, of any action or
proceeding for that purpose.
(b) The Managing Owner will deliver to the Lead Selling Agent,
as soon as available, two signed copies of each amendment to the
Registration Statement as originally filed and two sets of exhibits
thereto, and will also deliver to the Lead Selling Agent such number
of conformed copies of the Registration Statement as originally filed
and of each amendment thereto (without exhibits) as the Lead Selling
Agent shall reasonably require.
(c) The Managing Owner will deliver to the Lead Selling Agent as
promptly as practicable from time to time during the period when the
Prospectus is required to be delivered under the 1933 Act, such number
of copies of the Prospectus (as amended or supplemented) as the Lead
Selling Agent, Wholesalers, Additional Selling Agents and
Correspondents may reasonably request for the purposes contemplated by
the 1933 Act or the SEC Regulations.
(d) During the period when the Prospectus is required to be
delivered pursuant to the 1933 Act, the Managing Owner and the Trust
will use best efforts to comply with all requirements imposed upon
them by the 1933 Act and the Commodity Act, each as now and hereafter
amended, and by the SEC Regulations and rules and regulations of the
CFTC, as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Units during such period
in accordance with the provisions hereof and as set forth in the
Prospectus.
(e) If any event relating to or affecting the Managing Owner or
the Trust shall occur as a result of which it is necessary, in the
reasonable opinion of the Managing Owner or the Lead Selling Agent, to
amend or supplement the Prospectus in order to make the Prospectus not
materially misleading in light of the circumstances existing at the
time it is delivered to a subscriber, the Managing Owner and the Trust
will forthwith prepare and furnish to the Lead Selling Agent, at the
expense of the Managing Owner, a reasonable number of copies of
an amendment or amendments of, or a supplement or supplements to, the
Prospectus which will amend or supplement the Prospectus so that as
amended or supplemented it will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances existing at
the time the
- 15 -
Prospectus is delivered to a subscriber, not misleading. No such amendment
or supplement shall be filed without the approval of the Lead Selling Agent
and JWH and their counsel.
(f) The Managing Owner will use best efforts to qualify the
Units for offer and sale under applicable securities or "Blue Sky"
laws and continue such qualification throughout the Offering Period,
provided that in no event shall the Managing Owner or the Trust be
obligated to (i) take any action which would subject it to service of
process in suits other than those arising out of the offering or sale
of the Units, or taxes, in any jurisdiction where any of them is not
now so subject, (ii) change any material term in the Registration
Statement, or (iii) expend a sum of money considered unreasonable by
CISI.
Section 6. COVENANTS OF JWH.
(a) JWH agrees to cooperate, to the extent reasonably requested
by the Managing Owner, in the preparation of any amendments or
supplements relating to itself to the Registration Statement and the
Prospectus.
(b) During the period when the Prospectus is required to be
delivered under the 1933 Act, JWH agrees to notify the Managing Owner
immediately upon discovery of any untrue or misleading statement
regarding it, its operations or any of its principals or of the
occurrence of any event or change in circumstances which would result
in there being any untrue or misleading statement or an omission in
the Prospectus or Registration Statement regarding it, its operations
or any of its principals or result in the Prospectus not including all
information relating to JWH and its principals required pursuant to
CFTC regulations. During such period, JWH shall promptly inform the
Managing Owner if it is necessary to amend or supplement the
Prospectus in order to make the Prospectus not materially misleading
in light of the circumstances existing at the time the Prospectus is
delivered to a subscriber.
(c) JWH agrees to assist, and cause its principals or agents to
assist, at its own expense in "road show" presentations relating to
the initial and ongoing offering of the Units at the reasonable
request of the Lead Selling Agent and at the expense of JWH, provided
that no such assistance shall result in any action which any such
principal or agent reasonably believes may require registration of JWH
or any such principal or agent as a broker-dealer or salesman.
Section 7. PAYMENT OF EXPENSES AND FEES. CISI will advance expenses
incident to the performance of the obligations of the Managing Owner and the
Trust hereunder, including: (i) the printing and delivery to the Lead Selling
Agent in quantities as hereinabove stated of copies of the Registration
Statement and all amendments thereto, of the Prospectus and any supplements or
amendments thereto, and of any supplemental sales materials; (ii) the
reproduction of this Agreement and the printing and filing of the Registration
Statement and the Prospectus (and, in certain cases, the exhibits thereto) with
the SEC, CFTC and NFA; (iii) the qualification of the Units under the securities
- 16 -
or "Blue Sky" laws in the various jurisdictions, including filing fees and the
fees and disbursements of CISI's counsel incurred in connection therewith;
(iv) the services of counsel and accountants for CISI and the Trust, including
certain services of KPMG Peat Marwick, LLP in connection with their review of
the performance records in the Prospectus; (v) the printing or reproduction and
delivery to the Lead Selling Agent of such number of copies as it may reasonably
request of the Blue Sky Survey; and (vi) "road show" presentations (not
including the expenses of JWH and its personnel which shall be borne by JWH).
The Managing Owner and the Lead Selling Agent are each aware of the
limitations imposed by Rule 2810 of the NASD on the aggregate compensation which
may be received by the Lead Selling Agent in connection with the offering and
sale of the Units. The Lead Selling Agent will in no event make any payments to
its own Registered Representatives or any Additional Agent as described above,
which, when added to the up to 4% selling commissions which the Lead Selling
Agent may pay with respect to the sales of Units, would exceed 10% of the gross
proceeds of the Units sold to the public. CISI shall not reimburse the Lead
Selling Agent for any due diligence expenses in connection with the offering.
Section 8. CONDITIONS OF CLOSING. The obligations of each of the
parties hereunder are subject to the accuracy of the representations and
warranties of the other parties hereto, to the performance by such other parties
of their respective obligations hereunder and to the following further
conditions:
(a) At the Initial Closing Time and each Subsequent Closing Time
no order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceeding therefor
initiated or threatened by the SEC and no objection to the content
thereof shall have been expressed or threatened by the CFTC or NFA.
(b) At the Initial Closing Time, Sidley & Austin, counsel to
CISI and the Trust, shall deliver to all the parties hereto its
opinion, in form and substance satisfactory to each of the parties
hereto, to the effect that:
(i) The Certificate of Trust pursuant to which the
Trust has been formed and the Declaration and Agreement of
Trust each provides for the subscription for and sale of the
Units; all action required to be taken by the Managing Owner
and the Trust as a condition to the subscription for and
sale of the Units to qualified subscribers therefor has been
taken; and, upon payment of the consideration therefor
specified in the accepted Subscription Agreements and Powers
of Attorney, the Units will constitute valid beneficial
interests in the Trust and each subscriber who purchases
Units will become a Unitholder, subject to the requirements
(x) that each such purchaser shall have duly completed,
executed and delivered to the Trust a Subscription Agreement
and Power of Attorney relating to the Units purchased by
such party, (y) that such
- 17 -
purchaser meets all applicable suitability standards as set forth in
the Prospectus and (z) that the representations and warranties of such
purchaser in the Subscription Agreement and Power of Attorney are true
and correct.
(ii) The Trust is a business trust duly organized
pursuant to the Certificate of Trust, the Declaration and
Agreement of Trust and the Trust Act and validly existing
under the laws of the State of Delaware with proper power
and authority to conduct the business in which it proposes
to engage as described in the Prospectus; the Trust has
filed a certificate of assumed name in the State of Illinois
pursuant to 805 I.L.C.S. 405/1 and need not effect any other
filings or qualifications under the laws of the United
States in order to preserve the status of the Trust as a
business trust or to enable the Trust to perform its
obligations under the Trading Advisory Agreement and this
Agreement and to conduct the business in which it proposes
to be engaged as described in the Prospectus.
(iii) CISI is duly organized and validly existing and
in good standing as a corporation under the laws of the
State of Delaware with corporate power and authority to act
as managing owner of the Trust, and is qualified to do
business and is in good standing as a foreign corporation in
the State of Illinois and in each other jurisdiction in
which the failure to so qualify might, in its opinion,
reasonably be expected to result in material adverse
consequences to the Trust. CISI has full corporate power
and authority to perform its obligations as described in the
Registration Statement and Prospectus.
(iv) Each of CISI (including the principals, as
defined in the Commodity Act, of CISI) and the Trust has all
Federal and state governmental and regulatory licenses and
approvals and has received or made all filings and
registrations with Federal and state governmental and
regulatory agencies necessary in order for each of CISI and
the Trust to conduct its business as described in the
Registration Statement and Prospectus, and, to the best of
their knowledge, none of such approvals, licenses or
registrations have been rescinded or revoked.
(v) Each of the Declaration and Agreement of Trust,
the Escrow Agreement, the FX Agreement, the Trading Advisory
Agreement, the Customer Agreement and this Agreement has
been duly and validly authorized, executed and delivered by
or on behalf of CISI or the Trust, as the case may be, and
assuming that such agreements are legal, valid and binding
on the other parties hereto and thereto, each of the
Declaration and Agreement of Trust, the Escrow
- 18 -
Agreement, the Trading Advisory Agreement, and this Agreement
constitutes a legal, valid and binding agreement of CISI or the Trust
(as the case may be) enforceable in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by
the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(vi) The execution and delivery of this Agreement, the
Declaration and Agreement of Trust, the Escrow Agreement,
the FX Agreement, and the Trading Advisory Agreement and the
incurrence of the obligations herein and therein set forth
and the consummation of the transactions contemplated herein
and therein and in the Prospectus will not be in
contravention of any of the provisions of CISI's certificate
of incorporation or by-laws, or the Declaration and
Agreement of Trust, and, to their knowledge, will not
constitute a breach of, or default under, any instrument by
which CISI or the Trust is bound or any order, rule or
regulation applicable to CISI or the Trust of any court or
any governmental body or administrative agency having
jurisdiction over CISI or the Trust.
(vii) To their knowledge, there are no actions, claims
or proceedings pending or threatened in any court or before
or by any governmental or administrative body, nor have
there been any such suits, claims or proceeding within the
last five years, to which CISI (or any principal of CISI) or
the Trust is or was a party, or to which any of their assets
is or was subject, which are required to be, but are not
disclosed in, the Registration Statement or Prospectus or
which might reasonably be expected to materially adversely
affect the condition (financial or otherwise), business or
prospects of CISI or the Trust.
(viii) No authorization, approval or consent of any
governmental authority or agency is necessary in connection
with the subscription for and sale of the Units, except such
as may be required under the 1933 Act, the Commodity Act,
NFA compliance rules or applicable securities or "Blue Sky"
laws.
(ix) The terms and provisions of the Declaration and
Agreement of Trust, the Customer Agreement, the FX
Agreement, the Customer Agreement, the Trading Advisory
Agreement and this Agreement conforms in all material
respects to descriptions thereof contained in the
Prospectus.
- 19 -
(x) The Registration Statement is effective under the
1933 Act and, to the best of their knowledge, no proceedings
for a stop order are pending or threatened under Section
8(d) of the 1933 Act.
(xi) At the time the Registration Statement initially
became effective and at the time any post-effective
amendment thereto became effective, the Registration
Statement, and at the time the Prospectus and any amendments
or supplements thereto were first issued, the Prospectus,
complied as to form in all material respects with the
requirements of the 1933 Act, the SEC Regulations under the
1933 Act and CFTC regulations. Nothing has come to their
attention that would lead them to believe that with respect
to CISI, the Lead Selling Agent or CISFS (a) at the time the
Registration Statement initially became effective and at the
time any post-effective amendment thereto became effective,
the Registration Statement contained any untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or (b) the Prospectus as first
issued or as subsequently issued or at the Initial Closing
Time contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however,
that such counsel need express no opinion (A) as to the
financial statements, notes thereto and other financial or
statistical data set forth in the Registration Statement and
Prospectus or (B) as to any performance data set forth in
the Registration Statement, and Prospectus, including
Appendix I (and the notes thereto) in the Registration
Statement and Prospectus, except that such counsel shall
opine, without rendering any opinion as to the accuracy of
the information in Appendix I, that such Appendix I complies
as to form in all material respects with applicable CFTC
rules.
(xii) Such counsel confirm their opinion, a form of
which appears as Exhibit 8.01 to the Registration Statement,
that the summary of Federal income tax consequences to
Unitholders set forth under the caption "Federal Income Tax
Consequences" in the Prospectus accurately describes the
material tax consequences set forth therein and that such
counsel further confirm their advice to CISI explicitly set
forth therein and in such Exhibit 8.01.
(xiii) To their knowledge, (a) there are no contracts,
indentures, mortgages, loan agreements, leases or other
documents of a character required to be described or
referred to in the Registration Statement or Prospectus or
to be filed as exhibits to the Registration Statement other
than those described or referred to therein or filed as
- 20 -
exhibits thereto, and with respect to the existing contracts,
indentures, mortgages, loan agreements, leases and other documents so
described, referred to or filed, the descriptions thereof, references
thereto or copies so filed are correct in all material respects, and
(b) no material default on the part of CISI or the Trust exists in the
due performance or observance of any material obligation, agreement,
covenant or condition contained in any contract or lease so described
or filed.
(xiv) Assuming operation in accordance with the
Prospectus, the Trust, at Closing Time, is not an
"investment company" as that term is defined in the
Investment Company Act of 1940, as amended.
In rendering the opinions set forth above, Sidley & Austin may rely,
as to matters of Delaware law, upon the opinion of Messrs. Richards,
Layton & Finger, Wilmington, Delaware, and as to matters relating to
CISI, the Lead Selling Agent and CISFS on internal counsel to Cargill,
Incorporated.
(c) Ms. Linda Cutler, counsel to the Lead Selling Agent, shall
deliver to all the parties hereto, an opinion to the effect that:
(i) The Lead Selling Agent is duly organized and
validly existing and in good standing as a corporation under
the laws of the State of Delaware and is qualified to do
business and in good standing as a foreign corporation in
the State of Illinois and in each other jurisdiction in
which such qualification is required and in which the
failure to so qualify might, in her opinion, reasonably be
expected to result in material adverse consequences to the
Trust. The Lead Selling Agent has full corporate power and
authority to perform its obligations as described in the
Registration Statement and Prospectus.
(ii) Each of the Customer Agreement and this Agreement
has been duly authorized, executed and delivered by the Lead
Selling Agent, and this Agreement constitutes a legal, valid
and binding agreement of the Lead Selling Agent enforceable
in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered).
(iii) The Lead Selling Agent has all Federal and state
governmental and regulatory licenses and approvals and has
received or made all filings and registrations with Federal
and state governmental and regulatory agencies necessary in
order for the Lead Selling Agent to conduct its business as
described in the Registration
- 21 -
Statement and Prospectus, and, to her knowledge, none of such
approvals, licenses or registrations has been rescinded or revoked.
