EXHIBIT (1) (b)
Selling Dealers Agreement
PDC SECURITIES INCORPORATED
000 X. Xxxx Xxxxxx
X.X. Xxx 00
XXXXXXXXXX, XXXX XXXXXXXX 00000
(000) 000-0000
, 1996
Selling Dealers Agreement
RE: PDC 1996-A, B, C, and D and 1997-A, B, C, and D
(a Series of Limited Partnerships to be organized)
3~
1~
2~
Dear 4~:
We have entered into a Dealer Manager Agreement (the "Dealer Manager
Agreement") with Petroleum Development Corporation, a Nevada corporation
("PDC"), the proposed Managing General Partner of PDC 1996-A, B, C, and D
and 1997-A, B, C, and D, a series of limited partnerships to be formed
under the laws of West Virginia (the "Partnership"), under which we have
agreed to use our best efforts to place with qualified investors
preformation partnership interests in the Partnership ("Units"). PDC and
the Partnership are offering up to $50,000,000 of Units consisting of
2,500 Units at a price of $20,000 per Unit with fractional Units available
as described in the Partnership's Offering Prospectus, dated
(the "Prospectus"), a copy of which has previously been furnished to
you.
In connection with the performance of our obligations under the
Dealer Manager Agreement, we are authorized to engage you as a soliciting
dealer for the offer and sale of Units, to pay you all or a portion of our
commissions and fees for Units sold by you, all as is more fully set forth
herein. In further consideration of your participation in the offering
and sale of the Units, and as an inducement to you to become a soliciting
dealer, PDC, by its execution of this Agreement, agrees to extend to you
certain of the benefits provided to us in the Dealer Manager Agreement, to
indemnify you against certain civil liabilities under the Securities Act
of 1933, as amended (the "Act"). Unless the context otherwise requires,
all of the capitalized terms used herein shall have the meaning given to
such terms in the Dealer Manager Agreement or in the Prospectus. You are
hereby invited to become a soliciting dealer and, as such, to use your
best efforts to procure purchasers of Units in accordance with the terms
and provisions of this Agreement.
1. Representations and Warranties of PDC. All of the
representations and warranties contained in Section 2 of the Dealer
Manager Agreement are incorporated herein by this reference and given to
you by PDC as though fully set forth herein.
2. Offering and Sale of Units.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, we hereby appoint you as a soliciting dealer during the
Offering Period to offer to potential investors in the Partnership in
MEMBER
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD)
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC)
accordance with the terms of the Prospectus up to 2,500 Units, and you
agree to use your best efforts as soliciting dealer, promptly following
the Effective Date, to offer and sell such number of Units to potential
investors at the price and in accordance with the terms stated in the
Prospectus.
(b) All sales of Units will be conditioned upon acceptance by
PDC of the Subscriptions Documents of each subscriber to Units consisting
of the Subscription Agreement, duly executed by each such subscriber and
accompanied by payment of the purchase price of Units subscribed to by
each subscriber. PDC shall have the right, in its sole discretion, to
reject the Subscription of any potential purchaser of Units.
(c) The offering of Units by you will be made to potential
investors solely in the states in which you are registered to sell and
listed in Exhibit A to this Agreement.
(d) The Units will be offered and sold by you only to persons
who warrant or represent that they or their beneficiaries meet the
financial suitability requirements as set forth in the Prospectus and such
other conditions as may be required by the states in which the Units are
offered or sold.
(e) Subject to the terms and conditions herein set forth, we
agree that we shall pay to you commissions equal to 8% and a due diligence
fee of 2% (which 2% fee expressly includes an expense allowance and
marketing support fees, as xxxxx as due diligence fees) of the Partnership
Subscriptions of subscribers whose Subscriptions were obtained by you in
your capacity as soliciting dealer pursuant to this Agreement, such
commissions to be paid on the date commissions are paid to us pursuant to
the Dealer Manager Agreement. Prior to the time the partnership has been
formed and funded, the Managing General Partner will advance funds for
payment of sales commissions and selling expenses for units which have
been accepted and cleared from its own funds.
