PARTICIPATING BROKER AGREEMENT
COMMONWEALTH INCOME & GROWTH FUND IV
LIMITED PARTNERSHIP
THIS PARTICIPATING BROKER AGREEMENT (the "Agreement") is made and
entered into as of the day indicated on Exhibit A attached hereto and by this
reference incorporated herein, between Commonwealth Capital Securities Corp., a
Pennsylvania corporation (the "Dealer Manager"), and the Participating Broker
(the "Participating Broker") identified in Exhibit A hereto.
WHEREAS COMMONWEALTH INCOME & GROWTH FUND IV, is a limited partnership
(the "Partnership") duly organized under the Revised Uniform Limited Partnership
Act (1986) as enacted in the Commonwealth of Pennsylvania; and
WHEREAS, COMMONWEALTH INCOME & GROWTH FUND, INC., a Pennsylvania
corporation is serving as the general partner (the "General Partner") of the
Partnership; and
WHEREAS, the Partnership proposes to offer and sell up to 750,000 Units
of limited partnership interest in the Partnership ("Units") to the general
public, pursuant to a public offering (the "Offering") of the Units which shall
be registered with the Securities and Exchange Commission ("SEC"); and
WHEREAS, the Dealer Manager, which has heretofore entered into an
agency agreement with the Partnership pursuant to which it has been designated
the Dealer Manager to sell and manage the sale by others of the Units pursuant
to the terms of such agreement and the Offering (the "Agency Agreement"), is a
corporation incorporated in and presently in good standing in the Commonwealth
of Pennsylvania, and is presently registered with the Pennsylvania Securities
Commission and with the National Association of Securities Dealers, Inc.
("NASD") as a securities broker-dealer qualified to offer and sell to members of
the public securities of the type represented by the Units; and
WHEREAS, the Participating Broker is an entity, as designated in
Exhibit A hereto, organized and presently in good standing in the state or
states designated in Exhibit A hereto, presently registered as a broker-dealer
with the NASD, and presently licensed by the appropriate regulatory agency of
each state in which it will offer and sell the Units as a securities
broker-dealer qualified to offer and sell to members of the public securities of
the type represented by the Units; and
WHEREAS, the Partnership has filed with the SEC a registration
statement on Form S-1, including a preliminary or final prospectus, for the
registration of the Units under the Securities Act of 1933, as amended (the
"Securities Act") (such registration statement, as it may be amended, and the
prospectus and exhibits on file with the SEC at the time the registration
statement becomes effective, including any post-effective amendments or
supplements to such registration statement or prospectus after the effective
date of registration, being herein respectively referred to as the "Registration
Statement" and the "Prospectus"); and
WHEREAS, the offer and sale of the Units shall be made pursuant to the
terms and conditions of the Registration Statement and the Prospectus and,
further, pursuant to the terms and conditions of all applicable securities laws
of all states in which the Units are offered and sold; and
WHEREAS, the Dealer Manager desires to retain the Participating Broker
to use its best efforts to sell the Units, and the Participating Broker is
willing and desires to serve as a broker for the Dealer Manager for the sale of
the Units upon the following terms and conditions;
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NOW THEREFORE, in consideration of the premises and terms and
conditions thereof, it is agreed between the Dealer Manager and the
Participating Broker as follows.
1. Engagement.
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(a) Subject to the terms and conditions herein set forth, the
Dealer Manager hereby engages the Participating Broker and the Participating
Broker hereby agrees and covenants to use its best efforts to sell for the
account of the Partnership a portion of the Units described in the Registration
Statement, as specified on Exhibit A hereto. The Participating Broker hereby
accepts such engagement and covenants, warrants and agrees to sell the Units
according to all of the terms and conditions of the Registration Statement, all
applicable state and federal laws, including the Securities Act and any and all
regulations and rules pertaining thereto, heretofore or hereafter issued by the
SEC and the NASD, including but not limited to NASD'S Rules of Fair Practice.
(b) The Participating Broker shall use its best efforts,
promptly following receipt of written notice from the Dealer Manager of the
effective date of the Registration Statement, to sell the Units in such
quantities and for the account of such Partnership as shall be agreed between
the Participating Broker and Dealer Manager and specified on Exhibit A hereto,
and to such persons and according to all such terms as are contained in the
Registration Statement and the Prospectus. The Participating Broker shall comply
with all requirements set forth in the Registration Statement and Prospectus.
