Contract
Exhibit 1.1
UP TO 17,631,579 COMMON UNITS OF LIMITED PARTNER INTEREST
_____, 2017
Xxxxx Xxxxxx Associates, Inc.
000 Xxxxxxx Xxxxxxxx
XX Xxx 0000
Xxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Energy Resources 12, L.P. (the “Company”) is a Delaware limited partnership. The Company proposes to offer (the “Offering”) up to 17,631,579 common units of limited partner interest (the “Units”), all upon the other terms and subject to the conditions set forth in the Prospectus (as defined in Section 1(a)). Of the 17,631,579 Units, the first 2,631,579 Units sold will be sold at $19.00 per Unit and the remaining 15,000,000 Units will be sold at $20.00 per Unit. The Company’s sole general partner is Energy Resources 12 GP, LLC, a Delaware limited liability company (the “General Partner”).
In consideration of the mutual covenants and agreements contained herein, intending to be legally bound, the parties agree to the terms and conditions set forth in this Exclusive Dealer Manager Agreement (the “Agreement”).
Upon the terms and subject to the conditions contained in this Agreement, the Company hereby appoints Xxxxx Xxxxxx Associates, Inc., a New York corporation (the “Dealer Manager”), to act as the exclusive dealer manager for the Offering, and the Dealer Manager accepts such engagement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GENERAL PARTNER. The Company and the General Partner hereby represent, warrant and agree during the term of this Agreement as follows:
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shall refer to the amended prospectus then on file with the Commission, and (ii) if the prospectus filed by the Company pursuant to either Rule 424(b) or 424(c) of the Securities Act Rules and Regulations shall differ from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus filed pursuant to either Rule 424(b) or 424(c), as the case may be, from and after the date on which it shall have been filed. The term “preliminary Prospectus” as used herein shall mean a preliminary prospectus related to the Units as contemplated by Rule 430 or Rule 430A of the Securities Act Rules and Regulations included at any time as part of the Registration Statement. As used herein, the terms “Registration Statement”, “preliminary Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein. As used herein, the term “Effective Date” shall refer to the effective date of the Registration Statement and of each post-effective amendment to the Registration Statement, unless the context otherwise requires.
(i) on (A) each applicable Effective Date, (B) the date of the preliminary Prospectus, (C) the date of the Prospectus and (D) the date any supplement to the Prospectus is filed or deemed filed with the Commission, the Registration Statement, the Prospectus and any amendments or supplements thereto, as applicable, have complied, and will comply, in all material respects with the Securities Act, the Securities Act Rules and Regulations, the Exchange Act and the Exchange Act Rules and Regulations; and
(ii) the Registration Statement does not, and any amendment thereto will not, in each case as of the applicable Effective Date, include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus does not, and any amendment or supplement thereto will not, as of the applicable filing date, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the foregoing provisions of this Section 1(c) will not extend to any statements contained in, incorporated by reference in or omitted from the Registration Statement, the Prospectus or any amendment or supplement thereto that are based upon written information furnished to the Company by the Dealer Manager expressly for use therein.
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information, (ii) any issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or, to the Company’s knowledge, threat of any proceeding for that purpose, or (iii) any notification with respect to the suspension of the qualification of the Units for sale in any jurisdiction or any initiation or, to the Company’s knowledge, threat of any proceeding for such purpose. The Company is in compliance in all material respects with all federal and state securities laws, rules and regulations applicable to it and its activities, including, without limitation, with respect to the Offering and the sale of the Units.
The execution and delivery of this Agreement and the performance of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof, do not and will not conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under: (i) the Company’s or any of its subsidiaries’ organizational documents, as the case may be; (ii) any indenture, mortgage, unitholders’ agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties is bound except, for purposes of this clause (ii) only, for such conflicts, breaches or defaults that do not result in and could not reasonably be expected to result in, individually or in the aggregate, a Company MAE (as defined below in this Section 1(f)); or (iii) any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the Company, any of its subsidiaries or any of their properties. No consent, approval, authorization or order of any court or other governmental agency or body has been obtained or is required for the performance of this Agreement or for the consummation by the Company of any of the transactions contemplated hereby (except as have been obtained under the Securities Act, the Exchange Act, from the Financial Industry Regulatory Authority, Inc. (“FINRA”) or as may be required under state securities or applicable blue sky laws in connection with the offer and sale of the Units or under the laws of states in which the Company may own real properties in connection with its qualification to transact business in such states or as may be required by subsequent events which may occur). Neither the Company nor any of its subsidiaries is in violation of its or their organizational documents.