(f) Notwithstanding the provisions of Sections 2(e) of this
Agreement, you understand and agree that no commissions, fees or other
compensation shall be payable to us or to you if PDC has not received and
accepted Subscriptions aggregating at least $1,000,000 by the Termination
Date.
3. Subscription Payments.
(a) Payments received by us or you for Subscriptions shall be
made payable to "PNC Bank N.A. as Escrow Agent for PDC 1996-A [B, C, or D,
or 1997-A, B, C, or D, as the case may be] Limited Partnership".
(b) All such funds shall be transferred by you by noon of the
next business day after receipt to PDC Securities Incorporated for
transfer to the Bank Escrow Agent by noon of the next business day after
receipt for deposit in escrow in accordance with the Prospectus. In the
event that the ($1,000,000) Minimum Offering is not achieved on or before
the Termination Date, all funds held in the Escrow Account shall, within
10 days after the Termination Date, be returned directly to the respective
subscribers, together with a pro rata share of any interest earned
thereon. In the event the Minimum Offering is achieved on or before the
Termination Date, all funds held in the Escrow Account attributable to
subscribers whose Subscriptions are rejected by PDC, together with any
interest earned thereon, as well as any interest earned on the funds of
subscribers whose Subscriptions are accepted by PDC, shall, within 10 days
after the filing of the Certificate, be returned or disbursed, as the case
may be, to such subscribers.
2
4. Suitability
(a) As a soliciting dealer, you are aware of the suitability
standards, as set forth in the Prospectus, that an offeree must meet and
represent. As such, you will make reasonable inquiry to assure that there
is compliance with such standards.
(b) In recommending the purchase of Units in the Partnership,
you shall:
(1) Have reasonable grounds to believe, on the basis of
information obtained from the offeree concerning his investment
objectives, other investments, financial situation and needs, and any
other information known by you or any associated person, that:
(i) the offeree is or will be in a financial
position appropriate to enable him to realize to a significant extent the
benefits described in the Prospectus;
(ii) the offeree has a fair market net worth
sufficient to sustain the risks inherent in the program, including loss of
investment and lack of liquidity;
(iii) the program is otherwise suitable for the
offeree; and
(2) Maintain in your file documents disclosing the basis
upon which the determination of suitability was reached as to each
offeree.
(c) Notwithstanding the provisions of subsection (b) above, you
shall not execute any transaction of Units of the Partnership in any
discretionary account without prior written approval of the transaction by
the offeree.
(d) Prior to executing a purchase transaction of Units of the
Partnership, you shall inform the offeree of all the pertinent facts
relating to the liquidity and marketability of the Units during the term
of the Partnership.
5. Disclosure.
(a) Prior to participating in the offering, you shall have
reasonable grounds to believe, based on information made available to you
by PDC through a prospectus or other materials, that all material facts
are adequately and accurately disclosed and provide a basis for evaluating
the program:
(b) In determining the adequacy of disclosed facts pursuant to
subsection (a) hereof, you shall obtain information on material facts
relating at a minimum to the following, if relevant in view of the nature
of program:
(1) items of compensation;
(2) physical properties;
(3) tax aspects;
(4) financial stability and experience of PDC;
(5) the program's conflicts and risk factors; and
(6) appraisals and other pertinent reports.
(c) For the purpose of subsections (a) or (b) hereof, you may
rely upon the results of an inquiry conducted by another NASD member or
members, provided that:
3
(1) the member or persons associated with a member has
reasonable grounds to believe that such inquiry was conducted with due
care;
(2) the results of the inquiry were provided to you with
the consent of the member or members conducting or directing the inquiry;
and
(3) no member that participated in the inquiry is a
sponsor of the program or an affiliate of such sponsor.
6. Covenants and Undertakings of the Soliciting Dealer.
(a) You agree to comply with all of the covenants applicable to
us in Section 6 of the Dealer Manager Agreement.
