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Exhibit 1.1
FORM OF SELLING AGREEMENT
This Selling Agreement made (the "Agreement") dated as of
__________________, 20__ by and among Shaffer Diversified Fund, LP, a Delaware
limited partnership (the "Fund"), Shaffer Asset Management, Inc., a New York
corporation (the "General Partner"), ADM Investor Services, Inc., a Delaware
corporation (the "Commodity Broker"), and ________________________________, a
_____________ corporation (the "Selling Agent"),
W I T N E S S E T H:
WHEREAS, the General Partner has caused the Fund to be organized under
an agreement of limited partnership dated as of August 29, 2000 (the "Limited
Partnership Agreement") and a certificate of limited partnership filed on August
29, 2000 to engage in speculative trading of commodity futures contracts,
options thereon, and other commodity interests; and
WHEREAS, the General Partnership has caused the Fund to file a
registration statement on Form S-1 (No. 333- ) (in the form declared effective
by the SEC, the "Registration Statement")with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933 (the "Securities
Act") and the rules and regulations adopted by the SEC thereunder, as in effect
on the date hereof; and
WHEREAS, the Commodity Broker is to be the commodity broker for the
Fund as described in the prospectus included in the Registration Statement (as
amended or supplemented from time to time, the "Prospectus"); and
WHEREAS, the Fund proposes to issue and sell to the public units of
limited partner interest in the Fund (the "Units") as described in the
Prospectus; and
WHEREAS, the Selling Agent desires to assist in the sale of the Units
upon the terms and in reliance upon the representations, warranties and
covenants set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. OFFERING OF UNITS. (a) Appointment. The Fund hereby appoints the
Selling Agent as one of its agents on a non-exclusive basis to offer and sell
the Units. The Selling Agent shall attempt to sell the Units on a "best efforts"
basis at the price and in the manner described in the Prospectus and in
compliance with the terms and conditions set forth therein and herein. After the
initial closing of the offering of the Units (the "Offering"), the Fund may
continue to offer the Units at the month-end Net Asset Value per Unit (as
defined in the Limited Partnership Agreement) as of the last business day of the
month during which subscriptions are accepted by the General Partner. The
Offering may terminate at any time as determined by the General Partner. No
selling commissions shall be charged to the subscribers with respect to the
offer and sale of the Units. The Fund hereby authorizes the Selling Agent to
distribute the Prospectus and any amendments or supplements thereto in
accordance with the terms of this Agreement.
(b) Initial Compensation. In consideration of the services of
the Selling Agent in soliciting and obtaining subscriptions for the Units, the
Fund shall pay the Selling Agent a selling commission of 3% of the subscription
amount of any subscriptions obtained by the Selling Agent and accepted by the
General Partner on or before the last business day of the twelfth full calendar
months after the initial closing of the Offering; provided that the amount of
the selling commission payable under this
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Section 1(b) with respect to a Unit purchased after the initial closing of the
Offering based on the number of months remaining until the first business day of
the thirteen full calendar month thereafter. The Selling Agent shall refund a
pro rata amount of such selling commission with respect to any Units that are
redeemed on or before the last day of the twelfth full calendar month after the
initial closing of the Offering.
(c) Ongoing Compensation. Commencing on the first business day
of the thirteenth full month after the initial closing of the Offering, the Fund
shall pay to the Selling Agent each month 1/12 of 3% of the Net Asset Value
(determined as of the last business day of the immediately preceding month) of
Units outstanding at the end of such month that relate to subscriptions obtained
by the Selling Agent; provided that the Selling Agent represents that it is
registered with the Commodity Future Trading Commission (the "CFTC") as a
futures commission merchant or introducing broker and is a member in good
standing of the National Futures Association (the "NFA") in such capacity. The
Selling Agent may pay such compensation to its registered representatives who
are registered as associated persons with the CFTC and have passed the National
Commodity Futures Examination (Series 3) or the Futures Managed Funds
Examination (Series 31). If any such registered representative becomes employed
by another CFTC and NFA registered firm, and the subscribers to which such
registered representative sold become customers of the transferee firm, then the
Selling Agent shall transfer its ongoing compensation hereunder to the
transferee firm. The compensation specified in this Section 1(c) shall be in
consideration of and is contingent upon the provision by the Selling Agent or
its affiliate of additional services in connection with the Units sold by the
Selling Agent, including (i) inquiring of the General Partner from time to time,
at the request of a holder of Units sold by it, as to the Net Asset Value of a
Unit, (i) inquiring of the General Partner from time to time, at the request of
a holder of Units sold by it, regarding the commodities markets and the Fund,
(iii) assisting, at the request of the General Partner, in the redemption of
Units sold by it and (iv) providing such other services to the holders of Units
sold by it as the General Partner may, from time to time, reasonably request.