The Participating Broker understands and will advise potential investors that
all sales of the Units will be for Units of limited partnership interest in
COMMONWEALTH INCOME & GROWTH FUND IV. The Participating Broker shall use and
distribute, in connection with the offer and sale of the Units, only the
Prospectus and such sales materials and advertising as shall conform in all
respects to any restrictions of local law and the applicable requirements of the
Securities Act and which has been approved in writing by the General Partner or
the Dealer Manager. The Participating Broker will make a record of its
distribution of each preliminary prospectus, Participating Broker will, upon the
request of the Dealer Manager, promptly forward copies thereof to each person to
whom Participating Broker has theretofore distributed a preliminary prospectus.
The Dealer Manager reserves the right to establish such additional procedures as
it may deem necessary to ensure compliance with the requirements of the
Registration Statement, and the Participating Broker shall comply with all such
additional procedures to the extent that it has received written notice thereof.
(c) The Participating Broker shall be permitted to accept
subscriptions for the Units (the "Subscription(s)") by telephone from residents
of those states identified on Schedule A attached hereto and made a part hereof
provided that (1) the registered representative and branch manager of the
Participating Broker execute the subscription agreement attached as Appendix III
to the Prospectus (the "Subscription Agreement") on behalf of any investor who
subscribes for Units by telephone; and (2) the Participating Broker does not
charge any additional fees, including but not limited to, fees relating to the
opening of an account with the Participating Broker, to any investor who
telephonically or orally subscribes for Units. It is understood and agreed
between the Dealer Manager and the Participating Broker that the Dealer Manager
may, in its discretion, change, modify, add to or delete from the list of states
identified on Schedule A. Any such modification shall be effective three (3)
days from the date written notice to the Participating Broker has been mailed by
the Dealer Manager. The Participating Broker shall not execute a Subscription
Agreement on behalf of any investor who subscribes for Units by telephone unless
such investor has specifically authorized the registered representative and the
branch manager of the Participating Broker to execute the Subscription Agreement
on behalf of such investor and has made or agreed to make full payment for all
Units covered by such Subscription Agreement. Notwithstanding anything contained
herein to the contrary, the Participating Broker shall have no authority to make
representations on behalf of an investor or to initial representations contained
in the Subscription Agreement on behalf of an investor. In connection with
telephonic or other oral Subscriptions for Units, the Participating Broker
represents and warrants as follows: (i) that a Prospectus was delivered to the
investor before the investor made a decision to invest; (ii) that the investor
meets the suitability requirements set forth in the Prospectus; and (iii) that,
in compliance with Appendix F to Article 3, Section 34 of the NASD's Rules of
Fair Practice, the Participating Broker has reasonable grounds to believe and
does believe that the investment in the Partnership is suitable for the
investor, based upon information supplied by the investor to such Participating
Broker.
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(d) Notwithstanding anything to the contrary contained in
Section 2 of this Agreement, in the event that the Dealer Manager pays any
commission to the Participating Broker for sale of one or more Units, including,
but not limited to, those Units sold pursuant to a telephonic or other oral
Subscription therefore, where representatives of the Participating Broker
execute the Subscription Agreement relating to such Units, and the Subscription
is rescinded as to one or more of the Units covered by such Subscription, the
Dealer Manager shall decrease the next payment of commission or other
compensation otherwise payable to the Participating Broker by the Dealer Manager
under this Agreement by an amount equal to the commissions rate established in
Section 2 and Exhibit A of this Agreement, multiplied by the number of Units as
to which the Subscription is rescinded. In the event that no payment of
commissions or other compensation is due to the Participating Broker after such
withdrawal occurs, the Participating Broker shall pay the amount specified in
the preceding sentence to the Dealer Manager within ten (10) days following
mailing of notice to the Participating Broker by the Dealer Manager stating the
amount owed as a result of rescinded Subscriptions.