(iv) The execution and delivery of the Customer
Agreement and this Agreement, the incurrence of the
obligations herein and therein set forth and the
consummation of the transactions contemplated herein and
therein and in the Prospectus will not, to the best of her
knowledge, constitute a breach of, or default under, any
instrument known to her by which the Lead Selling Agent is
bound or, any order, rule or regulation applicable to the
Lead Selling Agent, of any court or any governmental body or
administrative agency having jurisdiction over the Lead
Selling Agent.
(v) To her knowledge, there are no actions, claims or
proceedings pending or threatened in any court or before or
by a governmental or administrative body, nor have there
been any suits, claims or proceedings within the last five
years, to which the Lead Selling Agent (or any principal of
the Lead Selling Agent) is or was a party or to which any of
its assets is or was subject, which are required to be
disclosed in the Registration Statement or Prospectus or
which might reasonably be expected to materially adversely
affect the business of the Lead Selling Agent.
(vi) Nothing has come to her attention that would lead
her to believe that (a) at the time the Registration
Statement initially became effective and at the time any
post- effective amendment thereto became effective, insofar
as the Lead Selling Agent and its principals are concerned,
the Registration Statement contained any untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or (b) the Prospectus as first filed
pursuant to Rule 424(b) or as subsequently filed pursuant to
Rule 424 or at the Initial Closing Time contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein
relating to the Lead Selling Agent or its principals, in
light of the circumstances under which they were made, not
misleading.
(d) Ms. Linda Cutler, counsel to CISFS, shall deliver to all the
parties hereto, an opinion to the effect that:
(i) CISFS is duly organized and validly existing and
in good standing as a corporation under the laws of the
State of Delaware and is qualified to do business and in
good standing as a foreign corporation in the State of
Illinois and in each other jurisdiction in which such
qualification is required and in which the failure to so
qualify
- 22 -
might, in her opinion, reasonably be expected to result in material
adverse consequences to the Trust. CISFS has full corporate power and
authority to perform its obligations as described in the Registration
Statement and Prospectus.
(ii) Each of the FX Agreement and this Agreement has
been duly authorized, executed and delivered by CISFS, and
this Agreement constitutes a legal, valid and binding
agreement of CISFS enforceable in accordance with its terms,
except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the
effect of general principles of equity (regardless of
whether enforceability is considered).
(iii) CISFS has all Federal and state governmental and
regulatory licenses and approvals and has received or made
all filings and registrations with Federal and state
governmental and regulatory agencies necessary in order for
CISFS to conduct its business as described in the
Registration Statement and Prospectus, and, to her
knowledge, none of such approvals, licenses or registrations
has been rescinded or revoked.
(iv) The execution and delivery of the FX Agreement
and this Agreement, the incurrence of the obligations herein
and therein set forth and the consummation of the
transactions contemplated herein and therein and in the
Prospectus will not, to the best of her knowledge,
constitute a breach of, or default under, any instrument
known to her by which CISFS is bound or, any order, rule or
regulation applicable to CISFS, of any court or any
governmental body or administrative agency having
jurisdiction over CISFS.
(v) To her knowledge, there are no actions, claims or
proceedings pending or threatened in any court or before or
by a governmental or administrative body, nor have there
been any suits, claims or proceedings within the last five
years, to which CISFS (or any principal of CISFS) is or was
a party or to which any of its assets is or was subject,
which are required to be disclosed in the Registration
Statement or Prospectus or which might reasonably be
expected to materially adversely affect the business of
CISFS.
(vi) Nothing has come to her attention that would lead
her to believe that (a) at the time the Registration
Statement initially became effective and at the time any
post-effective amendment thereto became effective, insofar
as CISFS and its principals are concerned, the
- 23 -
Registration Statement contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (b) the
Prospectus as first filed pursuant to Rule 424(b) or as subsequently
filed pursuant to Rule 424 or at the Initial Closing Time contained an
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein relating to
CISFS or its principals, in light of the circumstances under which
they were made, not misleading.
(e) David M. Kozak, counsel to JWH, shall deliver to all the
parties hereto an opinion as of the Initial Closing Time to the effect
that:
(i) JWH is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California and is in good standing in each jurisdiction in
which the nature or conduct of its business requires such
qualification and in which the failure to so qualify might
reasonably be expected to materially adversely affect the
Trust, as described in the Registration Statement and
Prospectus, and its ability to discharge its obligations
under the Trading Advisory Agreement and this Agreement.
(ii) Each of the Trading Advisory Agreement and this
Agreement has been duly authorized, executed and delivered
by JWH and constitutes a valid, binding and enforceable
agreement of JWH in accordance with its terms, subject only
to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the
enforceability generally of rights of creditors and except
as enforceability of the indemnification provisions
contained in such Agreements may be limited by applicable
law and the enforcement of specific terms or remedies may be
unavailable.
(iii) JWH (including the principals of JWH) has all
material Federal and state governmental and regulatory
licenses and approvals and has received or made all filings
and registrations with Federal and state governmental and
regulatory authorities necessary in order for JWH to conduct
its business as described in the Registration Statement and
Prospectus (including, without limitation, performance of
this Agreement and the Trading Advisory Agreement) and, to
the best of such counsel's knowledge, none of such
approvals, licenses or registrations has been rescinded or
revoked.
(iv) There is not pending or, to such counsel's
knowledge, threatened any actions, suits or proceedings
before or by any court or other governmental or
administrative body, nor have there been any
- 24 -
such suits, claims or proceedings within the last five years to which
JWH, or any of its principals, is or was a party, or to which any of
their assets is or was subject, which are required to be, but are not
disclosed in the Registration Statement or Prospectus or which might
reasonably be expected to result in any material adverse change in the
condition (financial or otherwise), business or prospects of JWH.
(v) The execution and delivery of this Agreement and
the Trading Advisory Agreement, the incurrence of the
obligations herein and therein set forth and the
consummation of the transactions contemplated herein,
therein and in the Prospectus will not be in contravention
of any of the provisions of the certificate of incorporation
or by-laws of JWH, or, to the best of such counsel's
knowledge, constitute a breach of, or default under, any
instrument by which JWH is bound or any order, rule or
regulation applicable to JWH of any court or any
governmental body or administrative agency having
jurisdiction over JWH.
(vi) Based upon reliance on certain SEC No-Action
Letters, the performance by JWH of the transactions
contemplated by the Trading Advisory Agreement and described
in the Prospectus will not subject JWH or any principal of
JWH to the registration requirements, prohibitions or other
terms of the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention
that would lead such counsel to believe that, (a) at the
time the Registration Statement initially became effective
and at the time any post-effective amendment thereto became
effective, insofar as JWH and its principals are concerned,
the Registration Statement contained any untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or (b) the Prospectus as first filed
pursuant to Rule 424(b) or as subsequently filed pursuant to
Rule 424 or at the Initial Closing Time contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein
relating to JWH or its principals, in light of the
circumstances under which they were made, not misleading;
provided, however, that no counsel for JWH need express an
opinion or belief (A) as to the financial statements, notes
thereto and other financial or statistical data and notes or
descriptions thereto set forth in the Registration Statement
and Prospectus or (B) as to the performance data and notes
or descriptions thereto set forth in the Registration
Statement, except that such counsel shall opine, without
rendering any opinion as to the accuracy of the information
in such tables, that the performance
- 25 -
records relating to JWH set forth in the Prospectus comply as to form
in all material respects with CFTC rules except to the extent
departures therefrom have been permitted by CFTC staff.
(f) At the Initial Closing Time, the Managing Owner shall
deliver a certificate to the effect that: (i) no order suspending the
effectiveness of the Registration Statement has been issued and to the
best of its knowledge no proceedings therefor have been instituted or
threatened by the SEC, the CFTC or other regulatory body; (ii) the
representations and warranties of the Managing Owner contained herein
are true and correct with the same effect as though expressly made at
the Initial Closing Time and in respect of the Registration Statement
as in effect at the Initial Closing Time; and (iii) the Managing Owner
has performed all covenants and agreements herein contained to be
performed on its part at or prior to the Initial Closing Time. Such
certificate may state that the Managing Owner has relied upon JWH to
provide certain information relating to JWH for use in the
Registration Statement.
(g) JWH shall deliver a report dated as of the Initial Closing
Time which shall present, for the period from the date after the last
day covered by the performance records in the Prospectus to the latest
practicable day before the Initial Closing Time, figures which shall
be a continuation of such performance records and which shall certify
that such figures are accurate in all material respects. JWH shall
also certify that such performance records have been calculated in
accordance with the notes to the applicable performance records in the
Prospectus.
(h) At the time the Registration Statement initially becomes
effective, KPMG Peat Marwick, LLP shall have delivered a letter,
substantially in the form previously agreed upon by the Lead Selling
Agent and the Managing Owner.
(i) At the Initial Closing Time, KPMG Peat Marwick, LLP shall
deliver a letter in a form satisfactory to the Lead Selling Agent and
the Managing Owner, substantially the same in scope and substance as
the letter described in paragraph (h) of this Section 8, dated as of
the Initial Closing Time.
(j) At the Initial Closing Time, JWH shall deliver a certificate
to the effect that (i) the representations and warranties of JWH
contained herein are true and correct with the same effect as though
expressly made at the Initial Closing Time, (ii) JWH has performed all
covenants and agreements herein contained to be performed on its part
at or prior to the Initial Closing Time and (iii) since the date of
the most recent financial information relating to JWH prior to the
date of this Agreement there has been no material adverse change, or
development involving a prospective material adverse change, in the
financial condition, business or business prospects of JWH.
(k) At the Initial Closing Time, the Lead Selling Agent shall
deliver a certificate to the effect that the representations and
warranties of the Lead Selling Agent and Futures Broker contained
herein are true and correct with the same effect as
- 26 -
though expressly made at the Initial Closing Time and in respect of the
Registration Statement as in effect at the Initial Closing Time.
(l) At the Initial Closing Time, CISFS shall deliver a
certificate to the effect that the representations and warranties of
CISFS contained herein are true and correct with the same effect as
though expressly made at the Initial Closing Time and in respect of
the Registration Statement as in effect at the Initial Closing Time.
(m) The Trust shall have received a capital contribution of the
Managing Owner in the amount required by the Declaration and Agreement
of Trust and as described in the Prospectus.
(n) The parties hereto shall have been furnished with such
additional information, opinions and documents, including supporting
documents relating to parties described in the Prospectus and
certificates signed by such parties with regard to information
relating to them and included in the Prospectus as they may reasonably
require for the purpose of enabling them to pass upon the sale of the
Units as herein contemplated and related proceedings, in order to
evidence the accuracy or completeness of any of the representations or
warranties or the fulfillment of any of the conditions herein
contained; and all actions taken by the parties hereto in connection
with the sale of the Units as herein contemplated shall be reasonably
satisfactory in form and substance to Sidley & Austin, Mr. Kozak and
Ms. Cutler.
(o) The representations and warranties set forth herein shall be
restated as of each Subsequent Closing Time as if made as of the date
thereof. The conditions of closing set forth in this Section 8 shall,
at the option of any party hereto, apply at each Subsequent Closing
Time.
If any of the conditions specified in this Section 8 shall not have
been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement and all obligations hereunder may be canceled by any
party hereto by notifying the other parties hereto of such
cancellation in writing or by telegram at any time at or prior to the
Initial Closing Time, and any such cancellation or termination shall
be without liability of any party to any other party except as
otherwise provided in Section 7.
Section 9. INDEMNIFICATION AND EXCULPATION.
(a) INDEMNIFICATION BY THE MANAGING OWNER. The Managing Owner
agrees to indemnify and hold harmless the Lead Selling Agent, JWH, any
Wholesaler, Additional Selling Agent and Correspondent and each
person, if any, who controls any of the foregoing within the meaning
of Section 15 of the 1933 Act, and the Trust agrees to indemnify and
hold harmless JWH and each person, if any, who controls JWH within the
meaning of Section 15 of the 1933 Act as follows:
- 27 -
(i) against any and all loss, liability, claim, damage
and expense whatsoever arising out of any untrue statement
or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto) or any
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary in order to make
the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading; and
(ii) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the aggregate
amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or
body commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission or any such
alleged untrue statement or omission (any settlement to be
subject to indemnity hereunder only if effected with the
written consent of the Managing Owner); and
(iii) against any and all expense whatsoever
(including the fees and disbursements of counsel and, in the
case of the Lead Selling Agent, any indemnification of a
Wholesaler, Additional Selling Agent or Correspondent made
pursuant to a Wholesaling Agreement, Additional Selling
Agent Agreement or Correspondent Selling Agreement, as the
case may be) reasonably incurred in investigating, preparing
or defending against litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense
is not paid under clauses (i) or (ii) above.
In no case shall the Managing Owner or the Trust be liable under this
indemnity (a) to JWH if such untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in
conformity with information relating to JWH and furnished or approved
in writing by JWH or (b) to the Lead Selling Agent if such untrue
statement or omission or alleged untrue statement or omission was made
in reliance upon and in conformity with information relating to the
Lead Selling Agent and furnished or approved by the Lead Selling Agent
or (c) to any Wholesaler, Additional Selling Agent or Correspondent,
if such untrue statement or alleged untrue statement was made in
reliance upon and in conformity with information (including
- 28 -
any material omission from such information), if any, relating to, such
Wholesaler, Additional Selling Agent or Correspondent and furnished or
approved by such party.
In no case shall the Managing Owner or the Trust be liable under this
indemnity agreement with respect to any claim made against any
indemnified party unless the Managing Owner or the Trust shall be
notified in writing of the nature of the claim within a reasonable
time after the assertion thereof, but failure to so notify the
Managing Owner or the Trust shall not relieve the Managing Owner or
the Trust from any liability which they may have on account of this
indemnity agreement unless such failure to notify shall materially
prejudice the Managing Owner or the Trust. The Managing Owner and the
Trust shall be entitled to participate at their own expense in the
defense or, if they so elect within a reasonable time after receipt of
such notice, to assume the defense of that portion of any suit so
brought relating to the Managing Owner's or the Trust's
indemnification obligations hereunder, which defense shall be
conducted by counsel chosen by them and satisfactory to the
indemnified party or parties, defendant or defendants therein. In the
event that the Managing Owner or the Trust elects to assume the
defense of any such suit and retain such counsel, the indemnified
party or parties, defendant or defendants in the suit, shall, in the
absence of conflicting claims, bear the fees and expenses of any
additional counsel thereafter retained by it or them.
In no event, however, shall the Managing Owner be obligated to
indemnify the Lead Selling Agent hereunder, and the Lead Selling Agent
agrees not to attempt to obtain any indemnity from the Managing Owner
hereunder, to the extent that the Managing Owner and the Lead Selling
Agent are advised by counsel reasonably satisfactory to the Managing
Owner and the Lead Selling Agent that payment of such indemnity could
adversely affect the classification of the Trust as a partnership for
Federal income tax purposes.
The Managing Owner agrees to notify JWH and the Lead Selling Agent
within a reasonable time of the assertion of any claim in connection
with the sale of the Units against it or any of its officers or
directors or any person who controls the Managing Owner within the
meaning of Section 15 of the 1933 Act.