The Selling Agent also shall use its best efforts to ensure that any of its
registered representatives to whom compensation is passed on pursuant to this
Section 1(c) shall cooperate in providing the services specified in clauses (i)
through (iv) for as long as such representative continues in the employment of
the Selling Agent. The Selling Agent shall forfeit its rights hereunder to
receive any compensation relating to the additional services for the entirety of
any month during which it is not duly registered with the CFTC as a futures
commission merchant or introducing broker and a member in good standing of NFA.
2. UNDERTAKING OF SELLING AGENT. The Selling Agent shall use its best
efforts to find eligible persons and entities to purchase Units on the terms
stated herein and in the Prospectus. In connection with the offer and sale of
the Units, the Selling Agent represents, warrants and agrees that it shall
comply fully with all applicable laws and the rules of the CFTC, the NFA, the
NASD, the SEC, the securities or blue-sky administrators of the jurisdictions in
which the Units are offered and any other applicable regulatory body. The
Selling Agent shall have no commitment with regard to the offer or sale of the
Units other than to use its best efforts as described above. The Selling Agent
shall deliver all cash and checks received by it from subscribers to the escrow
account (the "Escrow Account") maintained by the Fund at The Chase Manhattan
Bank (the "Escrow Agent") pursuant to an Escrow Agreement dated as of
_____________, 2000 (the "Escrow Agreement"). The Selling Agent shall transfer
such cash and checks to the Escrow Agent no later than noon on the business day
next succeeding the receipt of such cash and checks by the Selling Agent. Such
cash or checks shall be accompanied by one executed copy of the subscription
agreement and power of attorney for each subscription obtained, properly
completed and executed and in the form of Exhibit D to the Prospectus (a
"Subscription Agreement"). All cash and checks received by the Selling Agent
from subscribers shall be made payable to "The Chase Manhattan Bank -- Shaffer
Diversified Fund, LP Escrow Account." The Selling Agent shall promptly deliver
to the General Partner one photocopy of each such Subscription Agreement.
Promptly after receipt of a subscription and the funds therefor by the Escrow
Agent and delivery of a copy of the related
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Subscription Agreement to the General Partner, an interim receipt shall be
mailed by the General Partner to each such subscriber for the amount deposited
in the Escrow Account on behalf of such subscriber.
3. BLUE-SKY FILINGS. The Fund shall prepare, execute, file and amend,
as necessary, all applications for registration of the Units and of itself as a
dealer in securities, consents to service of process, reports of sale of Units
and similar blue-sky qualification, registration and exemption documents and
shall take such other actions which may be necessary or advisable, in the
opinion of the General Partner or its counsel, in order to qualify the Units for
offer and sale under the securities or blue-sky laws of such jurisdictions
within the United States of America as the General Partner may reasonably
request; provided that in no event shall the Fund be obligated to (a) 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 it is not now so subject or (b) offer in any jurisdiction that would
require a change in any term in the Registration Statement. The Selling Agent
shall be responsible for compliance with all applicable laws, rules and
regulations with respect to its acting as such in connection with sales of Units
in any jurisdiction.
4. CLOSING DATE. Subject to the right of the General Partner to
terminate the Offering at any time and subject to the conditions and
requirements stated in the Prospectus and herein, there shall be a closing of
the Offering on _____________, 2000 and on the last business day of each month
thereafter (each a "Closing Date"), with respect to subscriptions that were not
accepted or rejected on the preceding Closing Date. Such closing shall be held
at the offices of the General Partner (or other location as selected by the
General Partner) and shall provide for (a) payment of the aggregate purchase
price for the Units to the Fund by release of funds from the Escrow Account and
(b) compliance with Section 12.
