EXHIBIT 1.1
UNITED DEVELOPMENT FUNDING [LOGO]
FORM OF SELECTED DEALER AGREEMENT
Ladies and Gentlemen:
United Development Funding III, L.P. (the "Partnership"), a Delaware
limited partnership of which UMTH Land Development, L.P., a Delaware limited
partnership, serves as the general partner (the "General Partner"), is offering
for public sale a maximum of 17,500,000 units of limited partnership interest,
including 5,000,000 units issuable pursuant to the Partnership's distribution
reinvestment plan (collectively, the "Units"), to be issued and sold for an
aggregate purchase price of $350,000,000. There shall be a minimum purchase by
any one person of 250 Units (except for purchases through individual retirement
accounts or other qualified accounts, as indicated in the Prospectus (defined
below), or in any letter or memorandum from the Partnership to you (the
"Dealer")). Terms not defined herein shall have the same meaning as in the
Prospectus. In connection therewith, the Partnership invites you to participate
in the distribution of Units in the Partnership subject to the following terms:
I. The Offering
A registration statement with respect to the Partnership has been prepared
by the Partnership in accordance with applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC") promulgated
thereunder covering the Units (the "Rules and Regulations"). Such registration
statement was initially filed with the SEC on or about August 26, 2005. Copies
of such registration statement and each amendment thereto have been or will be
delivered to the Dealer. (The registration statement and prospectus contained
therein, as finally amended and revised at the effective date of the
registration statement, are respectively hereinafter referred to as the
"Registration Statement" and the "Prospectus," except that if the Prospectus
first filed by the Partnership pursuant to Rule 424(b) under the Securities Act
shall differ from the Prospectus, the term "Prospectus" shall also include the
Prospectus filed pursuant to Rule 424(b).)
The Dealer hereby agrees to use its best efforts to sell the Units for
cash on the terms and conditions stated in the Prospectus. Nothing in this
Selected Dealer Agreement (the "Agreement") shall be deemed or construed to make
the Dealer an association or other separate entity or employee, agent,
representative or partner of the Partnership, the General Partner or with other
dealers, and the Dealer is not authorized to act for the General Partner, the
Partnership or any other dealer of the Units, or to make any representations on
its behalf except as set forth in the Prospectus and such other printed
information furnished to the Dealer by the Partnership to supplement the
Prospectus (the "Supplemental Information"). The Dealer will be responsible for
its share of any liability or expense based on any claim to the contrary. The
Partnership shall not be liable to the Dealer, except for obligations expressly
assumed in this Agreement and any liabilities under the Securities Act, and no
obligations on the part of the Partnership will be implied or inferred from this
Agreement. The foregoing provision shall not be deemed a waiver of any liability
imposed under the Securities Act. This Agreement will confirm the understanding
and agreement between the Partnership and you, the Dealer, with respect to your
participation in the offering and sale of the Units on the terms and conditions
and subject to the representations and warranties hereinafter set forth.
II. Submission of Orders
Until such time as the Partnership has received and accepted subscriptions
for at least $1,000,000 of Units and released the proceeds from such
subscriptions from escrow (or such greater amount as may be applicable in
respect of any greater escrow in respect of subscribers from any state), those
persons who purchase
Units will be instructed by the Dealer to make their checks payable to "United
Development Funding III, L.P. Escrow Account." Thereafter, in the discretion of
the General Partner upon notice to the Dealer, those persons who purchase Units
will be instructed by the Dealer to make their checks payable to "United
Development Funding III, L.P." If the Dealer receives a check not conforming to
the foregoing instructions, the Dealer shall return such check directly to such
subscriber not later than the end of the next business day following its
receipt. Checks received by the Dealer that conform to the foregoing
instructions shall be transmitted for deposit pursuant to one of the methods in
this Article II. The Partnership may authorize the Dealer, if the Dealer is a
"$250,000 broker-dealer," to instruct its customers to make its checks for Units
subscribed for payable directly to the Dealer, in which case the Dealer will
collect the proceeds of the subscriber's checks and issue a check for the
aggregate amount of the subscription proceeds made payable to the order of the
escrow agent, or if the Partnership has received and accepted subscriptions for
at least $1,000,000 of Units and released the proceeds from such subscriptions
from escrow, made payable to the order of the Partnership.