As used in this Agreement, “Company MAE” means any event, circumstance, occurrence, fact, condition, change or effect, individually or in the aggregate, that is, or could reasonably be expected to be, materially adverse to (A) the condition, financial or otherwise, earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, or (B) the ability of the Company to perform its obligations under this Agreement or the validity or enforceability of this Agreement or the Units.
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Rules and Regulations. Such accountants have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).
At the time of the initial Closing Date, the Company shall maintain, either by itself or through the General Partner and/or an independent third party manager, a system of internal accounting and other controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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(r) MONEY LAUNDERING LAWS. The operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(i) The General Partner is a limited liability company duly formed and validly existing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(ii) This Agreement is duly and validly authorized, executed and delivered by or on behalf of the Company by the General Partner, and constitutes a valid and binding agreement enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of the United States, any state or any political subdivision thereof which affect creditors’ rights generally or by equitable principles relating to the availability of remedies or except to the extent that the enforceability of the indemnity and contribution provisions contained in this Agreement may be limited under applicable securities laws).
(iii) The execution and delivery of each of this Agreement and the performance hereunder by the General Partner do not and will not conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under: (i) the charter or bylaws, or other applicable organizational documents of the General Partner or any of its subsidiaries; (ii) any indenture, mortgage, securities agreement, note, lease or other agreement or instrument to which the General Partner or any of its subsidiaries is a party or by which the General Partner or any of its subsidiaries or any of their properties is bound except, for purposes of this clause (ii) only, for such conflicts, breaches or defaults that could not reasonably be expected to have or result in, individually or in the aggregate, (A) a material adverse effect on the condition, financial or otherwise, earnings, business affairs or
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business prospects of the General Partner, or (B) a Company MAE; or (iii) any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the General Partner or any of its properties. The General Partner is not in violation of its limited liability company agreement or other organizational documents.
(iv) There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the General Partner, threatened against or affecting the General Partner.
(v) The General Partner possesses such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by it, other than those which the failure to possess or own would not have or result in, individually or in the aggregate, (A) a material adverse effect on the condition, financial or otherwise, earnings, business affairs or business prospects of the General Partner, (B) a Company MAE, or (C) a material adverse effect on the performance of the services by the General Partner, and the General Partner has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit.
2. REPRESENTATIONS AND WARRANTIES OF THE DEALER MANAGER. The Dealer Manager represents and warrants to the Company and the General Partner during the term of this Agreement that:
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existing and in good standing under the laws of the State of New York, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
3. OFFERING AND SALE OF THE UNITS. Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby appoints the Dealer Manager as its agent and exclusive distributor to solicit subscriptions for the Units at the subscription price to be paid in cash and, subject to the Company’s prior written approval, at the Dealer Manager’s discretion, to retain one or more Soliciting Dealers (as defined in Section 3(a)) to assist in soliciting such subscriptions. The Dealer Manager hereby accepts such
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agency and exclusive distributorship and agrees to use its reasonable best efforts to sell or cause to be sold the Units in such quantities and to such individuals, corporations, partnerships, trusts, limited liability companies or other entities (collectively, a “Person”) in accordance with such terms as are set forth in this Agreement, the Prospectus and the Registration Statement. The Dealer Manager shall do so during the period commencing on the initial Effective Date and ending on the earliest to occur of the following: (1) the later of (x) two years from the initial Effective Date and (y) at the Company’s election, the date until which the Company is permitted to extend the Offering in accordance with the rules of the Commission; (2) the acceptance by the Company of subscriptions for 17,631,579 Units; (3) the termination of the Offering by the Company, which the Company shall have the right to terminate in its sole and absolute discretion at any time, provided that if such termination shall occur at any time during the 180-day period following the initial Effective Date, the Company shall not commence or undertake any preparations to commence another offering of Units or any similar securities prior to the 181st date following the initial Effective Date; (4) the termination of the effectiveness of the Registration Statement, provided that if such termination shall occur at any time during the 180-day period following the initial Effective Date, the Company shall not commence or undertake any preparations to commence another offering of Units or any similar securities prior to the 181st day following the initial Effective Date; and (5) the liquidation or dissolution of the Company (such period being the “Offering Period”).
The number of Units, if any, to be reserved for sale by Soliciting Dealers approved by the Company may be determined, from time to time, by the Dealer Manager in its sole discretion. In the absence of such determination, the Company shall, subject to the provisions of Section 3(b), accept Subscription Agreements (as defined in Section 6(d)) based upon a first-come, first accepted reservation or other similar method. Under no circumstances will the Dealer Manager be obligated to underwrite or purchase any Units for its own account and, in soliciting purchases of Units, the Dealer Manager shall act solely as the Company’s agent and not as an underwriter or principal.