5. REPORTS. So long as any of the Units are outstanding, the Fund at
its expense shall deliver to the Selling Agent upon request all financial
statements and other periodic and special reports distributed generally to the
holders of Units or required to be delivered to the holders of Units or filed
with the CFTC or the SEC under the Limited Partnership Agreement or any federal
statute, rule or regulation relating to securities, commodities or commodity
futures.
6. AGREEMENTS OF FUND AND GENERAL PARTNER. The Fund and the General
Partner jointly and severally agree:
(a) not to file any amendment or supplement to the
Registration Statement or Prospectus, except such as counsel for the
General Partner shall deem advisable in order to assure compliance with
applicable laws;
(b) to advise the Selling Agent:
(i) when the Registration Statement is declared
effective;
(ii) of the issuance by the CFTC, the SEC or any
other federal or state regulatory body of (A) any order or
decree enjoining the offering or the use of the Prospectus or
of the institution, or notice of the intended institution, of
any action or proceeding for that purpose or (B) any stop
order suspending the effectiveness of the Registration
Statement under the Securities Act, the CFTC registration or
NFA membership of the General Partner as a commodity pool
operator or the registration of Units under the securities or
blue-sky laws of any jurisdiction; and
(iii) of the receipt by the Fund or any
representative or attorney of the Fund of any other material
communication from the CFTC, the NFA, the SEC or any blue-sky
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administrator relating to the Fund, the Registration
Statement, any preliminary prospectus or the Prospectus;
and in any such case, the Fund shall make every reasonable effort to
prevent the issuance of any order suspending the effectiveness of the
Registration Statement under the Securities Act or the registration of
the Units under the laws of such other jurisdictions or enjoining the
offering and, if any such order is issued, to obtain as soon as
possible the withdrawal thereof; provided that in no event shall the
Fund be obligated (x) to take any action that 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 it is
not now so subject or (y) to change any term in the Registration
Statement, as the same may be amended or supplemented;
(c) to deliver to the Selling Agent, without charge, as many
conformed copies of the registration statement as originally filed and
of the Registration Statement and each amendment or supplement thereto
(including all exhibits filed with or incorporated by reference in any
such document) as the Selling Agent may reasonably request;
(d) during the Offering to deliver to the Selling Agent,
without charge, at such office or offices within the United States as
the Selling Agent may reasonably designate, as many copies of the
Prospectus as the Selling Agent may reasonably request;
(e) that the General Partner will withdraw as general partner
and commodity trading advisor of the Fund if the representations and
warranties contained in Section 9(b) cease to be true and correct; and
(f) that the Fund will terminate the services of the Commodity
Broker if the representations and warranties contained in Section 10(c)
cease to be true and correct.
7. AMENDMENT OF REGISTRATION STATEMENT AND PROSPECTUS. The Fund at its
expense shall amend the Registration Statement and the Prospectus and shall
supplement the Prospectus if, at any time after the date on which the
Registration Statement is declared effective and prior to each Closing:
(a) such amendment or supplement is necessary to comply with
the Securities Act, the Commodity Exchange Act (the "CEA"), blue-sky
laws of any jurisdiction or the rules or regulations promulgated under
such laws, to comply with any NFA deficiency notices, to correct any
material untrue statement in the Registration Statement or the
Prospectus or to eliminate any material omission therein or any
omission therein that renders any of the statements therein materially
misleading; or
(b) the Commodity Broker or the Selling Agent advises the Fund
that, in its opinion and that of its counsel, such amendment or
supplement is necessary to comply with applicable laws or the rules or
regulations promulgated thereunder, to comply with any such deficiency
notice or to correct any such material untrue statement or to eliminate
any such omission.
In any such case, the General Partner shall notify the Fund, the Commodity
Broker and the Selling Agent, and the Commodity Broker and the Selling Agent
shall notify the Fund and the General Partner, immediately upon discovery of any
untrue or misleading statements or omissions in the Registration Statement or
the Prospectus concerning such party or the occurrence of any event or change in
circumstances that would result in there being any untrue or misleading
statement or omission in the Registration Statement or the Prospectus relating
to the notifying party. The representations, warranties
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and indemnification obligations of the parties contained herein relating to the
Registration Statement and the Prospectus shall attach to any such amendment or
supplement.