The Dealer shall forward the subscription documents and the checks to the
Partnership by noon of the next business day following receipt of the
subscription documents and the checks. If, at the time of the Partnership's
receipt of the subscription documents and checks, the Partnership has not
received and accepted subscriptions for at least $1,000,000 of Units and
released the proceeds from such subscriptions from escrow, the Partnership
undertakes to submit each check to the escrow agent on the same day it is
received by the Partnership from the Dealer. The Dealer shall insure that any
such submissions of checks by the Partnership to the escrow agent occur in
accordance with the provisions of the previous sentence. If requested by the
Partnership, the Dealer shall obtain from subscribers for the Units, other
documentation reasonably deemed by the Partnership to be required under
applicable law or as may be necessary to reflect the policies of the
Partnership. Such documentation may include, without limitation, subscribers'
written acknowledgement and agreement to the privacy policies of the
Partnership.
III. Pricing
Units shall be offered to the public at the offering price of $20.00 per
Unit, subject to the terms and pricing information provided in the Prospectus
and the Distribution Reinvestment Plan attached thereto. Except as otherwise
indicated in the Prospectus or in any letter or memorandum sent to the Dealer by
the Partnership, a minimum initial purchase of 250 Units is required. Except as
otherwise indicated in the Prospectus, additional investments may be made in
cash in minimal increments of at least 50 Units. The Units are nonassessable,
and limited partners will not be required to contribute additional sums to the
capital of the Partnership. The Dealer hereby agrees to place any order for the
full purchase price.
IV. Dealers' Commissions and Fees
Except for discounts described in or as otherwise provided in the "Plan of
Distribution" section of the Prospectus, the Dealer's selling commission is the
percentage of the gross proceeds of Units sold by it pursuant to the terms of
this Agreement and accepted and confirmed by the General Partner or the
Partnership set forth as "selling commissions" in the "Plan of Distribution -
Compensation We Will Pay for the Sale of Our Units" and "Plan of Distribution -
Units Purchased by Affiliates" sections of the Prospectus, which commissions
will be paid by the Partnership. A sale of Units shall occur if and only if a
transaction has closed pursuant to all applicable offering and subscription
documents. In addition, as set forth in the Prospectus, the Partnership will
reimburse the Dealer for certain due diligence fees and UMTH Funding Services,
L.P. ("UMTH Funding"), an affiliate of the General Partner, may reallow to the
Dealer a portion of its marketing support fee for direct marketing support, each
up to the limits set forth in the "Plan of Distribution" section of the
Prospectus. The Dealer hereby agrees that, if it is a NASD member, it will not
re-allow all or any part of the compensation provided for in this Section IV to
any person who is not also a member of the NASD.
The Dealer acknowledges and agrees that no commissions, payments or amount
whatsoever will be paid to the Dealer unless or until the gross proceeds of the
Units sold are disbursed to the Partnership pursuant to the Escrow Agreement
between the Partnership and Coppermark Bank, N.A. Until the Required Capital, as
defined in the Escrow Agreement, is obtained, investments will be held in escrow
and, if the Required Capital is not obtained, investments will be returned to
the investors in accordance with the Prospectus.
The parties hereby agree that the foregoing commission is not and will not
be in excess of the usual and customary distributors' or sellers' commission
received in the sale of securities similar to the Units and that
-2-
Dealer's interest in the offering is limited to such commission from the
Partnership and the Dealer's indemnity referred to in Article XIII of this
Agreement. Any payment to the Dealer will be payable only with respect to
transactions lawful in the jurisdictions where such transactions occur.
V. Payment
The commissions to be paid to the Dealer hereunder with respect to any
subscriptions that are obtained by the Dealer and accepted by the Partnership
and the General Partner shall be paid to the Dealer within 10 days after those
subscribers are admitted as limited partners in the Partnership.
VI. Right to Reject Orders or Cancel Sales
All orders, whether initial or additional, are subject to acceptance by
and shall only become effective upon confirmation by the General Partner and the
Partnership, and the General Partner and the Partnership reserve the right to
reject any order for any or no reason. All subscriptions will be accepted or
rejected by the General Partner and the Partnership within approximately ten
days after the Partnership's receipt of all necessary documents relating
thereto. Issuance and delivery of the Units will be made only after actual
receipt of payment therefore, and upon acceptance of a subscription, the General
Partner or the Partnership will provide confirmation of that acceptance to the
Dealer and to the subscriber. If any check is not paid upon presentment, or if
the Partnership is not in actual receipt of clearinghouse funds or cash,
certified or cashier's check or the equivalent in payment for the Units within
15 days of sale, the Partnership reserves the right to cancel the sale without
notice. In the event an order is rejected, canceled or rescinded for any reason,
the Dealer agrees to return to the Partnership any commission theretofore paid
with respect to such order.