(b) INDEMNIFICATION BY JWH. JWH agrees to indemnify and hold
harmless the Lead Selling Agent, the Managing Owner, the Trust, and
each person, if any, who controls any of the foregoing within the
meaning of Section 15 of the 1933 Act (and, in the case of the
Managing Owner and the Trust, each person who signed the Registration
Statement or is a director of the Managing Owner), to the same extent
as the indemnity from the Managing Owner set forth in Section 9(a)
hereof, but only insofar as the losses, claims, damages, liabilities
or expenses indemnified against arise out of or are based upon any
untrue statement or omission or alleged untrue statement or omission
relating or with respect to JWH or any principal of JWH, or their
operations, trading systems, methods or performance, which was made in
any preliminary prospectus, the Registration Statement or the
Prospectus or any
- 29 -
amendment or supplement thereto and furnished by or approved by JWH for
inclusion therein.
(c) INDEMNIFICATION BY THE LEAD SELLING AGENT. The Lead Selling
Agent agrees to indemnify and hold harmless the Trust, the Managing
Owner, JWH and each person, if any, who controls the Trust, the
Managing Owner or JWH within the meaning of Section 15 of the 1933 Act
(and in the case of the Managing Owner and the Trust, each person who
signed the Registration Statement or is a director of the Managing
Owner), (i) to the same extent as the indemnity from the Managing
Owner set forth in Section 9(a) hereof, but only insofar as the
losses, claims, damages, liabilities or expenses indemnified against
arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission relating or with respect to the
Lead Selling Agent or any of its principals, or their operations,
which was made in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto and
furnished by or approved by the Lead Selling Agent for inclusion
therein and (ii) against any and all loss, liability, claim, damage
and expense whatsoever resulting from a demand, claim, lawsuit, action
or proceeding relating to the actions or capacities of the Lead
Selling Agent (including a breach of its obligations hereunder) and
any Wholesaler, Additional Selling Agent or Correspondent relating to
the offering of Units under this Agreement or any Wholesaling
Agreement, Additional Selling Agent Agreement or Correspondent Selling
Agent Agreement as the case may be.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 9 is not permitted under applicable law under subsection (a)
or (b) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by JWH, on the
one hand, and, the Lead Selling Agent, CISFS and the Managing Owner,
on the other, from the offering of the Units.
(e) LIMITATION ON CERTAIN INDEMNIFICATIONS AND EXCULPATIONS.
The exculpation provisions in the Trading Advisory Agreement shall not
relieve JWH from any liability it may have or incur to the Trust, the
Managing Owner or the Lead Selling Agent under this Agreement
(including, without limitation, pursuant to the provisions of
Section 9(b) hereof). Nor shall JWH be entitled to be indemnified by
the Managing Owner, pursuant to the indemnification provisions
contained in the Trading Advisory Agreement, against any loss,
liability, damage, cost or expense it may incur under this Agreement.
The Managing Owner shall not be entitled to be indemnified by the
Trust, pursuant to the indemnification provisions contained in the
Declaration and Agreement of Trust against any loss, liability,
damage, cost or expense it may incur under this Agreement.
- 30 -
Section 10. STATUS OF PARTIES. In selling the Units for the Trust,
the Lead Selling Agent is acting solely as an agent for the Trust and not as a
principal. The Lead Selling Agent will use its best efforts to assist the Trust
in obtaining performance by each purchaser whose offer to purchase Units from
the Trust has been accepted on behalf of the Trust, but the Lead Selling Agent
shall not have any liability to the Trust in the event that Subscription
Agreements and Powers of Attorney are improperly completed or any such purchase
is not consummated for any reason. Except as specifically provided herein, the
Lead Selling Agent shall in no respect be deemed to be an agent of the Trust.
Section 11. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or contained in certificates of any party hereto submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by, or on behalf of, the Lead Selling Agent, the Managing
Owner, the Trust, the Futures Broker, CISFS, JWH or any person who controls any
of the foregoing and shall survive the Initial Closing Time.
Section 12. TERMINATION. The Managing Owner shall have the right to
terminate this Agreement at any time prior to the Initial Closing Time by giving
written notice of such termination to JWH, the Lead Selling Agent, the Futures
Broker and CISFS.
Section 13. NOTICES AND AUTHORITY TO ACT. All communications
hereunder shall be in writing and, if sent to the Lead Selling Agent, CISI,
CISFS or the Trust, shall be mailed, delivered or telegraphed and confirmed to
it at Portfolio Diversification Group, Sears Tower, 233 South Wacker Drive,
Suite 2300, Chicago, Illinois 60606, Attention: L. Carlton Anderson; if sent to
JWH, shall be mailed, delivered or telegraphed and confirmed at One Glendinning
Place, Westport, Connecticut 06880, Attention: David M. Kozak. Notices shall be
effective when actually received.
Section 14. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Lead Selling Agent, the Trust, the Managing Owner,
CISFS, JWH and such parties' respective successors to the extent provided
herein. This Agreement and the conditions and provisions hereof are intended to
be and are for the sole and exclusive benefit of the parties hereto and their
respective successors, assigns and controlling persons and parties indemnified
hereunder, and for the benefit of no other person, firm or corporation. No
purchaser of a Unit shall be considered to be a successor or assign solely on
the basis of such purchase.
The parties acknowledge that the obligations of this Agreement are not
binding against the Unitholders individually but are binding only upon the
assets and property of the Trust and, in the event of any obligation or claim
arising hereunder against the Trust, no resort shall be had to the Unitholder's
personal property for the satisfaction of such obligation or claim.
Section 15. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CHOICE OF LAW THEREOF.
- 31 -
Section 16. REQUIREMENTS OF LAW. Whenever in this Agreement it is
stated that a party will take or refrain from taking a particular action, such
party may nevertheless refrain from taking or take such action if advised by
counsel that doing so is required by law or advisable to ensure compliance with
law, and shall not be subject to any liability hereunder for doing so, although
such action shall permit termination of the Agreement by the other parties
hereto.
If the foregoing is in accordance with each party's understanding of
its agreement, each party is requested to sign and return to CISI as Managing
Owner a counterpart hereof, whereupon this instrument along with all
counterparts will become a binding agreement among them in accordance with its
terms.
Very truly yours,
JWH GLOBAL TRUST
BY: CIS INVESTMENTS INC.,
Managing Owner
By:
--------------------------------
Name:
Title:
CIS INVESTMENTS, INC.
By:
--------------------------------
Name:
Title:
JOHN W. HENRY & COMPANY, INC.
By:
--------------------------------
Name:
Title:
CARGILL INVESTOR SERVICES, INC.
By:
--------------------------------
Name:
Title:
CIS FINANCIAL SERVICES, INC.
By:
--------------------------------
Name:
Title:
- 32 -
JWH GLOBAL TRUST
(A DELAWARE BUSINESS TRUST)
UNITS OF BENEFICIAL INTEREST
(SUBSCRIPTION PRICE: $100 PER UNIT
DURING THE INITIAL OFFERING PERIOD; NET
ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD)
ADDITIONAL SELLING AGENT AGREEMENT
April 3, 1997
- -----------------------
- -----------------------
- -----------------------
Dear Sirs:
CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has
caused the formation of a business trust pursuant to the Delaware Business Trust
Act (the "Delaware Act") under the name, JWH GLOBAL TRUST (the "Trust"), for the
purpose of engaging in speculative trading of futures contracts on currencies,
interest rates, energy and agricultural products, metals and stock indices;
options on such futures contracts, and spot and forward contracts on currencies
and precious metals. As described in the Prospectus referred to below, the
Trust will engage in speculative trading in the commodities markets under the
direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make
a public offering of units of beneficial interest in the Trust (the "Units")
through us, Cargill Investor Services, Inc. (the "Lead Selling Agent"), on a
best-efforts basis pursuant to the Selling Agreement dated as of April 3, 1997,
as amended, among us, the Trust and others (the "Selling Agreement"), a copy of
which has been furnished to you. In connection with the proposed public
offering, the Trust has filed with the United States Securities and Exchange
Commission (the "SEC"), pursuant to the United States Securities Act of 1933, as
amended (the "1933 Act"), a registration statement on Form S-1 to register the
Units, and as part thereof a prospectus (Registration No. 333-16825) (which
registration statement, together with all amendments thereto, shall be referred
to herein as the "Registration Statement" and which prospectus together with all
amendments and supplements thereto in the forms filed with the SEC pursuant to
Rule 424 under the Act shall be referred to herein as the "Prospectus"). Other
selling agents, including those introduced by wholesalers ("Wholesalers") to us
(the "Additional Selling Agents" and together with the Lead Selling Agent and
the Wholesalers, the "Selling Agents"), may be selected by us with the consent
of the Managing Owner. We have so selected you as an Additional Selling Agent.
We confirm our agreement with you as follows. Capitalized terms used but
otherwise not defined herein
shall have the meanings ascribed to them in the Selling Agreement unless the
context indicates otherwise.
1. APPOINTMENT AND UNDERTAKINGS OF THE ADDITIONAL SELLING AGENT
(a) Subject to the terms and conditions set forth in this Agreement, the
Selling Agreement and the Registration Statement, the Additional Selling Agent
is hereby appointed, and hereby accepts such appointment, as one of the Trust's
non-exclusive selling agents to offer and sell the Units on a best-efforts basis
without any commitment on the Additional Selling Agent's part to purchase any
Units. It is understood and agreed that the Lead Selling Agent, with the
consent of the Managing Owner, may retain other selling agents (including those
introduced by Wholesalers) and that the Additional Selling Agent or any other
Additional Selling Agent, with the consent of the Lead Selling Agent and
Managing Owner in their sole discretion, may retain correspondent selling agents
("Correspondents"). The Additional Selling Agent agrees to comply with the
terms and conditions of this Agreement and any terms and conditions of the
Selling Agreement applicable to Additional Selling Agents.
The Additional Selling Agent from time to time will provide the Lead
Selling Agent with a list of prospective Correspondents. Unless the prospective
Correspondent has a verifiable preexisting relationship with the Lead Selling
Agent (including previously having approached or been approached by the Lead
Selling Agent about being an Additional Selling Agent for the Trust) as notified
to the Additional Selling Agent in writing, such Correspondent shall only be
permitted to offer Units as a Correspondent of the Additional Selling Agent
pursuant to a Correspondent Selling Agreement in a form agreed to by the
Additional Selling Agent.
(b) The Additional Selling Agent agrees to use its reasonable efforts to
procure subscriptions for the Units as long as this Agreement and the Selling
Agreement remain in effect and to make the offering of Units at the offering
price and minimum amounts and on the other terms and conditions set forth in the
Prospectus and the Selling Agreement.
(c) The Additional Selling Agent shall offer and sell Units only to
persons and entities who satisfy the suitability and/or investment requirements
set forth in the Prospectus and the subscription agreements attached thereto and
who, to the Managing Owner's satisfaction, complete the subscription agreements
and related subscription documents used in connection with the offering of the
Units (the "Subscription Documents") and remit good funds for the full
subscription price. The Additional Selling Agent shall conduct a thorough
review of the suitability of each subscriber for Units that it solicits and of
the Subscription Documents. The Additional Selling Agent shall not forward to
the Managing Owner any Subscription Documents that are not in conformity with
the requirements specified in the Prospectus and in the Subscription Documents
appropriate for the particular subscriber, or that is illegible in any respect
or is not fully completed, dated, or signed, or that represents the subscription
of a person or entity not satisfying the suitability and/or investment
requirements applicable to such person or entity. The Additional Selling Agent
shall not execute any transactions in Units in a discretionary account over
which it has control without prior written approval of the customer in whose
name such discretionary account is maintained.
2
The Additional Selling Agent agrees not to recommend the purchase of Units
to any subscriber unless the Additional 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 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; the subscriber has a fair market net worth
sufficient to sustain the risks inherent in participating in the Trust,
including loss of investment and lack of liquidity; and the Units are otherwise
a suitable investment for the subscriber. In addition to submitting such
information to the Managing Owner, the Additional Selling Agent agrees to
maintain files of information disclosing the basis upon which the Additional
Selling Agent determined that the suitability requirements of Section (b)(2) of
Rule 2810 of the National Association of Securities Dealers, Inc. ("NASD")
(formerly Section 3 of Appendix F of the NASD's Rules of Fair Practice) were met
as to each subscriber (the basis for determining suitability may include the
Subscription Documents and other certificates submitted by subscribers). In
connection with making the foregoing representations and warranties, the
Additional Selling Agent further represents and warrants that it has received
copies of the Registration Statement, as amended to the date hereof, and the
Prospectus and has, among other things, examined the following sections in the
Prospectus and obtained such additional information from the Managing Owner
regarding the information set forth thereunder as the Additional Selling Agent
has deemed necessary or appropriate to determine whether the Prospectus
adequately and accurately discloses all material facts relating to an investment
in the Trust and provides an adequate basis to subscribers for evaluating an
investment in the Units:
"Summary"
"Risk Factors"
"Investment Factors"
"The Trust and Its Objectives"
"John W. Henry & Company, Inc."
"The Managing Owner"
"Fiduciary Obligations of the Managing Owner"
"Use of Proceeds"
"Charges"
"Conflicts of Interest"
"Redemptions; Net Asset Value"
"The Trust and the Trustee"
"Federal Income Tax Aspects"
In connection with making the representations and warranties set forth in
this paragraph, the Additional Selling Agent has not relied on inquiries made by
or on behalf of any other parties.
The Additional 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.
The Additional Selling Agent shall offer and sell Units in compliance with
the requirements set forth in the Registration Statement (particularly the
"Subscription Requirements" attached as
3
Exhibit B thereto), this Agreement and the Blue Sky Survey delivered to the Lead
Selling Agent by the Managing Owner's counsel, a copy of which has been provided
to the Additional Selling Agent. The Additional Selling Agent represents and
warrants that it shall comply fully at all times with all applicable federal and
state securities and commodities laws (including without limitation the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky
laws of the jurisdictions in which the Additional Selling Agent solicits
subscriptions, all applicable rules and regulations under such laws, and all
applicable requirements, rules, policy statements and interpretations of the
NASD, and the securities and commodities exchanges and other governmental and
self-regulatory authorities and organizations having jurisdiction over it or the
offering of Units). The Additional Selling Agent shall under no circumstances
engage in any activities hereunder in any jurisdiction (i) in which the Managing
Owner has not informed the Additional Selling Agent that counsel's advice has
been received that the Units are qualified for sale or are exempt under the
applicable securities or Blue Sky laws thereof or (ii) in which the Additional
Selling Agent may not lawfully engage.
The Additional Selling Agent further agrees to comply with the requirement
under applicable federal and state securities laws to deliver to each offeree a
Prospectus and any amendments or supplements thereto (including summary
financial information, if available, after the Trust has commenced operations).