8. REPRESENTATIONS AND WARRANTIES OF FUND. The General Partner, on
behalf of the Fund, represents and warrants to the Commodity Broker and the
Selling Agent that:
(a) the Fund is duly organized and validly existing as a
limited partnership under the laws of the State of Delaware and has
full power and authority under the Limited Partnership Agreement to
conduct its business as described in the Registration Statement and the
Prospectus and to issue, sell and deliver the Units;
(b) the Units, when issued and sold pursuant to the terms
hereof and of the Registration Statement, the Prospectus and the
Subscription Agreements, will be validly issued, fully paid and not
subject to further call or assessment;
(c) each of the advisory agreement dated as of August 29, 2000
between the Fund and Shaffer Asset Management, Inc., in its capacity as
commodity trading advisor (the "Advisory Agreement"), the Escrow
Agreement and this Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Fund and
each is, assuming that it has been duly and validly authorized,
executed and delivered by the other parties thereto (other than the
General Partner), a valid and binding agreement of the Fund, except
insofar as bankruptcy, moratorium or other similar laws may be
applicable and except that the exculpation, indemnification and
contribution provisions of such agreements may be limited by applicable
law and enforcement of any specific terms or remedies may be
unavailable;
(d) the Fund has all federal and state governmental and
regulatory approvals and licenses, and is maintaining on a current
basis all filings and registrations with federal and state governmental
and regulatory agencies, required to conduct its business as described
in the Registration Statement and the Prospectus;
(e) on the date on which the Registration Statement is
declared effective and the date on which the Prospectus is first filed
with the SEC pursuant to Rule 424(b) under the Securities Act, the
Registration Statement and the Prospectus (or when any post-effective
amendment to the Registration Statement becomes effective or any
supplement to the Prospectus is filed with the SEC, the Registration
Statement, as amended, and the Prospectus, as amended or supplemented)
will comply fully in all material respects with the requirements of the
Securities Act, the CEA and the rules thereunder and will accurately
describe the proposed operation of the Fund;
(f) each of the Registration Statement, as it may be amended,
and the Prospectus, as it may be amended or supplemented, will not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in
the light of the circumstances under which such statements were made);
except that this representation and warranty does not apply to any
statement or omission in the Registration Statement, as it may be
amended, or the Prospectus made in reliance upon information furnished
in writing to the Fund by the Commodity Broker or the Selling Agent
expressly for use therein; and
(g) the certificate delivered pursuant to Section 12 and all
other certificates delivered on behalf of the Fund pursuant to this
Agreement were on the dates on which they were delivered, or will be on
the dates on which they are to be delivered, accurate and complete in
all material respects.
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9. REPRESENTATIONS AND WARRANTIES OF GENERAL PARTNER. The General
Partner represents and warrants to the Fund, the Commodity Broker and the
Selling Agent that:
(a) it is a corporation duly organized and validly existing in
good standing under the laws of the State of New York and has full
corporate power to perform its obligations and enter into the
transactions described in the Registration Statement and the
Prospectus;
(b) each of the Limited Partnership Agreement, the Advisory
Agreement, the Escrow Agreement and this Agreement has been duly and
validly authorized, executed and delivered on behalf of the General
Partner and, assuming that it has been duly and validly authorized,
executed and delivered by the other parties thereto (other than the
Fund), is a valid and binding agreement of the General Partner, except
insofar as bankruptcy, moratorium or other similar laws may be
applicable and except that the exculpation, indemnification and
contribution provisions of such agreements may be limited by applicable
law and enforcement of any specific terms or remedies may be
unavailable;
(c) it has all federal and state governmental and regulatory,
and to the best of its knowledge, commodity exchange licenses and
approvals, and is maintaining on a current basis all filings and
registrations with federal and state governmental and regulatory
agencies, required to act as described in the Registration Statement
and the Prospectus (including without limitation registration as a
commodity pool operator under the CEA and membership as a commodity
pool operator in NFA), and the performance of such actions will not
violate or result in a breach of any provision of its certificate of
incorporation or bylaws or any agreement, instrument, order, law or
regulation binding upon it;
(d) all references to the General Partner and its principals
in the Registration Statement and the Prospectus are accurate and
complete in all material respects and set forth in all material
respects the information required to be disclosed to investors under
the CEA and the rules and regulations thereunder; and
(e) as to the General Partner and its principals, the
Registration Statement and the Prospectus do 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 (in the case of the Prospectus, in
the light of the circumstances under which such statements were made);
(f) the balance sheet of the General Partner and the notes
thereto included in the Registration Statement present fairly the
financial position of the General Partner as of the date thereof in
conformity or (in the case of any unaudited balance sheet) in
substantial conformity with generally accepted accounting principles;
and since the date of the most recent such balance sheet, there have
been no changes in the financial condition of the General Partner,
other than changes which in the aggregate are not materially adverse or
which are disclosed in the Prospectus, and since such date there have
been no changes in the business of the General Partner which are
material in the context of the Offering; and
(g) the certificate delivered pursuant to Section 12 and all
other certificates delivered on behalf of the General Partner pursuant
to the terms of this Agreement were on the dates on which they were
delivered, or will be on the dates on which they are to be delivered,
accurate and complete in all material respects.