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defined below). All non-conforming checks received from any Person shall be returned by the Dealer Manager to such Person not later than the end of the next Business Day following its receipt. After the initial Closing Date, payment of the purchase price for any Units will be made to the Dealer Manager and released in accordance with the terms of the Prospectus.
(c) COMPLETION OF SALES. A sale of a Unit shall be deemed by the Company to be completed for purposes of Section 3(d) if and only if (i) a properly completed and executed Subscription Agreement, together with payment of the full purchase price of each purchased Unit (which includes the applicable Selling Commissions and Marketing Expense Allowances) has been received, from an investor who satisfies the applicable suitability standards and minimum purchase requirements set forth in the Registration Statement as determined by the Dealer Manager, in accordance with the provisions of this Agreement, (ii) the Company has accepted such subscription, and (iii) such investor has been admitted as a unitholder of the Company (the date of such completion, a “Closing Date”). The Dealer Manager hereby acknowledges and agrees that (i) the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever or no reason, (ii) no Selling Commission or Marketing Expense Allowance will be paid to the Dealer Manager with respect to that portion of any subscription which is rejected and (iii) the Company is acting as an intermediary with respect to the Selling Commissions and Marketing Expense Allowances payable to the Dealer Manager, and shall pay amounts to the Dealer Manager in accordance with this Agreement if received from an investor in connection with its purchase of Units.
The initial Closing Date shall not occur until (i) the Company is prepared to accept Subscription Agreements for a minimum of $25,000,010 of Units, (ii) all funds for such subscriptions have been duly deposited in the Escrow Account and (iii) all subscriber checks have cleared the banking system. If less than all the Units shall have been subscribed and paid for at the initial Closing Date, then subsequent Closing Dates will take place at such times, dates and places as determined by the Company, with the concurrence of the Dealer Manager. Units will be issued to subscribers and corresponding compensation will be paid to the Dealer Manager upon each Closing Date.
(i) The Company agrees to pay the Dealer Manager selling commissions (“Selling Commissions”) in the amount of five percent (5.0%) of the selling price of each Unit for which a sale is completed. In no event shall the Dealer Manager be entitled to payment of any compensation in connection with a sale pursuant to the Offering that is not completed according to this Agreement.
(ii) To offset costs and expenses of marketing the Units, the Company will pay the Dealer Manager a non-accountable marketing expense allowance in the amount of one percent (1.0%) of the selling price of each Unit for which a sale is completed (the “Marketing Expense Allowance”).
(iii) Selling Commissions and Marketing Expense Allowance payable to the Dealer Manager with respect to the sale of any Units will be paid on the Closing Date of the sale of applicable Units.
(iv) As additional cash compensation for completing the sale of Units (the “Dealer Manager Incentive Fees”), the Company will pay the Dealer Manager an incentive fee of
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up to (A) $0.76 per Unit for the first 2,631,579 Units sold and $0.80 per Unit for the remaining Units sold (such amounts being 4% of the gross proceeds for such Units) less (B) any Account Maintenance Fees paid to the Dealer Manager pursuant to Section 13, payable from time to time as follows:
(A) Dealer Manager Incentive Fees shall be due each time the Company makes a distribution to holders of Incentive Distribution Rights after Payout occurs; and
(B) Dealer Manager Incentive Fees will be made on a pro rata basis with distributions of Available Cash to the holders of the Incentive Distribution Rights in an amount equal to the lesser of (i) thirty percent (30%) of the Available Cash for the month and (ii) the remaining balance of unpaid Dealer Manager Incentive Fees.
(C) For purposes of the foregoing clauses (A) and (B), capitalized terms not otherwise defined herein shall have the meanings given to them in the Company’s LPA (as defined in Section 5(h)).
(v) If the Company merges or consolidates, sells all or substantially all of its assets or engages in any other transaction in which the Incentive Distribution Rights are converted into, exchanged for, or otherwise become the right to receive cash, securities, property or other assets (collectively “Liquidity Event Consideration”), at the time the Liquidity Event Consideration is paid to the holders of Incentive Distribution Rights, the Company shall pay, or cause to be paid, to the Dealer Manager the lesser of (i) 100% of the amounts paid to the holders of the Incentive Distribution Rights (for the avoidance of doubt, it being the intent that the Dealer Manager shall receive 50% of the sum of the amounts paid to the holders of Incentive Distribution Rights plus the Dealer Manager Incentive Fees) and (ii) the remaining unpaid amount of the Dealer Manager Incentive Fees. If the Liquidity Event Consideration is other than cash the Company shall, in good faith, value any non-cash consideration and shall segregate an amount of such non-cash Liquidity Event Consideration equal to 30% of all amounts of non-cash Liquidity Event Consideration. The Company shall, as promptly as reasonably practical, convert all such segregated non-cash Liquidity Event Consideration to cash. Promptly following such conversion to cash, the Company shall make a cash payment in the amount so converted to the Dealer Manager, until the Dealer Manager has received the remaining unpaid Dealer Manager Incentive Fees. Upon payment of amounts provided for in this paragraph, the Dealer Manager Incentive Fees shall be deemed paid in full, and the surviving company from any merger or consolidation or the purchaser of assets or any other successor shall have no obligation with respect to the Dealer Manager Incentive Fees.