(e) All monies received for purchase of any of the Units shall
be forwarded by the Participating Broker to the Dealer Manager for delivery to
Chase Manhattan Bank (the "Escrow Agent") or, if final internal supervisory
review is conducted at a different location, to such final review office by the
end of such next business day, which in turn will transmit same to the Escrow
Agent by the end of the next business day following its receipt thereof, where
such monies will be deposited in an escrow account established by the
Partnership solely for such Subscriptions ("Escrow Account") until such time (if
any) that such monies are deliverable to the Partnership pursuant to the escrow
agreement between the Partnership and the Escrow Agent ("Escrow Agreement"),
except the Participating Broker shall return any check not made payable to
"Chase Manhattan Bank, Escrow Agent" directly to the Subscriber who submitted
the check. After such time that monies are deliverable to the Partnership, the
Participating Broker may accept checks made payable to either the Partnership or
the Escrow Agent. Subscriptions will be executed as described in the
Registration Statement or as directed by the Dealer Manager. The monies shall be
deposited or transmitted by the Participating Broker to the Dealer Manager no
later than the close of business of the next business day after receipt of the
Subscription documents by the Participating Broker; provided, however, that if
the Participating Broker maintains a branch office, the branch office shall
transmit the Subscription documents and check to the Participating Broker by the
close of business on the first business day following their receipt by the
branch office and the Participating Broker shall review the Subscription
documents and check to ensure their proper execution and form and, if they are
acceptable, transmit the check to the Dealer Manager by the close of business on
the first business day after their receipt by the Participating Broker. Pursuant
to the terms of the Agency Agreement, the Dealer Manager will transmit the check
or monies to the Escrow Agent by no later than the close of business on the next
business day after the check is received from the Participating Broker, unless a
final supervisory review is being conducted as set forth above, in which
instance the final review office will transmit the same to the Escrow Agent by
the end of the next business day following receipt thereof.
(f) During the term of this Agreement, the Dealer Manager
shall have authority to take such action as it may deem advisable in respect to
all matters pertaining to the performance of the Participating Broker under this
Agreement.
(g) The Units shall be offered and sold by the Participating
Broker only where the Units may be legally offered and sold, and only to such
persons in such states who shall be legally qualified to purchase the Units. The
Dealer Manager shall give the Participating Broker written notice at the time of
effectiveness of those states in which the offering and sale of Units may be
made, and shall amend such notice thereafter as additional states are added; no
Units shall be offered or sold in any other states.
(h) The Participating Broker shall have no obligation under
this Agreement to purchase any of the Units for its own account.
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(i) The Participating Broker will use every reasonable effort
to assure that Units are sold only to investors who:
(1) meet the investor suitability standards,
including the minimum income and net worth standard established by the
Partnership, and minimum purchase requirements set forth in the Registration
Statement;
(2) can reasonably benefit from investment in the
Partnership based on the prospective investor's overall investment objectives
and portfolio structure;
(3) is able to bear the economic risk of the
investment based on the prospective investor's overall financial situation; and
(4) has apparent understanding of: (a) the
fundamental risks of the investment; (b) the risk that the prospective investor
may lose the entire investment; (c) the lack of liquidity of the Units; (d) the
restrictions on transferability of the Units; (e) the background and
qualifications of the General Partner; and (f) the tax consequences of an
investment in the Units.
(j) The Participating Broker will make the determinations
required to be made by it pursuant to Section 1 (i) based on information it has
obtained from a prospective investor, including, at a minimum, but not limited
to, the prospective investor's age, investment objectives, investment
experience, income, net worth, financial situation, other investments of the
prospective investor, as well as any other pertinent factors deemed by the
Participating Broker to be relevant.
(k) In addition to the complying with the provisions of
Section 1 (i) above, and not in limitation of any other obligations of the
Participating Broker to determine suitability imposed by state or federal law,
the Participating Broker agrees that it will comply fully with all of the
provisions of Section 3 and 4 of Appendix F to the NASD's Rules of Fair
Practice, including specifically the following provisions:
(1) The Participating Broker shall have reasonable
grounds to believe and shall believe, based upon information provided by the
investor concerning the investor's other investments, financial situation and
needs, and upon any other information known by the Participating Broker, that
(a) each investor to whom the Participating Broker sells Units is or will be in
a financial position appropriate to enable the investor to realize to a
significant extent the benefits (including tax benefits) of an investment in the
Units, (b) each investor to whom the Participating Broker sells Units has a net
worth sufficient to sustain the risks inherent in an investment in the Units
(including potential loss and lack of liquidity), and (c) the Units otherwise
are or will be suitable investment for each investor to whom it sells Units, and
the Participating Broker shall maintain files disclosing the basis upon which
the determination of suitability was made;
(2) The Participating Broker shall not execute any
transaction involving the purchase of Units in a discretionary account without
prior written approval of the transaction by the investor;
(3) The Participating Broker shall have reasonable
grounds to believe and shall believe, based upon the information made available
to it, that all material facts are adequately and accurately disclosed in the
Registration Statement and provide a basis for evaluating the Units;
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(4) In making the determination set forth in
subparagraph (3) above, the Participating Broker shall evaluate items of
compensation, physical properties, tax aspects, financial stability and
experience of the sponsor, conflicts of interest and risk factors, appraisals,
as well as any other information deemed pertinent by it;
(5) If the Participating Broker relies upon the
results of any inquiry conducted by another member of the NASD with respect to
the obligations set forth in Section 1 (k)(3) or (4) above, the Participating
Broker shall have reasonable grounds to believe and shall believe that such
inquiry was conducted with due care, that the member or members conducting or
directing the inquiry consented to the disclosure of the results of the inquiry
and that the person who participated in or conducted the inquiry is not a
sponsor or an affiliate of the sponsor of the Partnership; and
(6) Prior to executing a purchase transaction in the
Units, the Participating Broker shall have informed the prospective investor of
all pertinent facts relating to the liquidity and marketability of the Units.