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10. REPRESENTATIONS AND WARRANTIES OF COMMODITY BROKER. The Commodity
Broker represents and warrants to the Fund, the General Partner and the Selling
Agent that:
(a) it is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and in good
standing and qualified to do business in each jurisdiction in which the
nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect its
ability to perform its obligations hereunder, and it has full corporate
power and authority to perform its obligations as described in the
Registration Statement and the Prospectus;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Commodity Broker and, assuming that it
has been duly and validly authorized, executed and delivered by the
other parties thereto, is a valid and binding agreement of the
Commodity Broker, except insofar as bankruptcy, moratorium or other
similar laws may be applicable and except that the exculpation,
indemnification and contribution provisions of such agreement may be
limited by applicable law and enforcement of any specific terms or
remedies may be unavailable;
(c) it has all federal and state governmental and regulatory
and commodity exchange licenses and approvals, and is maintaining on a
current basis all filings and registrations with federal and state
governmental and regulatory agencies, required to act as described in
the Registration Statement and the Prospectus (including without
limitation registration as a futures commission merchant under the CEA
and membership as a futures commission merchant in NFA), and the
performance of such actions will not violate or result in a breach of
any provision of its certificate of incorporation or bylaws or any
agreement, instrument, order, law or regulation binding upon it; and
(d) all references to legal proceedings involving the
Commodity Broker in the Registration Statement and the Prospectus set
forth in all material respects the information required to be disclosed
under the CEA and the rules and regulations thereunder.
11. REPRESENTATIONS AND WARRANTIES OF SELLING AGENT. The Selling Agent
represents and warrants to the Fund, the General Partner and the Commodity
Broker that:
(a) it is a corporation duly organized and validly existing in
good standing under the laws of the state of its incorporation and in
good standing and qualified to do business in each jurisdiction in
which the nature or conduct of its business requires such qualification
and the failure to be duly qualified would materially adversely affect
its ability to perform its obligations hereunder, is a member in good
standing of the NASD and has full corporate power and authority to act
as selling agent in the manner contemplated by this Agreement and as
described in the Registration Statement and the Prospectus;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Selling Agent and, assuming that it has
been duly and validly authorized, executed and delivered by the other
parties hereto, is a valid and binding agreement of the Selling Agent,
except insofar as bankruptcy, moratorium or other similar laws may be
applicable and except that the exculpation, indemnification and
contribution provisions of such agreement may be limited by applicable
law and enforcement of any specific terms or remedies may be
unavailable;
(c) it is in good standing and in compliance with all
applicable broker-dealer registration requirements in the jurisdictions
in which the Units will be sold by it;
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(d) any use or distribution of the Registration Statement, the
Prospectus or any preliminary prospectus by the Selling Agent will
comply with the terms and conditions set forth in the Prospectus and
with the Securities Act, the Securities Exchange Act of 1934, all
applicable blue-sky laws of the states in which the Selling Agent
intends to sell Units, the rules and regulations promulgated under all
such laws and all applicable rules and regulations of the NASD and
other self-regulatory organizations;
(e) in particular and not by way of limitation, it is aware of
NASD Rule 2810 and will comply fully with all the terms thereof in
connection with the offer and sale of the Units, and it will not
recommend the purchase or redemption of Units by any investor unless it
has reasonable grounds to believe, on the basis of information obtained
from such investor concerning, among other things, the investment
objectives, other investments, financial situation and needs of such
investor, that (i) such investor is or will be in a financial position
appropriate to enable such investor to realize to a significant extent
the benefits of the Fund, including tax benefits described in the
Registration Statement and the Prospectus, (ii) such subscriber has a
fair market net worth sufficient to sustain the risks inherent in
participating in the Fund, including loss of investment and lack of
liquidity, and (iii) the Units are otherwise a suitable investment for
the subscriber;
(f) it will maintain files of information disclosing the basis
upon which the Selling Agent determined that the suitability
requirements of NASD Rule 2810 were met as to each investor, which may
include the representations and warranties of such investor contained