(vi) In no event shall the total Dealer Manager Incentive Fees with respect to sold Units exceed (A) 4% of the gross proceeds for such Units minus (B) the Account Maintenance Fees paid to the Dealer Manager pursuant to Section 13. In no event shall the total aggregate compensation payable to the Dealer Manager and any Soliciting Dealers participating in the Offering, including, but not limited to, Selling Commissions, the Marketing Expense Allowance, the Dealer Manager Incentive Fees and Account Maintenance Fees, exceed ten percent (10%) of gross offering proceeds from the Offering.
No compensation in connection with the Offering may be paid to the Dealer Manager, Soliciting Dealers or their affiliates out of the proceeds of the Offering prior to the release
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of such proceeds from escrow. However, if any such payments are made from sources other than proceeds of the Offering, they shall be made only on the basis of bona fide transactions.
(vii) Notwithstanding anything to the contrary contained herein, if the Company pays any Selling Commission to the Dealer Manager for sale of one or more Units and the subscription is rescinded as to one or more of the Units covered by such subscription, then the Company shall decrease the next payment of Selling Commissions or other compensation otherwise payable to the Dealer Manager by the Company under this Agreement by an amount equal to the Selling Commission rate established in this Section 3(d), multiplied by the number of Units as to which the subscription is rescinded. If no payment of Selling Commissions or other compensation is due to the Dealer Manager after such withdrawal occurs, then the Dealer Manager shall pay the amount specified in the preceding sentence to the Company within a reasonable period of time not to exceed thirty (30) days following receipt of notice by the Dealer Manager from the Company stating the amount owed as a result of rescinded subscriptions.
The Dealer Manager may retain or re-allow all or a portion of the Selling Commissions and Dealer Manager Incentive Fees, subject to federal and state securities laws, to any Soliciting Dealer who sold the Units, as described more fully in the Soliciting Dealer Agreement (as defined in Section 6(g)).
4. CONDITIONS TO THE DEALER MANAGER’S OBLIGATIONS. The Dealer Manager’s obligations hereunder shall be subject to the following conditions, and if all such conditions are not satisfied or waived by the Dealer Manager on or before the applicable date set forth below or at any time thereafter until the Termination Date (as defined in Section 10(a)), then the Dealer Manager is not obligated hereunder and no funds shall be released from the Escrow Account if the Dealer Manager provides notice to this effect to the Company and the Escrow Agent:
(a) The representations and warranties on the part of the Company and the General Partner contained in this Agreement hereof shall be true and correct in all material respects and the Company and the General Partner shall have complied with their covenants, agreements and obligations contained in this Agreement in all material respects.
(b) The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and, to the best knowledge of the Company and the General Partner, no proceedings for that purpose shall have been instituted, threatened or contemplated by the Commission; and any request by the Commission for additional information (to be included in the Registration Statement or Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Dealer Manager.
(c) The Registration Statement and the Prospectus, and any amendment or any supplement thereto, shall not contain any untrue statement of material fact, or omit to state a material fact required to be stated therein in light of the circumstances under which they are made, or necessary to make the statements therein not misleading.
(d) At or prior to the initial Effective Date and each Closing Date, the Dealer Manager shall have received a written certificate executed by the Chief Executive Officer or President of the General Partner and the Chief Financial Officer of the General Partner, each on behalf of the Company,
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dated as of the applicable date, to the effect that: (i) the representations and warranties of the Company and the General Partner set forth in this Agreement are true and correct in all material respects with the same force and effect as though expressly made on and as of the applicable date; and (ii) the Company and the General Partner have complied in all material respects with all the agreements hereunder and satisfied all the conditions on their part to be performed or satisfied hereunder at or prior to the applicable date.