Neither the Additional Selling Agent nor any of its employees, agents or
representatives will use or distribute any marketing material or information
other than that prepared by the Trust and the Managing Owner. It is, however,
understood that the Additional Selling Agent may use documents that it prepares
solely for the purpose of communicating with its Registered Representatives and
Correspondents provided that the Additional Selling Agent provides to the Lead
Selling Agent a copy of each such document prior to such use.
(d) The additional services that the Additional Selling Agent will provide
on an ongoing basis to Unitholders will include but not be limited to: (i)
inquiring of the Managing Owner from time to time, at the request of
Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the Managing
Owner from time to time at the request of the Unitholders, as to the commodities
markets and the activities of the Fund, (iii) assisting, at the request of the
Managing Owner, in the redemption of Units sold by the Additional Selling Agent,
(iv) responding to questions of Unitholders from time to time with respect to
monthly account statements, annual reports and financial statements furnished to
Unitholders, and (v) providing such other services to the owners of Units as the
Managing Owner may, from time to time, reasonably request.
All payments for subscriptions shall be made by transfer of funds to the
escrow account of the Trust as described in the Prospectus, provided that any
such arrangements must comply in all relevant respects with SEC Regulations
10b-9 and 15c2-4.
(e) The Additional Selling Agent (i) acknowledges that, other than as set
forth herein, it is not authorized to act as the agent of the Lead Selling Agent
in any connection or transaction and (ii) agrees not to so act or to purport to
so act.
4
2. COMPENSATION
(a) In consideration for the Additional Selling Agent performing the
obligations under this Agreement, the Lead Selling Agent shall pay the
Additional Selling Agent a selling commission of __% of the subscription value
of the Unit(s) sold by the Additional Selling Agent. The selling commission
payable in respect of Units sold to any investor eligible to be charged a
Special Brokerage Fee Rate as described in the Prospectus shall be reduced by
the difference between the standard brokerage fee rate and the applicable
Special Brokerage Fee Rate (or, in the event that the Additional Selling Agent
shares the selling commission with a Wholesaler, the Additional Selling Agent's
proportionate share of such difference). Such commissions will be paid in
respect of each subscription as promptly as practicable after the initial
closing or each subsequent month-end closing.
(b) The Additional Selling Agent shall receive ongoing compensation,
payable monthly by the Lead Selling Agent, of __% per annum (or approximately
______% per month) of the month-end Net Asset Value of the Units sold by a
Registered Representative of the Additional Selling Agent which remain
outstanding for more than twelve months (including the month as of the end of
which such Unit is redeemed) assuming (i) the Additional Selling Agent's
continued registration with the Commodity Futures Trading Commission (the
"CFTC") as a futures commission merchant or introducing broker and continued
membership with the National Futures Association ("NFA") in such capacity and
(i) the Registered Representative's compliance with the additional requirements
described in subsection 1(d), registration with the CFTC and compliance with all
applicable proficiency requirements (including those imposed by the NASD as a
condition of receiving "trailing commissions") by either passing the Series 3
National Commodity Futures Exam or the Series 31 exam or being "grandfathered"
from having to do so. Such ongoing compensation shall begin to accrue with
respect to each Unit only after the end of the twelfth full month after the sale
of such Unit. Ongoing compensation payable in respect of Units sold to any
investor eligible to be charged a Special Brokerage Fee Rate as described in the
Prospectus shall be reduced by the difference between the standard brokerage fee
rate and the applicable Special Brokerage Fee Rate (or, in the event that the
Additional Selling Agent shares ongoing compensation with an eligible
Wholesaler, the Additional Selling Agent's proportionate share of such
difference). In the event the Additional Selling Agent's Wholesaler, if any, is
not eligible to receive ongoing compensation, the Additional Selling Agent shall
receive the amount that would have been due to the Wholesaler in the absence of
ineligibility. For purposes of determining when ongoing compensation should
begin to accrue, Units sold during the Initial Offering Period (as defined in
the Prospectus) shall not be deemed to be sold until the initial closing time
and Units sold during the Ongoing Offering Period (as defined in the Prospectus)
shall not be deemed to be sold until the day Units are issued, and in either
case not the day when subscriptions are accepted by the Managing Owner or
subscriptions funds are deposited in escrow.
Furthermore, the Lead Selling Agent shall not compensate the Additional
Selling Agent, and the Additional Selling Agent shall not compensate its
employees or other persons, unless the recipient thereof is legally qualified
and permitted to receive such compensation. Also, such ongoing compensation may
be paid by the Lead Selling Agent to the Additional Selling Agent and by the
Additional Selling Agent to its employees or other persons, only in respect of
outstanding Units sold by such persons to Unitholders and only so long as the
additional services described in Section 1(d)
5
above are provided by such person to Unitholders. With respect to particular
Units, substitute Registered Representatives who are appropriately registered
and who agree to perform the services described in Section 1(d) above with
respect to such Units ("Substitute Registered Representatives") may also receive
ongoing compensation with respect to such Units.
In case of Units with respect to which there is no Registered
Representative who is qualified to receive ongoing compensation as set forth
above, the Lead Selling Agent will pay the Additional Selling Agent installment
selling commissions at the same rate as in the case of ongoing compensation, but
the sum of such installment selling commissions and the initial selling
commission paid to the Additional Selling Agent and its Wholesaler, if any, is
limited in amount, pursuant to applicable NASD policy, to 9.0% of the initial
subscription price of the Units; provided, that no such installment selling
commissions shall be payable until the Managing Owner and the Lead Selling Agent
determine that the payment of such installment selling commission is in
compliance with Rule 2810 of the NASD (formerly Appendix F of the NASD's Rules
of Fair Practice) on aggregate compensation which may be received by the Selling
Agents.
In respect of Correspondents, if any, selected by the Additional Selling
Agent (with the consent of the Lead Selling Agent and the Managing Owner), the
Lead Selling Agent shall pay to the Additional Selling Agent selling commissions
and ongoing compensation or installment sales commissions as set forth above, a
portion (as agreed between the Additional Selling Agent and each such
Correspondent) of which shall be passed on by the Additional Selling Agent to
such Correspondents.
The Additional Selling Agent agrees that it will promptly pass on to its
Registered Representatives and Correspondents the applicable portions of the
selling commissions received from the Lead Selling Agent to which such
Registered Representatives and Correspondents are entitled pursuant to,
respectively, the Additional Selling Agent's standard compensation procedures
and the Additional Selling Agent's agreement with each such Correspondent.
The Additional Selling Agent, although otherwise entitled to ongoing
compensation, will not be entitled to receipt thereof with respect to particular
Units (but may continue to receive installment selling commissions) for any
month during any portion of which the Registered Representative who is receiving
such ongoing compensation is at any time not properly registered with the CFTC
or does not agree to provide the ongoing services described above. However, the
Lead Selling Agent agrees that Substitute Registered Representatives may receive
such ongoing compensation. The Additional Selling Agent shall, at the request
of the Lead Selling Agent, inform the Lead Selling Agent of currently
outstanding Units sold by the Additional Selling Agent or any Correspondent with
respect to which ongoing compensation may not be paid.
Ongoing compensation which cannot be paid because the Additional Selling
Agent or its Correspondent (or a Registered Representative of either) has not
met the eligibility requirements shall be retained by the Lead Selling Agent.
The Additional Selling Agent shall not, directly or indirectly, pay or
award any finder's fees, commissions or other compensation to any person engaged
by a potential investor for investment
6
advice as an inducement to such advisor to advise the purchase of Units;
provided, however, the normal sales commissions payable to a registered
broker-dealer or other properly licensed person for selling Units shall not be
prohibited hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Managing Owner shall have sole discretion to accept or reject any
subscription for the Units in whole or in part.
(d) The Lead Selling Agent agrees to make all payments to the Additional
Selling Agent pursuant to this Section 2 within 15 days following the end of a
monthly period in which compensation is earned. Notwithstanding anything above
to the contrary, the Lead Selling Agent shall be liable to make ongoing
compensation payments to the Additional Selling Agent only after the Lead
Selling Agent, in its capacity of futures broker for the Trust, has actually
received its brokerage fee from the Trust.
3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT
The Lead Selling Agent hereby represents and warrants as follows:
(a) The Lead Selling Agent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
power and authority to enter into and carry out its obligations under this
Agreement.
(b) The Lead Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD, and
registration or qualification under the laws of each state in which Lead Selling
Agent will offer and sell Units); the performance by the Lead Selling Agent of
its obligations under this Agreement will not violate or result in a breach of
any provision of its certificate of incorporation or by-laws or any agreement,
order, law, or regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Lead Selling Agent and is a valid and binding
agreement of the Lead Selling Agent enforceable against the Lead Selling Agent
in accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors except as enforceability of the
indemnification provisions contained in this Agreement may be limited by
applicable law and the enforcement of specific terms or remedies may be
unavailable.
4. REPRESENTATIONS AND WARRANTIES OF THE ADDITIONAL SELLING AGENT
The Additional Selling Agent hereby represents and warrants as follows:
(a) The Additional Selling Agent is a _____________ duly organized,
validly existing, and in good standing under the laws of the state of its
incorporation and has power and authority to enter into and carry out its
obligations under this Agreement.
7
(b) The Additional Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD,
registration as a futures commission merchant or introducing broker under the
CEA and membership with NFA, and registration or qualification under the laws of
each state in which Additional Selling Agent will offer and sell Units); the
performance by the Additional Selling Agent of its obligations under this
Agreement will not violate or result in a breach of any provision of its
certificate of incorporation or by-laws or any agreement, order, law, or
regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Additional Selling Agent and is a valid and binding
agreement of the Additional Selling Agent enforceable against the Additional
Selling Agent in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors except as
enforceability of the indemnification provisions contained in this Agreement may
be limited by applicable law and the enforcement of specific terms or remedies
may be unavailable.
(d) Neither the Additional Selling Agent nor any of its principals have
been the subject of any administrative, civil, or criminal actions within the
five years preceding the date hereof that would be material for an investor's
decision to purchase the Units which are not disclosed to the Trust, the
Managing Owner or the Lead Selling Agent.
(e) The information, if any, relating to the Additional Selling Agent
which the Additional Selling Agent has furnished to the Trust and the Managing
Owner for use in the Registration Statement is correct.
(f) In respect of purchasers of Units that are not individuals, the
Additional Selling Agent shall have received, prior to sale of Units to each
such purchaser, evidence that the purchaser is authorized to invest in the Units
and shall provide the Lead Selling Agent with copies of such evidence upon
reasonable request of the Lead Selling Agent.
5. AUTHORIZATION UNDER THE SELLING AGREEMENT
The Additional Selling Agent agrees to be bound by any action taken by the
Lead Selling Agent or the Managing Owner, in accordance with the provisions of
the Selling Agreement, to terminate the Selling Agreement or the offering of the
Units, to consent to changes in the Selling Agreement or to approve of or object
to further amendments to the Registration Statement or amendments or supplements
to the Prospectus, if, in the judgment of the Lead Selling Agent or the Managing
Owner, such action would be advisable. The Lead Selling Agent agrees that, at
the Additional Selling Agent's request, the Lead Selling Agent will require any
documents required to be delivered to or by the Lead Selling Agent pursuant to
Section 8 of the Selling Agreement to be addressed and delivered to the
Additional Selling Agent.
8
6. COVENANTS OF THE LEAD SELLING AGENT
(a) The Lead Selling Agent will provide the Additional Selling Agent with
copies of any amendment or supplement to the Prospectus prior to filing with the
CFTC and SEC. The Lead Selling Agent will notify the Additional Selling Agent
immediately (i) when any amendment to the Registration Statement shall have
become effective and (ii) of the issuance by the SEC, CFTC or any other Federal
or state regulatory body of any order suspending the effectiveness of the
Registration Statement under the 1933 Act, the CFTC registration or NFA
membership of the Managing Owner as a commodity pool operator, the CFTC
registration or NFA membership of the Lead Selling Agent as a futures commission
merchant, or the registration of Units under the Blue Sky or securities laws of
any state or other jurisdiction or any order or decree enjoining the offering or
the use of the then current Prospectus or of the institution, or notice of the
intended institution, of any action, investigation or proceeding for that
purpose.
(b) The Lead Selling Agent will cause the Managing Owner to deliver to
the Additional Selling Agent as promptly as practicable from time to time during
the period when the Prospectus is required to be delivered under the 1933 Act,
such number of copies of the Prospectus (as amended or supplemented) as the
Additional Selling Agent may reasonably request for the purposes contemplated by
the 1933 Act or the SEC Regulations.
(c) The Lead Selling Agent will cause the Managing Owner to furnish
to the Additional Selling Agent a reasonable number of copies of any amendment
or amendments of, or supplement or supplements to, the Prospectus which will
amend or supplement the Prospectus.
(d) The Lead Selling Agent will cause the Managing Owner to deliver
to the Additional Selling Agent copies of all written communications to any
Unitholder (other than tax information) whose Units were sold by the Additional
Selling Agent or its Correspondents.
7. INDEMNIFICATION AND CONTRIBUTION
(a) The Lead Selling Agent shall indemnify, hold harmless, and defend the
Additional Selling Agent and any person who controls the Additional Selling
Agent within the meaning of Section 15 of the 1933 Act, to the same extent, and
subject to the same conditions and procedural requirements, that the Managing
Owner agrees to indemnify the Lead Selling Agent pursuant to Section 9 of the
Selling Agreement; provided that, in no case shall the Lead Selling Agent be
liable under this indemnity to the Additional Selling Agent if the loss,
liability, claim, damages or expense of the Additional Selling Agent arises out
of any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or the Prospectus (or any amendment or supplement
thereto) or any omission or alleged omission therefrom of a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading made in reliance upon and in conformity with information
relating to the Additional Selling Agent and furnished or approved by the
Additional Selling Agent. In addition, the Lead Selling Agent shall indemnify,
hold harmless and defend the Additional Selling Agent (and any controlling
person) for any loss, liability, claim, damage or expense incurred by the
Additional Selling Agent arising from any breach of this Agreement by the Lead
Selling Agent. The Additional Selling Agent agrees that in no event shall
9
JWH be liable to it directly for any loss, liability, claim, damage or expense
whatsoever suffered by the Additional Selling Agent in connection with the
offering of Units or this Agreement.
(b) The Additional Selling Agent shall indemnify, hold harmless, and
defend the Trust, the Managing Owner, the Lead Selling Agent, JWH and any person
who controls any of the foregoing within the meaning of Section 15 of the 1933
Act against any and all loss, liability, claim, damage and expense whatsoever
incurred by any such party arising from any material breach by the Additional
Selling Agent of its representations, warranties, obligations and undertakings
set forth in this Agreement. The Trust, the Managing Owner and JWH are
expressly made third party beneficiaries of this Agreement.