(l) The Participating Broker agrees that it will comply with
Section 8, 24 and 36 of Article III of the NASD's Rules of Fair Practice.
(m) The Participating Broker agrees to retain in its files,
for a period of at least 6 years, information which will establish that each
purchaser of Units falls within the permitted class of investors.
(n) The Participating Broker shall not, directly or
indirectly, pay or award any finder's fees, commissions or other compensation to
any persons engaged by a potential Limited Partner for investment advice as an
inducement to such advisor to advise the potential investor to purchase Units in
the Partnership.
(o) The Participating Broker either (i) shall not purchase
Units for its own account or (ii) shall hold for investment any Units purchased
for its own account.
(p) The Participating Broker hereby confirms that it is
familiar with Securities Act Release No. 4968 and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to
the distribution of preliminary and final prospectuses, and confirms that it has
and will comply therewith.
(q) The Participating Broker represents and warrants that it
is (i) an entity, as designated in Exhibit A hereto, organized and presently in
good standing in the state or states designated in Exhibit A hereto, (ii) duly
registered as a broker-dealer under the provisions of the Exchange Act, and the
regulations promulgated thereunder, (iii) a member in good standing of NASD;
(iv) presently licensed by the appropriate regulatory agency of each state in
which it will offer and sell the Units as a securities broker-dealer qualified
to offer and sell to members of the public securities of the type represented by
the Units; and (v) neither Participating Broker nor any of Participating
Broker's officers, directors or agents is the subject of any federal or state
administrative or judicial proceeding or order which would disqualify it from
participating in offerings registered under the Securities Act.
2. Compensation of Participating Broker.
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The Dealer Manager shall pay the Participating Broker, as compensation
for all services to be rendered by the Participating Broker hereunder, a
commission equal to 8.0% on sales of Units by such Participating Broker, as set
forth in Exhibit A hereto, subject to reduction as specified in the Prospectus.
The Dealer Manager, in its sole discretion, may reallow to the Participating
Broker from its Dealer Manager fee, up to an additional 1.0% on sales of Units
by such Participating Broker, based on such factors as the number of Units sold
by the Participating Broker, bona fide due diligence expenses incurred by the
Participating Broker. Such commission rates shall remain in effect during the
term of this Agreement unless otherwise changed by a written agreement between
the parties hereto. A sale of Units shall be deemed to be completed only after a
Partnership receives a properly completed Subscription Agreement for Units of
such Partnership from the Participating Broker evidencing the fact that the
investor had received a final Prospectus for a period of not less than five full
business days, together with payment of the full purchase price of each
purchased Unit of such Partnership from a buyer who satisfies each of the terms
and conditions of the Registration Statement and Prospectus, and only after such
Subscription Agreement has been accepted in writing by the General Partner of
the Partnership. Such compensation shall be payable to the Participating Broker
by the Dealer Manager after such acceptance of the subscription agreement;
provided, however, that compensation or commissions shall not be paid by the
Dealer Manager (i) other than from funds received as compensation or commissions
from the Partnership for the sale of Units; (ii) until such time as
Subscriptions for a minimum of 75,000 Units of such Partnership ($1,500,000)
have been received and approved by the General Partner, and deposited into the
Escrow Account provided for in Section 1(e) hereof; (iii) until any and all
compensation or commissions payable by such Partnership to the Dealer Manager
have been received by the Dealer Manager; and (iv) the commission payable to any
broker-dealer or salesman exceeds the amount allowed by any regulatory agency.
The Partnership (and the Dealer Manager) may pay reduced commissions or may
eliminate commissions on certain sales of Units in accordance with, and on the
terms set forth in, the following five paragraphs (including the following
table) of this Section 2, which reduction or elimination of commissions will
not, however, change the net proceeds to the Partnership.