(e) Prior to the fifth business day following the Effective Date of each post-effective amendment to the Registration Statement that includes or incorporates by reference the audited financial statements for the preceding fiscal year, the Dealer Manager reserves the right to receive from Ernst & Young, LLP or other such independent registered public accountants for the Company, (i) a letter, dated the applicable date, addressed to the Dealer Manager, in form and substance satisfactory to the Dealer Manager, containing statements and information of the type ordinarily included in accountant’s “comfort letters” to placement agents or dealer managers, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited financial statements and certain financial information contained in the Registration Statement and the Prospectus.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the Dealer Manager as follows:
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the Company and the General Partner will not (and will cause its affiliates to not): (1) show or give to any investor or prospective investor or reproduce any material or writing that is marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Units to members of the public and (2) show or give to any investor or prospective investor in a particular jurisdiction any material or writing if such material bears a legend denoting that it is not to be used in connection with the sale of Units to members of the public in such jurisdiction.
(i) abide by and comply with (A) the privacy standards and requirements of the Xxxxx-Xxxxx-Xxxxxx Act of 1999 (the “GLB Act”), (B) the privacy standards and requirements of any other applicable federal or state law, and (C) its own internal privacy policies and procedures, each as may be amended from time to time;
(ii) refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers who have opted out of such disclosures except as necessary to service the customers or as otherwise necessary or required by applicable law; and
(iii) determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers from the Soliciting Dealers (the “List”) to identify customers that have exercised their opt-out rights. If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
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holding subscription funds in respect of Units. Once a minimum of $25,000,010 of subscription funds from the sale of Units (the “Minimum Offering”) has been deposited in the Escrow Account, upon determination by the Company that it intends to break escrow, the Company shall direct the transfer of the sales proceeds to an account owned by or maintained for the sole benefit of the Company. If the Minimum Offering has not been obtained prior to the Termination Date or if there shall be a Termination Date following the receipt of subscriptions following the initial Closing Date, the Escrow Agent shall, promptly following the Termination Date, but in no event more than five (5) business days after the Termination Date, return the subscribers’ funds directly to the subscriber in the form of a check.
6. COVENANTS OF THE DEALER MANAGER. The Dealer Manager covenants and agrees with the Company as follows:
In addition, the Dealer Manager shall, in accordance with applicable law or as prescribed by any state securities administrator, provide, or require in the Soliciting Dealer Agreement that the Soliciting Dealer shall provide, to any prospective investor copies of the Prospectus and any supplements thereto during the course of the Offering and prior to the sale. The Company may provide the Dealer Manager with certain Approved Sales Literature to be used by the Dealer Manager and the Soliciting Dealers in connection with the solicitation of purchasers of the Units. The Dealer Manager agrees not to deliver the Approved Sales Literature to any Person prior to the
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initial Effective Date. If the Dealer Manager elects to use such Approved Sales Literature after the initial Effective Date, then the Dealer Manager agrees that such material shall not be used by it in connection with the solicitation of purchasers of the Units and that it will direct Soliciting Dealers not to make such use unless accompanied or preceded by the Prospectus, as then currently in effect, and as it may be amended or supplemented in the future. The Dealer Manager agrees that it will not use any materials to offer Units other than the Prospectus and Approved Sales Literature provided to the Dealer Manager by the Company for use in the Offering.
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significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company; (ii) the investor has a net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and (iii) an investment in the Units offered in the Offering is otherwise suitable for the investor. The Dealer Manager agrees as to investors to whom it makes a recommendation with respect to the purchase of the Units in the Offering (and each Soliciting Dealer in its Soliciting Dealer Agreement shall agree, with respect to investors to whom it makes such recommendations) to maintain in the files of the Dealer Manager (or the Soliciting Dealer, as applicable) documents disclosing the basis upon which the determination of suitability was reached as to each investor. In making the determinations as to financial qualifications and as to suitability, the Dealer Manager and Soliciting Dealers may rely on information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the Person or any other information known by the Dealer Manager (or Soliciting Dealer, as applicable), after due inquiry. Notwithstanding the foregoing, the Dealer Manager shall not, and each Soliciting Dealer shall agree not to, execute any transaction in the Company in a discretionary account without prior written approval of the transaction by the customer.
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Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act, and the Dealer Manager hereby covenants to remain in compliance with such requirements and shall, upon request by the Company, provide a certification to the Company that, as of the date of such certification (i) its AML Program is consistent with the AML Rules, and (ii) it is currently in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act.
7. EXPENSES.
(a) Subject to Section 7(b), the Dealer Manager shall pay all of its own costs and expenses incident to the performance of its obligations under this Agreement.