(c) If the indemnification provided for in this Section 7 shall not be
permitted under applicable law in respect of any loss, liability, claim, damage
or expense referred to herein, then the indemnitor shall, in lieu of
indemnifying the indemnified party contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense, (A) in such proportion as shall be appropriate to reflect the relative
benefits received by the Lead Selling Agent on the one hand and the Additional
Selling Agent on the other from the offering of the Units by the Additional
Selling Agent or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of the Lead Selling Agent on the one hand the Additional Selling Agent on
the other with respect to the statements or omissions which resulted in such
loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Lead Selling Agent on the one hand or the Additional Selling Agent on the other,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The parties
agree that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by a pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by the indemnified party as a
result of the loss, liability, claim, damage or expense referred to above in
this Section 7, shall be deemed to include, for purpose of this Section 7, any
legal or other expenses reasonably incurred by such otherwise indemnified party
in connection with investigating or defending any such action or claim.
8. TERMINATION
(a) This Agreement shall terminate on the earlier of (i) such date as the
Lead Selling Agent may determine by giving 30 days' prior written notice to the
Additional Selling Agent, (ii) the termination of the Selling Agreement or the
offering of the Units or (iii) by the Lead Selling Agent, without notice, upon
breach by the Additional Selling Agent of, or non-compliance by the Additional
Selling Agent with, any material term of this Agreement.
(b) The Additional Selling Agent shall have the right to terminate its
participation under this Agreement (i) at any time upon breach by the Lead
Selling Agent of or non-compliance with,
10
any material term of this Agreement; and (ii) at any time upon thirty business
days' prior written notice of such termination to the Lead Selling Agent and the
Trust.
(c) The termination of this Agreement for any reason set forth in
Sections 8(a)(i), 8(a)(ii) or 8(b) shall not affect (i) the ongoing obligations
of the Lead Selling Agent to pay selling commissions, ongoing compensation or
installment selling commissions accrued prior to the termination hereof, (ii)
the Additional Selling Agent's obligations under Section 1(d) hereof or (iii)
the indemnification obligations under Section 7 hereof. In the event this
Agreement is terminated pursuant to Section 8(a)(iii), the Lead Selling Agent
may withhold accrued but unpaid selling commissions and ongoing compensation or
installment selling commissions due the Additional Selling Agent until the Lead
Selling Agent has been put in the same financial position as it would have been
in absent such breach or non-compliance.
9. CONFIDENTIALITY
(a) The Lead Selling Agent hereby covenants and agrees that under no
circumstances will it solicit any of the Additional Selling Agent's customers
whose names become known to the Lead Selling Agent in connection with the
offering of the Units. The Lead Selling Agent agrees that it will take such
steps to ensure the confidentiality of the Additional Selling Agent's client
list as the Additional Selling Agent may reasonably request.
(b) The Additional Selling Agent hereby covenants and agrees that under
no circumstances will it solicit any customer of the Lead Selling Agent or any
other Additional Selling Agent for the Trust whose name becomes known to the
Additional Selling Agent in connection with the offering of the Units. The
Additional Selling Agent agrees that it will take such steps to ensure the
confidentiality of the Lead Selling Agent's or any other Additional Selling
Agent's client list as the owner of such list may reasonably request. The
Additional Selling Agent further covenants and agrees not to solicit any selling
agent which has been introduced to the Lead Selling Agent by any Wholesaler or
any other Additional Selling Agent.
10. MISCELLANEOUS
(a) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the parties hereto; provided,
however, that a party hereto may not assign any rights, obligations, or
liabilities hereunder without the prior written consent of the other parties.
(b) All notices required or desired to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered or, when given by registered mail, postage prepaid, return receipt
requested, on the day of receipt, addressed as follows (or to such other address
as the party entitled to notice shall hereafter designate in accordance with the
terms hereof):
11
if to the Lead Selling Agent:
Cargill Investor Services, Inc.
233 South Wacker Drive, Suite 2300
Chicago, Illinois 60606
if to the Additional Selling Agent:
------------------------
------------------------
------------------------
(c) This Agreement shall be governed by, and construed in accordance
with, the law of the State of Illinois without regard to the principles of
choice of law thereof.
(d) All captions used in this Agreement are for convenience only, are not
a part hereof, and are not to be used in construing or interpreting any aspect
hereof.
(e) This Agreement may be executed in counterparts, each such counterpart
to be deemed an original, but which all together shall constitute one and the
same instrument.
(f) This Agreement may not be amended except by the express written
consent of the parties hereto. No waiver of any provision of this Agreement may
be implied from any course of dealing between or among any of the parties hereto
or from any failure by any party hereto to assert its rights under this
Agreement on any occasion or series of occasions.
(g) The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
12
If the foregoing is in accordance with your understanding of our agreement,
please sign and return a counterpart hereof, whereupon this instrument along
with all counterparts will become a binding agreement between us in accordance
with its terms.
Very truly yours,
CARGILL INVESTOR SERVICES, INC.
By:
-------------------------------
Its
----------------------------
CONFIRMED AND ACCEPTED
- --------------------------------
Additional Selling Agent
By:
- --------------------------------
Its
--------------------------
13
JWH GLOBAL TRUST
(A DELAWARE BUSINESS TRUST)
UNITS OF BENEFICIAL INTEREST
(SUBSCRIPTION PRICE: $100 PER UNIT
DURING THE INITIAL OFFERING PERIOD; NET
ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD)
WHOLESALING AGREEMENT
April 3, 1997
- ------------------------
- ------------------------
- ------------------------
Dear Sirs:
CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has
caused the formation of a business trust pursuant to the Delaware Business Trust
Act (the "Delaware Act") under the name, JWH GLOBAL TRUST (the "Trust"), for the
purpose of engaging in speculative trading of futures contracts on currencies,
interest rates, energy, and agricultural products, metals and stock indices;
options on such futures contracts; and spot and forward contracts on currencies
and precious metals. As described in the Prospectus referred to below, the
Trust will engage in speculative trading in the commodities markets under the
direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make
a public offering of units of beneficial interest in the Trust (the "Units")
through us, Cargill Investor Services, Inc. (the "Lead Selling Agent"), on a
best-efforts basis pursuant to the Selling Agreement dated as of April 3, 1997,
as amended, among us, the Trust and others (the "Selling Agreement"), a copy of
which has been furnished to you (the "Wholesaler"). In connection with the
proposed public offering, the Trust has filed with the United States Securities
and Exchange Commission (the "SEC"), pursuant to the United States Securities
Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1
to register the Units, and as part thereof a prospectus (Registration No.
333-16825) (which registration statement, together with all amendments thereto,
shall be referred to herein as the "Registration Statement" and which prospectus
together with all amendments and supplements thereto in the forms filed with the
SEC pursuant to Rule 424 under the Act shall be referred to herein as the
"Prospectus"). Other selling agents, including those introduced by wholesalers
("Wholesalers") to us (the "Additional Selling Agents" and together with the
Lead Selling Agent, the "Selling Agents"), may be selected by us with the
consent of the Managing Owner. You have agreed to act as a Wholesaler. We
confirm our agreement with
you as follows. Capitalized terms used but otherwise not defined herein shall
have the meanings ascribed to them in the Selling Agreement unless the context
indicates otherwise.
1. APPOINTMENT AND UNDERTAKINGS OF THE WHOLESALER
(a) Subject to the terms and conditions set forth in this Agreement, the
Selling Agreement and the Registration Statement, the Wholesaler is hereby
appointed, and hereby accepts such appointment, as one of the Trust's
non-exclusive Wholesalers to identify and introduce to the Lead Selling Agent
one or more Additional Selling Agents. It is understood and agreed that the
Lead Selling Agent, with the consent of the Managing Owner, may retain other
Wholesalers and Selling Agents (including those introduced by the Wholesaler or
other Wholesalers) and that an Additional Selling Agent, with the consent of the
Lead Selling Agent and Managing Owner in their sole discretion, may retain
correspondent selling agents ("Correspondents"). The Wholesaler agrees to
comply with the terms and conditions of this Agreement and any terms and
conditions of the Selling Agreement applicable to Wholesalers.
(b) The Wholesaler agrees to use diligent efforts, so long as this
Agreement and the Selling Agreement remain in effect, to identify and introduce
to the Lead Selling Agent one or more Additional Selling Agents, each of which
shall agree to offer and sell the Units on a best-efforts basis without any
commitment on the Additional Selling Agent's part to purchase any Units pursuant
to an Additional Selling Agent Agreement (the form of which is attached as
Exhibit A to the Selling Agreement) with the Lead Selling Agent.
(c) The Wholesaler covenants and agrees to wholesale Units through
registered or exempt broker-dealers which are each members of the National
Association of Securities Dealers, Inc. ("NASD") and which have signed
Additional Selling Agent Agreements with the Lead Selling Agent. The
Wholesaler's wholesaling activities will consist primarily of providing sales
literature and other information, all of which shall have been prepared or
approved by the Trust and the Managing Owner, concerning the Trust to qualified
broker-dealers and their principals and Registered Representatives who will be
participating in the offering of Units and assisting such persons in marketing
Units and in providing additional services on an ongoing basis to Unitholders.
The Wholesaler may participate in presentations to prospective investors,
receive or handle any part of the purchase price paid for Units or effect any
transactions in Units.
(d) The Wholesaler shall offer and sell Units in compliance with the
requirements set forth in the Registration Statement (particularly the
"Subscription Requirements" attached as Exhibit B thereto), this Agreement and
the Blue Sky Survey delivered to the Lead Selling Agent by the Managing Owner's
counsel, a copy of which has been provided to the Wholesaler and each Additional
Selling Agent introduced by the Wholesaler. The Wholesaler represents and
warrants that it shall comply fully at all times with all applicable federal and
state securities and commodities laws (including without limitation the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky
laws of the jurisdictions in which the Wholesaler solicits subscriptions, all
applicable rules and regulations under such laws, and all applicable
requirements, rules, policy statements and
2
interpretations of the NASD, and the securities and commodities exchanges and
other governmental and self-regulatory authorities and organizations having
jurisdiction over it or the offering of Units). The Wholesaler shall under no
circumstances engage in any activities hereunder in any jurisdiction (i) in
which the Managing Owner has not informed the Wholesaler that counsel's advice
has been received that the Units are qualified for sale or are exempt under the
applicable securities or Blue Sky laws thereof or (ii) in which the Wholesaler
may not lawfully engage.
(e) The Wholesaler further covenants and agrees to comply with any terms
and conditions of the Selling Agreement applicable to Additional Selling Agents
and the provisions of Sections 2(f)(i) to (iii) hereof applicable to Additional
Selling Agents.
(f) The Wholesaler has received copies of the Registration Statement, as
amended to the date hereof, and the Prospectus. The Wholesaler further
acknowledges, and agrees to assist each Additional Selling introduced by it
(references hereafter in this Agreement, except Sections 8 and 10, to
Additional Selling Agent(s) shall mean only those Additional Selling Agent(s)
introduced to the Lead Selling Agent by the Wholesaler) in compliance with, the
following:
(i) Units shall be offered at the offering price and minimum amounts
and on the other terms and conditions set forth in the Prospectus and the
Selling Agreement. The Additional Selling Agents shall offer and sell
Units only to persons and entities who satisfy the suitability and/or
investment requirements set forth in the Prospectus and the subscription
agreements attached thereto and who, to the Managing Owner's satisfaction,
complete the subscription agreements and related subscription documents
used in connection with the offering of the Units (the "Subscription
Documents") and remit good funds for the full subscription price. An
Additional Selling Agent shall conduct a thorough review of the suitability
of each subscriber for Units that it solicits and of the Subscription
Documents. The Additional Selling Agent shall not forward to the Managing
Owner any Subscription Documents that are not in conformity with the
requirements specified in the Prospectus and in the Subscription Documents
appropriate for the particular subscriber, or that are illegible in any
respect or are not fully completed, dated, or signed, or that represents
the subscription of a person or entity not satisfying the suitability
and/or investment requirements applicable to such person or entity. No
Additional Selling Agent shall execute any transactions in Units in a
discretionary account over which it has control without prior written
approval of the customer in whose name such discretionary account is
maintained.
An Additional Selling Agent shall not recommend the purchase of Units
to any subscriber unless the Additional 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 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; the
subscriber has a fair market net worth sufficient to sustain the risks
inherent in participating in the Trust, including loss of investment and
lack of
3
liquidity; and the Units are otherwise a suitable investment for the
subscriber. In addition to submitting such information to the
Managing Owner, the Additional Selling Agent shall agree to maintain
files of information disclosing the basis upon which the Additional
Selling Agent determined that the suitability requirements of Section
(b)(2) of Rule 2810 of the NASD (formerly Section 3 of Appendix F of
the NASD's Rules of Fair Practice) were met as to each subscriber (the
basis for determining suitability may include the Subscription
Documents and other certificates submitted by subscribers). In
connection with making the foregoing representations and warranties,
the Additional Selling Agent shall further represent and warrant that
it has, among other things, examined the following sections in the
Prospectus and obtained such additional information from the Managing
Owner regarding the information set forth thereunder as the Additional
Selling Agent has deemed necessary or appropriate to determine whether
the Prospectus adequately and accurately discloses all material facts
relating to an investment in the Trust and provides an adequate basis
to subscribers for evaluating an investment in the Units:
"Summary"
"Risk Factors"
"Investment Factors"
"The Trust and Its Objectives"
"John W. Henry & Company, Inc."
"The Managing Owner"
"Fiduciary Obligations of the Managing Owner"
"Use of Proceeds"
"Charges"
"Conflicts of Interest"
"Redemptions; Net Asset Value"
"The Trust and the Trustee"
"Federal Income Tax Aspects"
In connection with making the representations and warranties set forth
in this paragraph, the Additional Selling Agent shall not rely on inquiries
made by or on behalf of any other parties.
The Additional Selling Agents shall 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.
The Additional Selling Agent shall offer and sell Units in compliance
with the requirements set forth in the Registration Statement (particularly
the "Subscription Requirements" attached as Exhibit B thereto), this
Agreement and the Blue Sky Survey delivered to the Lead Selling Agent by
the Managing Owner's counsel, a copy of which has been provided to each
Additional Selling Agent. An Additional Selling Agent shall represent and
warrant that it shall comply fully at all times with all applicable federal
and state securities and commodities laws (including without limitation the
1933 Act, the
4
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Commodity
Exchange Act, as amended (the "CEA"), and the securities and Blue Sky laws
of the jurisdictions in which the Additional Selling Agent solicits
subscriptions, all applicable rules and regulations under such laws, and
all applicable requirements, rules, policy statements and interpretations
of the NASD, and the securities and commodities exchanges and other
governmental and self-regulatory authorities and organizations having
jurisdiction over it or the offering of Units). The Additional Selling
Agent shall under no circumstances engage in any activities hereunder in
any jurisdiction (i) in which the Managing Owner has not informed the
Additional Selling Agent that counsel's advice has been received that the
Units are qualified for sale or are exempt under the applicable securities
or Blue Sky laws thereof or (ii) in which the Additional Selling Agent may
not lawfully engage.
Each Additional Selling Agent shall further agree to comply with the
requirement under applicable federal and state securities laws to deliver
to each offeree a Prospectus and any amendments or supplements thereto
(including summary financial information, if available, after the Trust has
commenced operations). Neither the Additional Selling Agent nor any of its
employees, agents or representatives will use or distribute any marketing
material or information other than that prepared by the Trust and the
Managing Owner.