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A registered principal or representative of the Dealer Manager or a
Participating Broker, when purchasing on its own behalf, may purchase Units net
of all or a portion of the 8% selling commission. In connection with purchases
of certain minimum numbers of Units, the amount of commissions otherwise payable
to the Dealer Manager or a Participating Broker, shall be reduced in accordance
with the following schedule:
Dollar Amount Reallowed Commissions
of Units Purchase Price on Sales/Unit
Purchased Per Unit Percent
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$1,000 - $ 250,000 $20.00 8.0%
$250,020 - $ 350,000 $19.80 7.0%
$350,020 - $ 500,000 $19.60 6.0%
$500,020 - $ 750,000 $19.40 6.0%
$750,020 - $1,000,000 $19.20 5.0%
$1,000,020 or more $19.00 4.0%
Subscriptions for Units of COMMONWEALTH INCOME & GROWTH FUND IV may not
be combined in determining the volume discount to which an investor may be
entitled. Any such reduction in commissions will be credited to the purchaser as
defined below ("Purchaser"), by reducing the total purchase price otherwise
payable by the Purchaser.
Subscriptions may be combined for the purpose of determining the volume
discounts in the case of Subscriptions made by any Purchaser, provided all such
units are purchased through the same Participating Broker or through the Dealer
Manager. The volume discount will be prorated among the separate Subscribers
considered to be a single Purchaser.
Any request to combine more than one Subscription must be made in
writing in a form satisfactory to the General Partner and must set forth the
basis for such request. Any such request will be subject to verification by the
Dealer Manager that all of such Subscriptions were made by a single Purchaser.
If a Purchaser does not reduce the per Unit purchase price, the excess purchase
price over the discounted purchase price will be returned to the actual separate
Subscribers for Units.
For purposes of such volume discounts, Purchaser is defined as: (i) an
individual, his or her spouse, and their children under the age of 21, who
purchase the Units for his or her or their own accounts, and all pension or
trust funds established by each such individual; (ii) a corporation,
partnership, association, joint-stock company, trust fund, or any organized
group of persons, whether incorporated or not (provided that the entities
described in this clause (ii) must have been in existence for at least six
months before purchasing the Units and must have formed such group for a purpose
other than to purchase the Units at a discount); (iii) an employee's trust,
pension, profit-sharing, or other employee benefit plan that qualifies under
Section 401 of the Internal Revenue Code of 1986, as amended; and (iv) all
pension, trust, or other funds are maintained by a given bank. In addition, the
General Partner, in its sole discretion, may aggregate and combine separate
subscriptions for Units received during the Offering from (i) the Dealer Manager
or the same Participating Broker; (ii) investors whose accounts are managed by a
single investment adviser registered under the Investment Advisers Act of 1940;
(iii) investors over whose accounts a designated bank, insurance company, trust
company, or other entity exercises discretionary investment responsibility, or
(iv) a single corporation, partnership, trust association, or other organized
group of persons, whether incorporated or not, and whether such subscriptions
are by or for the benefit of such corporation, partnership, trust association,
or group.
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3. Association with Other Dealers.
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It is expressly understood between the Dealer Manager and the
Participating Broker that the Dealer Manager may cooperate with other
broker-dealers who are registered as broker-dealers with the NASD and duly
licensed by the appropriate regulatory agency of each state in which they will
offer and sell the Units of the Partnership. Such other participating
broker-dealers may be engaged by the Dealer Manager as brokers on terms and
conditions identical or similar to this Agreement and shall receive such rates
of commission as are agreed to between the Dealer Manager and the respective
other participating broker-dealers and as are in accordance with the terms of
the Registration Statement. The Participating Broker understands that, to that
extent, such other participating broker-dealers shall compete with the
Participating Broker in the sale of the Units. If the participating
broker-dealers, including the Participating Broker, among themselves, should be
deemed to constitute a partnership for Federal income tax purposes, then
Participating Broker hereby elects to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and
agrees not to take any position inconsistent with that election. Participating
Broker further hereby authorizes the Dealer Manager, in its discretion, to
execute and file on behalf of the Participating Broker such evidence of that
election as may be required by the Internal Revenue Service.
4. Conditions of the Participating Broker's Obligations.
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The Participating Broker's obligations hereunder are subject, during
the term of this Agreement and the Offering, to: (a) the performance by the
Dealer Manager of its obligations hereunder; and (b) the conditions that: (i)
the Registration Statement shall become and remain effective, and (ii) no stop
order shall have been issued suspending the effectiveness of the Offering.
5. Conditions to the Dealer Manager's Obligations.
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The obligations of the Dealer Manager hereunder are subject, during the
term of this Agreement and the Offering, to the conditions that: (a) at the
effective date of the Registration Statement and thereafter during the term of
this Agreement while any Units remain unsold, the Registration Statement shall
remain in full force and effect authorizing the offer and sale of the Units; (b)
no stop order suspending the effectiveness of the Offering or other order
restraining the offer or sale of the Units shall have been issued nor
proceedings therefor initiated or threatened by any state regulatory agency or
the SEC; and (c) the Participating Broker shall have satisfactorily performed
all of its obligations hereunder.
