EXHIBIT (1) (b)
Selling Dealers Agreement
PDC SECURITIES INCORPORATED
000 X. Xxxx Xxxxxx
X.X. Xxx 00
XXXXXXXXXX, XXXX XXXXXXXX 00000
(000) 000-0000
, 199
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 $60,000,000 of Units consisting of 3,000
Units at a price of $20,000 per Unit with fractional Units available as
described in the Partnership's Offering Prospectus, dated
December 19, 1995 (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 accordance with the terms
of the Prospectus up to 3,000 Units, and you agree to use your best
efforts as
MEMBER
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD)
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC)
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. Total compensation to NASD members under this agreement shall
not exceed 9.5% of Subscriptions and reimbursement of bona fide due
diligence expenses shall not exceed 0.5% of Subscriptions. 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 ($1,500,000 with respect
to PDC 1996-D Limited Partnership and $2,000,000 with respect to PDC 1997-D
Limited Partnership) 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) ; $1,500,000 with respect to PDC 1996-D Limited Partnership
and $2,000,000 with respect to PDC 1997-D Limited Partnership) 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.
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:
(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, 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.
(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.
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
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