(b) The Company agrees to pay all costs and expenses related to:
(i) the Commission’s registration of the offer and sale of the Units with the Commission;
(ii) expenses of printing the Registration Statement and the Prospectus and any amendment or supplement thereto as herein provided;
(iii) fees and expenses incurred in connection with any required filing with FINRA; and
(iv) expenses of qualifying the Units for offering and sale under state blue sky and securities laws, and expenses in connection with the preparation of the Blue Sky Survey.
8. INDEMNIFICATION.
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Company will indemnify, defend and hold harmless the Dealer Manager and the Soliciting Dealers, and their respective Indemnified Parties, from and against any losses, claims, expenses (including reasonable legal and other expenses incurred in investigating and defending such claims or liabilities), damages or liabilities, joint or several, to which the Dealer Manager, Soliciting Dealers, or their respective Indemnified Parties, may become subject under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Company or the General Partner, any material breach of a covenant contained herein by the Company or the General Partner, or any material failure by the Company or the General Partner to perform, its obligations hereunder or to comply with state or federal securities laws applicable to the Offering; (ii) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature or (C) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Units for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “Blue Sky Application”); or (iii) the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereto to make the statements therein not misleading or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will reimburse each Soliciting Dealer or the Dealer Manager, and their respective Indemnified Parties, for any reasonable legal or other expenses incurred by such Soliciting Dealer or the Dealer Manager, and their respective Indemnified Parties, in connection with investigating or defending such loss, claim, expense, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, expense, damage or liability arises out of, or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any post-effective amendment thereof or the Prospectus or any such amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
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omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading, or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto or any Blue Sky Application; (iv) any use of sales literature, including “broker-dealer use only” materials, by the Dealer Manager that is not Approved Sales Literature; or (v) any untrue statement made by the Dealer Manager or omission by the Dealer Manager to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the Offering, in each case, other than statements or omissions made in conformity with the Registration Statement, the Prospectus, any Approved Sales Literature or any other materials or information furnished by or on behalf of the Company. The Dealer Manager will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, expense, damage, liability or action. This indemnity agreement will be in addition to any liability which the Dealer Manager may otherwise have.
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incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such Indemnified Party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed. No indemnifying party shall, without the prior written consent of the Indemnified Parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 8 or Section 9 hereof (whether or not the Indemnified Parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each Indemnified Party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of any Indemnified Party.
9. CONTRIBUTION.
(a) If the indemnification provided for in Section 8 is for any reason unavailable to or insufficient to hold harmless an Indemnified Party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such Indemnified Party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Dealer Manager and the Soliciting Dealer, respectively, from the proceeds
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received in the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Dealer Manager and the Soliciting Dealer, respectively, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
(b) The relative benefits received by the Company, the Dealer Manager and the Soliciting Dealer, respectively, in connection with the proceeds received in the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement shall be deemed to be in the same respective proportion as the total net proceeds from the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement (before deducting expenses), received by the Company, and the total Selling Commissions and Marketing Expense Allowances received by the Dealer Manager and the Soliciting Dealer, respectively, in each case as set forth on the cover of the Prospectus bear to the aggregate offering price of the Units sold in the Offering as set forth on such cover.
(c) The relative fault of the Company, the Dealer Manager and the Soliciting Dealer, respectively, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact related to information supplied by the Company, by the Dealer Manager or by the Soliciting Dealer, respectively, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(d) The Company, the Dealer Manager and the Soliciting Dealer (by virtue of entering into the Soliciting Dealer Agreement) agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable contributions referred to above in this Section 9. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an Indemnified Party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in investigating, preparing or defending against any 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 alleged omission.
(e) Notwithstanding the provisions of this Section 9, the Dealer Manager and the Soliciting Dealer shall not be required to contribute any amount which exceeds (i) the total price at which the Units sold in the Offering to the public by them, less (ii) the amount of any damages which the Dealer Manager and the Soliciting Dealer have otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission.
(f) No party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any party who was not guilty of such fraudulent misrepresentation.
(g) For the purposes of this Section 9, the Dealer Manager’s officers, directors, employees, members, partners, agents and representatives, and each Person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Dealer Manager, and each officer, director, employee, member, partner, agent and representative of the Company, each officer of the
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Company who signed the Registration Statement and each Person, if any, who controls the Company, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Company. The Soliciting Dealers’ respective obligations to contribute pursuant to this Section 9 are several in proportion to the number of Units sold by each Soliciting Dealer in the Offering and not joint.
(i) For Cause (as defined below);
(ii) A court of competent jurisdiction enters a decree or order for relief in respect of the Dealer Manager in any involuntary case under the applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Dealer Manager or for any substantial part of its property or orders the winding up or liquidation of the Dealer Manager’s affairs; or
(iii) The Dealer Manager commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Dealer Manager or for any substantial part of its property, or makes any general assignment for the benefit of creditors, or fails generally to pay its debts as they become due.