6. Covenants of the Dealer Manager.
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The Dealer Manager covenants, warrants and represents, during the full
term of this Agreement, that:
(a) It shall use its best efforts to cause the Partnerships to
maintain the effectiveness of the Registration Statement and to file such
applications or amendments to the Registration Statement as may be reasonably
necessary for that purpose.
(b) It shall advise the Participating Broker whenever and as
soon as it receives or learns of any order issued by the SEC, any state
regulatory agency or any other regulatory agency which suspends the
effectiveness of the Registration Statement or prevents the use of the
Prospectus or which otherwise prevents or suspends the offering or sale of the
Units, or receives notice of any proceedings regarding any such order.
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(c) It shall use its best efforts to prevent the issuance of
any order described herein at Section 6 (b) hereof and to obtain the lifting of
any such order if issued.
(d) It shall give the Participating Broker written notice when
the Registration Statement becomes effective and shall deliver to the
Participating Broker such number of copies of the Prospectus, and any
supplements and amendments thereto, which are finally approved by the SEC, as
the Participating Broker may reasonably request for sale of the Units.
(e) It shall promptly notify the Participating Broker of any
post-effective amendments or supplements to the Registration Statement or
Prospectus, and shall furnish the Participating Broker with copies of any
revised Prospectus and/or supplements and amendments to the Prospectus.
(f) To the extent to which the Dealer Manager has knowledge,
it shall keep the Participating Broker fully informed of any material
development to which either Partnership is a party or which concerns the
business and condition of either Partnership.
(g) In conjunction with the Partnership on whose behalf Units
are being offered, it shall use its best efforts to cause, at or prior to the
time the Registration Statement becomes effective, the qualification of the
Units for offering and sale under the securities laws of such states as that
Partnership shall elect.
7. Payment of Costs and Expenses.
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The Participating Broker shall pay all costs and expenses incident to
the performance of its obligations under this Agreement, including:
(a) All expenses incident to the preparation, printing and
filing of all advertising originated by it related to the sale of the Units; and
(b) All other costs and expenses incurred in connection with
its sales efforts related to the sales of the Units which are not expressly
assumed by the Partnership in its Agency Agreement with the Dealer Manager.
8. Indemnification.
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(a) The Participating Broker agrees to indemnify, defend and
hold harmless the Partnership, the General Partner, the General Partner's
affiliates and its officers, directors, employees and agents, including the
Dealer Manager, against all losses, claims, demands, liabilities and expenses,
joint or several, including reasonable legal and other expenses incurred in
defending such claims or liabilities, whether or not resulting in any liability
to the Partnership, the General Partner, its affiliates and its officers,
directors, employees or agents, which they or any of them may incur arising out
of any offer or sale by the Participating Broker, or any person acting on its
behalf, of any Units pursuant to this Agreement if such loss, claim, demand,
liability, or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement of a material fact, or any omission or alleged omission
of a material fact, other than a statement, omission, or alleged omission by the
Participating Broker which is also, as the case may be, contained in or omitted
from the Prospectus or the Registration Statement, as filed and in effect with
the SEC, or in the amendment or supplement thereto and which statement or
omission was not based on information supplied to the Partnership or the Dealer
Manager by such Participating Broker, or (ii) the breach by the Participating
Broker, or any person acting on its behalf, of any of the terms and conditions
of this Agreement. This indemnity provision shall survive the termination of
this Agreement.
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(b) In the Agency Agreement, the General Partner has agreed
that it will indemnify and hold harmless the Dealer Manager and Participating
Broker against any losses, claims, damages or liabilities, joint or several, to
which they may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i) a
breach of any covenant or obligation of the General Partner in the Agency
Agreement or any representation or warranty of the General Partner in the Agency
Agreement or in the certificates provided pursuant to Paragraph 6(f) of the
Agency Agreement, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or any omission or alleged omission to
state therein a material fact necessary to make the statements therein not
misleading; and will reimburse the Dealer Manager and Participating Broker for
any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided, however, that it shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Prospectus in reliance upon and in conformity with
information supplied with respect to the Dealer Manager or Participating Broker
or any other agent which may offer and sell the Units, or their affiliates, in
writing, expressly for use therein. This indemnity agreement is in addition to
any liability which the General Partner may otherwise have.