VII. Prospectus and Supplemental Information
The Dealer is not authorized or permitted to give and will not give, any
information or make any representation concerning the Units except as set forth
in the Prospectus and the Supplemental Information. The Partnership will supply
the Dealer with reasonable quantities of the Prospectus, any supplements thereto
and any amended Prospectus, as well as any Supplemental Information, for
delivery to investors, and the Dealer will deliver a copy of the Prospectus and
all supplements thereto and any amended Prospectus to each investor to whom an
offer is made prior to or simultaneously with the first solicitation of an offer
to sell the Units to an investor. The Dealer agrees that it will not send or
give any supplements thereto and any amended Prospectus to that investor unless
it has previously sent or given a Prospectus and all supplements thereto and any
amended Prospectus to that investor or has simultaneously sent or given a
Prospectus and all supplements thereto and any amended Prospectus with such
Supplemental Information. The Dealer agrees that it will not show or give to any
investor or prospective investor or reproduce any material or writing that is
supplied to it by the Partnership and marked "dealer 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. The Dealer agrees that it will not use in connection
with the offer or sale of Units any material or writing that relates to another
program supplied to it by the Partnership bearing a legend that states that such
material may not be used in connection with the offer or sale of any securities
other than the program to which it relates. Dealer further agrees that it will
not use in connection with the offer or sale of Units any materials or writings
that have not been previously approved by the Partnership. The Dealer agrees, if
the Partnership so requests, to furnish a copy of any revised preliminary
Prospectus to each person to whom it has furnished a copy of any previous
preliminary Prospectus, and further agrees that it will itself mail or otherwise
deliver all preliminary and final Prospectuses required for compliance with the
provisions of Rule 15c2-8 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In offering and selling Units, the Dealer agrees to comply
with all the applicable requirements under the Securities Act and the Exchange
Act.
-3-
VIII. License and Association Membership
The Dealer's acceptance of this Agreement constitutes a representation to
the Partnership that the Dealer is a properly registered or licensed
broker-dealer, duly authorized to sell Units under federal and state securities
laws and regulations and in all states where it offers or sells Units, and that
it is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"). This Agreement shall automatically terminate if the
Dealer ceases to be a member in good standing of such association, or in the
case of a foreign dealer, so to conform. The Dealer agrees to notify the
Partnership immediately if it ceases to be a member in good standing, or in the
case of a foreign dealer, so to conform. The Dealer also hereby agrees to comply
with the Conduct Rules of the NASD, including but not limited to Rules 2730,
2740, 2420 and 2750, and the provisions in Rule 2810 that apply to Direct
Participation Programs.
IX. Anti-Money Laundering Compliance Programs
The Dealer represents to the Partnership that it has established and
implemented anti-money laundering compliance programs in accordance with
applicable law, including applicable NASD rules, SEC rules and the USA PATRIOT
Act of 2001, reasonably expected to detect and cause the reporting of suspicious
transactions in connection with the sale of Units of the Partnership.
X. Limitation of Offer
The Dealer will offer Units only to persons who meet the financial
qualifications set forth in the Prospectus or in any suitability letter or
memorandum sent to it by the Partnership and will only make offers to persons in
the states in which it is advised in writing that the Units are qualified for
sale or that such qualification is not required. In offering Units, the Dealer
will comply with the provisions of the NASD Conduct Rules, including the
provisions in Rule 2810 that apply to Direct Participation Programs, set forth
in the NASD Manual, as well as all other applicable rules and regulations
relating to suitability of investors, including without limitation, the
provisions of Article III.C. of the Statement of Policy Regarding Real Estate
Programs of the North American Securities Administrators Association, Inc.
XI. Representations and Warranties of the Partnership.
The Partnership hereby represents and warrants to the Dealer that:
(a) The Partnership has been duly and validly organized and formed as a
limited partnership under the laws of the state of Delaware, with
the power and authority to conduct its business as described in the
Prospectus. The Partnership has obtained all necessary
authorizations, approvals and orders of and from all governmental
regulatory officials and bodies authorizing it to own its properties
and conduct its business as described in the Registration Statement
and the Prospectus; provided, however, that the foregoing
representation is only to the best knowledge of the Partnership as
to any material penalty or other material liability.