(ii) The additional services that an Additional Selling Agent will
provide on an ongoing basis to Unitholders will include but not be limited
to: (i) inquiring of the Managing Owner from time to time, at the request
of Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the
Managing Owner from time to time at the request of the Unitholders, as to
the commodities markets and the activities of the Fund, (iii) assisting, at
the request of the Managing Owner, in the redemption of Units sold by the
Additional Selling Agent, (iv) responding to questions of Unitholders from
time to time with respect to monthly account statements, annual reports and
financial statements furnished to Unitholders, and (v) providing such other
services to the owners of Units as the Managing Owner may, from time to
time, reasonably request.
All payments for subscriptions shall be made by transfer of funds to
the escrow account of the Trust as described in the Prospectus, provided
that any such arrangements must comply in all relevant respects with SEC
Regulations 10b-9 and 15c2-4.
(g) The Wholesaler (i) acknowledges that, other than as set forth herein,
it is not authorized to act as the agent of the Lead Selling Agent in any
connection or transaction and (ii) agrees not to so act or to purport to so
act.
2. COMPENSATION
(a) In consideration for the Wholesaler performing the obligations under
this Agreement, the Lead Selling Agent shall pay the Wholesaler a selling
commission of 1% of the subscription value of the Unit(s) sold by each
Additional Selling Agent (it being understood that the Lead Selling Agent shall
pay each Additional Selling Agent's share of selling commission, ongoing
compensation or
5
installment selling commissions directly to such Additional Selling Agent in
accordance with the applicable Additional Selling Agent Agreement). The selling
commission payable in respect of Units sold to any investor eligible to be
charged a Special Brokerage Fee Rate as described in the Prospectus shall be
reduced by the Wholesaler's proportionate share of the difference between the
standard brokerage fee rate and the applicable Special Brokerage Fee Rate. Such
commissions will be paid in respect of each subscription as promptly as
practicable after the initial closing or each subsequent month-end closing.
(b) The Wholesaler shall receive ongoing compensation, payable monthly by
the Lead Selling Agent, of 1% per annum (or approximately 0.0833% per month) of
the month-end Net Asset Value of the Units sold by a Registered Representative
of an Additional Selling Agent which remain outstanding for more than twelve
months (including the month as of the end of which such Unit is redeemed)
assuming (i) the continued registration of the Wholesaler (or the firm with
which the Wholesaler is associated) and the Additional Selling Agent with the
Commodity Futures Trading Commission (the "CFTC") as futures commission
merchants or introducing brokers and continued membership with the National
Futures Association ("NFA") in such capacity and (i) the Wholesaler's and the
Registered Representative's compliance with the additional requirements
described in subsection 1(f)(ii), registration with the CFTC and compliance with
all applicable proficiency requirements (including those imposed by the NASD as
a condition of receiving "trailing commissions") by either passing the Series 3
National Commodity Futures Exam or the Series 31 exam or being "grandfathered"
from having to do so. Such ongoing compensation shall begin to accrue with
respect to each Unit only after the end of the twelfth full month after the sale
of such Unit. Ongoing compensation payable in respect of Units sold to any
investor eligible to be charged a Special Brokerage Fee Rate as described in the
Prospectus shall be reduced by the wholesaler's proportionate share of the
difference between the standard brokerage fee rate and the applicable Special
Brokerage Fee Rate. For purposes of determining when ongoing compensation
should begin to accrue, Units sold during the Initial Offering Period (as
defined in the Prospectus) shall not be deemed to be sold until the initial
closing time and Units sold during the Ongoing Offering Period (as defined in
the Prospectus) shall not be deemed to be sold until the day Units are issued,
and in either case not the day when subscriptions are accepted by the Managing
Owner or subscriptions funds are deposited in escrow.
Furthermore, the Lead Selling Agent shall not compensate the Wholesaler
unless the Wholesaler is legally qualified and permitted to receive such
compensation. Also, such ongoing compensation may be paid by the Lead Selling
Agent to the Wholesaler only in respect of outstanding Units sold by an
Additional Selling Agent or any of its Registered Representatives to Unitholders
and only so long as the additional services described in Section 1(f)(ii) above
are provided by the Wholesaler and such person to Unitholders. With respect to
particular Units, substitute Registered Representatives who are appropriately
registered and who agree in writing to perform the services described in
Section 1(f)(ii) above with respect to such Units ("Substitute Registered
Representatives") may also receive ongoing compensation with respect to such
Units.
If the Wholesaler is not qualified to receive ongoing compensation as set
forth above, the Lead Selling Agent will pay the Wholesaler installment selling
commissions at the same rate as in the case of ongoing compensation, but the sum
of such installment selling commissions and the initial
6
selling commission paid to the Wholesaler and each Additional Selling Agent is
limited in amount, pursuant to applicable NASD policy, to 9.0% of the initial
subscription price of the Units sold by each Registered Representative of such
Additional Selling Agent; provided, that no such installment selling commissions
shall be payable until the Managing Owner and the Lead Selling Agent determine
that the payment of such installment selling commission is in compliance with
Rule 2810 of the NASD (formerly Appendix F of the NASD's Rules of Fair Practice)
on aggregate compensation which may be received by the Selling Agents. In
respect of Units sold by its Registered Representatives who are eligible to
receive ongoing compensation, each Additional Selling Agent shall receive the
amount of ongoing compensation that is not paid to the Wholesaler because the
Wholesaler is not eligible to receive ongoing compensation but that would have
been due on such Units to the Wholesaler in the absence of such ineligibility.
The Wholesaler, although otherwise entitled to ongoing compensation, will
not be entitled to receipt thereof with respect to particular Units (but may
continue to receive installment selling commissions) for any month during any
portion of which the Registered Representative of an Additional Selling Agent
who is receiving such ongoing compensation is at any time not properly
registered with the CFTC or does not agree to provide the ongoing services
described above.
Ongoing compensation which cannot be paid because an Additional Selling
Agent or its Correspondent (or a Registered Representative of either) has not
met the eligibility requirements shall be retained by the Lead Selling Agent.
The Wholesaler shall not, directly or indirectly, pay or award any finder's
fees, commissions or other compensation to any person engaged by a potential
investor for investment advice as an inducement to such advisor to advise the
purchase of Units; provided, however, the normal sales commissions payable to a
registered broker-dealer or other properly licensed person for selling Units
shall not be prohibited hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Managing Owner shall have sole discretion to accept or reject any
subscription for the Units in whole or in part.
(d) The Lead Selling Agent agrees to make all payments to the Wholesaler
pursuant to this Section 2 within 15 days following the end of a monthly period
in which compensation is earned. Notwithstanding anything above to the
contrary, the Lead Selling Agent shall be liable to make ongoing compensation
payments to the Wholesaler only after the Lead Selling Agent, in its capacity of
futures broker for the Trust, has actually received its brokerage fee from the
Trust.
3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT
The Lead Selling Agent hereby represents and warrants as follows:
(a) The Lead Selling Agent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
power and authority to enter into and carry out its obligations under this
Agreement.
7
(b) The Lead Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD, and
registration or qualification under the laws of each state in which Lead Selling
Agent will offer and sell Units); the performance by the Lead Selling Agent of
its obligations under this Agreement will not violate or result in a breach of
any provision of its certificate of incorporation or by-laws or any agreement,
order, law, or regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Lead Selling Agent and is a valid and binding
agreement of the Lead Selling Agent enforceable against the Lead Selling Agent
in accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors except as enforceability of the
indemnification provisions contained in this Agreement may be limited by
applicable law and the enforcement of specific terms or remedies may be
unavailable.
4. REPRESENTATIONS AND WARRANTIES OF THE WHOLESALER
The Wholesaler hereby represents and warrants as follows:
(a) The Wholesaler is a ____________ duly organized, validly existing, and
in good standing under the laws of the state of its incorporation and has power
and authority to enter into and carry out its obligations under this Agreement.
(b) The Wholesaler has all governmental and regulatory registrations,
qualifications, approvals and licenses required to perform its obligations under
this Agreement; the performance by the Wholesaler of its obligations under this
Agreement will not violate or result in a breach of any provision of its
certificate of incorporation or by-laws or any agreement, order, law, or
regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Wholesaler and is a valid and binding agreement of
the Wholesaler enforceable against the Wholesaler in accordance with its terms,
subject only to bankruptcy, insolvency, reorganization, moratorium or similar
laws at the time in effect affecting the enforceability generally of rights of
creditors except as enforceability of the indemnification provisions contained
in this Agreement may be limited by applicable law and the enforcement of
specific terms or remedies may be unavailable.
(d) Neither the Wholesaler nor any of its principals have been the subject
of any administrative, civil, or criminal actions within the five years
preceding the date hereof that would be material for an investor's decision to
purchase the Units which are not disclosed to the Trust, the Managing Owner or
the Lead Selling Agent.
(e) The information, if any, relating to the Wholesaler which it has
furnished to the Trust and the Managing Owner for use in the Registration
Statement is correct.
8
5. AUTHORIZATION UNDER THE SELLING AGREEMENT
The Wholesaler agrees to be bound by any action taken by the Lead Selling
Agent or the Managing Owner, in accordance with the provisions of the Selling
Agreement, to terminate the Selling Agreement or the offering of the Units, to
consent to changes in the Selling Agreement or to approve of or object to
further amendments to the Registration Statement or amendments or supplements to
the Prospectus, if, in the judgment of the Lead Selling Agent or the Managing
Owner, such action would be advisable. The Lead Selling Agent agrees that, at
the Wholesaler's reasonable request, the Lead Selling Agent will require any
documents required to be delivered to or by the Lead Selling Agent pursuant to
Section 8 of the Selling Agreement to be addressed and delivered to the
Wholesaler.
6. COVENANTS OF THE LEAD SELLING AGENT
(a) The Lead Selling Agent will notify the Wholesaler immediately
(i) when any amendment to the Registration Statement shall have become effective
and (ii) of the issuance by the SEC, CFTC or any other Federal or state
regulatory body of any order suspending the effectiveness of the Registration
Statement under the 1933 Act, the CFTC registration or NFA membership of the
Managing Owner as a commodity pool operator, the CFTC registration or NFA
membership of the Lead Selling Agent as a futures commission merchant, or the
registration of Units under the Blue Sky or securities laws of any state or
other jurisdiction or any order or decree enjoining the offering or the use of
the then current Prospectus or of the institution, or notice of the intended
institution, of any action or proceeding for that purpose.
(b) The Lead Selling Agent will cause the Managing Owner to deliver to
the Wholesaler as promptly as practicable from time to time during the period
when the Prospectus is required to be delivered under the 1933 Act, such number
of copies of the Prospectus (as amended or supplemented) as the Wholesaler may
reasonably request for the purposes contemplated by the 1933 Act or the SEC
Regulations.
(c) The Lead Selling Agent will cause the Managing Owner to furnish to
the Wholesaler a reasonable number of copies of any amendment or amendments of,
or supplement or supplements to, the Prospectus which will amend or supplement
the Prospectus.
7. INDEMNIFICATION
(a) The Lead Selling Agent shall indemnify, hold harmless, and defend
the Wholesaler and any person who controls the Wholesaler within the meaning of
Section 15 of the 1933 Act, to the same extent, and subject to the same
conditions and procedural requirements, that the Managing Owner agrees to
indemnify the Lead Selling Agent pursuant to Section 9 of the Selling Agreement;
provided that in no case shall the Lead Selling Agent be liable under this
indemnity to the Wholesaler if the loss, liability, claim, damages or expense of
the Wholesaler arises out of any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or the Prospectus (or
any amendment or supplement thereto) or any omission or alleged omission
therefrom of a material fact required to be stated therein or necessary in order
to make the statements therein
9
not misleading made in reliance upon and in conformity with information relating
to the Wholesaler and furnished or approved by the Wholesaler. The Wholesaler
agrees that in no event shall JWH be liable to it directly for any loss,
liability, claim, damage or expense whatsoever suffered by the Wholesaler in
connection with the offering of Units or this Agreement.
(b) The Wholesaler shall indemnify, hold harmless, and defend the Trust,
the Managing Owner, the Lead Selling Agent, JWH and any person who controls any
of the foregoing within the meaning of Section 15 of the 1933 Act against any
and all loss, liability, claim, damage and expense whatsoever incurred by any
such party arising from any material breach by the Wholesaler of its
representations, warranties, obligations and undertakings set forth in this
Agreement. The Trust, the Managing Owner and JWH are expressly made third party
beneficiaries of this Agreement.
8. TERMINATION
(a) This Agreement shall terminate on the earlier of (i) such date as
the Lead Selling Agent may determine by giving 30 days' prior written notice to
the Wholesaler, (ii) the termination of the Selling Agreement or the offering of
the Units or (iii) by the Lead Selling Agent, without notice, upon breach by the
Wholesaler of, or non-compliance by the Wholesaler with, any material term of
this Agreement.
(b) The termination of this Agreement for any reason set forth in
Sections 8(a)(i) or 8(a)(ii) shall not affect (i) the ongoing obligations of the
Lead Selling Agent to pay selling commissions, ongoing compensation or
installment selling commissions accrued prior to the termination hereof, (ii)
the Wholesaler's obligations under Section 1(f)(ii) hereof or (iii) the
indemnification obligations under Section 7 hereof. In the event this Agreement
is terminated pursuant to Section 8(a)(iii), the Lead Selling Agent may withhold
accrued but unpaid selling commissions and ongoing compensation or installment
selling commissions due the Wholesaler until the Lead Selling Agent has been put
in the same financial position as it would have been in absent such breach or
non-compliance.
9. CONFIDENTIALITY
(a) The Lead Selling Agent hereby covenants and agrees that under no
circumstances will it solicit any of the Wholesaler's prospective Additional
Selling Agent whose names become known to the Lead Selling Agent in connection
with the offering of the Units, it being understood that the Lead Selling Agent
may solicit, or instruct other wholesalers to solicit, any of Wholesaler's
prospective Additional Selling Agents who has not signed an Additional Selling
Agent Agreement with the Lead Selling Agent prior to the earlier of (i)
termination of this Agreement or (ii) 120 days after the Wholesaler has provided
the name of such prospective Additional Selling Agent to the Lead Selling
Agent. The Lead Selling Agent agrees that it will take such steps to ensure
the confidentiality of the Wholesaler's client list as the Wholesaler may
reasonably request.
(b) The Wholesaler hereby covenants and agrees that under no
circumstances will it solicit any customer of the Lead Selling Agent, any other
Wholesaler or any Additional Selling Agent for the Trust whose name becomes
known to the Wholesaler in connection with the offering of the Units.
10
The Wholesaler agrees that it will take such steps to ensure the confidentiality
of the Lead Selling Agent's, any other Wholesaler's or any Additional Selling
Agent's client list as the owner of such list may reasonably request. The
Wholesaler further covenants and agrees not to solicit any selling agent which
has been introduced to the Lead Selling Agent by any other Wholesaler or any
Additional Selling Agent.