(c) No indemnifying party shall be liable under Sections 8(a)
and 8(b) above unless the party to be indemnified shall have notified such
indemnifying party in writing promptly after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the party to be indemnified, but failure to notify an indemnifying party of
any such claim shall not relieve it from any liabilities which it may have to
the indemnified party against whom action is brought other than on account of
its indemnity agreement contained in Sections 8(a) and 8(b) above. In the cases
of any such claim, if the party to be indemnified notified the indemnifying
party of the commencement thereof as aforesaid, the indemnifying party shall be
entitled to participate at its own expense in the defense of such claim. If it
so elects, in accordance with arrangements satisfactory to any other
indemnifying party or parties similarly notified, the indemnifying party has the
option to assume the defense of the claim, with counsel who shall be
satisfactory to such indemnified party and all other indemnified parties who are
defendants in such action; and after notice from the indemnifying party of its
election so to assume the defense thereof and the retaining of such counsel by
the indemnifying party, the indemnifying party shall not be liable to such
indemnified party under Sections 8(a) and 8(b) above for any legal or other
expenses, other than for the reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
including but not limited to any legal expenses the indemnified party will incur
if the indemnified party elects, at its option, to retain additional counsel to
participate in the defense. No indemnifying party shall be liable to indemnify
any person for any settlement of any action effected without the consent of such
indemnifying party.
(d) In order to provide for just and equitable contribution in
circumstance in which the indemnification provided in Sections 8(a), (b) and (c)
is for any reason other than the terms thereof held to be unavailable, the
parties entitled to indemnification by the terms hereof shall be entitled to
contribution for liabilities and expenses (including the reasonable costs of
investigation but after deducting any contribution received by such parties from
any other person) in such proportion as is appropriate to reflect the relative
benefits received by such parties from the offering of the Units. If, however,
the allocation provided by the preceding sentence is not permitted by applicable
law, then such contribution shall be in such proportion as is appropriate to
reflect such relative benefits and also the relative fault of such parties in
connection with the misstatement or omissions which result in such losses,
claims, damages or liabilities, as well as other equitable considerations. The
parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation or by any other method which does not take
into account the equitable considerations referred to above, and that no person
guilty of such fraudulent misrepresentation shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. Each
party who may seek contribution under this Section 8(d) shall, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8 (d), give written notice of the
commencement of such action, suit or proceeding to the other party or parties
from whom such contribution may be sought, but the omission so to notify such
contributing party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
otherwise than on account of the Section 8(d).
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9. Term of Agreement.
-----------------
This agreement shall become effective at 8:00 a.m. (Eastern Standard
Time) of the first full business day following the day on which the Registration
Statement becomes effective, or if later, the date on which this Agreement is
executed by the Dealer Manager and the Participating Broker. The Participating
Broker and the Dealer Manager may each prevent this Agreement from becoming
effective, without liability to the other, by written notice before the time
this Agreement would otherwise become effective. After this Agreement becomes
effective, either party may terminate it at any time for any reason by giving
thirty (30) days written notice to the other party; provided, however, that this
Agreement shall in any event automatically terminate at the first occurrence of
any of the following events: (a) the Registration Statement for offer and sale
of the Units shall cease to be effective; (b) the Partnerships shall be
terminated; or (c) the Participating Broker's license or registration to act as
a broker-dealer shall be revoked or suspended by any federal, self-regulatory or
state agency and such revocation or suspension is not cured within ten (10) days
from the date of such occurrence. In any event, this Agreement shall be deemed
suspended during any period for which such license is revoked or suspended.
10. Notices.
-------
All notices and communications hereunder shall be in writing and shall
be deemed to have been given and delivered when deposited in the United States
mail, postage prepaid, registered or certified mail, to the applicable address
set forth below.
If sent to the Dealer Manager:
Commonwealth Capital Securities Corp.
0000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: President
If sent to the Participating Broker:
to the person whose name and address are identified in
Exhibit A hereto.
11. Successors.
----------
This agreement shall be binding upon and inure to the benefit of the
parties hereto, and shall not be assigned or transferred by the Participating
Broker by operation of law or otherwise.
12. Miscellaneous
(a) This Agreement shall be construed in accordance with the
applicable laws of the Commonwealth of Pennsylvania.
(b) Exclusive Jurisdiction. Any disputes arising out of or
related to this Agreement shall be subject to the exclusive jurisdiction of the
Court of Common Pleas of Pennsylvania in the County of Delaware or the Federal
District Court for the Eastern District of Pennsylvania.