(b) The Registration Statement and Prospectus comply with the Securities
Act and the Rules and Regulations and do not contain any untrue
statements of material facts or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that the
foregoing provisions of this Article XI(b) will not extend to such
statements contained in or omitted from the Registration Statement
or Prospectus as are primarily within the knowledge of the Dealer or
are based upon information furnished by the Dealer in writing to the
Partnership specifically for inclusion therein.
(c) The Partnership intends to use the funds received from the sale of
the Units as set forth in the Prospectus.
-4-
(d) No consent, approval, authorization or other order of any
governmental authority is required in connection with the execution
or delivery by the Partnership of this Agreement or the issuance and
sale by the Partnership of the Units, except such as may be required
under the Securities Act or applicable state securities laws.
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Partnership, threatened against the Partnership at
law or in equity or before or by any federal or state commission,
regulatory body or administrative agency or other governmental body,
domestic or foreign, that will have a material adverse effect on the
business or property of the Partnership.
(f) The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated and compliance with the terms
of this Agreement by the Partnership will not conflict with or
constitute a default under any charter, bylaw, indenture, mortgage,
deed of trust, lease, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality or court, domestic
or foreign, having jurisdiction over the Partnership, except to the
extent that the enforceability of the indemnity and/or contribution
provisions contained in Article XIII of this Agreement may be
limited under applicable securities laws.
(g) The Partnership has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated
hereby, except to the extent that the enforceability of the
indemnity and/or contribution provisions contained in Article XIII
of this Agreement may be limited under applicable securities laws.
(h) At the time of the issuance of the Units, the Units will have been
duly authorized and validly issued, and upon payment therefor, will
be fully paid and nonassessable and will conform to the description
thereof contained in the Prospectus, subject to the requirement that
the limited partners do not participate in the management or control
of the business of the Partnership.
XII. Records
At all times during the term of this Agreement and for a period of five
years thereafter, the Dealer shall keep, or cause to be kept, and shall make
available to the Partnership, information establishing that each investor in the
Units meets the suitability standards employed in connection with the offer and
sale of Units, and a representation of each investor that he or she is
purchasing for his or her own account or for the account of another who meets
such suitability standards.
XIII. Indemnification
(a) The Partnership agrees to indemnify and hold the Dealer harmless
against any losses, claims, damages or liabilities, joint or
several:
(i) to which the Dealer may become subject under applicable law,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) are based upon any untrue
statement of any material fact contained in the Prospectus or
any amendment or supplement thereto, or in any supplemental
sales literature furnished by the Partnership, or that are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading;
(ii) to which the Dealer may become subject due to the
misrepresentation by the Partnership of material facts in
connection with the sale of the Units unless the
misrepresentation of such material facts was the direct result
of misleading information provided to the Partnership by any
dealer of the Units; or
-5-
(iii) to which the Dealer may become subject as a result of any
breach by the Partnership of the representations and
warranties contained in this Agreement.
The Partnership will reimburse the Dealer for any legal or other
expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage or liability (or actions in
respect thereof); provided, however, that the Partnership 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 any untrue
statement or alleged untrue statement or omission or alleged
omission made in the Prospectus, any amendment or supplement or any
sales literature, in reliance upon and in conformity with written
information furnished to the Partnership by the dealer specifically
for use in the preparation thereof. This indemnity agreement shall
be in addition to any liabilities that the Partnership may otherwise
have in connection with this offering.
(b) The Dealer agrees to indemnify and hold harmless the Partnership
against any losses, claims, damages or liabilities, joint or
several, to which it may become subject under applicable law,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon a breach of the
terms of this Agreement or the failure to comply with laws and
regulations applicable to the offering and the claim of registration
or exemption made by the Partnership, and will reimburse the
Partnership for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, claim,
damage or liability (or action in respect thereof). This indemnity
agreement shall be in addition to any liability that the Dealer may
otherwise have in connection with the offering.
The foregoing agreement shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if
any who controls the Partnership.