As used above, “Cause” shall mean fraud, criminal conduct, willful misconduct or willful breach of the Dealer Manager’s obligations under this Agreement which materially adversely affects the Dealer Manager’s ability to perform its duties; or a material breach of this Agreement by the Dealer Manager which materially affects adversely the Dealer Manager’s ability to perform its duties, provided that (A) Dealer Manager does not cure any such material breach within thirty (30) days of receiving notice of such material breach from the Company, or (B) if such material breach is not of a nature that can be remedied within such period, the Dealer Manager does not diligently take all reasonable steps to cure such breach or does not cure such breach within a reasonable time period.
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at least six (6) months’ written notice to the Company. The Dealer Manager also may terminate this Agreement immediately, subject to the thirty (30)-day cure period for a “for Good Reason” termination due to a material breach of this Agreement, upon written notice of termination from the Dealer Manager to the Company if any of the following events occur:
(i) For Good Reason (as defined below);
(ii) A court of competent jurisdiction enters a decree or order for relief in respect of the Company or any of its subsidiaries in any involuntary case under the applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or any of its subsidiaries or for any substantial part of its property or orders the winding up or liquidation of the Company’s or any of its subsidiaries’ affairs;
(iii) The Company or any of its subsidiaries commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or any of its subsidiaries or for any substantial part of their property, or makes any general assignment for the benefit of creditors, or fails generally to pay its debts as they become due;
(iv) There shall have been a material change in the nature of the business conducted or contemplated to be conducted as set forth in the Registration Statement at the initial Effective Date by the Company and its subsidiaries, considered as one entity;
(v) There shall have occurred a Company MAE, whether or not arising in the ordinary course of business;
(vi) A stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and is not rescinded within 10 business days after the issuance thereof; or
(vii) A material action, suit, proceeding or investigation of the type referred to in Section 1(g) shall have occurred or arisen on or after the initial Effective Date.
As used above, “Good Reason” shall mean fraud, criminal conduct, willful misconduct or willful or grossly negligent breach of the Company’s obligations under this Agreement, or a material breach of this Agreement by the Company, provided that (i) the Company does not cure any such material breach within thirty (30) days of receiving notice of such material breach from the Dealer Manager, or (ii) if such material breach is not of a nature that can be remedied within such period, the Company does not diligently take all reasonable steps to cure such breach or does not cure such breach within a reasonable time period.
(d) DELIVERY OF RECORDS UPON EXPIRATION OR EARLY TERMINATION. Upon the expiration or early termination of this Agreement for any reason, the Dealer Manager shall (i) promptly forward any and all funds, if any, in its possession which were received from investors for the sale of Units into the Escrow Account for the deposit of investor funds, (ii) to the extent not previously provided to the Company, provide a list of all investors who have subscribed for or
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purchased Units and all broker-dealers with whom the Dealer Manager has entered into a Soliciting Dealer Agreement, (iii) notify Soliciting Dealers of such termination, and (iv) promptly deliver to the Company copies of any sales literature designed for use specifically for the Offering that it is then in the process of preparing. Upon expiration or earlier termination of this Agreement, the Company shall pay to the Dealer Manager all compensation to which the Dealer Manager is or becomes entitled under Section 4(d) at such time as such compensation becomes payable.
11. MISCELLANEOUS.
If to the Company:
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000 X 0xx Xxxxxx, Xxxxx 000
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Xxxx Xxxxx, Xxxxx 00000
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Attention: Xxxxx XxXxxxxx
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with a copy to:
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Xxxxxx and Xxxxx, LLP
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0000 XxXxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxxx, Xxxxx 00000
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Attention: Xxxxxxx X. Xxxxxx
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If to the Dealer Manager:
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Xxxxx Xxxxxx Associates, Inc.
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000 Xxxxxxx Xxxxxxxx
XX Xxx 0000
Xxxxxxx, Xxx Xxxx 00000
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Attention: Xxxx X. Xxxxxxx
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with a copy to:
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Pillsbury Xxxxxxxx Xxxx Xxxxxxx LLP
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0000 Xxxxxxxx
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Xxx Xxxx, XX 00000
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Facsimile No.: (000) 000-0000
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Attention: Xxxxx X. Xxxxxxxxxxxx
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If to the General Partner:
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Energy Resources 12 GP, LLC
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000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
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Attention: Xxxxx XxXxxxxx, Chief Financial Officer
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with a copy to:
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Xxxxxx and Xxxxx, LLP
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0000 XxXxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxxx, Xxxxx 00000
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Attention: Xxxxxxx X. Xxxxxx
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Any party may change its address specified above by giving each party notice of such change in accordance with this Section 11(b).