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(c) Nothing in this Agreement shall constitute the
Participating Broker as in association with or in partnership with the Dealer
Manager. Instead, the Participating Broker is an independent contractor, and
this Agreement shall only authorize the Participating Broker to sell the Units
according to the terms as expressly set forth herein; provided, further, that
the Participating Broker shall not in any event have any authority to act except
according to the terms expressly set forth herein. The Dealer Manager is under
no obligation to the Participating Broker except for the obligations assumed
hereby or in any written communication from the Dealer Manager in connection
with this offering. Further, the Participating Broker shall have no independent
authority to appoint any person or other entity as an agent or sub-agent.
(d) This Agreement, including Exhibit A and Schedule A hereto,
embodies the entire understanding between the parties to the Agreement, and no
variation, modification or amendment to this Agreement shall be deemed valid or
effective unless it is in writing and signed by other parties hereto.
(e) If any provision of this Agreement shall be deemed void,
invalid or ineffective for any reason, the remainder of the Agreement shall
remain in full force and effect.
(f) This Agreement may be executed in counterpart copies, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument comprising this Agreement.
(g) All representations, warranties and covenants made by
Participating Broker and/or Dealer Manager contained herein or in certificates
delivered pursuant hereto, and the indemnity agreements contained herein, shall
remain operative and in force and effect regardless of any investigation made by
or on behalf of a party hereto, and shall survive the completion of the sale of
the Units.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year indicated on Exhibit A hereto.
PARTICIPATING BROKER: DEALER MANAGER:
COMMONWEALTH CAPITAL
___________________________________ SECURITIES CORP.
(Name of Participating Broker)
By: _____________________________ By: ______________________________
Print Name: ______________________ Print Name: ______________________
Title: ___________________________ Title: ___________________________
Witness: __________________________ Witness: __________________________
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EXHIBIT A
TO
PARTICIPATING BROKER AGREEMENT
OF
COMMONWEALTH INCOME & GROWTH
FUND III
This Exhibit A is attached to and made a part of that certain
Participating Broker Agreement, dated as of the _____ day of ___________, 20___,
by and between COMMONWEALTH CAPITAL SECURITIES CORP., as Managing Dealer, and
____________________________, as Broker.
1. Date of Agreement: __________________________________________________
2. Identity of Broker:
Name: ________________________________________________________________
Firm NASD (CRD) No. ___________________________________________________
Type of Entity: ______________________________________________________
(To be completed by Broker; i.e. Corporation,
Partnership or Sole Proprietorship)
State Organized In: ___________________________________________________
(To be completed by Broker)
Qualified To Do Business and in Good Standing in the Following
Jurisdictions (including your state organization) (Note: Qualification
to do business in any jurisdiction is generally a requirement imposed
by the secretary of state or other authority of jurisdictions in which
you do business, and is not related to your holding a license as a
securities broker-dealer in such jurisdictions. Questions concerning
this matter should be directed to you or your legal counsel):
_______________________________________________________________________
_______________________________________________________________________
(To be completed by Broker)
Licensed as Broker-Dealer in the following states: ____________________
_______________________________________________________________________
_______________________________________________________________________
(To be completed by Broker)
3. Schedule of Commissions Payable to participating broker
(see Section 2 of Agreement):
Number of Units
Purchased In Sales Price As a Percentage
Individual Order To Subscriber of the Sales Price (1) Dollar Amount
---------------- ------------- ---------------------- -------------
1 or more $20.00 8.0% $1.60
(1) Subject to reduction as set forth in Section 2 of the Participating
Broker Agreement
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4. Name and Address for Notice Purposes (see Paragraph 10 of Agreement):
Name: _________________________________________________________________
Title: ________________________________________________________________
Company: ______________________________________________________________
Address: ______________________________________________________________
City, State & Zip Code: _______________________________________________
Telephone Number (including area code):________________________________
5. Please complete the following for our records:
(a) Please name those individuals who hold the following
positions:
President: __________________________________________________
Due Diligence Officer: _______________________________________
Marketing Director: _________________________________________
In-House Editor: _____________________________________________
(b) Does your company hold national or regional conferences?
Yes __________ No ___________
If so, when? _________________________________________________
Who is the coordinator? ______________________________________
(c) How many representatives are registered with your
broker-dealer? _________________________________________
PLEASE ENCLOSE A CURRENT LIST. ALL INFORMATION WILL BE HELD
IN CONFIDENCE.
(d) Does your firm publish a newsletter?
Yes ________ No __________
(e) Does your firm have regular internal mailings, or bulk package
mailings to representatives?
Yes ___________ No ___________
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