in the Subscription Agreements and other certificates submitted by such
investor;
(g) it has, among other things, examined the Registration
Statement and the Prospectus and obtained such additional information
from the General Partner regarding the information set forth therein as
the Selling Agent has deemed necessary or appropriate to determine
whether the Registration Statement and the Prospectus adequately and
accurately disclose all material facts relating to an investment in the
Fund and provide an adequate basis to investors for evaluating an
investment in the Units; and in making such representation it has not
relied on inquiries made by or on behalf of any other parties;
(h) it will inform all subscribers of Units of all pertinent
facts relating to the liquidity and marketability of the Units as set
forth in the Registration Statement and the Prospectus; and
(i) it and its representatives have all required federal and
state governmental and regulatory approvals and licenses and have
effected all filings and registrations with federal and state
governmental and regulatory agencies required to conduct the business
of the Selling Agent, to perform its obligations under this Agreement
and to act as described in the Registration Statement and the
Prospectus, and the performance of such actions will not violate or
result in a breach of any provisions of its certificate of
incorporation or bylaws or any agreement, instrument, order, law or
regulation binding upon it.
12. CLOSING. The issuance and sale of the Units and the release of the
funds from the Escrow Account to the Fund shall be subject to the accuracy on
and as of the relevant Closing Date of, and compliance on such Closing Date
with, the representations and warranties of the Fund, the General Partner, the
Commodity Broker and the Selling Agent herein, to the performance by the Fund,
the General Partner, the Commodity Broker and the Selling Agent of their
respective obligations hereunder and to the following conditions:
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(a) the Fund, the Commodity Broker and the Selling Agent shall
have received a certificate of the General Partner, executed by an
authorized officer of the General Partner, which shall state that (i)
no order suspending the effectiveness of the Registration Statement, as
it may be amended, or prohibiting the sale of the Units is in effect
and no proceedings for such purpose are pending before or, to the
knowledge of such officer, threatened by the SEC, (ii) no adverse
comments or deficiency notices relating to the Prospectus have been
received from the CFTC or NFA that have not been responded to the
satisfaction of such agencies and (iii) the representations and
warranties of the Fund and the General Partner contained herein are
true and correct on and as of the Closing Date, and the Fund and the
General Partner have performed all covenants and agreements herein
contained to be performed on their parts at or prior to the date of the
certificate; and
(b) the Fund, the General Partner and the Commodity Broker
shall have received a certificate of the Selling Agent, executed by an
authorized officer of the Selling Agent, that the representations and
warranties of the Selling Agent contained herein are true and correct
on the date of the certificate as though made on such date.
13. INDEMNIFICATION. (a) The General Partner shall indemnify and hold
harmless the Commodity Broker, the Selling Agent and each person, if any, who
controls such persons within the meaning of section 15 of the Securities Act
against any and all losses, claims, damages, costs, expenses, liabilities, joint
or several (including any investigative, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), and actions to which they, or any of them,
may become subject under the Securities Act, the Securities Exchange Act of
1934, the CEA or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages, costs, expenses,
liabilities or actions arise out of or are based upon any untrue statement of a
material fact contained in the Registration Statement, the Prospectus or any
preliminary prospectus or any amendment of supplement thereto, or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of the Prospectus, of
any amendment or supplement thereto, in the light of the circumstances under
which such statements were made); provided that in no event shall the
indemnification agreement contained in this Section 13(a) inure to the benefit
of any of the indemnified parties (or any person controlling any such party
within the meaning of section 15 of the Securities Act) on account of any
losses, claims, damages, costs, expenses and liabilities arising from the sale
of the Units to any person if such losses, claims, damages, costs, expenses,
liabilities or actions arise out of or are based upon an untrue statement or
omission that the Prospectus corrects, prior to the delivery to such person of
his subscription, and a copy of the version of the Prospectus that corrects such
untrue statement or omission was not sent or given to such indemnified person at
or prior to the receipt of the subscription; provided further that in no event
shall any party claim indemnification under this Section 13(a) for amounts paid
pursuant to Section 13(b).