(b) You expressly represent and undertake that you will fully
comply with Sections 8, 24, 25 and 36 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
7. Closing Conditions. Your obligation to deliver Subscription
Documents to PDC for acceptance by it is subject to the satisfaction on or
before the Closing Date of the conditions set forth in Section 9 of the
Dealer Manager Agreement. If any condition to your obligations hereunder
shall not have been fulfilled when as required by this Agreement to be
fulfilled, you may waive any such condition which has not been fulfilled,
extend the time for its fulfillment or terminate this Agreement. In the
event that you elect to terminate this Agreement, all Subscriptions
Documents, Subscription funds held, checks and other documents and
instruments delivered to you for the purchase of the Units shall be
returned to the subscribers together with their pro rata share of any
interest earned on Subscriptions funds, accompanied by a notice from you
of the cancellation and termination of the offering of the Units.
8. Indemnification.
(a) Subject to the conditions set forth below, PDC and PDC
Securities Incorporated ("PDC Securities"). agree to indemnify and hold
harmless you, each of your officers, directors and employees and each
person, if any, who controls you within the meaning of Section 15 of the
Act, against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing for, defending against or
settling an litigation, commenced or threatened, or any claim whatsoever)
arising out of or based upon (i) any alleged untrue statement of a
material fact contained in the Prospectus as from time to time amended or
supplemented or the omission or alleged omission therefrom a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon
and in conformity with written information furnished to PDC with respect
to you, by you or on your behalf expressly for use in the Prospectus or
any amendment or supplement thereof, and (ii) the failure or alleged
failure of PDC Securities Incorporated or PDC to comply with requirements
of federal and state securities law.
If any action is brought against you or any such officer, director,
employee or controlling person in respect of which indemnity may be sought
against PDC pursuant to the foregoing paragraph, you or such officer,
director, employee or controlling person shall promptly notify PDC in
writing of the institution of such action and PDC shall assume the defense
of such action, including the employment of counsel (reasonably
satisfactory to you or such officer, director, employee or controlling
person) and payment of expenses. You or any such officer, director,
4
employee or controlling person shall have the right to employ personal
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of you or such officer, director, employee or
controlling person unless the employment of such counsel shall have been
authorized in writing on behalf of PDC in connection with the defense of
such action or PDC shall not have employed such counsel to have charge of
the defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to PDC (in which
case PDC shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events the
reasonable fees and expenses of not more than one additional counsel for
you and such officers, directors, employees and controlling person (which
firm shall be designated in writing by you) shall be borne by PDC.
Anything in this paragraph to the contrary notwithstanding, PDC shall not
be liable for any settlement of any such claim or action effected without
its written consent, which shall not be withheld unreasonably. The
indemnity agreement contained in this Section 8(a) and the warranties and
representations contained in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of you or any
such officer, director, employee or controlling person, and shall survive
any termination of this Agreement. You agree promptly to notify PDC of
the assertion of any claim or of the commencement of any litigation or
proceedings against you or PDC or the Partnership in connection with the
issuance and sale of the Units or in connection with the Prospectus.
(b) You agree to indemnify and hold harmless, PDC Securities
Incorporated, PDC, the Partnership and each of the officers and directors
of PDC and each other person, if any, who controls PDC or the Partnership
within the meaning of Section 15 of the Act to the same extent as the
foregoing indemnity from PDC to you but only with respect to (i) the
statements or omissions, if any, made in the Prospectus or any amendment
or supplement thereof in reliance upon, and in conformity with, written
information furnished with respect to you, by you or on your behalf
expressly for use in such Prospectus or any amendment or supplement
thereof and (ii) the failure or alleged failure of you to comply with the
requirements of federal or state securities law. In case any action shall
be indemnified based on such Prospectus or amendment or supplement thereof
and in respect of which indemnity may be sought against you, you shall
have the rights and duties given to PDC and each other person so
indemnified shall have the rights and duties given to you by the
provisions of the second paragraph of Section 8(a) above. The indemnity
agreements contained in this Section 8(b) shall remain in full force and
effect regardless of any investigation made by or on behalf of any person
indemnified herein, and shall survive any termination of this Agreement.