(e) APPLICABLE LAW. This Agreement and any disputes relative to the interpretation or enforcement hereto shall be governed by and construed under the internal laws, as opposed to the conflicts of laws provisions, of the State of New York.
(f) WAIVER. EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Borough of Manhattan, New York City, in respect of the interpretation and enforcement of the terms of this Agreement, and in respect of the transactions contemplated hereby, and each hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and each party hereto hereby irrevocably agrees that all claims with respect to such action or proceeding shall be heard and determined in such a New York State or Federal court.
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(i) THIRD PARTY BENEFICIARIES. Except for the Persons referred to in Section 8 and Section 9, there shall be no third party beneficiaries of this Agreement, and no provision of this Agreement is intended to be for the benefit of any Person not a party to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this Agreement. Except for the Persons referred to in Section 8 and Section 9, no third party shall by virtue of any provision of this Agreement have a right of action or an enforceable remedy against any party to this Agreement. Each of the Persons referred to in Section 8 and Section 9 shall be a third party beneficiary of this Agreement.
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(a) Each of the Company, General Partner and Dealer Manager recognizes and agrees that this Agreement is only with the other parties to this Agreement, and covenants to never assert any claim(s) under this Agreement against any past, present or future member, manager, director, officer, partner, employee, agent, incorporator, manager or unit holder or other owner of equity of any other party (collectively and individually, the “Non-Parties”), other than claims against a Non-Party for fraud or other willful misconduct in connection with this Agreement. Each Party recognizes that the Non-Parties are not the alter ego of, or otherwise liable for, any other Party.
(b) No past, present or future member, manager, director, officer, partner, employee, agent, incorporator, manager or unit holder or other owner of equity of the General Partner or the Company, as such, shall have any liability for any obligations of the Company, the General Partner or otherwise under this Agreement, or for any claim based on, in respect of, or by reason of, this Agreement, other than claims against a Non-Party for fraud or other willful misconduct in connection with this Agreement. The Dealer Manager, any Soliciting Dealers and each of their respective Indemnified Persons waives and releases all such liability. The waiver and release are part of the consideration for the execution of deliver of this Agreement.
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(a) The Dealer Manager shall provide account maintenance services to the Company regarding holders of the Company’s Units who are customers of the Dealer Manager (the “DLA Holders”). The services provided for in this Section 13 shall commence on the date of this Agreement and shall terminate upon the termination of the Offering.
(b) The Dealer Manager will provide the following services to the Company: (i) maintain up-to-date contact and other information regarding DLA Holders and make such information available to the Company upon request, (ii) assist the Company in communicating with DLA Holders and (iii) coordinate the on-going provision of information regarding the Company to DLA Holders as may be required or desirable from time to time.
(c) For providing such services, the Dealer Manager shall be paid an initial one-time fee of $5 for each DLA Holder. In addition, beginning with the first full month after a DLA Holder first acquires Units in his or her account at the Dealer Manager, the Company shall pay the Dealer Manager an annual fee of $10 per such account (pro-rated for the first quarter). The fees payable pursuant to this Section 13(c) are referred to herein as the “Account Maintenance Fees.” The Dealer Manager shall submit to the Company a detailed invoice after each calendar quarter for the Account Maintenance Fees. The Company shall pay the Account Maintenance Fees to the Dealer Manager within 30 days of receipt of the invoice. In no event shall any Account Maintenance Fees with respect to any period be payable after the termination of the Offering, and the total of the Account Maintenance Fees paid pursuant to this Section shall not exceed $500,000.
If the foregoing is in accordance with your understanding of our agreement, kindly sign and return it to us, whereupon this instrument will become a binding agreement between you, the Company and the General Partner in accordance with its terms.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have each duly executed this Exclusive Dealer Manager Agreement as of the day and year set forth above.
By Energy Resources 12 GP, LLC, its general partner
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By:
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Name: Xxxxx XxXxxxxx
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Title: Manager, Chief Financial Officer
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ENERGY RESOURCES 12 GP, LLC
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By:
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Name: Xxxxx XxXxxxxx
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Title: Manager, Chief Financial Officer
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[Signature page to Exclusive Dealer Manager Agreement]
Accepted as of the date first above written:
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XXXXX XXXXXX ASSOCIATES, INC.
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By:
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Name: Xxxx X. Xxxxxxx
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Title: Executive Vice President and Chief
Financial Officer
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[Signature page to Exclusive Dealer Manager Agreement]