(b) The Commodity Broker shall indemnify and hold harmless the
Fund, the General Partner, the Selling Agent and each person, if any, who
controls such persons within the meaning of section 15 of the Securities Act to
the same extent as the indemnity from the General Partner set forth in Section
13(a) (and, in the case of the General Partner, for any indemnity paid by the
General Partner pursuant to Section 13(a)), but only insofar as such losses,
claims, damages, costs, expenses, liabilities or actions arise out of or are
based upon any untrue statement or omission which was made in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing by the Commodity Broker expressly for use therein. The
obligation of the Commodity Broker for indemnification hereunder shall be
limited in the same manner as the obligation of the General Partner for
indemnification in the case of untrue statements or omissions that are corrected
by the version of the Prospectus.
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(c) The Selling Agent shall indemnify and hold harmless the
Fund, the General Partner, the Commodity Broker and each person, if any, who
controls such persons within the meaning of section 15 of the Securities Act to
the same extent as the indemnity from the General Partner set forth in Section
13(a) (and, in the case of the General Partner, for any indemnity paid by the
General Partner pursuant to Section 13(a)), but only insofar as such losses,
claims, damages, costs, expenses, liabilities or actions arise out of or are
based upon a breach of any agreement, covenant, representation or warranty set
forth in this Agreement by the Selling Agent.
(d) Each party acknowledges that the obligation of each other
party subject to this Section 13 is separate and distinct. Notwithstanding any
other provision of this Section 13, the General Partner (i) shall have no
obligation to indemnify the Selling Agent for more than the amount of proceeds
resulting from the sale of Units by the Selling Agent in connection with the
Offering plus the actual expenses of the Selling Agent incurred in connection
with any loss, claim, damage, charge or liability (including reasonable attorney
and accountant fees incurred in defense thereof) and (ii) any obligation of the
General Partner to indemnify the Selling Agent shall be adjusted to reflect the
relative responsibility, if any, of the Selling Agent for the circumstances
giving rise to the losses, claims, damages, costs, expenses, liabilities or
actions for which indemnification is sought.
(e) Notwithstanding any other provision of this Agreement,
indemnification of the General Partner or its controlling persons by the Fund
shall be permitted only to the extent permitted by the Limited Partnership
Agreement.
(f) Any party that proposes to assert the right to be
indemnified under this Section 13 shall, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnified party under this Section 13,
notify each such indemnifying party of the commencement of such action, suit or
proceeding; provided that the omission to notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have to any
indemnified party under this Section 13 except to the extent, and only to the
extent, that such omission was prejudicial to the indemnifying party. In no
event shall any such omission relieve an indemnifying party of any liability
which it may have to an indemnified party otherwise than under this Section 13.
In case any such action, suit or proceeding shall be brought against any
indemnified party, and such party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein, and, if it wishes, individually or jointly with any other indemnifying
party, to assume (or have such other party assume) the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election (or the
election of such other party) so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, other than reasonable costs of investigation requested by the
indemnifying party (or such other party), subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party
shall have the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment by counsel by such indemnified party has been
authorized by the indemnifying party (or such other indemnifying party as may
have assumed the defense of the action in question), (ii) the indemnified party
has reasonably concluded that there may be a conflict of interest between the
indemnifying party (or such other party) and the indemnified party in the
conduct of the defense of such action (in which case the indemnifying party (or
such other party) shall not have the right to direct the defense of such action
on behalf of the indemnified party) or (iii) the indemnifying party has not in
fact employed counsel to assume the defense of such action. In each such case,
the fees and expenses of counsel shall be at the expense of the indemnifying
party, subject to reimbursement of the indemnifying party by such other party.