PDC agrees promptly to notify you of the assertion of any claim, or of the
commencement of any litigation or proceeding against PDC or the
Partnership or any officer or director of PDC or any person who controls
the Partnership within the meaning of Section 15 of the Act, in connection
with the issuance and sale of the Units or in connection with the
Prospectus.
9. Representations and Agreement to Survive. Except as the context
otherwise requires, all representations, warranties and agreements
contained in this Agreement shall remain operative and in full force and
effect and shall survive the Closing Date.
10. Effective Date, Term and Termination of This Agreement.
(a) This Agreement shall become effective on the Effective
Date. You or PDC may elect to prevent this Agreement from becoming
effective without liability of any party to any other party, except as
provided in subsection (c) of this Section 10, by giving notice of such
election to the other parties hereto before the time this Agreement
otherwise would become effective.
5
(b) You shall have the right to terminate this Agreement at any
time during the Offering Period if any representation or warranties
hereunder shall be found to have been incorrect or misleading or PDC shall
fail, refuse or be unable to perform any of its agreements hereunder or to
fulfill any condition of your obligations hereunder of if the Prospectus
shall have been amended or supplemented despite your objection to such
amendment or supplement or (i) if all trading on the New York Stock
Exchange or the American Stock Exchange (in this Section collectively
called "Exchange") shall have been suspended, or minimum or maximum prices
for trading generally shall have been required on the Exchange by Exchange
or by order of the Securities and Exchange Commission or any other
governmental authority having jurisdiction or (ii) if the United States
shall have become involved in a war or major hostilities or (iii) if a
banking moratorium has been declared by a state or Federal authority or
(iv) if PDC or its properties shall have sustained a material or
substantial loss by fire, flood, accident, earthquake or other calamity or
malicious act which, whether or not said loss shall have been insured,
will in your opinion make it inadvisable to proceed with the offering and
sale of the Units; or if there shall have been such change in the
condition or prospects of the Partnership or PDC or in the levels of the
prime interest rate or long-term mortgage rate or in the condition of
securities markets generally as in your judgment would make it inadvisable
to proceed with the offering and sale of the Units.
(c) If for any reason this Agreement shall not become effective
or the offering hereunder is terminated, PDC shall not have any liability
to you except for such liabilities, if any, as may exist or thereafter
arise under Section 8 hereof.
11. Notices.
(a) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be
mailed, delivered or telegraphed and confirmed to you at the address on
page 1 of this agreement if sent to us or PDC and/or the Partnership shall
be mailed, delivered, telegraphed and confirmed to us or PDC and/or the
Partnership at 000 X. Xxxx Xxxxxx, X.X. Xxx 00, Xxxxxxxxxx, Xxxx Xxxxxxxx
00000.
(b) Notice shall be deemed to be given by you to us or PDC or
the Partnership or by us, PDC or the Partnership to you as of the third
business day after the same is mailed or telegraphed as provided in
Section 10 (a) above.
12. Parties. This Agreement shall inure solely to the benefit of
and shall be binding upon you, us and, to the extent provided herein, PDC
and the respective successors and assigns of such parties. Nothing
expressed or mentioned in this Agreement is intended or shall be construed
to give any person or corporation, other than the parties hereto and their
respective successors and assigns and the controlling persons, officers,
directors and employees, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained;
this Agreement and all conditions and provisions hereof being intended to
be and being for the sole and exclusive benefit of the parties hereto and
their respective successors and assigns and said controlling persons and
said officers, and directors and employees, and for the benefit of no
other person or corporation. No purchaser of any of the Units from you or
us shall be construed a successor or assign by reason merely of such
purchase.
13. Construction. This Agreement shall be construed in accordance
with the laws of the State of West Virginia.
6
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between us.
Very truly yours,
PDC SECURITIES INCORPORATED
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
BY
TITLE President
Accepted as of the date first above written.
BY
TITLE
PETROLEUM DEVELOPMENT CORPORATION hereby agrees to be bound by the
terms and provisions contained in this Agreement which are applicable to
it including the indemnification provisions of Section 8.
PETROLEUM DEVELOPMENT CORPORATION
BY
TITLE President
7