(c) Within ten days after receipt of an indemnified party of notice of
the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying
party under subsections (a) or (b) of this Article XIII, notify the
indemnifying party in writing of the commencement thereof; the
omission by any indemnified party to notify the indemnifying party
of any such action shall relieve the indemnifying party from any
liability in respect of such action that it may have to such
indemnified party on account of this indemnity agreement; but the
omission so to notify the indemnifying party shall not relieve it
from any liability that it may have to any indemnified party
otherwise than under such subsection. In case any such action shall
be brought against such indemnified party, and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that
it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory
to such indemnifying and indemnified parties, and after the
indemnified party shall have received notice from the agreed-upon
counsel that the defense has been so assumed, in the event that the
indemnified party nonetheless elects to participate in the defense
of any such action for any reason other than the presence of a
conflict of interest, the indemnifying party shall not be
responsible for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof.
XIV. Termination
The Dealer will suspend or terminate its offer and sale of Units upon the
request of the Partnership at any time and will resume its offer and sale of
Units hereunder upon subsequent request of the Partnership. Any party may
terminate this Agreement by written notice. Such termination shall be effective
five days after the mailing of such notice. No such termination shall operate to
terminate any rights the Dealer may have to be paid a commission with respect to
subscriptions that were obtained by the Dealer and submitted to the Partnership
for
-6-
acceptance prior to that termination. This Agreement is the entire agreement of
the parties and supersedes all prior agreements, if any, between the parties
hereto.
This Agreement may be amended at any time by the Partnership by written
notice to the Dealer, and any such amendment shall be deemed accepted by the
Dealer upon placing an order for sale of Units after receipt of such notice.
XV. Privacy Laws
The Partnership and the Dealer (each referred to individually in this
section as a "party") agree as follows:
(a) Each party agrees to abide by and comply with (i) the privacy
standards and requirements of the Xxxxx-Xxxxx-Xxxxxx Act of 1999 ("GLB
Act"), (ii) the privacy standards and requirements of any other applicable
federal or state law, and (iii) its own internal privacy policies and
procedures, each as may be amended from time to time.
(b) Each party agrees to 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
(c) Each party shall be responsible for determining which customers
have opted out of the disclosure of nonpublic personal information by
periodically reviewing and, if necessary, retrieving a list of such
customers (the "List") as provided by each to identify customers that have
exercised their opt-out rights. In the event 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 each 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.
XVI. Notice
All notices will be in writing and will be duly given to the Dealer when
mailed to the address specified by the Dealer herein.
XVII. Survival of Provisions
The respective agreements, representations and warranties of the
Partnership and the Dealer set forth in this Agreement shall remain operative
and in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigation made by or on behalf of the Dealer or any
person controlling the Dealer or by or on behalf of the Partnership or any
person controlling the Partnership, and (c) the acceptance of any payment for
the Units.
XVIII. Attorneys' Fees, Applicable Law and Venue
In any action to enforce the provisions of this Agreement or to secure
damages for its breach, the prevailing party shall recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the State of Texas and shall take effect when signed by the Dealer and
countersigned by the Partnership. Venue for any action (including arbitration)
brought hereunder shall lie exclusively in Dallas, Texas.
-7-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf by its duly authorized agent.
UNITED DEVELOPMENT FUNDING III, L.P.
By: UMTH Land Development, L.P.
Its General Partner
By: UMT Services, Inc.
Its General Partner
By: _______________________________
Name: _____________________________
Title: ____________________________
[SIGNATURE OF THE DEALER ON FOLLOWING PAGE.]
-8-
The undersigned Dealer has read the foregoing Agreement and hereby accepts
and agrees to the terms and conditions therein set forth. The Dealer represents
that the list below of jurisdictions in which it is registered or licensed as a
broker or dealer and is fully authorized to sell securities is true and correct,
and the Dealer agrees to advise the Partnership of any change in such list
during the term of this Agreement.
1. Identity of Dealer:
Name: __________________________________________________________________________
Type of entity: ________________________________________________________________
(corporation, partnership, proprietorship, etc.)
Organized in the State of: __________________________
Licensed as broker-dealer in the following States: _____________________________
________________________________________________________________________________
Tax I.D. #: ___________________________________________
2. Person to receive notice pursuant to Section XVI:
Name: __________________________________________________________________________
Company: _______________________________________________________________________
Address: _______________________________________________________________________
City, State and Zip Code: ______________________________________________________
Telephone No.: ______________________________________
Facsimile No.: ______________________________________
AGREED TO AND ACCEPTED BY THE DEALER:
_____________________________________
(Dealer's Firm Name)
By: _________________________________
(Signature)
Name: _______________________________
Title: ______________________________
-9-