10. MISCELLANEOUS
(a) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the parties hereto; provided,
however, that a party hereto may not assign any rights, obligations, or
liabilities hereunder without the prior written consent of the other parties.
(b) All notices required or desired to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered or, when given by registered mail, postage prepaid, return receipt
requested, on the day of receipt, addressed as follows (or to such other address
as the party entitled to notice shall hereafter designate in accordance with the
terms hereof):
if to the Lead Selling Agent:
Cargill Investor Services, Inc.
233 South Wacker Drive, Suite 2300
Chicago, Illinois 60606
if to the Wholesaler:
------------------------
------------------------
------------------------
(c) This Agreement shall be governed by, and construed in accordance
with, the law of the State of Illinois without regard to the principles of
choice of law thereof.
(d) All captions used in this Agreement are for convenience only, are
not a part hereof, and are not to be used in construing or interpreting any
aspect hereof.
(e) This Agreement may be executed in counterparts, each such
counterpart to be deemed an original, but which all together shall constitute
one and the same instrument.
(f) This Agreement may not be amended except by the express written
consent of the parties hereto. No waiver of any provision of this Agreement may
be implied from any course of dealing between or among any of the parties hereto
or from any failure by any party hereto to assert its rights under this
Agreement on any occasion or series of occasions.
11
(g) The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return a counterpart hereof, whereupon this instrument along
with all counterparts will become a binding agreement between us in accordance
with its terms.
Very truly yours,
CARGILL INVESTOR SERVICES, INC.
By:
-------------------------------
Its
----------------------------
CONFIRMED AND ACCEPTED
- --------------------------------
Wholesaler
By:
-----------------------------
Its
--------------------------
12
JWH GLOBAL TRUST
(A DELAWARE BUSINESS TRUST)
UNITS OF BENEFICIAL INTEREST
(SUBSCRIPTION PRICE: $100 PER UNIT
DURING THE INITIAL OFFERING PERIOD; NET
ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD)
CORRESPONDENT SELLING AGENT AGREEMENT
April 3, 1997
- --------------------------
- --------------------------
- --------------------------
Dear Sirs:
CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has
caused the formation of a business trust pursuant to the Delaware Business Trust
Act (the "Delaware Act") under the name, JWH GLOBAL TRUST (the "Trust"), for the
purpose of engaging in speculative trading of futures contracts on currencies,
interest rates, energy, and agricultural products, metals and stock indices;
options on such futures contracts; and spot and forward contracts on currencies
and precious metals. As described in the Prospectus referred to below, the
Trust will engage in speculative trading in the commodities markets under the
direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make
a public offering of units of beneficial interest in the Trust (the "Units")
through Cargill Investor Services, Inc. (the "Lead Selling Agent") on a
best-efforts basis pursuant to the Selling Agreement dated as of April 3, 1997,
as amended, among the Lead Selling Agent, the Trust and others (the "Selling
Agreement"), a copy of which has been furnished to you. In connection with the
proposed public offering, the Trust has filed with the United States Securities
and Exchange Commission (the "SEC"), pursuant to the United States Securities
Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1
to register the Units, and as part thereof a prospectus (Registration No.
333-16825) (which registration statement, together with all amendments thereto,
shall be referred to herein as the "Registration Statement" and which prospectus
together with all amendments and supplements thereto in the forms filed with the
SEC pursuant to Rule 424 under the Act shall be referred to herein as the
"Prospectus"). The Lead Selling Agent has, with the consent of the Managing
Owner, selected _______________ as an Additional Selling Agent. Other selling
agents (each a
"Correspondent Selling Agent") may be selected by the Additional Selling Agent,
with the consent of the Managing Owner and the Lead Selling Agent. You have
been so selected by the Additional Selling Agent. We understand that you are
willing to use your best efforts to market the Units. We confirm our agreement
with you as follows. Capitalized terms used but otherwise not defined herein
shall have the meaning ascribed to them in the Selling Agreement unless the
context indicates otherwise.
1. APPOINTMENT AND UNDERTAKINGS OF THE CORRESPONDENT SELLING AGENT
(a) Subject to the terms and conditions set forth in this Agreement, the
Selling Agreement and the Registration Statement, the Correspondent Selling
Agent is hereby appointed, and hereby accepts such appointment, as one of the
Trust's non-exclusive selling agents to offer and sell the Units on a
best-efforts basis without any commitment on the Correspondent Selling Agent's
part to purchase any Units. It is understood and agreed that the Lead Selling
Agent, with the consent of the Managing Owner, may retain other selling agents
and that the Additional Selling Agent, with the consent of the Lead Selling
Agent and Managing Owner in their sole discretion, may retain other
correspondent selling agents. The Correspondent Selling Agent agrees to comply
with the terms and conditions of this Agreement and any terms and conditions of
the Selling Agreement applicable to selling agents.
(b) The Correspondent Selling Agent agrees to use its reasonable efforts
to procure subscriptions for the Units as long as this Agreement and the Selling
Agreement remain in effect. The Correspondent Selling Agent agrees to make the
offering of Units at the offering price and minimum amounts and on the other
terms and conditions set forth in the Prospectus and the Selling Agreement.
(c) The Correspondent Selling Agent shall offer and sell Units only to
persons and entities who satisfy the suitability and/or investment requirements
set forth in the Prospectus and the subscription agreements attached thereto and
who, to the Managing Owner's satisfaction, complete the subscription agreements
and related subscription documents used in connection with the offering of the
Units (the "Subscription Documents") and remit good funds for the full
subscription price. The Correspondent Selling Agent shall conduct a thorough
review of the suitability of each subscriber for Units that it solicits and of
the Subscription Documents. The Correspondent Selling Agent shall not forward
to the Additional Selling Agent any Subscription Documents that are not in
conformity with the requirements specified in the Prospectus and in the
Subscription Documents appropriate for the particular subscriber, or that is
illegible in any respect or is not fully completed, dated, or signed, or that
represents the subscription of a person or entity not satisfying the suitability
and/or investment requirements applicable to such person or entity. The
Correspondent Selling Agent shall not execute any transactions in Units in a
discretionary account over which it has control without prior written approval
of the customer in whose name such discretionary account is maintained.
The Correspondent Selling Agent agrees not to recommend the purchase of
Units to any subscriber unless the Correspondent Selling Agent shall have
reasonable grounds to believe, on
2
the basis of information obtained from the subscriber concerning, among other
things, the subscriber's investment objectives, other investments, financial
situation and needs, that 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; the subscriber has a fair market net worth sufficient to sustain the
risks inherent in participating in the Trust, including loss of investment and
lack of liquidity; and the Units are otherwise a suitable investment for the
subscriber. In addition to submitting such information to the Managing Owner,
the Correspondent Selling Agent agrees to maintain files of information
disclosing the basis upon which the Correspondent Selling Agent determined that
the suitability requirements of Section (b)(2) of Rule 2810 of the National
Association of Securities Dealers, Inc. ("NASD") were met as to each subscriber
(the basis for determining suitability may include the Subscription Documents
and other certificates submitted by subscribers). In connection with making the
foregoing representations and warranties, the Correspondent Selling Agent
further represents and warrants that it has received copies of the Registration
Statement, as amended to the date hereof, and the Prospectus and has, among
other things, examined the following sections in the Prospectus and obtained
such additional information from the Managing Owner regarding the information
set forth thereunder as the Correspondent Selling Agent has deemed necessary or
appropriate to determine whether the Prospectus adequately and accurately
discloses all material facts relating to an investment in the Trust and provides
an adequate basis to subscribers for evaluating an investment in the Units:
"Summary"
"Risk Factors"
"Investment Factors"
"The Trust and Its Objectives"
"John W. Henry & Company, Inc."
"The Managing Owner"
"Fiduciary Obligations of the Managing Owner"
"Use of Proceeds"
"Charges"
"Conflicts of Interest"
"Redemptions; Net Asset Value"
"The Trust and the Trustee"
"Federal Income Tax Aspects"
In connection with making the representations and warranties set forth in
this paragraph, the Correspondent Selling Agent has not relied on inquiries made
by or on behalf of any other parties.
The Correspondent 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.
The Correspondent Selling Agent shall offer and sell Units in compliance
with the requirements set forth in the Registration Statement and Prospectus
(particularly the "Subscription Requirements" attached as Exhibit B thereto),
this Agreement and the Blue Sky Survey delivered
3
to the Lead Selling Agent by the Managing Owner's counsel, a copy of which has
been provided to the Correspondent Selling Agent. The Correspondent Selling
Agent represents and warrants that it shall comply fully at all times with all
applicable federal and state securities and commodities laws (including without
limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the
"1934 Act"), the Commodity Exchange Act, as amended (the "CEA"), and the
securities and Blue Sky laws of the jurisdictions in which the Correspondent
Selling Agent solicits subscriptions, all applicable rules and regulations under
such laws, and all applicable requirements, rules, policy statements and
interpretations of the NASD, and the securities and commodities exchanges and
other governmental and self-regulatory authorities and organizations having
jurisdiction over it or the offering of Units). The Correspondent Selling Agent
shall under no circumstances engage in any activities hereunder in any
jurisdiction (i) in which the Managing Owner has not informed the Correspondent
Selling Agent that counsel's advice has been received that the Units are
qualified for sale or are exempt under the applicable securities or Blue Sky
laws thereof or (ii) in which the Correspondent Selling Agent may not lawfully
engage.
The Correspondent Selling Agent further agrees to comply with the
requirement under applicable federal and state securities laws to deliver to
each offeree a Prospectus and any amendments or supplements thereto (including
summary financial information, if available, after the Trust has commenced
operations). Neither the Correspondent Selling Agent nor any of its employees,
agents or representatives will use or distribute any marketing material or
information other than that prepared by the Trust and the Managing Owner.
(d) The additional services that the Correspondent Selling Agent will
provide on an ongoing basis to Unitholders will include but not be limited to:
(i) inquiring of the Managing Owner (through the Additional Selling Agent) from
time to time, at the request of Unitholders, as to the Net Asset Value of a
Unit, (ii) inquiring of the Managing Owner (through the Additional Selling
Agent) from time to time at the request of the Unitholders, as to the
commodities markets and the activities of the Fund, (iii) assisting, at the
request of the Managing Owner (through the Additional Selling Agent), in the
redemption of Units sold by the Correspondent Selling Agent, (iv) responding to
questions of Unitholders from time to time with respect to monthly account
statements, annual reports and financial statements furnished to Unitholders,
and (v) providing such other services to the owners of Units as the Managing
Owner may, from time to time, reasonably request.
All payments for subscriptions shall be made by transfer of funds to the
escrow account of the Trust as described in the Prospectus, provided that any
such arrangements must comply in all relevant respects with SEC Regulations
10b-9 and 15c2-4.
(e) The Correspondent Selling Agent (i) acknowledges that, other than as
set forth herein, it is not authorized to act as the agent of the Lead Selling
Agent or the Additional Selling Agent in any connection or transaction and (ii)
agrees not to so act or to purport to so act.
2. COMPENSATION
4
(a) The Lead Selling Agent agrees to pay to the Additional Selling Agent a
selling commission of 4% of the subscription value of the Unit(s) sold by the
Correspondent Selling Agent. Such commissions will be paid in respect of each
subscription as promptly as practicable after the initial closing or each
subsequent month-end closing. The Additional Selling Agent agrees that it will
pass on promptly to the Correspondent Selling Agent 3% of the 4% initial selling
commission received by the Additional Selling Agent from the Lead Selling Agent.
The selling commission payable in respect of Units sold to any investor eligible
to be charged a Special Brokerage Fee Rate as described in the Registration
Statement and Prospectus shall be reduced by the difference between the standard
brokerage fee rate and the applicable Special Brokerage Fee Rate and the
Additional Selling Agent's and Correspondent Selling Agent's respective shares
of the selling commission on such Units accordingly shall be reduced.
(b) The Additional Selling Agent shall receive ongoing compensation,
payable monthly by the Lead Selling Agent, of 1/12 of 4% per month
(approximately 4% per annum) of the month-end Net Asset Value of the Units sold
by a Registered Representative of the Correspondent Selling Agent which remain
outstanding for more than twelve months (including the month as of the end of
which such Unit is redeemed) assuming (i) the Additional Selling Agent's and
Correspondent Selling Agent's continued registration with the Commodity Futures
Trading Commission (the "CFTC") as a futures commission merchant or introducing
broker and continued membership with the National Futures Association ("NFA") in
such capacity and (i) the Registered Representative's compliance with the
additional requirements described in subsection 1(d), registration with the CFTC
and compliance with all applicable proficiency requirements (including those
imposed by the NASD as a condition of receiving "trailing commissions") by
either passing the Series 3 National Commodity Futures Exam or the Series 31
exam or being "grandfathered" from having to do so. The Additional Selling
Agent agrees that it will pass on promptly to the Correspondent Selling Agent 3%
of the 4% per annum ongoing compensation received by the Additional Selling
Agent from the Lead Selling Agent. Such ongoing compensation shall begin to
accrue with respect to each Unit only after the end of the twelfth full month
after the sale of such Unit. Ongoing compensation payable in respect of Units
sold to any investor eligible to be charged a Special Brokerage Fee Rate as
described in the Registration Statement and Prospectus shall be reduced by the
difference between the standard brokerage fee rate and the applicable Special
Brokerage Fee Rate and the Additional Selling Agent's and Correspondent Selling
Agent's respective shares of ongoing compensation on such Units accordingly
shall be reduced. In the event the Additional Selling Agent is not eligible to
receive ongoing compensation, the Correspondent Selling Agent may receive the
amount that would have been due to the Additional Selling Agent in the absence
of ineligibility provided that the Correspondent Selling Agent shall have
entered into an Additional Selling Agreement with the Lead Selling Agent on
terms reasonably satisfactory to the Additional Selling Agent. For purposes of
determining when ongoing compensation should begin to accrue, Units sold during
the Initial Offering Period (as defined in the Registration Statement and
Prospectus) shall not be deemed to be sold until the initial closing time and
Units sold during the Ongoing Offering Period (as defined in the Registration
Statement and Prospectus) shall not be deemed to be sold until the day Units are
issued, and in either case not the day when subscriptions are accepted by the
Managing Owner or subscriptions funds are deposited in escrow.
5
Furthermore, the Additional Selling Agent shall not compensate the
Correspondent Selling Agent, and the Correspondent Selling Agent shall not
compensate its employees or other persons, unless the recipient thereof is
legally qualified and permitted to receive such compensation. Also, such
ongoing compensation may be paid by the Additional Selling Agent to the
Correspondent Selling Agent and by the Correspondent Selling Agent to its
employees or other persons, only in respect of outstanding Units sold by such
persons to Unitholders and only so long as the additional services described in
Section 1(d) above are provided by such person to Unitholders. With respect to
particular Units, substitute Registered Representatives who are appropriately
registered and who agree to perform the services described in Section 1(d) above
with respect to such Units ("Substitute Registered Representatives") may also
receive ongoing compensation with respect to such Units.