An indemnifying party shall not be liable for any settlement of any action or
claim effected without its consent. In the case of clause (ii), the indemnifying
party (or the indemnifying parties, if an indemnified
<PAGE> 11
party shall have a claim for indemnification against more than one indemnifying
party) shall not be liable for the expenses of more than one separate counsel
for each of (x) the Selling Agent and any person who controls the Selling Agent
within the meaning of section 15 of the Securities Act, (y) the Fund, the
General Partner and any person who controls the Fund and the General Partner
within the meaning of section 15 of the Securities Act and (z) the Commodity
Broker and any person who controls the Commodity Broker within the meaning of
section 15 of the Securities Act.
(g) The exculpation provisions of the Advisory Agreement or
the Limited Partnership Agreement shall not relieve the General Partner or its
principals from any liability they may have or incur to the Fund under this
Agreement.
14. FEES AND EXPENSES. Subject to reimbursement by the Fund as
described in the Prospectus, the General Partner shall pay all costs and
expenses relating to (a) the preparation, printing and filing with the CFTC, the
NFA and the SEC of the Registration Statement and exhibits thereto, each
preliminary prospectus, the Prospectus and all amendments and supplements to the
Registration Statement and the Prospectus, (b) the registration or qualification
of the Units for offer and sale under the blue-sky laws of various
jurisdictions, including the fees and disbursements of legal counsel in
connection therewith and in connection with the preparation and printing of
preliminary or supplementary blue-sky surveys, (c) the furnishing to the Selling
Agents of copies of each preliminary prospectus, the Prospectus, the
Registration Statement and all amendments or supplements thereto, and of such
other documents required to be furnished to the Selling Agents, including costs
of shipping and mailing, (d) the filing requirements of the NASD in connection
with its review of the terms and arrangements of the proposed financing, (e) the
fees and disbursements of the Escrow Agent, (f) all fees and disbursements of
Anchin, Block & Anchin, LLP in connection with the financial statements and the
performance records contained in the Prospectus and the preparation and delivery
of any other documents to be prepared and delivered in connection with the
transactions contemplated hereby, (g) the fees and disbursements of legal
counsel in connection with the organization of the Fund with the offering of the
Units and (h) all other organization and offering expenses relating to the Fund,
including any expenses incurred in any "roadshow" relating to the offering of
the Units. Each other party shall bear all of its expenses under this Agreement,
including fees and disbursements of its counsel.
15. MISCELLANEOUS. The indemnification agreements contained in Section
13, the obligation to settle accounts hereunder and the agreements,
representations and warranties herein shall survive the issue and payment for
the Units hereunder and any investigation made by any party hereto or any
controlling person of such party within the meaning of section 15 of the
Securities Act. All captions used herein are for convenience of reference only,
are not a portion of this Agreement and are not to be used in construing or
interpreting any aspect of this Agreement. This Agreement has been and is made
solely for the benefit of the parties and their respective successors and
assigns and, to the extent expressed herein, for the benefit of persons
controlling any party and their respective successors and assigns within the
meaning of section 15 of the Securities Act. No other person, partnership,
association or corporation shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include any
purchaser of Units merely because of such purchase. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
agreement, but all of which together shall constitute one and the same
instrument. This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein. This Agreement shall
be construed in accordance with the law of the State of Delaware, without regard
to principles of conflicts of laws.
16. NOTICES. Any notices under this Agreement shall be in writing or by
telephone, confirmed in writing. All such writings to be sent by first class
mail, postage prepaid, addressed to the recipient party at the address
previously furnished in writing by such party to each of the other parties
<PAGE> 12
hereto. Copies of all notices shall be sent to McDermott, Will & Emery, 50
Rockefeller Plaza, New York, New York 10020, attention John J. Sullivan.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
SHAFFER DIVERSIFIED FUND, LP
By: Shaffer Asset Management, Inc.
General Partner
By: /s/ Daniel S. Shaffer
Daniel S. Shaffer
President
SHAFFER ASSET MANAGEMENT, INC.
By: /s/ Daniel S. Shaffer
Daniel S. Shaffer
President
ADM INVESTOR SERVICES, INC.
By:
Name:
Title:
[SELLING AGENT]
By:
Name:
Title:
Selling Agent Address:
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