In case of Units with respect to which there is no Registered
Representatives who is qualified to receive ongoing compensation as set forth
above, the Additional Selling Agent will pay each such Registered Representative
installment selling commissions at the same rate as in the case of ongoing
compensation, but the sum of such installment selling commissions and the
initial selling commission paid to the Additional Selling Agent and the
Correspondent is limited in amount, pursuant to applicable NASD policy, to 9.0%
of the initial subscription price of the Units sold by such Registered
Representative; provided, that no such installment selling commissions shall be
payable until the Managing Owner and the Lead Selling Agent determine that the
payment of such installment selling commission is in compliance with Rule 2810
of the NASD (formerly Appendix F of NASD's Rules of Fair Practice) on aggregate
compensation which may be received by the selling agents.
The Correspondent Selling Agent agrees that it will promptly pass on to its
Registered Representatives the applicable portions of the selling commission and
ongoing compensation or installment selling commissions received from the
Additional Selling Agent to which such Registered Representatives are entitled
pursuant to the Correspondent Selling Agent's standard compensation procedures.
The Correspondent Selling Agent, although otherwise entitled to ongoing
compensation, will not be entitled to receipt thereof with respect to particular
Units (but may continue to receive installment selling commissions) for any
month during any portion of which the Registered Representative who is receiving
such ongoing compensation is at any time not properly registered with the CFTC
or does not agree to provide the ongoing services described above. However, the
Lead Selling Agent agrees that Substitute Registered Representatives may receive
such ongoing compensation.
Ongoing compensation which cannot be paid because the Correspondent Selling
Agent or its Registered Representative has not met the eligibility requirements
shall be retained by the Lead Selling Agent.
The Correspondent Selling Agent shall not, directly or indirectly, pay or
award any finder's fees, commissions or other compensation to any person engaged
by a potential investor for investment advice as an inducement to such advisor
to advise the purchase of Units; provided,
6
however, the normal sales commissions payable to a registered broker-dealer or
other properly licensed person for selling Units shall not be prohibited hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Managing Owner shall have sole discretion to accept or reject any
subscription for the Units in whole or in part.
(d) The Additional Selling Agent agrees to make all payments to the
Correspondent Selling Agent pursuant to this Section 2 within 15 days following
the receipt of payment of selling commission, ongoing compensation and
installment selling commissions from the Lead Selling Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT The Lead
Selling Agent hereby represents and warrants as follows:
(a) The Lead Selling Agent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
power and authority to enter into and carry out its obligations under this
Agreement.
(b) The Lead Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD, and
registration or qualification under the laws of each state in which Lead Selling
Agent will offer and sell Units); the performance by the Lead Selling Agent of
its obligations under this Agreement will not violate or result in a breach of
any provision of its certificate of incorporation or by-laws or any agreement,
order, law, or regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Lead Selling Agent and is a valid and binding
agreement of the Lead Selling Agent enforceable against the Lead Selling Agent
in accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect affecting the
enforceability generally of rights of creditors except as enforceability of the
indemnification provisions contained in this Agreement may be limited by
applicable law and the enforcement of specific terms or remedies may be
unavailable.
4. REPRESENTATIONS AND WARRANTIES OF THE ADDITIONAL SELLING AGENT The
Additional Selling Agent hereby represents and warrants as follows:
(a) The Additional Selling Agent is a ______________ duly organized,
validly existing, and in good standing under the laws of its state of
organization and has power and authority to enter into and carry out its
obligations under this Agreement.
7
(b) The Additional Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD, and
registration or qualification under the laws of each state in which Additional
Selling Agent will offer and sell Units); the performance by the Additional
Selling Agent of its obligations under this Agreement will not violate or result
in a breach of any provision of its certificate of incorporation or by-laws or
any agreement, order, law, or regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Additional Selling Agent and is a valid and binding
agreement of the Additional Selling Agent enforceable against the Additional
Selling Agent in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors except as
enforceability of the indemnification provisions contained in this Agreement may
be limited by applicable law and the enforcement of specific terms or remedies
may be unavailable.
5. REPRESENTATIONS AND WARRANTIES OF THE CORRESPONDENT SELLING AGENT The
Correspondent Selling Agent hereby represents and warrants as follows:
(a) The Correspondent Selling Agent is a __________ duly organized,
validly existing, and in good standing under the laws of the state of its
organization and has power and authority to enter into and carry out its
obligations under this Agreement.
(b) The Correspondent Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD,
registration as a futures commission merchant or introducing broker under the
CEA and membership with NFA, and registration or qualification under the laws of
each state in which Correspondent Selling Agent will offer and sell Units); the
performance by the Correspondent Selling Agent of its obligations under this
Agreement will not violate or result in a breach of any provision of its
certificate of incorporation or by-laws or any agreement, order, law, or
regulation binding upon it.
(c) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Correspondent Selling Agent and is a valid and
binding agreement of the Correspondent Selling Agent enforceable against the
Correspondent Selling Agent in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium or similar laws at the time
in effect affecting the enforceability generally of rights of creditors except
as enforceability of the indemnification provisions contained in this Agreement
may be limited by applicable law and the enforcement of specific terms or
remedies may be unavailable.
(d) Neither the Correspondent Selling Agent nor any of its principals have
been the subject of any administrative, civil, or criminal actions within the
five years preceding the date
8
hereof that would be material for an investor's decision to purchase the Units
which are not disclosed to the Trust, the Managing Owner, the Lead Selling Agent
and the Additional Selling Agent.
(e) The information, if any, relating to the Correspondent Selling Agent
which the Correspondent Selling Agent has furnished to the Trust and the
Managing Owner for use in the Registration Statement is correct.
(f) In respect of purchasers of Units that are not individuals, the
Correspondent Selling Agent shall have received, prior to sale of Units to each
such purchaser, evidence that the purchaser is authorized to invest in the Units
and shall provide the Lead Selling Agent or the Additional Selling Agent with
copies of such evidence upon reasonable request of the Lead Selling Agent or the
Additional Selling Agent.
6. AUTHORIZATION UNDER THE SELLING AGREEMENT
The Correspondent Selling Agent agrees to be bound by any action taken by
the Lead Selling Agent or the Managing Owner, in accordance with the provisions
of the Selling Agreement, to terminate the Selling Agreement or the offering of
the Units, to consent to changes in the Selling Agreement or to approve of or
object to further amendments to the Registration Statement or amendments or
supplements to the Prospectus, if, in the judgment of the Lead Selling Agent or
the Managing Owner, such action would be advisable. The Lead Selling Agent
agrees that, at the Correspondent Selling Agent's reasonable request, the Lead
Selling Agent will require any documents required to be delivered to or by the
Lead Selling Agent pursuant to Section 8 of the Selling Agreement to be
addressed and delivered to the Correspondent Selling Agent.
7 COVENANTS OF THE ADDITIONAL SELLING AGENT
(a) The Additional Selling Agent will notify the Correspondent Selling
Agent immediately (i) when any amendment to the Registration Statement shall
have become effective and (ii) of the issuance by the SEC, CFTC or any other
Federal or state regulatory body of any order suspending the effectiveness of
the Registration Statement under the 1933 Act, the CFTC registration or NFA
membership of the Managing Owner as a commodity pool operator, the CFTC
registration or NFA membership of the Lead Selling Agent as a futures commission
merchant, or the registration of Units under the Blue Sky or securities laws of
any state or other jurisdiction or any order or decree enjoining the offering or
the use of the then current Prospectus or of the institution, or notice of the
intended institution, of any action or proceeding for that purpose.
(b) The Additional Selling Agent will deliver to the Correspondent Selling
Agent as promptly as practicable from time to time during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of copies
of the Prospectus (as amended or supplemented) as the Correspondent Selling
Agent may reasonably request for the purposes contemplated by the 1933 Act or
the SEC Regulations.
9
(c) The Additional Selling Agent will furnish to the Correspondent Selling
Agent a reasonable number of copies of any amendment or amendments of, or
supplement or supplements to, the Prospectus which will amend or supplement the
Prospectus.
8. INDEMNIFICATION
(a) The Lead Selling Agent shall indemnify, hold harmless, and defend the
Correspondent Selling Agent and any person who controls the Correspondent
Selling Agent within the meaning of Section 15 of the 1933 Act, to the same
extent, and subject to the same conditions and procedural requirements, that the
Managing Owner agrees to indemnify the Lead Selling Agent pursuant to Section 9
of the Selling Agreement; provided that in no case shall the Lead Selling Agent
be liable under this indemnity to the Correspondent Selling Agent if the loss,
liability, claim, damages or expense of the Correspondent Selling Agent arises
out of any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) or any omission or alleged omission therefrom of a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading made in reliance upon and in conformity with information
relating to the Correspondent Selling Agent and furnished or approved by the
Correspondent Selling Agent. The Correspondent Selling Agent agrees that in no
event shall JWH be liable to it directly for any loss, liability, claim, damage
or expense whatsoever suffered by the Correspondent Selling Agent in connection
with the offering of Units or this Agreement.
(b) The Additional Selling Agent shall indemnify, hold harmless, and
defend the Correspondent Selling Agent and any person who controls the
Correspondent Selling Agent within the meaning of Section 15 of the 1933 Act
against any and all loss, liability, claim, damage and expense whatsoever
incurred by any such party arising from any material breach by the Additional
Selling Agent of its representations, warranties, obligations and undertakings
set forth in this Agreement.
(c) The Correspondent Selling Agent shall indemnify, hold harmless, and
defend the Trust, the Managing Owner, the Lead Selling Agent, JWH, the
Additional Selling Agent and any person who controls any of the foregoing within
the meaning of Section 15 of the 1933 Act against any and all loss, liability,
claim, damage and expense whatsoever incurred by any such party arising from any
material breach by the Correspondent Selling Agent of its representations,
warranties, obligations and undertakings set forth in this Agreement. The
Trust, the Managing Owner and JWH are expressly made third party beneficiaries
of this Agreement.
9. TERMINATION
(a) This Agreement shall terminate on the earlier of (i) such date as the
Lead Selling Agent may determine by giving 30 days' prior written notice to the
other parties, (ii) such date as the Additional Selling Agent may determine by
giving 30 days' prior written notice to the other parties, (iii) the termination
of the Selling Agreement or the offering of the Units or (iv) by the Lead
Selling Agent, without notice, upon breach by the Correspondent Selling Agent
of, or non-compliance by the Correspondent Selling Agent with, any material term
of this Agreement.
10
(b) The Correspondent Selling Agent shall have the right to terminate its
participation under this Agreement (i) at any time upon breach by the Lead
Selling Agent of or non-compliance with, any material term of this Agreement;
and (ii) at any time upon 30 days' prior written notice of such termination to
the Lead Selling Agent and the Trust.
(c) The termination of this Agreement for any reason set forth in Sections
9(a)(i), 9(a)(ii), 9(a)(iii) or 9(b) shall not affect (i) the ongoing
obligations of the Lead Selling Agent to pay selling commissions, ongoing
compensation or installment selling commissions accrued prior to the termination
hereof, (ii) the Additional Selling Agent's obligations under Section 1(d)
hereof or (iii) the indemnification obligations under Section 8 hereof. In the
event this Agreement is terminated pursuant to Section 9(a)(iv), the Lead
Selling Agent may withhold accrued but unpaid selling commissions and ongoing
compensation or installment selling commissions due the Correspondent Selling
Agent until the Lead Selling Agent has been put in the same financial position
as it would have been in absent such breach or non-compliance.
11. CONFIDENTIALITY
(a) The Lead Selling Agent hereby covenants and agrees that under no
circumstances will it solicit any of the Correspondent Selling Agent's customers
whose names become known to the Lead Selling Agent in connection with the
offering of the Units. The Lead Selling Agent agrees that it will take such
steps to ensure the confidentiality of the Correspondent Selling Agent's client
list as the Correspondent Selling Agent may reasonably request.
(b) The Additional Selling Agent hereby covenants and agrees that under no
circumstances will it solicit any of the Correspondent Selling Agent's customers
whose names become known to the Additional Selling Agent in connection with the
offering of the Units. The Additional Selling Agent agrees that it will take
such steps to ensure the confidentiality of the Correspondent Selling Agent's
client list as the Correspondent Selling Agent may reasonably request.
(b) The Correspondent Selling Agent hereby covenants and agrees that under
no circumstances will it solicit any customer of the Lead Selling Agent or any
other selling agent for the Trust whose name becomes known to the Correspondent
Selling Agent in connection with the offering of the Units. The Correspondent
Selling Agent agrees that it will take such steps to ensure the confidentiality
of the Lead Selling Agent's or any other selling agent's client list as the
owner of such list may reasonably request. The Correspondent Selling Agent
further covenants and agrees not to solicit any selling agent which has been
introduced to the Lead Selling Agent by any wholesaler or any other selling
agent.
12. MISCELLANEOUS
(a) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the parties hereto; provided,
however, that a party hereto may not assign any rights, obligations, or
liabilities hereunder without the prior written consent of the other parties.
11
(b) All notices required or desired to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered or, when given by registered mail, postage prepaid, return receipt
requested, on the day of receipt, addressed as follows (or to such other address
as the party entitled to notice shall hereafter designate in accordance with the
terms hereof):
if to the Lead Selling Agent:
Cargill Investor Services, Inc.
233 South Wacker Drive, Suite 2300
Chicago, Illinois 60606
if to the Additional Selling Agent:
------------------------
------------------------
------------------------
if to the Correspondent Selling Agent:
------------------------
------------------------
------------------------
(c) This Agreement shall be governed by, and construed in accordance with,
the law of the State of Illinois without regard to the principles of choice of
law thereof.
(d) All captions used in this Agreement are for convenience only, are not
a part hereof, and are not to be used in construing or interpreting any aspect
hereof.
(e) This Agreement may be executed in counterparts, each such counterpart
to be deemed an original, but which all together shall constitute one and the
same instrument.
(f) This Agreement may not be amended except by the express written
consent of the parties hereto. No waiver of any provision of this Agreement may
be implied from any course of dealing between or among any of the parties hereto
or from any failure by any party hereto to assert its rights under this
Agreement on any occasion or series of occasions.
(g) The provisions of this Agreement shall survive the termination of this
Agreement with respect to any matter arising while this Agreement was in effect.
12
If the foregoing is in accordance with your understanding of our agreement,
please sign and return a counterpart hereof to the Lead Selling Agent, whereupon
this instrument along with all counterparts will become a binding agreement
among them in accordance with its terms.
Very truly yours,
CARGILL INVESTOR SERVICES, INC.
By:
-------------------------------
Its
------------------------------
------------------------------------
Additional Selling Agent
By:
--------------------------------
Its
-----------------------------
CONFIRMED AND ACCEPTED
- ---------------------------------
Correspondent Selling Agent
By:
------------------------------
Its
---------------------------
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